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The George <R> </R> Class A, B, C, M, R and Y shares Investment Category: Value This prospectus explains what you should know about this mutual fund before you invest. Please read it carefully. Putnam Investment Management, LLC (Putnam Management), which has managed mutual funds since 1937, manages the fund. These securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Commission passed upon the accuracy or adequacy of this prospectus. Any statement to the contrary is a crime. <R> You may be eligible for a reduced sales charge. See How do I buy fund shares? for details. </R> Fund summary GOAL <R> The fund seeks to provide a balanced investment composed of a well diversified portfolio of stocks and bonds which produce both capital growth and current income. MAIN INVESTMENT STRATEGIES VALUE STOCKS AND BONDS We invest mainly in a combination of bonds and U.S. value stocks with a greater focus on value stocks. Value stocks are those that we believe are currently undervalued by the market. We look for companies undergoing positive change. If we are correct and other investors recognize the value of the company, the price of its stock may rise. We buy bonds of governments and private companies that are mostly investment-grade in quality with intermediate- to long-term maturities (three years or longer). Our equity investments are mainly in large and midsize companies. </R> MAIN RISKS The main risks that could adversely affect the value of the funds shares and the total return on your investment include: <R> * The risk that the stock price of one or more of the companies in the funds portfolio will fall, or will fail to rise. Many factors can adversely affect a stocks performance, including both general financial market conditions and factors related to a specific company or industry. This risk is generally greater for small and midsized companies, which tend to be more vulnerable to adverse developments. * The risk that movements in financial markets will adversely affect the price of the funds investments, regardless of how well the companies in which we invest perform. The market as a whole may not favor the types of investments we make. * The risk that the prices of the fixed-income investments we buy will fall if interest rates rise. Interest rate risk is generally higher for investments with longer maturities. * The risk that the issuers of the funds fixed-income investments will not make timely payments of interest and principal. This credit risk is generally higher for debt that is below investment-grade in quality. </R> 2 P R O S P E C T U S * The risk that, compared to other debt, mortgage-backed investments may increase in value less when interest rates decline, and decline in value more when interest rates rise. * The risk that our allocation of investments between stocks and bonds may adversely affect the funds performance. * The risk that the funds use of derivatives will cause losses due to increased exposure to the risks described above, the unexpected effect of market movements on a derivatives price, or the potential inability to terminate derivatives positions. You can lose money by investing in the fund. The fund may not achieve its goal, and is not intended as a complete investment program. An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. <R> INVESTOR PROFILE The fund is designed for investors seeking capital growth and current income and who are willing to wait out short-term market fluctuations. The fund discourages short-term trading activity. It should not be your sole investment. However, the fund may be appropriate as part of a portfolio of funds with different investment strategies, such as growth, blend, value, and income. Ask your financial representative for details. PAST PERFORMANCE The performance information below gives some indication of the risks and potential rewards associated with an investment in the fund and why a long-term investment horizon is important. The bar chart shows calendar year returns and the average annual total return over the past 10 years for the funds class A shares. Performance figures in the bar chart do not reflect the impact of sales charges. If they did, performance would be less than that shown. Although this information can be valuable, it is important to remember that past performance is not necessarily an indication of future results. 3 P R O S P E C T U S CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES Annual performance of A shares at NAV * Year-to-date performance through 9/30/07 was 4.27% . * In the funds best calendar quarter during this period (Q2 03), a $1,000 investment would have grown 11.65% to $1,117. * In the funds worst calendar quarter during this period (Q3 02), a $1,000 investment would have declined 10.81% to $892. Average Annual Total Returns (for periods ending 12/31/06) 4 P R O S P E C T U S This table compares the funds performance to that of several broad measures of market performance. Unlike the bar chart, this performance information reflects the impact of sales charges. (See Costs associated with your investment for details). Class A and class M share performance reflects the current maximum initial sales charges, and class B and class C share performance reflects the maximum applicable deferred sales charge if shares had been redeemed on 12/31/06 and, for class B shares, does not assume conversion to class A shares after eight years. For periods before the inception of class C shares (7/26/99) and class R shares (1/21/03), performance shown for these classes in the table is based on the performance of the funds class A shares, adjusted to reflect the appropria
te sales charge and the higher 12b-1 fees paid by the class C and class R shares. The funds performance for portions of the period benefited from Putnam Managements agreement to limit the funds expenses. The funds performance is compared to the Lehman Aggregate Bond Index, an unmanaged index of U.S. investment-grade fixed income securities. The funds performance is also compared to the S&P 500/Citigroup Value Index, an unmanaged index of capitalization-weighted stocks chosen for their value orientation. In addition, the funds performance is compared to the George Putnam Blended Index, an unmanaged index administered by Putnam Management, 60% of which is the S&P 500/Citigroup Value Index and 40% of which is the Lehman Aggregate Bond Index. After-tax returns reflect the highest individual federal income tax rates and do not reflect state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax ret
urns are shown for class A shares only and will vary for other classes. After-tax returns are not relevant to those investing through 401(k) plans, IRAs or other tax-deferred arrangements. COSTS ASSOCIATED WITH YOUR INVESTMENT Maximum sales charges and redemption fees (paid directly from your investment) Most Putnam funds include a sales charge when you purchase shares in order to compensate your financial representative for asset allocation and other services. Putnam funds offer a variety 5 P R O S P E C T U S of share classes to accommodate different ways of paying the sales charge (up front or over time). It is important to understand that the share classes with low or no up-front sales charge may impose higher ongoing expenses. To discourage short-term trading, most Putnam funds also charge a redemption fee for shares sold or exchanged within 7 days of purchase (within 90 days, for certain Putnam funds). This table summarizes the fees and expenses you may pay if you invest in the fund. Expenses are based on the funds last fiscal year. </R> Shareholder Fees (fees paid directly from your investment)* <R> Total Annual Fund Operating Expenses (expenses that are deducted from fund assets) All mutual funds pay ongoing fees for investment management and other services. These charges, expressed as a percentage of fund assets, are known as the Total Annual Fund Operating Expenses. The table below shows the funds annual operating expenses for the fiscal year ended July 31, 2007 (except as otherwise indicated). 6 P R O S P E C T U S * Certain investments in class A and class M shares may qualify for discounts on applicable sales charges. See How do I buy fund shares? for details. </R> ** A deferred sales charge of 1.00% on class A shares and of 0.65% on class M shares may be imposed on certain redemptions of shares bought without an initial sales charge. *** A 1.00% redemption fee (also referred to as a short-term trading fee) may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 7 days of purchase. <R> ^ Includes estimated expenses attributable to the funds investment in Putnam Prime Money Market Fund that the fund bears indirectly. How do these fees and expenses look in dollar terms? This example takes the maximum up-front sales charge (or applicable contingent deferred sales charge) and total annual fund operating expenses for each share class, and translates them into dollar amounts, showing the cumulative effect of these costs over time. This helps you more easily compare the cost of investing in the fund to the cost of investing in other mutual funds. The example makes certain assumptions. It assumes that you invest $10,000 in the fund for the time periods shown and then, except as shown for class B shares and class C shares, redeem all your shares at the end of those periods. It also assumes a 5% return on your investment each year and that the funds operating expenses remain the same. The example is hypothetical; your actual costs and returns may be higher or lower. EXAMPLE: Sales charge plus annual operating expenses on a $10,000 investment over time * Reflects conversion of class B shares to class A shares, which pay lower 12b-1 fees. Conversion occurs eight years after purchase. </R> 7 P R O S P E C T U S What are the funds main investment strategies and related risks? <R> This section contains greater detail on the funds main investment strategies and the related risks you would face as a fund shareholder. It is important to keep in mind that risk and reward generally go hand in hand; the higher the potential reward, the greater the risk. As mentioned in the fund summary, we pursue the funds goal by investing in bonds and value stocks. Under normal market conditions, we invest at least 25% of the funds total assets in fixed-income securities, including debt securities, preferred stocks and that portion of the value of convertible securities attributable to the fixed-income characteristics of those securities. We may consider, among other factors, a companys valuation, financial strength, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. * Common stocks. Common stock represents an ownership interest in a company. The value of a companys stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the companys products or services. A stocks value may also fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. From time to time, the fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those industries or sectors. The value o
f a companys stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a companys stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a companys stock will usually react more strongly than its bonds and other debt to actual or perceived changes in 8 P R O S P E C T U S the companys financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies. * Value stocks. Companies we believe are undergoing positive change and whose stock we believe is undervalued by the market may have experienced adverse business developments or may be subject to special risks that have caused their stocks to be out of favor. If our assessment of a companys prospects is wrong, or if other investors do not similarly recognize the value of the company, then the price of the companys stock may fall or may not approach the value that we have placed on it. * Foreign investments. We may invest in foreign investments. Foreign investments involve certain special risks. For example, their values may decline in response to changes in currency exchange rates, unfavorable political and legal developments, unreliable or untimely information, and economic and financial instability. In addition, the liquidity of these investments may be more limited than for most U.S. investments, which means we may at times be unable to sell them at desirable prices. Foreign settlement procedures may also involve additional risks. These risks are generally greater in the case of developing (also known as emerging) markets, which typically have less developed legal and financial systems. Certain of these risks may also apply to some extent to U.S.-traded investments that are denominated in foreign currencies, investments in U.S. companies that are traded in foreign markets or investments in U.S. companies that have significant foreign operations. </R> * Interest rate risk. The values of bonds and other debt instruments usually rise and fall in response to changes in interest rates. Declining interest rates generally increase the value of existing debt instruments, and rising interest rates generally decrease the value of existing debt instruments. Changes in a debt instruments value usually will not affect the amount of interest income paid to the fund, but will affect the value of the funds shares. Interest rate risk is generally greater for investments with longer maturities. 9 P R O S P E C T U S Some investments give the issuer the option to call or redeem an investment before its maturity date. If an issuer calls or redeems an investment during a time of declining interest rates, we might have to reinvest the proceeds in an investment offering a lower yield, and therefore might not benefit from any increase in value as a result of declining interest rates. </R> Premium investments offer coupon rates higher than prevailing market rates. However, they involve a greater risk of loss, because their values tend to decline over time. * Credit risk. Investors normally expect to be compensated in proportion to the risk they are assuming. Thus, debt of issuers with poor credit prospects usually offers higher yields than debt of issuers with more secure credit. Higher-rated investments generally have lower credit risk. <R> We invest mostly in investment-grade debt investments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that we believe are of comparable quality. We may invest in below investment-grade investments. However, we will not invest in securities that are rated lower than B or its equivalent by each rating agency rating the investment, or are unrated securities we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we buy it. Investments rated below BBB or its equivalent are below investment grade. This rating reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default. If this happens, or is perceived as likely to happen, the values of those investments will usually be more volatile and are likely to fall. A default or expected default could also make it difficult for us to sell the investments at prices approximating the values we had previously placed on them. Lower-rated debt usually has a more limited market than higher-rated debt, which may at times make it difficult for us to buy or sell certain debt instruments or to establish their fair value. Credit risk is generally greater for zero coupon bonds and other investments that are issued at less than their face value and that are required to make interest payments only at maturity rather than at intervals during the life of the inves
tment. Although investment-grade investments generally 10 P R O S P E C T U S have
lower credit risk, they may share some of the risks of lower-rated investments.
U.S. government investments generally have the least credit risk, but are not
completely free of credit risk. While some investments, such as U.S. Treasury
obligations and Ginnie Mae certificates, are backed by the full faith and credit
of the U.S. government, others are backed only by the credit of the
issuer. *
Mortgage-backed investments. Traditional debt
investments typically pay a fixed rate of interest until maturity, when the
entire principal amount is due. By contrast, payments on mortgage-backed
investments typically include both interest and partial payment of principal.
Principal may also be prepaid voluntarily, or as a result of refinancing or
foreclosure. We may have to invest the proceeds from prepaid investments in
other investments with less attractive terms and yields. Compared to debt that cannot be prepaid, mortgage-backed investments are
less likely to increase in value during periods of declining interest rates and
have a higher risk of decline in value during periods of rising interest rates.
They may increase the volatility of the fund. Some mortgage-backed investments
receive only the interest portion or the principal portion of payments on the
underlying mortgages. The yields and values of these investments are extremely
sensitive to changes in interest rates and in the rate of principal payments on
the underlying mortgages. The market for these investments may be volatile and
limited, which may make them difficult to buy or sell. Asset-backed securities,
which are subject to risks similar to those of mortgage-backed securities, are
also structured like mortgage-backed securities, but instead of mortgage loans
or interests in mortgage loans, the underlying assets may include such items as
motor vehicle installment sales or installment loan contracts, leases of various
types of real and personal property and receivables from credit card
agreements. *
Derivatives. We may engage in a variety
of transactions involving derivatives, such as futures, options, warrants and
swap contracts. Derivatives are financial instruments whose value depends upon,
or is derived from, the value of something else, such as one or more underlying
investments, pools of investments, indexes or 11
P R O S P E
C T U S currencies. We may make use of short derivatives positions, the values of which move in the opposite direction from the price of the underlying investment, pool of investments, index or currency. We may use derivatives both for hedging and non-hedging purposes, including as a substitute for a direct investment in the securities of one or more issuers. However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. </R> Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. Some derivatives are leveraged, which means that they provide the fund with investment exposure greater than the value of the funds investment in the derivatives. As a result, these derivatives may magnify or otherwise increase investment losses to the fund. The risk of loss from a short derivatives position is theoretically unlimited. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the funds derivatives positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction will not meet its obligations. For further information about the risks of derivatives, see the statement of additional information (SAI). <R> * Other investments. In addition to the main investment strategies described above, we may make other types of investments, such as investments in preferred stocks, convertible securities and asset-backed securities. The fund may also loan its portfolio securities to earn additional income. These practices may be subject to other risks, as described in the SAI. </R> 12 P R O S P E C T U S * Alternative strategies. Under normal market conditions, we keep the funds portfolio fully invested, with minimal cash holdings. However, at times we may judge that market conditions make pursuing the funds usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily use alternative strategies that are mainly designed to limit losses. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause the fund to miss out on investment opportunities, and may prevent the fund from achieving its goal. * Changes in policies. The Trustees may change the funds goal, investment strategies and other policies without shareholder approval, except as otherwise indicated. <R> * Portfolio transactions and portfolio turnover rate. The funds daily transactions on stock exchanges, commodities markets and futures markets involve costs that are reflected in the funds total return but not in the Total Annual Fund Operating Expenses. For example, the fund paid $4,050,985 in brokerage commissions during the last fiscal year, representing 0.09% of the funds average net assets. Of this amount, $820,880, representing 0.02% of the funds average net assets, was paid to brokers who also provided research services. Additional information regarding Putnams brokerage selection procedures is included in the SAI. Combining the brokerage commissions paid by the fund during the last fiscal year (as a percentage of the funds average net assets) with the funds Total Annual Fund Operating Expenses ratio for class A shares results in a combined cost ratio of 1.05% of the funds average net assets for class A shares for the last fiscal year. Because different types of funds use different trading procedures, investors should exercise caution when comparing brokerage commissions and combined cost ratios for different types of funds. For example, while brokerage commissions represent one component of the funds transaction costs, they do not reflect any undisclosed amount of profit or mark-up included in the price paid by the fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities and 13 P R O S P E C T U S certain derivatives. In addition, brokerage commissions do not reflect other elements of transaction costs, including the extent to which the funds purchase and sale transactions may change the market price for an investment (the market impact). Another factor in transaction costs is the funds portfolio turnover rate, which measures how frequently the fund buys and sells investments. A portfolio turnover of 100%, for example, would mean that the fund sold and replaced securities valued at 100% of the funds assets within a one-year period. Funds with high turnover may be more likely to realize capital gains that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transactions costs, which may detract from performance. The funds portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions. The funds portfolio turnover rate for the past five fiscal years compared with the average turnover rate for the funds Lipper category Turnover Comparison * Average portfolio turnover rate of funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The Lipper category average portfolio turnover rate is calculated using the portfolio turnover rate for the fiscal year end of each fund in the Lipper category. Fiscal years may vary across funds in the Lipper category, which may limit the comparability of the funds portfolio turnover rate to the Lipper average. Comparative data for the last fiscal year is based on information available as of September 30, 2007. </R> The fund may buy and sell investments relatively often. Both the funds portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions. High turnover may lead to increased costs and decreased performance and, for investors in taxable accounts, increased taxes. 14 P R O S P E C T U S * Portfolio holdings. The SAI includes a description of the funds policies with respect to the disclosure of its portfolio holdings. For information on the funds portfolio, you may visit the Putnam Investments website, www.putnam.com/individual, where the funds top 10 holdings and related portfolio information may be viewed monthly beginning approximately 15 days after the end of each month, and full portfolio holdings may be viewed beginning on the last business day of the month after the end of each calendar quarter. This information will remain available on the website until the fund files a Form N-CSR or N-Q with the Securities and Exchange Commission (SEC) for the period that includes the date of the info
rmation after which such information can be found on the SECs website at http://www.sec.gov. Who oversees and manages the fund? THE FUNDS TRUSTEES As a shareholder of a mutual fund, you have certain rights and protections, including representation by a Board of Trustees. The Putnam Funds Board of Trustees oversees the general conduct of the funds business and represents the interests of the Putnam fund shareholders. The Putnam Funds Board of Trustees includes Trustees who are elected by shareholder vote at least once every five years and at least 75% of whom are independent (not an officer of the fund or affiliated with Putnam Management). The Trustees periodically review the funds investment performance and the quality of other services such as administration, custody, and investor services. At least annually, the Trustees review the fees paid to Putnam Management and its affiliates for providing or overseeing these services as well as the overall level of the funds operating expenses. In carrying out their responsibilities, the Trustees are assisted by an administrative staff and auditors and 15 P R O S P E C T U S legal
counsel that are selected by the Trustees and are independent of Putnam
Management and its affiliates. Contacting the funds Trustees THE
FUNDS INVESTMENT MANAGER The
Trustees have retained Putnam Management to be the funds investment manager,
responsible for making investment decisions for the fund and managing the funds
other affairs and business. The basis for the Trustees approval of the funds
management contract described below is discussed in the funds annual report to
shareholders dated July 31, 2007. The fund pays Putnam Management a quarterly
management fee for these services based on the funds average net assets. The
fund paid Putnam Management a management fee (after applicable waivers) of 0.49%
of average net assets for the funds last fiscal year. Putnam Managements
address is One Post Office Square, Boston, MA 02109. *
Investment management teams. Putnams
investment professionals are organized into investment management teams, with a
particular team dedicated to a specific asset class. The members of the
Large-Cap Value, Core Fixed Income and Global Asset Allocation Teams manage the
funds investments. The names of all team members can be found at
www.putnam.com. The
team members identified as the funds Portfolio Leader and Portfolio Members
coordinate the teams efforts related to the fund and are primarily responsible
for the day-to-day management of the funds portfolio. In addition to these
individuals, the teams also include other investment professionals, whose
analysis, recommendations and research inform investment decisions made for the
fund. 16
P R O S P E
C T U S The principal managers of the fund * Other funds managed by the funds Portfolio Leader and Portfolio Members. As of the funds fiscal year-end, Jeffrey Knight was also a Portfolio Leader of Putnam Asset Allocation Funds, Putnam Income Strategies Fund and Putnam RetirementReady® Funds. Raman Srivastava was also a Portfolio Member of Putnam Income Fund and Putnam Global Income Fund. Jeanne Mockard, Geoffrey Kelley, Jeffrey Knight and Raman Srivastava may also manage other accounts and variable trust funds managed by Putnam Management or an affiliate. The SAI provides additional information about other accounts managed by these individuals. * Changes in the funds Portfolio Leader and Portfolio Members. No changes in the funds Portfolio Leader or Portfolio Members occurred during the fiscal year ended July 31, 2007. Jeanne Mockard has served as Portfolio Leader of the fund since May 2002, when Putnam Management introduced this designation. * Fund ownership. The following table shows the dollar ranges of shares of the fund and all Putnam funds owned by the professionals listed above at the end of the funds last two fiscal years, including investments by their immediate family members and amounts invested through retirement and deferred compensation plans. 17 P R O S P E C T U S Fund Portfolio Leader and Portfolio Members * Investment in the fund by Putnam employees and the Trustees. As of July 31, 2007, 12 of the 13 Trustees on the Board of Trustees of the Putnam funds owned fund shares. The table shows the approximate value of investments in the fund and all Putnam funds as of that date by Putnam employees and the funds Trustees, including in each case investments by their immediate family members and amounts invested through retirement and deferred compensation plans. * Compensation of investment professionals. Putnam Management believes that its investment management teams should be compensated primarily based on their success in helping investors achieve their goals. The portion of Putnam Investments total incentive compensation pool that is available to Putnam Managements Investment Division is based primarily on its delivery, across all of the portfolios it manages, of consistent, dependable and superior performance over time. The peer group for the fund, Balanced Funds, is the funds broad investment category as determined by Lipper Inc. The portion of the incentive compensation pool available to each of your investment management teams varies based primarily on its delivery, across all of the portfolios it manages, of consis
tent, dependable and superior performance over time on a before-tax basis. </R> 18 P R O S P E C T U S * Consistent performance means being above median over one year. * Dependable performance means not being in the 4th quartile of the peer group over one, three or five years. <R> * Superior performance (which is the largest component of Putnam Managements incentive compensation program) means being in the top third of the peer group over three and five years. In determining an investment management teams portion of the incentive compensation pool and allocating that portion to individual team members, Putnam Management retains discretion to reward or penalize teams or individuals, including the funds Portfolio Leader and Portfolio Members, as it deems appropriate, based on other factors. The size of the overall incentive compensation pool each year depends in large part on Putnams profitability for the year, which is influenced by assets under management. Incentive compensation is generally paid as cash bonuses, but a portion of incentive compensation may instead be paid as grants of restricted stock, options or other forms of compensation, based on the factors described above. In addition to incentive compensation, investment team members receive annual salaries that are typically based on seniority and experience. Incentive compensation generally represents at least 70%
of the total compensation paid to investment team members. </R> How does the fund price its shares? The price of the funds shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange (NYSE) each day the exchange is open. <R> The fund values its investments for which market quotations are readily available at market value. It values all other investments and assets at their fair value. For example, the fund may value a stock traded on a U.S. exchange at its fair value when the exchange closes early or trading in the stock is suspended. It may also value a stock at fair value if recent transactions in the stock have been very limited or material information about the issuer becomes available 19 P R O S P E C T U S after the close of the relevant market. Market quotations are not considered to be readily available for many debt securities. These securities are generally valued at fair value on the basis of valuations provided by an independent pricing service approved by the funds Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using information with respect to transactions in the bond being valued, market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. The fair value determined for an investment may differ from recent market prices for the investment. The fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates, which are generally determined as of 3:00 p.m. Eastern time each day the NYSE is open. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect the funds NAV. Because foreign markets may be open at different times than the NYSE, the value of the funds shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE. As a result, the fund has adopted fair value pricing procedures, which, among other things, require the fund to fair value foreign equity securities if there has been a movement i
n the U.S. market that exceeds a specified threshold that may change from time to time. If events materially affecting the values of the funds foreign fixed-income investments occur between the close of foreign markets and the close of regular trading on the NYSE, these investments will be valued at their fair value. As noted above, the value determined for an investment using the funds fair value pricing procedures may differ from recent market prices for the investment. </R> 20 P R O S P E C T U S How do I buy fund shares? <R> Opening an account You can open a fund account and purchase class A, B, C, and M shares by contacting your financial representative or Putnam Investor Services at 1-800-225-1581 and obtaining a Putnam account application. The completed application, along with a check made payable to the fund, must then be returned to Putnam Investor Services at the following address: Putnam Investor Services You can open a fund account with as little as $500. The minimum investment is waived if you make regular investments weekly, semi-monthly, or monthly through automatic deductions from your bank checking or savings account. Although Putnam is currently waiving the minimum, it reserves the right to reject initial investments under the minimum at its discretion. The fund sells its shares at the offering price, which is the NAV plus any applicable sales charge (class A and class M shares only). Your financial representative or Putnam Investor Services generally must receive your completed buy order before the close of regular trading on the NYSE for your shares to be bought at that days offering price. </R> If you participate in a retirement plan that offers the fund, please consult your employer for information on how to purchase shares of the fund through the plan, including any restrictions or limitations that may apply. <R> Mutual funds must obtain and verify information that identifies investors opening new accounts. If the fund is unable to collect the required information, Putnam Investor Services may not be able to open your fund account. Investors must provide their full name, residential or business address, Social Security or tax identification number, and date of birth. Entities, such as trusts, estates, corporations and partnerships, must also provide other identifying information. Putnam Investor Services may share identifying information with third parties for the purpose of verification. If 21 P R O S P E C T U S Putnam Investor Services cannot verify identifying information after opening your account, the fund reserves the right to close your account. Also, the fund may periodically close to new purchases of shares or refuse any order to buy shares if the fund determines that doing so would be in the best interests of the fund and its shareholders. Purchasing additional shares Once you have an existing account, you can make additional investments at any time in any amount in the following ways: * Through a financial representative. Your representative will be responsible for furnishing all necessary documents to Putnam Investor Services, and may charge you for his or her services. * Through Putnams Systematic Investing Program. You can make regular investments weekly, semi-monthly or monthly through automatic deductions from your bank checking or savings account. </R> * Via the Internet or phone. If you have an existing Putnam fund account and you have completed and returned an Electronic Investment Authorization Form, you can buy additional shares online at www.putnam.com or by calling Putnam Investor Services at 1-800-225-1581. * By mail. You may also request a book of investment stubs for your account. Complete an investment stub and write a check for the amount you wish to invest, payable to the fund. Return the check and investment stub to Putnam Investor Services. <R> * By wire transfer. You may buy fund shares by bank wire transfer of same-day funds. Please call Putnam Investor Services at 1-800-225-1581 for wiring instructions. Any commercial bank can transfer same-day funds by wire. The fund will normally accept wired funds for investment on the day received if they are received by the funds designated bank before the close of regular trading on the NYSE. Your bank may charge you for wiring same-day funds. Although the funds designated bank does not currently charge you for receiving same-day funds, it reserves the right to charge for this service. You cannot buy shares for tax-qualified retirement plans by wire transfer. 22 P R O S P E C T U S WHICH CLASS OF SHARES IS BEST FOR ME? This prospectus offers you four classes of fund shares: A, B, C and M. Qualified employee-benefit plans may also choose class R shares, and certain investors described below may also choose class Y shares. Each share class represents investments in the same portfolio of securities, but each class has its own sales charge and expense structure, allowing you and your financial representative to choose the class that best suits your investment needs. When you purchase shares of a fund, you must choose a share class. Deciding which share class best suits your situation depends on a number of factors that you should discuss with your financial representative, including: * How long you expect to hold your investment. Class B shares should generally not be considered for shorter time frames because they charge a contingent deferred sales charge (CDSC) that is phased out over the first six years. * How much you intend to invest. While investments of less than $100,000 can be made in any share class, classes A and M offer sales charge discounts starting at $50,000. * Total expenses associated with each share class. As shown in the section entitled Costs associated with your investment, each share class offers a different combination of up-front and ongoing expenses. Generally, the lower the up-front sales charge, the greater the ongoing expenses. </R> Here is a summary of the differences among the classes of shares: Class A shares * Initial sales charge of up to 5.25% * Lower sales charges available for investments of $50,000 or more * No deferred sales charge (except on certain redemptions of shares bought without an initial sales charge) <R> * Lower annual expenses, and higher dividends, than class B, C or M shares because of lower 12b-1 fees. </R> 23 P R O S P E C T U S Class B shares * No initial sales charge; your entire investment goes to work immediately * Deferred sales charge of up to 5.00% if shares are sold within six years of purchase * Higher annual expenses, and lower dividends, than class A or M shares because of higher 12b-1 fees * Convert automatically to class A shares after eight years, thereby reducing the future 12b-1 fees <R> * Orders for class B shares of one or more Putnam funds will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class A shares (as described below), is $100,000 or more. Investors considering cumulative purchases of $100,000 or more should consider whether class A shares would be more advantageous and consult their financial representative. </R> Class C shares * No initial sales charge; your entire investment goes to work immediately * Deferred sales charge of 1.00% if shares are sold within one year of purchase * Higher annual expenses, and lower dividends, than class A or M shares because of higher 12b-1 fees * No conversion to class A shares, so future 12b-1 fees do not decline over time <R> * Orders for class C shares of one or more Putnam funds, other than class C shares sold to qualified employee-benefit plans, will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class A shares (as described below), is $1,000,000 or more. Investors considering cumulative purchases of $1,000,000 or more should consider whether class A shares would be more advantageous and consult their financial representative. </R> 24 P R O S P E C T U S Class M shares * Initial sales charge of up to 3.25% * Lower sales charges available for investments of $50,000 or more * No deferred sales charge (except on certain redemptions of shares bought without an initial sales charge) * Lower annual expenses, and higher dividends, than class B or C shares because of lower 12b-1 fees * Higher annual expenses, and lower dividends, than class A shares because of higher 12b-1 fees * No conversion to class A shares, so future 12b-1 fees do not decline over time <R> * Orders for class M shares of one or more Putnam funds, other than class M shares sold to qualified employee-benefit plans, will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class M shares (as described below), is $1,000,000 or more. Investors considering cumulative purchases of $1,000,000 or more should consider whether class A shares would be more advantageous and consult their financial representative. </R> Class R shares (available to qualified plans only) * No initial sales charge; your entire investment goes to work immediately * No deferred sales charge * Lower annual expenses, and higher dividends, than class B, C or M shares because of lower 12b-1 fees * Higher annual expenses, and lower dividends, than class A shares because of higher 12b-1 fees <R> * No conversion to class A shares, so future 12b-1 fees do not decline over time. </R> 25 P R O S P E C T U S Class Y shares (available only to investors listed below) The following investors may purchase class Y shares if approved by Putnam: <R> * qualified retirement plans that are clients of third-party administrators (including affiliates of Putnam) that have entered into agreements with Putnam and offer institutional share class pricing (no sales charge or 12b-1 fee); </R> * bank trust departments and trust companies that have entered into agreements with Putnam and offer institutional share class pricing to their clients; * corporate IRAs administered by Putnam, if another retirement plan of the sponsor is eligible to purchase class Y shares; * college savings plans that qualify for tax-exempt treatment under Section 529 of the Internal Revenue Code; <R> * other Putnam funds and Putnam investment products; * investors purchasing shares through an asset-based fee program which regularly offers institutional share classes and which is sponsored by a registered broker-dealer or other financial institution that has entered into an agreement with Putnam; and * fee-paying clients of a registered investment advisor (RIA) who initially invests for clients an aggregate of at least $100,000 in Putnam funds through a fund supermarket or other mutual fund trading platform sponsored by a broker-dealer or trust company of which the RIA is not an affiliated or associated person and which has entered into an agreement with Putnam. Trust companies or bank trust departments that purchased class Y shares for trust accounts may transfer them to the beneficiaries of the trust accounts, who may continue to hold them or exchange them for class Y shares of other Putnam funds. Defined contribution plans (including corporate IRAs) that purchased class Y shares under prior eligibility criteria may continue to purchase class Y shares. </R> 26 P R O S P E C T U S * No initial sales charge; your entire investment goes to work immediately * No deferred sales charge <R> * Lower annual expenses, and higher dividends, than class A, B, C, M or R shares because of no 12b-1 fees. Initial sales charges for class A and M shares * Because of rounding in the calculation of offering price and the number of shares purchased, actual sales charges you pay may be more or less than these percentages. ** Offering price includes sales charge. Reducing your class A or class M sales charge The fund offers two principal ways for you to qualify for discounts on initial sales charges on class A and class M shares, often referred to as breakpoint discounts: * Right of accumulation. You can add the amount of your current purchases of class A or class M shares of the fund and other Putnam funds to the value of your existing accounts in the fund and other Putnam funds. Individuals can also include purchases by, and accounts owned by, their spouse and minor children, including accounts established through different financial representatives. For your current purchases, you will pay the initial sales charge applicable to the total value of the linked accounts and purchases, which may be lower than the sales charge otherwise applicable to each of your current purchases. Shares of Putnam money market funds, other than money market fund shares acquired by exchange from other Putnam funds, are not included for purposes of the right of accumulation.
</R> 27 P R O S P E C T U S To calculate the total value of your existing accounts and any linked accounts, the fund will use the current maximum public offering price of those shares. <R> * Statement of intention. A statement of intention is a document in which you agree to make purchases of class A or class M shares in a specified amount within a period of 13 months. For each purchase you make under the statement of intention you will pay the initial sales charge applicable to the total amount you have agreed to purchase. While a statement of intention is not a binding obligation on you, if you do not purchase the full amount of shares within 13 months, the fund will redeem shares from your account in an amount equal to the higher initial sales charge you would have paid in the absence of the statement of intention. </R> Account types that may be linked with each other to obtain breakpoint discounts using the methods described above include: * Individual accounts * Joint accounts * Accounts established as part of a retirement plan and IRA accounts (some restrictions may apply) <R> * Shares of Putnam funds owned through accounts in the name of your dealer or other financial intermediary (with documentation identifying beneficial ownership of shares) </R> * Accounts held as part of a Section 529 college savings plan managed by Putnam Management (some restrictions may apply) <R> In order to obtain a breakpoint discount, you should inform your financial representative at the time you purchase shares of the existence of other accounts or purchases that are eligible to be linked for the purpose of calculating the initial sales charge. The fund or your financial representative may ask you for records or other information about other shares held in your accounts and linked accounts, including accounts opened with a different financial representative. Restrictions may apply to certain accounts and transactions. Further details about breakpoint discounts can be found on Putnam Investments website at www.putnam.com/individual by selecting Mutual Funds, and in the SAI. 28 P R O S P E C T U S * Additional reductions and waivers of sales charges. In addition to the breakpoint discount methods described above, sales charges may be reduced or waived under certain circumstances and for certain categories of investors. For instance, an employer-sponsored retirement plan is eligible to purchase class A shares without sales charges if its plan administrator or dealer of record has entered into an agreement with Putnam Retail Management or it invests at least $1 million in class A shares of the fund or other Putnam funds. Information about reductions and waivers of sales charges, including deferred sales charges, is included in the SAI. You may consult your financial representative or Putnam Retail Management
for assistance. How do I sell or exchange fund shares? You can sell your shares back to the fund or exchange them for shares of the same class of another Putnam fund any day the NYSE is open, either through your financial representative or directly to the fund. (See Policy on excessive short-term trading regarding sales or exchanges made within 7 days of purchase.) Payment for redemption may be delayed until the fund collects the purchase price of shares, which may be up to 10 calendar days after the purchase date. Regarding exchanges, not all Putnam funds offer all classes of shares or may be open to new investors. If you exchange shares subject to a deferred sales charge, the transaction will not be subject to the deferred sales charge. When you redeem the shares acquired through the exchange, however, the redemption may be subject to the deferred sales charge, depending upon when you originally purchased the shares. The deferred sales charge will be computed using the schedule of any fund into or from which you have exchanged your shares that would result in your paying the highest deferred sales charge applicable to your class of shares. For purposes of computing the deferred sales charge, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any subsequent exchanges among funds. 29 P R O S P E C T U S * Selling or exchanging shares through your financial representative. Your representative must receive your request in proper form before the close of regular trading on the NYSE for you to receive that days NAV, less any applicable deferred sales charge and short-term trading fee. Your representative will be responsible for furnishing all necessary documents to Putnam Investor Services on a timely basis and may charge you for his or her services. * Selling or exchanging shares directly with the fund. Putnam Investor Services must receive your request in proper form before the close of regular trading on the NYSE in order to receive that days NAV, less any applicable sales charge and short-term trading fee. By mail. Send a letter of instruction signed by all registered owners or their legal representatives to Putnam Investor Services. If you have certificates for the shares you want to sell or exchange, you must return them unendorsed with your letter of instruction. By telephone. You may use Putnams telephone redemption privilege to redeem shares valued at less than $100,000 unless you have notified Putnam Investor Services of an address change within the preceding 15 days, in which case other requirements may apply. Unless you indicate otherwise on the account application, Putnam Investor Services will be authorized to accept redemption instructions received by telephone. A telephone exchange privilege is currently available for amounts up to $500,000. Sale or exchange of shares by telephone is not permitted if there are certificates for your shares. The telephone redemption and exchange privileges may be modified or terminated without notice. Via the Internet. You may also exchange shares via the Internet at www.putnam.com. Ask your financial representative or Putnam Investor Services for prospectuses of the Putnam funds. Some Putnam funds are not available in all states. </R> * Shares held through your employers retirement plan. For information on how to sell or exchange shares of the fund that were purchased through your employers retirement plan, including any restrictions and charges that the plan may impose, please consult your employer. 30 P R O S P E C T U S * Additional requirements. In certain situations, for example, if you sell shares with a value of $100,000 or more, the signatures of all registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. In addition, Putnam Investor Services usually requires additional documents for the sale of shares by a corporation, partnership, agent or fiduciary, or surviving joint owner. For more information concerning Putnams signature guarantee and documentation requirements, contact Putnam Investor Services. The fund also reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. The fund into which you would like to exchange may also reject your exchange. These actions may apply to all shareholders or only to those shareholders whose exchanges Putnam Management determines are likely to have a negative effect on the fund or other Putnam funds. Consult Putnam Investor Services before requesting an exchange. Ask your financial representative or Putnam Investor Services for prospectuses of other Putnam funds. Some Putnam funds are not available in all states. Deferred sales charges for class B, class C and certain class A and class M shares If you sell (redeem) class B shares within six years of purchase, you will generally pay a deferred sales charge according to the following schedule. A deferred sales charge of 1.00% will apply to class C shares if redeemed within one year of purchase. Unless otherwise agreed with Putnam Retail Management, class A shares that are part of a purchase of $1 million or more (other than by a qualified retirement plan) will be subject to a 1.00% deferred sales charge if redeemed within 18 months of purchase. A deferred sales charge of 0.65% may apply to class M shares purchased without a sales charge for certain rollover IRA accounts if redeemed within one year of purchase. 31 P R O S P E C T U S Deferred sales charges will be based on the lower of the shares cost and current NAV. Shares not subject to any charge will be redeemed first, followed by shares held longest. You may sell shares acquired by reinvestment of distributions without a charge at any time. * Payment information. The fund generally sends you payment for your shares the business day after your request is received. Under unusual circumstances, the fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. You will not receive interest on uncashed redemption checks. </R> Policy on excessive short-term trading <R> * Risks of excessive short-term trading. Excessive short-term trading activity may reduce the funds performance and harm all fund shareholders by interfering with portfolio management, increasing the funds expenses and diluting the funds net asset value. Depending on the size and frequency of short-term trades in the funds shares, the fund may experience increased cash volatility, which could require the fund to maintain undesirably large cash positions or buy or sell portfolio securities it would not have bought or sold. The need to execute additional portfolio transactions due to these cash flows may also increase the funds brokerage and administrative costs and, for investors in taxable accounts, may increase the taxable distributions received from th
e fund. When the fund invests in foreign securities, its performance may be adversely impacted and the interests of longer-term shareholders may be diluted as a result of time-zone arbitrage, a short-term trading practice that seeks to exploit changes in the value of the funds investments that result from events occurring after the close of the foreign markets on which the investments trade, but prior to the later close of trading on the NYSE, the time as of which the fund determines its net asset value. If an arbitrageur is successful, he or she may dilute the interests of other shareholders by trading shares at prices that do not fully reflect their fair value. 32 P R O S P E C T U S Because the fund invests in securities that may trade infrequently or may be more difficult to value, such as securities of smaller companies, it may be susceptible to trading by short-term traders who seek to exploit perceived price inefficiencies in the funds investments. In addition, the market for securities of smaller companies may at times show market momentum, in which positive or negative performance may continue from one day to the next for reasons unrelated to the fundamentals of the issuer. Short-term traders may seek to capture this momentum by trading frequently in the funds shares, which will reduce the funds performance and may dilute the interests of other shareholders. Because securities of smaller companies may be less liquid than securities of larger companies, the fund may also be unable to buy or sell these securities at desirable prices when the need arises (for example, in response t
o volatile cash flows caused by short-term trading). Similar risks may apply if the fund holds other types of less liquid securities, including below investment grade bonds. </R> * Fund policies. In order to protect the interests of long-term shareholders of the fund, Putnam Management and the funds Trustees have adopted policies and procedures intended to discourage excessive short-term trading. The fund seeks to discourage excessive short-term trading by imposing short-term trading fees and using fair value pricing procedures to value investments under some circumstances. In addition, Putnam Management monitors activity in shareholder accounts about which it possesses the necessary information in order to detect excessive short-term trading patterns and takes steps to deter excessive short-term traders. <R> * Short-term trading fee. The fund will impose a short-term trading fee of 1.00% of the total redemption amount (calculated at market value) if you sell or exchange your shares after holding them for 7 days or less (including if you purchased the shares by exchange). The short-term trading fee is paid directly to the fund and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading. The short-term trading fee will not apply in certain circumstances, such as redemptions in the event of shareholder death or post-purchase disability, redemptions from certain omnibus accounts, redemptions made as part of a systematic withdrawal plan, and redemptions in connection with periodic portfolio rebalancings 33 P R O S P E C T U S of
certain wrap accounts or automatic rebalancing arrangements entered into by
Putnam Retail Management and a dealer. The fee will not apply to shares sold or
exchanged by a Section 529 college savings plan or a Putnam fund-of-funds, or to
redemptions for the purpose of paying benefits pursuant to tax-qualified
retirement plans. In addition, for investors in defined contribution plans
administered by Putnam or a Putnam affiliate, the short-term trading fee applies
only to exchanges of shares purchased by exchange, and will not apply to
redemptions to pay distributions or loans from such plans, redemptions of shares
purchased directly with contributions by a plan participant or sponsor and
redemptions of shares purchased in connection with loan repayments. These
exceptions may also apply to defined contribution plans administered by third
parties that assess the funds short-term trading fee. For purposes of
determining whether the short-term trading fee applies, the shares that were
held the longest will be redeemed first. Some financial intermediaries,
retirement plan sponsors or recordkeepers that hold omnibus accounts with the
fund are currently unable or unwilling to assess the funds short-term trading
fee. Some of these firms use different systems or criteria to assess fees that
are currently higher than, and in some cases in addition to, the funds
short-term trading fee. *
Account
monitoring. Putnam Managements Compliance Department currently uses multiple
reporting tools to monitor activity in retail customer accounts for which Putnam
Investor Services maintains records. This review is based on the funds internal
parameters for detecting excessive short-term trading, which consider the number
of round trip transactions above a specified dollar amount within a specified
period of time. These parameters may change from time to time. If a monitored
account engages in short-term trading that Putnam Management or the fund
considers to be excessive or inappropriate, Putnam Management will issue the
investor and his or her financial intermediary, if any, a written warning.
Continued excessive short-term trading activity by an investor or intermediary
that has received a warning may lead to the termination of the exchange
privilege. The fund also reserves the right to terminate the exchange privilege
without a warning. In addition, 34
P R O S P E
C T U S Putnam
Management will also communicate instances of excessive short-term trading to
the compliance staff of an investors broker, if one is identified. *
Account
restrictions. In addition to enforcing these exchange parameters, Putnam Management and
the fund reserve the right to reject or restrict purchases or exchanges for any
reason. Putnam Management or the fund may determine that an investors trading
activity is excessive or otherwise potentially harmful based on various factors,
including an investors or financial intermediarys trading history in the fund,
other Putnam funds or other investment products, and may aggregate activity in
multiple accounts under common ownership or control. If the fund identifies an
investor or intermediary as a potential excessive trader, it may, among other
things, require further trades to be submitted by mail rather than by phone or
over the Internet, impose limitations on the amount, number, or frequency of
future purchases or exchanges, or temporarily or permanently bar the investor or
intermediary from investing in the fund or other Putnam funds. The fund may take
these steps in its discretion even if the investors activity may not have been
detected by the funds current monitoring parameters. *
Limitations on the funds policies. There is no
guarantee that the fund will be able to detect excessive short-term trading in
all accounts. For example, Putnam Management currently does not have access to
sufficient information to identify each investors trading history, and in
certain circumstances there are operational or technological constraints on its
ability to enforce the funds policies. In addition, even when Putnam Management
has sufficient information, its detection methods may not capture all excessive
short-term trading. In
particular, many purchase, redemption and exchange orders are received from
financial intermediaries that hold omnibus accounts with the fund. Omnibus
accounts, in which shares are held in the name of an intermediary on behalf of
multiple benefi-cial owners, are a common form of holding shares among
retirement plans and financial intermediaries such as brokers, advisers and
third-party administrators. The fund is generally not able to 35
P R O S P E
C T U S identify trading by a particular beneficial owner within an omnibus
account, which makes it difficult or impossible to determine if a particular
shareholder is engaging in excessive short-term trading. Putnam Management
monitors aggregate cash flows in omnibus accounts on an ongoing basis. If high
cash flows or other information indicate that excessive short-term trading may
be taking place, Putnam Management will contact the financial intermediary, plan
sponsor or recordkeeper that maintains accounts for the underlying beneficial
owner and attempt to identify and remedy any excessive trading. However, the
funds ability to monitor and deter excessive short-term traders in omnibus
accounts ultimately depends on the capabilities and cooperation of these
third-party financial firms. A financial intermediary or plan sponsor may impose
different or additional limits on short-term trading. Distribution plans and payments to dealers Putnam
funds are distributed primarily through dealers (including any broker, dealer,
bank, bank trust department, registered investment representative, financial
planner, retirement plan administrator, and any other institution having
selling, services, or any similar agreement with Putnam Retail Management or one
of its affiliates). In order to pay for the marketing of fund shares and
services provided to shareholders, the fund has adopted distribution (12b-1)
plans, which increase the annual operating expenses you pay each year in certain
share classes, as described in the section Costs associated
with your investment. Putnam Retail Management
and its affiliates also make additional payments to dealers that do not increase
your fund expenses, as described below. *
Distribution (12b-1) plans. The funds 12b-1 plans
provide for payments at annual rates (based on average net assets) of up to
0.35% on class A shares and 1.00% on class B, class C, class M and class R
shares. The Trustees currently limit payments on class A, class M and class R
shares to 0.25%, 0.75% and 0.50% of average net assets, respectively. Because
these fees are paid out of the funds assets on an ongoing basis, they will
increase the cost 36
P R O S P E
C T U S of your investment. The higher fees for class B, class C, class M and class R shares may cost you more than paying the initial sales charge for class A shares. Because class C and class M shares, unlike class B shares, do not convert to class A shares, class C and class M shares may cost you more over time than class B shares. Class R shares will generally be less expensive than class B shares for shareholders who are eligible to purchase either class. Class Y shares, for shareholders who are eligible to purchase them, will be less expensive than other classes of shares because they do not bear sales charges or 12b-1 fees. * Payments to dealers. If you purchase your shares through a dealer, your dealer generally receives payments from Putnam Retail Management representing some or all of the sales charges and distribution (12b-1) fees, if any, shown in the tables under the heading Costs associated with your investment at the front of this prospectus. Putnam Retail Management and its affiliates also pay additional compensation to selected dealers in recognition of their marketing support and/or program servicing (each of which is described in more detail below). These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the fund or other Putnam funds to its customers. These additional payments are made by Putnam Retail Management and its affili-ates and do not increase the amount paid by you or the fund as shown under the heading Costs associated with your investment. The additional payments to dealers by Putnam Retail Management and its affiliates are generally based on one or more of the following factors: average net assets of a fund attributable to that dealer, sales or net sales of a fund attributable to that dealer, or reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in fund shares), or on the basis of a negotiated lump sum payment for services provided. Marketing support payments, which are generally available to most dealers engaging in significant sales of Putnam fund shares, are not expected, with certain limited exceptions, to exceed 0.085% of the average assets of Putnams retail mutual funds attributable to that dealer on an annual basis. These payments 37 P R O S P E C T U S are
made for marketing support services provided by the dealers, including business
planning assistance, educating dealer personnel about the Putnam funds and
shareholder financial planning needs, placement on the dealers preferred or
recommended fund company list, and access to sales meetings, sales
representatives and management representatives of the dealer. Program servicing payments, which are paid in some
instances to dealers in connection with investments in the fund by retirement
plans and other investment programs, are not expected, with certain limited
exceptions, to exceed 0.20% of the total assets in the program on an annual
basis. These payments are made for program services provided by the dealer,
including participant recordkeeping, reporting, or transaction processing, as
well as services rendered in connection with fund/investment selection and
monitoring, employee enrollment and education, plan balance rollover or
separation, or other similar services. Other payments. Putnam Retail Management
and its affiliates may make other payments (including payments in connection
with educational seminars or conferences) or allow other promotional incentives
to dealers to the extent permitted by SEC and NASD rules and by other applicable
laws and regulations. Certain dealers also receive additional payments from the
funds transfer agent in recognition of subaccounting or other services they
provide to shareholders or plan participants who invest in the fund or other
Putnam funds through their retirement plan. These payments are not expected,
with certain exceptions for affiliated and unaffiliated entities noted in the
SAI, to exceed 0.13% of the total assets of such shareholders or plan
participants in the fund or other Putnam funds on an annual basis. See the
discussion in the SAI under the heading Management Investor Servicing Agent
and Custodian for more details. You
can find a list of all dealers to which Putnam made marketing support and/or
program servicing payments in 2006 in the SAI, which is on file with the SEC and
is also available on Putnams website at www.putnam.com. You can also find other
details in the SAI about the payments made by Putnam Retail Management and its
affiliates and the services provided by your dealer. Your dealer may charge you
38
P R O S P E
C T U S fees or commissions in addition to those disclosed in this prospectus. You can also ask your dealer about any payments it receives from Putnam Retail Management and its affiliates and any services your dealer provides, as well as about fees and/or commissions it charges. </R> Fund distributions and taxes <R> The fund normally distributes any net investment income quarterly and any net realized capital gains annually. You may choose to reinvest distributions from net investment income, capital gains or both in additional shares of this fund or other Putnam funds, or you may receive them in cash in the form of a check or an electronic deposit to your bank account. If you do not select an option when you open your account, all distributions will be reinvested. If you choose to receive distributions in cash, but correspondence from the fund or Putnam Investor Services is returned as undeliverable, the distribution option on your account may be converted to reinvest future distributions. You will not receive any interest on uncashed distribution checks. </R> For shares purchased through your employers retirement plan, the terms of the plan will govern how the plan may receive distributions from the fund. Generally, periodic distributions from the fund to the plan are reinvested in additional fund shares, although the plan may permit you to receive fund distributions from net investment income in cash while reinvesting capital gains distributions in additional shares or to receive all fund distributions in cash. If you do not select another option, all distributions will be reinvested in additional fund shares. <R> Unless you are investing through a tax-deferred retirement account (such as an IRA), you should consider avoiding a purchase of fund shares shortly before the fund makes a distribution, because doing so may cost you money in taxes. Contact your financial representative or Putnam to find out the distribution schedule for your fund. For federal income tax purposes, distributions of investment income are taxable as ordinary income. Taxes on distributions of capital gains are determined by how long the fund owned the investments that generated them, rather than by 39 P R O S P E C T U S how long you have owned your shares. Distributions are taxable to you even if they are paid from income or gains earned by the fund before your investment (and thus were included in the price you paid). Properly designated distributions of gains from investments that the fund owned for more than one year are taxable as long-term capital gains. Distributions of gains from investments that the fund owned for one year or less and gains on the sale of bonds characterized as market discount are taxable as ordinary income. Properly designated distributions of qualified dividend income are taxable at the rate applicable to long-term capital gains provided that both you and the fund meet certain holding period and other requirements. Distributions are also taxable whether you receive them in cash or reinvest them in additional shares of this fund or other Putnam funds. Distributions by the fund to retirement plans that qualify for tax-exempt treatment under federal income tax laws will not be taxable. Special tax rules apply to investments through such plans. You should consult your tax advisor to determine the suitability of the fund as an investment through such a plan and the tax treatment of distributions (including distributions of amounts attributable to an investment in the fund) from such a plan. </R> The funds investments in certain debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. <R> The funds investments in foreign securities, if any, may be subject to foreign withholding taxes. In that case, the funds return on those investments would be decreased. Shareholders generally will not be entitled to claim a credit or deduction with respect to foreign taxes. In addition, the funds investment in foreign securities or foreign currencies may increase or accelerate the funds recognition of ordinary income and may affect the timing or amount of the funds distributions. The funds use of derivatives, if any, may affect the amount, timing, and character of distributions to shareholders and, therefore, may increase the amount of taxes payable by shareholders. </R> 40 P R O S P E C T U S Any gain resulting from the sale or exchange of your shares will generally also be subject to tax. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes. Financial highlights <R> The financial highlights tables are intended to help you understand the funds recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from the funds financial statements, which have been audited by PricewaterhouseCoopers LLP. Its report and the funds financial statements are included in the funds annual report to shareholders, which is available upon request. 41 P R O S P E C T U S Financial highlights (For a common share outstanding throughout the period) See notes to financial highlights at the end of this section. Financial highlights (Continued) * Not annualized </R> For the period January 21, 2003 (commencement of operations) to July 31, 2003. (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period. <R> (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. </R> (c) Includes amounts paid through expense offset and brokerage service arrangements. <R> (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of each class reflect a reduction of the following amounts: (e) Reflects a non-recurring reimbursement from Putnam Investments relating to the calculation of certain amounts paid by the fund to Putnam in previous years for transfer agent services, which amounted to $0.01 per share and 0.05% of average net assets for the period ended July 31, 2006. (f) Reflects a non-recurring accrual related to Putnam Managements settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts: </R> (g) Amount represents less than $0.01 per share. (h) Portfolio turnover excludes dollar roll transactions. (i) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (j) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. 44 P R O S P E C T U S Make the most of your Putnam privileges The following services are available to you as a Putnam mutual fund shareholder. * SYSTEMATIC INVESTMENT PLAN Invest as much as you wish. The amount you choose will be automatically transferred weekly, semi-monthly or monthly from your checking or savings account. * SYSTEMATIC WITHDRAWAL Make regular withdrawals monthly, quarterly, semi annually, or annually from your Putnam mutual fund account. * SYSTEMATIC EXCHANGE Transfer assets automatically from one Putnam account to another on a regular, prearranged basis. * EXCHANGE PRIVILEGE Exchange money between Putnam funds in the same class of shares. The exchange privilege allows you to adjust your investments as your objectives change. A signature guarantee is required for exchanges of more than $500,000 and shares of all Putnam funds may not be available to all investors. A 1.00% short-term trading fee may apply to exchanges of fund shares that are made within the applicable holding period. For certain global, international, high-yield, and small-cap funds, the fee will apply to shares held for 90 days or less. For other Putnam funds (other than money market funds), the fee will apply to shares held for seven days or less. Please read the prospectus of the applicable fund for more details. Investors may not maintain, within the same fund, simultaneous plans for systematic investment or exchange (into the fund) and systematic withdrawal or exchange (out of the fund). These privileges are subject to change or termination. Many of these services can be accessed online at www.putnam.com. For more information about any of these services and privileges, call your financial advisor or a Putnam customer service representative toll free at 1-800-225-1581. 45 P R O S P E C T U S Putnam Family of Fundsa The
following is a complete list of Putnams open-end mutual funds offered to the
public. Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest or
send money. PUTNAM
GROWTH FUNDS PUTNAM
BLEND FUNDS PUTNAM
VALUE FUNDS PUTNAM
INCOME FUNDS 46
P R O S P E
C T U S PUTNAM INCOME FUNDS (cont.) PUTNAM TAX-FREE INCOME FUNDS Putnam State Tax-Free Income Fundsd Arizona, California, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio and Pennsylvania PUTNAM ASSET ALLOCATION FUNDS Putnam Income Strategies Fund Putnam Asset Allocation Funds three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments. The three portfolios: PUTNAM RETIREMENTREADY® FUNDS Putnam RetirementReady Funds ten investment portfolios that offer diversification among stocks, bonds and money market instruments and adjust to become more conservative over time based on a target date for withdrawing assets. Putnam RetirementReady 2050 Fund a As of 9/30/07. b Closed to new investors. c An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although these funds seek to preserve your investment at $1.00 per share, it is possible to lose money by investing in such funds. d Not available in all states. 47 P R O S P E C T U S For more information The funds SAI and annual and semi-annual reports to shareholders include additional information about the fund. The SAI, and the independent registered public accounting firms report and the financial statements included in the funds most recent annual report to its shareholders, are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The funds annual report discusses the market conditions and investment strategies that significantly affected the funds performance during its last fiscal year. You may get free copies of these materials, request other information about any Putnam fund, or make shareholder inquiries, by contacting your financial representative, by visiting Putnams website at www.putnam.com/individual, or by calling Putnam toll-free at 1-800-225-1581. You may review and copy information about a fund, including its SAI, at the Securities and Exchange Commissions Public Reference Room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the Public Reference Room. You may also access reports and other information about the fund on the EDGAR Database on the Commissions website at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commissions Public Reference Section, Washington, D.C. 20549-0102. You may need to refer to the funds file number. </R>
<R> One Post Office Square </R> <R> 248219 11/07 The George Putnam Fund of Boston FORM N-1A STATEMENT OF ADDITIONAL INFORMATION ("SAI") <R> 11/30/07 This SAI is not a prospectus. If the fund has more than one form of current prospectus, each reference to the prospectus in this SAI shall include all of the fund's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. Certain disclosure has been incorporated by reference from the fund's annual report. For a free copy of the fund's annual report or a prospectus dated 11/30/07, as revised from time to time, call Putnam Investor Services at 1-800-225-1581, visit Putnam's website at www.putnam.com or write Putnam Investor Services, P.O. Box 8383, Boston, MA 02266-8383. </R> Part I of this SAI contains specific information about the fund. Part II includes information about the fund and the other Putnam funds. 502090
As filed with the Securities and Exchange Commission on
<R>
November 26, 2007
</R>
Registration No. 2-10816
811-00058
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ X /
----
----
Pre-Effective Amendment No.
/ /
----
----
<R>
Post-Effective Amendment No. 97
/ X /
</R>
and/or
----
----
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
/ X /
ACT OF 1940
----
----
<R>
Amendment No. 31
/ X /
</R>
(Check appropriate box or boxes)
----
---------------
THE GEORGE PUTNAM FUND OF BOSTON
(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
--------------
It is proposed that this filing will become effective
(check appropriate box)
----
/ /
immediately upon filing pursuant to paragraph (b)
----
----
<R>
/ X /
on November 30, 2007 pursuant to paragraph (b)
</R>
----
----
/ /
60 days after filing pursuant to paragraph (a)(1)
----
----
/ /
on (date) pursuant to paragraph (a)(1)
----
----
/ /
75 days after filing pursuant to paragraph (a)(2)
----
----
/ /
on (date) pursuant to paragraph (a)(2) of Rule 485.
----
If appropriate, check the following box:
----
/ /
this post-effective amendment designates a new
----
effective date for a previously filed post-effective amendment.
-----------------------
BETH S. MAZOR, Vice President
THE GEORGE PUTNAM FUND OF BOSTON
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
---------------
Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY LLP
One International Place
Boston, Massachusetts 02110
Putnam Fund
of Boston
11 | 30 | 07
Prospectus
CONTENTS
<R>
Fund summary
2
Goal
2
Main investment strategies.
2
Main risks
2
Investor profile
3
Past performance
3
Costs associated with your investment.
5
What are the funds main investment
strategies and related risks?
8
Who oversees and manages the fund?
15
How does the fund price its shares?
19
How do I buy fund shares?
21
How do I sell or exchange
fund shares?
29
Policy on excessive short-term trading.
32
Distribution plans and payments
to dealers
36
Fund distributions and taxes
39
Financial highlights
41
</R>
Past
Past
Past
1 year
5 years
10 years
Class A before taxes
6.38%
5.20%
6.61%
Class A after taxes on distributions
3.84%
3.96%
4.78%
Class A after taxes on distributions
and sale of fund shares
5.42%
3.88%
4.72%
Class B before taxes
6.35%
5.23%
6.38%
Class C before taxes
10.41%
5.54%
6.38%
Class M before taxes
7.97%
5.11%
6.31%
Class R before taxes
11.95%
6.09%
6.92%
Class Y before taxes
12.51%
6.62%
7.46%
S&P 500/Citigroup Value Index
(no deduction for fees, expenses or taxes)
20.80%
10.43%
9.45%
Lehman Aggregate Bond Index
(no deduction for fees, expenses or taxes)
4.33%
5.06%
6.24%
George Putnam Blended Index
(no deduction for fees, expenses or taxes)
14.07%
8.63%
8.54%
Maximum Deferred
Sales Charge (Load)
Maximum Sales
(as a percentage of
Charge (Load)
the original purchase
Maximum
Imposed on Purchases
price or redemption
Redemption Fee***
(as a percentage
proceeds, whichever
(as a percentage of total
of the offering price)
is lower)
redemption proceeds)
Class A
5.25%
NONE**
1.00%
Class B
NONE
5.00%
1.00%
Class C
NONE
1.00%
1.00%
Class M
3.25%
NONE**
1.00%
Class R
NONE
NONE
1.00%
Class Y
NONE
NONE
1.00%
Total Annual
Management
Distribution
Other
Fund Operating
Fees
(12b-1) Fees
Expenses^
Expenses
Class A
0.49%
0.25%
0.22%
0.96%
Class B
0.49%
1.00%
0.22%
1.71%
Class C
0.49%
1.00%
0.22%
1.71%
Class M
0.49%
0.75%
0.22%
1.46%
Class R
0.49%
0.50%
0.22%
1.21%
Class Y
0.49%
N/A
0.22%
0.71%
1 year
3 years
5 years
10 years
Class A
$618
$815
$1,028
$1,641
Class B
$674
$839
$1,128
$1,821*
Class B (no redemption)
$174
$539
$ 928
$1,821*
Class C
$274
$539
$ 928
$2,019
Class C (no redemption)
$174
$539
$ 928
$2,019
Class M
$469
$772
$1,096
$2,015
Class R
$123
$384
$ 665
$1,466
Class Y
$ 73
$227
$ 395
$ 883
<R>
2007
2006
2005
2004
2003
The George Putnam
Fund of Boston
144%
117%
169%
166%
121%
Lipper Balanced Funds Average*
68%
70%
72%
74%
81%
<R>
Address correspondence
to:
The
Putnam Funds Trustees
One Post Office
Square
Boston, MA 02109
Joined
Positions Over
Portfolio Leader
Fund
Employer
Past Five Years
Jeanne Mockard
2000
Putnam Management
Senior Portfolio Manager
1985 Present
Joined
Positions Over
Portfolio Members
Fund
Employer
Past Five Years
Geoffrey Kelley
2006
Putnam Management
Portfolio Manager
1994 Present
Previously, Quantitative
Portfolio Specialist
Jeffrey Knight
2001
Putnam Management
Chief Investment Officer,
1993 Present
Global Asset Allocation Team
Previously, Director, Global
Asset Allocation Team
Raman Srivastava
2004
Putnam Management
Portfolio Manager
1999 Present
Previously, Portfolio Construction
Specialist; Quantitative Analyst
Fund
All Putnam funds
Putnam employees
$7,068,000
$446,000,000
Trustees
$ 951,000
$ 92,000,000
P.O. Box 8383
Boston, MA 02266-8383
Class A sales charge
Class M sales charge
as a percentage of*:
as a percentage of*:
Amount of purchase
Net amount
Offering
Net amount
Offering
at offering price ($)
invested
price**
invested
price**
Under 50,000
5.54%
5.25%
3.36%
3.25%
50,000 but under 100,000
4.17
4.00
2.30
2.25
100,000 but under 250,000
3.09
3.00
1.27
1.25
250,000 but under 500,000
2.30
2.25
1.01
1.00
500,000 but under 1,000,000
2.04
2.00
1.01
1.00
1,000,000 and above
NONE
NONE
NONE
NONE
<R>
Year after purchase
1
2
3
4
5
6
7+
Charge
5%
4%
3%
3%
2%
1%
0%
INVESTMENT OPERATIONS:
LESS DISTRIBUTIONS:
RATIOS AND SUPPLEMENTAL DATA:
Net
Total
Ratio of net
Net asset
realized and
Total
From
From
Net asset
return
Net
Ratio of
investment
value,
Net
unrealized
from
net
net realized
value,
at net
assets,
expenses to
income (loss)
Portfolio
beginning
investment
gain (loss) on
investment
investment
gain on
Total
Redemption
end
asset
end of period
average net
to average
turnover
Period ended
of period
income (loss)(a)
investments
operations
income
investments
distributions
fees
of period
value (%)(b)
(in thousands)
assets (%)(c)
net assets (%)
(%)
CLASS A
July 31, 2007
$18.21
.48(d)
1.46
1.94
(.52)
(1.53)
(2.05)
(g)
$18.10
10.99
$3,184,271
.96(d)
2.61(d)
144.33(h)
July 31, 2006
18.40
.42(d,e)
.27
.69
(.50)
(.38)
(.88)
(g)
18.21
3.89(e)
3,155,761
.90(d,e)
2.31(d,e)
117.11(h)
July 31, 2005
16.91
.35(d,f)
1.47
1.82
(.33)
(.33)
(g)
18.40
10.89
3,458,405
.98(d)
1.97(d,f)
169.29(h)
July 31, 2004
15.72
.32(d)
1.20
1.52
(.33)
(.33)
(g)
16.91
9.77
3,322,532
1.00(d)
1.90(d)
165.66
July 31, 2003
15.02
.37
.81
1.18
(.48)
(.48)
15.72
8.06
3,784,601
.99
2.50
121.38(i,j)
CLASS B
July 31, 2007
$18.02
.33(d)
1.46
1.79
(.38)
(1.53)
(1.91)
(g)
$17.90
10.15
$413,532
1.71(d)
1.82(d)
144.33(h)
July 31, 2006
18.22
.28(d,e)
.26
.54
(.36)
(.38)
(.74)
(g)
18.02
3.05(e)
624,026
1.65(d,e)
1.58(d,e)
117.11(h)
July 31, 2005
16.73
.21(d,f)
1.48
1.69
(.20)
(.20)
(g)
18.22
10.17
917,951
1.73(d)
1.22(d,f)
169.29(h)
July 31, 2004
15.56
.19(d)
1.19
1.38
(.21)
(.21)
(g)
16.73
8.88
1,095,665
1.75(d)
1.16(d)
165.66
July 31, 2003
14.87
.26
.80
1.06
(.37)
(.37)
15.56
7.25
1,308,605
1.74
1.75
121.38(i,j)
CLASS C
July 31, 2007
$18.09
.34(d)
1.45
1.79
(.38)
(1.53)
(1.91)
(g)
$17.97
10.16
$69,893
1.71(d)
1.86(d)
144.33(h)
July 31, 2006
18.30
.28(d,e)
.25
.53
(.36)
(.38)
(.74)
(g)
18.09
3.01(e)
70,192
1.65(d,e)
1.56(d,e)
117.11(h)
July 31, 2005
16.81
.21(d,f)
1.48
1.69
(.20)
(.20)
(g)
18.30
10.14
77,024
1.73(d)
1.22(d,f)
169.29(h)
July 31, 2004
15.63
.19(d)
1.20
1.39
(.21)
(.21)
(g)
16.81
8.92
75,185
1.75(d)
1.16(d)
165.66
July 31, 2003
14.94
.26
.80
1.06
(.37)
(.37)
15.63
7.25
91,282
1.74
1.73
121.38(i,j)
CLASS M
July 31, 2007
$18.02
.38(d)
1.45
1.83
(.43)
(1.53)
(1.96)
(g)
$17.89
10.42
$176,993
1.46(d)
2.10(d)
144.33(h)
July 31, 2006
18.22
.33(d,e)
.26
.59
(.41)
(.38)
(.79)
(g)
18.02
3.34(e)
187,338
1.40(d,e)
1.81(d,e)
117.11(h)
July 31, 2005
16.74
.26(d,f)
1.47
1.73
(.25)
(.25)
(g)
18.22
10.39
215,816
1.48(d)
1.47(d,f)
169.29(h)
July 31, 2004
15.57
.23(d)
1.19
1.42
(.25)
(.25)
(g)
16.74
9.18
217,046
1.50(d)
1.40(d)
165.66
July 31, 2003
14.87
.30
.80
1.10
(.40)
(.40)
15.57
7.58
239,662
1.49
2.02
121.38(i,j)
CLASS R
July 31, 2007
$18.15
.44(d)
1.46
1.90
(.48)
(1.53)
(2.01)
(g)
$18.04
10.76
$2,044
1.21(d)
2.38(d)
144.33(h)
July 31, 2006
18.36
.36(d,e)
.27
.63
(.46)
(.38)
(.84)
(g)
18.15
3.57(e)
1,525
1.15(d,e)
2.00(d,e)
117.11(h)
July 31, 2005
16.89
.30(d,f)
1.48
1.78
(.31)
(.31)
(g)
18.36
10.63
726
1.23(d)
1.67(d,f)
169.29(h)
July 31, 2004
15.70
.21(d)
1.29
1.50
(.31)
(.31)
(g)
16.89
9.60
127
1.25(d)
1.33(d)
165.66
July 31, 2003
15.05
.17
.65
.82
(.17)
(.17)
15.70
5.52*
1
.65*
1.18*
121.38(i,j)
CLASS Y
July 31, 2007
$18.26
.53(d)
1.46
1.99
(.57)
(1.53)
(2.10)
(g)
$18.15
11.24
$385,361
.71(d)
2.86(d)
144.33(h)
July 31, 2006
18.46
.47(d,e)
.26
.73
(.55)
(.38)
(.93)
(g)
18.26
4.09(e)
493,985
.65(d,e)
2.59(d,e)
117.11(h)
July 31, 2005
16.95
.40(d,f)
1.49
1.89
(.38)
(.38)
(g)
18.46
11.26
660,532
.73(d)
2.23(d,f)
169.29(h)
July 31, 2004
15.76
.36(d)
1.21
1.57
(.38)
(.38)
(g)
16.95
10.03
848,161
.75(d)
2.16(d)
165.66
July 31, 2003
15.05
.41
.82
1.23
(.52)
(.52)
15.76
8.38
880,435
.74
2.76
121.38(i,j)
42
P R O S P E C T U S
43
P R O S P E C T U S
Percentage
of average
net assets
July 31, 2007
<0.01%
July 31, 2006
0.01
July 31, 2005
0.01
July 31, 2004
<0.01
Percentage
of average
Per share
net assets
Class A
<$0.01
0.02%
Class B
<0.01
0.02
Class C
<0.01
0.02
Class M
<0.01
0.02
Class R
<0.01
0.02
Class Y
<0.01
0.02
<R>
Putnam Discovery Growth Fund
Putnam Growth Opportunities
Fund
Putnam
Health Sciences Trust
Putnam International New
Opportunities Fund
Putnam New Opportunities Fund
Putnam OTC & Emerging
Growth Fund
Putnam Small Cap Growth Fund
Putnam Vista
Fund
Putnam
Voyager Fund
Putnam Capital Appreciation Fund
Putnam Capital Opportunities
Fund
Putnam
Europe Equity Fund
Putnam Global Equity Fund
Putnam Global Natural
Resources Fund
Putnam International Capital Opportunities Fund
Putnam International Equity
Fund
Putnam
Investors Fund
Putnam Research Fund
Putnam Tax Smart Equity
Fund®
Putnam
Utilities Growth and Income Fund
Putnam Classic Equity Fund
Putnam Convertible
Income-Growth Trust
Putnam Equity Income Fund
The George Putnam Fund of
Boston
The
Putnam Fund for Growth and Income
Putnam International Growth
and Income Fund
Putnam Mid Cap Value Fund
Putnam New Value
Fund
Putnam
Small Cap Value Fund
Putnam American Government Income Fund
Putnam Diversified Income
Trust
Putnam
Floating Rate Income Fund
Putnam Global Income
Trust
Putnam
High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam Limited Duration Government Income Fundb
Putnam Money Market Fundc
Putnam U.S. Government Income Trust
Putnam AMT-Free Insured Municipal Fund
Putnam Tax Exempt Income Fund
Putnam Tax Exempt Money Market Fundc
Putnam Tax-Free High Yield Fund
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
Putnam RetirementReady 2045 Fund
Putnam RetirementReady 2040 Fund
Putnam RetirementReady 2035 Fund
Putnam RetirementReady 2030 Fund
Putnam RetirementReady 2025 Fund
Putnam RetirementReady 2020 Fund
Putnam RetirementReady 2015 Fund
Putnam RetirementReady 2010 Fund
Putnam RetirementReady Maturity Fund
about The George Putnam
Fund of Boston
Boston, Massachusetts 02109
1-800-225-1581
Address correspondence to
Putnam Investor Services
P.O. Box 8383
Boston, MA 02266-8383
www.putnam.com
File No. 811-00058
PART B
Table of Contents
PART I
FUND ORGANIZATION AND CLASSIFICATION
I-3
INVESTMENT RESTRICTIONS
I-4
CHARGES AND EXPENSES
I-5
<R>
OTHER ACCOUNTS MANAGED BY THE FUND'S PORTFOLIO MANAGERS
I-14
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL
I-15
STATEMENTS
</R>
PART II
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
II-1
TAXES
II-31
<R>
MANAGEMENT
II-40
DETERMINATION OF NET ASSET VALUE
II-57
HOW TO BUY SHARES
II-59
DISTRIBUTION PLANS
II-68
INVESTOR SERVICES
II-75
SIGNATURE GUARANTEES
II-79
REDEMPTIONS
II-79
SHAREHOLDER LIABILITY
II-80
DISCLOSURE OF PORTFOLIO INFORMATION
II-80
PROXY VOTING GUIDELINES AND PROCEDURES
II-81
SECURITIES RATINGS
II-81
DEFINITIONS
II-86
APPENDIX A
II-87
</R>
SAI
PART I
FUND ORGANIZATION AND CLASSIFICATION
The George Putnam Fund of Boston is a Massachusetts business trust organized on November 1, 1937. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of The Commonwealth of Massachusetts.
The fund is an open-end management investment company with an unlimited number of authorized shares of beneficial interest which may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. The fund offers classes of shares with different sales charges and expenses.
Each share has one vote, with fractional shares voting proportionally. Shares of all classes will vote together as a single class except when otherwise required by law or as determined by the Trustees. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if the fund were liquidated, would receive the net assets of the fund.
The fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although the fund is not required to hold annual meetings of its shareholders, shareholders holding at least 10% of the outstanding shares entitled to vote have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. The fund has voluntarily undertaken to hold a shareholder meeting at which the Board of Trustees would be elected at least every five years beginning in 2004.
The fund is a "diversified" investment company under the Investment Company Act of 1940. This means that with respect to 75% of its total assets, the fund may not invest more than 5% of its total assets in the securities of any one issuer (except U.S. government securities and securities issued by other investment companies). The remaining 25% of its total assets is not subject to this restriction. To the extent the fund invests a significant portion of its assets in the securities of a particular issuer, it will be subject to an increased risk of loss if the market value of such issuer's securities declines.
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed without a vote of a majority of the outstanding voting securities, the fund may not and will not:
(1) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.
(2) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.
(3) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry.
(4) Invest in commodities or commodity contracts except that it may purchase or sell financial futures contracts and options thereon.
(5) Act as an underwriter except to the extent that, in connection with the disposition of its portfolio securities, it may be deemed to be an underwriter under certain federal securities laws.
(6) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.
(7) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.
(8) Purchase any security the disposition of which is restricted under federal securities laws if as a result more than 15% of the fund's net assets, taken at current value, would be invested in such securities, excluding restricted securities that have been determined by the Trustees of the fund (or the person designated by them to make such determinations) to be readily marketable.
(9) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein.
The Trustees may not deal with the fund as principal in the purchase or sale of securities, or borrow money or property from the fund.
The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of the fund means the affirmative vote of the lesser of (l)
more than 50% of the outstanding fund shares, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding fund shares are represented at the meeting in person or by proxy.
The following non-fundamental investment policies may be changed by the Trustees without shareholder approval:
(1) The fund will not invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of the fund (or the person designated by the Trustees of the fund to make such determinations) to be readily marketable), and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of the fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c).
All percentage limitations on investments (other than pursuant to non-fundamental restriction (1)) will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment.
CHARGES AND EXPENSES
Management fees
<R>
Under a Management Contract dated August 3, 2007, the fund pays a quarterly fee to Putnam Management based on the average net assets of the fund, as determined at the close of each business day during the quarter, at the annual rate of:
</R>
0.65% of the first $500 million of average net assets;
0.55% of the next $500 million of average net assets;
0.50% of the next $500 million of average net assets;
0.45% of the next $5 billion of average net assets;
0.425% of the next $5 billion of average net assets;
0.405% of the next $5 billion of average net assets;
0.39% of the next $5 billion of average net assets; and
0.38% thereafter.
<R>
For the past three fiscal years, pursuant to the management contract and the management contract previously in effect, the fund incurred the following fees:
</R>
Amount of | Amount management fee | ||
Management management | would have been without | ||
Fiscal year | fee paid | fee waived | expense limitation |
<R> | |||
2007 | $21,859,869 | $269,766 | $22,129,635 |
</R> | |||
2006 | $23,520,227 | $317,704 | $23,837,931 |
2005 | $25,814,461 | $585,732 | $26,400,193 |
<R>
Fee waivers for investments in affiliated fund. The fund invests a portion of its assets in Putnam Prime Money Market Fund. In connection with such investment, management fees paid by the fund are reduced by an amount equal to the management fee paid by Putnam Prime Money Market Fund with respect to assets invested by the fund in Putnam Prime Money Market Fund. The following table shows management fees waived by Putnam Management in respect of such investments during the fiscal years indicated:
</R>
Amount of | |
management fee | |
Fiscal Year | waived |
<R> | |
2007 | $269,766 |
</R> | |
2006 | $317,704 |
2005 | $585,732 |
Brokerage commissions
<R>
The following table shows brokerage commissions paid during the fiscal years indicated:
Brokerage | |
Fiscal year | commissions |
<R> | |
2007 | $4,050,985 |
</R> | |
2006 | $4,002,332 |
2005 | $4,013,652 |
<R> | |
</R> |
The portfolio turnover rates for the fund's 2006 and 2005 fiscal years were lower than the portfolio turnover rate for the fund's 2004 fiscal year due to a decrease in trading activity.
The following table shows transactions placed with brokers and dealers during the most recent fiscal year to recognize research services received by Putnam Management and its affiliates:
Dollar value of these | Percentage of | Amount of |
transactions | total transactions | commissions |
<R> | ||
$1,169,364,480 | 4.48% | $820,880 |
At the end of fiscal 2007, the fund held the following securities of its regular broker-dealers (or affiliates of such broker-dealers):
Broker-dealers or affiliates | Value of securities held |
Bank of America Corp. | $103,104,245 |
Bear Stearns Cos., Inc. | $2,618,352 |
Citigroup Global Markets Holdings, Inc. | $107,766,595 |
Deutsche Bank | $1,097,136 |
Goldman Sachs & Co. | $20,698,566 |
JPMorgan Chase & Co. | $71,733,438 |
Lehman Brothers, Inc. | $8,686,930 |
Merrill Lynch & Co., Inc. | $22,452,920 |
Morgan Stanley Dean Witter & Co. | $31,430,427 |
UBS Warburg Investments, Ltd. | $3,065,300 |
</R> |
Administrative expense reimbursement
<R>
The fund reimbursed Putnam Management for administrative services during fiscal 2007, including compensation of certain fund officers and contributions to the Putnam Investments Profit Sharing Retirement Plan for their benefit, as follows:
</R>
Portion of total reimbursement | |
Total | for compensation and |
reimbursement | contributions |
<R> | |
$74,521 | $62,580 |
</R> |
Trustee responsibilities and fees
The Trustees are responsible for generally overseeing the conduct of fund business. Subject to such policies as the Trustees may determine, Putnam Management furnishes a continuing investment program for the fund and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages the fund's other affairs and business.
<R>
The table below shows the value of each Trustee's holdings in the fund and in all of the Putnam Funds as of December 31, 2006.
</R>
Name of Trustee | Dollar range of The George | Aggregate dollar range of shares |
Putnam Fund of Boston shares | held in all of the Putnam funds | |
owned | overseen by Trustee | |
<R> | ||
Jameson A. Baxter | over $100,000 | over $100,000 |
</R> | ||
Charles B. Curtis | $1-$10,000 | over $100,000 |
<R> | ||
*Robert J. Darretta | N/A | N/A |
</R> | ||
Myra R. Drucker | $1-$10,000 | over $100,000 |
John A. Hill | over $100,000 | over $100,000 |
Paul L. Joskow | $10,001-$50,000 | over $100,000 |
Elizabeth T. Kennan | $10,001-$50,000 | over $100,000 |
<R> | ||
Kenneth R. Leibler | $1-$10,000 | over $100,000 |
</R> | ||
Robert E. Patterson | $10,001-$50,000 | over $100,000 |
<R> | ||
George Putnam, III | over $100,000 | over $100,000 |
</R> | ||
W. Thomas Stephens | $1-$10,000 | over $100,000 |
Richard B. Worley | $1-$10,000 | over $100,000 |
**Charles E. Haldeman, Jr. | $10,001-$50,000 | over $100,000 |
<R> |
* Elected to the Board of Trustees after December 31, 2006.
** Trustee who is or may be deemed to be an "interested person" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management and/or Putnam Retail Management. Mr. Haldeman is the President of your fund and each of the other Putnam funds, and is President and Chief Executive Officer of Putnam Investments. The balance of the Trustees are not "interested persons."
Each independent Trustee of the fund receives an annual retainer fee and additional fees for each Trustees' meeting attended, for attendance at industry seminars and for certain compliance-related services. Independent Trustees who serve on board committees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. Independent Trustees also are reimbursed for costs incurred in connection with their services, including costs of travel, seminars and educational materials. All of the current independent Trustees of the fund are Trustees of all the Putnam funds and receive fees for their services.
</R>
The Trustees periodically review their fees to ensure 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 Board Policy and Nominating Committee, which consists solely of independent Trustees of the fund, estimates that committee and Trustee meeting time, together with the appropriate preparation, requires the equivalent of at least three business days per Trustee meeting. The standing committees of the Board of Trustees, and the number of times each committee met during your fund's fiscal year, are shown in the table below:
<R> | |
Audit and Compliance Committee | 13 |
Board Policy and Nominating Committee | 13 |
Brokerage Committee | 6 |
*Communications, Service and Marketing Committee | 9 |
Contract Committee | 19 |
</R> | |
Distributions Committee | 11 |
Executive Committee | 2 |
<R> | |
Investment Oversight Committees | 35 |
**Investment Oversight Coordinating Committee | 10 |
Pricing Committee | 11 |
* Effective July 2007, certain responsibilities of the Marketing Committee and the Shareholder Communications and Relations Committee were assigned to a new committee, the Communications, Service and Marketing Committee. The number of meetings indicated for the Communications, Service and Marketing Committee includes the number of meetings held by the Marketing Committee and the Shareholder Communications and Relations Committee during the fund's last fiscal year.
**Effective July 2007, certain responsibilities of the Investment Process Committee were assigned to a new committee, the Investment Oversight Coordinating Committee. The number of meetings indicated for the Investment Oversight Coordinating Committee includes the number of meetings held by the Investment Process Committee during the fund's fiscal year.
The following table shows the year each Trustee was first elected a Trustee of the Putnam funds, the fees paid to each Trustee by the fund for fiscal 2007, and the fees paid to each Trustee by all of the Putnam funds during calendar year 2006:
</R>
COMPENSATION TABLE | ||||
<R> | ||||
Pension or | ||||
retirement | Estimated | |||
benefits | annual | Total | ||
Aggregate | accrued as | benefits from | compensation | |
compensation | part of | all Putnam | from all | |
from the | fund | funds upon | Putnam | |
Trustees/Year | fund | expenses | retirement(1) | funds(2) |
Jameson A. Baxter/1994(3) | $6,960 | $3,355 | $110,500 | $290,000 |
Charles B. Curtis/2001 | $7,108 | $3,152 | $113,900 | $300,000 |
Robert J.Darretta/2007(6) | N/A | N/A | N/A | N/A |
Myra R. Drucker/2004 (3) | $7,254 | N/A | N/A | $290,000 |
Charles E. Haldeman, | ||||
Jr./2004 | $0 | $0 | N/A | $0 |
John A. Hill/1985(3)(4) | $9,191 | $5,272 | $161,700 | $421,419 |
Paul L. Joskow/1997(3) | $6,963 | $2,437 | $113,400 | $295,000 |
Elizabeth T. Kennan/1992 | ||||
(3) | $7,080 | $4,447 | $108,000 | $300,000 |
Kenneth R. Leibler/2006(5) | $6,597 | N/A | N/A | $77,500 |
Robert E. Patterson/1984 | $7,080 | $2,947 | $106,500 | $300,000 |
George Putnam, III/1984(4) | $7,409 | $2,646 | $130,300 | $320,000 |
W. Thomas | ||||
Stephens/1997(3) | $6,848 | $3,029 | $107,100 | $290,000 |
Richard B. Worley/2004 | $6,846 | N/A | N/A | $300,000 |
</R> |
(1) Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.
<R>
(2) As of December 31, 2006, there were 107 funds in the Putnam family. For Mr. Hill, amounts shown also include compensation for service as Chairman of TH Lee, Putnam Emerging Opportunities Portfolio, a closed-end fund advised by an affiliate of Putnam Management.
(3) Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan. As of July 31, 2007, the total amounts of deferred compensation payable by the fund, including income earned on such amounts, to these Trustees were: Ms. Baxter - $26,805; Ms. Drucker - $4,300; Mr. Hill - $131,946; Dr. Joskow - $31,834 and Dr. Kennan - $4,283.
(4) Includes additional compensation to Messrs. Hill and Putnam for service as Chairman of the Trustees and President (through May 31, 2007) of the Funds, respectively.
(5) Mr. Leibler was elected to the Board of Trustees of the Putnam funds on October 12, 2006.
(6) Mr. Darretta was elected to the Board of Trustees of the Putnam funds on July 12, 2007.
</R>
Under a Retirement Plan for Trustees of the Putnam funds (the "Plan"), each Trustee who retires with at least five years of service as a Trustee of the funds is entitled to receive an annual retirement benefit equal to one-half of the average annual attendance and retainer fees paid to such Trustee for calendar years 2003, 2004 and 2005. This retirement benefit is payable during a Trustee's lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. A death benefit, also available under the Plan, ensures that the Trustee and his or her beneficiaries will receive benefit payments for the lesser of an aggregate period of (i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (currently the Board Policy and Nominating Committee) may terminate or amend the Plan at any time, but no termination or amendment will result in a reduction in the amount of benefits (i) currently being paid to a Trustee at the time of such termination or amendment, or (ii) to which a current Trustee would have been entitled had he or she retired immediately prior to such termination or amendment. The Trustees have terminated the Plan with respect to any Trustee first elected to the board after 2003.
<R>
For additional information concerning the Trustees, see "Management" in Part II of this SAI.
</R>
Share ownership
<R>
At October 31, 2007, the officers and Trustees of the fund as a group owned [less than 1%/ ( %)] of the outstanding shares of each class of the fund, and [, except as noted below,] no person owned of record or to the knowledge of the fund beneficially 5% or more of any class of shares of the fund.
</R>
Class | Shareholder name | Percentage |
and address | Owned | |
<R> | ||
Class A | Edward D. Jones & Co. | 17.71% |
201 Progress Pkwy | ||
Maryland Hts, MO 63043-3003 | ||
Class B | Edward D. Jones & Co. | 12.18% |
201 Progress Pkwy | ||
Maryland Hts, MO 63043-3003 | ||
Class C | Merrill, Lynch, Pierce, Fenner & Smith | 6.85% |
4800 Dear Lake Dr. East | ||
Jacksonville, FL 32246-6484 | ||
Class M | Carwash & Co. | 69.47% |
ADP/State Street Collective Trust | ||
200 Newport Ave. | ||
Quincy, MA 02171-2102 | ||
Class R | MG Trust Company | 24.31% |
Skilled Care Pharmacy | ||
PO Box 10699 | ||
Fargo ND, 58106-0699 | ||
Class R | MG Trust Company | 6.62% |
Mackintire Insurance Agency Inc | ||
700 17TH ST STE 300 | ||
Denver, CO 80202-3531 | ||
Class Y* | Abbott Laboratories Stock Retirement Programs | 18.52% |
Class Y* | IBEW Local 3 | 12.82% |
Class Y* | Marsh McLennan Supplemental Retirement Plan | 9.88% |
Class Y* | Electrical Contractors Association and Local Union 134, | 6.71% |
IBEW Joint Pension Trust of Chicago | ||
Class Y* | The Canandaigua Brands, Inc. | 5.54% |
401(k) & Profit Sharing Plan | ||
Class Y* | Cenveo Corporation 401(k) Plan | 5.28% |
</R> | ||
* The address for the name listed is: c/o Mercer Trust Company, as trustee or agent, Investors Way, Norwood, MA 02062. | ||
Distribution fees
<R>
During fiscal 2007, the fund paid the following 12b-1 fees to Putnam Retail Management:
</R>
Class A | Class B | Class C | Class M | Class R |
<R> | ||||
$8,184,368 | $5,340,309 | $719,741 | $1,416,043 | $9,391 |
</R> |
Class A sales charges and contingent deferred sales charges
Putnam Retail Management received sales charges with respect to class A shares in the following amounts during the periods indicated:
Total front- | Sales charges retained by | Contingent | |
end sales | Putnam Retail Management | deferred sales | |
Fiscal year | charges | after dealer concessions | charges |
<R> | |||
2007 | $1,698,240 | $140,998 | $2,235 |
</R> | |||
2006 | $2,297,830 | $184,386 | $1,419 |
2005 | $2,832,862 | $228,229 | $3,343 |
<R> | |||
</R> |
Class B contingent deferred sales charges
Putnam Retail Management received contingent deferred sales charges upon redemptions of class B shares in the following amounts during the periods indicated:
Contingent | |
deferred sales | |
Fiscal year | charges |
<R> | |
2007 | $436,895 |
</R> | |
2006 | $700,881 |
2005 | $1,080,096 |
<R> | |
</R> |
Class C contingent deferred sales charges
Putnam Retail Management received contingent deferred sales charges upon redemptions of class C shares in the following amounts during the periods indicated:
Contingent | |
deferred sales | |
Fiscal year | charges |
<R> | |
2007 | $4,809 |
</R> | |
2006 | $5,642 |
2005 | $7,340 |
<R> | |
</R> |
Class M sales charges and contingent deferred sales charges
Putnam Retail Management received sales charges with respect to class M shares in the following amounts during the periods indicated:
Sales charges retained | |||
Total front- | by Putnam Retail | Contingent deferred sales | |
end sales | Management after | charges | |
Fiscal year | charges | dealer concessions | |
<R> | |||
2007 | $14,525 | $1,700 | $0 |
</R> | |||
2006 | $25,373 | $2,850 | $0 |
2005 | $32,473 | $5,309 | $0 |
<R> | |||
</R> |
Investor servicing and custody fees and expenses
<R>
During the 2007 fiscal year, the fund incurred the following fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company:
Investor Servicing fees | Custody fees |
$8,712,790 | $348,820 |
</R> |
OTHER ACCOUNTS MANAGED BY THE FUND'S PORTFOLIO MANAGERS
The following table shows the number and approximate assets of other investment accounts (or portions of investment accounts) that the fund's Portfolio Leader and Portfolio Members managed as of the fund's most recent fiscal year-end. The other accounts may include accounts for which the individual was not designated as a portfolio member. Unless noted, none of the other accounts pays a fee based on the account's performance.
Other accounts | ||||||
(including separate | ||||||
accounts, managed | ||||||
account programs and | ||||||
Other SEC-registered | Other accounts that | single-sponsor defined | ||||
Portfolio Leader | open-end and closed- | pool assets from more | contribution plan | |||
or Member | end funds | than one client | offerings) | |||
|
||||||
Number | Number | Number | ||||
of | of | of | ||||
accounts | Assets | accounts | Assets | accounts | Assets | |
|
||||||
<R> | ||||||
|
||||||
Jeanne Mockard | 1 | $323,000,000 | 1 | $7,000,000 | 1 | $500,000 |
|
||||||
Geoffrey Kelley | 1 | $323,000,000 | 1 | $7,000,000 | 1 | $500,000 |
|
||||||
Jeffrey Knight | 30 | $8,239,900,00 | 86 | $4,818,800,00 | 5 | $241,800,000 |
0 | 0 | |||||
|
||||||
Raman Srivastava | 10 | $4,960,800,00 | 13 | $8,249,000,00 | 18 | $6,227,600,00 |
0 | 0 | 0 | ||||
|
See "Management - Portfolio Transactions - Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how Putnam Management addresses potential conflicts of interest resulting from an individual's management of more than one account.
</R>
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS
<R>
PricewaterhouseCoopers LLP, 125 High Street, Boston, Massachusetts 02110, is the fund's independent registered public accounting firm providing audit services, tax return review and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Registered Public Accounting Firm, financial highlights and financial statements included in the fund's Annual Report for the fiscal year ended July 31, 2007, filed electronically on September 28, 2007, (File No. 811-00058), are incorporated by reference into this SAI. The financial highlights included in the prospectus and incorporated by reference into this SAI and the financial statements incorporated by reference into the prospectus and this SAI have been so included and incorporated in reliance upon the report of the independent registered public accounting firm, given on their authority as experts in auditing and accounting.
</R>
TABLE OF CONTENTS | |
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS | II-1 |
TAXES | II-31 |
MANAGEMENT | II-40 |
DETERMINATION OF NET ASSET VALUE | II-57 |
HOW TO BUY SHARES | II-59 |
DISTRIBUTION PLANS | II-68 |
<R> | |
INVESTOR SERVICES | II-75 |
</R> | |
SIGNATURE GUARANTEES | II-79 |
REDEMPTIONS | II-79 |
SHAREHOLDER LIABILITY | II-80 |
DISCLOSURE OF PORTFOLIO INFORMATION | II-80 |
PROXY VOTING GUIDELINES AND PROCEDURES | II-81 |
<R> | |
SECURITIES RATINGS | II-81 |
</R> | |
DEFINITIONS | II-86 |
APPENDIX A | II-87 |
Nov Draft-07
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION (SAI)
PART II
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
As noted in the prospectus, in addition to the main investment strategies and the principal risks described in the prospectus, the fund may employ other investment practices and may be subject to other risks, which are described below. Because the following is a combined description of investment strategies of all of the Putnam funds, certain matters described herein may not apply to your fund. Unless a strategy or policy described below is specifically prohibited or limited by the investment restrictions discussed in the funds prospectus or in this SAI, or by applicable law, the fund may engage in each of the practices described below without limit. This section contains information on the investments and investment practices listed below. With respect to funds for which Putnam Investments Limited (PIL) serves as sub-investment manager (as described in the funds prospectus), references to Putnam Management in this section include PIL.
<R> | |
Alternative Investment Strategies | Mortgage-backed and Asset-backed Securities |
Bank Loans | Options on Securities |
Borrowing | Preferred Stocks and Convertible Securities |
Derivatives | Private Placements and Restricted Securities |
Floating Rate and Variable Rate Demand Notes | Real Estate Investment Trusts (REITs) |
Foreign Currency Transactions | Redeemable Securities |
Foreign Investments and Related Risks | Repurchase Agreements |
Forward Commitments and Dollar Rolls | Securities Loans |
Futures Contracts and Related Options | Securities of Other Investment Companies |
Hybrid Instruments | Short-term Trading |
Industry and Sector Groups | Special Purpose Acquisition Companies |
Inflation-Protected Securities | Structured investments |
Initial Public Offerings (IPOs) | Swap Agreements |
Inverse Floaters | Tax-exempt Securities |
Lower-rated Securities | Warrants |
Money Market Instruments | Zero-coupon and Payment-in-kind Bonds |
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Alternative Investment Strategies
Under normal market conditions, the fund seeks to remain fully invested and to minimize its cash holdings. However, at times, Putnam Management may judge that market conditions may make pursuing a fund's investment strategies inconsistent with the best interests of its shareholders. Putnam Management then may temporarily use alternative strategies that are mainly designed to limit the fund's losses. In implementing these strategies, the fund may invest primarily in, among other things, debt securities, preferred stocks, U.S. Government and agency obligations, cash or money market instruments (including, to the extent permitted by law or applicable exemptive relief, money market funds), or any other securities Putnam Management considers consistent with such defensive strategies.
Bank Loans
The fund may invest in bank loans. By purchasing a loan, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a particular borrower. The fund may act as part of a lending syndicate, and in such cases would be purchasing a participation in the loan. The fund may also purchase loans by assignment from another lender. Many loans are secured by the assets of the borrower, and most impose restrictive covenants which must be met by the borrower. These loans are typically made by a syndicate of banks, represented by an agent bank which has negotiated and structured the loan and which is
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responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate, and for enforcing its and their other rights against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan.
The funds ability to receive payments of principal and interest and other amounts in connection with loan participations held by it will depend primarily on the financial condition of the borrower (and, in some cases, the lending institution from which it purchases the loan). The value of collateral, if any, securing a loan can decline, or may be insufficient to meet the borrowers obligations or difficult to liquidate. In addition, the funds access to collateral may be limited by bankruptcy or other insolvency laws. The failure by the fund to receive scheduled interest or principal payments on a loan would adversely affect the income of the fund and would likely reduce the value of its assets, which would be reflected in a reduction in the fund's net asset value. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a loan or participating in a lending syndicate. In selecting the loans in which the f und will invest, however, Putnam Management will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. Putnam Management's analysis may include consideration of the borrower's financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. Putnam Management will generally not have access to non-public information to which other investors in syndicated loans may have access. Because loans in which the fund may invest are not generally rated by independent credit rating agencies, a decision by the fund to invest in a particular loan will depend almost exclusively on Putnam Management's, and the original lending institution's, credit analysis of the borrower. Investments in loans may be of any quality, including distressed loans, and will be subject to the funds credit quality policy. The loans in which the fund may invest include those that pay fixed rates of interest and those that pay floating rates i.e., rates that adjust periodically based on a known lending rate, such as a banks prime rate.
Loans may be structured in different forms, including novations, assignments and participating interests. In a novation, the fund assumes all of the rights of a lending institution in a loan, including the right to receive payments of principal and interest and other amounts directly from the borrower and to enforce its rights as a lender directly against the borrower. The fund assumes the position of a co-lender with other syndicate members. As an alternative, the fund may purchase an assignment of a portion of a lender's interest in a loan. In this case, the fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank's rights in the loan. The fund may also purchase a participating interest in a portion of the rights of a lending institution in a loan. In such case, it will be entitled to receive payments of principal, interest and premium, if any, but w ill not generally be entitled to enforce its rights directly against the agent bank or the borrower, and must rely for that purpose on the lending institution. The fund may also acquire a loan interest directly by acting as a member of the original lending syndicate.
The fund will in many cases be required to rely upon the lending institution from which it purchases the loan to collect and pass on to the fund such payments and to enforce the fund's rights under the loan. As a result, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving principal, interest and other amounts with respect to the underlying loan. When the fund is required to rely upon a lending institution to pay to the fund principal, interest and other amounts received by it, Putnam Management will also evaluate the creditworthiness of the lending institution.
The borrower of a loan in which the fund holds an interest may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that the fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan.
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Corporate loans in which the fund may invest are generally made to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate activities. A significant portion of the corporate loans purchased by the fund may represent interests in loans made to finance highly leveraged corporate acquisitions, known as "leveraged buy-out" transactions, leveraged recapitalization loans and other types of acquisition financing. The highly leveraged capital structure of the borrowers in such transactions may make such loans especially vulnerable to adverse changes in economic or market conditions. In addition, loans generally are subject to restrictions on transfer, and only limited opportunities may exist to sell such participations in secondary markets. As a result, the fund may be unable to sell loans at a time when it may otherwise be desirable to do so or may be able to sell them only at a price that is less than their fair market value. T he fund may hold investments in loans for a very short period of time when opportunities to resell the investments that Putnam Management believes are attractive arise.
Certain of the loans acquired by the fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan participation. To the extent that the fund is committed to make additional loans under such a participation, it will at all times set aside on its books liquid assets in an amount sufficient to meet such commitments. Certain of the loan participations acquired by the fund may also involve loans made in foreign currencies. The fund's investment in such participations would involve the risks of currency fluctuations described above with respect to investments in the foreign securities.
With respect to its management of investments in bank loans, Putnam Management will normally seek to avoid receiving material, non-public information (Confidential Information) about the issuers of bank loans being considered for acquisition by the fund or held in the funds portfolio. In many instances, borrowers may offer to furnish Confidential Information to prospective investors, and to holders, of the issuers loans. Putnam Managements decision not to receive Confidential Information may place Putnam Management at a disadvantage relative to other investors in loans (which could have an adverse effect on the price the fund pays or receives when buying or selling loans). Also, in instances where holders of loans are asked to grant amendments, waivers or consent, Putnam Managements ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that Putnam Managements d ecision not to receive Confidential Information under normal circumstances could adversely affect the funds investment performance.
Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in loans, Putnam Management may from time to time come into possession of material, non-public information about the issuers of loans that may be held in the funds portfolio. Possession of such information may in some instances occur despite Putnam Managements efforts to avoid such possession, but in other instances Putnam Management may choose to receive such information (for example, in connection with participation in a creditors committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, Putnam Management's ability to trade in these loans for the account of the fund could potentially be limited by its possession of such information. Such limitations on Putnam Management's ability to trade could have an adverse effect on the fund by, for example, preventing the fund fr om selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time.
In some instances, other accounts managed by Putnam Management or an affiliate may hold other securities issued by borrowers whose loans may be held in the funds portfolio. These other securities may include, for example, debt securities that are subordinate to the loans held in the funds portfolio, convertible debt or common or preferred equity securities. In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuers loans. In such cases, Putnam Management may owe conflicting fiduciary duties to the fund and other client accounts. Putnam Management will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a
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result of these conflicting client interests, than if Putnam Management's client accounts collectively held only a single category of the issuers securities.
Borrowing
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The fund may borrow money to the extent permitted by its investment policies and restrictions and applicable law. When the fund borrows money or otherwise leverages its portfolio, the value of an investment in the fund will be more volatile and other investment risks will tend to be compounded. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the funds holdings. In addition to borrowing money from banks, the fund may engage in certain other investment transactions that may be viewed as forms of financial leverage for example, using dollar rolls, investing collateral from loans of portfolio securities, entering into when-issued, delayed-delivery or forward commitment transactions or using derivatives such as swaps, futures, forwards, and options. Because the fund either (1) sets aside cash (or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees) on its books in respect of such transactions during the period in which the transactions are open or (2) otherwise covers its obligations under the transactions, such as by holding offsetting investments, the fund does not consider these transactions to be borrowings for purposes of its investment restrictions or senior securities for purposes of the Investment Company Act of 1940. In some cases (e.g., with respect to futures and forwards that are contractually required to cash-settle), the fund is permitted under relevant guidance from the Securities and Exchange Commission ( the SEC) or SEC staff to set aside assets with respect to an investment transaction in the amount of its net (marked-to-market) obligations thereunder, rather than the full notional amount of the transaction. By setting aside assets equal only to its net obligations, the fund will have the ability to employ leverage to a greater extent than if it set aside assets equal to the notional amo unt of the transaction, which may increase the risk associated with such investments.
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Derivatives
Certain of the instruments in which the fund may invest, such as futures contracts, options, hybrid instruments, forward contracts, swap agreements and structured investments, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value or other attributes of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI. The funds use of derivatives may cause the fund to recognize higher amounts of short-term capital gains, which are generally taxed to shareholders at ordinary income tax rates. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. The funds use of certain derivatives may in some cases involve forms of financial le verage, which involves risk and may increase the volatility of the funds net asset value. See Borrowing. In its use of derivatives, the fund may take both long positions (the values of which move in the same direction as the prices of the underlying investments, pools of investments, indexes or currencies), and short positions (the values of which move in the opposite direction from the prices of the underlying investments, pools of investments indexes or currencies).
Short positions may involve greater risks than long positions, as the risk of loss is theoretically unlimited (unlike a long position, in which the risk of loss may be limited to the amount invested). The fund may use derivatives that combine long and short positions in order to capture the difference between underlying investments, pools of investments, indices or currencies.
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Floating Rate and Variable Rate Demand Notes
The fund may purchase taxable or tax-exempt floating rate and variable rate demand notes for short-term cash management or other investment purposes. Floating rate and variable rate demand notes and bonds may have a stated maturity in excess of one year, but may have features that permit a holder to demand payment of principal plus accrued interest upon a specified number of days notice. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks. The issuer has a corresponding right, after a given period, to prepay in its discretion the outstanding principal of the obligation plus accrued interest upon a specific number of days notice to the holders. The interest rate of a floating rate instrument may be based on a known lending rate, such as a bank's prime rate, and is reset whenever such rate is adjusted. The interest rate on a variable rate demand note is reset at specified intervals at a market rate.
Foreign Currency Transactions
To manage its exposure to foreign currencies, the fund may engage in foreign currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options. In addition, the fund may engage in these transactions for the purpose of increasing its return. Foreign currency transactions involve costs, and, if unsuccessful, may reduce the funds return.
Generally, the fund may engage in both "transaction hedging" and "position hedging." The fund may also engage in foreign currency transactions for non-hedging purposes, subject to applicable law. When it engages in transaction hedging, the fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The fund may also engage in position hedging to protect against a decline in the value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of the currency in which securities the fund intends to buy are denominated or quoted).
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 or for other hedging or non-hedging purposes. If conditions warrant, for hedging or non-hedging purposes, the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. The fund may also purchase or sell exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies.
A foreign currency futures contract is a standardized exchange-traded contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the Commodity Futures Trading Commission (the "CFTC"), such as the New York Mercantile Exchange, and have margin requirements.
A foreign currency forward contract is a negotiated agreement to exchange currency at a future time, 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. The contract price may be higher or lower than the current spot rate. 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. 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
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the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amount agreed upon by the parties rather than predetermined amounts. In addition, forward contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers, so that no intermediary is required. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades.
At the maturity of a forward or futures contract, the fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts may be effected only on a commodities exchange or board of trade which provides a secondary market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out 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.
It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the fund is obligated to deliver.
As noted above, the fund may purchase or sell exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the fund the right to purchase the currency at the exercise price until the expiration of the option.
Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies are also listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the euro, the joint currency of most countries in the European Union.
The fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies may be affected by all of those factors which influence foreign exchange rates and investments generally.
The fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.
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Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities that the fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they involve costs to the fund and tend to limit any potential gain which might result from the increase in value of such currency.
The fund may also engage in non-hedging currency transactions. For example, Putnam Management may believe that exposure to a currency is in the fund's best interest but that securities denominated in that currency are unattractive. In that case the fund may purchase a currency forward contract or option in order to increase its exposure to the currency. In accordance with SEC regulations, the fund will set aside liquid assets on its books to cover forward contracts used for non-hedging purposes.
In addition, the fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The fund receives a premium from writing a call or put option, which increases the fund's current return if the option expires unexercised or is closed out at a net profit. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written.
The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options, forward contracts and futures contracts) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, forward contracts and futures contracts, since exchange rates may not be free to fluctuate in response to other market forces.
The value of a foreign currency option, forward contract or futures contract reflects the value of an exchange rate, which in turn reflects relative values of two currencies -- the U.S. dollar and the foreign currency in question. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, forward contracts and futures contracts, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with optio ns at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies.
There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets.
The decision as to whether and to what extent the fund will engage in foreign currency exchange transactions will depend on a number of factors, including prevailing market conditions, the composition of the fund's portfolio and the availability of suitable transactions. Accordingly, there can be no assurance that the fund will engage in foreign currency exchange transactions at any given time or from time to time.
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Foreign Investments and Related Risks
Foreign securities are normally denominated and traded in foreign currencies. As a result, the value of the fund's foreign investments and the value of its shares may be affected favorably or unfavorably by changes in currency exchange rates relative to the U.S. dollar. In addition, the fund is required to compute and distribute its income in U.S. dollars. Therefore, if the exchange rate for a foreign currency declines after a fund's income has been earned and translated into U.S. dollars (but before payment), the fund could be required to liquidate portfolio securities to make such distributions. Similarly, if an exchange rate declines between the time a fund incurs expenses in U.S. dollars and the time such expenses are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater than the equivalent amount in any such currency of such expenses at the time they were incurred.
There may be less information publicly available about a foreign issuer than about a U.S. issuer, and foreign issuers may not be subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. In addition, there may be less (or less effective) regulation of exchanges, brokers and listed companies in some foreign countries. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than in the United States.
Foreign settlement procedures and trade regulations may be more complex and involve certain risks (such as delay in payment or delivery of securities or in the recovery of the fund's assets held abroad) and expenses not present in the settlement of investments in U.S. markets. For example, settlement of transactions involving foreign securities or foreign currencies (see below) may occur within a foreign country, and the fund may accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may pay 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.
In addition, foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency exchange controls, foreign withholding taxes or restrictions on the repatriation of foreign currency, confiscatory taxation, political, social or financial instability and diplomatic developments which could affect the value of the fund's investments in certain foreign countries. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply.
Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit the fund's ability to invest in securities of certain issuers organized under the laws of those foreign countries.
The risks described above, including the risks of nationalization or expropriation of assets, typically are increased in connection with investments in "emerging markets." For example, political and economic structures in these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. High rates of inflation or currency devaluations may adversely affect the economies and securities markets of such countries. Investments in emerging markets may be considered speculative.
The currencies of certain emerging market countries have experienced devaluations relative to the U.S. dollar, and future devaluations may adversely affect the value of assets denominated in such currencies. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation or deflation for many years, and future inflation may adversely affect the economies and securities markets of such countries.
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In addition, unanticipated political or social developments may affect the value of investments in emerging markets and the availability of additional investments in these markets. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make investments in securities traded in emerging markets illiquid and more volatile than investments in securities traded in more developed countries, and the fund may be required to establish special custodial or other arrangements before making investments in securities traded in emerging markets. There may be little financial or accounting information available with respect to issuers of emerging market securities, and it may be difficult as a result to assess the value or prospects of an investment in such securities.
American Depository Receipts (ADRs) as well as other hybrid forms of ADRs, including European Depository Receipts (EDRs) and Global Depository Receipts (GDRs), are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuers home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing in foreign securities.
Certain of the foregoing risks may also apply to some extent to securities of U.S. issuers that are denominated in foreign currencies or that are traded in foreign markets, or securities of U.S. issuers having significant foreign operations.
Forward Commitments and Dollar Rolls
The fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the fund sets aside on its books liquid assets in an amount sufficient to meet the purchase price, or if the fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be-announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Where such purchases are made through dealers, the fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the fund of an advantageous yield or price. Although the fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments.
The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the fund delivers securities under the commitment, the fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.< /P>
The fund may enter into dollar roll transactions (generally using TBAs) in which it sells a fixed income security for delivery in the current month and simultaneously contracts to purchase similar securities (for example, same type, coupon and maturity) at an agreed upon future time. By engaging in a dollar roll
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transaction, the fund foregoes principal and interest paid on the security that is sold, but receives the difference between the current sales price and the forward price for the future purchase. The fund would also be able to earn interest on the proceeds of the sale before they are reinvested. The fund accounts for dollar rolls as purchases and sales. Because cash (or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees) in the amount of the funds commitment under a dollar roll is set aside on the funds books, the fund does not consider these transactions to be borrowings for purposes of its investment restrictions.
The obligation to purchase securities on a specified future date involves the risk that the market value of the securities that the fund is obligated to purchase may decline below the purchase price. In addition, in the event the other party to the transaction files for bankruptcy, becomes insolvent or defaults on its obligation, the fund may be adversely affected.
Futures Contracts and Related Options
Subject to applicable law, the fund may invest without limit in futures contracts and related options for hedging and non-hedging purposes, such as to manage the effective duration of the fund's portfolio or as a substitute for direct investment. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the CFTC, and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Examples of futures contracts that the fund may use (which may include single-security futures) include, without limitation, U.S. Treasury security futures, index futures, corporate or municipal bond futures, Government National Mortgage Association certificate futures, interest rate swap futures, and Eurodollar futures. In addition, as described elsewhere in this SAI, the fund may use foreign currency futures.
Although futures contracts (other than index futures and futures based on the volatility or variance experienced by an index) 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. Index futures and futures based on the volatility or variance experienced by an index do not call for actual delivery or acceptance of commodities or securities, but instead require cash settlement of the futures contract on the settlement date specified in the contract. Such contracts may also be closed out before the settlement date. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the d ifference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. If the fund is unable to enter into a closing transaction, the amount of the fund's potential loss is unlimited. The closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss.
Unlike when the fund purchases or sells a security, no price is paid or received by the fund upon the purchase or sale of a futures contract. Instead, upon entering into a contract, the fund is required to deliver to the futures broker an amount of liquid assets. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs.
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Subsequent payments, called "variation margin" or "maintenance margin," to and from the broker are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the fund would be required to make a variation margin payment to the broker.
The fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a position then currently held by the fund. The fund may close its positions by taking opposite positions which will operate to terminate the fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the fund, and the fund realizes a loss or a gain. Such closing transactions involve additional commission costs.
The fund does not intend to purchase or sell futures or related options for other than hedging purposes, if, as a result, the sum of the initial margin deposits on the fund's existing futures and related options positions and premiums paid for outstanding options on futures contracts would exceed 5% of the fund's net assets.
The fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (the "CEA"), and therefore, is not subject to registration or regulation as a pool operator under the CEA.
Index futures. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s). The fund may also purchase and sell options on index futures contracts.
For example, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") is composed of 500 selected U.S. common stocks. 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 currently to buy or sell 250 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $37,500 (250 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the fund enters into a futures contract to buy 250 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 $1,000 (250 units x gain of $4). If the fund enters into a futures contract to sell 250 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the fund will lose $500 (250 units x loss of $2).
Options on futures contracts. The fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. In return for the premium paid, options on futures contracts give the purchaser the right to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the 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 future. If an option is exercised on the last trading day prior to its expiration date , the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the underlying asset on which the
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future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid.
The fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or indices or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the fund expects to purchase. Such options generally operate in the same manner, and involve the same risks, as options purchased or written directly on the underlying investments. In addition, the fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirement s similar to those described above in connection with the discussion of futures contracts. The writing of an option on a futures contract involves risks similar to those relating to the sale of futures contracts.
Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts generally involves less potential risk to the fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments.
As an alternative to purchasing call and put options on index futures, the fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures.
Risks of transactions in futures contracts and related options. Successful use of futures contracts by the fund is subject to Putnam Management's ability to predict movements in various factors affecting securities markets, including interest rates and market movements, and, in the case of index futures and futures based on the volatility or variance experienced by an index, Putnam Managements ability to predict the future level of the index or the future volatility or variance experienced by an index. For example, it is possible that, where the fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the fund's portfolio may decline. If this occurred, the fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the fund has hedged against th e possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so.
The use of options and futures strategies also involves the risk of imperfect correlation among movements in the prices of the securities or other assets underlying the futures and options purchased and sold by the fund, of the options and futures contracts themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures used by the fund and the portion of the portfolio being hedged, the prices of futures may not correlate perfectly with movements in the underlying asset due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the underly ing asset and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the underlying asset and movements in the prices of related
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futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position.
There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a position held by the fund, the fund may seek to close out such position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current t rading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
Hybrid Instruments
These instruments are generally considered derivatives and include indexed or structured securities, and combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument. A hybrid instrument may be a debt security, preferred stock, warrant, convertible security, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to prices, changes in prices, or differences between prices, of securities, currencies, intangibles, goods, articles or commodities (collectively, underlying assets), or by another objective index, economic factor or other measure, including interest rates, currency exchange rates, or commodities or securities indices (collectively, benchmarks). Hybrid instruments may take a number of forms, including, but not limited to, deb t instruments with interest or principal payments or redemption terms determined by reference to the value of an index at a future time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity.
The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies. An investment in a hybrid instrument may entail significant risks that are not associated with a similar investment in a traditional debt instrument that has a fixed principal amount, is denominated in U.S. dollars or bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark. The risks of a particular hybrid instrument will depend upon the terms of the instrument, but may include the possibility of significant changes in the benchmark(s) or the prices of the underlying assets to which the instrument is linked. Such risks generally depend upon factors unrelated to the operations or credit quality of the issuer of the hybrid instrument, which may not be foreseen by the purchaser, such as economic and political events, the supply and demand of the underlying assets and interest rate movements. Hybrid instruments may be highly volatile and their use by the fund may not be successful.
Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if leverage is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or
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underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain.
Hybrid instruments can be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions. One solution would be to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three year interest rate in a designated group of countries. The redemption price formula would provide for payoffs of less than par if rates were above the specified level. Furthermore, a fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise significantly. The purpose of this arrangement, known as a structured securi ty with an embedded put option, would be to give the fund the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transaction costs. Of course, there is no guarantee that the strategy will be successful and the fund could lose money if, for example, interest rates do not move as anticipated or credit problems develop with the issuer of the hybrid instrument.
Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time.
Hybrid instruments may also carry liquidity risk since the instruments are often customized to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. Under certain conditions, the redemption value of such an investment could be zero. In addition, because the purchase and sale of hybrid investments could take place in an over-the-counter market without the guarantee of a central clearing organization, or in a transaction between the fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty of the issuer of the hybrid instrument would be an additional risk factor the fund would have to consider and monitor. In addition, uncertainty regarding the tax treatment of hybrid instruments may reduce demand for such instruments. Hybrid instruments also may not be subject t o regulation by the CFTC, which generally regulates the trading of commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other governmental regulatory authority.
Industry and Sector Groups
Putnam Management uses a customized set of industry and sector groups for classifying securities ("Putnam Industry Codes"). The Putnam Industry Codes are based on an expanded Standard & Poors industry classification model, modified to be more representative of global investing and more applicable to both large and small capitalization securities. For presentation purposes, the fund may apply the Putnam Industry Codes differently in reporting industry groups in the funds shareholder reports or other communications.
Inflation-Protected Securities
The fund may invest in U.S. Treasury Inflation Protected Securities (U.S. TIPS), which are fixed income securities issued by the U.S. Department of Treasury, the principal amounts of which are adjusted daily based upon changes in the rate of inflation. The fund may also invest in other inflation-protected securities issued by non-U.S. governments or by private issuers. U.S. TIPS pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount. The interest rate on these bonds is fixed at issuance, but over the life of the bond this interest may be paid on an increasing or decreasing principal value that has been adjusted for inflation.
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Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed for U.S. TIPS, even during a period of deflation. However, because the principal amount of U.S. TIPS would be adjusted downward during a period of deflation, the fund will be subject to deflation risk with respect to its investments in these securities. In addition, the current market value of the bonds is not guaranteed, and will fluctuate. If the fund purchases U.S. TIPS in the secondary market whose principal values have been adjusted upward due to inflation since issuance, the fund may experience a loss if there is a subsequent period of deflation. The fund may also invest in other inflation-related bonds which may or may not provide a guarantee of principal. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal amount.
The periodic adjustment of U.S. TIPS is currently tied to the CPI-U, which is calculated by the U.S. Department of Treasury. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation-protected bonds issued by a non-U.S. government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can no assurance that the CPI-U or any non-U.S. inflation index will accurately measure the real rate of inflation in the prices of goods and services. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. In addition, there can be no assurance that the rate of inflation in a non-U.S. country will be correlated to the rate of inflation in the United States.
In general, the value of inflation-protected bonds is expected to fluctuate in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-protected bonds. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected bonds. If inflation is lower than expected during the period the fund holds the security, the fund may earn less on the security than on a conventional bond. Any increase in principal value is taxable in the year the increase occurs, even though holders do not receive cash representing the increase at that time. As a result, when the fund invests in inflation-protected securities, it could be required at times to liquidate other investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements as a regulated investment company and to eliminate any fund-level income tax liability under the Internal Revenue Code.
The U.S. Treasury began issuing inflation-protected bonds in 1997. Certain non-U.S. governments, such as the United Kingdom, Canada and Australia, have a longer history of issuing inflation-protected bonds, and there may be a more liquid market in certain of these countries for these securities.
Initial Public Offerings (IPOs)
The fund may purchase debt or equity securities in initial public offerings (IPOs). These securities, which are often issued by unseasoned companies, may be subject to many of the same risks of investing in companies with smaller market capitalizations. Securities issued in IPOs have no trading history, and information about the companies may be available for very limited periods. Securities issued in an IPO frequently are very volatile in price, and the fund may hold securities purchased in an IPO for a very short period of time. As a result, the funds investments in IPOs may increase portfolio turnover, which increases brokerage and administrative costs and may result in taxable distributions to shareholders.
At any particular time or from time to time the fund may not be able to invest in securities issued in IPOs, or invest to the extent desired because, for example, only a small portion (if any) of the securities being offered in an IPO may be made available to the fund. In addition, under certain market conditions a relatively small number of companies may issue securities in IPOs. Similarly, as the number of Putnam funds to which IPO securities are allocated increases, the number of securities issued to any one fund may decrease. The investment performance of the fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when the fund is able to do so. In addition, as the fund increases in size, the impact of IPOs on the funds performance will generally decrease.
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Inverse Floaters
These securities have variable interest rates that typically move in the opposite direction from movements in prevailing short-term interest rate levels rising when prevailing short-term interest rate fall, and vice versa. The prices of inverse floaters can be considerably more volatile than the prices of bonds with comparable maturities. The fund currently does not intend to invest more than 15% of its assets in inverse floating obligations.
Lower-rated Securities
The fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"). The lower ratings reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the fund more volatile and could limit the fund's ability to sell its securities at prices approximating the values the fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the fund at times may be unable to establish the fair value of such securities.
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Securities ratings are based largely on the issuer's historical financial condition and the rating agencies' analysis at the time of rating. Consequently, the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition, which may be better or worse than the rating would indicate. In addition, the rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's (or by any other nationally recognized securities rating agency) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See "Securities Ratings."
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Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the value of the fund's fixed-income assets. Conversely, during periods of rising interest rates, the value of the fund's fixed-income assets will generally decline. The values of lower-rated securities may often be affected to a greater extent by changes in general economic conditions and business conditions affecting the issuers of such securities and their industries. Negative publicity or investor perceptions may also adversely affect the values of lower-rated securities. Changes by nationally recognized securities rating agencies in their ratings of any fixed-income security and changes in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from these securities, but will affect the fund's net asset value. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether its retention will assist in meeting the fund's investment objective(s).
Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing. The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness.
At times, a substantial portion of the fund's assets may be invested in an issue of which the fund, by itself or together with other funds and accounts managed by Putnam Management or its affiliates, holds all or a major portion. Although Putnam Management generally considers such securities to be liquid because of the
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availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell these securities when Putnam Management believes it advisable to do so or may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on such securities. This could increase the fund's operating expenses and adversely affect the fund's net asset value. In the case of tax-exempt funds, any income derived from the fund's ownership or operation o f such assets would not be tax-exempt. The ability of a holder of a tax-exempt security to enforce the terms of that security in a bankruptcy proceeding may be more limited than would be the case with respect to securities of private issuers. In addition, the fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the fund may exercise its rights by taking possession of such assets.
To the extent the fund invests in securities in the lower rating categories, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities in the higher rating categories.
Money Market Instruments
Money market instruments, or short-term debt instruments, consist of obligations such as commercial paper, bank obligations (i.e., certificates of deposit and bankers acceptances), repurchase agreements and various government obligations, such as Treasury bills. These instruments have a remaining maturity of one year or less and are generally of high credit quality. Money market instruments may be structured to be, or may employ a trust or other form so that they are, eligible investments for money market funds. For example, put features can be used to modify the maturity of a security or interest rate adjustment features can be used to enhance price stability. If a structure fails to function as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service (IRS) nor any other regulatory authority has ruled definitively on certain legal issues presented by certa in structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by the funds.
Commercial paper is a money market instrument issued by banks or companies to raise money for short-term purposes. Unlike some other debt obligations, commercial paper is typically unsecured. Commercial paper may be issued as an asset-backed security (that is, backed by a pool of assets representing the obligations of a number of different issuers), in which case certain of the risks discussed in Mortgage-backed and Asset-backed securities would apply. Commercial paper is traded primarily among institutions.
Putnam Money Market Fund, Putnam Tax Exempt Money Market Fund and Putnam Prime Money Market Fund may invest in bankers acceptances issued by banks with deposits in excess of $2 billion (or the foreign currency equivalent) at the close of the last calendar year. If the Trustees change this minimum deposit requirement, shareholders would be notified. Other Putnam funds may invest in bankers acceptances without regard to this requirement.
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In accordance with rules issued by the SEC, the fund may from time to time invest all or a portion of its cash balances in Putnam Prime Money Market Fund or other money market and/or short-term bond funds advised by Putnam Management. In connection with such investments, Putnam Management may waive a portion of the advisory fees otherwise payable by the fund. See Charges and expenses in Part I of this SAI for the amount, if any, waived by Putnam Management in connection with such investments.
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Mortgage-backed and Asset-backed Securities
Mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities, represent a participation in, or are secured by, mortgage loans. Asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property and receivables from credit card agreements.
Mortgage-backed securities have yield and maturity characteristics corresponding to the underlying assets. Unlike traditional debt securities, which may pay a fixed rate of interest until maturity, when the entire principal amount comes due, payments on certain mortgage-backed securities include both interest and a partial repayment of principal. Besides the scheduled repayment of principal, repayments of principal may result from the voluntary prepayment, refinancing or foreclosure of the underlying mortgage loans. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in early payment of the applicable mortgage-backed securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-backed securities in an investment that provides as high a yield as the mortgage-backed securities. Consequently, early payment associated with mortgage-backed securities may cause these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed-income securities. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage-backed securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-backed securities. If the life of a mortgage-backed security is inaccurately predicted, the fund may not be able to realize the rate of return it expected.
Adjustable rate mortgage securities (ARMs), like traditional mortgage-backed securities, are interests in pools of mortgage loans that provide investors with payments consisting of both principal and interest as mortgage loans in the underlying mortgage pool are paid off by the borrowers. Unlike fixed-rate mortgage-backed securities, ARMs are collateralized by or represent interests in mortgage loans with variable rates of interest. These interest rates are reset at periodic intervals, usually by reference to an interest rate index or market interest rate. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on, among other things, changes in market interest rates or changes in the issuers creditworthiness. Because the interest rates are reset only periodically, changes in the interest rate on ARMs may lag changes in preva iling market interest rates. Also, some ARMs (or the underlying mortgages) are subject to caps or floors that limit the maximum change in the interest rate during a specified period or over the life of the security. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods. The fund may also invest in hybrid ARMs, whose underlying mortgages combine fixed-rate and adjustable rate features.
Mortgage-backed and asset-backed securities are less effective than other types of securities as a means of "locking in" attractive long-term interest rates. One reason is the need to reinvest prepayments of principal; another is the possibility of significant unscheduled prepayments resulting from declines in interest rates. These prepayments would have to be reinvested at lower rates. The automatic interest rate adjustment feature of mortgages underlying ARMs likewise reduces the ability to lock-in attractive rates. As a result, mortgage-backed and asset-backed securities may have less potential for capital appreciation during periods of declining interest rates than other securities of comparable maturities, although they may have a similar risk of decline in market value during periods of rising interest rates. Prepayments may also significantly shorten the effective maturities of these securities, especially during periods of declining interest rates. Conversely, du ring periods of rising interest rates, a reduction in prepayments may increase the effective maturities of these securities, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing the volatility of the fund.
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At times, some mortgage-backed and asset-backed securities will have higher than market interest rates and therefore will be purchased at a premium above their par value. Prepayments may cause losses on securities purchased at a premium.
CMOs may be issued by a U.S. government agency or instrumentality or by a private issuer. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. government or its agencies or instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. government, its agencies or instrumentalities or any other person or entity.
Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities, each having different maturities, interest rates and payment schedules, and with the principal and interest on the underlying mortgages allocated among the several classes in various ways. Payment of interest or principal on some classes or series of CMOs may be subject to contingencies or some classes or series may bear some or all of the risk of default on the underlying mortgages. CMOs of different classes or series are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the classes or series of a CMO with the earliest maturities generally will be retired prior to their maturities. Thus, the early retirement of particular classes or series of a CMO would have the same effect as the prepayment of mortgages underlying othe r mortgage-backed securities. Conversely, slower than anticipated prepayments can extend the effective maturities of CMOs, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing their volatility.
Prepayments could result in losses on stripped mortgage-backed securities. Stripped mortgage-backed securities are usually structured with two classes that receive different portions of the interest and principal distributions on a pool of mortgage loans. The yield to maturity on an interest only or IO class of stripped mortgage-backed securities is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurable adverse effect on the fund's yield to maturity to the extent it invests in IOs. If the assets underlying the IO experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal only or POs tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The secondary market for stripped mortgage-backed securities may be more volatile and less liquid than that for other mortgage-backed securities, potentially limiting the fund's ability to buy or sell those securities at any particular time. The fund currently does not intend to invest more than 35% of its assets in IOs and POs under normal market conditions.
The risks associated with other asset-backed securities (including in particular the risks of issuer default and of early prepayment) are generally similar to those described above for CMOs. In addition, because asset-backed securities generally do not have the benefit of a security interest in the underlying assets that is comparable to a mortgage, asset-backed securities present certain additional risks that are not present with mortgage-backed securities. The ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited. For example, revolving credit receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a number of state and federal consumer credit laws, many of which give debtors the right to set-off certain amounts owed, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles, rather than by real property. < /P>
Asset-backed securities may be collateralized by the fees earned by service providers. The value of asset-backed securities may be substantially dependent on the servicing of the underlying asset and are therefore subject to risks associated with negligence by, or defalcation of, their servicers. In certain circumstances, the mishandling of related documentation may also affect the rights of the security holders in and to the underlying collateral. The insolvency of entities that generate receivables or that utilize the assets may result in added costs and delays in addition to losses associated with a decline in the value of the underlying assets.
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Options on Securities
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Writing covered options. The fund may write covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees, in such amount as are set aside on the funds books), when in the opinion of Putnam Management such transactions are consistent with the fund's investment objective(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the fund at a stated price.
The fund may write only covered options, which means that, so long as the fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges) or have an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees, in such amount as are set aside on the funds books). In the case of put options, the fund will set aside on its books assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees and equal in value 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 al l of the risk of the option it has written. The fund may write combinations of covered puts and calls on the same underlying security.
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The fund will receive a premium from writing a put or call option, which increases the fund's return in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, 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 the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund wi ll suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.
The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.
Purchasing put options. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have
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realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. The fund may also purchase put options for other investment purposes.
Purchasing call options. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. The fund may also purchase call options for other investment purposes.
Risk factors in options transactions. The successful use of the fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price.
When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change.
The effective use of options also depends on the fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options.
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The fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration.
Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States.
Over-the-counter ("OTC") options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. The fund may use both European-style options, which are only exercisable immediately prior to their expiration, and American-style options, which are exercisable at any time prior to the expiration date.
In addition to options on securities and futures, the fund may also enter into options on futures, swaps, or other instruments as described elsewhere in this SAI.
Preferred Stocks and Convertible Securities
A preferred stock generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of an issuer's assets but is junior to the debt securities of the issuer in those same respects. The market prices of preferred stocks are subject to changes in interest rates and are more sensitive to changes in an issuer's creditworthiness than are the prices of debt securities. Shareholders of preferred stock may suffer a loss of value if dividends are not paid. Under ordinary circumstances, preferred stock does not carry voting rights. In addition, many preferred stocks may be called or redeemed prior to their maturity by the issuer under certain conditions.
Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. Convertible securities entitle the holder to receive interest paid or accrued on debt or dividends paid or accrued on preferred stock until the security matures or is redeemed, converted or exchanged.
The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (i.e., a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security.
If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying security. Convertible securities generally have less potential for gain than common stocks.
The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the
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security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.
The fund's investments in preferred stocks and convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund.
Private Placements and Restricted Securities
The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value.
While such private placements may often offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 or the availability of an exemption from registration (such as Rules 144 or 144A), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale.
The absence of a trading market can make it difficult to ascertain a market value for illiquid investments. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering such securities for resale and the risk of substantial delay in effecting such registration. In addition, market quotations are less readily available. The judgment of Putnam Management may at times play a greater role in valuing these securities than in the case of publicly traded securities.
Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act of 1933. The fund may be deemed to be an "underwriter" for purposes of the Securities Act of 1933 when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the f unds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to Putnam Management.
Real Estate Investment Trusts (REITs)
The fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate related loans. Like regulated investment companies such as the fund, REITs are not taxed on income distributed to shareholders provided that they comply with certain requirements under the Internal Revenue Code. The fund will indirectly bear its proportionate share of any expenses paid by REITs in which it invests in addition to the funds own expenses.
REITs involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). REITs are generally classified as equity REITs, mortgage REITs or a
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combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the risk of borrower default. REITs, and mortgage REITs in particular, are also subject to interest rate risk. REITs are dependent upon their operators management skills, are generally not diversified (except to the extent the Internal Revenue Code requires), and are subject to heavy cash flow dependency and the risk of default by borrowers. REITs are also subject to the possibility of failing to qualify for tax-free pass-thro ugh of income under the Code or failing to maintain their exemptions from registration under the Investment Company Act of 1940. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.
The fund's investment in a REIT may require the fund to accrue and distribute income not yet received or may result in the fund making distributions that constitute a return of capital to fund shareholders for federal income tax purposes. In addition, distributions by a fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.
Redeemable Securities
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Certain securities held by the fund may permit the issuer at its option to "call" or redeem its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed.
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Repurchase Agreements
The fund, unless it is a money market fund, may enter into repurchase agreements, amounting to not more than 25% of its total assets. Money market funds may invest without limit in repurchase agreements. A repurchase agreement is a contract under which the fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the fund to resell such security at a fixed time and price (representing the fund's cost plus interest). It is the fund's present intention to enter into repurchase agreements only with commercial banks and registered broker-dealers and only with respect to obligations of the U.S. government or its agencies or instrumentalities or certain other investment-grade, fixed-income securities (including, without limitation, certain corporate bonds and notes, commercial paper, mortgage-backed securities and short-term securities). Repurchase agreements may also be viewed as loans mad e by the fund which are collateralized by the securities subject to repurchase. Putnam Management will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate.
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Pursuant to an exemptive order issued by the SEC, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments.
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Securities Loans
The fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. If a borrower defaults, the value of the collateral may decline before the fund can dispose of it. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that the loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the fund an amount equal to any dividends or interest received on securities lent. The fund retains all or a portion of the interest received on investment o f the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities may pass to the borrower, the fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the fund to exercise voting rights on any matters materially affecting the investment. The fund may also call such loans in order to sell the securities. The fund may pay fees in connection with arranging loans of its portfolio securities.
Securities of Other Investment Companies
Securities of other investment companies, including shares of open- and closed-end investment companies and unit investment trusts (which may include exchange-traded funds (ETFs)), represent interests in collective investment portfolios that, in turn, invest directly in underlying instruments. The fund may invest in other investment companies when it has more uninvested cash than Putnam Management believes is advisable, when it receives cash collateral from securities lending arrangements, when there is a shortage of direct investments available, or when Putnam Management believes that investment companies offer attractive values.
Investment companies may be structured to perform in a similar fashion to a broad-based securities index or may focus on a particular strategy or class of assets. ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries. These indexes may be broad-based, sector-based or international. Investing in investment companies involves substantially the same risks as investing directly in the underlying instruments, but also involves expenses at the investment company-level, such as portfolio management fees and operating expenses. These expenses are in addition to the fees and expenses of the fund itself, which may lead to duplication of expenses while the fund owns another investment companys shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than Putnam Management.
Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment companys net asset value. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts due to market conditions or other reasons, based on the policies of the relevant exchange. The shares of investment companies, particularly closed-end in vestment companies, may also be leveraged, which would increase the volatility of the funds net asset value.
The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally limited by federal securities laws.
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Short-term Trading
In seeking the fund's objective(s), Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly aver age of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the fund's portfolio.
Special Purpose Acquisition Companies
The fund may invest in stock, warrants, and other securities of special purpose acquisition companies (SPACs) or similar special purpose entities that pool funds to seek potential acquisition opportunities. Unless and until an acquisition is completed, a SPAC generally invests its assets (less a portion retained to cover expenses) in U.S. Government securities, money market securities and cash; if an acquisition that meets the requirements for the SPAC is not completed within a pre-established period of time, the invested funds are returned to the entitys shareholders. Because SPACs and similar entities are in essence blank check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entitys management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, these securities, which are typically traded in the over-the-counter market, may be considered illiquid and/or be subject to restrictions on resale.
Structured investments
A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities (structured securities) backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to s tructured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.
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Swap Agreements
The fund may enter into swap agreements and other types of over-the-counter transactions such as caps, floors and collars with broker-dealers or other financial institutions for hedging or investment purposes. A swap involves the exchange by the fund with another party of their respective commitments to pay or receive cash flows, e.g., an exchange of floating rate payments for fixed-rate payments. The purchase of a cap entitles the purchaser, to the extent that a specified index or other underlying financial measure exceeds a predetermined value, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index or other underlying financial measure falls or other underlying measure below a predetermined value, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of a cap and a floor.
Swap agreements and similar transactions can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices, inflation rates or the volatility of an index or one or more securities. For example, if the fund agrees to exchange payments in U.S. dollars for payments in a non-U.S. currency, the swap agreement would tend to decrease the fund's exposure to U.S. interest rates and increase its exposure to that non-U.S. currency and interest rates. The fund may also engage in total return swaps, in which payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity or f ixed-income security, a combination of such securities, or an index). The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of a funds investments and its share price. The fund's ability to engage in certain swap transactions may be limited by tax considerations.
The funds ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. If a counterparty's creditworthiness declines, the value of the agreement would be likely to decline, potentially resulting in losses. If a default occurs by the other party to such transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction, which may be limited by applicable law in the case of a counterparty's insolvency. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly traded securities.
The fund may also enter into options on swap agreements ("swaptions"). A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. The fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. Swaptions are generally subject to the same risks involved in the funds use of options. See Options on Securities.
The fund may enter into credit default swap contracts for investment purposes. As the seller in a credit default swap contract, the fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). In return for its obligation, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.
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The fund may also purchase credit default swap contracts in order to hedge against the risk of default of the debt of a particular issuer or basket of issuers, in which case the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the funds return.
Tax-exempt Securities
General description. As used in this SAI, the term "Tax-exempt securities" includes debt obligations issued by a state, its political subdivisions (for example, counties, cities, towns, villages, districts and authorities) and their agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) the corresponding states personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt securities may be issued include the refunding of outstanding obligations or the payment of general operating expenses.
Short-term Tax-exempt securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes.
In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects such as privately operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt securities, although the current federal tax laws place substantial limi tations on the size of such issues.
Tax-exempt securities share many of the structural features and risks of other bonds, as described elsewhere in this SAI. For example, the fund may purchase callable Tax-exempt securities, zero-coupon Tax-exempt securities, or stripped Tax-exempt securities, which entail additional risks. The fund may also purchase structured or asset-backed Tax-exempt securities, such as the securities (including preferred stock) of special purpose entities that hold interests in the Tax-exempt securities of one or more issuers and issue tranched securities that are entitled to receive payments based on the cash flows from those underlying securities. See Redeemable securities, Zero-coupon and payment-in-kind bonds, Structured investments, and Mortgage-backed and Asset-backed Securities in this SAI. Structured Tax-exempt securities may involve increased risk that the interest received by the fund may not be exempt f rom federal or state income tax, or that such interest may result in liability for the alternative minimum tax for shareholders of the fund. For example, in certain cases, the issuers of certain securities held by a special purpose entity may not have received an unqualified opinion of bond counsel that the interest from the securities will be exempt from federal income tax and (if applicable) the corresponding states personal income tax.
The amount of information about the financial condition of an issuer of tax-exempt securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities of better-known issuers.
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Escrow-secured or pre-refunded bonds. These securities are created when an issuer uses the proceeds from a new bond issue to buy high grade, interest-bearing debt securities, generally direct obligations of the U.S. government, in order to redeem (or pre-refund), before maturity, an outstanding bond issue that is not immediately callable. These securities are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre-refunded bond until that bonds call date. Pre-refunded bonds often receive an AAA or equivalent rating. Because pre-refunded bonds still bear the same interest rate, and have a very high credit quality, their price may increase. However, as the original bond approaches its call date, the bond's price will fall to its call price.
Residual interest bonds. The fund may invest in residual interest bonds, which are created by depositing municipal securities in a trust and dividing the income stream of an underlying municipal bond in two parts, one, a variable rate security and the other, a residual interest bond. The interest rate for the variable rate security is determined by an index or a periodic auction process, while the residual interest bond holder receives the balance of the income from the underlying municipal bond less an auction fee. The market prices of residual interest bonds may be highly sensitive to changes in market rates and may decrease significantly when market rates increase.
Tobacco Settlement Revenue Bonds. The fund may invest in tobacco settlement revenue bonds, which are secured by an issuing states proportionate share of payments under the Master Settlement Agreement (MSA). The MSA is an agreement that was reached out of court in November 1998 between 46 states and six U.S. jurisdictions and tobacco manufacturers representing an overwhelming majority of U.S. market share. The MSA provides for annual payments by the manufacturers to the states and jurisdictions in perpetuity in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. Within some states, certain localities may in turn be all ocated a specific portion of the states MSA payment pursuant to an arrangement with the state.
A number of state and local governments have securitized the future flow of payments under the MSA by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus risk to the fund, are dependent on the receipt of future settlement payments by the state or its instrumentality. The actual amount of future settlement payments may vary based on, among other things, annual domestic cigarette shipments, inflation, the financial capability of participating tobacco companies, and certain offsets for disputed payments. Payments made by tobacco manufacturers could be reduced if cigarette shipments continue to decline below the base levels used in establishing manufacturers payment obligations under the MSA. Demand for cigarettes in the U.S. could continue to decline based on many f actors, including, without limitation, anti-smoking campaigns, tax increases, price increases implemented to recoup the cost of payments by tobacco companies under the MSA, reduced ability to advertise, enforcement of laws prohibiting sales to minors, elimination of certain sales venues such as vending machines, and the spread of local ordinances restricting smoking in public places.
Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet their obligations. The bankruptcy of an MSA-participating manufacturer could cause delays or reductions in bond payments, which would affect the funds net asset value. Under the MSA, a market share loss by MSA-participating tobacco manufacturers to non-MSA participating manufacturers would also cause a downward adjustment in the payment amounts under some circumstances.
The MSA and tobacco manufacturers have been and continue to be subject to various legal claims, including, among others, claims that the MSA violates federal antitrust law. In addition, the United States Department of Justice has alleged in a civil lawsuit that the major tobacco companies defrauded and misled the American public about the health risks associated with smoking cigarettes. An adverse outcome to this lawsuit or to any other litigation matters or regulatory actions relating to the MSA or affecting tobacco manufacturers could
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adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers.
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In addition to the risks described above, tobacco settlement revenue bonds are subject to other risks described in this SAI, including the risks of asset-backed securities discussed under Mortgage-backed and Asset-backed Securities.
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Participation interests (Money Market Funds only). The money market funds may invest in Tax-exempt securities either by purchasing them directly or by purchasing certificates of accrual or similar instruments evidencing direct ownership of interest payments or principal payments, or both, on Tax-exempt securities, provided that, in the opinion of counsel, any discount accruing on a certificate or instrument that is purchased at a yield not greater than the coupon rate of interest on the related Tax-exempt securities will be exempt from federal income tax to the same extent as interest on the Tax-exempt securities. The money market funds may also invest in Tax-exempt securities by purchasing from banks participation interests in all or part of specific holdings of Tax-exempt securities. These participations may be backed in whole or in part by an irrevocable letter of credit or guarantee of the selling bank. The selling bank may recei ve a fee from the money market funds in connection with the arrangement. The money market funds will not purchase such participation interests unless it receives an opinion of counsel or a ruling of the Internal Revenue Service that interest earned by it on Tax-exempt securities in which it holds such participation interests is exempt from federal income tax. No money market fund expects to invest more than 5% of its assets in participation interests.
Stand-by commitments. When the fund purchases Tax-exempt securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt securities. A stand-by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments.
Yields. The yields on Tax-exempt securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt securities with the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. Neither event will require the elimination of an investment from the fund's portfolio, but Putnam Management will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio.
"Moral obligation" bonds. The fund may invest in so-called moral obligation bonds, where repayment of the bond is backed by a moral (but not legally binding) commitment of an entity other than the issuer, such as a state legislature, to pay. Such a commitment may be in addition to the legal commitment of the issuer to repay the bond or may represent the only payment obligation with respect to the bond (where, for example, no amount has yet been specifically appropriated to pay the bond. See Municipal leases below.)
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Municipal leases. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, lease obligations) of municipal authorities or entities. Lease obligations do not constitute general obligations of the municipality for which the municipalitys taxing power is pledged. Certain of these lease obligations contain non-appropriation clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a non-appropriation lease, the funds ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult.
Additional risks. Securities in which the fund may invest, including Tax-exempt securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt securities may be materially affected.
From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt securities. Further proposals limiting the issuance of Tax-exempt securities may well be introduced in the future. If it appeared that the availability of Tax-exempt securities for investment by the fund and the value of the fund's portfolio could be materially affected by such changes in law, the Trustees of the fund would reevaluate its investment objective and policies and consider changes in the structure of the fund or its dissolution.
Warrants
The fund may invest in warrants, which are instruments that give the fund the right to purchase certain securities from an issuer at a specific price (the strike price) for a limited period of time. The strike price of warrants typically is much lower than the current market price of the underlying securities, yet they are subject to similar price fluctuations. As a result, warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying securities and do not represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date. These factors can make warrants more speculative than other types of invest ments.
In addition to warrants on securities, the fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exer cise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying
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index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant.
The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do.
Zero-coupon and Payment-in-kind Bonds
The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current i nterest in cash. Thus, it may be necessary at times for the fund to liquidate other investments in order to satisfy its distribution requirements under the Internal Revenue Code.
TAXES
The following discussion of U.S. federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the Code), existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisers regarding their particular situation and the possible application of foreign, state and local tax laws.
Taxation of the fund. The fund intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things:
(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities and foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies, and (ii) net income from interests in qualified publicly traded partnerships (as defined below);
(b) diversify its holdings so that, at the end of each quarter of the funds taxable year, (i) at least 50% of the market value of the funds total assets is represented by cash and cash items, U.S. Government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the funds total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the funds total assets is invested (x) in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related
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trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below). In the case of the funds investments in loan participations, the fund shall treat a financial intermediary as an issuer for the purposes of meeting this diversification requirement; and
(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paidgenerally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.
In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, 100% of the net income of a regulated investment company derived from an interest in a qualified publicly traded partnership (defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof and (ii) that derives less than 90% of its income from the qualifying income described in paragraph (a) above) will be treated as qualifying income. In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respec t to items attributable to an interest in a qualified publicly traded partnership. Finally, for purposes of paragraph (b) above, the term outstanding voting securities of such issuer will include the equity securities of a qualified publicly traded partnership.
If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to federal income tax on income distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).
If the fund were to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.
If the fund fails to distribute in a calendar year substantially all of its ordinary income for such year and substantially all of its capital gain net income for the one-year period ending October 31 (or later if the fund is permitted so to elect and so elects), plus any retained amount from the prior year, the fund will be subject to a 4% excise tax on the undistributed amounts. A dividend paid to shareholders by the fund in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax.
Fund distributions. Distributions from the fund (other than exempt-interest dividends, as discussed below) will be taxable to shareholders as ordinary income to the extent derived from the funds investment income and net short-term capital gains. Properly designated distributions of net capital gains (that is, the excess of net gains from the sale of capital assets held by the fund for more than one year over net losses from the sale of capital assets held for not more than one year) (Capital Gain Dividends) will be taxable to shareholders as such, regardless of how long a shareholder has held the shares in the fund.
If a fund invests all of its assets in shares of underlying funds, its distributable income and gains will normally consist entirely of distributions from underlying funds and gains and losses on the disposition of shares of underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, the fund will not be able to recognize its share of those losses (so as to offset distributions of net income or capital gains from other underlying funds) until it disposes of shares of the underlying fund or those
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losses reduce distributions required to be made by the underlying fund. Moreover, even when the fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, the fund will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund). As a result of the foregoing rules, and certain other special rules, the amounts of net investment income and net capital gains that the fund will be required to distribute to shareholders may be greater than such amounts would have been had the fund invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the character of distrib utions from a fund (e.g., long-term capital gain, exempt interest, eligibility for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the fund invested directly in the securities held by the underlying funds. In addition, in certain circumstances, the "wash sale" rules under Section 1091 of the Code may apply to a fund's sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an underlying fund are sold by the fund at a loss and the fund acquires additional shares of that same underlying fund 30 days before or after the date of the sale. The wash-sale rules could defer losses in the fund's hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.
For taxable years beginning before January 1, 2011, qualified dividend income received by an individual will be taxed at the rates applicable to long-term capital gain. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the funds shares. A dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, on the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a passive foreign investment company.
In general, distributions of investment income designated by a fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to such funds shares. In any event, if the aggregate qualified dividends received by a fund during any taxable year are 95% or more of its gross income, then 100% of the funds dividends (other than properly designated Capital Gain Dividends) will be eligible to be treated as qualified dividend income. For this purpose, the only gain included in the term gross income is the excess of net short-term capital gain over net long-term capital loss.
In general, fixed-income and money market funds receive interest, rather than dividends, from their portfolio securities. As a result, it is not currently expected that any significant portion of such funds distributions to shareholders will be derived from qualified dividend income.
If a fund receives dividends from an underlying fund that qualifies as a regulated investment company, and the underlying fund designates such dividends as qualified dividend income, then the fund may, in turn, designate a portion of its distributions as qualified dividend income as well, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.
Long-term capital gain rates applicable to individuals have been temporarily reducedin general, to 15% with lower rates applying to taxpayers in the 10% and 15% rate brackets for taxable years beginning before January 1, 2011.
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Exempt-interest dividends. The fund will be qualified to pay exempt-interest dividends to its shareholders only if, at the close of each quarter of the funds taxable year, at least 50% of the total value of the funds assets consists of obligations the interest on which is exempt from federal income tax. Distributions that the fund properly designates as exempt-interest dividends are treated as interest excludable from shareholders gross income for federal income tax purposes but may be taxable for federal alternative minimum tax (AMT) purposes and for state and local purposes. If the fund intends to qualify to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets.
Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the funds total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the Internal Revenue Service to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are substantial users of the facilities financed by such obligations or bonds or who are related persons of such substantial users.
A fund that is qualified to pay exempt-interest dividends will inform investors within 60 days of the funds fiscal year-end of the percentage of its income distributions designated as tax-exempt. The percentage is applied uniformly to all distributions made during the year. The percentage of income designated as tax-exempt for any particular distribution may be substantially different from the percentage of the funds income that was tax-exempt during the period covered by the distribution.
Exempt-interest dividends may be taxable for purposes of the federal AMT. For individual shareholders, exempt-interest dividends that are derived from interest on private activity bonds that are issued after August 7, 1986 (other than a qualified 501(c)(3) bond, as such term is defined in the Code) generally must be included in an individuals tax base for purposes of calculating the shareholders liability for federal AMT. Corporate shareholders will be required to include all exempt-interest dividends in determining their federal AMT. The AMT calculation for corporations is based, in part, on a corporations earnings and profits for the year. A corporation must include all exempt-interest dividends in calculating its earnings and profits for the year.
Putnam AMT-Free Insured Municipal Fund intends to distribute exempt-interest dividends that will not be taxable for federal AMT purposes for individuals. It intends to make such distributions by investing in tax exempt securities other than private activity bonds that are issued after August 7, 1986 (other than qualified 501(c)(3) bonds, as such term is defined in the Code). Because corporate shareholders are required to include all exempt-interest dividends in determining their federal AMT, exempt-interest dividends distributed by Putnam AMT-Free Insured Municipal Fund will be taxable for purposes of the federal AMT.
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The Supreme Court is currently considering an appeal of a state court decision that might significantly affect how states tax in-state and out-of-state municipal bonds. A Kentucky state court held that a Kentucky law violates the U.S. Constitution by treating, for Kentucky state tax purposes, the interest income on in-state municipal bonds differently from the income on out-of-state municipal bonds. If the Supreme Court affirms this holding, most states likely will revisit the way in which they treat the interest on municipal bonds, and this has the potential to increase significantly the amount of state tax paid by shareholders on exempt-interest dividends. The Supreme Court heard oral arguments regarding this case on November 5, 2007, however as of
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the date of this SAI, the Court has not issued a decision. You should consult your tax advisor to discuss the tax consequences of your investment in the fund.
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Derivative transactions. If the fund engages in derivative transactions, including transactions in options, futures contracts, straddles, and other similar transactions, including for hedging purposes, it will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the funds securities, convert long-term capital gains into short-term capital gains or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund may make any applicable elections pertaining to such transactions consistent with the interests of the fund.
Certain of the funds derivative activities (including its transactions, if any, in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the funds book income exceeds its taxable income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the funds remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipients basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset. If the funds book income is less than its taxable income (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment and to eliminate fund-level income tax
In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss.
Investments in REITs.
If the fund invests in equity securities of real estate investment trusts ("REITs"), such investments in REIT equity securities 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. The fund's investment in REIT equity securities may at other times result in the fund's receipt of cash in excess of the REIT's earnings. If the fund distributes such amounts, such distribution could constitute a return of capital to the fund shareholders for federal income tax purposes. Dividends received by a fund from a REIT generally will not constitute qualified dividend income.
The fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits ("REMICs"), REITs that are themselves taxable mortgage pools ("TMPs") or REITs that invest in TMPs. Under a notice recently issued by the IRS and Treasury regulations that have not yet been issued, but may apply retroactively, a portion of a Fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject to federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as the fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual interest directly.
In general, excess inclusion income allocated to shareholders cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions). Any investment in residual interests of a Collateralized Mortgage Obligation (a CMO) that has elected to be treated as a REMIC can create complex tax problems, especially if the fund has state or local governments or other tax-exempt organizations as shareholders. Under current law, a fund serves to block unrelated business taxable income ("UBTI") from being realized by its tax-exempt shareholders. Notwithstanding the foregoing, a tax-exempt shareholder will recognize UBTI by virtue of its investment in the fund if shares in the fund constitute debt-financed property in the hands of the tax-
II-36
exempt shareholder within the meaning of Code Section 514(b). Furthermore, a tax-exempt shareholder may recognize unrelated business taxable income ("UBTI") if the fund recognizes excess inclusion income derived from direct or indirect investments in REMIC residual interests or TMPs if the amount of such income recognized by the fund exceeds the fund's investment company taxable income (after taking into account deductions for dividends paid by the fund).
Under legislation enacted in December 2006, a charitable remainder trust ("CRT"), as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in November 2006 , a CRT will not recognize UBTI solely as a result of investing in a fund that recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes excess inclusion income, then the fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applic able in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholders distributions for the year by the amount of the tax that relates to such shareholders interest in the fund. CRTs are urged to consult their tax advisors concerning the consequences of investing in the fund.
Return of capital distributions. If the fund makes a distribution to you in excess of its current and accumulated earnings and profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares.
Dividends and distributions on the funds shares are generally subject to federal income tax as described herein to the extent they do not exceed the funds realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholders investment. Such distributions are likely to occur in respect of shares purchased at a time when the funds net asset value reflects gains that are either unrealized, or realized but not distributed. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholders investment (and thus included in the price paid by the shareholder).
Securities issued or purchased at a discount. The funds investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the fund may be required to sell securities in its portfolio that it otherwise would have continued to hold.
Capital loss carryover. Distributions from capital gains are generally made after applying any available capital loss carryovers. The amounts and expiration dates of any capital loss carryovers available to the fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this SAI or incorporated by reference into this SAI.
Foreign currency-denominated securities and related hedging transactions. The funds transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
If more than 50% of the funds assets at year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held
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for at least the minimum period specified in the Code. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholders ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes.
Under current law, a fund cannot pass through to shareholders foreign tax credits borne in respect of foreign securities income earned by underlying funds. In general, a fund may elect to pass through to its shareholders foreign income taxes it pays only in the case where it directly holds more than 50% of its assets in foreign stock and securities at the close of its taxable year. Foreign securities held indirectly through an underlying fund do not contribute to this 50% threshold.
Investment by the fund in passive foreign investment companies (PFICs) could subject the fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on the proceeds from the sale of its investment in such a company. This tax cannot be eliminated by making distributions to fund shareholders; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a qualified electing fund. The QEF and mark-to-market elections may have the effect of accelerating the recognition of income (without the receipt of cash) and increasing the amount required to be distributed by the fund to avoid taxation. Making either of these elections therefore may require the fund to liquidate other investments to meet its distribution requirement, which may also accelerate the recognition of gain and affect the funds total retur n. Dividends paid by PFICs will not be eligible to be treated as qualified dividend income.
A passive foreign investment company is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons.
Sale or redemption of shares. The sale, exchange or redemption of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale, exchange or redemption of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received by the shareholder with respect to the shares. Al l or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.
Depending on a funds percentage ownership in an underlying fund both before and after a redemption of underlying fund shares, the funds redemption of shares of such underlying fund may cause the fund to be treated as receiving a dividend treated as qualified dividend income, if applicable, or otherwise taxable as ordinary income on the full amount of the distribution instead of receiving capital gain income on the shares of the underlying fund. This would be the case where the fund holds a significant interest in an underlying fund and redeems only a small portion of such interest.
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Shares purchased through tax-qualified plans. Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisers to determine the suitability of shares of a fund as an investment through such plans and the precise effect of an investment on their particular tax situation.
Backup withholding. The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. Pursuant to recently enacted tax legislation, the backup withholding rules may also apply to distributions that are properly designated as exempt-interest dividends. The back-up withholding tax rate is 28% for amounts paid through 2010. This legislation will expire and the back-up withholding rate will be 31% for amounts paid after December 31, 2010, unless Congress enacts tax legislation providing otherwise.
In order for a foreign investor to qualify for exemption from the back-up withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisers in this regard.
Tax shelter reporting regulations. Under U.S. Treasury regulations, if a shareholder realizes a loss on disposition of fund shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies.
Non-U.S. Shareholders. In general, dividends (other than Capital Gain Dividends or exempt-interest dividends) paid by the fund to a shareholder that is not a U.S. person within the meaning of the Code (a foreign person) are subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate) even if they are funded by income or gains (such as portfolio interest, short-term capital gains, or foreign-source dividend and interest income) that, if paid to a foreign person directly, would not be subject to withholding. However, for taxable years of the fund beginning before January 1, 2008, the fund will not be required to withhold any amounts (i) with respect to distributions (other than distributions to a foreign person (w) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (x) to the extent that the dividend is attributable to certain in terest on an obligation if the foreign person is the issuer or is a 10% shareholder of the issuer, (y) that is within certain foreign countries that have inadequate information exchange with the United States, or (z) to the extent the dividend is attributable to interest paid by a person that is a related person of the foreign person and the foreign person is a controlled foreign corporation) from U.S.-source interest income that would not be subject to U.S. federal income tax if earned directly by an individual foreign person, to the extent such distributions are properly designated by the fund (an interest-related dividend), and (ii) with respect to distributions (other than distributions to an individual foreign person who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution) of net short-term capital gains in excess of net long-term capital losses, to the extent such distributions are properly designated by the fund (a short-term capital gain dividend). A fund may opt not to designate dividends as interest-related dividends or short-term capital gain dividends to the full extent permitted by the Code. In addition, as indicated above, Capital Gain Dividends will not be subject to withholding of U.S. federal income tax. There is no guarantee that the exemption from withholding will be extended to tax years of the fund beginning on or after January 1, 2008.
The fact that a fund achieves its investment objectives by investing in underlying funds will generally not adversely affect the funds ability to pass on to foreign shareholders the full benefit of the interest-related dividends and short-term capital gain dividends that it receives from its underlying investments in the funds, except possibly to the extent that (1) interest-related dividends received by the fund are offset by deductions
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allocable to the funds qualified interest income or (2) short-term capital gain dividends received by the fund are offset by the funds net short- or long-term capital losses, in which case the amount of a distribution from the fund to a foreign shareholder that is properly designated as either an interest-related dividend or a short-term capital gain dividend, respectively, may be less than the amount that such shareholder would have received had they invested directly in the underlying funds.
If a beneficial holder who is a foreign person has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates.
Under U.S. federal tax law, a beneficial holder of shares who is a foreign person is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund or on Capital Gain Dividends unless (i) such gain or Capital Gain Dividend is effectively connected with the conduct of a trade or business carried on by such holder within the United States or (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale or Capital Gain Dividend and certain other conditions are met.
MANAGEMENT
Trustees
<R> | ||
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Name, Address1 , Year of | Principal | Other Directorships Held by Trustee |
Birth, Position(s) Held with | Occupation(s) During | |
Fund and Length of Service | Past 5 Years | |
as a Putnam Fund Trustee2 | ||
| ||
Jameson A. Baxter (Born | President of Baxter | Director of ASHTA Chemicals, Inc., Ryerson Inc. (a |
1943), Trustee since 1994 and | Associates, Inc., a | metals service corporation), the Mutual Fund |
Vice Chairman since 2005 | private investment firm. | Directors Forum and Advocate Health Care. She is |
Chairman Emeritus of the Board of Trustees, Mount | ||
Holyoke College, having served as Chairman for | ||
five years. Until 2007, Ms. Baxter was a director of | ||
Banta Corporation (a printing and supply chain | ||
management company); until 2004, she was a | ||
director of BoardSource (formerly the National | ||
Center for Nonprofit Boards), and until 2002, she | ||
was a director of Intermatic Corporation (a | ||
manufacturer of energy control products). | ||
| ||
Charles B. Curtis (Born | President and Chief | Member of the Council on Foreign Relations and |
1940), Trustee since 2001 | Operating Officer, | serves as a Director of Edison International and |
Nuclear Threat Initiative | Southern California Edison. Until 2006, Mr. Curtis | |
(a private foundation | served as a member of the Trustee Advisory Council | |
dealing with national | of the Applied Physics Laboratory, Johns Hopkins | |
security issues) and | University. Until 2003, Mr. Curtis was a Member of | |
serves as Senior Advisor | the Electric Power Research Institute Advisory | |
to the United Nations | Council and the University of Chicago Board of | |
Foundation. | Governors for Argonne National Laboratory. Prior | |
to 2002, Mr. Curtis was a Member of the Board of | ||
Directors of the Gas Technology Institute and the | ||
Board of Directors of the Environment and Natural | ||
Resources Program Steering Committee, John F. | ||
Kennedy School of Government, Harvard | ||
|
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Name, Address1 , Year of | Principal | Other Directorships Held by Trustee |
Birth, Position(s) Held with | Occupation(s) During | |
Fund and Length of Service | Past 5 Years | |
as a Putnam Fund Trustee2 | ||
| ||
University. Until 2001, Mr. Curtis was a Member of | ||
the Department of Defense Policy Board and | ||
Director of EG&G Technical Services, Inc. (a fossil | ||
energy research and development support company). | ||
| ||
Robert J. Darretta (Born | Prior to 2007, Mr. | Director of UnitedHealth Group (a |
1946), Trustee since 2007 | Darretta held several | diversified health-care conglomerate). Until April, |
accounting and finance | 2007, Mr. Darretta was Vice Chairman of the Board | |
positions with Johnson | of Directors of Johnson & Johnson. | |
& Johnson (a diversified | ||
health-care | ||
conglomerate), including | ||
Chief Financial Officer, | ||
Executive Vice | ||
President, and Treasurer. | ||
| ||
Myra R. Drucker (Born | Ms. Drucker is Chair of | Ms. Drucker is an ex-officio member of the New |
1948), Trustee since 2004 | the Board of Trustees of | York Stock Exchange (NYSE) Pension Managers |
Commonfund (a not-for- | Advisory Committee, having served as Chair for | |
profit firm specializing | seven years. Until August 31, 2004, Ms. Drucker | |
in asset management for | was Managing Director and a member of the Board | |
educational endowments | of Directors of General Motors Asset Management | |
and foundations), Vice | and Chief Investment Officer of General Motors | |
Chair of the Board of | Trust Bank. Ms. Drucker also served as a member of | |
Trustees of Sarah | the NYSE Corporate Accountability and Listing | |
Lawrence College, and a | Standards Committee and the NYSE/NASD IPO | |
member of the | Advisory Committee. Prior to joining General | |
Investment Committee | Motors Asset Management in 2001, Ms. Drucker | |
of the Kresge | held various executive positions in the investment | |
Foundation (a charitable | management industry. Ms. Drucker served as Chief | |
trust). She is also a | Investment Officer of Xerox Corporation (a | |
director of New York | technology and service company in the document | |
Stock Exchange LLC, a | industry), where she was responsible for the | |
wholly-owned | investment of the companys pension assets. Ms. | |
subsidiary of the | Drucker was also Staff Vice President and Director | |
publicly-traded NYSE | of Trust Investments for International Paper (a paper | |
Group, Inc., a director of | products, paper distribution, packaging and forest | |
Interactive Data | products company) and previously served as | |
Corporation (a provider | Manager of Trust Investments for Xerox | |
of financial market data, | Corporation. | |
analytics and related | ||
services to financial | ||
institutions and | ||
individual investors), | ||
and an advisor to RCM | ||
Capital Management (an | ||
investment management | ||
firm). | ||
| ||
John A. Hill (Born 1942), | Vice Chairman, First | Director of Devon Energy Corporation and various |
Trustee since 1985 and | Reserve Corporation (a | private companies controlled by First Reserve |
Chairman since 2000 | private equity buyout | Corporation, as well as Chairman of TH Lee, |
|
II-41
Name, Address1 , Year of | Principal | Other Directorships Held by Trustee |
Birth, Position(s) Held with | Occupation(s) During | |
Fund and Length of Service | Past 5 Years | |
as a Putnam Fund Trustee2 | ||
| ||
firm that specializes in | Putnam Investment Trust (a closed-end investment | |
energy investments in | company advised by an affiliate of Putnam | |
the diversified world- | Management). He is also a Trustee of Sarah | |
wide energy industry). | Lawrence College. | |
| ||
Paul L. Joskow (Born 1947), | Elizabeth and James | Director of TransCanada Corporation (an energy |
Trustee since 1997 | Killian Professor of | company focused on natural gas transmission and |
Economics and | power services) and Exelon Corporation (an energy | |
Management, and | company focused on power services) and a Member | |
Director of the Center | of the Board of Overseers of the Boston Symphony | |
for Energy and | Orchestra. Prior to August 2007, he served as a | |
Environmental Policy | director of National Grid (a U.K.-based holding | |
Research at the | company with interests in electric and gas | |
Massachusetts Institute | transmission and distribution and | |
of Technology. | telecommunications infrastructure). Prior to July, | |
2006, he served as President of the Yale University | ||
Council and continues to serve as a member of the | ||
Council. Prior to February 2005, he served on the | ||
board of the Whitehead Institute for Biomedical | ||
Research (a non-profit research institution). Prior to | ||
February 2002, he was a Director of State Farm | ||
Indemnity Company (an automobile insurance | ||
company), and prior to March 2000, he was a | ||
Director of New England Electric System (a public | ||
utility holding company). | ||
| ||
Elizabeth T. Kennan (Born | Partner in Cambus- | Lead Director of Northeast Utilities. She is a Trustee |
1938), Trustee since 1992 | Kenneth Farm | of the National Trust for Historic Preservation, of |
(thoroughbred horse and | Centre College and of Midway College (in Midway, | |
cattle breeding). She is | Kentucky). Until 2006, she was a Member of The | |
President Emeritus of | Trustees of Reservations. Prior to June 2005, she | |
Mount Holyoke College. | was a Director of Talbots, Inc. (a distributor of | |
womens apparel), and she has served as Director on | ||
a number of other boards, including Bell Atlantic, | ||
Chastain Real Estate, Shawmut Bank, Berkshire Life | ||
Insurance and Kennedy Home Life Insurance. Dr. | ||
Kennan has also served as President of Five | ||
Colleges Incorporated and as a Trustee of Notre | ||
Dame University, and is active in various | ||
educational and civic associations. Prior to 2001, Dr. | ||
Kennan served on the oversight committee of the | ||
Folger Shakespeare Library. | ||
| ||
Kenneth R. Leibler (Born | Founding partner and | Prior to December 2006, Mr. Leibler served as a |
1949), Trustee since 2006 | former Chairman of the | director of the Optimum Funds Group. Prior to |
Boston Options | October, 2006 he served as a director of ISO New | |
Exchange, an electronic | England, the organization responsible for the | |
market place for the | operation of the electric generation system in the | |
trading of listed | New England states. Prior to 2000, he was a director | |
derivatives securities, | of the Investment Company Institute in Washington, | |
and lead director of | D.C. Prior to January 2005, Mr. Leibler served as | |
Ruder Finn Group, a | Chairman and Chief Executive Officer of the Boston | |
global communications | Stock Exchange. Prior to January 2000, he served as | |
|
II-42
Name, Address1 , Year of | Principal | Other Directorships Held by Trustee |
Birth, Position(s) Held with | Occupation(s) During | |
Fund and Length of Service | Past 5 Years | |
as a Putnam Fund Trustee2 | ||
| ||
and advertising firm. He | President and Chief Executive Officer of Liberty | |
currently serves as a | Financial Companies, a publicly traded diversified | |
Trustee of Beth Israel | asset management organization. Prior to June 1990, | |
Deaconess Hospital in | he served as President and Chief Operating Officer | |
Boston and as a director | of the American Stock Exchange (AMEX). Prior to | |
of Northeast Utilities, | serving as AMEX President, he held the position of | |
which operates New | Chief Financial Officer, and headed its management | |
England largest energy | and marketing operations. | |
delivery system. | ||
| ||
Robert E. Patterson (Born | Senior Partner of Cabot | Chairman Emeritus and Trustee of the Joslin |
1945), Trustee since 1984 | Properties, L.P. and | Diabetes Center. Prior to December 2001 and June |
Chairman of Cabot | 2003, Mr. Patterson served as a Trustee of Cabot | |
Properties, Inc. (a | Industrial Trust and the Sea Education Association, | |
private equity firm | respectively. | |
investing in commercial | ||
real estate). Prior to | ||
December 2001, he was | ||
President of Cabot | ||
Industrial Trust (a | ||
publicly traded real | ||
estate investment trust). | ||
| ||
George Putnam III (Born | Chairman of New | Director of The Boston Family Office, LLC (a |
1951), Trustee since 1984 | Generation Research, | registered investment advisor), and a Trustee of St. |
Inc. (a publisher of | Marks School. Until 2006, Mr. Putnam was a | |
financial advisory and | Trustee of Shore Country Day School. Until 2002, | |
other research services) | he was a Trustee of the Sea Education Association. | |
and President of New | ||
Generation Advisers, | ||
Inc. (a registered | ||
investment adviser to | ||
private funds), which are | ||
firms he founded in | ||
1986. Prior to June 2007, | ||
Mr. Putnam was | ||
President of the Putnam | ||
Funds. | ||
| ||
W. Thomas Stephens (Born | Chairman and Chief | Director of TransCanadaPipelines Ltd (an energy |
1942), Trustee since 1997 | Executive Officer of | infrastructure company). Until 2004, Mr. Stephens |
Boise Cascade, LLC (a | was a Director of Xcel Energy Incorporated (a | |
paper, forest product and | public utility company), Qwest Communications and | |
timberland assets | Norske Canada, Inc. (a paper manufacturer). Until | |
company). | 2003, Mr. Stephens was a Director of Mail-Well, | |
Inc. (a diversified printing company). Prior to July | ||
2001, Mr. Stephens was Chairman of Mail-Well. | ||
| ||
Richard B. Worley (Born | Managing Partner of | Serves as a Trustee of the University of |
1945), Trustee since 2004 | Permit Capital LLC (an | Pennsylvania Medical Center, the Robert Wood |
investment management | Johnson Foundation (a philanthropic organization | |
firm). Prior to 2002, he | devoted to healthcare issues) and the National | |
served as Chief Strategic | Constitution Center. Mr. Worley also a Director of | |
|
II-43
Name, Address1 , Year of | Principal | Other Directorships Held by Trustee |
Birth, Position(s) Held with | Occupation(s) During | |
Fund and Length of Service | Past 5 Years | |
as a Putnam Fund Trustee2 | ||
| ||
Officer of Morgan | the Colonial Williamsburg Foundation (a historical | |
Stanley Investment | preservation organization) and the Philadelphia | |
Management. He | Orchestra Association. He serves on the investment | |
previously served as | committees of Mount Holyoke College and World | |
President, Chief | Wildlife Fund (a wildlife conservation organization). | |
Executive Officer and | ||
Chief Investment Officer | ||
of Morgan Stanley Dean | ||
Witter Investment | ||
Management and as a | ||
Managing Director of | ||
Morgan Stanley (a | ||
financial services firm). | ||
| ||
Interested Trustees | ||
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*Charles E. Haldeman, Jr. | President and Chief | Serves on the Board of Governors of the Investment |
(Born 1948), Trustee since | Executive Officer of | Company Institute and as Chair of the Board of |
2004 and President of the | Putnam, LLC (Putnam | Trustees of Dartmouth College. Mr. Haldeman |
Putnam Funds since June | Investments). Member | serves on the Partners HealthCare Investment |
2007 | of Putnam Investments | Committee, the Tuck School of Business at |
Executive Board of | Dartmouth College Board of Overseers, and the | |
Directors and Advisory | Harvard Business School Board of Deans Advisors. | |
Council. Prior to | ||
November 2003, Mr. | ||
Haldeman served as Co- | ||
Head of Putnam | ||
Investments Investment | ||
Division. Prior to joining | ||
Putnam Investments in | ||
2002, he served as Chief | ||
Executive Officer of | ||
Delaware Investments | ||
and President and Chief | ||
Operating Officer of | ||
United Asset | ||
Management. | ||
| ||
</R> | ||
1The address of each Trustee is One Post Office Square, Boston, MA 02109. As of December 31, 2006, there were 107 Putnam Funds.
2Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 72, death or removal.
*Trustee who is or may be deemed to be an interested person (as defined in the Investment Company Act of 1940) of the fund, Putnam Management and/or Putnam Retail Management. Mr. Haldeman is the President of your fund and each of the other Putnam funds, and is President and Chief Executive Officer of Putnam Investments.
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Officers
In addition to Charles E. Haldeman, Jr., the funds President, the other officers of the fund are shown below. All of the officers of your fund are employees of Putnam Management or its affiliates or are members of the Trustees independent administrative staff.
<R> | ||
| ||
Name, Address1 , Year of | Length of Service with | Principal Occupation(s) During Past 5 Years and |
Birth, Position(s) Held with | the Putnam Funds2 | Position(s) with Funds Investment Adviser and |
Fund | Distributor3 | |
| ||
Charles E. Porter4 | Since 1989 | Executive Vice President, Associate Treasurer and |
(Born 1938), Executive Vice | Principal Executive Officer, The Putnam Funds | |
President, Principal Executive | ||
Officer, Associate Treasurer | ||
and Compliance Liaison | ||
| ||
Jonathan S. Horwitz4 | Since 2004 | Senior Vice President and Treasurer, The Putnam |
(Born 1955), Senior Vice | Funds. Prior to 2004, Managing Director, Putnam | |
President and Treasurer | Investments | |
| ||
Steven D. Krichmar | Since 2002 | Senior Managing Director, Putnam Investments |
(Born 1958), Vice President | ||
and Principal Financial Officer | ||
| ||
Janet C. Smith | Since 2007 | Managing Director, Putnam Investments, Putnam |
(Born 1965), Vice President, | Management | |
Assistant Treasurer and | ||
Principal Accounting Officer | ||
| ||
Beth S. Mazor | Since 2002 | Managing Director, Putnam Investments |
(Born 1958), Vice President | ||
| ||
Robert R. Leveille | Since 2007 | Managing Director, Putnam Investments, Putnam |
(Born 1969), Vice President | Management and Putnam Retail Management | |
and Chief Compliance Officer | Prior to 2005, was a member of Bell Boyd & Lloyd | |
LLC, and prior to 2003, Vice President and Senior | ||
Counsel of Liberty Funds Group LLC. | ||
| ||
Mark C. Trenchard | Since 2002 | Managing Director, Putnam Investments |
(Born 1962), Vice President | ||
and BSA Compliance Officer | ||
| ||
Francis J. McNamara, III | Since 2004 | Senior Managing Director, Putnam Investments, |
(Born 1955), Vice President | Putnam Management and Putnam Retail | |
and Chief Legal Officer | Management. Prior to 2004, was General Counsel | |
of State Street Research & Management Company. | ||
| ||
James P. Pappas | Since 2004 | Managing Director, Putnam Investments |
(Born 1953), Vice President | During 2002, was Chief Operating Officer of | |
Atalanta/Sosnoff Management Corporation. | ||
| ||
Richard S. Robie, III | Since 2004 | Senior Managing Director, Putnam Investments. |
(Born 1960), Vice President | Prior to 2003, was Senior Vice President of United | |
Asset Management Corporation. | ||
| ||
Judith Cohen4 | Since 1993 | Vice President, Clerk and Assistant Treasurer, The |
(Born 1945), Vice President, | Putnam Funds | |
Clerk and Assistant Treasurer | ||
| ||
Wanda M. McManus4 | Since 1993 | Vice President, Senior Associate Treasurer and |
(Born 1947), Vice President, | Assistant Clerk, The Putnam Funds | |
Senior Associate Treasurer and | ||
Assistant Clerk | ||
|
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Name, Address1 , Year of | Length of Service with | Principal Occupation(s) During Past 5 Years and |
Birth, Position(s) Held with | the Putnam Funds2 | Position(s) with Funds Investment Adviser and |
Fund | Distributor3 | |
| ||
Nancy E. Florek4 | Since 2000 | Vice President, Assistant Clerk, Assistant Treasurer |
(Born 1957), Vice President, | and Proxy Manager, The Putnam Funds | |
Assistant Clerk, Assistant | ||
Treasurer and Proxy Manager | ||
| ||
Susan G. Malloy | Since 2007 | Managing Director, Putnam Investments |
(Born 1957),Vice President | ||
and Assistant Treasurer | ||
| ||
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1The address of each Officer is One Post Office Square, Boston, MA 02109.
2Each officer serves for an indefinite term, until his or her resignation, retirement, death or removal.
3Prior positions and/or officer appointments with the fund or the funds investment adviser and distributor have been omitted.
4Officers of the fund who are members of the Trustees independent administrative staff. Compensation for these individuals is fixed by the Trustees and reimbursed to Putnam Management.
Except as stated above, 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.
Standing Committees of the Board of Trustees
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Audit and Compliance Committee. The Audit and Compliance Committee provides oversight on matters relating to the preparation of the funds financial statements, compliance matters, internal audit functions, and Codes of Ethics issues. This oversight is discharged by regularly meeting with management and the funds independent auditors and keeping current on industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds independent auditors, including their independence. The members of the Committee include only Trustees who are not interested persons of the funds or Putnam Management. Each member of the Committee also is independent, as such term is interpreted for purposes of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended, and the listing standards of the New York Stock Exchange. The Board of Trustees has adopted a written charter for the Committee. The Committee currently consists of Messrs. Patterson (Chairperson), Darretta, Hill, Leibler, Stephens and Ms. Drucker.
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Board Policy and Nominating Committee. The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee will consider nominees for Trustee recommended by shareholders of a fund provided that such recommendations are submitted by the date disclosed in the funds proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the Securities Exchange Act of 1934, as amended. The Committee also reviews policy matters affecting the operation of the Board and its independent staff. In addition, the Committee oversees the voting of proxies associated with portfolio investmen ts of the funds with the goal of ensuring that these proxies are voted in the best interest of the funds shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Trustees who are not interested persons of the funds or Putnam Management and currently consists of Dr. Kennan (Chairperson), Ms. Baxter and Messrs. Hill and Patterson.
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Brokerage Committee. The Brokerage Committee reviews the funds' policies regarding the execution of portfolio trades and Putnam Management's practices and procedures relating to the implementation of those policies. The Committee reviews periodic reports on the cost and quality of execution of portfolio transactions and the extent to which brokerage commissions have been used (i) by Putnam Management to obtain brokerage and research services generally useful to it in managing the portfolios of the funds and of its other clients, and (ii) by the funds to pay for certain fund expenses. The Committee reports to the Trustees and makes recommendations to Trustees regarding these matters. The Committee currently consists of Drs. Joskow (Chairperson) and Kennan, Ms. Baxter and Messrs. Curtis, Putnam and Worley.
Communications, Service and Marketing Committee. The Communications, Service and Marketing Committee reviews the quality of services provided to shareholders and oversees the marketing and sale of fund shares by Putnam Retail Management. The Committee also exercises general oversight of marketing and sales communications used by Putnam Retail Management, as well as other communications sent to fund shareholders. The Committee also reviews periodic summaries of any correspondence to the Trustees from shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Messrs. Putnam (Chairperson), Curtis, Patterson and Stephens and Drs. Joskow and Kennan.
Contract Committee. The Contract Committee reviews and evaluates at least annually all arrangements pertaining to (i) the engagement of Putnam Management and its affiliates to provide services to the funds, (ii) the expenditure of the funds' assets for distribution purposes pursuant to Distribution Plans of the funds, and (iii) the engagement of other persons to provide material services to the funds, including in particular those instances where the cost of services is shared between the funds and Putnam Management and its affiliates or where Putnam Management or its affiliates have a material interest. The Committee also reviews the proposed organization of new fund products, and proposed structural changes to existing funds. The Committee reports and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Ms. Baxter (Chairperson), Drs. Joskow and Kennan and Messrs. Curtis, Putnam and Worl ey.
Distributions Committee. The Distributions Committee oversees all dividends and distributions by the funds. The Committee makes recommendations to the Trustees of the funds regarding the amount and timing of distributions paid by the funds, and determines such matters when the Trustees are not in session. The Committee also oversees the policies and procedures pursuant to which Putnam Management prepares recommendations for distributions, and meets regularly with representatives of Putnam Management to review the implementation of such policies and procedures. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Ms. Drucker (Chairperson) and Messrs. Darretta, Hill, Leibler, Patterson and Stephens.
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Executive Committee. The functions of the Executive Committee are twofold. The first is to ensure that the funds business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to establish annual and ongoing goals, objectives and priorities for the Board of Trustees and to ensure coordination of all efforts between the Trustees and Putnam Management on behalf of the shareholders of the funds. The Committee currently consists of Messrs. Hill (Chairperson), Curtis, Patterson and Putnam, Dr. Joskow and Ms. Baxter.
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Investment Oversight Committees. The Investment Oversight Committees regularly meet with investment personnel of Putnam Management to review the investment performance and strategies of the funds in light of their stated investment objectives and policies. The Committees seek to identify any compliance issues that are unique to the applicable categories of funds and work with the appropriate Board committees to ensure that any such issues are properly addressed. Investment Oversight Committee A currently consists of Messrs. Leibler (Chairperson) and Stephens and Dr. Joskow. Investment Oversight Committee B currently consists of Messrs. Darretta (Chairperson), Curtis and Hill. Investment Oversight Committee C currently consists of
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Messrs. Worley (Chairperson) and Patterson and Ms. Baxter. Investment Oversight Committee D currently consists of Ms. Drucker (Chairperson), Messrs. Haldeman and Putnam and Dr. Kennan.
Investment Oversight Coordinating Committee. The Investment Oversight Coordinating Committee coordinates the work of the Investment Oversight Committees and works with representatives of Putnam Management to coordinate the Board's general oversight of the investment performance of the funds. From time to time, as determined by the Chairman of the Board, the Committee may also review particular matters relating to fund investments and Putnam Management's investment process. The Committee currently consists of Ms. Drucker (Chairperson) and Messrs. Darretta, Leibler and Worley.
Pricing Committee. The Pricing Committee oversees the valuation of assets of the Putnam funds and reviews the funds policies and procedures for achieving accurate and timely pricing of fund shares. The Committee also oversees implementation of these policies, including fair value determinations of individual securities made by Putnam Management or other designated agents of the funds. The Committee also oversees compliance by money market funds with Rule 2a-7, interfund transactions pursuant to Rule 17a-7 and the correction of occasional pricing errors. The Committee also reviews matters related to the liquidity of portfolio holdings. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Messrs. Leibler (Chairperson), Darretta, Hill, Patterson and Stephens and Ms. Drucker.
Indemnification of Trustees
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.
For details of Trustees fees paid by the fund and information concerning retirement guidelines for the Trustees, see Charges and expenses in Part I of this SAI.
Putnam Management and its affiliates
Putnam Management is one of Americas oldest and largest money management firms. Putnam Managements staff of experienced portfolio managers and research analysts selects securities and constantly supervises the funds portfolio. By pooling an investors money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937.
Putnam Management is a subsidiary of Putnam, LLC. Putnam, LLC, which generally conducts business under the name Putnam Investments, is owned through a series of wholly-owned subsidiaries by Great-West Lifeco Inc., which is a financial services holding company with operations in Canada, the United States and Europe and is a member of the Power Financial Corporation group of companies. Power Financial Corporation, a global company with interests in the financial services industry, is a subsidiary of Power Corporation of Canada, a financial, industrial, and communications holding company, of which the Honorable Paul Desmarais, Sr., through a group of private holding companies which he controls, has voting control.
Trustees and officers of the fund who are also officers of Putnam Management or its affiliates or who are stockholders of Putnam Investments or its parent companies will benefit from the advisory fees, sales commissions, distribution fees, custodian fees and transfer agency fees paid or allowed by the fund.
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The Management Contract
Under a Management Contract between the fund and Putnam Management, subject to such policies as the Trustees may determine, Putnam Management, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, Putnam Management also manages, supervises and conducts the other affairs and business of the fund, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the funds net asset value, but excluding shareholder accounting services) and places all orders for the purchase and sale of the funds portfolio securities. Putnam Management may place fund portfolio transactions with broker-dealers that furnish Putnam Management, without cost to it, certain research, statistical and quotation services of value to Putnam Management and its affiliates in advising the fund and other clients. In so doing, Putnam Manage ment may cause the fund to pay greater brokerage commissions than it might otherwise pay.
For details of Putnam Managements compensation under the Management Contract, see Charges and expenses in Part I of this SAI. Putnam Managements compensation under the Management Contract may be reduced in any year if the funds expenses exceed the limits on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the fund are qualified for offer or sale. The term expenses is defined in the statutes or regulations of such jurisdictions, and generally excludes brokerage commissions, taxes, interest, extraordinary expenses and, if the fund has a distribution plan, payments made under such plan.
Under the Management Contract, Putnam Management may reduce its compensation to the extent that the funds expenses exceed such lower expense limitation as Putnam Management may, by notice to the fund, declare to be effective. For the purpose of determining any such limitation on Putnam Managements compensation, expenses of the fund shall not reflect the application of commissions or cash management credits that may reduce designated fund expenses. The terms of any such expense limitation from time to time in effect are described in the prospectus and/or Part I of this SAI.
In addition, for all funds through the end of the funds fiscal year ending in 2008, Putnam Management has agreed to waive fees and reimburse expenses of the fund to the extent necessary to ensure that the fund pays total fund operating expenses at an annual rate that does not exceed the simple average of the expenses of all front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund (expressed in each case as a percentage of average net assets). For these purposes, total fund operating expenses of both the fund and the Lipper category average will be calculated without giving effect to 12b-1 fees or any expense offset and brokerage service arrangements that may reduce fund expenses, the Lipper category average will be calculated by Lipper each calendar quarter in accordance with Lippers standard method for comparing fund expenses based on expense information for the most recent fiscal year of each fund incl uded in that category, and the expense limitation will be updated as of the first business day after Lipper publishes the category average (generally shortly after the end of each calendar quarter).
In addition to the fee paid to Putnam Management, the fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their assistants who provide certain administrative services for the fund and the other Putnam funds, each of which bears an allocated share of the foregoing costs. The aggregate amount of all such payments and reimbursements is determined annually by the Trustees.
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The amount of this reimbursement for the funds most recent fiscal year is included in Charges and expenses in Part I of this SAI. Putnam Management pays all other salaries of officers of the fund. The fund pays all expenses not assumed by Putnam Management including, without limitation, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The fund pays the cost of typesetting for its prospectuses and the cost of printing and mailing any prospectuses sent to its shareholders. Putnam Retail Management pays the cost of printing and distributing all other prospectuses.
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The Management Contract provides that Putnam Management shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by Putnam Management, on 30 days written notice. It may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not interested persons of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a majority of the outstanding voting securities as defined in the Investment Company Act of 1940.
Effective January 1, 2007, Putnam Management has entered into a Master Sub-Accounting Services Agreement with State Street Bank and Trust Company ("State Street"), under which Putnam Management has delegated to State Street responsibility for providing certain administrative, pricing, and bookkeeping services for the fund. Putnam Management pays State Street a fee, monthly, based on a combination of fixed annual charges and charges based on the fund's assets and the number and types of securities held by the fund, and reimburses State Street for certain out-of-pocket expenses
The Sub-Manager
PIL, an affiliate of Putnam Management, has been retained as the sub-manager for a portion of the assets of certain funds as determined by Putnam Management from time to time. PIL is currently authorized to serve as the sub-manager, to the extent determined by Putnam Management from time to time, for the following funds: Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Advantage Fund, Putnam High Yield Trust, Putnam Global Equity Fund, Putnam Global Natural Resources Fund, Putnam Europe Equity Fund, Putnam International Equity Fund, Putnam International Growth and Income Fund, Putnam Research Fund and Putnam Utilities Growth & Income Fund. PIL may serve as sub-manager pursuant to the terms of a sub-management agreement between Putnam Management and PIL. Pursuant to the terms of the sub-management agreement, Putnam Management (and not the fund) pays a quarterly sub-management fee to PIL for its services at the annual rate of 0.35% of the average aggregate net asset value of the portion of Putnam Europe Equity Fund, Putnam Global Equity Fund, Putnam Global Natural Resources Fund, Putnam International Equity Fund, Putnam International Growth and Income Fund, Putnam Research Fund and Putnam Utilities Growth and Income Fund, if any, managed by PIL from time to time, and 0.40% of the average aggregate net asset value of the portion of Putnam Diversified Income Trust, Putnam Global Income Trust, Putnam High Yield Advantage Fund and Putnam High Yield Trust, if any, managed by PIL from time to time.
Under the terms of the sub-management contract, PIL, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PIL from time to time by Putnam Management and makes investment decisions on behalf of such portion of the fund, subject to the supervision of Putnam Management. Putnam Management may also, at its discretion, request PIL to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers. PIL, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties.
The sub-management contract provides that PIL shall not be subject to any liability to Putnam Management, the fund or 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 obligations and duties on the part of PIL.
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The sub-management contract may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PIL or Putnam Management, on 30 days written notice. The sub-management contract also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not interested persons of Putnam Management or the fund. The sub-management contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not interested persons of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a majority of the outstanding voting securities as defined in the Investment Company Act of 1940.
The Sub-Adviser
The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, has been retained as a sub-adviser for a portion of the assets of certain funds as determined from time to time by Putnam Management or, with respect to portions of a funds assets for which PIL acts as sub-manager as described above, PIL. PAC is currently authorized to serve as the sub-adviser, to the extent determined by Putnam Management or PIL, for Putnam International Equity Fund. PAC serves as sub-adviser pursuant to the terms of a sub-advisory agreement among Putnam Management, PIL and PAC. Pursuant to the terms of the sub-advisory agreement, Putnam Management or, with respect to portions of the funds assets for which PIL acts as sub-manager, PIL (and not the fund) pays a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.10% of the average aggregate net asset value of the portion of the fund with respect to which PAC acts as sub-adviser.
Under the terms of the sub-advisory contract, PAC, at its own expense, furnishes recommendations to purchase, hold, sell or exchange investments, securities and assets for that portion of the fund that is allocated to PAC from time to time by Putnam Management or PIL. Putnam Management or PIL, as applicable, will determine whether to execute each such recommendation by PAC, whose activities as sub-adviser are subject to the supervision of Putnam Management (and, if applicable, PIL). PAC, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties.
The sub-advisory contract provides that PAC shall not be subject to any liability to Putnam Management, PIL, the fund or 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 obligations and duties on the part of PAC.
The sub-advisory contract may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PAC, PIL or Putnam Management, on 30 days written notice. The sub-advisory contract also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not interested persons of Putnam Management or the fund. The sub-advisory contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not interested persons of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a majority of the outstanding voting securities as defined in the Investment Company Act of 1940.
Portfolio Transactions
Potential conflicts of interest in managing multiple accounts. Like other investment professionals with multiple clients, the funds Portfolio Leader(s) and Portfolio Member(s) may face certain potential conflicts of interest in connection with managing both the fund and the other accounts listed under Other Accounts Managed by the Funds Portfolio Managers at the same time. The paragraphs below describe some of these
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potential conflicts, which Putnam Management believes are faced by investment professionals at most major financial firms. As described below, Putnam Management and the Trustees of the Putnam funds have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.
The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (performance fee accounts), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:
The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.
The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.
The trading of other accounts could be used to benefit higher-fee accounts (front- running).
The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.
Putnam Management attempts to address these potential conflicts of interest relating to higher-fee accounts through various compliance policies that are generally intended to place all accounts, regardless of fee structure, on the same footing for investment management purposes. For example, under Putnam Managements policies:
Performance fee accounts must be included in all standard trading and allocation procedures with all other accounts.
All accounts must be allocated to a specific category of account and trade in parallel with allocations of similar accounts based on the procedures generally applicable to all accounts in those groups (e.g., based on relative risk budgets of accounts).
All trading must be effected through Putnams trading desks and normal queues and procedures must be followed (i.e., no special treatment is permitted for performance fee accounts or higher-fee accounts based on account fee structure).
Front running is strictly prohibited.
The funds Portfolio Leader(s) and Portfolio Member(s) may not be guaranteed or specifically allocated any portion of a performance fee.
As part of these policies, Putnam Management has also implemented trade oversight and review procedures in order to monitor whether particular accounts (including higher-fee accounts or performance fee accounts) are being favored over time.
Potential conflicts of interest may also arise when the Portfolio Leader(s) or Portfolio Member(s) have personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to limited exceptions, Putnam Managements investment professionals do not have the opportunity to invest in client accounts, other than the Putnam funds. However, in the ordinary course of business, Putnam Management or related persons may from time to time establish pilot or incubator funds for the purpose of testing proposed investment strategies and products prior to offering them to clients. These pilot accounts may be in the form of registered investment companies, private funds such as partnerships or separate accounts established by Putnam Management or an affiliate. Putnam Management or an affiliate supplies the funding for these accounts. Putnam employees, including the funds Portfolio Leader(s) and Po rtfolio Member(s), may also invest in certain pilot accounts. Putnam Management, and to the extent applicable, the Portfolio Leader(s) and Portfolio Member(s) will benefit from the favorable investment performance of those funds and accounts. Pilot funds and accounts may, and frequently do, invest in the same securities as the client accounts. Putnam Managements policy is to treat pilot accounts in the same manner as client accounts for purposes of trading allocation neither favoring nor disfavoring them except as is legally
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required. For example, pilot accounts are normally included in Putnam Managements daily block trades to the same extent as client accounts (except that pilot accounts do not participate in initial public offerings).
A potential conflict of interest may arise when the fund and other accounts purchase or sell the same securities. On occasions when the Portfolio Leader(s) or Portfolio Member(s) consider the purchase or sale of a security to be in the best interests of the fund as well as other accounts, Putnam Managements trading desk may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to the fund or another account if one account is favored over another in allocating the securities purchased or sold for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account. Putnam Managements trade allocation policies generally provide that each days transactions in securities that are purchased or sold by multip le accounts are, insofar as possible, averaged as to price and allocated between such accounts (including the fund) in a manner which in Putnam Managements opinion is equitable to each account and in accordance with the amount being purchased or sold by each account. Certain exceptions exist for specialty, regional or sector accounts. Trade allocations are reviewed on a periodic basis as part of Putnam Managements trade oversight procedures in an attempt to ensure fairness over time across accounts.
Cross trades, in which one Putnam account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay, or if such trades result in more attractive investments being allocated to higher-fee accounts. Putnam Management and the funds Trustees have adopted compliance procedures that provide that any transactions between the fund and another Putnam-advised account are to be made at an independent current market price, as required by law.
Another potential conflict of interest may arise based on the different investment objectives and strategies of the fund and other accounts. For example, another account may have a shorter-term investment horizon or different investment objectives, policies or restrictions than the fund. Depending on another accounts objectives or other factors, the Portfolio Leader(s) and Portfolio Member(s) may give advice and make decisions that may differ from advice given, or the timing or nature of decisions made, with respect to the fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by the Portfolio Leader(s) or Portfolio Member(s) when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts. As noted above, Putnam Management has implemented trade oversight and review procedures to monitor whether any account is systematically favored over time.
The funds Portfolio Leader(s) and Portfolio Member(s) may also face other potential conflicts of interest in managing the fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. For information on restrictions imposed on personal securities transactions of the funds Portfolio Leader(s) and Portfolio Member(s), please see Personal Investments by Employees of Putnam Management and Putnam Retail Management and Officers and Trustees of the Fund.
For information about other funds and accounts managed by the funds Portfolio Leader(s) and Portfolio Member(s), please refer to Who manages the fund(s)? in the prospectus and Other Accounts Managed By The Funds Portfolio Managers in Part I of the SAI.
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Brokerage and research services.
Transactions on stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions may vary among different brokers. A particular broker may charge different commissions according to such factors as execution venue and exchange. Although the fund does not typically pay commissions for principal transactions in the over-the-counter markets, such as most fixed income securities and certain derivatives, an undisclosed amount of profit or mark-up is included in the price the fund pays. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund.
It has for many years been a common practice in the investment advisory business for broker-dealers that execute portfolio transactions for the clients of advisers of investment companies and other institutional investors to provide those advisers with brokerage and research services, as defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the 1934 Act). Consistent with this practice, Putnam Management receives brokerage and research services from broker-dealers with which Putnam Management places the fund's portfolio transactions. The services that broker-dealers may provide to Putnam Managements managers and analysts include, among others, economic analysis, investment research, industry and company reviews, statistical information, evaluations of investments, recommendations as to the purchase and sale of investments and performance measurement services. Some of these services are of value to Putnam Management and its affiliates in advisi ng various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. Research services provided by broker-dealers are supplemental to Putnam Managements own research efforts and relieve Putnam Management of expenses it might otherwise have borne in generating such research. The management fee paid by the fund is not reduced because Putnam Management and its affiliates receive brokerage and research services even though Putnam Management might otherwise be required to purchase some of these services for cash. Putnam Management is not permitted to use portfolio transactions to generate soft dollar credits to pay for mixed-use services (i.e., products that may be used both for investment- and non-investment-related purposes).
In general, Putnam Management does not use the funds portfolio transactions to generate soft dollar credits to pay for brokerage and research services generated by third parties, except that Putnam Management may allocate fund trades to generate soft dollar credits for third party investment research reports and related fundamental investment research (i) when trading through the firm generating the research would not be feasible or consistent with seeking most favorable price and execution, and (ii) where the total amount allocated to these third party services does not exceed 8% of the total commissions of all clients of Putnam Management and certain of its affiliates in the aggregate for any calendar year (although more than 8% of the funds commissions or a particular funds commissions in a year may be used to pay for such third-party research services). In addition to generating soft-dollar credits to pay for these permitted third-party services, Pu tnam Management may instruct executing brokers to step out a portion of the trades placed with them to the providers of such services, subject to the aggregate 8% limit mentioned above.
Putnam Management places all orders for the purchase and sale of portfolio investments for the funds, and buys and sells investments for the funds through a substantial number of brokers and dealers. In selecting broker-dealers to execute the funds portfolio transactions, Putnam Management uses its best efforts to obtain for each fund the most favorable price and execution reasonably 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 and in considering the overall reasonableness of the brokerage commissions paid, Putnam Management, having in mind the fund's best interests, considers all factors it deems relevant, including, in no particular order of importance, and by way of illustration, price, the size and type of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions.
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Putnam Management may cause the fund to pay a broker-dealer that provides "brokerage and research services" (as defined in the 1934 Act and as described above) to Putnam Management an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission another broker-dealer would have charged for effecting that transaction. Putnam Management's authority to cause the fund to pay any such greater commissions is subject to the requirements of applicable law and such policies as the Trustees may adopt from time to time. It is the position of the staff of the SEC that Section 28(e) of the 1934 Act does not apply to the payment of such greater commissions in "principal" transactions. Accordingly, Putnam Management will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above.
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The Trustees of the funds have directed Putnam, subject to seeking most favorable pricing and execution, to use its best efforts to allocate a portion of overall fund trades to trading programs which generate commission credits to pay fund expenses such as shareholder servicing and custody charges. The extent of any commission credits generated for this purpose may vary significantly from time to time and from fund to fund depending on, among other things, the nature of each fund's trading activities and market conditions.
The Management Contract provides that commissions, fees, brokerage or similar payments received by Putnam Management or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. Putnam Management seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount.
Principal Underwriter
Putnam Retail Management is the principal underwriter of shares of the fund and the other continuously offered Putnam funds. Putnam Retail Management is not obligated to sell any specific amount of shares of the fund and will purchase shares for resale only against orders for shares. See Charges and expenses in Part I of this SAI for information on sales charges and other payments received by Putnam Retail Management.
Personal Investments by Employees of Putnam Management and Putnam Retail Management and Officers and Trustees of the Fund
Employees of Putnam Management, PIL, PAC and Putnam Retail Management and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management, PIL, PAC and Putnam Retail Management (the Putnam Investments Code of Ethics) and by the fund (the Putnam Funds Code of Ethics). The Putnam Investments Code of Ethics and the Putnam Funds Code of Ethics, in accordance with Rule 17j-1 of the Investment Company Act of 1940, as amended, contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund.
The Putnam Investments Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Putnam Investments Code of Ethics, consistent with standards recommended by the Investment Company Institutes Advisory Group on Personal Investing and requirements established by Rule 17j-1 and rules adopted under the Investment Advisers Act of 1940, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal
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transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process.
The Putnam Funds Code of Ethics incorporates and applies the restrictions of the Putnam Investments Code of Ethics to officers and Trustees of the fund who are affiliated with Putnam Investments. The Putnam Funds Code of Ethics does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds Code of Ethics regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit reports of personal securities transactions under certain circumstances.
The funds Trustees, in compliance with Rule 17j-1, approved the Putnam Investments and the Putnam Funds Codes of Ethics and are required to approve any material changes to these Codes. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Codes of Ethics.
Investor Servicing Agent
Putnam Investor Services, a division of Putnam Fiduciary Trust Company (PFTC), is the funds investor servicing agent (transfer, plan and dividend disbursing agent), for which it receives fees that are paid monthly by the fund as an expense of all its shareholders. The fee paid to Putnam Investor Services is determined on the basis of the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. For Putnam Prime Money Market Fund, the fee paid to Putnam Investor Services is 0.01% per annum.
Certain dealers also receive payments from PFTC in recognition of services they provide to shareholders who invest in the fund or other Putnam funds through an omnibus account or to retirement plan participants who invest in the fund or other Putnam funds through their retirement plans. These services include sub-accounting and similar recordkeeping services. For purposes of this section the term dealers includes any broker, dealer, bank, bank trust department, registered investment adviser, financial planner, retirement plan administrator and any other institution having a selling, services or any similar agreement with Putnam Retail Management or one of its affiliates. Payments by PFTC to dealers for sub-accounting services provided to participants in retirement plans and to shareholders who invest in the funds through an omnibus account may be determined on the basis of (i) the number of retirement plan participants that invest in the fund through such pla ns or the number of shareholders in such omnibus account, as applicable, or (ii) the assets of such plan invested in the funds or the assets held in such account, as applicable. Such payments are not expected to exceed (i) $16 or $19 (depending on whether the shares in which the retirement plan participant or shareholder invests are subject to a contingent deferred sales charge) per plan participant or shareholder for those payments determined on the basis of the number of retirement plan participants or shareholders or (ii) 0.10% or 0.13% (depending on whether the shares in which the retirement plan participant or shareholder invests are subject to a contingent deferred sales charge) of the total assets of such plan or in such account invested in the funds on an annual basis for those payments determined on the basis of assets held. PFTC also makes payments to dealers that charge networking fees for certain services provided in connection with the maintenance of shareholder accounts. The payments described in this paragraph are not expected to exceed 0.13% of the total assets of such shareholders or plan participants in the funds on an annual basis, except for payments to dealers for sub-accounting services that are based on the number of plan participants or shareholders where the average account size for that dealer causes the payment to exceed 0.13% of the total assets of such plan participants or shareholders in the funds on an annual basis. In addition, as described in the following paragraph, the payments to Mercer HR Services, LLC (MHRS) for sub-accounting, recordkeeping, retirement plan administration and other services are expected to exceed 0.13% of the total assets of plan participants or shareholders in the funds on an annual basis.
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PFTC and its affiliates transferred their defined contribution plan administration business to MHRS, an affiliate of PFTC at the time, effective January 1, 2005. PFTC has agreed to pay MHRS approximately 0.296% of the average value of the assets in MHRS-administered plans invested in the funds on an annual basis in consideration of sub-accounting, recordkeeping, retirement plan administration and other services being provided to participants in MHRS-administered retirement plans with respect to their investments in the funds. In addition to these payments, PFTCs affiliates may make payments to MHRS and its affiliates of the types, and up to the amounts, described below under the headings Distribution Plans" and Additional Dealer Payments.
Custodian
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Effective January 1, 2007, the fund retained State Street Bank and Trust Company, located at 2 Avenue de Lafayette, Boston, Massachusetts 02111, as its custodian. PFTC, the funds previous custodian, is managing the transfer of the funds assets to State Street. This transfer is expected to be completed during the first half of 2007. State Street is responsible for safeguarding and controlling the funds cash and securities, handling the receipt and delivery of securities, collecting interest and dividends on the funds investments, serving as the funds foreign custody manager, providing reports on foreign securities depositaries, making payments covering the expenses of the fund and performing other administrative duties. State Street does not determine the investment policies of the fund or decide which securities the fund will buy or sell. State Street has a lien on the funds assets to secure charges and advances made by it.
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PFTC will remain custodian with respect to fund assets until the assets are transferred, performing similar services to those described for State Street. PFTC may employ one or more sub-custodians in fulfilling its responsibilities. The fund pays State Street and PFTC an annual fee based on the funds assets held with each of them and on securities transactions processed by each of them and reimburses them for certain out-of-pocket expenses. In addition to the fees the fund pays to PFTC for providing custody services, the fund will make additional payments to PFTC in 2007 for managing the transition of custody services from PFTC to State Street and for providing oversight services. The fund may from time to time enter into brokerage arrangements that reduce or recapture fund expenses, including custody expenses. The fund also has an offset arrangement that may reduce the funds custody fee based on the amount of cash maintained by its custodian. See Charges and expenses in Part I of this SAI for information on fees and reimbursements for investor servicing and custody received by PFTC.
Counsel to the Fund and the Independent Trustees
Ropes & Gray LLP serves as counsel to the fund and the independent Trustees, and is located at One International Place, Boston, Massachusetts 02110.
DETERMINATION OF NET ASSET VALUE
The fund determines the net asset value per share of each class of shares once each day the New York Stock Exchange (the Exchange) is open. Currently, the Exchange is closed Saturdays, Sundays and the following holidays: New Years Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving Day and Christmas Day. The fund determines net asset value as of the close of regular trading on the Exchange, normally 4:00 p.m. Eastern time, except that Putnam Prime Money Market Fund normally determines net asset value as of 5:00 p.m. Eastern time. The net asset value per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares.
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Assets of money market funds are valued at amortized cost pursuant to SEC Rule 2a-7. For other funds, securities and other assets (Securities) for which market quotations are readily available are valued at prices which, in the opinion of Putnam Management, most nearly represent the market values of such Securities. Currently, prices for these Securities are determined using the last reported sale price (or official closing price for Securities listed on certain markets) or, if no sales are reported (as in the case of some Securities traded over-the-counter), the last reported bid price, except that certain Securities are valued at the mean between the last reported bid and ask prices. All other Securities are valued by Putnam Management or other parties at their fair value following procedures approved by the Trustees.
Reliable market quotations are not considered to be readily available for, among other Securities, long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value, generally on the basis of valuations furnished by approved pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders. Other Securities, such as various types of options, are valued at fair value on the basis of valuations furnished by broker-dealers or other market intermediaries.
Putnam Management values all other Securities at fair value using its internal resources. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the Securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted Securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such Securities and any available analysts reports regarding the issuer. In the case of Securities that are restricted as to resale, Putnam Management determines fair value based on the inherent worth of the Securit y without regard to the restrictive feature, adjusted for any diminution in value resulting from the restrictive feature.
Generally, trading in certain Securities (such as foreign securities) is substantially completed each day at various times before the close of the Exchange. The closing prices for these Securities in markets or on exchanges outside the U.S. that close before the close of the Exchange may not fully reflect events that occur after such close but before the close of the Exchange. As a result, the fund has adopted fair value pricing procedures, which, among other things, require the fund to fair value foreign equity securities if there has been a movement in the U.S. market that exceeds a specified threshold. Although the threshold may be revised from time to time and the number of days on which fair value prices will be used will vary, it is possible that fair value prices will be used by the fund to a significant extent. In addition, Securities held by some of the funds may be traded in foreign markets that are open for business on days that the fund is not, and the tradin g of such Securities on those days may have an impact on the value of a shareholders investment at a time when the shareholder cannot buy and sell shares of the fund.
Currency exchange rates used in valuing Securities are normally determined as of 3:00 p.m. Eastern time. Occasionally, events affecting such exchange rates may occur between the time of the determination of exchange rates and the close of the Exchange, which, in the absence of fair valuation, would not be reflected in the computation of the funds net asset value. If events materially affecting the currency exchange rates occur during such period, then the exchange rates used in valuing affected Securities will be valued by Putnam Management at their fair value following procedures approved by the Trustees.
In addition, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain Securities (such as convertible bonds, U.S. government securities and tax-exempt securities) are determined based on market quotations collected before the close of the Exchange. Occasionally, events affecting the value of such Securities may occur between the time of the determination of value and the close of the Exchange, which, in the absence of fair value prices, would not be reflected in the computation of the funds net asset value. If events materially affecting the value of such
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Securities occur during such period, then these Securities will be valued by Putnam Management at their fair value following procedures approved by the Trustees. It is expected that any such instance would be very rare.
The fair value of Securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such Securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a Security at a given point in time and does not reflect an actual market price.
The fund may also value its Securities at fair value under other circumstances pursuant to procedures approved by the Trustees.
Money Market Funds
Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940.
Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a money market fund remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholders investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholders account on the last business day of each month. It is expected that a money market funds net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholders account from dividends accrued during the month with respect to such accou nt. If, at the time of payment of a dividend, such negative amount exceeds a shareholders accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund.
HOW TO BUY SHARES
Each prospectus describes briefly how investors may buy shares of the fund and identifies the share classes offered by that prospectus. Because of different sales charges and expenses, the investment performance of the classes will vary. This section of the SAI contains more information on how to buy shares. For more information, including your eligibility to purchase certain classes of shares, contact your investment dealer or Putnam Investor Services (at 1-800-225-1581). Investors who purchase shares at net asset value through employer-sponsored defined contribution plans should also consult their employer for information about the extent to which the matters described in this section and in the sections that follow apply to them.
General Information
The fund is currently making a continuous offering of its shares. The fund receives the entire net asset value of shares sold. The fund will accept unconditional orders for shares to be executed at the public offering price based on the net asset value per share next determined after the order is placed. In the case of class A shares and class M shares, the public offering price is the net asset value plus the applicable sales charge, if any. (The public offering price is thus calculable by dividing the net asset value by 100% minus the sales charge, expressed as a percentage.) No sales charge is included in the public offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the public offering price will be based on the net asset value determined on the day the order is placed, but only if the dealer or a registered transfer agent or registered clearing agent receives the order, together with all required identifyin g information, before the close of regular trading on the Exchange. If the dealer or registered transfer agent or registered clearing agent receives the order after the close of the Exchange, the price will be based on the net asset value next
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determined. If funds for the purchase of shares are sent directly to Putnam Investor Services, they will be invested at the public offering price based on the net asset value next determined after all required identifying information has been collected. Payment for shares of the fund must be in U.S. dollars; if made by check, the check must be drawn on a U.S. bank.
Initial purchases are subject to the minimums stated in the prospectus, except that (i) individual investments under certain employee benefit plans or Tax Qualified Retirement Plans may be lower, and (ii) the minimum investment is waived for investors participating in systematic investment plans or military allotment plans. Information about these plans is available from investment dealers or Putnam Investor Services. Currently Putnam is waiving the minimum for all initial purchases, but reserves the right to reject initial purchases under the minimum in the future, except as noted in the first sentence of this paragraph.
Systematic investment plan. As a convenience to investors, shares may be purchased through a systematic investment plan. Pre-authorized monthly, semi-monthly, or weekly bank drafts for a fixed amount ($200,000 or less) are used to purchase fund shares at the applicable public offering price next determined after Putnam Retail Management receives the proceeds from the draft. A shareholder may choose any date or dates in the month for these drafts, but if the date falls on a weekend or holiday, the draft will be processed on the next business day. Further information and application forms are available from the investment dealers or from Putnam Retail Management.
Reinvestment of distributions. Distributions to be reinvested are reinvested without a sales charge in shares of the same class as of the ex-dividend date using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Dividends for Putnam money market funds are credited to a shareholder's account on the payment date. Distributions for all other funds that declare a distribution daily are reinvested without a sales charge as of the last day of the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date.
Purchasing shares with securities (in-kind purchases). In addition to cash, the fund will consider accepting securities as payment for fund shares at the applicable net asset value. Generally, the fund will only consider accepting securities to increase its holdings in a portfolio security, or if Putnam Management determines that the offered securities are a suitable investment for the fund and in a sufficient amount for efficient management.
While no minimum has been established, it is expected that the fund would not accept securities with a value of less than $100,000 per issue as payment for shares. The fund may reject in whole or in part any or all offers to pay for purchases of fund shares with securities, may require partial payment in cash for such purchases to provide funds for applicable sales charges, and may discontinue accepting securities as payment for fund shares at any time without notice. The fund will value accepted securities in the manner described in the section "Determination of Net Asset Value" for valuing shares of the fund. The fund will only accept securities that are delivered in proper form. The fund will not accept certain securities, for example, options or restricted securities, as payment for shares. The acceptance of securities by certain funds in exchange for fund shares is subject to additional requirements. For federal income tax purposes, a purchase of fund shares with se curities will be treated as a sale or exchange of such securities on which the investor will generally realize a taxable gain or loss. The processing of a purchase of fund shares with securities involves certain delays while the fund considers the suitability of such securities and while other requirements are satisfied. For information regarding procedures for payment in securities, contact Putnam Retail Management. Investors should not send securities to the fund except when authorized to do so and in accordance with specific instructions received from Putnam Retail Management.
Putnam Prime Money Market Fund. The fund makes a continuous offering of its shares. Shares of the fund are sold at the net asset value per share next determined after confirmation of a completed purchase order by Putnam Investor Services. As the fund is designed for institutional investors, the share classes offered and the terms and conditions of buying them vary from the provisions set forth below for other Putnam funds. The funds prospectus contains detailed information on these terms and conditions. Payment for shares must be in
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federal funds or other immediately available funds. No initial or contingent deferred sales charges apply to shares of the fund.
Sales Charges and Other Share Class FeaturesRetail Investors
This section describes certain key features of share classes offered to retail investors and retirement plans that do not purchase shares at net asset value. Much of this information addresses the sales charges, including initial sales charges and contingent deferred sales charges (CDSCs) imposed on the different share classes and various commission payments made by Putnam to dealers and other financial intermediaries facilitating shareholders investments. This information supplements the descriptions of these share classes and payments included in the prospectus.
Initial sales charges, dealer commissions and CDSCs on shares sold outside the United States may differ from those applied to U.S. sales.
Initial sales charges for class A and class M shares. The public offering price of class A and class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase (calculable as described above). The fund receives the net asset value. The tables below indicate the sales charges applicable to purchases of class A and class M shares of the funds by style category. The variations in sales charges reflect the varying efforts required to sell shares to different categories of purchasers.
The sales charge is allocated between your investment dealer and Putnam Retail Management as shown in the tables below, except when Putnam Retail Management, in its discretion, allocates the entire amount to your investment dealer.
The underwriter's commission, or dealer reallowance, is the sales charge shown in the prospectus less any applicable dealer discount. Putnam Retail Management will give dealers ten days' notice of any changes in the dealer discount. Putnam Retail Management retains the entire sales charge on any retail sales made by it.
For purchases of class A shares by retail investors that qualify for the $1 million sales charge breakpoint described in the prospectus, Putnam Retail Management pays commissions on sales during the one-year period beginning with the date of the initial purchase qualifying for that breakpoint. Each subsequent one-year measuring period for these purposes begins with the first qualifying purchase following the end of the prior period. These commissions are paid at the rate of 1.00% of the amount of qualifying purchases up to $3 million, 0.50% of the next $47 million of qualifying purchases and 0.25% of qualifying purchases thereafter.
For Growth Funds, Blend Funds, Value Funds, Asset Allocation Funds and RetirementReady Funds only:
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CLASS A | CLASS M | |||
Amount of sales | Amount of sales | |||
charge | charge | |||
reallowed to | reallowed to | |||
Sales charge as | dealers as a | Sales charge as | dealers as a | |
Amount of transaction at | a percentage of | percentage of | a percentage of | percentage of |
offering price ($) | offering price | offering price | offering price | offering price |
Under 50,000 | 5.25% | 5.00% | 3.25% | 3.00% |
50,000 but under 100,000 | 4.00 | 3.75 | 2.25 | 2.00 |
100,000 but under 250,000 | 3.00 | 2.75 | 1.25 | 1.00 |
250,000 but under 500,000 | 2.25 | 2.00 | 1.00 | 1.00 |
500,000 but under 1,000,000 | 2.00 | 1.75 | 1.00 | 1.00 |
1,000,000 and above | NONE | NONE | N/A* | N/A* |
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For Taxable and Tax-Free Income Funds only (except for Money Market Funds, Putnam Floating Rate Income Fund and Putnam Limited Duration Government Income Fund):
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CLASS A | CLASS M | |||
Amount of sales | Amount of sales | |||
charge | charge | |||
reallowed to | reallowed to | |||
Sales charge as | dealers as a | Sales charge as | dealers as a | |
Amount of transaction at | a percentage of | percentage of | a percentage of | percentage of |
offering price ($) | offering price | offering price | offering price | offering price |
Under 50,000 | 3.75% | 3.50% | 3.25% | 3.00% |
50,000 but under 100,000 | 3.75 | 3.50 | 2.25 | 2.00 |
100,000 but under 250,000 | 3.00 | 2.75 | 1.25 | 1.00 |
250,000 but under 500,000 | 2.25 | 2.00 | 1.00 | 1.00 |
500,000 but under 1,000,000 | 2.00 | 1.75 | 1.00 | 1.00 |
1,000,000 and above | NONE | NONE | N/A* | N/A* |
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For Putnam Floating Rate Income Fund and Putnam Limited Duration Government Income Fund only:
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CLASS A | CLASS M | |||
Amount of sales | Amount of sales | |||
charge | charge | |||
reallowed to | reallowed to | |||
Sales charge as | dealers as a | Sales charge as | dealers as a | |
Amount of transaction at | a percentage of | percentage of | a percentage of | percentage of |
offering price ($) | offering price | offering price | offering price | offering price |
Under 100,000 | 3.25% | 3.00% | 2.00% | 1.80% |
100,000 but under 250,000 | 2.50 | 2.25 | 1.25 | 1.00 |
250,000 but under 500,000 | 2.00 | 1.75 | 1.00 | 1.00 |
500,000 but under 1,000,000 | 1.50 | 1.25 | 1.00 | 1.00 |
1,000,000 and above | NONE | NONE | N/A* | N/A* |
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*The fund will not accept purchase orders for class M shares (other than by qualified employee-benefit plans) where the total of the current purchase, plus existing account balances that are eligible to be linked under a right of accumulation (as described below) is $1 million or more.
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Purchases of $1 million or more of class A shares. Purchases of class A shares of one or more Putnam funds of $1 million or more are not subject to an initial sales charge, but shares purchased by investors other than qualified benefit plans are subject to a CDSC of 1.00% if redeemed before the first day of the month in which the eighteenth-month anniversary of the purchase falls, unless the dealer of record has, with Putnam Retail Managements approval, (i) waived its commission or (ii) agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply.
Subject to the exceptions stated in the preceding paragraph, a deferred sales charge of 1.00% will apply to class A shares and class T shares of Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund that are obtained by exchanging shares from another Putnam fund that were originally purchased without
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an initial sales charge (if such original purchase was made at net asset value because it was in an amount equal to $1 million or more), if the shares are redeemed before the first day of the month in which the eighteenth-month anniversary of the original purchase falls.
The CDSC assessed on redemptions of fewer than all of an investor's class A shares eligible for a CDSC will be based on the amount of the redemption minus the amount of any appreciation on the investor's CDSC-eligible class A shares since the purchase of such shares. The CDSC assessed on full redemptions of CDSC-eligible class A shares will be based on the lower of the shares' cost and current NAV. Putnam Retail Management will retain any CDSC imposed on redemptions of class A shares to compensate it for the up-front commissions paid to financial intermediaries for class A share sales.
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Purchases of class A shares for rollover IRAs. Purchases of class A shares for a Putnam Rollover IRA, including Putnam Rollover IRAs for which Putnam Retail Management or an affiliate is the dealer of record, from a retirement plan for which an affiliate of Putnam Management or a business partner of such affiliate is the administrator are not subject to an initial sales charge or CDSC. Putnam Retail Management may pay commissions or finders fees of up to 1.00% of the proceeds for such Putnam Rollover IRA purchases to the dealer of record or other third party.
Contingent sales charges for class M shares (rollover IRAs). Purchases of class M shares for a Putnam Rollover IRA with proceeds in any amount from a retirement plan for which an affiliate of Putnam Management or a business partner of such affiliate is the administrator are not subject to an initial sales charge but may be subject to a CDSC on shares redeemed within one year of purchase at the rates set forth below, which are equal to commissions Putnam Retail Management pays to the dealer of record at the time of the sale of class M shares. These purchases will not be subject to a CDSC if the dealer of record has, with Putnam Retail Managements approval, waived its commission or agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply.
<R> | |
Class M CDSC and dealer commission | |
All growth, blend, value and asset allocation funds: | 0.65% |
All income funds (except Putnam Money Market Fund): | 0.40% |
Putnam Money Market Fund | 0.15% |
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Commission payments and CDSCs for class B and class C shares. Except as noted below, Putnam Retail Management will pay a 4% commission on sales of class B shares of the fund only to those financial intermediaries who have entered into service agreements with Putnam Retail Management. For tax-exempt funds, this commission includes a 0.20% pre-paid service fee (except for Putnam Tax-Free High Yield Fund and Putnam AMT-Free Insured Municipal Fund, each of which has a 0.25% pre-paid service fee). For Putnam Floating Rate Income Fund and Putnam Limited Duration Government Income Fund, Putnam Retail Management will pay a 2.75% commission to financial intermediaries selling class B shares of the fund.
Putnam Retail Management pays financial intermediaries a 1.00% commission on sales of class C shares of a fund.
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Putnam Retail Management will retain any CDSC imposed on redemptions of class B and class C shares to compensate it for the cost of paying the up-front commissions paid to financial intermediaries for class B or class C share sales. Purchases of class C shares may be made without a CDSC if the dealer of record has, with Putnam Retail Managements approval, waived its commission or agreed to refund its commission to Putnam Retail Management.
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Conversion of class B shares into class A shares. Class B shares will automatically convert to class A shares on or around the end of the month eight years after the purchase date (for Putnam Small Cap Value Fund and Putnam Small Cap Growth Fund, on or around the end of the month six years after the purchase date; and for Mid Cap Value Fund, six and one half years). Class B shares acquired by exchanging class B shares of another Putnam fund will convert to class A shares based on the time of the initial purchase. Class B shares acquired through reinvestment of distributions will convert to class A shares based on the date of the initial purchase to which such shares relate. For this purpose, class B shares acquired through reinvestment of distributions will be attributed to particular purchases of class B shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of class B shares to cla ss A shares is subject to the condition that such conversions will not constitute taxable events for Federal tax purposes. Shareholders should consult with their tax advisers regarding the state and local tax consequences of the conversion of class B shares to class A shares, or any other exchange or conversion of shares.
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Sales without sales charges, contingent deferred sales charges or short-term trading fees
The fund may sell shares without a sales charge or CDSC to the following categories of investors:
(i) current and former Trustees of the fund, their family members, business and personal associates; current and former employees of Putnam Management and certain current and former corporate affiliates, their family members, business and personal associates; employee benefit plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest;
(ii) employer-sponsored retirement plans, for the repurchase of shares in connection with repayment of plan loans made to plan participants (if the sum loaned was obtained by redeeming shares of a Putnam fund sold with a sales charge) (not applicable to tax-exempt funds);
(iii) clients of administrators or other service providers of tax-qualified employer-sponsored retirement plans which have entered into agreements with Putnam Retail Management (not applicable to tax-exempt funds);
(iv) registered representatives and other employees of broker-dealers having sales agreements with Putnam Retail Management; employees of financial institutions having sales agreements with Putnam Retail Management or otherwise having an arrangement with any such broker-dealer or financial institution with respect to sales of fund shares; and their immediate family members (spouses and children under age 21, including step-children and adopted children);
(v) investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by such closed-end fund;
(vi) a trust department of any financial institution purchasing shares of the fund in its capacity as trustee of any trust (other than a tax-qualified retirement plan trust), through an arrangement approved by Putnam Retail Management, if the value of the shares of the fund and other Putnam funds purchased or held by all such trusts exceeds $1 million in the aggregate;
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(vii) "wrap accounts" maintained for clients of broker-dealers, financial institutions or financial intermediaries who have entered into agreements with Putnam Retail Management with respect to such accounts and
(viii) college savings plans that qualify for tax-exempt treatment under section 529 of the Internal Revenue Code and
(ix) investors who invest liquidation proceeds from Putnam closed-end funds.
In the case of paragraph (i) above, the availability of shares at NAV has been determined to be appropriate because involvement by Putnam Retail Management and other brokers in purchases by these investors is typically minimal.
In addition to the categories enumerated above, in connection with settlements reached between certain firms and the NASD and/or SEC regarding sales of class B and class C shares in excess of certain dollar thresholds, the fund will permit shareholders who are clients of these firms (and applicable affiliates of such firms) to redeem class B and class C shares of the fund and concurrently purchase class A shares (in an amount to be determined by the dealer of record and Putnam Retail Management in accordance with the terms of the applicable settlement) without paying an initial sales charge.
The fund may issue its shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition of substantially all of the securities owned by other investment companies or personal holding companies. The CDSC will be waived on redemptions to pay premiums for insurance under Putnams insured investor program.
Application of CDSC to Systematic Withdrawal Plans (SWP). Investors who set up a SWP for a share account (see "Plans available to shareholders -- Systematic Withdrawal Plan") may withdraw through the SWP up to 12% of the net asset value of the account (calculated as set forth below) each year without incurring any CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC liability will be redeemed next until the 12% limit is reached. The 12% figure is calculated on a pro rata basis at the time of the first payment made pursuant to an SWP and recalculated thereafter on a pro rata basis at the time of each SWP payment. Therefore, shareholders who have chosen an SWP based on a percentage of the net asset value of their account of up to 12% will be able to receive SWP payments without incurring a CDSC. However, shareholders who have chosen a specific dollar amount (for example, $100 per month from the fund that pays income distributions monthly) for their periodic SWP payment should be aware that the amount of that payment not subject to a CDSC may vary over time depending on the net asset value of their account. For example, if the net asset value of the account is $10,000 at the time of payment, the shareholder will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at the time of the next payment the net asset value of the account has fallen to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest applicable CDSC. This SWP privilege may be revised or terminated at any time.
Other exceptions to application of CDSC. No CDSC is imposed on the redemption of shares of any class subject to a CDSC to the extent that the shares redeemed (i) are no longer subject to the holding period therefor, (ii) resulted from reinvestment of distributions, or (iii) were exchanged for shares of another Putnam fund, provided that the shares acquired in such exchange or subsequent exchanges (including shares of a Putnam money market fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires. In determining whether the CDSC applies to each redemption, shares not subject to a CDSC are redeemed first.
The fund will waive any CDSC on redemptions, in the case of individual, joint or Uniform Transfers to Minors Act accounts, in the event of death or post-purchase disability of a shareholder, for the purpose of paying benefits pursuant to tax-qualified retirement plans ("Benefit Payments"), or, in the case of living trust accounts,
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in the event of the death or post-purchase disability of the settlor of the trust. Benefit Payments currently include, without limitation, (1) distributions from an IRA due to death or post-purchase disability, (2) a return of excess contributions to an IRA or 401(k) plan, and (3) distributions from retirement plans qualified under Section 401(a) of the Code or from a 403(b) plan due to death, disability, retirement or separation from service. These waivers may be changed at any time.
Exceptions to application of short-term trading fee. In addition to the exceptions noted in the funds prospectus, the short-term trading fee will not apply to automatic rebalancing arrangements entered into by Putnam Retail Management and dealers and also will not be imposed in cases of shareholder death or post-purchase disability or other circumstances in which a CDSC would be waived as stated above under Other exceptions to application of CDSC. In addition, the short-term trading fee will not apply to shares sold or exchanged by a Putnam fund-of-funds or a Section 529 college savings plan.
Ways to Reduce Initial Sales ChargesClass A and M Shares
There are several ways in which an investor may obtain reduced sales charges on purchases of class A shares and class M shares. The variations in sales charges reflect the varying efforts required to sell shares to separate categories of purchasers. These provisions may be altered or discontinued at any time.
Right of accumulation. A purchaser of class A shares or class M shares may qualify for a right of accumulation discount by combining all current purchases by such person with the value of certain other shares of any class of Putnam funds already owned. The applicable sales charge is based on the total of:
(i) the investor's current purchase(s); and
(ii) the maximum public offering price (at the close of business on the previous day) of:
(a) all shares held in accounts registered to the investor and other accounts eligible to be linked to the investors accounts (as described below) in all of the Putnam funds (except closed-end and money market funds, unless acquired as described in (b) below); and
(b) any shares of money market funds acquired by exchange from other Putnam funds.
The following persons may qualify for a right of accumulation discount:
(i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940 (which includes corporations which are corporate affiliates of each other);
(ii) an individual, his or her spouse and their children under age 21, purchasing for his, her or their own account;
(iii) a trustee or other fiduciary purchasing for a single trust estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code of 1986, as amended);
<R>
(iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (not including tax-exempt organizations qualifying under Section 403(b)(7) (a "403(b) plan") of the Code; and
</R>
(v) employee benefit plans of a single employer or of affiliated employers, other than 403(b) plans.
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A combined purchase currently may also include shares of any class of other continuously offered Putnam funds (other than money market funds) purchased at the same time, if the dealer places the order for such shares directly with Putnam Retail Management.
For individual investors, Putnam Investor Services automatically links accounts the registrations of which are under the same last name and address. Account types eligible to be linked for the purpose of qualifying for a right of accumulation discount include the following (in each case as registered to the investor, his or her spouse and his or her children under the age of 21):
(i) individual accounts;
(ii) joint accounts;
(iii) accounts established as part of a plan established pursuant to Section 403(b) of the Internal Revenue Code of 1986, as amended (403(b) plans) or an IRA other than a Simple IRA, SARSEP or SEP IRA;
(iv) shares owned through accounts in the name of the investors (or spouses or minor childs) dealer or other financial intermediary (with documentation identifying to the satisfaction of Putnam Investor Services the beneficial ownership of such shares); and
(v) accounts established as part of a Section 529 college savings plan managed by Putnam Management
Shares owned by a plan participant as part of an employee benefit plan of a single employer or of affiliated employers (other than 403(b) plans) or a single fiduciary account opened by a trustee or other fiduciary (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code) are not eligible for linking to other accounts attributable to such person to qualify for the right of accumulation discount, although all current purchases made by each such plan may be combined with existing aggregate balances of such plan in Putnam funds for purposes of determining the sales charge applicable to shares purchased at such time by the plan.
To obtain the right of accumulation discount on a purchase through an investment dealer, when each purchase is made the investor or dealer must provide Putnam Retail Management with sufficient information to verify that the purchase qualifies for the privilege or discount. The shareholder must furnish this information to Putnam Investor Services when making direct cash investments. Sales charge discounts under a right of accumulation apply only to current purchases. No credit for right of accumulation purposes is given for any higher sales charge paid with respect to previous purchases for the investors account or any linked accounts.
Statement of Intention. Investors may also obtain the reduced sales charges for class A shares or class M shares shown in the prospectus for investments of a particular amount by means of a written Statement of Intention (also referred to as a Letter of Intention), which expresses the investor's intention to invest that amount (including certain "credits," as described below) within a period of 13 months in shares of any class of the fund or any other continuously offered Putnam fund (excluding money market funds), including through an account established as part of a Section 529 college savings plan managed by Putnam Management. Each purchase of class A shares or class M shares under a Statement of Intention will be made at the lesser of (i) the public offering price applicable at the time of such purchase and (ii) the public offering price applicable on the date the Statement of Intention is executed to a single transaction of the total dollar amount indicated in the Statement of Intention.
An investor may receive a credit toward the amount indicated in the Statement of Intention equal to the maximum public offering price as of the close of business on the previous day of all shares he or she owns, or which are eligible to be linked for purposes of the right of accumulation described above, on the date of the Statement of Intention which are eligible for purchase under a Statement of Intention (plus any shares of money market funds acquired by exchange of such eligible shares). Investors do not receive credit for shares purchased by the reinvestment of distributions. Investors qualifying for the "combined purchase privilege" (see above) may purchase shares under a single Statement of Intention.
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The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount, and must be invested immediately. Class A shares or class M shares purchased with the first 5% of such amount will be held in escrow to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased. When the full amount indicated has been purchased, the escrow will be released. If an investor desires to redeem escrowed shares before the full amount has been purchased, the shares will be released from escrow only if the investor pays the sales charge that, without regard to the Statement of Intention, would apply to the total investment made to date.
If an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period, upon recovery from the investor's dealer of its portion of the sales charge adjustment. Once received from the dealer, which may take a period of time or may never occur, the sales charge adjustment will be used to purchase additional shares at the then current offering price applicable to the actual amount of the aggregate purchases. These additional shares will not be considered as part of the total investment for the purpose of determining the applicable sales charge pursuant to the Statement of Intention. No sales charge adjustment will be made unless and until the investor's dealer returns any excess commissions previously received.
If an investor purchases less than the dollar amount indicated on the Statement of Intention within the 13-month period, the sales charge will be adjusted upward for the entire amount purchased at the end of the 13-month period. This adjustment will be made by redeeming shares from the account to cover the additional sales charge, the proceeds of which will be paid to the investor's dealer and Putnam Retail Management. Putnam Retail Management will make a corresponding downward adjustment to the amount of the reallowance payable to the dealer with respect to purchases made prior to the investors failure to fulfill the conditions of the Statement of Intention. If the account exceeds an amount that would otherwise qualify for a reduced sales charge, that reduced sales charge will be applied. Adjustments to sales charges and dealer reallowances will not be made in the case of the shareholders death prior to the expiration of the 13-month period.
Statements of Intention are not available for certain employee benefit plans.
Statement of Intention forms may be obtained from Putnam Retail Management or from investment dealers. In addition, shareholders may complete the applicable portion of the funds standard account application. Interested investors should read the Statement of Intention carefully.
Commissions on Sales to Employee Benefit Plans
Purchases of $1 million or more of class A shares. On sales of class A shares at net asset value to a qualified benefit plan or a health reimbursement account, Putnam Retail Management pays commissions monthly to the dealer of record at the time of the sale on net monthly purchases up to the following rates: 1.00% of the first $1 million, 0.75% of the next $1 million and 0.50% thereafter.
Purchases of class R shares. Putnam Retail Management may, at its discretion, pay commissions of up to 1.00% on sales of class R shares. For commission payments made by Putnam Retail Management to dealers and other financial intermediaries with respect to other classes of shares offered to employee benefit plans and other tax-favored plan investors, see the corresponding sub-heading under Sales Charges and Other Share Class Features - Retail Investors.
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DISTRIBUTION PLANS
If the fund or a class of shares of the fund has adopted a distribution plan, the prospectus describes the principal features of the plan. This SAI contains additional information which may be of interest to investors.
Continuance of a plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the fund and who have no direct or indirect interest in the plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to a plan must be likewise approved by the Trustees and the Qualified Trustees. No plan may be amended in order to increase materially the costs which the fund may bear for distribution pursuant to such plan without also being approved by a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. A plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be.
Putnam Retail Management compensates qualifying dealers (including, for this purpose, certain financial institutions) for sales of shares and the maintenance of shareholder accounts.
Putnam Retail Management may suspend or modify its payments to dealers. The payments are also subject to the continuation of the relevant distribution plan, the terms of the service agreements between the dealers and Putnam Retail Management and any applicable limits imposed by the National Association of Securities Dealers, Inc.
Financial institutions receiving payments from Putnam Retail Management as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of securities brokers or dealers.
Except as otherwise agreed between Putnam Retail Management and a dealer, for purposes of determining the amounts payable to dealers for shareholder accounts for which such dealers are designated as the dealer of record, "average net asset value" means the product of (i) the average daily share balance in such account(s) and (ii) the average daily net asset value of the relevant class of shares over the quarter.
Class A shares:
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at up to the annual rates set forth below (as a percentage of the average net asset value of class A shares for which such dealers are designated the dealer of record) except as described below. No payments are made during the first year after purchase on shares purchased at net asset value by shareholders that invest at least $1 million, unless the dealer of record has waived the sales commission, or, in the case of dealers of record for a qualified benefit plan investing at least $1 million, where such dealer has agreed to a reduced sales commission.
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<R> | |
| |
Rate* | Fund |
| |
0.25% | All funds currently making payments under a class A |
distribution plan, except for those listed below | |
| |
0.20% for shares purchased before 3/21/05; | Putnam Tax-Free High Yield Fund |
0.25% for shares purchased on or after 3/21/05** | |
| |
0.20% for shares purchased before 4/1/05; | Putnam AMT-Free Insured Municipal Fund |
0.25% for shares purchased on or after 4/1/05 | |
| |
0.20% for shares purchased on or before 12/31/89; | Putnam Convertible Income-Growth Trust |
0.25% for shares purchased after 12/31/89 | The George Putnam Fund of Boston |
Putnam Global Equity Fund | |
Putnam Global Natural Resources Fund | |
Putnam Health Sciences Trust | |
The Putnam Fund for Growth and Income | |
Putnam Investors Fund | |
Putnam Vista Fund | |
Putnam Voyager Fund | |
| |
0.20% for shares purchased on or before 3/31/90; | Putnam High Yield Trust |
0.25% for shares purchased after 3/31/90 | Putnam U.S. Government Income Trust |
| |
0.20% for shares purchased on or before 1/1/90; | Putnam Equity Income Fund |
0.25% for shares purchased after 1/1/90 | |
| |
0.20% for shares purchased on or before 3/31/91; | Putnam Income Fund |
0.25% for shares purchased after 3/31/91; | |
| |
0.15% for shares purchased on or before 3/6/92; | Putnam Michigan Tax Exempt Income Fund |
0.20% for shares purchased after 3/6/92 but before | Putnam Minnesota Tax Exempt Income Fund |
4/1/05; | Putnam Ohio Tax Exempt Income Fund |
0.25% for shares purchased on or after 4/1/05 | |
| |
0.15% for shares purchased on or before 5/11/92; | Putnam Massachusetts Tax Exempt Income Fund |
0.20% for shares purchased after 5/11/92 but before | |
4/1/05; | |
0.25% for shares purchased on or after 4/1/05 | |
| |
0.15% for shares purchased on or before 12/31/92; | Putnam California Tax Exempt Income Fund |
0.20% for shares purchased after 12/31/92 but | Putnam New Jersey Tax Exempt Income Fund |
before 4/1/05; | Putnam New York Tax Exempt Income Fund |
0.25% for shares purchased on or after 4/1/05 | Putnam Tax Exempt Income Fund |
| |
0.15% for shares purchased on or before 3/5/93; | Putnam Arizona Tax Exempt Income Fund |
0.20% for shares purchased after 3/5/93 but before | |
4/1/05; | |
0.25% for shares purchased on or after 4/1/05 | |
| |
0.15% for shares purchased on or before 7/8/93; | Putnam Pennsylvania Tax Exempt Income Fund |
0.20% for shares purchased after 7/8/93 but before | |
4/1/05; | |
0.25% for shares purchased on or after 4/1/05 | |
| |
0.00% | Putnam Money Market Fund |
Putnam Tax Exempt Money Market Fund | |
| |
</R> |
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*For purposes of this table, shares are deemed to be purchased on date of settlement (i.e., once purchased and paid for). Shares issued in connection with dividend reinvestments are considered to be purchased on the date of their issuance, not the issuance of the original shares.
**Shares of Putnam Tax-Free High Yield Fund issued in connection with the merger of Putnam Municipal Income Fund into that fund pay a commission at the annual rate of 0.20% or 0.25%, based on the date of the original purchase of the shareholders corresponding shares of Putnam Municipal Income Fund, as set forth below: 0.20% for shares purchased on or before 5/7/92; 0.25% for shares purchased after 5/7/92.
Class B shares:
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class B shares for which such dealers are designated the dealer of record).
<R> | |
| |
Rate | Fund |
| |
0.25% | All funds currently making payments under a class B |
distribution plan, except for those listed below | |
| |
0.25%, except that the first year's service fees of | Putnam AMT-Free Insured Municipal Fund |
0.25% are prepaid at time of sale | Putnam Tax-Free High Yield Fund |
| |
0.20%, except that the first years service fees of | Putnam Arizona Tax Exempt Income Fund |
0.20% are prepaid at time of sale | Putnam California Tax Exempt Income Fund |
Putnam Massachusetts Tax Exempt Income Fund | |
Putnam Michigan Tax Exempt Income Fund | |
Putnam Minnesota Tax Exempt Income Fund | |
Putnam New Jersey Tax Exempt Income Fund | |
Putnam New York Tax Exempt Income Fund | |
Putnam Ohio Tax Exempt Income Fund | |
Putnam Pennsylvania Tax Exempt Income Fund | |
Putnam Tax Exempt Income Fund | |
| |
0.00% | Putnam Money Market Fund |
| |
</R> |
Class C shares:
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class C shares for which such dealers are designated the dealer of record). No payments are made during the first year after purchase unless the shareholder has made arrangements with Putnam Retail Management and the dealer of record has waived the sales commission.
<R> | |
| |
Rate | Fund |
| |
1.00% | All funds currently making payments under a class C |
distribution plan, except the fund listed below | |
| |
0.50% | Putnam Money Market Fund |
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</R>
Different rates may apply to shares sold outside the United States.
Class M shares:
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class M shares for which such dealers are designated the dealer of record), except as follows. No payments are made during the first year after purchase on shares purchased at net asset value for Putnam Rollover IRAs, unless the dealer of record has waived the sales commission.
<R> | |
| |
Rate | Fund |
| |
0.65% | All growth, blend, value and asset allocation funds |
currently making payments under a class M | |
distribution plan | |
| |
0.40% | All income funds currently making payments under a |
class M distribution plan (except for Putnam Money | |
Market Fund) | |
| |
0.15% | Putnam Money Market Fund |
| |
</R> |
Putnam Retail Managements payments to dealers for plans investing in class M shares for which such dealers are designated the dealer of record may equal up to the annual rate of 0.75% of the average net asset value of such class M shares for all growth, blend, value and asset allocation funds currently making payments under a class M distribution plan and up to the annual rate of 0.50% of the average net asset value of such class M shares for all income funds currently making payments under a class M distribution plan (except for Putnam Floating Rate Income Fund, Putnam Limited Duration Government Income Fund and Putnam Money Market Fund).
Different rates may apply to shares sold outside the United States.
Class R shares:
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at up to the annual rates set forth below (as a percentage of the average net asset value of class R shares for which such dealers are designated the dealer of record).
<R> | |
| |
Rate | Fund |
| |
0.50% | All funds currently making payments under a class R |
distribution plan | |
| |
</R> |
A portion of the class R distribution fee payable to dealers may be paid to third parties who provide services to plans investing in class R shares and participants in such plans.
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Class S Shares
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class S shares for which such dealers are designated the dealer of record).
<R> | |
| |
Rate | Fund |
| |
0.10% | Putnam Prime Money Market Fund |
| |
</R> |
Class T shares:
Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class T shares for which such dealers are designated the dealer of record).
<R> | |
| |
Rate | Fund |
| |
0.25% | Putnam Money Market Fund |
| |
</R> |
Additional Dealer Payments
As described above and in the section Distribution Plans, dealers may receive different commissions, sales charge reallowances and other payments with respect to sales of different classes of shares of the funds. These payments may include servicing payments to retirement plan administrators and other institutions up to the same levels as described above under Distribution Plans. For purposes of this section the term dealer includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution having a selling, services, or any similar agreement with Putnam Retail Management or one of its affiliates. In addition, with respect to Prime Money Market Fund, the term dealer also includes an entity that provides information about such fund to its clients and a service provider that licenses software or other technology to Putnam Retail Ma nagement to facilitate the acceptance of orders directly from shareholders.
Putnam Retail Management and its affiliates pay additional compensation to selected dealers under the categories described below. These categories are not mutually exclusive, and a single dealer may receive payments under all categories. These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the fund or other Putnam funds to its customers. These additional payments are made pursuant to agreements with dealers and do not change the price paid by investors for the purchase of a share or the amount a fund will receive as proceeds from such sales or the distribution (12b-1) fees and the expenses paid by the fund as shown under the heading Fees and Expenses in the prospectus.
Marketing Support Payments. Putnam Retail Management and its affiliates will make payments to certain dealers for marketing support services, including business planning assistance, educating dealer personnel about the Putnam funds and shareholder financial planning needs, placement on the dealers preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the dealer. These payments are made to dealers that are registered as holders of record or dealers of record for accounts in the fund. These payments are generally based on one or more of the following factors: average net assets of Putnams retail mutual funds attributable to that dealer, gross or net sales of Putnams retail mutual funds attributable to that dealer, reimbursement of ticket charges (fees that a
II-73
dealer firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment for services rendered.
Putnam Retail Management and its affiliates compensate dealers differently depending upon, among other factors, the level and/or type of marketing support provided by the dealer. In addition, payments typically apply to retail sales and assets, but may not, in certain situations, apply to other specific types of sales or assets, such as to retirement plans or fee-based advisory programs.
Marketing support payments to any one dealer are not expected, with certain limited exceptions, to exceed 0.085% of the average assets of Putnams retail mutual funds attributable to that dealer on an annual basis.
The following dealers (and such dealers respective affiliates) received marketing support payments from Putnam Retail Management and its affiliates during the calendar year ended December 31, 2006:
<R> | |
| |
A.G. Edwards & Sons, Inc. | Merrill Lynch, Pierce, Fenner & Smith, Inc. |
| |
Advantage Capital Corporation | MetLife Securities, Inc |
| |
AIG Financial Advisors, Inc. | ML Life Insurance Company of New York |
| |
American General Securities Incorporated | Morgan Stanley DW Inc. |
| |
American Portfolios Financial Services, Inc. | Multi-Financial Services Corporation |
| |
Ameriprise Financial Services, Inc. | Mutual Service Corporation |
| |
Associated Securities Corporation | National Planning Corporation |
| |
AXA Financial Services, Inc. | New England Securities Corporation |
| |
Bank of New York | Next Financial Group, Inc, |
| |
Bank One Securities Inc. | NFP Securities, Inc. |
| |
Cadaret, Grant & Co. Inc | Oppenheimer & Co. Inc. |
| |
Chase Investment Services Corp. | Peoples Securities |
| |
Citicorp Investment Services | PFS Investments, Inc. |
| |
Citigroup Global Markets, Inc. | Piper Jaffray & Co |
| |
Commonwealth Equity Services | PNC Investments |
| |
Contemporary Financial Solutions | Prime Vest Financial Services, Inc. |
| |
CUNA Brokerage Services, Inc. | Raymond James & Associates, Inc. |
| |
Edward D. Jones & Co | Raymond James Financial Services, Inc. |
| |
Financial Network Investment Corp. | RBC Dain Rauscher, Inc. |
| |
FSC Securities Corporation | Robert W. Baird & Co. Incorporated |
| |
Genworth Financial Securities Corp. | Royal Alliance Associates |
| |
Goldman, Sachs and Co. | Securities America Financial Corporation, Inc. |
| |
HD Vest Investment Securities, Inc. | Signator Investors, Inc. |
| |
ING Financial Advisers, LLC | SII Investments |
| |
ING Financial Partners | SMBC Friend Securities Co., Ltd. |
| |
INVEST Financial Corporation | SunTrust Investment Services, Inc. |
| |
Investment Centers of America, Inc. | TCF Investments, Inc. |
| |
J.P. Morgan Securities Inc. | Terra Securities Inc. |
| |
Janney Montgomery Scott LLC | U.S. Bancorp Investments, Inc. |
| |
Key Investment Services | UBS Financial Services Inc. |
| |
Lincoln Financial Advisors Corp. | United Planners Financial Services of America |
| |
Lincoln Investment Planning, Inc. | Wachovia Securities, LLC |
| |
Linsco/Private Ledger Corp. | Walnut Street Securities, Inc. |
| |
M L Stern & Company | Waterstone Financial Group Inc. |
| |
M&T Securities, Inc | Wells Fargo Investments, LLC |
|
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McDonald Investments, Inc. | WM Financial Services |
| |
Mellon Financial Markets, LLC | Woodbury Financial Services, Inc. |
| |
Merrill Lynch Life Insurance Company | |
| |
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Additional dealers may receive marketing support payments in 2007 and in future years. Any additions, modifications or deletions to the list of dealers identified above that have occurred since December 31, 2006 are not reflected. You can ask your dealer about any payments it receives from Putnam Retail Management and its affiliates.
Program Servicing Payments. Putnam Retail Management and its affiliates will also make payments to certain dealers that sell Putnam fund shares through retirement plans and other investment programs to compensate dealers for a variety of services they provide to such programs. A dealer may perform program services itself or may arrange with a third party to perform program services. In addition to participant recordkeeping, reporting, or transaction processing, program services may include services rendered in connection with fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services, and (for Putnam Prime Money Market Fund only) providing technology or otherwise facilitating trading and the dissemination of information about the fund. Payments by Putnam Retail Management and its affiliates for program servicing support to any one dealer are not expected , with certain limited exceptions, to exceed 0.20% of the total assets in the program on an annual basis. In addition, Putnam Retail Management and its affiliates will make one-time or annual payments to selected dealers receiving program servicing payments in reimbursement of printing costs for literature for participants, account maintenance fees or fees for establishment of Putnam funds on the dealers system. The amounts of these payments may, but will not normally (except in cases where the aggregate assets in the program are small), cause the aggregate amount of the program servicing payments to such dealer on an annual basis to exceed the amounts set forth above.
The following dealers (and such dealers respective affiliates) received program servicing payments from Putnam Retail Management and its affiliates during the calendar year ended December 31, 2006:
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ADP Broker-Dealer, Inc. | Merrill Lynch, Pierce, Fenner & Smith, Inc. |
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Ameriprise Financial Services, Inc. | MFS Heritage Trust Company |
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AST Trust Company | MFS Retirement Services, Inc. |
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BISYS Retirement Services, Inc. | MidAtlantic Capital Corporation |
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Ceridian Retirement Plan Services, Inc. | National Financial Services LLC |
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Charles Schwab & Co., Inc. | Nationwide Investment Services Corp |
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Charles Schwab Trust Company | Nationwide Life Insurance Company |
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Correll Co. | Newport Retirement Services, Inc. |
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CPI Qualifed Plan Consultants, Inc. | NYLIFE Distributors LLC |
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DailyAccess Corporation | Plan Administrators, Inc. |
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Dyatech, LLC | Principal Life Insurance Co. |
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ExpertPlan, Inc. | Princor Financial Services, Inc. |
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Financial Administrative Services Corp. | Reliance Trust Company |
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Fiserv Trust Company | SunTrust Bank |
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Hartford Life Insurance Co. | Trusource, a division of Union Bank of California, |
N.A. | |
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Invesmart, Inc. | Union Bank of California, N.A. |
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July Business Services | Upromise Investments, Inc. |
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Massachusetts Mutual Life Insurance Co. | VALIC Retirement Services Company |
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McLeod Administrative Services Inc. | Wachovia Bank, N.A. |
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Mercer HR Services LLC | Wells Fargo Bank, N.A. |
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Additional dealers may receive program servicing payments in 2007 and in future years. Any additions, modifications or deletions to the list of dealers identified above that have occurred since December 31, 2006 are not reflected. You can ask your dealer about any payments it receives from Putnam Retail Management and its affiliates.
Other Payments. From time to time, Putnam Retail Management, at its expense, may provide additional compensation to dealers which sell or arrange for the sale of shares of the fund to the extent not prohibited by laws or the rules of any self-regulatory agency, such as the NASD. Such compensation provided by Putnam Retail Management may include financial assistance to dealers that enable Putnam Retail Management to participate in and/or present at dealer-sponsored conferences or seminars, sales or training programs for invited registered representatives and other dealer employees, dealer entertainment, and other dealer-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. Putnam Retail Management makes payments for entertainment events it deems appropriate, subject to Putnam Retail Managements interna l guidelines and applicable law. These payments may vary upon the nature of the event.
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Certain dealers also receive payments from the funds transfer agent in recognition of sub-accounting or other services they provide to shareholders or plan participants who invest in the fund or other Putnam funds through their retirement plan. These payments are not expected, with certain exceptions both for affiliated and unaffiliated entities noted in the discussion under the heading Management Investor Servicing Agent, to exceed 0.13% of the total assets of such shareholders or plan participants in the fund or other Putnam funds on an annual basis. See the discussion under the heading Management Investor Servicing Agent for more details.
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You can ask your dealer for information about payments it receives from Putnam Retail Management or its affiliates and the services it provides for those payments.
In addition to payments to dealers described above, PFTC or Putnam Retail Management may, at the direction of a retirement plans sponsor, reimburse or pay direct expenses of the plan that would otherwise be payable by the plan.
INVESTOR SERVICES
Shareholder Information
Each time shareholders buy or sell shares, they will receive a statement confirming the transaction and listing their current share balance. (Under certain investment plans, a statement may only be sent quarterly.) Shareholders will receive a statement confirming reinvestment of distributions in additional fund shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. To help shareholders take full advantage of their Putnam investment, they will receive a Welcome Kit and a periodic publication covering many topics of interest to investors. The fund also sends annual and semiannual reports that keep shareholders informed about its portfolio and performance, and year-end tax information to simplify their recordkeeping. Easy-to-read, free booklets on special subjects such as the Exchange Privilege and IRAs are available from Putnam Investor Services. Shareholders may call Putnam Investor Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m. and 8:00 p.m., and Saturdays from 9:00 a.m. to 5:00 p.m., Boston time for more information, including account balances. Shareholders can also visit the Putnam Web site at http://www.putnam.com.
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Your Investing Account
The following information provides more detail concerning the operation of a Putnam Investing Account. For further information or assistance, investors should consult Putnam Investor Services. Shareholders who purchase shares through a defined contribution plan should note that not all of the services or features described below may be available to them, and they should contact their employer for details.
A shareholder may reinvest a cash distribution without a front-end sales charge or without the reinvested shares being subject to a CDSC, as the case may be, by delivering to Putnam Investor Services the uncashed distribution check. Putnam Investor Services must receive the properly endorsed check within 1 year after the date of the check.
The Investing Account also provides a way to accumulate shares of the fund. In most cases, after an initial investment, a shareholder may send checks to Putnam Investor Services, made payable to the fund, to purchase additional shares at the applicable public offering price next determined after Putnam Investor Services receives the check. Checks must be drawn on a U.S. bank and must be payable in U.S. dollars.
Putnam Investor Services acts as the shareholder's agent whenever it receives instructions to carry out a transaction on the shareholder's account. Upon receipt of instructions that shares are to be purchased for a shareholder's account, shares will be purchased through the investment dealer designated by the shareholder. Shareholders may change investment dealers at any time by written notice to Putnam Investor Services, provided the new dealer has a sales agreement with Putnam Retail Management.
Shares credited to an account are transferable upon written instructions in good order to Putnam Investor Services and may be sold to the fund as described under "How do I sell fund shares?" in the prospectus. Money market funds and certain other funds will not issue share certificates. A shareholder may send to Putnam Investor Services any certificates which have been previously issued for safekeeping at no charge to the shareholder.
Putnam Retail Management, at its expense, may provide certain additional reports and administrative material to qualifying institutional investors with fiduciary responsibilities to assist these investors in discharging their responsibilities. Institutions seeking further information about this service should contact Putnam Retail Management, which may modify or terminate this service at any time.
The fund pays Putnam Investor Services' fees for maintaining Investing Accounts.
Checkwriting Privilege. For those funds that allow shareholders, as disclosed in the prospectus, to redeem shares by check, Putnam is currently waiving the minimum per-check amount stated in the prospectus.
Reinstatement Privilege
An investor who has redeemed shares of the fund may reinvest within 90 days of such redemption (one year, in the case of shares redeemed prior to January 1, 2007) the proceeds of such redemption in shares of the same class of the fund, or may reinvest within 90 days of such redemption (one year, in the case of shares redeemed prior to January 1, 2007) the proceeds in shares of the same class of one of the other continuously offered Putnam funds (through the exchange privilege described in the prospectus), including, in the case of shares subject to a CDSC, the amount of CDSC charged on the redemption. Any such reinvestment would be at the net asset value of the shares of the fund(s) the investor selects, next determined after Putnam Retail Management receives a Reinstatement Authorization. The time that the previous investment was held will be included in determining any applicable CDSC due upon redemptions and, in the case of class B shares, the eight-year period for co nversion to class A shares. Reinstatements into class B, class C or class M shares may be permitted even if the resulting purchase would otherwise be rejected for causing a shareholders investments in such class to exceed the applicable investment maximum. Shareholders will receive from
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Putnam Retail Management the amount of any CDSC paid at the time of redemption as part of the reinstated investment, which may be treated as capital gains to the shareholder for tax purposes.
Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on a sale of fund shares, but to the extent that any shares are sold at a loss and the proceeds are reinvested in shares of the fund, some or all of the loss may be disallowed as a deduction. Consult your tax adviser. Investors who desire to exercise the Reinstatement Privilege should contact their investment dealer or Putnam Investor Services.
Exchange Privilege
Except as otherwise set forth in this section, by calling Putnam Investor Services, investors may exchange shares valued up to $500,000 between accounts with identical registrations, provided that no certificates are outstanding for such shares. During periods of unusual market changes and shareholder activity, shareholders may experience delays in contacting Putnam Investor Services by telephone to exercise the telephone exchange privilege. No exchanges are permitted into or out of Putnam Prime Money Market Fund.
Putnam Investor Services also makes exchanges promptly after receiving a properly completed Exchange Authorization Form and, if issued, share certificates. If the shareholder is a corporation, partnership, agent, or surviving joint owner, Putnam Investor Services will require additional documentation of a customary nature. Because an exchange of shares involves the redemption of fund shares and reinvestment of the proceeds in shares of another Putnam fund, completion of an exchange may be delayed under unusual circumstances if the fund were to suspend redemptions or postpone payment for the fund shares being exchanged, in accordance with federal securities laws. Exchange Authorization Forms and prospectuses of the other Putnam funds are available from Putnam Retail Management or investment dealers having sales contracts with Putnam Retail Management. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectu s and consider these objectives and policies carefully before requesting an exchange. Shares of certain Putnam funds are not available to residents of all states. The fund reserves the right to change or suspend the exchange privilege at any time. Shareholders would be notified of any change or suspension. Additional information is available from Putnam Investor Services.
Shareholders of other Putnam funds may also exchange their shares at net asset value for shares of the fund, as set forth in the current prospectus of each fund. Exchanges from Putnam Money Market Fund or Putnam Tax Exempt Money Market Fund into another Putnam fund may be subject to an initial sales charge.
For federal income tax purposes, an exchange is a sale on which the investor generally will realize a capital gain or loss depending on whether the net asset value at the time of the exchange is more or less than the investor's basis.
All exchanges are subject to applicable short-term trading fees and Putnams policies on excessive short-term trading, as set forth in the Funds Prospectus. In addition, trustees, sponsors and administrators of qualified plans that invest in the Fund may impose short-term trading fees whose terms may differ from those described in the Prospectus.
Dividends PLUS
Shareholders may invest the fund's distributions of net investment income or distributions combining net investment income and short-term capital gains in shares of the same class of another continuously offered Putnam fund (the "receiving fund") using the net asset value per share of the receiving fund determined on the date the fund's distribution is payable. No sales charge or CDSC will apply to the purchased shares unless the fund paying the distribution is a money market fund. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objective(s) and policies carefully before investing their distributions in the receiving fund. Shares of certain Putnam funds are not available to residents of all states.
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Shareholders of other Putnam funds (except for money market funds, whose shareholders must pay a sales charge or become subject to a CDSC) may also use their distributions to purchase shares of the fund at net asset value.
For federal tax purposes, distributions from the fund which are reinvested in another fund are treated as paid by the fund to the shareholder and invested by the shareholder in the receiving fund and thus, to the extent composed of taxable income and deemed paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at any time and is not available for dividends paid by Putnam Prime Money Market Fund. Shareholders in other Putnam funds cannot cross fund reinvest into the Putnam Prime Money Market Fund.
Plans Available To Shareholders
The plans described below are fully voluntary and may be terminated at any time without the imposition by the fund or Putnam Investor Services of any penalty. All plans provide for automatic reinvestment of all distributions in additional shares of the fund at net asset value. The fund, Putnam Retail Management or Putnam Investor Services may modify or cease offering these plans at any time.
Systematic Withdrawal Plan ("SWP"). An investor who owns or buys shares of the fund valued at $5,000 or more at the current public offering price may open a SWP plan and have a designated sum of money ($50 or more) paid monthly, quarterly, semi-annually or annually to the investor or another person. (Payments from the fund can be combined with payments from other Putnam funds into a single check through a designated payment plan.) Shares are deposited in a plan account, and all distributions are reinvested in additional shares of the fund at net asset value (except where the plan is utilized in connection with a charitable remainder trust). Shares in a plan account are then redeemed at net asset value to make each withdrawal payment. Payment will be made to any person the investor designates; however, if shares are registered in the name of a trustee or other fiduciary, payment will be made only to the fiduciary, except in the case o f a profit-sharing or pension plan where payment will be made to a designee. As withdrawal payments may include a return of principal, they cannot be considered a guaranteed annuity or actual yield of income to the investor. The redemption of shares in connection with a plan generally will result in a gain or loss for tax purposes. Some or all of the losses realized upon redemption may be disallowed pursuant to the so-called wash sale rules if shares of the same fund from which shares were redeemed are purchased (including through the reinvestment of fund distributions) within a period beginning 30 days before, and ending 30 days after, such redemption. In such a case, the basis of the replacement shares will be increased to reflect the disallowed loss. Continued withdrawals in excess of income will reduce and possibly exhaust invested principal, especially in the event of a market decline. The cost of administering these plans for the benefit of those shareholders participating in them is borne by the fund as an expense of all shareholders. The fund, Putnam Retail Management or Putnam Investor Services may terminate or change the terms of the plan at any time. A plan will be terminated if communications mailed to the shareholder are returned as undeliverable.
Investors should consider carefully with their own financial advisers whether the plan and the specified amounts to be withdrawn are appropriate in their circumstances. The fund and Putnam Investor Services make no recommendations or representations in this regard.
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Tax-favored plans. (Not offered by funds investing primarily in tax-exempt securities.) Investors may purchase shares of the fund through the following Tax Qualified Retirement Plans, available to qualified individuals or organizations:
Standard and variable profit-sharing (including 401(k)) and money purchase pension plans; and Individual Retirement Account Plans (IRAs), including simple IRAs, Roth IRAs, SEP IRAs; and Coverdell Education savings plans.
Forms and further information on these Plans are available from investment dealers or from Putnam Retail Management. In addition, specialized professional plan administration services are available on an optional basis; contact Putnam Investor Services at 1-866-207-7261.
Consultation with a competent financial and tax adviser regarding these Plans and consideration of the suitability of fund shares as an investment under the Employee Retirement Income Security Act of 1974, or otherwise, is recommended.
Automatic Rebalancing Arrangements. Putnam Retail Management or Putnam Investor Services may enter into arrangements with certain dealers which provide for automatic periodic rebalancing of shareholders accounts in Putnam funds. For more information about these arrangements, please contact Putnam Retail Management or Putnam Investor Services.
SIGNATURE GUARANTEES
Requests to redeem shares having a net asset value of $100,000 or more, or to transfer shares or make redemption proceeds payable to anyone other than the registered account owners, must be signed by all registered owners or their legal representatives and must be guaranteed by a bank, broker/dealer, municipal securities dealer or broker, credit union, national securities exchange, registered securities association, clearing agency, savings association or trust company, provided such institution is authorized and acceptable under and conforms with Putnam Fiduciary Trust Companys signature guarantee procedures. A copy of such procedures is available upon request. In certain situations, for example, if you want your redemption proceeds sent to an address other than your address as it appears on Putnams records, you may also need to provide a signature guarantee. Putnam Investor Services usually requires additional documentation for the sale of shares by a corpo ration, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for more information on Putnams signature guarantee and documentation requirements.
REDEMPTIONS
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Suspension of redemptions. The fund may not suspend shareholders right of redemption, or postpone payment for more than seven days, unless the Exchange is closed for other than customary weekends or holidays, or if permitted by the rules of the SEC during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for protection of investors.
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In-kind redemptions. With the consent of a redeeming shareholder (or, with respect to certain funds as indicated in the prospectus, in Putnams discretion), the fund will consider satisfying all or a portion of a redemption request by distributing securities or other property in lieu of cash (in-kind redemptions). Any transaction costs or other expenses involved in liquidating securities received in an in-kind redemption will be borne by the redeeming investor. For information regarding procedures for in-kind redemptions, please contact Putnam Retail Management.
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SHAREHOLDER LIABILITY
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Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the fund or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of fund property for all loss and expense of any shareholder held personally liable for the obligations of the fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund would be unable to meet its obligations. We believe the likelihood of such circumstances is remote.
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DISCLOSURE OF PORTFOLIO INFORMATION
The Trustees of the Putnam funds have adopted policies with respect to the disclosure of the funds portfolio holdings by the fund, Putnam Management, or their affiliates. These policies provide that information about the funds portfolio generally may not be released to any party prior to (i) the posting of such information on the Putnam Investments website, (ii) the filing of the information with the SEC in a required filing, or (iii) the dissemination of such information to all shareholders simultaneously. Certain limited exceptions pursuant to the funds policies are described below. The Trustees will periodically receive reports from the funds Chief Compliance Officer regarding the operation of these policies and procedures, including any arrangements to make non-public disclosures of the funds portfolio information to third parties. Putnam Management and its affiliates are not permitted to receive compensation or other consideration in co nnection with disclosing information about the funds portfolio holdings to third parties.
Public Disclosures
The funds portfolio holdings are currently disclosed to the public through required filings with the SEC and on the Putnam Investments website. The fund files its portfolio holdings with the SEC for each fiscal quarter on Form N-CSR (with respect to each annual period and semi-annual period) and Form N-Q (with respect to the first and third quarters of the funds fiscal year). Shareholders may obtain the funds Form N-CSR and N-Q filings on the SECs website at http://www.sec.gov. In addition, the funds Form N-CSR and N-Q filings may be reviewed and copied at the SECs public reference room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SECs website or the operation of the public reference room.
Putnam Management also currently makes the funds portfolio information publicly available on the Putnam Investments website, www.putnam.com, as disclosed in the following table:
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Information(1) | Frequency of Disclosure | Date of Web Posting |
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Full Portfolio Holdings | Quarterly | Last business day of the month |
following the end of each | ||
calendar quarter | ||
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Top 10 Portfolio Holdings and | Monthly | Approximately 15 days after the |
other portfolio statistics | end of each month | |
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(1) Putnam mutual funds that are not currently offered to the general public (incubated funds) do not post portfolio holdings on the Web. Full portfolio holdings for the Putnam RetirementReady® Funds, which invest solely in six other Putnam funds, are posted on www.putnam.com approximately 15 days after the end of each month. Please see the prospectus for these funds target allocations.
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The scope of the information relating to the funds portfolio that is made available on the website may change from time to time without notice. In addition, the posting of fund holdings may be delayed in some instances for technical reasons.
Putnam Management or its affiliates may include fund portfolio information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the website.
Other Disclosures
The funds policies require that non-public disclosures of information regarding the funds portfolio may be made only if there is a legitimate business purpose consistent with fiduciary duties to all shareholders of the fund. In addition, the party receiving the non-public information must sign a non-disclosure agreement unless otherwise approved by Putnam Managements Compliance Department. Arrangements to make non-public disclosures of the funds portfolio information must be approved by the Chief Compliance Officer of the fund. The Chief Compliance Officer will report on an ongoing basis to a committee of the funds Board of Trustees consisting only of Trustees who are not interested persons of the fund or Putnam Management regarding any such arrangement that the fund may enter into with third parties other than service providers to the fund.
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The fund periodically discloses its portfolio information on a confidential basis to various service providers that require such information in order to assist the fund with its day-to-day business affairs. In addition to Putnam Management and its affiliates, including PFTC and PRM, these service providers include the funds custodian and sub-custodians, which currently include State Street Bank and Trust Company, Mellon Bank N.A., Brown Brothers Harriman & Co., UMB Bank, N.A., JP Morgan Chase Bank, and Citibank N.A., the funds independent registered public accounting firm, legal counsel, and financial printer (McMunn Associates, Inc.), and the funds proxy voting service, currently Glass, Lewis & Co. These service providers are required to keep such information confidential, and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund.
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The fund may also periodically provide non-public information about its portfolio holdings to rating and ranking organizations, such as Lipper Inc. and Morningstar Inc., in connection with those firms research on and classification of the fund and in order to gather information about how the funds attributes (such as volatility, turnover, and expenses) compare with those of peer funds. Any such firm would be required to keep the funds portfolio information confidential and would be prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund.
PROXY VOTING GUIDELINES AND PROCEDURES
The Trustees of the Putnam funds have established proxy voting guidelines and procedures that govern the voting of proxies for the securities held in the funds portfolios. The proxy voting guidelines summarize the funds positions on various issues of concern to investors, and provide direction to the proxy voting service used by the funds as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of the Trustees, Putnam Management, the proxy voting service and the funds proxy coordinator in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management and describe the procedures for handling potential conflicts of interest. The Putnam funds proxy voting guidelines and procedures are included in this SAI as Appendix A. Information regarding how the funds voted proxies relat ing to portfolio securities during the 12-month period ended June 30, 2006 is available on the Putnam Individual Investor website, www.putnam.com/individual, and on the SECs website at www.sec.gov. If you have questions about finding forms on the SECs website, you may call the SEC at 1-800-SEC-0330. You
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may also obtain the Putnam funds proxy voting guidelines and procedures by calling Putnams Shareholder Services at 1-800-225-1581.
SECURITIES RATINGS
The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, Putnam Management may use the highest rating assigned by any agency. Putnam Management will not necessarily sell an investment if its rating is reduced. The following rating services describe rated securities as follows:
Moodys Investors Service, Inc.
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as gilt edged. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
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Notes
MIG 1/VMIG 1 -- This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.
Commercial paper
Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
-- Well established access to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Standard & Poors
Bonds
AAA -- An obligation rated AAA has the highest rating assigned by Standard & Poors. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
AA -- An obligation rated AA differs from the highest-rated obligations only in small degree. The obligors capacity to meet its financial commitment on the obligation is very strong.
A -- An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
BBB -- An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the lowest degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions.
BB -- An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
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B -- An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligations. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
CCC -- An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC -- An obligation rated CC is currently highly vulnerable to nonpayment.
C -- The C rating may be used to cover a situation where a bankruptcy petition has been filed, or similar action has been taken, but payments on this obligation are being continued.
D -- An obligation rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless Standard & Poors believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition, or the taking of a similar action if payments on an obligation are jeopardized.
Notes
SP-1 -- Strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
Commercial paper
A-1 -- This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3 -- Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
Duff & Phelps Corporation
Long-Term Debt
AAA -- Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.
A+, A, A- -- Protection factors are average but adequate. However, risk factors are more variable and greater in periods of economic stress.
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BBB+, BBB, BBB- -- Below-average protection factors but still considered sufficient for prudent investment. Considerable variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet obligations when due. Present or prospective financial protection factors fluctuate according to industry conditions or company fortunes. Overall quality may move up or down frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations will not be met when due. Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in the rating within this category or into a higher or lower rating grade.
CCC -- Well below investment-grade securities. Considerable uncertainty exists as to timely payment of principal, interest or preferred dividends. Protection factors are narrow and risk can be substantial with unfavorable economic/industry conditions, and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet scheduled principal and/or interest payments.
Fitch Investors Service, Inc.
AAA -- Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit quality. The obligors ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA.
A -- Bonds considered to be investment grade and of high credit quality. The obligors ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit quality. The obligors ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
BB -- Bonds considered to be speculative. The obligors ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class are lightly protected as to the obligors ability to pay interest over the life of the issue and repay principal when due.
CCC -- Bonds have certain characteristics which, with passing of time, could lead to the possibility of default on either principal or interest payments.
CC -- Bonds are minimally protected. Default in payment of interest and/or principal seems probable.
C -- Bonds are in actual or imminent default in payment of interest or principal.
DDD -- Bonds are in default and in arrears in interest and/or principal payments. Such bonds are extremely speculative and should be valued only on the basis of their value in liquidation or reorganization of the obligor.
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DEFINITIONS | ||
Putnam Management | -- | Putnam Investment Management, LLC, the funds |
investment manager. | ||
Putnam Retail Management | -- | Putnam Retail Management Limited Partnership, the |
funds principal underwriter. | ||
Putnam Fiduciary Trust | -- | Putnam Fiduciary Trust Company, a custodian of the |
funds assets. | ||
Company | ||
Putnam Investor Services | -- | Putnam Investor Services, a division of Putnam |
Fiduciary Trust Company, the funds investor | ||
servicing agent. | ||
Putnam Investments | -- | The name under which Putnam LLC, the parent |
company of Putnam Management and its affiliates, | ||
generally conducts business. |
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Appendix A
Proxy voting guidelines of the Putnam funds
The proxy voting guidelines below summarize the funds positions on various issues of concern to investors, and give a general indication of how fund portfolio securities will be voted on proposals dealing with particular issues. The funds proxy voting service is instructed to vote all proxies relating to fund portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Coordinator, a member of the Office of the Trustees who is appointed to assist in the coordination and voting of the funds proxies.
The proxy voting guidelines are just that guidelines. The guidelines are not exhaustive and do not include all potential voting issues. Because proxy issues and the circumstances of individual companies are so varied, there may be instances when the funds may not vote in strict adherence to these guidelines. For example, the proxy voting service is expected to bring to the Proxy Coordinators attention proxy questions that are company-specific and of a non-routine nature and that, even if covered by the guidelines, may be more appropriately handled on a case-by-case basis.
Similarly, Putnam Managements investment professionals, as part of their ongoing review and analysis of all fund portfolio holdings, are responsible for monitoring significant corporate developments, including proxy proposals submitted to shareholders, and notifying the Proxy Coordinator of circumstances where the interests of fund shareholders may warrant a vote contrary to these guidelines. In such instances, the investment professionals will submit a written recommendation to the Proxy Coordinator and the person or persons designated by Putnam Managements Legal and Compliance Department to assist in processing referral items pursuant to the funds Proxy Voting Procedures. The Proxy Coordinator, in consultation with the funds Senior Vice President, Executive Vice President, and/or the Chair of the Board Policy and Nominating Committee, as appropriate, will determine how the funds proxies will be voted. When indicated, the Chair of the Board Policy and Nominating Committee may consult with other members of the Committee or the full Board of Trustees.
The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals that have been put forth by management and approved and recommended by a companys board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to non-U.S. issuers.
The Putnam funds will disclose their proxy votes in accordance with the timetable established by SEC rules (i.e., not later than August 31 of each year for the most recent 12-month period ended June 30).
I. BOARD-APPROVED PROPOSALS
The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself (sometimes referred to as management proposals), which have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies and of the funds intent to hold corporate boards accountable for their actions in promoting shareholder interests, the funds proxies generally will be voted for the decisions reached by majority independent boards of directors, except as otherwise indicated in these guidelines. Accordingly, the funds proxies will be voted for board-approved proposals, except as follows:
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Matters relating to the Board of Directors
Uncontested Election of Directors
The funds proxies will be voted for the election of a companys nominees for the board of directors, except as follows:
► The funds will withhold votes for the entire board of directors if
· the board does not have a majority of independent directors,
· the board has not established independent nominating, audit, and compensation committees,
· the board has more than 19 members or fewer than five members, absent special circumstances,
· the board has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the shares of the company cast at its previous two annual meetings, or
· the board has adopted or renewed a shareholder rights plan (commonly referred to as a poison pill) without shareholder approval during the current or prior calendar year.
► The funds will on a case-by-case basis withhold votes from the entire board of directors where the board has approved compensation arrangements for one or more company executives that the funds determine are unreasonably excessive relative to the companys performance.
► The funds will withhold votes for any nominee for director who:
· is considered an independent director by the company and who has received compensation from the company other than for service as a director (e.g., investment banking, consulting, legal, or financial advisory fees),
· attends less than 75% of board and committee meetings without valid reasons for the absences (e.g., illness, personal emergency, etc.),
· as a director of a public company (Company A), is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an interlocking directorate), or
· serves on more than five unaffiliated public company boards (for the purpose of this guideline, boards of affiliated registered investment companies will count as one board).
Commentary:
Board independence: Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an independent director is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee from the company other than in his or her capacity as a
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member of the board of directors or any board committee. The funds Trustees believe that the receipt of any amount of compensation for services other than service as a director raises significant independence issues.
Board size: The funds Trustees believe that the size of the board of directors can have a direct impact on the ability of the board to govern effectively. Boards that have too many members can be unwieldy and ultimately inhibit their ability to oversee management performance. Boards that have too few members can stifle innovation and lead to excessive influence by management.
Time commitment: Being a director of a company requires a significant time commitment to adequately prepare for and attend the companys board and committee meetings. Directors must be able to commit the time and attention necessary to perform their fiduciary duties in proper fashion, particularly in times of crisis. The funds Trustees are concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards. The funds may withhold votes from such directors on a case-by-case basis where it appears that they may be unable to discharge their duties properly because of excessive commitments.
Interlocking directorships: The funds Trustees believe that interlocking directorships are inconsistent with the degree of independence required for outside directors of public companies.
Corporate governance practices: Board independence depends not only on its members individual relationships, but also on the boards overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. The funds may withhold votes on a case-by-case basis from some or all directors who, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders. Such instances may include cases where a board of directors has approved compensation arrangements for one or more members of management that, in the judgment of the funds Trustees, are excessive by reasonable corporate standards relative to the companys record of performance.
Contested Elections of Directors
► The funds will vote on a case-by-case basis in contested elections of directors.
Classified Boards
► The funds will vote against proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.
Commentary: Under a typical classified board structure, the directors are divided into three classes, with each class serving a three-year term. The classified board structure results in directors serving staggered terms, with usually only a third of the directors up for re-election at any given annual meeting. The funds Trustees generally believe that it is appropriate for directors to stand for election each year, but recognize that, in special circumstances, shareholder interests may be better served under a classified board structure.
Other Board-Related Proposals
The funds will generally vote for board-approved proposals that have been approved by a majority independent board, and on a case-by-case basis on board-approved proposals where the board fails to meet the guidelines basic independence standards (i.e., majority of independent directors and independent nominating, audit, and compensation committees).
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Executive Compensation
The funds generally favor compensation programs that relate executive compensation to a companys long-term performance. The funds will vote on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows:
► Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans).
► The funds will vote against stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity-based plans).
► The funds will vote against any stock option or restricted stock plan where the companys actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67% .
► The funds will vote against stock option plans that permit the replacing or repricing of underwater options (and against any proposal to authorize such replacement or repricing of underwater options).
► The funds will vote against stock option plans that permit issuance of options with an exercise price below the stocks current market price.
► Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for an employee stock purchase plan that has the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value; (2) the offering period under the plan is 27 months or less; and (3) dilution is 10% or less.
Commentary: Companies should have compensation programs that are reasonable and that align shareholder and management interests over the longer term. Further, disclosure of compensation programs should provide absolute transparency to shareholders regarding the sources and amounts of, and the factors influencing, executive compensation. Appropriately designed equity-based compensation plans can be an effective way to align the interests of long-term shareholders with the interests of management. The funds may vote against executive compensation proposals on a case-by-case basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on a proposal relating to executive compensation, the funds will consider whether the proposal has been approved by an independent compensation committee of the board.
Capitalization
Many proxy proposals involve changes in a companys capitalization, including the authorization of additional stock, the issuance of stock, the repurchase of outstanding stock, or the approval of a stock split. The management of a companys capital structure involves a number of important issues, including cash flow, financing needs, and market conditions that are unique to the circumstances of the company. As a result, the funds will vote on a case-by-case basis on board-approved proposals involving changes to a companys capitalization, except that where the funds are not otherwise withholding votes from the entire board of directors:
► The funds will vote for proposals relating to the authorization and issuance of additional common stock (except where such proposals relate to a specific transaction).
► The funds will vote for proposals to effect stock splits (excluding reverse stock splits).
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► The funds will vote for proposals authorizing share repurchase programs.
Commentary: A company may decide to authorize additional shares of common stock for reasons relating to executive compensation or for routine business purposes. For the most part, these decisions are best left to the board of directors and senior management. The funds will vote on a case-by-case basis, however, on other proposals to change a companys capitalization, including the authorization of common stock with special voting rights, the authorization or issuance of common stock in connection with a specific transaction (e.g., an acquisition, merger or reorganization), or the authorization or issuance of preferred stock. Actions such as these involve a number of considerations that may affect a shareholders investment and that warrant a case-by-case determination.
Acquisitions, Mergers, Reincorporations, Reorganizations and Other Transactions
Shareholders may be confronted with a number of different types of transactions, including acquisitions, mergers, reorganizations involving business combinations, liquidations, and the sale of all or substantially all of a companys assets, which may require their consent. Voting on such proposals involves considerations unique to each transaction. As a result, the funds will vote on a case-by-case basis on board-approved proposals to effect these types of transactions, except as follows:
► The funds will vote for mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware.
Commentary: A company may reincorporate into another state through a merger or reorganization by setting up a shell company in a different state and then merging the company into the new company. While reincorporation into states with extensive and established corporate laws notably Delaware provides companies and shareholders with a more well-defined legal framework, shareholders must carefully consider the reasons for a reincorporation into another jurisdiction, including especially an offshore jurisdiction.
Anti-Takeover Measures
Some proxy proposals involve efforts by management to make it more difficult for an outside party to take control of the company without the approval of the companys board of directors. These include the adoption of a shareholder rights plan, requiring supermajority voting on particular issues, the adoption of fair price provisions, the issuance of blank check preferred stock, and the creation of a separate class of stock with disparate voting rights. Such proposals may adversely affect shareholder rights, lead to management entrenchment, or create conflicts of interest. As a result, the funds will vote against board-approved proposals to adopt such anti-takeover measures, except as follows:
► The funds will vote on a case-by-case basis on proposals to ratify or approve shareholder rights plans; and
► The funds will vote on a case-by-case basis on proposals to adopt fair price provisions.
Commentary: The funds Trustees recognize that poison pills and fair price provisions may enhance shareholder value under certain circumstances. As a result, the funds will consider proposals to approve such matters on a case-by-case basis.
Other Business Matters
Many proxies involve approval of routine business matters, such as changing a companys name, ratifying the appointment of auditors, and procedural matters relating to the shareholder meeting. For the most part, these routine matters do not materially affect shareholder interests and are best left to the board of directors and senior management of the company. The funds will vote for board-approved proposals approving such matters, except as follows:
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► The funds will vote on a case-by-case basis on proposals to amend a companys charter or bylaws (except for charter amendments necessary to effect stock splits to change a companys name or to authorize additional shares of common stock).
► The funds will vote against authorization to transact other unidentified, substantive business at the meeting.
► The funds will vote on a case-by-case basis on other business matters where the funds are otherwise withholding votes for the entire board of directors.
Commentary: Charter and bylaw amendments and the transaction of other unidentified, substantive business at a shareholder meeting may directly affect shareholder rights and have a significant impact on shareholder value. As a result, the funds do not view such items as routine business matters. Putnam Managements investment professionals and the funds proxy voting service may also bring to the Proxy Coordinators attention company-specific items that they believe to be non-routine and warranting special consideration. Under these circumstances, the funds will vote on a case-by-case basis.
II. SHAREHOLDER PROPOSALS
SEC regulations permit shareholders to submit proposals for inclusion in a companys proxy statement. These proposals generally seek to change some aspect of the companys corporate governance structure or to change some aspect of its business operations. The funds generally will vote in accordance with the recommendation of the companys board of directors on all shareholder proposals, except as follows:
► The funds will vote for shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.
► The funds will vote for shareholder proposals to require shareholder approval of shareholder rights plans.
► The funds will vote on a case-by-case basis on shareholder proposals requiring companies to make payments under management severance agreements only if both of the following conditions are met:
o the company undergoes a change in control, and
o the change in control results in a loss of employment for the person receiving the severance payment.
► The funds will vote on a case-by-case basis on shareholder proposals requesting that the board adopt a policy to recoup, in the event of a significant restatement of financial results or significant extraordinary write-off, to the fullest extent practicable, for the benefit of the company, all performance-based bonuses or awards that were paid to senior executives based on the company having met or exceeded specific performance targets to the extent that the specific performance targets were not, in fact, met.
► The funds will vote for shareholder proposals requiring a company to report on its executive retirement benefits (e.g., deferred compensation, split-dollar life insurance, SERPs and pension benefits).
► The funds will vote for shareholder proposals requiring a company to disclose its relationships with executive compensation consultants (e.g., whether the company, the board or the compensation committee retained the consultant, the types of services provided by the consultant over the past five years, and a list of the consultants clients on which any of the companys executives serve as a director).
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► The funds will vote for shareholder proposals that are consistent with the funds proxy voting guidelines for board-approved proposals.
► The funds will vote on a case-by-case basis on other shareholder proposals where the funds are otherwise withholding votes for the entire board of directors.
Commentary: In light of the substantial reforms in corporate governance that are currently underway, the funds Trustees believe that effective corporate reforms should be promoted by holding boards of directors and in particular their independent directors accountable for their actions, rather than imposing additional legal restrictions on board governance through piecemeal proposals. Generally speaking, shareholder proposals relating to business operations are often motivated primarily by political or social concerns, rather than the interests of shareholders as investors in an economic enterprise. As stated above, the funds Trustees believe that boards of directors and management are responsible for ensuring that their businesses are operating in accordance with high legal and ethical standards and should be held accountable for resulting corporate behavior. Accordingly, the funds will generally support the recommendations of boards that meet the basic independence and governance standards established in these guidelines. Where boards fail to meet these standards, the funds will generally evaluate shareholder proposals on a case-by-case basis.
However, the funds generally support shareholder proposals to declassify a board or to require shareholder approval of shareholder rights plans. The funds Trustees believe that these shareholder proposals further the goals of reducing management entrenchment and conflicts of interest, and aligning managements interests with shareholders interests in evaluating proposed acquisitions of the company. The Trustees also believe that shareholder proposals to limit severance payments to appropriate situations may further these goals in some instances and the funds will consider supporting these shareholder proposals on a case by case basis. (The funds Trustees will also consider whether the severance payments, taking all of the pertinent circumstances into account, constitute excessive compensation.)
The funds Trustees believe that performance-based compensation can be an effective tool for aligning management and shareholder interests. However, to fulfill its purpose, performance compensation should only be paid to executives if the performance targets are actually met. A significant restatement of financial results or a significant extraordinary write-off may reveal that executives who were previously paid performance compensation did not actually deliver the required business performance to earn that compensation. In these circumstances, it may be appropriate for the company to recoup this performance compensation. The fund will consider on a case by case basis shareholder proposals requesting that the board adopt a policy to recoup, in the event of a significant restatement of financial results or significant extraordinary write-off, performance-based bonuses or awards paid to senior executives based on the company having met or exceeded specific performanc e targets to the extent that the specific performance targets were not, in fact, met. The fund does not believe that such a policy should necessarily disadvantage a company in recruiting executives, as executives should understand that they are only entitled to performance compensation based on the actual performance they deliver.
The funds Trustees also believe that shareholder proposals that are intended to increase transparency, particularly with respect to executive compensation, without establishing rigid restrictions upon a companys ability to attract and motivate talented executives, are generally beneficial to sound corporate governance without imposing undue burdens. The funds will generally support shareholder proposals calling for reasonable disclosure.
III. VOTING SHARES OF NON-U.S. ISSUERS
Many of the Putnam funds invest on a global basis, and, as a result, they may be required to vote shares held in non-U.S. issuers i.e., issuers that are incorporated under the laws of foreign jurisdictions and that are not listed on a U.S. securities exchange or the NASDAQ stock market. Because non-U.S. issuers are incorporated under the laws of countries and jurisdictions outside the U.S., protection for shareholders may vary significantly from jurisdiction to jurisdiction. Laws governing non-U.S. issuers may, in some cases, provide
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substantially less protection for shareholders. As a result, the foregoing guidelines, which are premised on the existence of a sound corporate governance and disclosure framework, may not be appropriate under some circumstances for non-U.S. issuers.
In many non-U.S. markets, shareholders who vote proxies of a non-U.S. issuer are not able to trade in that companys stock on or around the shareholder meeting date. This practice is known as share blocking. In countries where share blocking is practiced, the funds will vote proxies only with direction from Putnam Managements investment professionals.
In addition, some non-U.S. markets require that a companys shares be re-registered out of the name of the local custodian or nominee into the name of the shareholder for the meeting. This practice is known as share re-registration. As a result, shareholders, including the funds, are not able to trade in that companys stock until the shares are re-registered back in the name of the local custodian or nominee. In countries where share re-registration is practiced, the funds will generally not vote proxies.
The funds will vote proxies of non-U.S. issuers in accordance with the foregoing guidelines where applicable, except as follows:
Uncontested Election of Directors
Japan
► For companies that have established a U.S.-style corporate structure, the funds will withhold votes for the entire board of directors if
· the board does not have a majority of outside directors,
· the board has not established nominating and compensation committees composed of a majority of outside directors, or
· the board has not established an audit committee composed of a majority of independent directors.
► The funds will withhold votes for the appointment of members of a companys board of statutory auditors if a majority of the members of the board of statutory auditors is not independent.
Commentary:
Board structure: Recent amendments to the Japanese Commercial Code give companies the option to adopt a U.S.-style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). The funds will vote for proposals to amend a companys articles of incorporation to adopt the U.S.-style corporate structure.
Definition of outside director and independent director: Corporate governance principles in Japan focus on the distinction between outside directors and independent directors. Under these principles, an outside director is a director who is not and has never been a director, executive, or employee of the company or its parent company, subsidiaries or affiliates. An outside director is independent if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.). The guidelines have incorporated these definitions in applying the board independence standards above.
Korea
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► The funds will withhold votes for the entire board of directors if
· the board does not have a majority of outside directors,
· the board has not established a nominating committee composed of at least a majority of outside directors, or
· the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are outside directors.
Commentary: For purposes of these guideline, an outside director is a director that is independent from the management or controlling shareholders of the company, and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, the funds will also apply the standards included in Article 415-2(2) of the Korean Commercial Code (i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the companys largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.
United Kingdom
► The funds will withhold votes for the entire board of directors if
· the board does not have at least a majority of independent non-executive directors,
· the board has not established nomination committees composed of a majority of independent non-executive directors, or
· the board has not established compensation and audit committees composed of (1) at least three directors (in the case of smaller companies, two directors) and (2) solely of independent non-executive directors.
► The funds will withhold votes for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director (e.g., investment banking, consulting, legal, or financial advisory fees).
Commentary:
Application of guidelines: Although the U.K.s Combined Code on Corporate Governance (Combined Code) has adopted the comply and explain approach to corporate governance, the funds Trustees believe that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in U.K. companies. As a result, these guidelines will be applied in a prescriptive manner.
Definition of independence: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that the funds do not view service on the board for more than nine years as affecting a directors independence.
Smaller companies: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.
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Canada
In January 2004, Canadian securities regulators issued proposed policies that would impose new corporate governance requirements on Canadian public companies. The recommended practices contained in these new corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, the funds will vote on matters relating to the board of directors of Canadian issuers in accordance with the guidelines applicable to U.S. issuers.
Commentary: Like the U.K.s Combined Code, the proposed policies on corporate governance issued by Canadian securities regulators embody the comply and explain approach to corporate governance. Because the funds Trustees believe that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner.
Russia
► The funds will vote on a case-by-case basis for the election of nominees to the board of directors.
Commentary: In Russia, director elections are typically handled through a cumulative voting process. Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors, or to allocate their votes among nominees in any other way. In contrast, in regular, voting, shareholders may not give more than one vote per share to any single nominee. Cumulative voting can help to strengthen the ability of minority shareholders to elect a director.
In Russia, as in other emerging markets, standards of corporate governance are usually behind those in developed markets. Rather than vote against the entire board of directors, as the funds generally would in the case of a company whose board fails to meet the funds standards for independence, the funds may, on a case by case basis, cast all of their votes for one or more independent director nominees. The funds believe that it is important to increase the number of independent directors on the boards of Russian companies to mitigate the risks associated with dominant shareholders.
Other Matters
► The funds will vote for shareholder proposals calling for a majority of a companys directors to be independent of management.
► The funds will vote for shareholder proposals seeking to increase the independence of board nominating, audit, and compensation committees.
► The funds will vote for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.
► The funds will vote on a case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of the companys outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of the companys outstanding common stock where shareholders have preemptive rights.
As adopted February 9, 2007
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Proxy voting procedures of the Putnam funds
The proxy voting procedures below explain the role of the funds Trustees, the proxy voting service and the Proxy Coordinator, as well as how the process will work when a proxy question needs to be handled on a case-by-case basis, or when there may be a conflict of interest.
The role of the funds Trustees
The Trustees of the Putnam funds exercise control of the voting of proxies through their Board Policy and Nominating Committee, which is composed entirely of independent Trustees. The Board Policy and Nominating Committee oversees the proxy voting process and participates, as needed, in the resolution of issues that need to be handled on a case-by-case basis. The Committee annually reviews and recommends, for Trustee approval, guidelines governing the funds proxy votes, including how the funds vote on specific proposals and which matters are to be considered on a case-by-case basis. The Trustees are assisted in this process by their independent administrative staff (Office of the Trustees), independent legal counsel, and an independent proxy voting service. The Trustees also receive assistance from Putnam Investment Management, LLC (Putnam Management), the funds investment advisor, on matters involving investment judgments. In all case s, the ultimate decision on voting proxies rests with the Trustees, acting as fiduciaries on behalf of the shareholders of the funds.
The role of the proxy voting service
The funds have engaged an independent proxy voting service to assist in the voting of proxies. The proxy voting service is responsible for coordinating with the funds custodians to ensure that all proxy materials received by the custodians relating to the funds portfolio securities are processed in a timely fashion. To the extent applicable, the proxy voting service votes all proxies in accordance with the proxy voting guidelines established by the Trustees. The proxy voting service will refer proxy questions to the Proxy Coordinator (described below) for instructions under circumstances where: (1) the application of the proxy voting guidelines is unclear; (2) a particular proxy question is not covered by the guidelines; or (3) the guidelines call for specific instructions on a case-by-case basis. The proxy voting service is also requested to call to the Proxy Coordinators attention specific proxy questions that, while governed by a guideline, appear to involve unusual or controversial issues. The funds also utilize research services relating to proxy questions provided by the proxy voting service and by other firms.
The role of the Proxy Coordinator
Each year, a member of the Office of the Trustees is appointed Proxy Coordinator to assist in the coordination and voting of the funds proxies. The Proxy Coordinator will deal directly with the proxy voting service and, in the case of proxy questions referred by the proxy voting service, will solicit voting recommendations and instructions from the Office of the Trustees, the Chair of the Board Policy and Nominating Committee, and Putnam Managements investment professionals, as appropriate. The Proxy Coordinator is responsible for ensuring that these questions and referrals are responded to in a timely fashion and for transmitting appropriate voting instructions to the proxy voting service.
Voting procedures for referral items
As discussed above, the proxy voting service will refer proxy questions to the Proxy Coordinator under certain circumstances. When the application of the proxy voting guidelines is unclear or a particular proxy question is not covered by the guidelines (and does not involve investment considerations), the Proxy Coordinator will assist in interpreting the guidelines and, as appropriate, consult with one or more senior staff members of the Office of the Trustees and the Chair of the Board Policy and Nominating Committee on how the funds shares will be voted.
II-98
For proxy questions that require a case-by-case analysis pursuant to the guidelines or that are not covered by the guidelines but involve investment considerations, the Proxy Coordinator will refer such questions, through a written request, to Putnam Managements investment professionals for a voting recommendation. Such referrals will be made in cooperation with the person or persons designated by Putnam Managements Legal and Compliance Department to assist in processing such referral items. In connection with each such referral item, the Legal and Compliance Department will conduct a conflicts of interest review, as described below under Conflicts of Interest, and provide a conflicts of interest report (the Conflicts Report) to the Proxy Coordinator describing the results of such review. After receiving a referral item from the Proxy Coordinator, Putnam Managements investment professionals will provide a written recommendation t o the Proxy Coordinator and the person or persons designated by the Legal and Compliance Department to assist in processing referral items. Such recommendation will set forth (1) how the proxies should be voted; (2) the basis and rationale for such recommendation; and (3) any contacts the investment professionals have had with respect to the referral item with non-investment personnel of Putnam Management or with outside parties (except for routine communications from proxy solicitors). The Proxy Coordinator will then review the investment professionals recommendation and the Conflicts Report with one or more senior staff members of the Office of the Trustees in determining how to vote the funds proxies. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to Putnam Managements investment professionals, the voting recommendation, and the Conflicts Report.
In some situations, the Proxy Coordinator and/or one or more senior staff members of the Office of the Trustees may determine that a particular proxy question raises policy issues requiring consultation with the Chair of the Board Policy and Nominating Committee, who, in turn, may decide to bring the particular proxy question to the Committee or the full Board of Trustees for consideration.
Conflicts of interest
Occasions may arise where a person or organization involved in the proxy voting process may have a conflict of interest. A conflict of interest may exist, for example, if Putnam Management has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of a personal conflict of interest (e.g., familial relationship with company management) relating to a particular referral item shall disclose that conflict to the Proxy Coordinator and the Legal and Compliance Department and otherwise remove himself or herself from the proxy voting process. The Legal and Compliance Department will review each item referred to Putnam Managements investment professionals to determine if a conflict of interest exists and will provide the Proxy Coordinator with a Conflicts Report for each referral item that (1) describes any conflict of interest; (2) discusses the procedures used to address such conflict of interest; and (3) discloses any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professionals recommendation. The Conflicts Report will also include written confirmation that any recommendation from an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.
As adopted March 11, 2005
II-99
THE GEORGE PUTNAM FUND OF BOSTON
FORM N-1A
PART C
OTHER INFORMATION
Item 23. | Exhibits | |
(a) | Agreement and Declaration of Trust, as amended August 1, 1996 -- | |
Incorporated by reference to Post-Effective Amendment No. 85 to | ||
the Registrant's Registration Statement. | ||
(b) | By-Laws, as amended through July 21, 2000 Incorporated by | |
reference to Post-Effective Amendment No. 89 to the Registrant's | ||
Registration Statement. | ||
(c)(1) | Portions of Agreement and Declaration of Trust Relating to | |
Shareholder's Rights -- Incorporated by reference to Post-Effective | ||
Amendment No. 82 to the Registrant's Registration Statement. | ||
(c)(2) | Portions of By-Laws Relating to Shareholder's Rights -- | |
Incorporated by reference to Post-Effective Amendment No. 83 to | ||
the Registrant's Registration Statement. | ||
<R> | ||
(d)(1) | Management Contract with Putnam Investment Management, LLC | |
dated August 3, 2007. | ||
(e)(1) | Distributors Contract with Putnam Retail Management Limited | |
Partnership dated August 3, 2007. | ||
</R> | ||
(e)(2) | Form of Dealer Sales Contract -- Incorporated by reference to Post- | |
Effective Amendment No. 82 to the Registrant's Registration | ||
Statement. | ||
(e)(3) | Form of Financial Institution Sales Contract -- Incorporated by | |
reference to Post-Effective Amendment No. 82 to the Registrant's | ||
Registration Statement. | ||
(f) | Trustee Retirement Plan dated October 4, 1996, as amended July | |
21, 2000--Incorporated by reference to Post-Effective Amendment | ||
No. 94 to the Registrant's Registration Statement. | ||
<R> | ||
(g) | Master Custodian Agreement with State Street Bank and Trust | |
Company dated January 1, 2007. | ||
(h)(1) | Amended and Restated Investor Servicing Agreement with Putnam | |
Fiduciary Trust Company dated January 1, 2005 Incorporated by | ||
reference to Post-Effective Amendment No. 95 to the Registrant's | ||
Registration Statement. |
(h)(2) | Letter of Indemnity with Putnam Investment Management dated | |
December 18, 2003 -- Incorporated by reference to Post-Effective | ||
Amendment No. 94 to the Registrant's Registration Statement. | ||
</R> | ||
(h)(3) | Liability Insurance Allocation Agreement dated December 18, | |
2003-- Incorporated by reference to Post-Effective Amendment | ||
No. 94 to the Registrant's Registration Statement. | ||
<R> | ||
(h)(4) | Master Sub-Accounting Services Agreement between Putnam | |
Investment | ||
Management, LLC and State Street Bank and Trust Company dated | ||
January 1, 2007. | ||
</R> | ||
(i) | Opinion of Ropes & Gray LLP, including consent -- Incorporated | |
by reference to Post-Effective Amendment No. 83 to the | ||
Registrant's Registration Statement. | ||
(j) | Consent of Independent Registered Public Accounting Firm. | |
(k) | Not applicable. | |
(l) | Investment Letter from Putnam Investments, LLC to the Registrant | |
-- Incorporated by reference to Post-Effective Amendment No. 81 | ||
to the Registrant's Registration Statement. | ||
(m)(1) | Class A Distribution Plan and Agreement dated January 1, 1990, as | |
amended April 24, 1992 -- Incorporated by reference to Post- | ||
Effective Amendment No. 81 to the Registrant's Registration | ||
Statement. | ||
(m)(2) | Class B Distribution Plan and Agreement dated April 24, 1992 -- | |
Incorporated by reference to Post-Effective Amendment No. 81 to | ||
the Registrant's Registration Statement. | ||
(m)(3) | Class C Distribution Plan and Agreement dated July 16, 1999 -- | |
Incorporated by reference to Post-Effective Amendment No. 90 to | ||
. | the Registrant's Registration Statement | |
(m)(4) | Class M Distribution Plan and Agreement dated November 28, | |
1994 -- Incorporated by reference to Post-Effective Amendment | ||
No. 84 to the Registrant's Registration Statement. | ||
(m)(5) | Class R Distribution Plan and Agreement dated November 15, | |
2002 -- Incorporated by reference to Post-Effective Amendment | ||
No. 92 to the Registrant's Registration Statement. | ||
(m)(6) | Form of Dealer Service Agreement -- Incorporated by reference to | |
Post-Effective Amendment No. 86 to the Registrant's Registration | ||
Statement. | ||
(m)(7) | Form of Financial Institution Service Agreement -- Incorporated by | |
reference to Post-Effective Amendment No. 86 to the Registrant's | ||
Registration Statement. |
<R> | ||
(n) | Rule 18f-3 Plan dated May, 2007. | |
(p)(1) | The Putnam Funds Code of Ethics dated July, 2007. | |
(p)(2) | Putnam Investments Code of Ethics dated December, 2006. | |
(p)(3) | Amendments to Putnam Investments Code of Ethics dated August, | |
2007 | ||
</R> | ||
Item 24. | Persons Controlled by or under Common Control with Registrant | |
None. | ||
Item 25. | Indemnification |
<R>
The information required by this item is incorporated herein by reference to Post-Effective Amendment No. 87 from the Registrant's Registration Statement on Form N-1A under the Investment Company Act of 1940 (File No. 811-00058).
</R>
Item 26. Business and Other Connections of the Investment Adviser
<R>
Except as set forth below, the directors and officers of the Registrants investment adviser, of Putnam Investments Limited, investment sub-manager to certain Putnam funds (the Sub-Manager), and of The Putnam Advisory Company, LLC, investment sub-adviser to certain funds, 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, Sub-Manager, or certain of the investment advisers 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 other than the Sub-Manager, and the Putnam Funds is One Post Office Square, Boston, Massachusetts 02109. The address of the Sub-Manager is Cassini House, 57-59 St Jamess Street, London, England, SW1A 1LD.
</R>
Name | Non-Putnam business and other connections |
Gian D. Fabbri | Partner, KF Style, LLC, 73 Charles St., Boston, |
Assistant Vice President, Putnam | MA 02114 |
Investment Management, LLC | |
Stephen M. Gianelli | Prior to October 2005, Associate, Goodwin |
Vice President, Putnam Investment | Procter, Exchange Place, 53 State Street, Boston, |
Management, LLC | MA 02109 |
Nicholas J. Skrine | Prior to June 2005, Developer/Business Analyst, |
Assistant Vice President, Putnam | Harbourvest Partners, LLC, One Financial |
Investment Management, LLC | Center, 44th Floor, Boston, MA 02111 |
Item 27. Principal Underwriter
(a) Putnam Retail Management Limited Partnership is the principal underwriter for each of the following investment companies including the Registrant:
<R>
Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asset Allocation Funds, Putnam California Tax Exempt Income Fund, Putnam Capital Appreciation Fund, Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust, Putnam Discovery Growth Fund, Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe Equity Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global Income Trust, Putnam Global Natural Resources Fund, The Putnam Fund for Growth and Income, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam International Equity Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam Limited Duration Government Income Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money
C-3
Market Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam RetirementReady Funds, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam Tax Smart Funds Trust, Putnam TH Lee Emerging Opportunities Portfolio, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Variable Trust, Putnam Vista Fund and Putnam Voyager Fund.
</R>
(b) The directors and officers of the Registrant's principal underwriter are listed below. Except as noted below none of the officers are officers of the Registrant.
The principal business address of each person is One Post Office Square Boston MA 02109:
Name | Position and Office with the Underwriter |
| |
Aaron III Jefferson F. | Senior Vice President |
| |
Ahearn Paul D. | Vice President |
| |
Alberghene D. Michael | Assistant Vice President |
| |
Alessi John J. | Vice President |
| |
Amisano Paulette C. | Vice President |
| |
<R> | |
| |
</R> | |
| |
Azzarito Nicholas S. | Vice President |
| |
Babcock III Warren W. | Senior Vice President |
| |
Baker Christopher H. | Vice President |
| |
Baker Erin L. | Senior Vice President |
| |
Balfour Renee | Assistant Vice President |
| |
Barnett William E. | Senior Vice President |
| |
<R> | |
| |
Barrett Brian R. | Assistant Vice President |
| |
</R> | |
| |
Bartlett-Armstrong Laura Ann | Senior Vice President |
| |
Bartony Paul A. | Senior Vice President |
| |
Bergeron Christopher E. | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Borden Richard S. | Senior Vice President |
| |
Bosinger Paul C. | Vice President |
| |
<R> | |
| |
Bottcher Stephen N. | Assistant Vice President |
| |
</R> | |
| |
Bouchard Keith R. | Senior Vice President |
| |
Bouvier Andre W. | Senior Vice President |
|
C-4
<R> | |
| |
Boyle Ellen J. | Vice President |
| |
</R> | |
| |
Bradford Jr. Linwood E. | Managing Director |
| |
Brennan Sean M. | Vice President |
| |
Brown Michael D. | Senior Vice President |
| |
Buffington Scott R. | Senior Vice President |
| |
Bumpus James F. | Managing Director |
| |
Bunker Christopher M. | Senior Vice President |
| |
<R> | |
| |
Burke Brian M. | Assistant Vice President |
| |
</R> | |
| |
Burns Robert T. | Managing Director |
| |
Cabana Susan D. | Senior Vice President |
| |
Call Timothy W. | Senior Vice President |
| |
<R> | |
| |
Callahan Lea H | Assistant Vice President |
| |
</R> | |
| |
Callinan Richard E. | Senior Vice President |
| |
Campbell Christopher F. | Vice President |
| |
Caple Daniel S. | Senior Vice President |
| |
Card Victoria R. | Vice President |
| |
Casey David M. | Senior Vice President |
| |
Cass William D. | Senior Vice President |
| |
Chapman Frederick | Senior Vice President |
| |
Cinelli Kathleen J. | Assistant Vice President |
| |
Clark James F. | Vice President |
| |
<R> | |
| |
Clifford Tracy L. | Senior Vice President |
| |
Coletti Stefanie H. | Assistant Vice President |
| |
</R> | |
| |
Colman Donald M. | Senior Vice President |
| |
Colman Leonard | Vice President |
| |
Coneeny Mark L. | Managing Director |
| |
Connolly William T. | Senior Managing Director |
| |
Cooley Jonathan A. | Senior Vice President |
| |
Corbett Dennis T. | Senior Vice President |
| |
Cosentino Joseph D. | Vice President |
| |
Coveney Anne M. | Managing Director |
| |
Covington Ryan R. | Senior Vice President |
| |
Crean Jeremy P. | Vice President |
| |
Cristo Chad H. | Senior Vice President |
| |
Croft Ariane D. | Vice President |
| |
Curtin Brian | Vice President |
| |
Dahill Jessica E. | Senior Vice President |
|
C-5
Daly Elizabeth Paul | Vice President |
| |
Davidian Raymond A. | Vice President |
| |
DeAngelis Adam | Vice President |
| |
DeGregorio Jr. Richard A. | Vice President |
| |
Demery Thomas R. | Vice President |
| |
<R> | |
| |
</R> | |
| |
Dewey Jr. Paul S. | Managing Director |
| |
DiBuono Jeffrey P. | Vice President |
| |
DiPietro Daniel S. | Assistant Vice President |
| |
Disciullo Joseph A. | Assistant Vice President |
| |
Donadio Joyce M. | Senior Vice President |
| |
Druker Linda A. | Assistant Vice President |
| |
<R> | |
| |
Dyer Martin | Senior Vice President |
| |
</R> | |
| |
Economou Stefan G. | Vice President |
| |
Eidelberg Kathleen E. | Vice President |
| |
<R> | |
| |
<R> | |
| |
Erlandson William J. | Senior Vice President |
| |
Fanning Virginia A. | Senior Vice President |
| |
Favaloro Beth A. | Managing Director |
| |
Felan III Catarino | Senior Vice President |
| |
Feldman Susan H. | Managing Director |
| |
Fiedler Stephen J. | Senior Vice President |
| |
Filmore Benjamin R. | Vice President |
| |
Fishman Mitchell B. | Managing Director |
| |
Fleming Robert A. | Vice President |
| |
Fogarty Jr. Vincent G. | Senior Vice President |
| |
Foresyth Charles W. | Vice President |
| |
Forrester Gordon M. | Managing Director |
| |
Foster Laura G. | Senior Vice President |
| |
Fredericks Peter Torrey | Assistant Vice President |
| |
Fulginite Greg Andrew | Vice President |
| |
Garvin Thomas D. | Vice President |
| |
Gaudette Marjorie B. | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Gentile Donald A. | Assistant Vice President |
| |
Georgantas Arthur | Vice President |
| |
<R> | |
| |
Geraigery Mark F. | Assistant Vice President |
| |
</R> | |
| |
Gervais Jeffrey C. | Assistant Vice President |
|
C-6
Giacobbe Gale L. | Assistant Vice President |
| |
<R> | |
| |
</R> | |
| |
Giessler Todd C. | Vice President |
| |
Greeley Jr. Robert E. | Vice President |
| |
Greenwood Julie M. | Vice President |
| |
Haines James B. | Senior Vice President |
| |
Halloran James E. | Senior Vice President |
| |
Halloran Thomas W. | Managing Director |
| |
Hancock Nancy E. | Vice President |
| |
Hartigan Craig W. | Senior Vice President |
| |
Hartigan Maureen A. | Senior Vice President |
| |
Hayes Alexander D. | Vice President |
| |
Hess Jr. William C. | Senior Vice President |
| |
Holland Jeffrey K. | Senior Vice President |
| |
Holmes Maureen A. | Senior Vice President |
| |
<R> | |
| |
Homer Edward M. | Assistant Vice President |
| |
</R> | |
| |
Horby Gary C. | Senior Vice President |
| |
Hoyt Paula J. | Senior Vice President |
| |
Hughes Rosemary A. | Assistant Vice President |
| |
Hume John P. | Vice President |
| |
Hyland John P. | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Jones Thomas A. | Managing Director |
| |
Jordan Stephen R. | Assistant Vice President |
| |
<R> | |
| |
</R> | |
| |
Kapinos Peter J. | Senior Vice President |
| |
Kay Karen R. | Managing Director |
| |
Keith Pamela J. | Assistant Vice President |
| |
Kelley Brian J. | Senior Vice President |
| |
Kelly A. Siobhan | Senior Vice President |
| |
Kelly David | Managing Director |
| |
Kennedy Daniel J. | Senior Vice President |
| |
Kersten Charles N. | Senior Vice President |
| |
<R> | |
| |
Keve Peony Katherine | Vice President |
| |
</R> | |
| |
Kinsman Anne M. | Senior Vice President |
| |
<R> | |
| |
</R> | |
|
C-7
Kotsiras Steven | Senior Vice President |
| |
Kreutzberg Howard H. | Managing Director |
| |
Kringdon Joseph D. | Managing Director |
| |
Lacascia Charles M. | Managing Director |
| |
Lacour Jayme J. | Vice President |
| |
Larson John R. | Senior Vice President |
| |
Layn Jeffrey W. | Senior Vice President |
| |
Leahy Jon F. | Assistant Vice President |
| |
Lecce Vincent L. | Vice President |
| |
Leesui Ryan | Vice President |
| |
<R> | |
| |
Leveille Robert R. ** | Managing Director |
| |
</R> | |
| |
Levy Norman S. | Senior Vice President |
| |
Lieberman Samuel L. | Senior Vice President |
| |
Lighty Brian C. | Vice President |
| |
Link Christopher H. | Senior Vice President |
| |
Litant Lisa M. | Vice President |
| |
Lohmeier Andrew | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Maher James M. | Vice President |
| |
<R> | |
| |
Maher Stephen B. | Vice President |
| |
</R> | |
| |
Mahoney Julie M. | Senior Vice President |
| |
Malone James | Senior Vice President |
| |
Martin David M. | Vice President |
| |
<R> | |
| |
Martino Eric M. | Assistant Vice President |
| |
</R> | |
| |
Mason Ryan L. | Vice President |
| |
Matkin Jefferson P. | Vice President |
| |
Mattucci John T. | Vice President |
| |
McCafferty Karen A. | Managing Director |
| |
McCarthy Anne B. | Vice President |
| |
McCollough Martha J. | Assistant Vice President |
| |
McDaries Jane S. | Assistant Vice President |
| |
McDermott Robert J. | Senior Vice President |
| |
McKenna Mark J. | Managing Director |
| |
McNamara III Francis J. * | Senior Managing Director |
| |
<R> | |
| |
</R> | |
| |
Mehta Ashok | Senior Vice President |
|
C-8
Metelmann Claye A. | Senior Vice President |
| |
Miller Bradley S. | Senior Vice President |
| |
Millette Michelle T. | Vice President |
| |
Minor Sean Charles | Vice President |
| |
Minsk Judith | Senior Vice President |
| |
Mitchell Thomas M. | Senior Vice President |
| |
Molesky Kevin P. | Senior Vice President |
| |
Moody Paul R. | Senior Vice President |
| |
Moore George D. | Vice President |
| |
Morais Joseph | Assistant Vice President |
| |
<R> | |
| |
Moreno Alejandro | Assistant Vice President |
| |
</R> | |
| |
Murphy Brian X. | Assistant Vice President |
| |
Nadherny Robert Charles | Managing Director |
| |
Nakamura Denise-Marie | Senior Vice President |
| |
Naumann Daniel | Assistant Vice President |
| |
Naumenko Maxim O. | Assistant Vice President |
| |
Nichols Leslie G. | Assistant Vice President |
| |
Nickodemus John P. | Managing Director |
| |
Nickolini Michael A. | Senior Vice President |
| |
Nicolazzo Jon C. | Senior Vice President |
| |
Norcross George H. | Vice President |
| |
O'Connell Jr. Paul P. | Senior Vice President |
| |
O'Connor Brian P. | Senior Vice President |
| |
O'Connor Matthew P. | Managing Director |
| |
O'Connor Scott D. | Vice President |
| |
Olsen Stephen | Vice President |
| |
Palmer Patrick J. | Senior Vice President |
| |
Perkins Erin M. | Senior Vice President |
| |
Petitti Joseph | Senior Vice President |
| |
Pheeney Bradford S. | Vice President |
| |
Pheeney Douglas K. | Vice President |
| |
Piggott Kelley M. | Assistant Vice President |
| |
<R> | |
| |
</R> | |
| |
Powers Michele M. | Assistant Vice President |
| |
Pulkrabek Scott M. | Senior Vice President |
| |
Puzzangara John C. | Senior Vice President |
| |
Puzzangara Kendra L. | Senior Vice President |
| |
Quinn Brian J. | Senior Vice President |
| |
Quinn Kyle C. | Vice President |
| |
Reid Sandra L. | Senior Vice President |
| |
Ritter Jesse D. | Senior Vice President |
|
C-9
Rodammer Kris | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Rowe Robert B. | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Saunders Catherine A. | Managing Director |
| |
<R> | |
| |
</R> | |
| |
Segers Elizabeth R. | Managing Director |
| |
<R> | |
| |
</R> | |
| |
Seydler Bonnie S. | Senior Vice President |
| |
<R> | |
| |
Shanley Thomas J. | Assistant Vice President |
| |
</R> | |
| |
Shea Lisa M. | Assistant Vice President |
| |
Short Jr. Harold P. | Managing Director |
| |
Siebold Mark J. | Senior Vice President |
| |
Siemon Jr. Frank E. | Senior Vice President |
| |
<R> | |
| |
Siergiewicz Laurie R. | Assistant Vice President |
| |
</R> | |
| |
Skomial Victoria S. | Assistant Vice President |
| |
<R> | |
| |
</R> | |
| |
Sochanek Regan A. | Vice President |
| |
Spigelmeyer III Carl M. | Vice President |
| |
<R> | |
| |
</R> | |
| |
Stathoulopoulos Manny | Vice President |
| |
Steingarten Brie A.E. | Vice President |
| |
<R> | |
| |
Stern Derek | Vice President |
| |
</R> | |
| |
Stuart James F. | Senior Vice President |
| |
Sullivan Brian L. | Senior Vice President |
| |
Sullivan Daniel John | Assistant Vice President |
| |
Sullivan Elaine M. | Managing Director |
| |
Sweeney Janet C. | Senior Vice President |
| |
Sweetser Laura A. | Assistant Vice President |
| |
Taber Rene B. | Senior Vice President |
| |
Tanner B. Iris | Vice President |
| |
Tate Stephen J. | Vice President |
| |
<R> | |
|
C-10
</R> | |
| |
Tottenham Abby | Assistant Vice President |
| |
Tucker Jason A. | Managing Director |
| |
Tyrie David C. | Managing Director |
| |
Urban Elke R. | Vice President |
| |
Valentin-Hess Carmen | Vice President |
| |
Wallace Stephen | Senior Vice President |
| |
Webster David C. | Vice President |
| |
White Patrick J. | Senior Vice President |
| |
Wilde Michael R. | Vice President |
| |
Williams Brie P. | Vice President |
| |
<R> | |
| |
</R> | |
| |
Williams John K. | Assistant Vice President |
| |
Wynn Jr. Frederick M. | Managing Director |
| |
<R> | |
| |
Zannino David J. | Vice President |
| |
</R> | |
| |
Zechello Steven R. | Senior Vice President |
| |
<R> | |
| |
</R> | |
| |
Zitnay Lauren K. | Assistant Vice President |
| |
Zografos-Preusser Laura J. | Senior Vice President |
| |
Zoltowski Michelle F. | Assistant Vice President |
|
*Mr. McNamara is Vice President and Chief Legal Officer of the Registrant.
<R>
**Mr. Leveille is Vice President and Chief Compliance Officer of the Registrant.
</R>
C-11
Item 28. Location of Accounts and Records
<R>
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 the Registrant's Clerk, Judith Cohen; the Registrant's investment adviser, Putnam Investment Management, LLC (PIM); the Registrant's principal underwriter, Putnam Retail Management Limited Partnership (PRM); the Registrant's custodian, State Street Bank and Trust Company (which, in addition to its duties as custodian, also provides certain administrative, pricing and bookkeeping services); and the Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of Putnam Fiduciary Trust Company (PFTC). The address of the Clerk, PIM, PRM and PFTC is One Post Office Square, Boston, Massachusetts 02109. State Street Bank and Trust Company is located at 225 Franklin Street, Boston, M assachusetts 02110 and 2 Avenue de Lafayette, Boston, Massachusetts 02111.
</R>
Item 29. Management Services
None.
Item 30. Undertakings
None.
NOTICE
A copy of the Agreement and Declaration of Trust of The George Putnam Fund of Boston is on file with the Secretary of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrant.
<R>
POWER OF ATTORNEY
I, the undersigned Officer of each of the funds listed on Schedule A hereto, hereby severally constitute and appoint John Hill, George Putnam III, Charles E. Porter, Jonathan S. Horwitz, John W. Gerstmayr and Bryan Chegwidden, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statements on Form N-1A of each of the funds listed on Schedule A hereto and any and all amendments (including post-effective amendments) to said Registration Statements and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto my 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 mig ht 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 my hand and seal on the date set forth below.
Signature | Title | Date |
/s/ Janet C. Smith | ||
--------------------------------------- | Vice President, Assistant | January 2, 2007 |
Janet C. Smith | Treasurer and Principal | |
Accounting Officer |
Schedule A
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asset Allocation Funds
Putnam California Tax Exempt Income Fund
Putnam Capital Appreciation Fund
Putnam Classic Equity Fund
Putnam Convertible Income-Growth Trust
Putnam Discovery Growth Fund
Putnam Diversified Income Trust
Putnam Equity Income Fund
Putnam Europe Equity Fund
Putnam Florida Tax Exempt Income Fund
Putnam Funds Trust
The George Putnam Fund of Boston
Putnam Global Equity Fund
Putnam Global Income Trust
Putnam Global Natural Resources Fund
The Putnam Fund for Growth and Income
Putnam Health Sciences Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam International Equity Fund
Putnam Investment Funds
Putnam Investors Fund
Putnam Limited Duration Government Income Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam Money Market Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Tax Exempt Income Fund
Putnam Ohio Tax Exempt Income Fund
Putnam OTC & Emerging Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Schedule A (continued)
Putnam RetirementReady® Funds
Putnam Tax Exempt Income Fund
Putnam Tax Exempt Money Market Fund
Putnam Tax-Free Income Trust
Putnam Tax Smart Funds Trust
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Variable Trust
Putnam Vista Fund
Putnam Voyager Fund
POWER OF ATTORNEY
I, the undersigned Trustee of each of the funds listed on Schedule A hereto, hereby severally constitute and appoint John Hill, George Putnam III, Charles E. Porter, Jonathan S. Horwitz, John W. Gerstmayr and Bryan Chegwidden, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statements on Form N-1A of each of the funds listed on Schedule A hereto and any and all amendments (including post-effective amendments) to said Registration Statements and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto my 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 mig ht 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 my hand and seal on the date set forth below.
Signature | Title | Date |
/s/ Robert J. Darretta | ||
--------------------------------------- | Trustee | July 12, 2007 |
Robert J. Darretta |
Schedule A
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asset Allocation Funds
Putnam California Tax Exempt Income Fund
Putnam Capital Appreciation Fund
Putnam Classic Equity Fund
Putnam Convertible Income-Growth Trust
Putnam Discovery Growth Fund
Putnam Diversified Income Trust
Putnam Equity Income Fund
Putnam Europe Equity Fund
Putnam Funds Trust
The George Putnam Fund of Boston
Putnam Global Equity Fund
Putnam Global Income Trust
Putnam Global Natural Resources Fund
The Putnam Fund for Growth and Income
Putnam Health Sciences Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam International Equity Fund
Putnam Investment Funds
Putnam Investors Fund
Putnam Limited Duration Government Income Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam Money Market Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Tax Exempt Income Fund
Putnam Ohio Tax Exempt Income Fund
Putnam OTC & Emerging Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Schedule A (continued)
Putnam RetirementReady® Funds
Putnam Tax Exempt Income Fund
Putnam Tax Exempt Money Market Fund
Putnam Tax-Free Income Trust
Putnam Tax Smart Funds Trust
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Variable Trust
Putnam Vista Fund
Putnam Voyager Fund
</R>
SIGNATURES
<R>
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 26th day of November, 2007.
</R>
The George Putnam Fund of Boston
By: /s/ Charles E. Porter, Executive Vice President,
Associate Treasurer, Principal Executive Officer
and Compliance Liaison
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
Signature | Title |
John A. Hill | Chairman of the Board and Trustee |
Jameson A. Baxter | Vice Chairman of the Board and Trustee |
<R> | |
Charles E. Haldeman, Jr. | President and Trustee |
</R> | |
Charles E. Porter | Executive Vice President, Associate Treasurer, |
Principal Executive Officer and Compliance Liaison | |
Steven D. Krichmar | Vice President and Principal Financial Officer |
<R> | |
Janet C. Smith | Vice President, Assistant Treasurer and Principal |
Accounting Officer | |
</R> | |
Charles B. Curtis | Trustee |
<R> |
Robert J. Darretta | Trustee | |
</R> | ||
Myra R. Drucker | Trustee | |
<R> | ||
</R> | ||
Paul L. Joskow | Trustee | |
Elizabeth T. Kennan | Trustee | |
Kenneth R. Leibler | Trustee | |
Robert E. Patterson | Trustee | |
<R> | ||
George Putnam, III | Trustee | |
</R> | ||
W. Thomas Stephens | Trustee | |
Richard B. Worley | Trustee | |
By: /s/ Charles E. Porter, as Attorney-in-Fact | ||
<R> | November 26, 2007 | |
</R> |
Exhibit Index | |
Item 22 | Exhibit |
<R> | |
(d)(1) | Management Contract with Putnam Investment Management, LLC dated |
August 3, 2007. | |
(e)(1) | Distributors Contract with Putnam Retail Management Limited |
Partnership dated August 3, 2007. | |
(g) | Master Custodian Agreement with State Street Bank and Trust Company |
dated January 1, 2007. | |
(h)(4) | Master Sub-Accounting Services Agreement between Putnam Investment |
Management, LLC and State Street Bank and Trust Company dated | |
January 1, 2007. | |
</R> | |
(j) | Consent of Independent Registered Public Accounting Firm |
<R> | |
(n) | Rule 18f-3 Plan dated May, 2007. |
(p)(1) | The Putnam Funds Code of Ethics dated July, 2007. |
(p)(2) | Putnam Investments Code of Ethics dated December, 2006. |
(p)(3) | Amendments to Putnam Investments Code of Ethics dated August, 2007. |
</R> |
THE GEORGE PUTNAM FUND OF BOSTON
MANAGEMENT CONTRACT
This Management Contract is dated as of August 3, 2007 between THE GEORGE PUTNAM FUND OF BOSTON, a Massachusetts business trust (the Fund), and PUTNAM INVESTMENT MANAGEMENT, LLC, a Delaware limited liability company (the Manager).
In consideration of the mutual covenants herein contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously an investment program for the Fund or, in the case of a Fund that has divided its shares into two or more series under Section 18(f)(2) of the Investment Company Act of 1940, as amended (the 1940 Act), each series of the Fund identified from time to time on Schedule A to this Contract (each reference in this Contract to a Fund or to the Fund is also deemed to be a reference to any existing series of the Fund, as appropriate in the particular context), will determine what investments will be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund will be held uninvested and will, on behalf of the Fund, make changes in such investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and the stated investment objectives, policies and restrictions of the Fund, will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and will exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the net asset value of the Fund, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund.
(c) The Manager, at its expense, will place all orders for the purchase and sale of portfolio investments for the Funds account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager 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 for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the
Manager, bearing in mind the Funds best interests at all times, will consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager will not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broke r or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Managers overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Funds account, neither the Manager nor any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for the compensation in whole or in part of such officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund. The Fund will also pay or reimburse the Manager for all or part of the cost of suitable office space, utilities, support services and equipment attributable to such officers and persons as may be determined in each case by the Trustees of the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund.
(e) The Manager will not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3.
(f) Subject to the prior approval of a majority of the Trustees, including a majority of the Trustees who are not interested persons and, to the extent required by the 1940 Act and the rules and regulations under the 1940 Act, subject to any applicable guidance or interpretation of the Securities and Exchange Commission or its staff, by the shareholders of the Fund, the Manager may, from time to time, delegate to a sub-adviser or sub-administrator any of the Managers duties under this Contract, including the management of all or a portion of the assets being managed. In all instances, however, the Manager must oversee the provision of delegated services, the Manager must bear the separate costs of employing any sub-adviser or sub-administrator, and no delegation will relieve the Manager of any of its obligations under this Contract.
2
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager may have advisory, management, service or other contracts with other organizations and persons and may have other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the Managers services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), and (c) of Section 1, a fee, based on the Funds Average Net Assets, computed and paid quarterly at the annual rates set forth on Schedule B attached to this Contract, as from time to time amended.
Average Net Assets means the average of all of the determinations of the Funds net asset value at the close of business on each business day during each quarter while this Contract is in effect. The fee is payable for each quarter within 30 days after the close of the quarter.
The fees payable by the Fund to the Manager pursuant to this Section 3 will be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments.
In the event that expenses of the Fund for any fiscal year exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale, the compensation due the Manager for such fiscal year will be reduced by the amount of excess by a reduction or refund thereof. In the event that the expenses of the Fund exceed any expense limitation which the Manager may, by written notice to the Fund, voluntarily declare to be effective subject to such terms and conditions as the Manager may prescribe in such notice, the compensation due the Manager will be reduced, and if necessary, the Manager will assume expenses of the Fund, to the extent required by the terms and conditions of such expense limitation.
If the Manager serves for less than the whole of a quarter, the foregoing compensation will be prorated.
3
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract will automatically terminate, without the payment of any penalty, in the event of its assignment, provided that no delegation of responsibilities by the Manager pursuant to Section 1(f) will be deemed to constitute an assignment. No provision of this Contract may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. No amendment of this Contract is effective until approved in a manner consistent with the 1940 Act, the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract is effective upon its execution and will remain in full force and effect as to a Fund continuously thereafter (unless terminated automatically as set forth in Section 4 or terminated in accordance with the following paragraph) through June 30, 2008, and will continue in effect from year to year thereafter so long as its continuance is approved at least annually by (i) the Trustees, or the shareholders by the affirmative vote of a majority of the outstanding shares of the respective Fund, and (ii) a majority of the Trustees who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval.
Either party hereto may at any time terminate this Contract as to a Fund by not less than 60 days written notice delivered or mailed by registered mail, postage prepaid, to the other party. Action with respect to a Fund may be taken either (i) by vote of a majority of the Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the respective Fund.
Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the affirmative vote of a majority of the outstanding shares of a Fund means the affirmative vote, at a duly called and held meeting of shareholders of the respective Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at the meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at the meeting are present in person or by proxy or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at the meeting, whichever is less.
For the purposes of this Contract, the terms affiliated person, control, interested person and assignment have their respective meanings defined in the 1940 Act, subject, however, to the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff; the term approve at least annually will be construed in a manner consistent with the 1940
4
Act and the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff; and the term brokerage and research services has the meaning given in the Securities Exchange Act of 1934 and the rules and regulations under the Securities Exchange Act of 1934 and under any applicable guidance or interpretation of the Securities and Exchange Commission or its staff.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund for any act or omission in the course of, or connected with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the respective Fund.
5
IN WITNESS WHEREOF, THE GEORGE PUTNAM FUND OF BOSTON and PUTNAM INVESTMENT MANAGEMENT, LLC have each caused this instrument to be signed on its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written.
THE GEORGE PUTNAM FUND OF BOSTON
By: /s/ Charles E. Porter
Charles E. Porter
Executive Vice President, Associate
Treasurer, Principal Executive Officer and
Compliance Liaison
PUTNAM INVESTMENT MANAGEMENT, LLC
By: /s/ James P. Pappas
James P. Pappas
Managing Director
6
Schedule A
Not applicable
Schedule B
0.65% of the first $500 million of Average Net Assets;
0.55% of the next $500 million of Average Net Assets;
0.50% of the next $500 million of Average Net Assets;
0.45% of the next $5 billion of Average Net Assets;
0.425% of the next $5 billion of Average Net Assets;
0.405% of the next $5 billion of Average Net Assets;
0.39% of the next $5 billion of Average Net Assets; and
0.38% of any excess thereafter.
THE GEORGE PUTNAM FUND OF BOSTON
DISTRIBUTORS CONTRACT
Distributors Contract dated August 3, 2007, by and between THE GEORGE PUTNAM FUND OF BOSTON, a Massachusetts business trust (the Fund; each reference in this Contract or in the Terms and Conditions defined below to a Fund or the Fund is also deemed to be a reference to any existing series of the Fund, as appropriate in the particular context), and PUTNAM RETAIL MANAGEMENT LIMITED PARTNERSHIP, a Massachusetts limited partnership (Putnam).
WHEREAS, the Fund and Putnam are desirous of entering into this agreement to provide for the distribution by Putnam of shares of the Fund;
NOW, THEREFORE, in consideration of the mutual agreements contained in the Terms and Conditions of Distributors Contract attached to and forming a part of this Contract (the Terms and Conditions), the Fund hereby appoints Putnam as a distributor of shares of the Fund, and Putnam hereby accepts such appointment, all as set forth in the Terms and Conditions.
A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, THE GEORGE PUTNAM FUND OF BOSTON and PUTNAM RETAIL MANAGEMENT LIMITED PARTNERSHIP have each caused this Distributors Contract to be signed on its behalf, all as of the day and year first written above.
THE GEORGE PUTNAM FUND OF BOSTON
By: /s/ Charles E. Porter
Charles E. Porter
Executive Vice President, Associate Treasurer,
Principal Executive Officer and Compliance Liaison
PUTNAM RETAIL MANAGEMENT
LIMITED PARTNERSHIP
By: /s/ William T. Connolly
William T. Connolly
Senior Managing Director
TERMS AND CONDITIONS
OF
DISTRIBUTORS CONTRACT
1. Reservation of Right Not to Sell. The Fund reserves the right to refuse at any time or times to sell any of its shares of beneficial interest (shares) hereunder for any reason deemed adequate by it.
2. Payments to Putnam. In connection with the distribution of shares of the Fund, Putnam will be entitled to receive: (a) payments pursuant to any Distribution Plan and Agreement from time to time in effect between the Fund and Putnam with respect to the Fund or any particular class of shares of the Fund, (b) any contingent deferred sales charges applicable to the redemption of shares of the Fund or of any particular class of shares of the Fund, determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund and (c) subject to the provisions of Section 3 below, any front-end sales charges applicable to the sale of shares of the Fund or of any particular class of shares of the Fund, less any applicable dealer discount.
3. Sales of Shares to Putnam and Sales by Putnam. Putnam will have the right, as principal, to sell shares of the Fund to investment dealers against orders therefor (a) at the public offering price (calculated as described below) less a discount determined by Putnam, which discount shall not exceed the amount of the sales charge referred to below, or (b) at net asset value. Upon receipt of an order to purchase Fund shares from an investment dealer with whom Putnam has a Sales Contract, Putnam will promptly purchase shares from the Fund to fill such order. The public offering price of a class of shares shall be the net asset value of such shares then in effect, plus any applicable front-end sales charge determined in the manner set forth in the then current Prospectus and Statement of A dditional Information of the Fund or as permitted by the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. In no event shall the public offering price exceed 1000/915ths of such net asset value, and in no event shall any applicable sales charge exceed 8 1/2% of the public offering price. The net asset value of the shares shall be determined in the manner provided in the Agreement and Declaration of Trust of the Fund as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information of the Fund.
Putnam will also have the right, as principal, to purchase shares from the Fund at their net asset value and to sell such shares to the public against orders therefor at the public offering price or at net asset value.
Putnam will also have the right, as principal, to sell shares at their net asset value and not subject to a contingent deferred sales charge to such persons as may be approved by the Trustees of the Fund, all such sales to comply with the provisions of the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder.
2
Putnam will also have the right, as agent for the Fund, to sell shares at the public offering price or at net asset value to such persons and upon such conditions as the Trustees of the Fund may from time to time determine.
On every sale the Fund shall receive the applicable net asset value of the shares. Putnam will reimburse the Fund for any increased issue tax paid on account of sales charges. Upon receipt of registration instructions in proper form and payment for shares, Putnam will transmit such instructions to the Fund or its agent for registration of the shares purchased.
4. Sales of Shares by the Fund. The Fund reserves the right to issue shares at any time directly to its shareholders as a stock dividend or stock split and to sell shares to its shareholders or to other persons approved by Putnam at not less than net asset value.
5. Repurchase of Shares. Putnam will act as agent for the Fund in connection with the repurchase of shares by the Fund upon the terms and conditions set forth in the then current Prospectus and Statement of Additional Information of the Fund.
6. Basis of Purchases and Sales of Shares. Putnam will use its best efforts to place shares sold by it on an investment basis. Putnam does not agree to sell any specific number of shares. Shares will be sold by Putnam only against orders therefor. Putnam will not purchase shares from anyone other than the Fund except in accordance with Section 5, and will not take long or short positions in shares contrary to the Agreement and Declaration of Trust of the Fund.
7. Rules of NASD, etc. Putnam will conform to the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and the sale of securities laws of any jurisdiction in which it sells, directly or indirectly, any shares. Putnam also agrees to furnish to the Fund sufficient copies of any agreements or plans it intends to use in connection with any sales of shares in adequate time for the Fund to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared.
8. Putnam Independent Contractor. Putnam shall be an independent contractor and neither Putnam nor any of its officers or employees as such is or shall be an employee of the Fund. Putnam is responsible for its own conduct and the employment, control and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. Putnam assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employer taxes thereunder.
Putnam will maintain at its own expense insurance against public liability in such an amount as the Trustees of the Fund may from time to time reasonably request.
9. Expenses. Putnam will pay all expenses of qualifying shares for sale under the so-called Blue Sky laws of any state (except expenses of any action by the Fund relating to its Agreement and Declaration of Trust or other matters approved by the Trustees), and expenses of preparing, printing and distributing advertising and sales literature. Putnam shall not be responsible for any
3
expenses of registering shares under the Securities Act of 1933, as amended, or the preparation, printing and distribution of Prospectuses, Statements of Additional Information and shareholders reports, except that Putnam will pay the cost of printing and distributing any Prospectuses, Statements of Additional Information and shareholders reports used by it and by others in the offer or sale of shares to persons who, at the time of such offer or sale were not already shareholders of the Fund, to the extent such cost is not paid by others.
10. Indemnification of Fund. Putnam agrees to indemnify and hold harmless the Fund and each person who has been, is, or may hereafter be a Trustee of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of Putnam or any agent or employee of Putnam or any other person for whose acts Putnam is responsible or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished by the Fund. Putnam also agrees likewise to indemnify and hold harmless the Fund and each such person in connection with any claim or in connection with any action, suit or proceeding which arises out of or is alleged to arise out of Putnams (or an affiliate of Putnams) failure to exercise reasonable care and diligence with respect to its services rendered in connection with investment, reinvestment, automatic withdrawal and other plans for shares. The term expenses includes amounts paid in satisfaction of judgments or in settlements which are made with Putnams consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or a Trustee may be entitled as a matter of law.
11. Assignment Terminates this Contract; Amendments of this Contract. This Contract will automatically terminate, without the payment of any penalty, in the event of its assignment. This Contract may be amended only if such amendment be approved either by action of the Trustees of the Fund or at a meeting of the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval.
12. Effective Period and Termination of this Contract. This Contract is effective upon its execution and will remain in full force and effect as to a Fund continuously thereafter (unless terminated automatically as set forth in Section 11 or terminated in accordance with the following paragraph) through June 30, 2008, and will continue in effect from year to year thereafter so long as its continuance is approved at least annually by (i) the Trustees, or the shareholders by the affirmative vote of a majority of the outstanding shares of the respective Fund, and (ii) a majority of the Trustees who are not interested persons of the Fund or of Putnam, by vote cast in person at a meeting called for the purpose of voting on such approval.
Either party hereto may at any time terminate this Contract as to a Fund by not less than 60 days written notice delivered or mailed by registered mail, postage prepaid, to the other party. Action with respect to a Fund may be taken either (i) by vote of a majority of the Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the respective Fund.
4
Termination of this Contract pursuant to this Section 12 will be without the payment of any penalty.
13. Certain Definitions. For the purposes of this Contract, the affirmative vote of a majority of the outstanding shares of a Fund means the affirmative vote, at a duly called and held meeting of shareholders of the respective Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at the meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at the meeting are present in person or by proxy or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at the meeting, whichever is less.
For the purposes of this Contract, the terms interested person and assignment have their respective meanings defined in the Investment Company Act of 1940, as amended, subject, however, to the Rules and Regulations under the Investment Company Act of 1940 and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff; and the term approve at least annually will be construed in a manner consistent with the Investment Company Act of 1940 and the Rules and Regulations under the Investment Company Act of 1940 and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff.
5
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
We hereby consent to the incorporation by reference in this Post-Effective Amendment No. 97 to the registration statement on Form N-1A (File No. 2-10816) (Registration Statement) of our report dated September 12, 2007, relating to the financial statements and financial highlights appearing in the July 31, 2007, Annual Report of The George Putnam Fund of Boston, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial highlights" and "Independent Registered Public Accounting Firm and Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
/s/ PriceWaterhouseCoopers LLP
Boston, Massachusetts
November 26, 2007
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EXECUTION COPY
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of January 1, 2007 by and among each management investment company identified on Appendix A hereto, each such investment company acting on its own behalf separately from all of the other investment companies and not jointly or jointly and severally with any of the other investment companies (each such investment company and each management investment company made subject to this Agreement in accordance with Section 21.5 below shall hereinafter be referred to as a Fund), and STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company (the Custodian).
WITNESSETH:
WHEREAS, each Fund is authorized to issue common stock or shares of beneficial interest (Shares), and some Funds are authorized to issue Shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, as more particularly identified on Appendix A hereto (each such series and each series made subject to this Agreement in accordance with Section 21.6 below shall hereinafter be referred to as a Portfolio with respect to that Fund, but for any Fund that does not have any separate series, then any reference to Portfolio is a reference to that Fund);
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
Each Fund hereby employs the Custodian as a custodian of assets of the Portfolios, including securities which the Fund, on behalf of the applicable Portfolio, desires to be held in places within the United States (domestic securities) and securities it desires to be held outside the United States (foreign securities). Each Fund, on behalf of its Portfolio(s), agrees to deliver to the Custodian all securities and cash of the Portfolios (other than any securities or cash of the Portfolios held by a futures commission merchant or commodity clearing organization pursuant to Rule 17f-6 under the Investment Company Act of 1940, as amended (the 1940 Act)), and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such Shares as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio but not delivered to the Custodian or which is delivered out in accordance with Proper Instructions or Special Instructions (as such terms are defined in Section 7 hereof). With respect to uncertificated shares (the Underlying Shares) of registered investment companies (as defined in Section 3(a)(1) of the 1940 Act) (hereinafter sometimes referred to as the Underlying Portfolios), whether in the same group of investment companies (as defined in Section 12(d)(1)(G)(ii) of the 1940 Act) or otherwise, the holding of confirmation statements that identify the shares as being recorded in the Custodians name on behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of Proper Instructions, the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ as its agent one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees or the Board of Directors of the Fund (as appropriate, and in each case, the Board) on behalf of the applicable Portfolio(s). The Custodian may place and maintain each Funds foreign securities with Eligible Foreign Custodians employed by the Custodian and/or Foreign Securities Systems, all as designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4 hereof.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS TO BE HELD IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a U.S. Securities System) and (b) Underlying Shares owned by each Fund on behalf of a Portfolio which are maintained pursuant to Section 2.10 hereof in an account with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the Underlying Transfer Agent).
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian, whether held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
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6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with street delivery custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodians own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Portfolio (a) against receipt of collateral as agreed from time to time by the Fund on behalf of the Portfolio, except that in connection with any loans for which collateral is to be credited to the Custodians account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral or (b) to the lending agent, or the lending agents custodian, in accordance with written Proper Instructions (which may but need not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;
11) For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer that is both registered under the Securities Exchange Act of 1934, as amended (the Exchange Act), and a
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member of The National Association of Securities Dealers, Inc. (the NASD), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund on behalf of a Portfolio;
13) For delivery in accordance with the provisions of any agreement among a Fund on behalf of the Portfolio, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (the CFTC) and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund on behalf of a Portfolio;
14) Upon the sale or other delivery of such investments, including, without limitation, to one or more (a) additional custodians appointed by the Fund, and communicated to the Custodian from time to time via a writing duly executed by an authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s), (each a Repo Custodian), or (b) Special Sub-Custodians, and prior to receipt of payment therefor, as set forth in written Proper Instructions (such delivery in advance of payment, along with payment in advance of delivery made in accordance with Section 2.6(7), as applicable, shall each be referred to herein as a Free Trade), provided that such Proper Instructions shall set forth (a) the securities of the Portfolio to be delivered and (b) the person(s) to whom delivery of such securities shall be made;
15) Upon receipt of Proper Instructions from the Fund or the Funds transfer agent (the Transfer Agent) for delivery to such Transfer Agent or to the holders of Shares in connection with payments in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the Prospectus), in satisfaction of requests by holders of Shares for repurchase or redemption;
16) In the case of a sale processed through the Underlying Transfer Agent of Underlying Shares, in accordance with Section 2.10 hereof;
17) For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and
18) For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio specifying (a) the securities of the Portfolio to be delivered and (b) the person or persons to whom delivery of such securities shall be made.
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SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered by the Custodian in the name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or in the name of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered management investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement shall be in street name or other good delivery form. If, however, a Fund directs the Custodian to maintain securities in street name, the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Cash held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its reasonable discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited therewith shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board. Such cash shall be deposited by the Custodian only in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased and not held pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to (a) registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business if, on the record date for payment by the issuer, such securities are held hereunder, and (b) bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent, and, with respect to (a) and (b) above, shall credit such income, on the designated settlement date, as predetermined income, to such Portfolios custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the applicable Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled. The Fund, or its duly authorized
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investment manager, shall instruct the Custodian regarding all Fund or investment manager determinations that a portfolio security has been deemed worthless by such Fund.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian pursuant to Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the applicable Fund on behalf of a Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodians account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian, or another bank, or a broker-dealer which is a member of NASD along with written evidence of the agreement by the Custodian, or another bank, or a broker-dealer which is a member of NASD to repurchase such securities from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund;
2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in Section 6 hereof;
4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, audit, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
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5) For the payment of any dividends on Shares declared pursuant to the Funds articles of incorporation or organization and by-laws or agreement or declaration of trust, as applicable, and Prospectus (collectively, Governing Documents);
6) For payment of the amount of dividends received in respect of securities sold short;
7) Upon the purchase of domestic investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred to herein as a Free Trade), provided that such Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made;
8) For payment as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and
9) For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the Portfolio specifying (a) the amount of such payment and (b) the person or persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) one or more of its wholly-owned subsidiaries which is a bank or trust company and which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. No Underlying Transfer Agent acting as such shall be deemed an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System in compliance with the conditions of Rule 17f-4 under the 1940 Act, as amended from time to time.
SECTION 2.9 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio, establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of
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any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (b) for purposes of segregating cash or government securities in connection with swap arrangements of the Portfolio, options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (c) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the SEC), or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered investment companies, and (d) for any other purpose in accordance with Proper Instructions.
SECTION 2.10 DEPOSIT OF FUND ASSETS WITH THE UNDERLYING TRANSFER AGENT. Underlying Shares beneficially owned by the Fund, on behalf of a Portfolio, shall be deposited and/or maintained in an account or accounts maintained with an Underlying Transfer Agent and the Custodians only responsibilities with respect thereto shall be limited to the following:
1) Upon receipt of a confirmation or statement from an Underlying Transfer Agent (copies of which the Custodian will maintain as may be required by Section 11 of this Agreement) that such Underlying Transfer Agent is holding or maintaining Underlying Shares in the name of the Custodian (or a nominee of the Custodian) for the benefit of a Portfolio, the Custodian shall identify by book-entry that such Underlying Shares are being held by it as custodian for the benefit of the Portfolio.
2) In respect of the purchase of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall pay out monies of such Portfolio as so directed, and record such payment from the account of such Portfolio on the Custodians books and records.
3) In respect of the sale or redemption of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall transfer such Underlying Shares as so directed, record such transfer from the account of such Portfolio on the Custodians books and records and, upon the Custodians receipt of the proceeds therefor, record such payment for the account of such Portfolio on the Custodians books and records.
The Custodian shall not be liable to the Fund for any loss or damage to the Fund or any Portfolio resulting from the maintenance of Underlying Shares with an Underlying Transfer Agent except for losses to the extent resulting from (i) the fraud, negligence, or willful misconduct of the Custodian or any of its agents or of any of its or their employees, (ii) violation of law applicable to the Custodian in its capacity as a custodian and that affects the Custodians performance of the Services hereunder, or (iii) material breach of this Agreement by the Custodian (provided, however, that the Custodian shall have the opportunity to cure, within thirty (30) days of its receipt of written notice from the Fund, solely those breaches capable of cure without material adverse impact to the Fund, provided, in each such instance where the Custodian is aware of an event related to such notice, the Custodian had previously informed the Fund promptly of such
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event; any such communication from the Custodian to the Fund shall not be used as or considered as an admission of fault and will be provided solely as an accommodation to the Fund).
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities.
SECTION 2.12 PROXIES. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased and not held pursuant to Section 2.6(7), the Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund or its duly authorized agent all proxies, all proxy soliciting materials and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased and not held pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the applicable Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Fund on behalf of the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to voluntary corporate actions such as tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund all written information received by the Custodian from issuers of the securities whose tender or exchange or other action is sought and from the party (or its agents) making the tender or exchange offer or other action. The Custodian shall also transmit promptly to the applicable Fund for each Portfolio all written information received by the Custodian regarding any class action or other litigation in connection with Portfolio securities or other assets issued in the United States and then held, or previously held, during the term of this Agreement by the Custodian for the account of the Fund for such Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with domestic securities or other property of the Portfolios at any time held by it unless (i) the Custodian is in actual possession of such domestic securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur prior to such deadline established by the Custodian in its reasonable discretion as will give the Custodian sufficient time to take such action, which deadline shall in no event be longer than three (3) business days. The Custodian shall inform the Fund of pertinent deadlines in each case. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the Custodian shall have no responsibility to so transmit any information under this Section 2.13.
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SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 3.1. DEFINITIONS. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
Country Risk means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such countrys political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
Eligible Foreign Custodian has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.
Eligible Securities Depository has the meaning set forth in section (b)(1) of Rule 17f-7.
Foreign Assets means any of the Portfolios investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios transactions in such investments.
Foreign Custody Manager has the meaning set forth in section (a)(3) of Rule 17f-5.
Rule 17f-5 means Rule 17f-5 promulgated under the 1940 Act.
Rule 17f-7 means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. Each Fund, by resolution adopted by its Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios.
3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
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Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by each Fund, on behalf of the applicable Portfolio(s), of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Funds Board on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction authorizing the Foreign Custody Manager to open an account, or to place or maintain Foreign Assets, with the Eligible Foreign Custodians identified in each country as listed on Schedule A, as required by each Portfolio from time to time. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager with respect to such Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodians acceptance of delegation is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager for each appropriate country as is listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the relevant market in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
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(c) MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) performance of the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall reasonably promptly notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3.2, the Board, or at the Boards delegation, a Funds investment adviser, shall be deemed to have considered and determined to accept, on behalf of the Fund, such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios.
3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of each calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 reasonably promptly after the occurrence of the material change.
3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign Custody Manager represents to each Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. Each Boards delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisio ns of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
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SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES.
3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS TO BE HELD OUTSIDE THE UNITED STATES
SECTION 4.1 DEFINITIONS. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
Foreign Securities System means an Eligible Securities Depository listed on Schedule B hereto.
Foreign Sub-Custodian means a foreign banking institution serving as an Eligible Foreign Custodian.
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions,
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which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) Upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii) In connection with any repurchase agreement related to foreign securities;
(iii) To the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;
(iv) To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v) To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vi) To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Foreign Sub-Custodians own negligence or willful misconduct;
(vii) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
(viii) In the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;
(ix) For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
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(x) In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(xi) Upon the sale or other delivery of such foreign securities (including, without limitation, to one or more Special Sub-Custodians or Repo Custodians) as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and (B) the person or persons to whom delivery shall be made;
(xii) In connection with the lending of foreign securities; and
(xiii) For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to whom delivery of such securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
(i) Upon the purchase of foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;
(ii) In connection with the conversion, exchange or surrender of foreign securities of the Portfolio;
(iii) For the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, audit or accounting fees, and other operating expenses;
(iv) For the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;
(v) In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
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(vi) Upon the purchase of foreign investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made;
(vii) For payment of part or all of the dividends received in respect of securities sold short;
(viii) In connection with the borrowing or lending of foreign securities; and
(ix) For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such payment is to be made.
4.4.3. MARKET CUSTOMS. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to each Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board being provided with substantively less information than had been previously provided hereunder.
SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered by the Custodian or the Foreign Sub-Custodian in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the applicable Fund on behalf of a Portfolio cash (including cash denominated in foreign currencies) deposited with the Custodian. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts. Where the Custodian is unable to maintain, or market practice does not readily allow the
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maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of the Portfolio with a Foreign Sub-Custodian. All accounts referred to in this section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio.
SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued, which facilitation efforts may include endeavoring to (a) cause to be executed by the registered holder of such foreign securities (if such securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio), all proxies, without indication of the manner in which such proxies are to be voted, and (b) deliver to the Fund or its agents all proxy soliciting materials and all notices relating to such securities. Each Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of such Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the applicable Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to voluntary corporate actions such as tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange or other action is sought or from the party (or its agents) making the tender or exchange offer or other action. The Custodian shall also transmit promptly to the applicable Fund all written information received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios regarding any class action or other litigation in connection with Portfolio foreign securities or other assets issued outside the United States and then held, or previously held, during the term of this Agreement by the Custodian via a Foreign Sub-Custodian for the account of the Fund for such Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise
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of any such right or power, and both (i) and (ii) occur prior to such deadline established by the Custodian in its reasonable discretion as will give the Custodian (including any Foreign Sub-Custodian) sufficient time to take such action, which deadline shall in no event be longer than three (3) business days. The Custodian shall inform the Fund of pertinent deadlines in each case. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the Custodian shall have no responsibility to so transmit any information under this Section 4.9.
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodians performance of such obligations. At a Funds election, its Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub- Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on any Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed on such Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibilities of the Custodian with regard to such tax law shall be t o use reasonable efforts to effect the withholding of local taxes and related charges with regard to market entitlement/payment in accordance with local law and subject to local market practice or custom and to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which such Fund has provided such information. Except as specifically provided in this Agreement or otherwise agreed to in writing by the Custodian, the Custodian shall have no independent obligation to determine the tax obligations now or hereafter imposed on any of the Funds by any taxing authority or to obtain or provide information relating thereto, and shall have no obligation or liability with respect to such tax obligations, it being specifically understood and agreed that the Custodian shall not thereby or otherwise be considered any Funds tax advisor or tax counsel.
SECTION 5. SPECIAL SUB-CUSTODIANS
Upon receipt of Special Instructions (as such term is defined in Section 7 hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a sub-custodian for the purposes of effecting such transaction(s) as may be designated by a Fund in Special Instructions. Each such designated sub-custodian is referred to herein as a Special Sub-Custodian. Each such duly appointed Special
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Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time to time by a Fund, with the acknowledgment of the Custodian. In connection with the appointment of any Special Sub-Custodian, and in accordance with Special Instructions, the Custodian shall enter into a sub-custodian agreement with the Fund and the Special Sub-Custodian in form and substance approved by such Fund, provided that such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.
SECTION 6. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by a Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between such Fund and the Custodian.
SECTION 6A. INVESTMENT ADMINISTRATION SERVICES
Custodian shall provide Investment Administration Services to the Funds pursuant to the terms and conditions of the attached Investment Administration Services Addendum.
SECTION 7. PROPER INSTRUCTIONS AND SPECIAL INSTRUCTIONS
Proper Instructions, which may be standing instructions, shall mean instructions received by the Custodian from a Fund or a person or entity duly authorized by the Fund. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or in a communication utilizing access codes effected between electro-mechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be agreed from time to time by the Custodian and the person(s) or entity giving such instruction, provided that such person(s) or entity has followed any security procedures agreed to from time to time by the applicable Fund and the Custodian including, but not limited to, the security procedures selected by the Fund via the form of Funds Transfer Addendum hereto. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person
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authorized to provide such instructions with respect to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this section, Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.
Special Instructions, as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer of the applicable Fund or any other person designated in writing by the Treasurer of such Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper Instructions or on a separate instrument clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing.
Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified by such Funds Treasurer or Assistant Treasurer, a certificate setting forth: (i) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of notice to the contrary.
SECTION 8. EVIDENCE OF AUTHORITY
Subject to Section 15, the Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the applicable Fund. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the applicable Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
SECTION 9. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:
1) Make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement; provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio;
2) Surrender securities in temporary form for securities in definitive form;
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3) Endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
4) In general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the applicable Board.
SECTION 10. REPRESENTATIONS AND WARRANTIES
(1) The Custodian represents and warrants to each Fund that:
a. It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts and is qualified to conduct its business in every jurisdiction where its business is conducted except where the failure to be so qualified would not have a material adverse affect on the Custodian.
b. It has the power and authority to carry on its business in The Commonwealth of Massachusetts and to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or threatened which would materially impair the Custodians ability to perform its duties and obligations under this Agreement;
e. This Agreement constitutes its legal, valid, binding and enforceable agreement; and
f. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Custodian or any law or regulation applicable to it.
(2) Each Fund represents and warrants to the Custodian that:
a. It is duly organized, validly existing and in good standing in its state of organization as specified on Appendix A, and is qualified to conduct its business in every jurisdiction where its business is conducted except where the failure to be so qualified would not have a material adverse affect on the Fund;
b. It has the power and authority under applicable laws and its Governing Documents to enter into and perform this Agreement;
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c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or threatened which would materially impair the Funds ability to perform its duties and obligations under this Agreement;
e. This Agreement constitutes its legal, valid, binding and enforceable agreement; and
f. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it.
SECTION 11. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of each Fund under the 1940 Act, with particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of such Fund and employees and agents of the SEC. The Custodian shall, at a Funds request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. Each Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to Portfo
lio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Funds counterparty(ies), or the agents of either of them. In addition to the foregoing, the Custodian shall provide storage for, during the term of this Agreement, historical records delivered to it by any prior custodian of the Funds and consult with the Funds in any event of the Custodians inability to do so; provided, that the parties hereby agree that the Custodian shall have no responsibility for the condition, accuracy, integrity, searchability, reconciliation or contents of such historical records.
SECTION 12. OPINION OF FUNDS INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as a Fund with respect to a Portfolio may from time to time request, to obtain from year to year favorable opinions from the Funds independent accountants with respect to its activities hereunder in connection with the preparation of the Funds Form N-1A or Form N-2, as applicable, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.
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SECTION 13. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide each Fund, on behalf of each of its Portfolios, at such times as such Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (either, a Securities System), relating to the services provided by the Custodian under this Agreement; such reports shall be of sufficient scope and in sufficient detail as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
SECTION 14. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time in writing between each Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 15. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it in good faith without negligence, bad faith, willful misconduct, violation of law applicable to the Custodian in its capacity as a custodian and that affects the Custodians performance of the Services hereunder, or material breach of this Agreement (provided, however, that the Custodian shall have the opportunity to cure, within thirty (30) days of its receipt of written notice from the Fund, solely those breaches capable of cure without material adverse impact to the Fund, provided, in each such instance where the Custodian is aware of an event related to such notice, the Custodian had previously informed the Fund promptly of such event; any such communication from the Custodian to the Fund shall not be used as or considered as an admission of fault and will be provided solely as an accommodation to the Fund), including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to any Fund or Portfolio for any loss, liability, claim or expense to the extent resulting from or caused by anything which is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism.
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Except as may arise from the Custodians own negligence, bad faith, willful misconduct, violation of law applicable to the Custodian in its capacity as a custodian that affects the Custodians performance of the Services hereunder, or material breach of this Agreement (provided, however, that the Custodian shall have the opportunity to cure, within thirty (30) days of its receipt of written notice from the Fund, solely those breaches capable of cure without material adverse impact to the Fund, provided, in each such instance where the Custodian is aware of an event related to such notice, the Custodian had previously informed the Fund promptly of such event; any such communication from the Custodian to the Fund shall not be used as or considered as an admission of fault and will be provided solely as an accommodation to the Fund), or the negligence, bad faith or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense to the extent resulting from or caused by: (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by any Fund or its duly authorized investment manager or investment adviser in its instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any act or omission of a Special Sub-Custodian including, without limitation, reliance on reports prepared by a Special Sub-Custodian ; (v) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodians sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, any Fund, the Custodians sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; (viii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction; and (ix) the Custodian acting in accordance with any Proper Instruction with respect to Free Trade.
In the event of equipment failure, work stoppage, governmental action, communication disruption or other impossibility of performance beyond the Custodians control, the Custodian shall take reasonable steps to minimize service interruptions. The Custodian shall enter into and shall maintain in effect, at all times during the term of this Agreement, with appropriate parties one or more agreements making reasonable provision for (i) periodic back-up of the computer files and data with respect to the Funds; and (ii) emergency use of electronic data processing equipment to provide services under this Agreement.
The Custodian shall have no more or less responsibility or liability to any Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian (as
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such term is defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally in this Agreement and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim to the extent resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care. With respect to foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) which are registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing in accordance with Section 4.5 of this Agreement, the applicable Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities.
If a Fund on behalf of a Portfolio requires the Custodian to take any action not otherwise addressed in this Agreement with respect to securities, which action involves the payment of money or which action may, in the reasonable opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, such Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
In the event a Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, predetermined income, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominees own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolios assets to the extent necessary to obtain reimbursement. To the extent not inconsistent with market rules or practice, the Custodian shall first utilize available cash and thereafter such Portfolios other assets, it being specifically understood that any failure of the Custodian to so utilize or dispose shall in no way affect either the validity or priority of the Custodians security interest in such cash or assets. Further, and only to the extent practicable, the Custodian shall provide notice to the Fund prior to commencing such utilization or disposal, and, if such prior notice is not practicable, the Custodian shall provide notice to the Fund as soon as practicable thereafter, it being specifically understood that any failure of the Custodian to provide any such notice shall in no way affect the Custodians rights or remedies under this paragraph or applicable law.
In no event shall any party hereto be liable for indirect, special or consequential damages.
SECTION 16. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
(a) This Agreement shall become effective as of its execution and shall continue in full force and effect for an initial term of four (4) years from the date hereof, and shall automatically
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renew for additional consecutive three (3) year terms, unless either party gives one hundred eighty (180) days prior written notice to the other of its intent not to renew. If this Agreement is terminated (the effective date of such termination being referred to as the Termination Date), the Custodian shall, at the reasonable request of the Funds, and subject to the consent of the Custodian (which consent shall not be unreasonably withheld or delayed), continue to provide services hereunder for a period (the Extension Period) not to exceed ninety (90) days from the Termination Date, and the compensation payable to the Custodian for its services and expenses during such Extension Period shall not exceed one hundred and five percent (105%) (per annum) of the compensation last agreed upon by each Fund and the Custodian and in effect immediately prior to the Termination Date.
(b) In the event that the Agreement is terminated by any Fund with respect to a Portfolio (the Terminating Fund), other than for cause, with respect to such Terminating Fund prior to the four (4) year anniversary of the date hereof (the Anniversary Date), and the Custodian has not terminated either this Agreement with respect to such Terminating Fund or any agreement pursuant to which the Custodian provides fund accounting services relative to such Terminating Fund, the Terminating Fund shall pay to the Custodian, in lieu of any other fees, expenses, termination penalties, damages or other amounts (except as identified in paragraph (c) below), an early termination fee equal to the present value, using a discount rate of seven percent (7%), compounded annually, of the remaining fees which would have been due by the Terminating Fund to the Custodian for the period from the Termination Date until the Anniversary Date if the Agreement had not been terminated (the Remaining Fees) which Remaining Fees shall be determined using the average monthly compensation for its services (prior to the application of any earnings credits) earned by the Custodian hereunder with respect to such Terminating Fund during the 12-month period (or if shorter, such lesser period of time) preceding such Termination Date (the Early Termination Fee).
For the avoidance of doubt, no Terminating Fund will be required to make any such Early Termination Fee payment (other than as set forth in paragraph (e) below) if this Agreement is terminated on or after the Anniversary Date or by the Terminating Funds for cause at any time.
(c) Notwithstanding the provisions of paragraph (b) above, no Early Termination Fee shall be payable in the event (each, a Liquidation, Merger or Consolidation Event) that a Fund or Portfolio is
(i) liquidated; or
(ii) merged into or consolidated with another Fund or Portfolio with respect to which the Custodian provides Services pursuant to this Agreement; or
(iii) merged into or consolidated with another investment company or series of an investment company (each series representing interests in a separate portfolio of securities and other assets) with respect to which the Custodian provides custody services,
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provided, that in each case of (i) and (ii) above, the aggregate amount of fees for custody services provided by the Custodian with respect to all Funds and Portfolios covered by this Agreement immediately after, and taking into consideration the effect of, such Liquidation, Merger or Consolidation Event (the Projected Fees) shall be equal to or greater than the aggregate amount of fees for custody services provided by the Custodian pursuant to this Agreement, measured as of the date of this Agreement (the Existing Fees);
and further provided, that in each case of (iii) above, (A) the Projected Fees plus (B) the Incremental Fees (as defined below) shall be equal to or greater than the Existing Fees.
For purposes of this Section 16(c), the Projected Fees shall equal the custody fees, with respect to such Funds and Portfolios subject to this Agreement immediately after such Liquidation, Merger or Consolidation Event, projected to be earned by the Custodian on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity.
For purposes of this Section 16(c), the Existing Fees shall equal the custody fees, with respect to such Funds and Portfolios on the date of this Agreement, projected to be earned by the Custodian on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity.
For purposes of this Section 16(c), the Other Contract shall mean a contractual arrangement pursuant to which the Custodian provides custody services that may not be terminated earlier than the Anniversary Date and whose fee schedule is fixed until the Anniversary Date.
For purposes of this Section 16(c), the Incremental Fees shall mean (A) the custody fees with respect to custody services under the Other Contract that are projected to be earned by the Custodian on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity, immediately after such Liquidation, Merger or Consolidation Event, less (B) the custody fees with respect to custody services under the Other Contract that were projected to have been earned by the Custodian on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity, immediately prior to such Liquidation, Merger or Consolidation Event.
(d) Upon any termination of this Agreement pursuant to paragraph (b) above and receipt of a final bill from the Custodian, the Terminating Fund shall pay to the Custodian all accrued and unpaid fees and expenses, whether the same have been billed or remain unbilled prior to delivery of such final bill, and shall reimburse the Custodian for any reasonable de-conversion costs associated with such termination.
(e) Notwithstanding any term herein to the contrary, termination of this Agreement with respect to a Terminating Fund shall in no way affect the rights and duties under this Agreement with respect to any other Fund or Portfolio.
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(f) In the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction, any Fund on behalf of one or more of the Portfolios may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement without penalty.
(g) This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.
SECTION 17. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon notice of such appointment and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, as may be applicable, all securities, funds and other properties of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System or at the Underlying Transfer Agent.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance therewith.
In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a bank as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of any Fund to provide Proper Instructions as aforesaid, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.
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SECTION 18. OVERSIGHT; AUDIT RIGHTS; ADDITIONAL SUB-CERTIFICATIONS AND REPORTS
SECTION 18.1 OVERSIGHT. The Custodian acknowledges that the Funds have informed the Custodian of their intent to engage Putnam Fiduciary Trust Company, a Massachusetts trust company (PFTC), or one of PFTCs affiliates to perform custody oversight services on behalf of the Funds. Upon notice and instruction from the Funds that they have engaged PFTC or its affiliate regarding such custody oversight services, the Custodian shall, at the expense of the Funds, reasonably cooperate with such entity to provide such information regarding the Funds and such information regarding the Custodians performance of the services contemplated by this Agreement (the Services) to such entity as it may reasonably request from time to time.
SECTION 18.2 AUDIT RIGHTS.
(a) To the extent required by applicable law, rule or regulation and upon request of a Fund (which shall include reasonable advance notice), the Custodian shall allow such Funds regulators or supervisory authorities to perform periodic on-site audits as may be reasonably required to examine the Custodians performance of the Services. Notwithstanding the foregoing, prior to the performance of any audits of the Custodians performance of the Services, the Fund will request that such regulator or supervisory authority to the extent possible shall coordinate such audit through the Custodians primary regulator, the United States Federal Reserve Bank of Boston.
(b) Upon request of a Fund (which shall include reasonable advance notice), the Custodian shall allow such Fund and its duly-authorized agents, auditors (including internal audit staff and external auditors), and compliance personnel to perform periodic on-site audits as may be reasonably required to examine the Custodians performance of the Services.
(c) Notwithstanding the audit and inspection rights conferred by the foregoing subsection, the Custodian reserves the right to impose reasonable limitations on the number, frequency, timing and scope of audits and inspections requested by the Funds so as to prevent or minimize any potential impairment or disruption of its operations, distraction of its personnel or breaches of security or confidentiality; provided, however, that the Custodian may not limit the number, frequency or timing of audits and inspections by regulatory bodies with supervisory authority over a Fund or by a Fund resulting from a regulatory problem at the Custodian and affecting the Custodians ability to provide the Services hereunder or any material weakness or significant deficiency in the Custodians internal controls. In addition, the Custodian shall be entitled to impose a commercially reasonable per person hourly charge for the cooperation and assistance of its personnel in connection with any audit in excess of one (1) in any twelve (12) month period; provided, however, that no such charge may be imposed in connection with any audit or inspection by any regulatory body with supervisory authority over a Fund or by a Fund resulting from a regulatory problem at the Custodian and affecting the Custodians ability to provide the Services hereunder or any material weakness or significant deficiency in the Custodians internal controls. Nothing contained in this section shall obligate the Custodian to provide access to or otherwise disclose: (i) any information that is unrelated to the relevant Fund and the provision of the Services to such Fund; (ii) any information which is treated as confidential under the Custodians corporate
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policies, including, without limitation, internal audit reports, compliance or risk management plans or reports, work papers and other reports and information relating to management functions; or (iii) any other documents, reports or other information that the Custodian is obligated to maintain in confidence as a matter of law or regulation. In addition, any access provided hereunder to technology shall be limited to a demonstration by the Custodian of the functionality thereof and a reasonable opportunity to communicate with the Custodian personnel regarding such technology.
SECTION18.3 ADDITIONAL SUB-CERTIFICATIONS AND REPORTS
The Custodian shall provide to the Funds: (a) sub-certifications in connection with Sarbanes-Oxley Act of 2002 certification requirements; and (b) periodic reports and reasonable documentation for delivery to the Funds Chief Compliance Officer in connection with Rule 38a-1 under the 1940 Act with respect to the Services and the Custodians compliance with its operating policies and procedures related thereto.
SECTION 19. INCLUDED SERVICE ENHANCEMENTS.
If, in the ordinary course of its business, the Custodian enhances core system processing functionality that it uses in connection with the Services, the Custodian shall use such enhanced core system processing enhancements in performing the Services hereunder, at no additional charge to the Funds, as soon as the Custodian reasonably determines that such use is appropriate. To the extent the Custodian reasonably determines that such enhanced core system processing enhancements are relevant to the Funds receipt of the Services, the Custodian shall inform the Funds of such core system processing enhancements.
SECTION 20. CONFIDENTIALITY.
The parties hereto agree that each shall treat as confidential all information provided by a party (the Disclosing Party) to the other party (the Recipient) or to which the Recipient obtains access and that relates to the Disclosing Party, including information regarding its business, financial affairs, operations or otherwise, including without limitation, securities holdings and trading information of a Portfolio or Fund (Confidential Information). In maintaining the confidentiality of the Confidential Information of a Disclosing Party, each Recipient shall exercise the same degree of care that such person exercises with respect to its own Confidential Information of a similar nature, including the use of customary data protection procedures, and in no event less than a reasonable degree of care. All Confidential Information of a Disclosing Party shall be used by a Recipient solely for the purpose of rendering or receiving services pursuant to this Agreement and shall not be disclosed to any party other than such Recipients (i) employees and contractors who have a need-to-know for purposes of performing such Recipients obligations under this Agreement, provided, that, such persons and entities are bound by confidentiality provisions at least as stringent as those contained herein, (ii) regulators or examiners, and (iii) auditors and legal counsel, to the extent required in connection with services provided by such parties to Recipient.
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The Recipient shall notify the Disclosing Party of any unauthorized use or disclosure of Confidential Information of the Disclosing Party of which the Recipient becomes aware. The parties agree that disclosure of Confidential Information of a Disclosing Party may give rise to an irreparable injury to such Disclosing Party inadequately compensable in damages. Accordingly, the Disclosing Party may seek (without the posting of any bond or other security) injunctive relief against the breach of the foregoing undertaking of confidentiality and nondisclosure, in addition to any other legal remedies which may be available.
The foregoing obligations of confidentiality and non-disclosure shall not be applicable to any information that the Recipient demonstrates (i) is publicly available when provided or thereafter becomes publicly available, other than through disclosure by the Recipient or any of its affiliates, or that is independently derived by the Recipient without the use of any information provided by the Disclosing Party, (ii) that is required in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of law or regulation (collectively, Legal Process), or (iii) where the Recipient has received the prior written consent of the Disclosing Party. In the event that a Recipient is requested by or pursuant to, or required by, Legal Process to disclose any Confidential Information of any other party to this Agreement, such Recipient will, to the extent not legally prohibited, provide the applicable Disclosing Party with prompt notice of such Legal Process in order to enable the Disclosing Party, at its own expense, to seek an appropriate protective order or other remedy (and, if the Disclosing Party seeks such order, the Recipient will provide such cooperation as the Disclosing Party shall reasonably request at the Disclosing Partys expense) to resist or narrow the scope of such request or legal process, or waive compliance, in whole or in part, with the terms of this Section 20. In the event that such protective order or other remedy is not obtained or the Disclosing Party waives such compliance, only that portion of the Confidential Information may be disclosed as the Recipient, as advised by counsel, is legally required to disclose and the Recipient will request that all such Confidential Information so disclosed will be accorded confidential treatment. Confidential Information disclosed in combination with other information that is not Confidential Information is not deemed to fall within one of the foregoing exceptions by reason of such combination.
Furthermore, and notwithstanding anything in this section to the contrary, the Custodian may aggregate Fund or Portfolio data with similar data of other customers of the Custodian (Aggregated Data) and may use Aggregated Data for purposes of constructing statistical models so long as such Aggregated Data represents a sufficiently large sample that no Fund or Portfolio data can be identified either directly or by inference or implication.
All of the undertakings and obligations relating to confidentiality and nondisclosure, whether contained in this Section or elsewhere in this Agreement or any schedule or exhibit hereto shall survive the termination or expiration of this Agreement for a period of three (3) years.
31.
SECTION 21. GENERAL
SECTION 21.1 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 21.2 PRIOR AGREEMENTS. This Agreement supersedes and terminates, as of the date hereof, any prior Agreements between each Fund on behalf of each of the Portfolios and the Custodian relating to the custody of such Funds assets.
SECTION 21.3 ASSIGNMENT. This Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of each applicable Fund.
SECTION 21.4 INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of this Agreement, the Custodian and each Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of a Funds Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 21.5 ADDITIONAL FUNDS. In the event that any management investment company advised by Putnam Investment Management, LLC or an affiliate thereof, in addition to those listed on Appendix A hereto desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such management investment company shall become a Fund hereunder and the Custodian and the Fund shall be bound by all terms and conditions and provisions hereof.
SECTION 21.6 ADDITIONAL PORTFOLIOS. In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A hereto with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder and the Custodian and the Fund shall be bound by all terms and conditions and provisions hereof with respect to such Portfolio.
SECTION 21.7 THE PARTIES. All references herein to the Fund are to each of the management investment companies listed on Appendix A hereto, and each management investment company made subject to this Agreement in accordance with Section 21.5 above, individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series corporation, trust or other entity, all references herein to the Portfolio are to the individual series or portfolio of such corporation, trust or other entity, or to such corporation, trust or other entity on
32.
behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to the parties shall mean the Custodian and such other individual Fund as to which the matter pertains.
A copy of the Declaration of Trust of each Fund is on file with the Secretary of The Commonwealth of The Commonwealth of Massachusetts. Notice is hereby given, and it is expressly agreed that the obligations under this Agreement of any such Fund shall not be binding upon any of the trustees, shareholders, nominees, officers, agents or employees of such Fund personally, but bind only the trust property of such Fund. In the case of each Fund, the execution and delivery of this Agreement on its behalf has been authorized by its trustees, and signed by an authorized officer, in each case acting in such capacity and not individually, and neither such authorization by the trustees nor such execution and delivery shall be deemed to have been made by any of them individually, but shall only bind the trust property of each Fund.
SECTION 21.8 REMOTE ACCESS SERVICES ADDENDUM. The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.
SECTION 21.9 NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail, overnight courier or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To any Fund: | c/o PUTNAM FIDUCIARY TRUST COMPANY |
1 Post Office Square | |
Boston, Massachusetts 02109 | |
Attention: Judd Symon, Senior Vice President | |
Telephone: 617-760-5181 | |
Telecopy: 617-760-5140 | |
with a copy to: | ROPES & GRAY |
One International Place | |
Boston, MA 02110-2624 | |
Attention: John W. Gertsmayr | |
Telephone: 617-951-7393 | |
Telecopy: 617-235-0040 |
33.
To the Custodian: | STATE STREET BANK AND TRUST COMPANY |
Lafayette Corporate Center | |
2 Avenue de Lafayette | |
Boston, Massachusetts 02111 | |
Attention: Robert F. Dame, Senior Vice President, LCC/2S | |
Telephone: 617-662-4036 | |
Telecopy: 617-662-4040 |
Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of overnight courier, upon receipt, in the case of cable twenty-four hours after dispatch and, in the case of telex or telecopy, immediately on dispatch and if delivered by cable, telex or telecopy outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
SECTION 21.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.
SECTION 21.11 SEVERABILITY; WAIVER. If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. The failure of a party hereto to insist upon strict adherence to any term of this Agreement on any occasion or the failure of a party hereto to exercise or any delay in exercising any right or remedy under this Agreement shall not constitute a waiver of any such term, right or remedy or a waiver of any other rights or remedies and no single or partial exercise of any right or remedy under this Agreement shall prevent any further exercise of the right or remedy or the exercise of any other right or remedy.< /P>
SECTION 21.12 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 21.13 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs each Fund to indicate whether it authorizes the Custodian
34.
to provide such Funds name, address, and share position to requesting companies whose securities the Fund owns. If a Fund tells the Custodian no, the Custodian will not provide this information to requesting companies. If a Fund tells the Custodian yes or does not check either yes or no below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For a Funds protection, the Rule prohibits the requesting company from using the Funds name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.
YES | [ ] | The Custodian is authorized to release the Funds name, address, and share positions. |
NO | [X] | The Custodian is not authorized to release the Funds name, address, and share |
positions. |
35.
SIGNATURE PAGE
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the date first above-written.
FUND SIGNATURE ATTESTED TO BY: | EACH OF THE ENTITIES SET |
FORTH ON APPENDIX A HERETO | |
/s/ Robert T. Burns | /s/ Jonathan S. Horwitz |
By:_______________________ | By:____________________________ |
Robert T. Burns | Jonathan S. Horwitz |
Managing Director, | Senior Vice President and Treasurer |
Putnam Investments | |
SIGNATURE ATTESTED TO BY: | STATE STREET BANK AND TRUST |
COMPANY | |
/s/ Stephanie L. Poster | /s/ Joseph L. Hooley |
By:____________________ | By:________________________________ |
Stephanie L. Poster | Joseph L. Hooley |
Vice President and Senior Managing Counsel | Executive Vice President |
APPENDIX A
TO
MASTER CUSTODIAN AGREEMENT
Putnam U.S. Mutual Funds | |
001 | THE GEORGE PUTNAM FUND OF BOSTON |
002 | PUTNAM FUND FOR GROWTH & INCOME |
003 | PUTNAM INVESTORS FUND |
004 | PUTNAM INCOME FUND |
005 | PUTNAM GLOBAL EQUITY FUND |
006 | PUTNAM VISTA FUND |
007 | PUTNAM VOYAGER FUND |
008 | PUTNAM CONVERTIBLE INCOME-GROWTH |
010 | PUTNAM MONEY MARKET FUND |
011 | PUTNAM TAX EXEMPT INCOME FUND |
012 | PUTNAM EQUITY INCOME FUND |
014 | PUTNAM HIGH YIELD TRUST |
016 | PUTNAM VT GLOBAL EQUITY FUND |
018 | PUTNAM GLOBAL NATURAL RESOURCES |
019 | PUTNAM NEW JERSEY TAX EXEMPT INC |
021 | PUTNAM HEALTH SCIENCES TRUST |
024 | PUTNAM OTC & EMERGING GRWTH FUND |
027 | PUTNAM CALIFORNIA TAX EXEMPT |
030 | PUTNAM NEW YORK TAX EXEMPT |
032 | PUTNAM U.S. GOVT. INCOME TRUST |
033 | PUTNAM AMERICAN GOVT INCOME FUND |
035 | PUTNAM AMT-FREE INS MUNI FND |
036 | PUTNAM TAX FREE HIGH YIELD |
037 | PUTNAM FLORIDA TAX EXEMPT INCOME |
041 | PUTNAM GLOBAL INCOME TRUST |
047 | PUTNAM PENNSYLVANIA TAX EXEMPT |
052 | PUTNAM MANAGED MUNI INCOME TRUST |
054 | PUTNAM HIGH YIELD MUNICIPAL TR. |
057 | PUTNAM EUROPE EQUITY FUND |
058 | PUTNAM INVEST GRADE MUNI INC TR |
060 | PUTNAM HIGH YIELD ADVANTAGE FUND |
061 | PUTNAM HIGH INCOME SECURITIES FD |
062 | PUTNAM TAX EXEMPT MONEY MARKET |
065 | PUTNAM VT VOYAGER FUND |
066 | PUTNAM VT GROWTH & INCOME FUND |
067 | PUTNAM VT HIGH YIELD FUND |
068 | PUTNAM VT INCOME FUND |
069 | PUTNAM VT MONEY MARKET FUND |
070 | VT GLOBAL ASSET ALLOCATION FUND |
073 | PUTNAM PREMIER INCOME TRUST |
074 | PUTNAM MASTER INTERMEDIATE TRUST |
075 | PUTNAM DIVERSIFIED INCOME TRUST |
098 | PUTNAM VT NEW OPPORTUNITIES FUND |
152 | VT UTILITIES GROWTH & INCOME FD |
168 | PUTNAM TAX FREE HEALTH CARE |
183 | MUNICIPAL BOND FUND |
184 | PUTNAM CAL INVEST GRADE MUNI TR |
185 | PUTNAM NY INVEST GRADE MUNI TR |
250 | PUTNAM ASSET ALLOC GROWTH PORT |
259 | PUTNAM ASSET ALLOC BALANCED PORT |
264 | PUTNAM ASSET ALLOC CONSERVE PORT |
274 | PUTNAM NEW VALUE FUND |
377 | PUTNAM DISCOVERY GROWTH FUND |
398 | PUTNAM LTD DURATION GOVT INC FND |
433 | PUTNAM CAPITAL APPRECIATION |
539 | PUTNAM INTL NEW OPPORTUNITIES |
582 | PUTNAM MUNI OPPORTUNITIES TRUST |
829 | PUTNAM INV GRADE MUNI TR II PFD |
840 | PUTNAM UTILITIES GROWTH & INCOME |
841 | PUTNAM INTERNATIONAL EQUITY |
845 | PUTNAM MASS TAX EXEMPT |
846 | PUTNAM MICHIGAN TAX EXEMPT |
847 | PUTNAM MINNESOTA TAX EXEMPT |
848 | PUTNAM OHIO TAX EXEMPT |
852 | PUTNAM NEW OPPORTUNITIES FUND |
855 | PUTNAM ARIZONA TAX EXEMPT INCOME |
862 | PUTNAM MANAGED - PREFERRED |
868 | PUTNAM INVEST GRADE MUNI-PREFERD |
899 | PUTNAM CAL INV GRADE MUNI TR PFD |
913 | PUTNAM MUNI OPPORT TR -PREFER |
931 | PUTNAM HIGH YIELD MUNI-PREFERRED |
932 | PUTNAM NY INV GRADE MUNI TR PFD |
949 | THE CLASSIC EQUITY FUND |
961 | PUTNAM VT DIVERSIFIED INCOME FD |
23H | VT MID CAP VALUE |
23K | VT CAPITAL OPPORTUNITIES |
23N | PUTNAM VT EQUITY INCOME |
23T | PRIME MONEY MARKET FUND |
29X | FLOATING RATE INCOME FUND |
2AP | PUTNAM GROWTH OPPORTUNITIES FUND |
2AQ | PUTNAM RESEARCH FUND |
2AZ | PUTNAM INTERNATIONAL CAPITAL OPP |
2CE | PUTNAM INTERNATL GROWTH & INCOME |
2DN | VT INTERNATL GROWTH & INCOME FD |
2DO | VT INTERNATIONAL EQUITY |
2DP | VT INTERNATL NEW OPPORTUNITIES |
2DQ | PUTNAM VT VISTA FUND |
2DR | PUTNAM VT NEW VALUE |
2HF | PUTNAM SMALL CAP GROWTH |
2II | PUTNAM CAPITAL OPPORTUNITIES |
2IO | PUTNAM VT INVESTORS FUND |
2IP | PVT OTC & EMERG GROWTH FUND |
2IS | PUTNAM VT GEORGE PUTNAM FUND |
2IW | PUTNAM VT HEALTH SCIENCES FUND |
2LA | PUTNAM VT RESEARCH FUND |
2MF | PUTNAM SMALL CAP VALUE FUND |
2MI | PUTNAM TAX SMART EQUITY FUND |
2MJ | PUTNAM VT SMALL CAP VALUE FUND |
2OV | PUTNAM MID-CAP VALUE FUND |
2PU | PUTNAM VT GROWTH OPPS FUND |
2PX | PUTNAM VT AM GOVT INCOME FUND |
2TJ | VT DISCOVERY GROWTH |
2TP | PUTNAM VT CAPITAL APPRECIATIO |
2WX | EMERGING OPPORTUNITIES THLEE |
7BF | PUTNAM INCOME STRATEGIES FUND |
Putnam Retirement Ready Funds | |
40F | RETIREMENT READY 2040 |
40M | RETIREMENT READY 2045 |
48I | RETIREMENT READY 2010 |
48P | RETIREMENT READY MATURITY |
48W | RETIREMENT READY 2015 |
49D | RETIREMENT READY 2020 |
49K | RETIREMENT READY 2025 |
49R | RETIREMENT READY 2030 |
49Y | RETIREMENT READY 2035 |
7CR | RETIREMENT READY 2050 |
EXECUTION COPY
MASTER SUB-ACCOUNTING SERVICES AGREEMENT
This AGREEMENT is made as of January 1, 2007 by and between PUTNAM INVESTMENT MANAGEMENT, LLC, a Delaware limited liability company, having its principal place of business at 1 Post Office Square, Boston, Massachusetts 02109 (the Administrator), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Sub-Accounting Agent").
WITNESSETH:
WHEREAS, pursuant to various management or administration agreements (collectively, the Administration Agreement) by and between the Administrator and each management investment company party thereto (and each management investment company that becomes a party thereto), the Administrator has been retained to provide, and provides, certain fund accounting and recordkeeping services;
WHEREAS, the Administrator may contract, subcontract or otherwise arrange for the Sub-Accounting Agents provision of certain of the aforementioned services, including the fund accounting and recordkeeping services set forth below;
WHEREAS, the Administrator desires to retain the Sub-Accounting Agent to perform certain fund accounting and recordkeeping services with regard to each management investment company for which it provides fund accounting and recordkeeping services under the Administration Agreement, as more particularly identified on Appendix A hereto (each such management investment company and each management investment company made subject to this Agreement in accordance with Section 11.5 below shall hereinafter be referred to as a Fund and collectively as the Funds);
WHEREAS each Fund is authorized to issue common st , ock or shares of beneficial interest (Shares), and some Funds are authorized to issue Shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, as more particularly identified on Appendix A hereto (each such series and each series made subject to this Agreement in accordance with Section 11.6 below shall hereinafter be referred to as Portfolio with respect to that Fund, but for any Fund that does not have any separate series, then any reference to the Portfolio is a reference to that Fund; and
WHEREAS, the Sub-Accounting Agent is willing to perform such services upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
SECTION 1. DUTIES OF THE SUB-ACCOUNTING AGENT.
SECTION 1.1
BOOKS OF ACCOUNT.
The Sub-Accounting Agent shall maintain the books of account of each Portfolio and shall perform the duties described in Appendix B in the manner prescribed by such Portfolios currently effective prospectus, statement of additional information or other governing document, certified copies of which have been supplied to the Sub-Accounting Agent (a "governing document").
The Administrator shall provide timely prior notice to the Sub-Accounting Agent of any modification in the manner in which calculations are to be performed as prescribed in any revision to such Portfolios governing document and shall supply the Sub-Accounting Agent with certified copies of all amendments and/or supplements to the governing documents in a timely manner. For purposes of calculating the net asset value of a Portfolio, the Sub-Accounting Agent shall value each Portfolios portfolio securities utilizing prices obtained from sources designated by the Administrator (collectively, the Authorized Price Sources) on a price source authorization substantially in the form attached hereto as Exhibit A, as the same may be amended from time to time, or otherwise designated by means of Proper Instructions (as such term is defined in Section 2.2 below) (the Pr ice Source Authorization). The Sub-Accounting Agent shall not be responsible for any revisions to calculation methods unless such revisions are communicated in writing by the Administrator to the Sub-Accounting Agent.
SECTION 1.2
RECORDS.
The Sub-Accounting Agent shall create and maintain all records relating to its activities and obligations under this Agreement in such a manner as will meet the obligations of the Administrator with respect to each Fund under the Investment Company Act of 1940, as amended (the 1940 Act), specifically Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the applicable Fund and shall at all times during the regular business hours of the Sub-Accounting Agent be open for inspection by duly authorized officers, employees or agents of the applicable Fund and employees and agents of the Securities and Exchange Commission. Subject to Section 3 below, the Sub-Accounting Agent shall preserve for the period required by law the records required to be maintained thereunder.
The Administrator acknowledges that, in keeping the books of account of each Fund and/or making the calculations described herein with respect to Fund property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) of such Funds custodial services agreement with State Street Bank and Trust Company (the Custody Contract), if any, or pursuant to comparable provisions of other custodial services agreements applicable to the Fund, the Sub-Accounting Agent is authorized and instructed to rely upon information provided to it by such Fund, such Funds counterparty(ies), or the agents of either of them.
2.
SECTION 1.3
APPOINTMENT OF AGENTS.
The Sub-Accounting Agent may at its own expense employ one or more of its affiliates as agents in the performance of its duties and the exercise of its rights under this Agreement, provided that the employment of such agents shall not reduce the Sub-Accounting Agents obligations or liabilities hereunder.
SECTION 2. DUTIES OF THE ADMINISTRATOR.
SECTION 2.1
DELIVERY OF INFORMATION.
The Administrator shall provide, or shall cause a third party to provide, timely notice to the Sub-Accounting Agent of certain data as a condition to the Sub-Accounting Agent's performance described in Section 1 above. The data required to be provided pursuant to this section is set forth on Schedule A hereto, which schedule may be separately amended or supplemented by the parties from time to time.
The Sub-Accounting Agent is authorized and instructed to rely upon the information it receives from the Administrator or any third party designated by the Administrator to provide such information, including without limitation as set forth on Schedule A.
SECTION 2.2
PROPER INSTRUCTIONS.
The Administrator and any other person duly authorized by it shall communicate to the Sub-Accounting Agent by means of Proper Instructions. Proper Instructions shall mean (i) a writing signed or initialed by one or more persons as the Administrator shall have from time to time authorized in writing or (ii) communication effected directly between the Administrator or its third-party agents (each, a Third Party Agent) and the Sub-Accounting Agent by electro-mechanical or electronic devices, provided that the Administrator and the Sub-Accounting Agent agree to security procedures. The Sub-Accounting Agent may rely upon any Proper Instruction reasonably believed by it to be genuine and to have been properly issued by or on behalf of the Administrator. Oral instructions shall be considered Proper Instructions if the Sub-Accounting Agent reasonably believes them to have been given by a person authorized to give such instructions. The Administrator shall cause all oral instructions to be confirmed in accordance with clauses (i) or (ii) above, as appropriate. The Administrator shall give timely Proper Instructions to the Sub-Accounting Agent in regard to matters affecting accounting practices and the Sub-Accounting Agent's performance pursuant to this Agreement.
SECTION 3.
STANDARD OF CARE; LIMITATION OF LIABILITY.
The Sub-Accounting Agent shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to the Administrator for any action taken or omitted by it in good faith without negligence, bad faith, willful misconduct, violation of law applicable to the Sub-Accounting Agent in its capacity as a fund accounting agent and that affects the Sub-Accounting Agents performance of the Services hereunder, or material breach of this Agreement (provided, however, that the Sub-Accounting Agent shall have the opportunity to cure, within thirty (30)
3.
days of its receipt of written notice from the Administrator, solely those breaches capable of cure without material adverse impact to the Administrator, provided, in each such instance where the Sub-Accounting Agent is aware of an event related to such notice, the Sub-Accounting Agent had previously informed the Administrator promptly of such event; any such communication from the Sub-Accounting Agent to the Administrator shall not be used as or considered as an admission of fault and will be provided solely as an accommodation to the Administrator), including, without limitation, acting in accordance with any Proper Instruction. The Sub-Accounting Agent shall be entitled to rely on and may act upon the advice of counsel (who may be counsel for the Administrator or the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Without in any way limiting the generality of the foregoing, the Sub-Accounting Agent shall in no event be liable for any loss or damage to the extent arising from causes beyond its control including, without limitation, delay or cessation of services hereunder or any damages resulting therefrom as a result of work stoppage, power or other mechanical failure, natural disaster, governmental action, communication disruption or other impossibility of performance, or causes commonly referred to as Acts of God.
In the event of equipment failure, work stoppage, governmental action, communication disruption or other impossibility of performance beyond the Sub-Accounting Agents control, the Sub-Accounting Agent shall take reasonable steps to minimize service interruptions. The Sub-Accounting Agent shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for (i) periodic back-up of the computer files and data with respect to the Funds; and (ii) emergency use of electronic data processing equipment to provide services under this Agreement.
The Sub-Accounting Agent shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys fees) in any way due to the Administrators use of the accounting services or the performance of or failure to perform the Sub-Accounting Agents obligations under this Agreement. The Administrator shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys fees) in any way due to the performance of or failure to perform the Administrators obligations under this Agreement. The aforementioned disclaimer applies without limitation to claims regardless of the form of action, whether in contract, tort (including negligence), strict liability or otherwise, and regardless of whether such damages are foreseeable.
The Administrator, any Third Party Agent or any Authorized Price Source from which the Sub-Accounting Agent shall receive or obtain certain records, reports and other data utilized or included in the sub-accounting services provided hereunder is solely responsible for the contents of such information including, without limitation, the accuracy thereof and the Administrator agreesto make no claim against the Sub-Accoun ting Agent arising out of the contents of such third-party data including, but not limited to, the accuracy thereof. Except as otherwise required by the Price Source Authorization with respect to the use of data obtained from Authorized Price Sources, the Sub-Accounting Agent shall have no responsibility to review, confirm or otherwise assume any duty with respect to the accuracy or completeness of any such information and, it shall be without liability for any loss or damage suffered as a result of the Sub-Accounting Agents reliance on and utilization of such information. The Sub-Accounting
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Agent shall have no responsibility and shall be without liability for any loss or damage caused by the failure of the Administrator or any Third Party Agent to provide it with the information required by Section 2.1 above. Further, and without in any way limiting the generality of the foregoing, the Sub-Accounting Agent shall have no liability in respect of any loss, damage or expense suffered by the Administrator, any Fund or any third party, insofar as such loss, damage or expense arises from the performance of the Sub-Accounting Agents duties hereunder by reason of the Sub-Accounting Agents reliance upon records that were maintained for the Administrator or any Fund by any entity other than the Sub-Accounting Agent prior to the Administrators appointment of the Sub-Accounting Agent pursuant to this Agreement.
The Administrator agrees to indemnify and hold the Sub-Accounting Agent free and harmless from any expense, loss, damage or claim, including reasonable attorney's fees, suffered by the Sub-Accounting Agent and caused by or resulting from the acts or omissions of the Administrator or any third party whose services the Sub-Accounting Agent must rely upon in performing the services hereunder, except to the extent that any such expense, loss, damage or claim is caused by or results from the Sub-Accounting Agents own negligence, bad faith, willful misconduct, violation of law applicable to the Sub-Accounting Agent in its capacity as a fund accounting agent and that affects the Sub-Accounting Agents performance of the Services hereunder, or material breach of this Agreement (provided, however, that the Sub-Accounting Agent shall have the opportunity to cure, within thirty (30) days of its receipt of written notice from the Administrator, solely those breaches capable of cure without material adverse impact to the Administrator, provided, in each such instance where the Sub-Accounting Agent is aware of an event related to such notice, the Sub-Accounting Agent had previously informed the Administrator promptly of such event; any such communication from the Sub-Accounting Agent to the Administrator shall not be used as or considered as an admission of fault and will be provided solely as an accommodation to the Administrator).
The Administrator acknowledges and agrees that, with respect to investments any Portfolio maintains with an entity which may from time to time act as a transfer agent for uncertificated shares of registered investment companies (the Underlying Transfer Agent), such Underlying Transfer Agent is the sole source of information on the number of shares held by it on behalf of a Portfolio and that the Sub-Accounting Agent has the right to rely on holdings information furnished by the Underlying Transfer Agent to the Sub-Accounting Agent in performing its duties under this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
The Administrator represents and warrants to the Sub-Accounting Agent that:
(a) It is duly incorporated or organized, validly existing and in good standing in its jurisdiction of incorporation or organization and is qualified to conduct its business in every jurisdiction where its business is conducted except where the failure to be so qualified would not have a material adverse affect on the Administrator;
(b) The execution, delivery and performance of this Agreement, all documents and instruments to be delivered hereunder or thereunder and all transactions contemplated hereunder or thereunder have been duly authorized by all necessary action;
5.
(c) The person executing this Agreement on its behalf has been duly authorized to act on its behalf;
(d) This Agreement constitutes its legal, valid, binding and enforceable agreement;
(e) It has obtained all authorizations, approvals and consents of any governmental body required in connection with this Agreement and all transactions contemplated hereunder and such authorizations are in full force and effect; and
(f) The execution, delivery and performance of this Agreement and the transactions hereunder will not violate any agreement, law, ordinance, charter, by-law, rule or regulation applicable to it or to any Fund, or by which it or any Fund is bound or by which any of its or any Funds assets are affected. Further, the Administrator hereby acknowledges and agrees that it shall promptly notify the Sub-Accounting Agent of any statute, regulation, rule, or other regulatory requirement or policy governing the Administrator or the Funds, and any change thereto, which may affect the Sub-Accounting Agents responsibilities under this Agreement.
The Sub-Accounting Agent represents and warrants to the Administrator that:
(a) It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts and is qualified to conduct its business in every jurisdiction where its business is conducted except where the failure to be so qualified would not have a material adverse affect on the Sub-Accounting Agent;
(b) The execution, delivery and performance of this Agreement, all documents and instruments to be delivered hereunder or thereunder and all transactions contemplated hereunder or thereunder have been duly authorized by all necessary action;
(c) The person executing this Agreement on its behalf has been duly authorized to act on its behalf;
(d) This Agreement constitutes its legal, valid, binding and enforceable agreement;
(e) It has obtained all authorizations, approvals and consents of any governmental body required in connection with this Agreement and all transactions contemplated hereunder and such authorizations are in full force and effect; and
(f) The execution, delivery and performance of this Agreement and the transactions hereunder will not violate any agreement, law, ordinance, charter, by-law, rule or regulation applicable to it, or by which it is bound or by which any of its assets are affected. Further, the Sub-Accounting Agent hereby acknowledges and agrees that it shall promptly notify the Administrator of any statute, regulation, rule, or other regulatory requirement or policy governing the Sub-Accounting Agent, and any change thereto, which may affect the Administrators responsibilities under this Agreement.
6.
SECTION 5. COMPENSATION OF SUB-ACCOUNTING AGENT.
The Sub-Accounting Agent shall be entitled to reasonable compensation for its services and expenses as Sub-Accounting Agent, as agreed upon from time to time in writing between the Administrator and the Sub-Accounting Agent.
SECTION 6. TERM OF AGREEMENT.
(a) This Agreement shall become effective as of its execution and shall continue in full force and effect for an initial term of seven (7) years from the date hereof, and shall automatically renew for additional consecutive three (3) year terms, unless either party gives one hundred eighty (180) days prior written notice to the other of its intent not to renew. If this Agreement is terminated (the effective date of such termination being referred to as the Termination Date), the Sub-Accounting Agent shall, at the reasonable request of the Administrator, and subject to the consent of the Sub-Accounting Agent (which consent shall not be unreasonably withheld or delayed), continue to provide services hereunder for a period (the Extension Period) not to exceed ninety (90) days from the Termination Date, and the compensation payabl e to the Sub-Accounting Agent for its services and expenses during such Extension Period shall not exceed one hundred and five percent (105%) (per annum) of the compensation last agreed upon by the Administrator and the Sub-Accounting Agent and in effect immediately prior to the Termination Date.
(b) In the event that the Agreement is terminated by the Administrator, other than for cause, either in its entirety, with respect to any particular Fund, or with respect to its applicability to any particular Portfolio, as may be applicable, prior to the five (5) year anniversary of the date hereof (the Anniversary Date), and the Sub-Accounting Agent has not terminated either this Agreement or any agreement pursuant to which the Sub-Accounting Agent provides custody services to the Funds, either in its entirety, with respect to such particular Fund, or with respect to its applicability to such particular Portfolio, as applicable, the Administrator shall pay to the Sub-Accounting Agent, in lieu of any other fees, expenses, termination penalties, damages or other amounts (except as identified in paragraph (c) below), an early termination fee equal to the present value, using a discount rate of seven percen t (7%), compounded annually, of the remaining fees which would have been due by the Administrator to the Sub-Accounting Agent for Services provided to the Funds, to such particular Fund, or to such particular Portfolio, as applicable, for the period from the Termination Date until the Anniversary Date if the Agreement had not been terminated either in its entirety, with respect to such particular Fund, or with respect to its applicability to such particular Portfolio, as applicable (the Remaining Fees) which Remaining Fees shall be determined using the average monthly compensation for its services (prior to the application of any earnings credits) earned by the Sub-Accounting Agent hereunder with respect to all Funds, such particular Fund, or such particular Portfolio, as applicable, during the 12-month period (or if shorter, such lesser period of time) preceding such Termination Date (the Early Term ination Fee).
For the avoidance of doubt, the Administrator will not be required to make any such Early Termination Fee payment (other than as set forth in paragraph (e) below) if this Agreement is terminated on or after the Anniversary Date or by the Administrator for cause at any time.
7.
(c) Notwithstanding the provisions of paragraph (b) above, no Early Termination Fee shall be payable in the event (each, a Liquidation, Merger or Consolidation Event) that a Fund or Portfolio is
(i) liquidated; or
(ii) merged into or consolidated with another Fund or Portfolio with respect to which the Sub-Accounting Agent provides Services pursuant to this Agreement; or
(iii) merged into or consolidated with another investment company or series of an investment company (each series representing interests in a separate portfolio of securities and other assets) with respect to which the Sub-Accounting Agent provides fund accounting services (either as an accounting agent or sub-accounting agent),
provided, that in each case of (i) and (ii) above, the aggregate amount of fees for fund accounting services provided by the Sub-Accounting Agent with respect to all Funds and Portfolios covered by this Agreement immediately after, and taking into consideration the effect of, such Liquidation, Merger or Consolidation Event (the Projected Fees) shall be equal to or greater than the aggregate amount of fees for fund accounting services provided by the Sub-Accounting Agent pursuant to this Agreement, measured as of the date of this Agreement (the Existing Fees);
and further provided, that in each case of (iii) above, (A) the Projected Fees plus (B) the Incremental Fees (as defined below), shall be equal to or greater than the Existing Fees.
For purposes of this Section 6(c), the Projected Fees shall equal the fund accounting fees, with respect to such Funds and Portfolios subject to this Agreement immediately after such Liquidation, Merger or Consolidation Event, projected to be earned by the Sub-Accounting Agent on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity.
For purposes of this Section 6(c), the Existing Fees shall equal the fund accounting fees, with respect to such Funds and Portfolios on the date of this Agreement, projected to be earned by the Sub-Accounting Agent on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity.
For purposes of this Section 6(c), the Other Contract shall mean a contractual arrangement pursuant to which the Sub-Accounting Agent provides fund accounting services that may not be terminated earlier than the Anniversary Date and whose fee schedule is fixed until the Anniversary Date.
For purposes of this Section 6(c), the Incremental Fees shall mean (A) the fund accounting fees with respect to fund accounting services under the Other Contract that are projected to be earned by the Sub-Accounting Agent on an annualized basis for the ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity, immediately after such Liquidation, Merger or Consolidation Event, less (B) the fund accounting fees with respect to fund accounting services under the Other Contract that were projected to have been earned by the Sub-Accounting Agent on an annualized basis for the
8.
ensuing twelve-month period, with no adjustments for market fluctuations or subscription and redemption activity, immediately prior to such Liquidation, Merger or Consolidation Event.
(d) Upon any termination of this Agreement pursuant to paragraph (b) above, the Administrator shall pay to the Sub-Accounting Agent all accrued and unpaid fees and expenses, whether the same have been billed or remain unbilled, and shall reimburse Sub-Accounting Agent for any reasonable de-conversion costs associated with such termination.
(e) Notwithstanding any term herein to the contrary, termination of this Agreement with respect to the coverage of any one particular Fund or Portfolio shall in no way affect the rights and duties under this Agreement with respect to any other Fund or Portfolio.
(f) Notwithstanding any term herein to the contrary, this Agreement may, at the sole option of the Sub-Accounting Agent, be terminated (in its entirety, with respect to any particular Fund, or with respect to its applicability to any particular Portfolio, as may be applicable) without prior notice by the Sub-Accounting Agent in the event of (i) any termination by a Fund of its custodial services agreement with State Street Bank and Trust Company (in each such case, in such agreements entirety, with respect to any particular Fund, or with respect to its applicability to any particular Portfolio, as may be applicable) or (ii) any termination of the Administration Agreement or the termination or resignation of the Administrator under the Administration Agreement (in each such case, in such agreements entirety, with respect to any particular Fund, or with respect to its applicability to any particular Portfolio, as may be applicable). < /B>
SECTION 7. SUCCESSOR AGENT.
If a successor fund accounting agent with respect to any Fund, or Portfolio thereof, shall be appointed by the Administrator, the Sub-Accounting Agent shall upon termination deliver to such successor agent at the office of the Sub-Accounting Agent all records of such Fund or Portfolio thereof, as applicable, held by it hereunder. If no such successor agent shall be appointed, the Sub-Accounting Agent shall have the right at its office to deliver such records to the Administrator.
SECTION 8. AUDIT RIGHTS; REPORTS TO ADMINISTRATOR BY INDEPENDENT PUBLIC ACCOUNTANTS
SECTION 8.1
AUDIT RIGHTS.
(a) To the extent required by applicable law, rule or regulation and upon request of the Administrator (which shall include reasonable advance notice), the Sub-Accounting Agent shall allow the Administrators regulators or supervisory authorities to perform periodic on-site audits as may be reasonably required to examine the Sub-Accounting Agents performance of the services contemplated by this Agreement (the Services). Notwithstanding the foregoing, prior to the performance of any audits of the Sub-Accounting Agents performance of the Services, the Administrator will request that such regulator or supervisory authority to the extent possible shall coordinate such audit through the Sub-Accounting Agents primary regulator, the United States Federal Reserve Bank of Boston.
9.
(b) Upon request of the Administrator (which shall include reasonable advance notice), the Sub-Accounting Agent shall allow the Administrator and its auditors (including internal audit staff and external auditors) and compliance personnel to perform periodic on-site audits as may be reasonably required to examine the Sub-Accounting Agents performance of the Services.
(c) Notwithstanding the audit and inspection rights conferred by the foregoing subsection, the Sub-Accounting Agent reserves the right to impose reasonable limitations on the number, frequency, timing and scope of audits and inspections requested by the Administrator so as to prevent or minimize any potential impairment or disruption of its operations, distraction of its personnel or breaches of security or confidentiality; provided, however, that the Sub-Accounting Agent may not limit the number, frequency or timing of audits and inspections by regulatory bodies with supervisory authority over the Administrator or by the Administrator resulting from a regulatory problem at the Sub-Accounting Agent and affecting the Sub-Accounting Agents ability to provide the Services hereunder or any material weakness or significant deficiency in the Sub-Accounting Agents internal controls. In addition, the Sub-Accounting Agen t shall be entitled to impose a commercially reasonable per person hourly charge for the cooperation and assistance of its personnel in connection with any audit in excess of one (1) in any twelve (12) month period; provided, however, that no such charge may be imposed in connection with any audit or inspection by any regulatory body with supervisory authority over the Administrator or by the Administrator resulting from a regulatory problem at the Sub-Accounting Agent and affecting the Sub-Accounting Agents ability to provide the Services hereunder or any material weakness or significant deficiency in the Sub-Accounting Agents internal controls. Nothing contained in this section shall obligate the Sub-Accounting Agent to provide access to or otherwise disclose: (i) any information that is unrelated to the Administrator or the Funds and the provision of the Services to the Administrator; (ii) any information which is treated as confidential u nder the Sub-Accounting Agents corporate policies, including, without limitation, internal audit reports, compliance or risk management plans or reports, work papers and other reports and information relating to management functions; or (iii) any other documents, reports or other information that the Sub-Accounting Agent is obligated to maintain in confidence as a matter of law or regulation. In addition, any access provided hereunder to technology shall be limited to a demonstration by the Sub-Accounting Agent of the functionality thereof and a reasonable opportunity to communicate with the Sub-Accounting Agent personnel regarding such technology.
SECTION 8.2
REPORTS TO ADMINISTRATOR BY INDEPENDENT PUBLIC ACCOUNTANTS
The Sub-Accounting Agent shall provide the Administrator, at such times as the Administrator may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures relating to the services provided by the Sub-Accounting Agent under this Agreement; such reports shall be of sufficient scope and in sufficient detail as may reasonably be required by the Administrator to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
10.
SECTION 8.3
ADDITIONAL SUB-CERTIFICATIONS AND REPORTS
The Sub-Accounting Agent shall provide to the Administrator: (a) sub-certifications in connection with Sarbanes-Oxley Act of 2002 certification requirements; and (b) periodic reports and reasonable documentation for delivery to the Funds Chief Compliance Officer in connection with Rule 38a-1 under the 1940 Act with respect to the Services and the Sub-Accounting Agents compliance with its operating policies and procedures related thereto.
SECTION 9. INCLUDED SERVICE ENHANCEMENTS.
If, in the ordinary course of its business, the Sub-Accounting Agent enhances core system processing functionality that it uses in connection with the Services, the Sub-Accounting Agent shall use such enhanced core system processing enhancements in performing the Services hereunder, at no additional charge to the Administrator, as soon as the Sub-Accounting Agent reasonably determines that such use is appropriate. To the extent the Sub-Accounting Agent reasonably determines that such enhanced core system processing enhancements are relevant to the Administrators receipt of the Services, the Sub-Accounting Agent shall inform the Administrator of such core system processing enhancements.
SECTION 10. CONFIDENTIALITY.
Each party hereto agrees that it shall treat as confidential all information provided by the other party (the Disclosing Party) to such party (the Recipient) or to which the Recipient obtains access and that relates to the Disclosing Party, including information regarding its business, financial affairs, operations or otherwise, including without limitation, securities holdings and trading information of a Portfolio or Fund (Confidential Information). In maintaining the confidentiality of the Confidential Information of a Disclosing Party, each Recipient shall exercise the same degree of care that such person exercises with respect to its own Confidential Information of a similar nature, including the use of customary data protection procedures, and in no even t less than a reasonable degree of care. All Confidential Information of a Disclosing Party shall be used by the Recipient solely for the purpose of rendering or receiving services pursuant to this Agreement and shall not be disclosed to any party other than such Recipients (i) employees and contractors who have a need-to-know for purposes of performing such Recipients obligations under this Agreement, provided, that, such persons and entities are bound by confidentiality provisions at least as stringent as those contained herein, (ii) regulators or examiners, and (iii) auditors and legal counsel, to the extent required in connection with services provided by such parties to Recipient.
The Recipient shall notify the Disclosing Party of any unauthorized use or disclosure of Confidential Information of the Disclosing Party of which the Recipient becomes aware. The parties agree that disclosure of Confidential Information of a Disclosing Party may give rise to an irreparable injury to such Disclosing Party inadequately compensable in damages. Accordingly, the Disclosing Party may seek (without the posting of any bond or other security) injunctive relief against the breach of the foregoing undertaking of confidentiality and nondisclosure, in addition to any other legal remedies which may be available.
The foregoing obligations of confidentiality and non-disclosure shall not be applicable to any information that the Recipient demonstrates (i) is publicly available when provided or thereafter
11.
becomes publicly available, other than through disclosure by the Recipient or any of its affiliates, or that is independently derived by the Recipient without the use of any information provided by the Disclosing Party, (ii) that is required in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of law or regulation (collectively, Legal Process), or (iii) where the Recipient has received the prior written consent of the Disclosing Party. In the event that a Recipient is requested by or pursuant to, or required by, Legal Process to disclose any Confidential Information of any other party to this Agreement, such Recipient will, to the extent not legally prohibited, provide the Disclosing Party with prompt notice of such Legal Process in order to enable the Disclosing Party, at its own expense, to seek an approp riate protective order or other remedy (and, if the Disclosing Party seeks such order, the Recipient will provide such cooperation as the Disclosing Party shall reasonably request at the Disclosing Partys expense) to resist or narrow the scope of such request or legal process, or waive compliance, in whole or in part, with the terms of this Section 10. In the event that such protective order or other remedy is not obtained or the Disclosing Party waives such compliance, only that portion of the Confidential Information may be disclosed as the Recipient, as advised by counsel, is legally required to disclose and the Recipient will request that all such Confidential Information so disclosed will be accorded confidential treatment. Confidential Information disclosed in combination with other information that is not Confidential Information is not deemed to fall within one of the foregoing exceptions by reason of such combination.
Furthermore, and notwithstanding anything in this section to the contrary, the Sub-Accounting Agent may aggregate Fund or Portfolio data with similar data of other customers of the Sub-Accounting Agent (Aggregated Data) and may use Aggregated Data for purposes of constructing statistical models so long as such Aggregated Data represents a sufficiently large sample that no Fund or Portfolio data can be identified either directly or by inference or implication.
All of the undertakings and obligations relating to confidentiality and nondisclosure, whether contained in this Section or elsewhere in this Agreement or any schedule or exhibit hereto shall survive the termination or expiration of this Agreement for a period of three (3) years.
SECTION 11. GENERAL.
SECTION 11.1
MASSACHUSETTS LAW TO APPLY. This Agreement shall be governed by, construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts excluding that body of law applicable to conflicts of law.
SECTION 11.2
PRIOR AGREEMENTS. This Agreement supersedes and terminates, as of the date hereof, any prior agreements between the Administrator and the Sub-Accounting Agent relating to fund accounting and recordkeeping services regarding each Fund.
SECTION 11.3
ASSIGNMENT. This Agreement may not be assigned by (a) the Administrator without the prior written consent of the Sub-Accounting Agent or (b) by the Sub-Accounting Agent without the prior written consent of the Administrator, except that either party may, without such prior consent, assign to an entity controlling, controlled by or under common control with such party or to a successor of all of or a substantial portion of its business; however, such assignment shall not relieve the assigning party of its responsibilities hereunder.
12.
SECTION 11.4
INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of this Agreement, the Sub-Accounting Agent and the Administrator may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of a Funds governing documents. No interpretive or additional provisions made as provided in the preceding sentence shal l be deemed to be an amendment of this Agreement.
SECTION 11.5
ADDITIONAL FUNDS. In the event that the Administrator desires to have the Sub-Accounting Agent render services hereunder with respect to any management investment company in addition to those listed on Appendix A hereto, it shall so notify the Sub-Accounting Agent in writing, and if the Sub-Accounting Agent agrees in writing to provide such services, such management investment company shall become a Fund hereunder and the Sub-Accounting Agent and the Administrator shall be bound by all terms and conditions and provisions hereof with respect to such Fund.
SECTION 11.6
ADDITIONAL PORTFOLIOS. In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A hereto with respect to which the Administrator desires to have the Sub-Accounting Agent render services as sub-accounting agent under the terms hereof, the Administrator shall so notify the Sub-Accounting Agent in writing, and if the Sub-Accounting Agent agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder and the Sub-Accounting Agent and the Administrator shall be bound by all terms and conditions and provisions hereof with respect to such Portfolio.
SECTION 11.7
REMOTE ACCESS SERVICES ADDENDUM. The Administrator and the Sub-Accounting Agent hereby agree to the terms of the Remote Access Services Addendum hereto.
SECTION 11.8
AMENDMENTS. This Agreement may be modified or amended from time to time only by mutual written agreement of the parties hereto.
SECTION 11.9
NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail, overnight courier or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To the Administrator: | PUTNAM INVESTMENT MANAGEMENT, LLC |
1 Post Office Square | |
Boston, Massachusetts 02109 | |
Attention: Susan G. Malloy, Managing Director | |
Telephone: 617-760-5050 |
13.
with a copy to: | PUTNAM INVESTMENT MANAGEMENT, LLC |
1 Post Office Square | |
Boston, Massachusetts 02109 | |
Francis J. McNamara, III, Senior Managing Director and | |
General Counsel | |
Telephone: 617-760-1722 | |
To the Sub-Accounting Agent: | STATE STREET BANK AND TRUST COMPANY |
Lafayette Corporate Center | |
2 Avenue de Lafayette | |
Boston, Massachusetts 02111 | |
Attention: Robert F. Dame, Senior Vice President | |
Telephone: 617-662-4036 | |
Telecopy: 617-662-4040 |
Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of overnight courier, upon receipt, in the case of cable twenty-four hours after dispatch and, in the case of telex or telecopy, immediately on dispatch and if delivered by cable, telex or telecopy outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
SECTION 11.10
COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same agreement.
SECTION 11.11
SEVERABILITY; WAIVER. If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. The failure of a party hereto to insist upon strict adherence to any term of this Agreement on any occasion or the failure of a party hereto to exercise or any delay in exercising any right or remedy under this Agreement shall not constitute a waiver of any such term, right or remedy or a waiver of any other rights or remedies and no single or partial exercise of any right or remedy under this Agreement shall prevent any further exercise of the right or remedy or the exercise of any other right or remedy.
SECTION 11.12
REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
14.
SIGNATURE PAGE
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative under seal as of the date first above written.
SIGNATURE ATTESTED TO BY: | PUTNAM INVESTMENT | |||
MANAGEMENT, LLC | ||||
/s/ Robert T. Burns | /s/ Steven D. Krichmar | |||
By: _________________________ |
By: ____________________________ | |||
Robert T. Burns | Steven D. Krichmar | |||
Managing Director | Chief of Operations, Senior | |||
Managing Director | ||||
SIGNATURE ATTESTED TO BY: | STATE STREET BANK AND TRUST | |||
COMPANY | ||||
/s/ Stephanie L. Poster | /s/ Joseph L. Hooley | |||
By: _____________________________ |
By: ______________________________ | |||
Stephanie L. Poster | Joseph L. Hooley | |||
Vice President and Senior Managing Counsel | Executive Vice President |
APPENDIX A
TO
MASTER ACCOUNTING SERVICES AGREEMENT
Putnam U.S. Mutual Funds
001 | THE GEORGE PUTNAM FUND OF BOSTON |
002 | PUTNAM FUND FOR GROWTH & INCOME |
003 | PUTNAM INVESTORS FUND |
004 | PUTNAM INCOME FUND |
005 | PUTNAM GLOBAL EQUITY FUND |
006 | PUTNAM VISTA FUND |
007 | PUTNAM VOYAGER FUND |
008 | PUTNAM CONVERTIBLE INCOME-GROWTH |
010 | PUTNAM MONEY MARKET FUND |
011 | PUTNAM TAX EXEMPT INCOME FUND |
012 | PUTNAM EQUITY INCOME FUND |
014 | PUTNAM HIGH YIELD TRUST |
016 | PUTNAM VT GLOBAL EQUITY FUND |
018 | PUTNAM GLOBAL NATURAL RESOURCES |
019 | PUTNAM NEW JERSEY TAX EXEMPT INC |
021 | PUTNAM HEALTH SCIENCES TRUST |
024 | PUTNAM OTC & EMERGING GRWTH FUND |
027 | PUTNAM CALIFORNIA TAX EXEMPT |
030 | PUTNAM NEW YORK TAX EXEMPT |
032 | PUTNAM U.S. GOVT. INCOME TRUST |
033 | PUTNAM AMERICAN GOVT INCOME FUND |
035 | PUTNAM AMT-FREE INS MUNI FND |
036 | PUTNAM TAX FREE HIGH YIELD |
037 | PUTNAM FLORIDA TAX EXEMPT INCOME |
041 | PUTNAM GLOBAL INCOME TRUST |
047 | PUTNAM PENNSYLVANIA TAX EXEMPT |
052 | PUTNAM MANAGED MUNI INCOME TRUST |
054 | PUTNAM HIGH YIELD MUNICIPAL TR. |
057 | PUTNAM EUROPE EQUITY FUND |
058 | PUTNAM INVEST GRADE MUNI INC TR |
060 | PUTNAM HIGH YIELD ADVANTAGE FUND |
061 | PUTNAM HIGH INCOME SECURITIES FD |
062 | PUTNAM TAX EXEMPT MONEY MARKET |
065 | PUTNAM VT VOYAGER FUND |
066 | PUTNAM VT GROWTH & INCOME FUND |
067 | PUTNAM VT HIGH YIELD FUND |
068 | PUTNAM VT INCOME FUND |
069 | PUTNAM VT MONEY MARKET FUND |
070 | VT GLOBAL ASSET ALLOCATION FUND |
073 | PUTNAM PREMIER INCOME TRUST |
074 | PUTNAM MASTER INTERMEDIATE TRUST |
075 | PUTNAM DIVERSIFIED INCOME TRUST |
098 | PUTNAM VT NEW OPPORTUNITIES FUND |
152 | VT UTILITIES GROWTH & INCOME FD |
168 | PUTNAM TAX FREE HEALTH CARE |
183 | MUNICIPAL BOND FUND |
184 | PUTNAM CAL INVEST GRADE MUNI TR |
185 | PUTNAM NY INVEST GRADE MUNI TR |
250 | PUTNAM ASSET ALLOC GROWTH PORT |
259 | PUTNAM ASSET ALLOC BALANCED PORT |
264 | PUTNAM ASSET ALLOC CONSERVE PORT |
274 | PUTNAM NEW VALUE FUND |
377 | PUTNAM DISCOVERY GROWTH FUND |
398 | PUTNAM LTD DURATION GOVT INC FND |
433 | PUTNAM CAPITAL APPRECIATION |
539 | PUTNAM INTL NEW OPPORTUNITIES |
582 | PUTNAM MUNI OPPORTUNITIES TRUST |
829 | PUTNAM INV GRADE MUNI TR II PFD |
840 | PUTNAM UTILITIES GROWTH & INCOME |
841 | PUTNAM INTERNATIONAL EQUITY |
845 | PUTNAM MASS TAX EXEMPT |
846 | PUTNAM MICHIGAN TAX EXEMPT |
847 | PUTNAM MINNESOTA TAX EXEMPT |
848 | PUTNAM OHIO TAX EXEMPT |
852 | PUTNAM NEW OPPORTUNITIES FUND |
855 | PUTNAM ARIZONA TAX EXEMPT INCOME |
862 | PUTNAM MANAGED - PREFERRED |
868 | PUTNAM INVEST GRADE MUNI-PREFERD |
899 | PUTNAM CAL INV GRADE MUNI TR PFD |
913 | PUTNAM MUNI OPPORT TR -PREFER |
931 | PUTNAM HIGH YIELD MUNI-PREFERRED |
932 | PUTNAM NY INV GRADE MUNI TR PFD |
949 | THE CLASSIC EQUITY FUND |
961 | PUTNAM VT DIVERSIFIED INCOME FD |
23H | VT MID CAP VALUE |
23K | VT CAPITAL OPPORTUNITIES |
23N | PUTNAM VT EQUITY INCOME |
23T | PRIME MONEY MARKET FUND |
29X | FLOATING RATE INCOME FUND |
2AP | PUTNAM GROWTH OPPORTUNITIES FUND |
2AQ | PUTNAM RESEARCH FUND |
2AZ | PUTNAM INTERNATIONAL CAPITAL OPP |
2CE | PUTNAM INTERNATL GROWTH & INCOME |
2DN | VT INTERNATL GROWTH & INCOME FD |
2DO | VT INTERNATIONAL EQUITY |
2DP | VT INTERNATL NEW OPPORTUNITIES |
2DQ | PUTNAM VT VISTA FUND |
2DR | PUTNAM VT NEW VALUE |
2HF | PUTNAM SMALL CAP GROWTH |
2II | PUTNAM CAPITAL OPPORTUNITIES |
2IO | PUTNAM VT INVESTORS FUND |
2IP | PVT OTC & EMERG GROWTH FUND |
2IS | PUTNAM VT GEORGE PUTNAM FUND |
2IW | PUTNAM VT HEALTH SCIENCES FUND |
2LA | PUTNAM VT RESEARCH FUND |
2MF | PUTNAM SMALL CAP VALUE FUND |
2MI | PUTNAM TAX SMART EQUITY FUND |
2MJ | PUTNAM VT SMALL CAP VALUE FUND |
2OV | PUTNAM MID-CAP VALUE FUND |
2PU | PUTNAM VT GROWTH OPPS FUND |
2PX | PUTNAM VT AM GOVT INCOME FUND |
2TJ | VT DISCOVERY GROWTH |
2TP | PUTNAM VT CAPITAL APPRECIATIO |
2W | |
X | EMERGING OPPORTUNITIES THLEE |
7BF | PUTNAM INCOME STRATEGIES FUND |
Putnam Retirement Ready Funds
40F | RETIREMENT READY 2040 |
40M | RETIREMENT READY 2045 |
48I | RETIREMENT READY 2010 |
48P | RETIREMENT READY MATURITY |
48W | RETIREMENT READY 2015 |
49D | RETIREMENT READY 2020 |
49K | RETIREMENT READY 2025 |
49R | RETIREMENT READY 2030 |
49Y | RETIREMENT READY 2035 |
7CR | RETIREMENT READY 2050 |
APPENDIX B
TO
MASTER ACCOUNTING SERVICES AGREEMENT
DUTIES OF SUB-ACCOUNTING AGENT*
(i) | Record each Portfolios investment, capital share and income and expense |
activities; | |
(ii) | Establish amortization calculations in accordance with Administrators amortization |
authorizations; | |
(iii) | Maintain ledgers for investment securities; |
(iv) | Maintain historical tax lots for each security; |
(v) | Reconcile cash and investment balances to the custodians records; |
(vi) | Post entries to and prepare each Portfolios daily trial balance; |
(vii) | Calculate fee-based expenses and set-up expense accruals; |
(viii) | Calculate capital gains and losses; |
(ix) | Calculate net income of each Portfolio; |
(x) | Pursuant to Price Source Authorization duly executed by Administrator, receive |
quotes regarding portfolio investments; | |
(xi) | Compute the net asset value (NAV) of each Portfolio daily; |
(xii) | Disseminate NAV, distribution and other Portfolio data as authorized by |
Administrator; | |
(xiii) | Compute each Portfolios yield and, if required by Administrator, portfolio |
average dollar-weighted maturity; | |
(xiv) | For multi-managed Portfolios, calculate NAV and maintain books, ledgers, and |
capital at manager level (none of which in the capacity of an official book or | |
recordkeeper); | |
(xv) | Maintain a separate portfolio to calculate a tax basis for each Portfolios investments, |
as directed by Administrator (not in the capacity of an official book or recordkeeper); | |
(xvi) | Prepare a monthly proof package of accounting reports mutually agreed upon, |
including, as applicable, the following: | |
Account Position Appraisal (details holdings, shares, value) | |
Trial balance reflecting all as of activity | |
Capital Stock Roll-forward | |
Base Equivalent Cash Statement | |
Detail Gains and Loss report | |
Cost of securities held | |
Accretion and amortization of cost | |
Open Trades | |
Forward contracts and swap receivables and payables |
Income | |
Distributions | |
Paid In Capital | |
Unrealized Gains and Losses | |
Cost Roll Forward | |
Interest-only yield and impairment spreadsheets | |
Cash to Custodian reconciliations, as may be applicable; | |
(xvii) | Prepare and transmit to Administrator, or such other entities or persons as the |
Administrator may instruct from time to time, such quarterly reports of Portfolio | |
data as may be mutually agreed upon by the parties hereto; and | |
(xviii) | Daily portfolio reconciliation for attribution and performance. |
* Details with respect to such duties may be set forth in mutually acceptable service level | |
documents. |
EXHIBIT A
TO
MASTER ACCOUNTING SERVICES AGREEMENT
Form of Price Source Authorization
SCHEDULE A |
TO |
MASTER ACCOUNTING SERVICES AGREEMENT |
INFORMATION REQUIRED TO BE SUPPLIED | RESPONSIBLE PARTY |
Portfolio Trade Authorizations | Investment Adviser |
Currency Transactions | Investment Adviser |
Cash Transaction Report | Custodian |
Portfolio Prices | Third Party Vendors/Investment Adviser |
Exchange Rates | Third Party Vendors/Investment Adviser |
Capital Stock Activity Report | Transfer Agent |
Dividend/Distribution Schedule | Investment Adviser |
Dividend/Distribution Declaration | Investment Adviser |
Dividend Reconciliation/Confirmation | Transfer Agent |
Corporate Actions | Third Party Vendors/Custodian |
Service Provider Fee Schedules | Investment Adviser |
Expense Budget | Investment Adviser/Administrator |
Amortization Policy | Investment Adviser |
Accounting Policy/Complex Investments | Investment Adviser |
Audit Management Letter | Auditor |
Annual Shareholder Letter | Investment Adviser |
Annual/Semi-Annual Reports | Investment Adviser/Administrator |
PUTNAM FUNDS |
Plan pursuant to Rule 18f-3(D) under the Investment Company Act of 1940 |
Effective November 1, 1999, as most recently amended May 11, 2007
Each of the open-end investment companies managed by Putnam Investment Management, LLC (each a "Fund" and, together, the "Funds") may from time to time issue one or more of the following classes of shares: Class A shares, Class B shares, Class C shares, Class I shares, Class M shares, Class P shares, Class R shares, Class S shares, Class T shares and Class Y shares. Each class is subject to such investment minimums and other conditions of eligibility as are set forth in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect. The differences in expenses among these classes of shares, and the conversion and exchange features of each class of shares, are set forth below in this Plan. Except as noted below, expenses are allocated among the classes of shares of each Fund based upon the net assets of each Fund attributable to shares of each class. This Plan is subject to change, to the extent permitted by law and by the Agreement and Declaration of Trust and By-laws of each Fund, by action of the Trustees of each Fund. This Plan does not apply to the shares of Putnam Variable Trust or any other open-end investment company managed by Putnam Investment Management, LLC that may from time to time maintain a separate plan pursuant to Rule 18f-3 under the Investment Company Act of 1940.
CLASS A SHARES |
Distribution and Service Fees |
Class A shares pay distribution and service fees pursuant to plans (the "Class A Plans") adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"). Class A shares also bear any costs associated with obtaining shareholder approval of the Class A Plans (or an amendment to a Class A Plan). Pursuant to the Class A Plans, Class A shares may pay up to 0.35% of the relevant Fund's average net assets attributable to the Class A shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect). Amounts payable under the Class A Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
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Conversion Features |
Class A shares do not convert to any other class of shares.
Exchange Features |
Class A shares of any Fund other than Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund may be exchanged, at the holder's option, for Class A shares of any other Fund that offers Class A shares without the payment of a sales charge, provided that Class A shares of such other Fund are available to residents of the relevant state. Class A shares of Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund may be exchanged, at the holders option, for Class A, Class B or Class C shares of any other Fund that offers such classes of shares in the relevant state without the current payment of a contingent deferred sales charge (a "CDSC"), but, in the case of exchanges for Class A shares of another Fund, may be subject to a front-end sales charge upon such exchange. The holding period for determining any CDSC applicable to the shares received in such exchange will include the holding period of the shares exchanged, and will be calculated using the schedule o f any Fund into or from which shares have been exchanged that would result in the highest CDSC applicable to such Class A shares.
In addition, Class A shares of Putnam Money Market Fund that are offered in conjunction with Class Y shares of other Putnam Funds may be exchanged, at the holders option, for Class Y shares of such other Funds without the payment of a CDSC.
Initial Sales Charge |
Class A shares are offered at a public offering price that is equal to their net asset value ("NAV") plus a sales charge of up to 5.25% of the public offering price (which maximum may be less for certain Funds, as described in each Fund's registration statement or prospectus and statement of additional information as from time to time in effect). The sales charges on Class A shares are subject to reduction or waiver as permitted by Rule 22d-1 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
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Contingent Deferred Sales Charge |
Purchases of Class A shares of $1 million or more that are redeemed within eighteen months of purchase may be subject to a CDSC of 1.00% of either the purchase price or the NAV of the shares redeemed, whichever is less, as described in each Fund's registration statement or prospectus and statement of additional information as from time to time in effect. Class A shares are not otherwise subject to a CDSC.
The CDSC on Class A shares is subject to reduction or waiver in certain circumstances, as permitted by Rule 6c-10 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
CLASS B SHARES |
Distribution and Service Fees |
Class B shares pay distribution and service fees pursuant to plans adopted pursuant to Rule 12b-1 under the 1940 Act (the "Class B Plans"). Class B shares also bear any costs associated with obtaining shareholder approval of the Class B Plans (or an amendment to a Class B Plan). Pursuant to the Class B Plans, Class B shares may pay up to 1.00% of the relevant Fund's average net assets attributable to Class B shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect). Amounts payable under the Class B Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
Conversion Features |
Class B shares automatically convert to Class A shares of the same Fund no later than the end of the month in which the eighth anniversary of the date of purchase occurs (or such earlier date as the Trustees of a Fund may authorize), except that Class B shares purchased through the reinvestment of dividends and other distributions on Class B shares convert to Class A shares at the same time as the shares with respect to which they were purchased are converted and Class B shares acquired by the exchange of Class B shares of another Fund will convert to Class A shares based on the time of the initial purchase.
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Exchange Features |
Class B shares of any Fund may be exchanged, at the holder's option, for Class B shares of any other Fund that offers Class B shares without the payment of a sales charge, provided that Class B shares of such other Fund are available to residents of the relevant state. The holding period for determining any CDSC will include the holding period of the shares exchanged, and will be calculated using the schedule of any Fund into or from which shares have been exchanged that would result in the highest CDSC applicable to such Class B shares.
Initial Sales Charge |
Class B shares are offered at their NAV, without an initial sales charge.
Contingent Deferred Sales Charge |
Class B shares that are redeemed within 6 years of purchase are subject to a CDSC of up to 5.00% of either the purchase price or the NAV of the shares redeemed, whichever is less (which period may be shorter and which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect); such percentage declines the longer the shares are held, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect. Class B shares purchased with reinvested dividends or capital gains are not subject to a CDSC.
The CDSC on Class B shares is subject to reduction or waiver in certain circumstances, as permitted by Rule 6c-10 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
CLASS C SHARES |
Distribution and Service Fees |
Class C shares pay distribution and service fees pursuant to plans adopted pursuant to Rule 12b-1 under the 1940 Act (the "Class C Plans"). Class C shares also bear any costs associated with obtaining shareholder approval of the Class C Plans (or an amendment to a Class C Plan). Pursuant to the Class C Plans, Class C shares may pay up to 1.00% of the relevant Fund's average net assets attributable to the Class C shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements
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of additional information as from time to time in effect). Amounts payable under the Class C Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
Conversion Features |
Class C shares do not convert to any other class of shares.
Exchange Features |
Class C shares of any Fund may be exchanged, at the holder's option, for Class C shares of any other Fund that offers Class C shares without the payment of a sales charge, provided that Class C shares of such other Fund are available to residents of the relevant state. The holding period for determining any CDSC will include the holding period of the shares exchanged, and will be calculated using the schedule of any Fund into or from which shares have been exchanged that would result in the highest CDSC applicable to such Class C shares. Exchange privileges for Class C shares offered outside the United States may vary.
Initial Sales Charge |
Class C shares are offered at their NAV, without an initial sales charge.
Contingent Deferred Sales Charge |
Class C shares are subject to a 1.00% CDSC if the shares are redeemed within one year of purchase. The CDSC on Class C shares is subject to reduction or waiver in certain circumstances, as permitted by Rule 6c-10 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
CLASS I SHARES |
Distribution and Service Fees |
Class I shares do not pay a distribution fee. |
Conversion Features |
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Class I shares do not convert to any other class of shares.
Exchange Features |
Class I shares of any Fund may be exchanged, at the holder's option, for Class I shares of any other Fund that offers Class I shares without the payment of a sales charge, provided that Class I shares of such other Fund are available to residents of the relevant state.
Initial Sales Charge |
Class I shares are offered at their NAV, without an initial sales charge.
Contingent Deferred Sales Charge |
Class I shares are not subject to any CDSC. |
CLASS M SHARES |
Distribution and Service Fees |
Class M shares pay distribution and service fees pursuant to plans adopted pursuant to Rule 12b-1 under the 1940 Act (the "Class M Plans"). Class M shares also bear any costs associated with obtaining shareholder approval of the Class M Plans (or an amendment to a Class M Plan). Pursuant to the Class M Plans, Class M shares may pay up to 1.00% of the relevant Fund's average net assets attributable to Class M shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect). Amounts payable under the Class M Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
Conversion Features |
Class M shares do not convert to any other class of shares.
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Exchange Features |
Class M shares of any Fund other than Putnam Money Market Fund may be exchanged, at the holder's option, for Class M shares of any other Fund that offers Class M shares without the payment of a sales charge, provided that Class M shares of such other Fund are available to residents of the relevant state. Class M shares of Putnam Money Market Fund may be exchanged, at the holders option, for Class B, Class C or Class M shares of any other Fund that offers such classes of shares in the relevant state without the current payment of a CDSC, but, in the case of exchanges for Class M shares of another Fund, may be subject to a front-end sales charge upon such exchange. The holding period for determining any CDSC applicable to the shares received in such exchange will include the holding period of the shares exchanged, and will be calculated using the schedule of any Fund into or from which shares have been exchanged that would result in the highest CDS applicable to such shares . Exchange privileges for Class M shares offered outside the United States may vary.
Initial Sales Charge |
Class M shares are offered at a public offering price that is equal to their NAV plus a sales charge of up to 3.50% of the public offering price (which maximum may be less for certain Funds, as described in each Fund's registration statement or prospectus and statement of additional information as from time to time in effect). The sales charges on Class M shares are subject to reduction or waiver as permitted by Rule 22d-1 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
Contingent Deferred Sales Charge |
Certain purchases of Class M that are redeemed within one year of purchase may be subject to a CDSC of up to 0.65% of either the purchase price or the NAV of the shares redeemed, whichever is less, as described in each Fund's registration statement or prospectus and statement of additional information as from time to time in effect. Class M shares are otherwise not subject to a CDSC.
CLASS P SHARES |
Distribution and Service Fees |
Class P shares do not pay a distribution fee. |
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Conversion Features |
Class P shares do not convert to any other class of shares.
Exchange Features |
Class P shares of any Fund may be exchanged, at the holder's option, for Class P shares of any other Fund that offers Class P shares without the payment of a sales charge, provided that Class P shares of such other Fund are available to residents of the relevant state.
Initial Sales Charge |
Class P shares are offered at their NAV, without an initial sales charge.
Contingent Deferred Sales Charge |
Class P shares are not subject to any CDSC. |
CLASS R SHARES |
Distribution and Service Fees |
Class R shares pay distribution and service fees pursuant to plans adopted pursuant to Rule 12b-1 under the 1940 Act (the "Class R Plans"). Class R shares also bear any costs associated with obtaining shareholder approval of the Class R Plans (or an amendment to a Class R Plan). Pursuant to the Class R Plans, Class R shares may pay up to 1.00% of the relevant Fund's average net assets attributable to Class R shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect). Amounts payable under the Class R Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
Conversion Features |
Class R shares do not convert to any other class of shares.
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Exchange Features |
Class R shares of any Fund may be exchanged, at the holder's option, for Class R shares of any other Fund that offers Class R shares without the payment of a sales charge, provided that Class R shares of such other Fund are available to residents of the relevant state.
Initial Sales Charge |
Class R shares are offered at their NAV, without any sales charge.
Contingent Deferred Sales Charge |
Class R shares are not subject to any CDSC. |
CLASS S SHARES |
Distribution and Service Fees |
Class S shares pay distribution and service fees pursuant to plans (the "Class S Plans") adopted pursuant to Rule 12b-1 under the 1940 Act. Class S shares also bear any costs associated with obtaining shareholder approval of the Class S Plans (or an amendment to a Class S Plan). Pursuant to the Class S Plans, Class S shares may pay up to 0.25% of the relevant Fund's average net assets attributable to the Class S shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect). Amounts payable under the Class S Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
Conversion Features |
Class S shares do not convert to any other class of shares.
Exchange Features |
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Class S shares of any Fund may be exchanged, at the holder's option, for Class S shares of any other Fund that offers Class S shares without the payment of a sales charge, provided that Class S shares of such other Fund are available to residents of the relevant state.
Initial Sales Charge |
Class S shares are offered at their NAV, without an initial sales charge.
Contingent Deferred Sales Charge |
Class S shares are not subject to any CDSC. |
CLASS T SHARES |
Distribution and Service Fees |
Class T shares pay distribution and service fees pursuant to plans (the "Class T Plans") adopted pursuant to Rule 12b-1 under the 1940 Act. Class T shares also bear any costs associated with obtaining shareholder approval of the Class T Plans (or an amendment to a Class T Plan). Pursuant to the Class T Plans, Class T shares may pay up to 0.35% of the relevant Fund's average net assets attributable to the Class T shares (which percentage may be less for certain Funds, as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect). Amounts payable under the Class T Plans are subject to such further limitations as the Trustees may from time to time determine and as set forth in the registration statement or prospectus and statement of additional information of each Fund as from time to time in effect.
Conversion Features |
Class T shares do not convert to any other class of shares.
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Exchange Features |
Class T shares of any Fund may be exchanged, at the holder's option, for Class A or T shares of any other Fund that offers Class A or T shares without the payment of a CDSC, provided that Class A or T shares of such other Fund are available to residents of the relevant state. Such exchanges may be subject to a front-end sales charge. Class T shares of Putnam Money Market Fund may also be exchanged, at the holders option, for Class B or Class C shares of any other Fund that offers such classes of shares in the relevant state. The holding period for determining any CDSC applicable to the shares received in the exchange will include the holding period of the shares exchanged, and will be calculated using the schedule of any Fund into or from which shares have been exchanged that would result in the highest CDSC applicable to such shares.
Initial Sales Charge |
Class T shares are offered at a public offering price that is equal to their NAV plus a sales charge of up to 5.25% of the public offering price (which maximum may be less for certain Funds, as described in each Fund's registration statement or prospectus and statement of additional information as from time to time in effect). The sales charges on Class T shares are subject to reduction or waiver as permitted by Rule 22d-1 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
Contingent Deferred Sales Charge |
Purchases of Class T shares that (1) were acquired by exchanging shares from another Fund that were purchased without an initial sales charge and (2) are redeemed within eighteen months of such original purchase are subject to a CDSC of 1.00% of either the purchase price or the NAV of the shares redeemed, whichever is less. Class T shares are not otherwise subject to a CDSC.
The CDSC on Class T shares is subject to reduction or waiver in certain circumstances, as permitted by Rule 6c-10 under the 1940 Act and as described in the Funds' registration statements or prospectuses and statements of additional information as from time to time in effect.
CLASS Y SHARES |
Distribution and Service Fees |
Class Y shares do not pay a distribution fee. |
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Conversion Features |
Class Y shares do not convert to any other class of shares.
Exchange Features |
Class Y shares of any Fund may be exchanged, at the holder's option, for Class Y shares of any other Fund that offers Class Y shares without the payment of a sales charge, provided that Class Y shares of such other Fund are available to residents of the relevant state, and further provided that shares of such other Fund are available through the relevant retirement plan or platform.
In addition, Class Y shares of any Fund that are offered in conjunction with Class A shares of Putnam Money Market Fund may be exchanged, at the holders option, for Class A shares of Putnam Money Market Fund without the payment of a CDSC.
Initial Sales Charge |
Class Y shares are offered at their NAV, without an initial sales charge.
Contingent Deferred Sales Charge |
Class Y shares are not subject to any CDSC. |
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Exhibit A
THE PUTNAM FUNDS
Code of Ethics
Each of The Putnam Funds (the Funds) has determined to adopt this Code of Ethics with respect to certain types of personal securities transactions by officers and Trustees of the Funds which might be deemed to create possible conflicts of interest and to establish reporting requirements and enforcement procedures with respect to such transactions.
I. Rules Applicable to Officers and Trustees Affiliated with Putnam Investments Trust or Its Subsidiaries
A. Incorporation of Advisers Code of Ethics. The provisions of the Code of Ethics for employees of Putnam Investments Trust and its subsidiaries (the Putnam Investments Code of Ethics), which is attached as Appendix A hereto, are hereby incorporated herein as the Funds Code of Ethics applicable to officers and Trustees of the Funds who are employees of the Funds or officers, directors or employees of Putnam Investments Trust or its subsidiaries. A violation of the Putnam Investments Code of Ethics shall constitute a violation of the Funds Code.
B. Reports. Officers and Trustees of each of the Funds who are made subject to the Putnam Investments Code of Ethics pursuant to the preceding paragraph shall file the reports required by the Putnam Investments Code of Ethics with the Code of Ethics Officer designated therein. A report filed with the Code of Ethics Officer shall be deemed to be filed with each of the Funds of which the reporting individual is an officer or Trustee.
C. Review and Reporting.
(1) The Code of Ethics Officer shall cause the reported personal securities transactions to be compared with completed and contemplated portfolio transactions of each of the Funds to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Code of Ethics Officer shall give such person an opportunity to supply additional explanatory material.
(2) If the Code of Ethics Officer determines that a violation of any provision of this Code has or may have occurred, he shall submit his written determination, together with any additional explanatory material, to the Audit and Compliance Committee of the Funds at its next meeting when Code of Ethics matters are discussed.
D. Sanctions. In addition to reporting violations of this Code to the Audit and Compliance Committee of the Funds as provided in Section I-C(2), the Code of Ethics Officer shall also report to such Committee any sanctions imposed with
Exhibit A
respect to such violations. The Committee reserves the right to impose such additional sanctions as it deems appropriate.
II. Rules Applicable to Unaffiliated Trustees
A. Definitions.
(1) Beneficial ownership shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder.
(2) Control means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.
(3) Interested Trustee means a Trustee of a Fund who is an interested person of the Fund within the meaning of the Investment Company Act.
(4) Purchase or sale of a security includes, among other things, the writing of an option to purchase or sell a security.
(5) Security shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act (in effect, all securities) except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers acceptances, bank certificates of deposit, commercial paper and high-quality short-term debt investments, including repurchase agreements, and shares of registered open-end investment companies, but shall include any security convertible into or exchangeable for a security.
(6) Unaffiliated Trustee means a Trustee who is not made subject to the Putnam Investments Code of Ethics pursuant to Part I hereof.
B. Prohibited Purchases and Sales. No Unaffiliated Trustee of any of the Funds shall purchase or sell, directly or indirectly, any security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his actual knowledge at the time of such purchase or sale:
(1) is being considered for purchase or sale by the Fund;
(2) is being purchased or sold by the Fund; or
(3) was purchased or sold by the Fund within the most recent five days if such person participated in the recommendation to, or the decision by, Putnam Investment Management to purchase or sell such security for the Fund.
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Exhibit A
C. Exempted Transactions. The prohibitions of Section II-B of this Code shall not apply to:
(1) purchases or sales of securities effected in any account over which the Unaffiliated Trustee has no direct or indirect influence or control;
(2) purchases or sales of securities which are non-volitional on the part of either the Unaffiliated Trustee or the Fund;
(3) purchases of securities which are part of an automatic dividend reinvestment plan;
(4) purchases of securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired;
(5) purchases or sales of securities other than those exempted in (1) through (4) above which do not cause the Unaffiliated Trustee to gain improperly a personal benefit through his relationship with the Fund and are only remotely potentially harmful to a Fund because they would be very unlikely to affect a highly institutional market, and are previously approved by the Compliance Liaison of the Funds, in consultation with the Code of Ethics Officer, which approval shall be confirmed in writing.
D. Reporting.
(1) Whether or not one of the exemptions listed in Section II-C applies, every Unaffiliated Trustee of a Fund shall file with the Funds Compliance Liaison a report containing the information described in Section II-D(2) of this Code with respect to purchases or sales of any security in which such Unaffiliated Trustee has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, if such Trustee, at the time of that transaction, knew or, in the ordinary course of fulfilling his official duties as a Trustee of the Fund, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee:
(a) such security was or is to be purchased or sold by the Fund or
(b) such security was or is being considered for purchase or sale by the Fund;
provided, however, that an Unaffiliated Trustee shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control.
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Exhibit A
(2) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:
(a) The date of the transaction, the title, the number of shares, the interest rate and maturity date (if applicable) and the principal amount of each security involved;
(b) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(c) The price at which the transaction was effected;
(d) The name of the broker, dealer or bank with or through whom the transaction was effected; and
(e) the date that the report is submitted by each Unaffiliated Trustee.
(3) Every report concerning a purchase or sale prohibited under Section II-B hereof with respect to which the reporting person relies upon one of the exemptions provided in Section II-C shall contain a brief statement of the exemption relied upon and the circumstances of the transaction.
(4) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the security to which the report relates.
(5) Notwithstanding anything to the contrary contained herein, an Unaffiliated Trustee who is an interested person of the Funds shall file the reports required by Rule 17j-1(d)(1) under the Investment Company Act of 1940 with the Code of Ethics Officer of Putnam Investments. Such reports shall be reviewed by such Officer as provided in Section I-C(1) and any related violations shall be reported by him to the Audit and Compliance Committee as provided in Section I-C(2). The Committee may impose such additional sanctions as it deems appropriate.
E. Review and Reporting.
(1) The Compliance Liaison of the Funds, in consultation with the Code of Ethics Officer of Putnam Investments, shall cause the reported personal securities transactions that he receives pursuant to Section II-D(1) to be compared with completed and contemplated portfolio transactions of the Funds to determine whether any transaction (Reviewable Transactions) listed in Section II-B (disregarding exemptions provided by Section II-C(1) through (5)) may have occurred.
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Exhibit A
(2) If the Compliance Liaison determines that a Reviewable Transaction may have occurred, he shall then determine whether a violation of this Code may have occurred, taking into account all the exemptions provided under Section II-C. Before making any determination that a violation has occurred, the Compliance Liaison shall give the person involved an opportunity to supply additional information regarding the transaction in question.
F. Sanctions. If the Compliance Liaison determines that a violation of this Code has occurred, he shall so advise the Funds Audit and Compliance Committee, and provide the Committee with a report of the matter, including any additional information supplied by such person. The Committee may impose such sanctions as it deems appropriate.
III. Miscellaneous
A. Amendments to the Putnam Investments Code of Ethics. Any amendment to the Putnam Investments Code of Ethics shall be deemed an amendment to Section I-A of this Code effective 30 days after written notice of such amendment shall have been received by the Chairman of the Funds, unless the Trustees of the Funds expressly determine that such amendment shall become effective at an earlier or later date or shall not be adopted.
B. Records. The Funds shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm under the conditions described in Rule 31a-2(f)(1) under the Investment Company Act and shall be available for examination by representatives of the Securities and Exchange Commission.
(1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place;
(2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs;
(3) A copy of each report made by an officer or Trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; and
(4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place.
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Exhibit A
To the extent any record required to be kept by this section is also required to be kept by Putnam Investments pursuant to the Putnam Investments Code of Ethics, Putnam Investments shall maintain such record on behalf of the Funds as well.
C. Confidentiality. All reports of securities transactions and any other information filed with any Fund pursuant to this Code shall be treated as confidential, but are subject to review as provided herein and by personnel of the Securities and Exchange Commission.
D. Interpretation of Provisions. The Trustees may from time to time adopt such interpretations of this Code as they deem appropriate.
E. Delegation by Chairman. The Chairman of the Funds may from time to time delegate any or all of his responsibilities under this Code, either generally or as to specific instances, to such officer or Trustee of the Funds as he may designate.
As revised
[July 13, 2007]
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working@PUTNAM
DECEMBER 2006
Putnam's Code of Ethics
Graphic Omitted: Portrait of Justice Samuel Putnam
Dear Putnam Employee,
Putnams Code of Ethics is an essential component of the fiduciary mindset and of our commitment to the maintenance of the highest professional standards. Taking care of other peoples money is a serious responsibility, and we need to ensure that our clients interests come first. Firms with a strong fiduciary culture are attractive to clients who are looking for superior money management, and Putnams Code is designed to ensure that Putnam preserves that trust.
The rules reflected in the Code are good business practices and were not created simply to meet regulatory standards. If, from time to time, the rules seem burdensome, I ask you to put yourself in the place of our shareholders and clients, who have entrusted us to manage their assets so that they may pursue the goals of saving for retirement or funding their childrens education. We have also provided a guide to use as quick reference to some of the Codes key provisions.
If you have any questions or concerns at any time, however, I encourage you to contact one of the members of our Code of Ethics staff in the Legal and Compliance Department.
Graphic Omitted: Signature of Ed Haldeman
Ed Haldeman
President and Chief Executive Officer
Table of Contents | |
Code of Ethics Overview | 1 |
Putnams Code Of Ethics | 4 |
Definitions | 5 |
Section I Personal Securities Rules for All Employees | 8 |
A. Pre-clearance | 8 |
Rule 1: Pre-clearance Requirements | 8 |
Rule 2: Personal Trading Assistant (PTA) System and Restricted List | 8 |
Rule 3: Marsh & McLennan (MMC) Securities | 11 |
B. Prohibited Transactions | 12 |
Rule 1: Short-Selling Prohibition | 12 |
Rule 2: Initial Public Offerings Prohibition | 13 |
Rule 3: Private Placement Pre-approval Requirements | 13 |
Rule 4: Trading with Material Non-public Information | 14 |
Rule 5: No Personal Trading with Client Portfolios | 14 |
Rule 6: Holding Putnam Mutual Fund Shares | 15 |
Rule 7: Putnam Mutual Fund Employee Restrictions | 16 |
Rule 8: Special Orders | 17 |
Rule 9: Excessive Trading | 17 |
Rule 10: Spread Betting | 18 |
C. Discouraged Transaction | 18 |
Rule 1: Naked Options | 18 |
D. Exempted Transactions | 19 |
Rule 1: Involuntary Transactions | 19 |
Rule 2: Special Exemptions | 19 |
Section II Additional Special Rules for Personal Securities Transactions | 20 |
A. Access Persons and Certain Investment Professionals | 20 |
Rule 1: 90-Day Short-Term Rule | 20 |
B. Certain Investment Professionals | 20 |
Rule 2: 7-Day Rule | 20 |
Rule 3: Blackout Rule | 21 |
Rule 4: Contra-Trading Rule | 22 |
Rule 5: No Personal Benefit | 23 |
Section III General Rules for All Employees | 24 |
Rule 1: Compliance with All Laws, Regulations, and Policies | 24 |
Rule 2: Conflicts of Interest | 24 |
Rule 3: Gifts and Entertainment Policy | 24 |
Rule 4: Anti-bribery/Kickback Policy | 27 |
Rule 5: Political Activities, Contributions, Solicitations, and Lobbying Policy | 27 |
Rule 6: Confidentiality of Putnam Business Information | 29 |
Rule 7: Outside Business Affiliations | 29 |
Rule 8: Role as Trustee or Fiduciary Outside of Putnam Investments | 30 |
Rule 9: Investment Clubs | 30 |
Rule 10: Business Negotiations for Putnam Investments | 30 |
Rule 11: Accurate Records | 31 |
Rule 12: Family Members Conflict Policy | 31 |
Rule 13: Affiliated Entities | 32 |
Rule 14: Computer and Network Use Policy | 32 |
Rule 15: CFA Institute Code of Ethics and Standards of Professional Conduct | 33 |
Rule 16: Privacy Policy | 33 |
Rule 17: Anti-money Laundering Policy | 34 |
Rule 18: Record Retention | 34 |
Section IV Reporting Requirements | 35 |
Reporting of Personal Securities Transactions | 35 |
Rule 1: Broker Confirmations and Statements | 35 |
Rule 2: Access Person Quarterly Transaction Report | 36 |
Rule 3: Access Person Initial/Annual Holdings Report | 36 |
Rule 4: Certifications | 36 |
Rule 5: Outside Business Affiliations | 36 |
Rule 6: Reporting of Irregular Activity | 37 |
Rule 7: Ombudsman | 37 |
Section V Education Requirements | 38 |
Rule 1: Distribution of Code | 38 |
Rule 2: Annual Training Requirement | 38 |
Section VI Compliance and Appeal Procedures | 39 |
Section VII Sanctions | 41 |
Appendix A: Insider Trading Prohibitions Policy Statement | 43 |
Appendix A: Definitions: Insider Trading | 44 |
Appendix A Section I: Rules Concerning Inside Information | 45 |
Rule 1: Inside Information | 45 |
Rule 2: Material Non-public Information | 45 |
Rule 3: Reporting of Material Non-public Information | 45 |
Appendix A Section II: Overview of Insider Trading | 47 |
Appendix B: Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds | 51 |
Appendix C: Contra-Trading Rule Clearance Form | 52 |
Appendix D: CFA Institute Code of Ethics and Standards of Professional Conduct | 53 |
Appendix E: Inducement Policy for Putnam Investments Limited (PIL) Employees | 57 |
Code of Ethics Overview
This overview of Putnams Code of Ethics is not intended to substitute for a careful reading of the complete document. As a condition of continued employment, every Putnam employee is required to read, understand, and comply with all of the provisions of the Code of Ethics. Additionally, employees are expected to comply with the policies and procedures contained within the Putnam Employee Handbook, which is available online at www.ibenefitcenter.com.
It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our fund shareholders or other clients, or do anything that could damage or erode the trust our clients place in Putnam and its employees. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code.
The rules of the Code cover activities, including personal securities transactions, of Putnam employees, certain family members of employees, and entities (such as corporations, trusts, or partnerships) that employees may be deemed to control or influence.
Sanctions will be imposed for violations of the Code of Ethics. Sanctions may include monetary fines, bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment, and termination of employment. The proceeds resulting from monetary sanctions will be given to a charity chosen by the Code of Ethics Officer.
Insider trading
Putnam employees are forbidden to buy or sell any security while either Putnam or the employee is in possession of material, non-public information (inside information) concerning the security or the issuer. A violation of Putnams insider trading policies may result in criminal and civil penalties, including imprisonment, disgorgement of profits, and substantial fines. An employee aware of or in possession of inside information must report it immediately to the Code of Ethics Officer. (See Appendix A: Insider Trading Prohibitions Policy Statement.)
Conflicts of interest
The Code of Ethics imposes limits on activities of Putnam employees where the activity may conflict with the interests of Putnam or its clients. These include limits on the receipt and solicitation of gifts and on service as a fiduciary for a person or entity outside of Putnam. For example, Putnam employees generally may not accept gifts over $100 in total value in a calendar year from any entity, or any supplier of goods or services to Putnam. In addition, a Putnam employee may not serve as a director of any corporation or other entity without prior approval of the Code of Ethics Officer.
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Confidentiality
Information about Putnam clients and Putnam investment activity and research is proprietary and confidential and may not be disclosed or used by any Putnam employee outside Putnam without a valid business purpose.
Putnam mutual funds
All employees and certain family members are subject to a minimum 90-day holding period for shares in Putnams open-end mutual funds. This restriction does not apply to Putnams Stable Value or money market funds. Except in limited circumstances, all employees must hold Putnam open-end fund shares in accounts at Putnam.
Portfolio managers and others with access to investment information (Access Persons) are subject to a minimum one-year holding period for holding Putnam open-end fund shares.
Personal securities trading
Putnam employees may not buy or sell any security for their own account without clearing the proposed transaction in advance. Clearance is facilitated through the Personal Trading Assistant (PTA), the online pre-clearance system for equity securities, and directly with the Code of Ethics Administrator for fixed-income securities and transactions in Putnam closed-end funds. Certain securities are exempted from this pre-clearance requirement (e.g., shares of open-end (not closed-end) mutual funds).
Putnam employees may not buy any securities in an initial public offering or in a private placement, except in limited circumstances when prior written authorization is obtained.
Clearance must be obtained in advance, between 9:00 a.m. and 4:00 p.m. Eastern Time (ET) on the day of the trade. A clearance is valid only for the day it is obtained. Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Employees are prohibited from making more than 10 trades in individual securities each calendar quarter.
Short selling
Putnam employees are prohibited from short selling any security, whether or not it is held in a Putnam client portfolio, although short selling against broad market indexes and against the box are permitted. Note, however, that short selling against the box or otherwise hedging an investment in shares of Marsh & McLennan (MMC) stock is prohibited.
Confirmations of trading and periodic account statements
All Putnam employees must have their brokers send copies of confirmations and statements of personal securities transactions to the Code of Ethics Administrator. This also applies to members of the immediate family who share the same household as the employee or for whom the employee has investment discretion. Employees must contact the Code of Ethics Administrator to (a) obtain an authorization [407] letter, (b) provide instructions to the broker in establishing a personal brokerage account, and (c) enter a broker account profile into PTA.
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Quarterly and annual reporting
Employees will be notified if the following requirements apply. Upon commencement of employment and thereafter on an annual basis, Access Persons must disclose in the PTA system all personal securities holdings (even those to which pre-clearance may not apply). On a quarterly basis, Access Persons must disclose all their securities transactions in Personal Trading Assistant (PTA) within 15 days after the end of the quarter.
Personal securities transactions by Access Persons
and certain investment professionals
The Code imposes several special restrictions on personal securities transactions by Access Persons and certain investment professionals, which are summarized as follows. (Refer to Section II for details):
· 90-Day Short-Term Rule. No Access Person shall purchase and then sell at a profit, or sell and then repurchase at a lower price, any security or related derivative security within 90 calendar days.
· 7-Day Rule. Before a portfolio manager places an order to buy a security for any portfolio he manages, he must sell from his personal account any such security or related derivative security purchased within the preceding seven calendar days, and disgorge any profit from the sale.
· Blackout Rule. No portfolio manager may sell any security or related derivative security for her personal account until seven calendar days after the most recent purchase of that security or related derivative security for any portfolio she manages. No portfolio manager may buy any security or related derivative security for her personal account until seven calendar days after the most recent sale of that security or related derivative security by any portfolio she manages.
Analysts are also subject to the 7-Day and Blackout rules in connection with a recommendation to buy/outperform or sell/underperform a security.
· Contra-Trading Rule. No portfolio manager may sell out of her personal account any security or related derivative security that is held in any portfolio she manages unless she has received the written approval of an appropriate CIO and the Code of Ethics Officer.
· No portfolio manager may cause a Putnam client to take action for the managers personal benefit.
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Putnams Code Of Ethics
Putnam Investments is required by law to adopt a Code of Ethics. The purposes of the law are to ensure that companies and their employees comply with all applicable laws and to prevent abuses in the investment advisory business that can arise when conflicts of interest exist between the employees of an investment advisor and its clients. By adopting and enforcing a Code of Ethics, we strengthen the trust and confidence reposed in us by demonstrating that at Putnam, client interests come first.
The Code that follows represents a balancing of important interests. On the one hand, as a registered investment advisor, Putnam owes a duty of undivided loyalty to its clients, and must avoid even the appearance of a conflict that might be perceived as abusing the trust they have placed in Putnam. On the other hand, Putnam does not want to prevent conscientious professionals from investing for their own account where conflicts do not exist or that are immaterial to investment decisions affecting Putnam clients.
When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Putnam employees owe a fiduciary duty to Putnam clients. In most cases, this means that the affected employee will be required to forego conflicting personal securities transactions. In some cases, personal investments will be permitted, but only in a manner, which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting Putnam client portfolios or taking unfair advantage of the relationship Putnam employees have to Putnam clients.
The Code contains specific rules prohibiting defined types of conflicts. Because every potential conflict cannot be anticipated, the Code also contains general provisions prohibiting conflict situations. In view of these general provisions, it is critical that any individual who is in doubt about the applicability of the Code in a given situation seeks a determination from the Code of Ethics Officer about the propriety of the conduct in advance. The procedures for obtaining such a determination are described in Section VI of the Code.
It is critical that the Code be strictly observed. Not only will adherence to the Code ensure that Putnam renders the best possible service to its clients, it will help to ensure that no individual is liable for violations of law.
It should be emphasized that adherence to this policy is a fundamental condition of employment at Putnam. Every employee is expected to adhere to the requirements of this Code of Ethics despite any inconvenience that may be involved. Any employee failing to do so may be subject to disciplinary action, including financial penalties and termination of employment, as determined by the Code of Ethics Officer, the Code of Ethics Oversight Committee, or the Chief Executive Officer of Putnam Investments.
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Definitions
The words below are defined specifically for the purpose of Putnams Code of Ethics.
Access Persons
Each employee will be informed if he or she is considered an Access Person. The Code of Ethics Officer maintains a list of all Access Persons, categorized as follows:
· All employees of Putnams Investment Division
· All employees of Global Operations Services
· All employees of Putnam Investments Limited (PIL) and those based in Europe
· All employees who have access to My Putnam (unless access is limited to the Wall Street Journal via Factiva)
· All members of Putnams Executive Board
· Senior Managing Directors and Managing Directors of the Transfer Agency
· Senior Managing Directors and Managing Directors of Enterprise Services
· Senior Managing Directors and Managing Directors of Putnam Retail Management (PRM) and Putnam Global Investment Management (PGIM)
· All directors and officers of a registered investment advisor affiliate, i.e., Putnam Investment Management, LLC, (PIM), The Putnam Advisory Company, LLC (PAC), or Putnam Investments Limited (PIL)
· Employees who have systems access to non-public information about any clients purchase or sale of securities or to information regarding recommendations with respect to such purchases or sales
· Employees who have access to non-public information regarding the portfolio holdings of any Putnam-advised or sub-advised mutual fund
· Others as defined by the Legal and Compliance Department
Closed-end fund A fund with a fixed number of shares outstanding, and that does not redeem shares the way a typical mutual fund does. Closed-end funds typically trade like stocks on exchange.
Code of Ethics Administrator The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, nondiscretionary administration of this Code. The current Code of Ethics Administrator is Laura Rose, who can be reached at extension 11104.
Code of Ethics Officer The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Code. The Code of Ethics Officer shall be the Chief Compliance Officer or such other person as is designated by the Chief Executive Officer of Putnam Investments. If the Code of Ethics Officer is unavailable, the Deputy Code of Ethics Officer shall act in his stead. The Code of Ethics Officer is Tony Ruys de Perez. The Deputy Code of Ethics Officer is Kathleen Griffin.
Code of Ethics Oversight Committee Has oversight responsibility for administering the Code of Ethics. Members include the Code of Ethics Officer and other members of Putnams senior management approved by the Chief Executive Officer of Putnam.
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Considered Securities Limited Sale Rule This rule permits a sale (but not a purchase) of a security up to 250 shares per day if the market capitalization of the security is $500 million to $5 billion.
Discretionary Account An account for which the holder gives his/her broker or investment advisor (but not an immediate family member) complete authority to make management decisions to buy and sell securities (also called controlled account or managed account).
Exchange Traded Fund (ETF) A fund that tracks an index, but can be traded like a stock. ETFs always bundle together the securities that are in an index. Examples include (but are not limited to): SPDRs, WEBs, QQQQs, iShares, and HLDRs.
NOTE:
Excluded from pre-clearance but not from reporting requirements are: exchange-traded index funds (ETFs) containing a portfolio of securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQQs, iShares, and HLDRs), and any option on a broad-based market index or an exchange-traded futures contract or option. Country funds, as well as other funds that are not tied to an index, are considered closed-end funds and are subject to pre-clearance and reporting requirements. (See Section I.A, Rule 1: Pre-clearance Requirements for more information.)
Immediate family Spouse, domestic partner, minor children, or other relatives living in the same household as the Putnam employee. All pre-clearance and reporting rules apply to immediate family members.
Narrow-based derivative A future, swap, put or call option, or similar derivative instrument whose return is determined by reference to fewer than 25 underlying issuers. Single stock futures and ETFs based on less than 25 issuers are included.
Personal Trading Assistant (PTA) The Personal Trading Assistant (PTA) is an internet application designed for employees to manage personal trading activities, such as pre-clearance, reporting, and certifications, in accordance with regulatory requirements and Putnams Code of Ethics.
Policy statements The Insider Trading Prohibitions Policy Statement is attached to the Code as Appendix A and the Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds is attached to the Code as Appendix B.
Private placement Any offering of a security not offered to the public and not requiring registration with the relevant securities authorities.
Purchase or sale of a security Any acquisition or transfer of any interest in the security for direct or indirect consideration; this includes the writing of an option. This definition includes any transfer of a security by an employee as a gift to an individual or a charity.
Putnam Any or all of Putnam, LLC and its subsidiaries, any one of which shall be a Putnam company.
Putnam client Any of the Putnam mutual funds, or any advisor, trust, or other client for whom Putnam manages money.
Putnam employee (or employee) Any employee of Putnam.
Restricted list The list established in accordance with Rule 1 of Section I.A.
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Security The following instruments are defined as securities and require pre-clearance:
· Any type or class of equity or debt security, e.g., corporate or municipal bonds.
· Any rights relating to a security, such as warrants and convertible securities
· Closed-end funds
· Any narrow-based derivative, e.g., a put or call option on a single security Pre-clearance and reporting is not required (unless otherwise noted) for:
· Currencies, Treasuries (T-bills), and direct and indirect obligations of the U.S. government and its agencies
· Direct and indirect obligations of any member country in the Organization for Economic Co-Operation and Development (OECD), commercial paper, certificates of deposit (CDs), repurchase agreements, bankers acceptances, and other money market instruments
Selling Short The sale of a security that the investor does not own in order to take advantage of an anticipated decline in the price of the security. In order to sell short, the investor must borrow the security from his broker in order to make delivery to the buyer.
Selling Short Against the Box A short sale where the investor owns the security, but does not want to use the shares for delivery, so he borrows them from the brokerage firm.
Transaction for a personal account Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a general partner or a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f ) for any account other than a Putnam client account, which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion.
Rule of construction regarding time periods Unless the context indicates otherwise, time periods used in the Code of Ethics shall be measured inclusively, i.e., beginning on the date from which the measurement is made.
EXCEPTIONS
Unless the context indicates otherwise, there will be no exceptions to the rules.
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Section I Personal Securities Rules for All Employees
A. Pre-clearance
Rule 1: Pre-clearance Requirements
Pre-clearance is required for the following securities:
· MMC Stock
· Any type or class of equity or debt security, including corporate and municipal bonds
· Any rights relating to a security, such as warrants and convertible securities
· Closed-end funds including Putnam closed-end funds. Country funds as well as other funds that are not tied to an index are considered closed-end funds and are subject to pre-clearance and reporting requirements, e.g., India Fund (INF), Morgan Stanley Asia Pacific Fund (APF), Central Europe and Russia Fund (CEE). Certain closed-end funds which sometimes are referred to as closed-end ETFs, such as Blackrock (BKK), Western Asset Emerging (ESD), or Eaton Vance Muni Trust (EVN), are also subject to pre-clearance and reporting requirements.
· Any narrow-based derivative, e.g., a put or call option on a single security
· Any security donated as a gift to an individual or a charity
Pre-clearance is not required for:
· Open-end mutual funds
· Currencies, Treasuries (T-bills), and direct and indirect obligations of the U.S. government and its agencies
· Direct and indirect obligations of any member of the country of the Organization for Economic Co-Operation and Development (OECD), commercial paper, certificates of deposit (CDs), repurchase agreements, bankers acceptances, and other money market instruments
The following are excluded from pre-clearance but not from reporting requirements:
· Exchange-traded index funds (ETFs) containing a portfolio of securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQQs, iShares, and HLDRs), and any option on a broad-based market index or an exchange-traded futures contract or option thereon.
Rule 2: Personal Trading Assistant (PTA) System and Restricted List
No Putnam employee shall purchase or sell for his personal account any security requiring pre-clearance under Rule 1 without prior clearance obtained through procedures set forth by the Code of Ethics Officer. Equity securities are pre-cleared through the PTA pre-clearance system (under the @Putnam tab at www.ibenefitcenter.com). Fixed-income securities must be pre-cleared by calling the Code of Ethics Administrator. There are special rules for trading in Putnam closed-end funds. (See Appendix B.) Subject to the limited exceptions below, no clearance will be granted for securities appearing on the Restricted List. Securities will be placed on the Restricted List in the following circumstances:
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(a) When orders to purchase or sell such security have been entered for any Putnam client or the security is being actively considered for purchase for any Putnam client, unless the security is a non-convertible investment-grade (rated at least BBB by S&P or Baa by Moodys) fixed-income investment;
(b) When such a security is a voting security of a corporation in the banking, savings and loan, communications, public utilities, or gaming (i.e., casinos) industries, if holdings of Putnam clients in that corporation exceed 7%;
(c) When, in the judgment of the Code of Ethics Officer, other circumstances warrant restricting personal transactions of Putnam employees in a particular security;
(d) When required under the Policy Statement Concerning Insider Trading Prohibitions. (See Appendix A.)
IMPLEMENTATION
An employee wishing to trade any equity securities for his personal account shall first obtain clearance through the Personal Trading Assistant (PTA) system. The system may be accessed online either at www.ibenefitcenter.com by clicking on Employee Essentials under the @Putnam tab and selecting Access PTA, or at iworkplace. Employees may pre-clear securities between 9:00 a.m. and 4:00 p.m. ET. Requests to make personal securities transactions may not be made using the system or presented to the Code of Ethics Administrator before 9:00 a.m. or after 4:00 p.m. ET.
Pre-clearance must be made by calling the Code of Ethics Administrator for fixed-income (municipal and corporate bonds, including non-convertible investment-grade bonds rated BBB by S&P or Baa by Moodys).
The PTA system will inform the employee whether the security may be traded and whether trading in the security is subject to the Large Cap limitation or the Considered List Limited Sale Exception. The response of the pre-clearance system as to whether a security appears on the Restricted List and, if so, whether it is eligible for the exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VI, regarding the request to trade a particular security.
A clearance is only valid for trading on the day it is obtained. Trades in any security by employees in Asian or European offices of Putnam or trades by any employee in securities listed on Asian or European stock exchanges, however, may be executed within one business day after pre-clearance is obtained.
If a security is not on the Restricted List, other classes of securities of the same issuer (e.g., preferred or convertible preferred stock) may be on the Restricted List. It is the employees responsibility to identify with particularity the class of securities for which permission is being sought for a personal investment.
If the PTA system does not recognize a security, or if an employee is unable to use the system or has any questions with respect to the system or pre-clearance, the employee may consult the Code of Ethics Administrator. The Code of Ethics Administrator shall not have authority to answer any questions about a security other than whether trading is permitted. The response of the Code of Ethics Administrator as to whether a security appears on the Restricted List and, if so, whether it is eligible for any applicable exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VI, regarding the request to trade a particular security.
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EXCEPTIONS
A. Large Cap Exemption. If a security appearing on the Restricted List is an equity security for which the issuer has a market capitalization (defined as outstanding shares multiplied by current price per share) of over $5 billion, then upon clearance approval, the Putnam employee may not trade more than 1,000 shares of the security for the day.
B. Considered List Limited Sale Rule. As the Putnam list of considered securities is broad and inclusive, employees will be permitted to make limited sales (250 shares) but not purchases of securities held in their accounts if trading is blocked solely by the Considered List of securities.
C. Pre-clearing Transactions Effected by Share Subscription. Trades of securities made by subscription rather than on an exchange are limited to issuers having a market capitalization of $5 billion or more and are subject to the 1,000 share limit. The following are procedures to comply with Rules 1 and 2 when effecting a purchase or sale of shares by subscription:
· The Putnam employee must pre-clear the trade on the day he or she submits a subscription to the issuer rather than on the actual day of the trade since the actual day of the trade typically will not be known to the employee who submits the subscription. The employee must contact the Code of Ethics Administrator at the time of pre-clearance and will be told whether the purchase is permitted (in the case of a corporation having a market capitalization of $5 billion or more) or not permitted (in the case of a smaller capitalization issuer).
· The subscription for any purchase or sale of shares must be reported on the Access Persons quarterly personal securities transaction report, noting the trade was accomplished by subscription.
· Because no brokers are involved in the transaction, the confirmation requirement will be waived for these transactions, although the Putnam employee must provide the Legal and Compliance Department with any transaction summaries or statements sent by the issuer.
D. Trades in Approved Discretionary Brokerage Accounts. A transaction does not need to be pre-cleared if it takes place in an account that the Code of Ethics Officer has approved in writing as exempt from the pre-clearance requirement. In the sole discretion of the Code of Ethics Officer, accounts that will be considered for exclusion from the pre-clearance requirement are only those for which an employees securities broker or investment advisor has complete discretion (a discretionary account). Employees wishing to seek such an exemption must send a written request to the Code of Ethics Administrator and meet the following conditions: (i) the employee certifies annually in writing that the employee has no influence over the transactions in the discretionary account and is not aware of the transactions in the discretionary account prior to their execution; (ii) the compliance department of the emp loyees broker or investment advisor certifies annually in writing that the employee has no influence over the transactions in the discretionary account and is not aware of the transactions in the discretionary account prior to their execution; and (iii) each calendar quarter, the broker or investment advisor sends Putnams Code of Ethics Administrator copies of each quarterly statement for the discretionary account.
COMMENTS
· Pre-clearance. Subpart (a) of Rule 2 is designed to avoid the conflict of interest that might occur when an employee trades for his personal account a security that currently is being
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traded or is likely to be traded for a Putnam client. Such conflicts arise, for example, when the trades of an employee might have an impact on the price or availability of a particular security, or when the trades of the client might have an impact on price to the benefit of the employee. Thus, exceptions involve situations where the trade of a Putnam employee is unlikely to have an impact on the market.
· Regulatory Limits. Owing to a variety of federal statutes and regulations in the banking, savings and loan, communications, and gaming industries, it is critical that accounts of Putnam clients do not hold more than 10% of the voting securities (7% for public utilities) of any issuer in those industries. Subpart (b) of this rule limits employees personal trades to sales of shares in these areas because of the risk that the personal holdings of Putnam employees may be aggregated with Putnam holdings. Putnams so-called 7% rule will allow the regulatory limits to be observed.
· Options. For the purposes of this Code, options are treated like the underlying security. Thus, an employee may not purchase, sell, or write option contracts for a security that is on the Restricted List. The automatic exercise or assignment of an options contract (the purchase or writing of which was previously pre-cleared) does not have to be pre-cleared. Note, however, that the purchase or sale of securities obtained through the exercise of options must be pre-cleared.
· Involuntary Transactions. Involuntary personal securities transactions are exempted from the Code. Special attention should be paid to this exemption. (See Section I.D.)
· Tender Offers. This Rule does not prohibit an employee from tendering securities from his personal account in response to any and all tender offers, even if Putnam clients are also tendering securities. If tendering a security in response to a partial tender offer, an employee must pre-clear the trade on the day she submits instructions to her broker, and she will be prohibited from trading if Putnam clients are also tendering the same security.
· Gifts of Securities. Pre-clearance is required for securities donated as a gift to a charitable organization or to an individual. Employees are required to provide a gift transfer certificate of the transaction (if produced) to the Code of Ethics Administrator along with an account statement reflecting the gift transaction. Receipt of a securities gift should be reported on the Access Persons Annual Holdings Report. Employees who receive a securities gift must report the gift to the Code of Ethics Administrator to make the necessary adjustments in PTA and Access Persons must disclose this holding in PTA.
Rule 3: Marsh & McLennan (MMC) Securities
All employees trading in MMC securities must be pre-cleared in the PTA system. MMC securities include stock, options, and any other securities such as debt. Trades in the MMC Employee Stock Purchase Plan and in all Putnam and MMC employee benefit and bonus plans, i.e., reallocating, rebalancing, or exchanging in and out of the 401(k)/Profit/Bonus Plan, etc., are included in this requirement.
Pre-clearance of MMC is required when, for example, you:
· Sell MMC out of the Stock Purchase Plan
· Exchange MMC shares into or out of your 401(k)/Profit Sharing/Bonus Plan
· Reallocate your Putnam fund choices, which results in a buy or sell of MMC from your 401(k)/Profit Sharing/Bonus Plan
· Trade in MMC securities in other accounts held outside Putnam
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Pre-clearance is not required when you:
· Increase/decrease the amount of money that is automatically deducted (systematic plan) from your paycheck and used to purchase MMC shares in your 401(k)/Profit Sharing/Stock Purchase Plan
· Maintain standing instructions to have money deducted (automatic payroll deductions) and want to increase or decrease the percentage allocated, or instruct to reduce it to 0 in your 401(k)/Profit Sharing/Stock Purchase Plan
· Apply for a loan and/or make withdrawals of the stock from your 401(k)/Profit Sharing Plan
COMMENTS
All transactions of MMC require pre-clearance in PTA before you contact your broker to trade shares in an outside brokerage account or before contacting Citigroup Smith Barney to sell shares out of your Stock Purchase Plan. Also, if MMC is one of your choices in the 401(k)/Profit Sharing Plan, all exchanges in/out must be cleared. Even though clearance is not required for Putnam mutual funds, if you do not wish to include MMC shares when rebalancing any of your fund choices, which will result in an automatic exchange of your MMC shares, you must remember to exclude MMC shares prior to submitting your changes. If you are investing online, check the box to exclude MMC; or if you are investing by telephone with a Putnam representative, ask to exclude MMC before rebalancing the funds.
Additional MMC-related policies:
· MMC securities may from time to time be restricted due to the federal laws that govern trading on inside information. All transactions are prohibited during this period.
· Members of the Executive Board of Directors and members of the Chief Financial Officers senior staff may not trade in MMC securities during the period between the calendar quarter-end and the public announcement of MMCs earnings for the quarter.
· Transactions in MMC securities that are held in Putnams internal plans are not subject to the 90-Day Short-Term Rule (applicable to Access Persons only) or to the holding periods that apply to Putnam mutual funds.
B. Prohibited Transactions
Rule 1: Short-Selling Prohibition
Putnam employees are prohibited from short selling any security in their own account, whether or not the security is held in a Putnam client portfolio. Employees are prohibited from hedging investments made in securities of MMC.
EXCEPTION
Short selling against broad market indexes (such as the Dow Jones Industrial Average, the NASDAQ index, and the S&P 100 and 500 indexes) and short selling against the box are permitted (except that short selling shares of MMC against the box is not permitted).
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Rule 2: Initial Public Offerings Prohibition
No Putnam employee shall purchase any security for her personal account in an initial public offering. Employees are also restricted from participating in Initial Public Offerings via a Discretionary Account.
EXCEPTION
Pre-existing Status Exception. A Putnam employee shall not be barred by this Rule or by Rule 2(a) of Section I.A. from purchasing securities for her personal account in connection with an initial public offering of securities by a bank or insurance company when the employees status as a policyholder or depositor entitles her to purchase securities on terms more favorable than those available to the general public, in connection with the banks conversion from mutual or cooperative form to stock form, or the insurance companys conversion from mutual to stock form, provided that the employee has had the status entitling her to purchase on favorable terms for at least two years. This exception is only available with respect to the value of bank deposits or insurance policies that an employee owns before the announcement of the initial public offering. This exception does not apply, however, if the security appears on th e Restricted List in the circumstances set forth in subparts (b), (c), or (d) of Section I.A., Rule 2.
COMMENTS
· The purpose of this Rule is twofold. First, it is designed to prevent a conflict of interest between Putnam employees and Putnam clients who might be in competition for the same securities in a limited public offering. Second, the Rule is designed to prevent Putnam employees from being subject to undue influence as a result of receiving favors in the form of special allocations of securities in a public offering from broker-dealers who seek to do business with Putnam.
· Purchases of securities in the immediate after-market of an initial public offering are not prohibited, provided they do not constitute violations of other provisions of the Code of Ethics. For example, participation in the immediate after-market as a result of a special allocation from an underwriting group would be prohibited by Section III, Rule 3, concerning gifts and other favors.
· Public offerings subsequent to initial public offerings are not deemed to create the same potential for competition between Putnam employees and Putnam clients because of the pre-existence of a market for the securities.
Rule 3: Private Placement Pre-approval Requirements
No Putnam employee shall purchase any security for his personal account in a limited private offering or private placement without prior approval of the Code of Ethics Officer. Privately placed limited partnerships and funds such as private equity or hedge funds are specifically included in this Rule.
COMMENTS
· The purpose of this Rule is to prevent a Putnam employee from investing in securities for his own account pursuant to a limited private offering that could compete with or disadvantage Putnam clients, and to eliminate any incentives Putnam employees might have to favor those who can affect access to limited offerings.
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· Exemptions to the prohibition will generally not be granted where the proposed investment relates directly or indirectly to investments by a Putnam client, or where individuals involved in the offering (including the issuers, broker, underwriter, placement agent, promoter, fellow investors, and affiliates of the foregoing) have any prior or existing business relationship with Putnam or a Putnam employee, or where the Putnam employee believes that such individuals may expect to have a future business relationship with Putnam or a Putnam employee.
· An exemption may be granted, subject to reviewing all the facts and circumstances, for investments in:
(a) Pooled investment funds, including hedge funds, subject to the condition that an employee investing in a pooled investment fund would have no involvement in the activities or decision-making process of the fund except for financial reports made in the ordinary course of the funds business, and subject to the condition that the hedge fund does not invest significantly in registered investment companies.
(b) Private placements where the investment cannot relate, or be expected to relate, directly or indirectly to Putnam or investments by a Putnam client.
· Employees who apply for an exemption will be expected to disclose to the Code of Ethics Officer in writing all facts and relationships relating to the proposed investment.
· Applications to invest in private placements will be reviewed by the Code of Ethics Oversight Committee. This review will take into account, among other factors, the considerations described in the preceding comments.
Rule 4: Trading with Material Non-public Information
No Putnam employee shall purchase or sell any security for her personal account or for any Putnam client account while in possession of material, non-public information concerning the security or the issuer. Please read Appendix A, Policy Statement Concerning Insider Trading Prohibitions.
Rule 5: No Personal Trading with Client Portfolios
No Putnam employee shall purchase from or sell to a Putnam client any securities or other property for his personal account, nor engage in any personal transaction to which a Putnam client is known to be a party, or in which the transaction may have a significant relationship to any action taken by a Putnam client.
IMPLEMENTATION
It is the responsibility of every Putnam employee to make inquiry prior to any personal transaction in order to satisfy himself that the requirements of this Rule have been met.
COMMENT
This Rule is required by federal law. It does not prohibit a Putnam employee from purchasing any shares of an open-end Putnam fund. The policy with respect to employee trading in Putnam closed-end funds is attached as Appendix B.
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Rule 6: Holding Putnam Mutual Fund Shares
Putnam employees may not hold shares of Putnam open-end U.S. mutual funds other than through accounts maintained at Putnam. Employees placing purchase orders in shares of Putnam open-end funds must place such orders through Putnam and not through an outside broker or other intermediary. Employees redeeming or exchanging shares of Putnam open-end funds must place those orders through Putnam and not through an outside broker or other intermediary. For transfer instructions, contact a Putnam Preferred Client Services (PCS) representative at 1-800-634-1590.
REMINDER
For purposes of this Rule, employee includes:
· Members of the immediate family of a Putnam employee who share the same household as the employee or for whom the Putnam employee has investment discretion (family member);
· Any trust in which a Putnam employee or family member is a trustee with investment discretion and in which such Putnam employee or any family members are collectively beneficiaries;
· Any closely held entity (such as a partnership, limited liability company, or corporation) in which a Putnam employee and his or her family members hold a controlling interest and with respect to which they have investment discretion; and
· Any account (including any retirement, pension, deferred compensation, or similar account) in which a Putnam employee or family member has a substantial economic interest and over which the Putnam employee or family member exercises investment discretion.
COMMENTS
These requirements also apply to:
· Self-directed IRA accounts holding Putnam fund shares;
· Variable insurance accounts that invest in Putnam Variable Trusts such as the Putnam/Hartford Capital Manager Programs. Employees must designate Putnam Retail Management as the broker of record for all such accounts and disclose these holdings in the PTA system.
NOTE:
Employees are required to seek permission from the Code of Ethics Officer to hold Putnam funds in variable trusts outside of Putnam.
EXCEPTION
Retirement, pension, deferred compensation, and similar accounts that cannot be legally transferred to Putnam are not subject to the requirement. For example, a spouse of a Putnam employee may have a 401(k)/Profit Sharing Plan with her employer that invests in Putnam funds. Any employee who continues to hold shares in open-end Putnam funds outside of Putnam must notify the Code of Ethics Officer in writing of the account information, provide the reason why the account cannot be transferred to Putnam, and arrange for a quarterly statement of transactions in such account to be sent to the Code of Ethics Administrator.
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Rule 7: Putnam Mutual Fund Employee Restrictions
(a) Employees (defined in Rule 6) may not, within a 90-calendar day period, make a purchase followed by a sale or a sale followed by a purchase of shares of the same open-end Putnam mutual fund, even if the transactions occur in different accounts.
(b) Employees who are Access Persons may not, within a one-year period, make a purchase followed by a sale or a sale followed by a purchase of shares of the same open-end Putnam mutual fund or of shares of any U.S. registered mutual fund to which Putnam acts as advisor or sub-advisor, even if the transactions occur in different accounts.
(c) All employees are required to link their immediate family members accounts holding Putnam mutual funds to comply with the disclosure requirements. These accounts are also subject to the 90-day and one-year rules. To link these accounts, log on to www.ibenefitcenter.com, click on @Putnam, and select Employee Essentials/Linked Mutual Fund Accounts. You are required to confirm the information and will be prompted to add any accounts that you or your family members have that should be linked or delink accounts that you or your family members have closed.
COMMENTS
This Rule applies to transactions by a Putnam employee and family members as defined in the Code in any type of account including retail, IRA, variable annuity, and 401(k)/Profit Sharing Plan, as well as any deferred compensation accounts, and the restrictions apply across all accounts maintained by an employee and family members:
· An employee who buys shares of an open-end Putnam mutual fund may not sell any shares of the same mutual fund until 90 calendar days have passed, or one year for Access Persons.
· Example: If an employee buys shares of a Putnam fund on Day 1 for a retail account and then sells (by exchange) shares of the same fund for his or her 401(k)/Profit Sharing Plan accounts on Day 85, the employee has violated the rule.
· Similarly, an employee who sells shares of an open-end Putnam mutual fund may not buy any shares of the same mutual fund until 90 calendar days have passed, or one year for Access Persons.
· The purpose of these blackout period restrictions is to prevent any market timing or the appearance of any market timing activity.
· This Rule applies to transactions by a Putnam employee and his or her family members as defined in the Code in any type of account including retail, IRA, variable annuity, and 401(k)/Profit Sharing Plan, as well as any deferred compensation accounts.
· The minimum sanction for an initial violation of the blackout period will be disgorgement of any profit made on the transaction. Additional sanctions may apply, including termination of employment.
EXCEPTIONS
A. The restrictions do not apply to Putnams money market funds and Putnam Stable Value Fund.
B. 401(k)/Profit Sharing Plan Contributions and Payroll Deductions: The 90-day or one year restriction is not triggered by the initial allocation of regular employee or employer contributions or forfeitures to an employees account under the terms of Putnam employee
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benefit plans or a Putnam payroll-deduction direct-investment program; later exchanges of these contributions will be subject to either the 90-day or one-year blackout period.
C. Systematic Programs: The restrictions do not apply with respect to shares sold or acquired as a result of participation in a systematic program for contributions, withdrawals, or exchanges, provided that an election to participate in any such program and the participation dates of the program are not changed more often than quarterly after the program is elected by the employee. Access Persons may elect a quarterly or semiannual rebalancing program although it may only be changed on an annual basis.
D. Employee Benefit Plan Withdrawals and Distributions: No restriction applies with respect to shares sold for withdrawals, loans, or distributions under the terms of Putnam employee benefit plans.
E. Dividends, Distributions, Mergers, and Share Class Conversions: No restriction applies with respect to the acquisition of shares as a result of reinvestment of dividends, distributions, mergers, conversions of share classes, or other similar actions. Subsequent transactions with respect to the shares will be covered.
F. College Savings Program: Redemptions from an employees college savings 529 plan to pay for qualified educational expenses for the beneficiary of the account (and redemptions due to death or disability) are exempt from the 90-day and one-year restrictions applicable to Putnam mutual funds. Qualified redemptions include:
· Tuition
· School fees
· Books
· Supplies and equipment required for enrollment
· Room and board
· Death
· Disability
G. Special Situations: In special situations as determined from time to time by Putnams Code of Ethics Oversight Committee, exceptions may by granted to the blackout periods as a result of death, disability, or special circumstances (such as personal hardship).
Employees may request an exception by submitting a written request to the Code of Ethics Officer.
Rule 8: Special Orders
Good Until Canceled (GTC) Limit Orders are prohibited.
Any order not executed on the day of pre-clearance must be resubmitted for pre-clearance before being executed on a subsequent day. Good until canceled limit orders are prohibited because of the potential failure to pre-clear.
EXCEPTION
Same-day limit orders are permitted.
Rule 9: Excessive Trading
Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. Employees are prohibited from making more than 10 trades in
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individual securities in any given quarter. For the purpose of this rule, an employee is prohibited from engaging in more than a total of 10 trades in all accounts the employee may hold (including those accounts held by his immediate family members), not 10 trades per individual account.
EXCEPTION
For the purpose of calculating the number of trades in any quarter, trading the same security in the same direction (buy or sell) over a period of five business days will be counted as one transaction.
Trades in ETFs containing 25 or more issuers and trades of MMC stock in Putnam internal plans are not counted towards the 10 trade limit.
COMMENT
Although a Putnam employees excessive trading may not itself constitute a conflict of interest with Putnam clients, Putnam believes that its clients confidence in Putnam will be enhanced and that the likelihood of Putnam achieving better investment skills results for its clients over the long term will be increased if Putnam employees rely on their investment skills, as opposed to their trading skills in transactions for their own account. Moreover, excessive trading by a Putnam employee for his or her own account diverts an employees attention from the responsibility of servicing Putnam clients, and increases the possibilities for transactions that are in actual or apparent conflict with Putnam client transactions. Short-term trading is strongly discouraged, and employees are encouraged to take a long-term view.
Rule 10: Spread Betting
PIL employees may not enter into any spread betting contracts on financial instruments.
COMMENT
Spread betting provides exposure to the movement of an index or security price without holding any form of certificate.
This Rule guards against the danger that a Putnam employee may be in violation of the Code of Ethics by virtue of his spread betting transactions. Please note that this restriction also applies to the spouse of a Putnam employee and any relatives of a Putnam employee living in the same household as the employee, as their transactions are covered by the Code of Ethics. (See page 2.)
C. Discouraged Transaction
Rule 1: Naked Options
Putnam employees are strongly discouraged from engaging in writing (selling) naked options for their personal accounts.
Naked option transactions are particularly dangerous, because a Putnam employee may be prevented by the restrictions in this Code of Ethics from covering the naked option at the appropriate time. All employees should keep in mind the limitations on their personal securities trading imposed by this Code when contemplating such an investment strategy.
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Engaging in naked options transactions on the basis of material, non-public information is prohibited. (See Appendix A, Policy Statement Concerning Insider Trading Prohibitions.)
D. Exempted Transactions
Rule 1: Involuntary Transactions
Transactions that are involuntary on the part of a Putnam employee are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C.
COMMENTS
This exemption is based on categories of conduct that the Securities and Exchange Commission does not consider abusive.
· Examples of involuntary personal securities transactions include:
(a) Sales out of the brokerage account of a Putnam employee as a result of a bona fide margin call, provided that withdrawal of collateral by the Putnam employee within the ten days previous to the margin call was not a contributing factor to the margin call;
(b) Purchases arising out of an automatic dividend reinvestment program of an issuer of a publicly traded security.
· Transactions by a trust in which the Putnam employee (or a member of his immediate family) holds a beneficial interest, but for which the employee has no direct or indirect influence or control with respect to the selection of investments, are involuntary transactions. In addition, these transactions do not fall within the definition of personal securities transactions. (See Appendix A, Definitions.)
· A good-faith belief on the part of the employee that a transaction was involuntary will not be a defense to a violation of the Code of Ethics. In the event of confusion as to whether a particular transaction is involuntary, the burden is on the employee to seek a prior written determination of the applicability of this exemption. The procedures for obtaining such a determination appear in Section VI.
Rule 2: Special Exemptions
Transactions that have been determined, in writing by the Code of Ethics Officer before the transaction occurs, to be no more than remotely harmful to Putnam clients because the transaction would be very unlikely to affect a highly institutional market, or because the transaction is clearly not related economically to the securities to be purchased, sold, or held by a Putnam client, are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C.
IMPLEMENTATION
An employee may seek an ad hoc exemption under this Rule by following the procedures in Section VI.
COMMENTS
· This exemption is also based upon categories of conduct that the Securities and Exchange Commission does not consider abusive.
· The burden is on the employee to seek a prior written determination that the proposed transaction meets the standards for an ad hoc exemption set forth in this Rule.
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Section II Additional Special Rules for Personal Securities
Transactions
A. Access Persons and Certain Investment Professionals
Access Persons include all investment professionals and other employees as defined on page 1.
Rule 1: 90-Day Short-Term Rule
Access Persons may not sell a security at a profit within 90 days of purchase or buy a security at a price below which he or she sold it within the past 90 days.
EXCEPTION
None, unless prior written approval from the Code of Ethics Officer is obtained. Exceptions may be granted on a case-by-case basis when no abuse is involved and the equities of the situation support an exemption. For example, although an Access Person may buy a stock as a long-term investment, that stock may have to be sold involuntarily due to unforeseen activity such as a merger.
IMPLEMENTATION
A. The 90-Day Short-Term Rule applies to all Access Persons, as defined in the Definitions section of the Code.
B. Calculation of whether there has been a profit is based upon the market prices of the securities. The calculation includes commissions and other sales charges.
C. As an example, an Access Person would not be permitted to sell a security at $12 that he purchased within the prior 90 days for $10. Similarly, an Access Person would not be permitted to purchase a security at $10 that she had sold within the prior 90 days for $12.
COMMENTS
· The prohibition against short-term trading profits by Access Persons is designed to minimize the possibility that they will capitalize inappropriately on the market impact of trades involving a client portfolio about which they might possibly have information.
· Although Chief Investment Officers, portfolio managers, and analysts may sell securities at a profit within 90 days of purchase in order to comply with the requirements of the 7-Day Rule applicable to them (described below), the profit will have to be disgorged to charity under the terms of the 7-Day Rule.
B. Certain Investment Professionals
Rule 2: 7-Day Rule
(a) Before a portfolio manager (including a Chief Investment Officer with respect to an account he manages) places an order to buy a security for any Putnam client portfolio that he manages, he must sell that security or related derivative security if he has purchased it in his personal account within the preceding seven calendar days.
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(b) Analysts: Before an analyst makes a purchase or an outperform recommendation for a security (including designation of a security for inclusion in the portfolio of Putnam Research Fund), he must sell that security or related derivative security if he has purchased it in his personal account within the preceding seven calendar days.
COMMENTS
· This Rule applies to portfolio managers (including Chief Investment Officers with respect to accounts they manage) in connection with any purchase, no matter how small, in any client account managed by that portfolio manager or CIO (even so-called clone accounts). In particular, it should be noted that the requirements of this Rule also apply with respect to purchases in client accounts, including clone accounts, resulting from cash flows. To comply with the requirements of this Rule, it is the responsibility of each portfolio manager or CIO to be aware of the placement of all orders for purchases of a security by client accounts that he or she manages for seven days following the purchase of that security for his or her personal account.
· An investment professional who must sell securities to be in compliance with the 7-Day Rule must absorb any loss and disgorge to charity any profit resulting from the sale. The recipient charity will be chosen by the Code of Ethics Officer.
· This Rule is designed to avoid even the appearance of a conflict of interest between an investment professional and a Putnam client. A greater burden is placed on these professionals given their positions in the organization. Transactions executed for the employees personal account must be conducted in a manner consistent with the Code of Ethics and in such a manner as to avoid any actual or perceived conflict of interest or any abuse of the employees position of trust and responsibility.
· Portfolio manager is used in this Section as a functional label, and is intended to cover any employee with authority to authorize a trade on behalf of a Putnam client, whether or not such employee bears the title portfolio manager. Analyst is also used in this Section as a functional label, and is intended to cover any employee who is not a portfolio manager but who may make recommendations regarding investments for Putnam clients.
Rule 3: Blackout Rule
(a) Portfolio Managers: No portfolio manager (including Chief Investment Officers with respect to accounts they manage) shall: (i) sell any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent purchase of that security or related derivative security by any Putnam client portfolio she manages or co-manages; or (ii) purchase any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent sale of that security or related derivative security from any Putnam client portfolio that she manages or co-manages.
(b) Analysts: No analyst shall: (i) sell any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent buy or outperform recommendation for that security or related derivative security (including designation of a security for inclusion in the portfolio of Putnam Research Fund); or (ii) purchase any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent sell or underperform recommendation for that security or related derivative security (including the removal of a security from the portfolio of Putnam Research Fund).
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COMMENTS
· This Rule applies to portfolio managers (including Chief Investment Officers with respect to accounts they manage) in connection with any purchase, no matter how small, in any client account managed by that portfolio manager or CIO (even clone accounts). In particular, it should be noted that the requirements of this rule also apply with respect to transactions in client accounts, including clone accounts, resulting from cash flows. In order to comply with the requirements of this Rule, it is the responsibility of each portfolio manager and CIO to be aware of all transactions in a security by client accounts that he or she manages that took place within the seven days preceding a transaction in that security for his or her personal account.
· This Rule is designed to prevent a Putnam portfolio manager or analyst from engaging in personal investment conduct that appears to be counter to the investment strategy she is pursuing or recommending on behalf of a Putnam client.
Rule 4: Contra-Trading Rule
(a) Portfolio Managers: No portfolio manager shall, without prior clearance and written approval, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio that he manages or co-manages.
(b) Chief Investment Officers: No Chief Investment Officer shall, without prior clearance and written approval, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio managed in his investment group.
IMPLEMENTATION
A. Individuals Authorized to Give Approval. Prior to engaging in any such sale, a portfolio manager shall seek written approval of the proposed sale. In the case of a portfolio manager, prior written approval of the proposed sale shall be obtained from a Chief Investment Officer to whom he reports or, in his absence, another Chief Investment Officer. In the case of a Chief Investment Officer, prior written approval of the proposed sale shall be obtained from another Chief Investment Officer. In addition to the foregoing, prior written approval must also be obtained from the Code of Ethics Officer.
B. Contents of Written Approval. In every instance, use either the attached form of written approval known as Appendix C in this Booklet or such other form as the Code of Ethics Officer shall designate. The written approval should be signed by the Chief Investment Officer giving approval and dated when such approval was given, and shall state, briefly, the reasons why the trade was allowed and why the investment conduct pursued by the portfolio manager or Chief Investment Officer was deemed inappropriate for the Putnam client account controlled by the individual seeking to engage in the transaction for his personal account. Such written approval shall be sent by the Chief Investment Officer approving the transaction to the Code of Ethics Officer, for her approval, within 24 hours or as promptly as circumstances permit. Approvals obtained after a transaction has been completed, or while it is in process, will not satisfy the requirements of this Rule.
COMMENT
This Rule, like Rule 3 of this section, is designed to prevent a Putnam portfolio manager from engaging in personal investment conduct that appears to be counter to the investment strategy that he is pursuing on behalf of a Putnam client.
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Rule 5: No Personal Benefit
No portfolio manager shall cause, and no analyst shall recommend, a Putnam client to take action for the portfolio managers or analysts own personal benefit.
COMMENTS
· A portfolio manager who trades in, or an analyst who recommends, particular securities for a Putnam client account in order to support the price of securities in his personal account, or who front runs a Putnam client order is in violation of this Rule. Portfolio managers and analysts should be aware that this Rule is not limited to personal transactions in securities (as that word is defined in the Definitions section). Thus, a portfolio manager or analyst who front runs a Putnam client purchase or sale of obligations of the U.S. government is in violation of this Rule. U.S. government obligations are excluded from the definition of security.
· This Rule is not limited to instances when a portfolio manager or analyst has malicious intent. It also prohibits conduct that creates an appearance of impropriety. Portfolio managers and analysts who have questions about whether proposed conduct creates an appearance of impropriety should seek a prior written determination from the Code of Ethics Officer, using the procedures described in Section VI.
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Section III General Rules for All Employees
Rule 1: Compliance with All Laws, Regulations, and Policies
All employees must comply with applicable laws and regulations as well as company policies. This includes tax, anti-trust, political contribution, and international boycott laws. In addition, no employee at Putnam may engage in fraudulent conduct of any kind.
COMMENTS
· Putnam may report to the appropriate legal authorities conduct by Putnam employees that violates this Rule.
· It should also be noted that the U.S. Foreign Corrupt Practices Act makes it a criminal offense to make a payment or offer of payment to any non-U.S. governmental official, political party, or candidate to induce that person to affect any governmental act or decision, or to assist Putnams obtaining or retaining business.
Rule 2: Conflicts of Interest
No Putnam employee shall conduct herself in a manner that is contrary to the interests of, or in competition with, Putnam or a Putnam client, or that creates an actual or apparent conflict of interest with a Putnam client.
COMMENTS
· This Rule is designed to recognize the fundamental principle that Putnam employees owe their chief duty and loyalty to Putnam and Putnam clients.
· It is expected that a Putnam employee who becomes aware of an investment opportunity that she believes is suitable for a Putnam client whom she services will present it to the appropriate portfolio manager prior to taking advantage of the opportunity herself.
Rule 3: Gifts and Entertainment Policy
No Putnam employee shall accept anything of material value from any broker-dealer, financial institution, corporation, or other entity; any existing or prospective supplier of goods or services with a business relationship to Putnam; or any company or other entity whose securities are held in or are being considered as investments for the Putnam funds, or any other client account. Included are gifts, favors, preferential treatment, special arrangements, or access to special events.
COMMENTS
This Rule is intended to permit the acceptance of only proper types of customary and limited business amenities.
A Putnam employee may not, under any circumstances, accept anything that could create the appearance of a conflict of interest. For example, acceptance of any consideration is prohibited if it would create the appearance of a reward or inducement for conducting Putnam business either with the person providing the gift or his employer.
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IMPLEMENTATION
A. Gifts. An employee may not accept gifts with an aggregate value of more than $100 in any year from any one source, i.e., entity or firm. Any Putnam employee who is offered or receives an item exceeding $100 in value must report the details to the Code of Ethics Officer and surrender or return the gift. Any entertainment event provided to an employee where the host is not in attendance is treated as a gift and is subject to the $100 per year per source limit.
B. Entertainment. Putnams rules are designed to permit reasonable, ordinary business entertainment, but prohibit any events that may be perceived as extravagant or that involve lavish expenditures.
1. Occasional lunches, dinners, cocktail parties, or comparable gatherings conducted for business purposes are permitted.
For example, occasional attendance at group functions sponsored by sell-side firms is permitted where the function relates to investments or other business activity. Occasional attendance at these functions is not required to be counted against the limits described in section (B)(2) below.
2. Other entertainment events, such as sporting events, theater, movies, concerts, or other forms of entertainment conducted for business purposes, are permitted only under the following conditions:
(i) The host must be present for the event.
(ii) The location of the event must be in the metropolitan area in which the office of the employee is located.
(iii) Spouses or other family members of the employee may not attend the entertainment event or any meals before or after the entertainment event.
(iv) The value of the entertainment event provided to the employee may not exceed $150, not including the value of any meals that may be provided to the employee before or after the event.
Acceptance of entertainment events that have a market value materially exceeding the face value of the entertainment, which includes, for example, attendance at sporting event playoff games, is prohibited. This prohibition applies even if the face value of tickets to the events is $150 or less or if the Putnam employee offers to pay for the tickets. If there is any ambiguity about whether to accept an entertainment event in these circumstances, please consult the Code of Ethics Officer.
(v) The employee may not accept entertainment events under this provision in section (B)(2) more than six times a year and not more than two times in any year from any single source.
(vi) The Code of Ethics Officer may grant exceptions to these rules. For example, it may be appropriate for an employee attending a legitimate conference in a location away from the office to attend a business entertainment event in that location. All exceptions must be approved in advance by written request to the Code of Ethics Officer.
3. Any employee attending any entertainment event under the provision in sections (B)(1) or (B)(2) above must disclose a meal or entertainment in the PTA system within 20 business days of the event. Failure to report will be treated as a violation of the Code.
Planned absences, i.e., vacations, leaves (other than certain medical leaves), or business trips, are not valid excuses for providing late reports. Failure to meet the deadline violates the Codes rules and sanctions may be imposed.
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4. Meals and entertainment that are part of the regular program at an investment conference (i.e., open to all participants) are not subject to the limits of section (B)(2) above. Meals that are part of a meeting and/or a conference do not require reporting. An employee is required to disclose a meal outside of a business meeting or conference setting.
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C. The following items are prohibited:
1. Any entertainment event attendance that would reflect badly on Putnam as a firm of the highest fiduciary and ethical standards. For example, events involving adult entertainment or gambling must be avoided.
2. Entertainment involving travel away from the metropolitan area in which the employee is located. Even if an exception is granted as discussed in section (B)(2)(vi) above, payment by a third party of the cost of transportation to a location outside the employees metropolitan area, lodging while in another location, and any meals not specifically approved by the Code of Ethics officer are prohibited.
3. Personal loans to a Putnam employee on terms more favorable than those generally available for comparable credit standing and collateral.
4. Preferential brokerage or underwriting commissions or spreads or allocations of shares or interests in an investment for the personal account of a Putnam employee.
D. As with any of the provisions of the Code of Ethics, a sincere belief by the employee that he was acting in accordance with the requirements of this Rule will not satisfy his obligations under the Rule. Therefore, an employee who is in doubt concerning the propriety of any gift or favor should seek a prior written determination from the Code of Ethics Officer, as provided in Section VI.C.
E. No Putnam employee may solicit any gift or entertainment from any person, even if the gift or entertainment, if unsolicited, would be permitted.
F. The Rule does not prohibit employees on business travel from using local transportation and arrangements customarily supplied by brokers or similar entities. For example, it is customary for brokers in developing markets to make local transportation arrangements. These arrangements are permitted so long as the expense of lodging and air travel are paid by Putnam.
G. Putnam Retail Management (PRM) employees are subject to additional NASD rules on gifts and entertainment, which can be found in the PRM compliance manual.
Rule 4: Anti-bribery/Kickback Policy
No Putnam employee shall pay, offer, or commit to pay any amount of consideration that might be, or appear to be, a bribe or kickback in connection with Putnams business.
COMMENT
Although the Rule does not specifically address political contributions (described in Rule 5), Putnam employees should be aware that it is against corporate policy to use company assets to fund political contributions of any sort, even where such contributions may be legal. No Putnam employee should offer or agree to make any political contributions (including political dinners and similar fundraisers) on behalf of Putnam, and no employee will be reimbursed by Putnam for such contributions made by the employee personally.
Rule 5: Political Activities, Contributions, Solicitations, and Lobbying Policy
A. Corporate Contributions. Political activities of corporations such as Putnam are highly regulated, and corporate political contributions are prohibited. No corporate assets, funds, facilities, or personnel may be used to benefit any candidate, campaign, political party, or political committee, including contributions made in connection with fundraisers.
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1. If employees anticipate that any corporate funds or assets (such as corporate facilities or personnel) may be used in connection with any political volunteer activity, they must obtain pre-approval from the Chief Compliance Officer.
2. Employees should not seek or approve reimbursement from Putnam for any political contribution expenses. Any contributions for which employees seek reimbursement from Putnam are considered contributions by Putnam and are subject to the corporate political contribution requirements.
B. Personal Contributions. Employees have the right to make personal contributions. However, if employees choose to participate in the political process, they must do so as individuals, not as representatives of Putnam.
In certain limited circumstances, individual contributions may raise issues under applicable laws regulating political contributions to public officials, or candidates for official positions, who could be in a position to hire Putnam. As a result, the following rules apply to individual contributions by employees.
1. Prior to making any political contribution to a person or entity with whom Putnam has a current or proposed business relationship, or who can make or influence decisions to engage Putnam to provide services, employees must pre-clear the proposed contribution with the Chief Compliance Officer.
2. Employees may not make contributions to candidates or elected officials for the following offices without prior written approval from the Chief Compliance Officer:
· State or local offices in California, New Jersey, Ohio, or West Virginia
· State Treasurer in Connecticut or Vermont
· Any public office in the City of Houston
· Contributions by certain PRM employees to Ohio officials and candidates are also subject to Putnams Municipal Securities Rulemaking Board (MSRB) Political Contribution Policy.
C. Government Official. Employees must obtain pre-approval from the Code of Ethics Officer prior to providing any gift (including meals, entertainment, transportation, or lodging) to any government official or employee.
D. Lobbying. Federal and state law imposes limits and registration requirements on efforts by individuals and companies to influence the passage of legislation or to obtain business from governments. Accordingly, Putnam employees should not engage in any lobbying activities without approval from Putnams Director of Government Relations. Lobbying does not include solicitation of investment management business through the ordinary course of business, such as responding to a Request For Proposal (RFP).
COMMENTS
· Putnam has established a political action committee (PAC) that contributes to worthy candidates for political office. Any request received by a Putnam employee for a political contribution must be directed to Putnams Legal and Compliance Department.
· This Rule prohibits solicitation on personal letterhead by Putnam employees except as approved by the Code of Ethics Officer.
· Certain officers and employees of Putnam Retail Management (PRM) and other employees involved in Putnams College Advantage Section 529 Plan with Ohio Tuition Trust Authority are subject to special rules on political contributions. For questions on these requirements, please call the Director of Compliance for PRM.
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Rule 6: Confidentiality of Putnam Business Information
No unauthorized disclosure may be made by any employee or former employee of any trade secrets or proprietary information of Putnam or of any confidential information. No information regarding any Putnam client portfolio, actual or proposed securities trading activities of any Putnam client, or Putnam research shall be disclosed outside the Putnam organization unless doing so has a valid business purpose and is in accord with relevant procedures established by Putnam relating to such disclosures.
COMMENT
All information about Putnam and Putnam clients is strictly confidential. Putnam research information should not be disclosed without proper approval and never for personal gain.
Rule 7: Outside Business Affiliations
No Putnam employee shall serve as employee, officer, director, trustee, or general partner of a corporation or entity other than Putnam, without prior written approval of the Code of Ethics Officer. Requests for a role at a publicly traded company are especially disfavored and are closely reviewed. Permission will be granted only in extenuating circumstances. [See also Section IV, Rule 5.]
IMPLEMENTATION
A. All employees must provide a written request seeking approval from the Code of Ethics Officer if they wish to serve as an employee, officer, director, trustee, or general partner of a corporation or entity other than Putnam. The details of the outside business affiliation must be disclosed in PTA. Click on Certifications/Disclosures/Outside Business Affiliation/start/complete each question/click Submit. A determination will be sent via e-mail.
B. NASD-licensed employees under PRM also have an obligation to disclose outside business affiliations, new or terminated, in PTA as well.
C. Upon hire, all employees who also hold an outside position must complete an Outside Business Affiliation Disclosure in PTA.
EXCEPTION
Charitable or Non-profit Exception. Putnam employees may serve as an officer, director, or trustee of a charitable or not-for-profit institution, provided that the employee abides by the Code of Ethics and the Policy Statements with respect to any investment activity for which she has any discretion or input as officer, director, or trustee. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such charitable or not-for-profit institutions for which an employee serves as an officer, director, or trustee unless the employee is responsible for day-to-day portfolio management of the account.
COMMENTS
· This Rule is designed to ensure that Putnam cannot be deemed an affiliate of any issuer of securities by virtue of service by one of its officers or employees as director or trustee.
· Positions with public companies are especially problematic and will normally not be approved.
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· Certain charitable or not-for-profit institutions have assets (such as endowment funds or employee benefit plans) that require prudent investment. To the extent that a Putnam employee (because of her position as officer, director, or trustee of an outside entity) is charged with responsibility to invest such assets prudently, she may not be able to discharge that duty while simultaneously abiding by the spirit of the Code of Ethics and the Policy Statements. Employees are cautioned that they should not accept service as an officer, director, or trustee of an outside charitable or not-for-profit entity where such investment responsibility is involved, without seriously considering their ability to discharge their fiduciary duties with respect to such investments.
Rule 8: Role as Trustee or Fiduciary Outside of Putnam Investments
No Putnam employee shall serve as a trustee, an executor, a custodian, or any other fiduciary, or as an investment advisor or counselor for any account outside Putnam.
EXCEPTIONS
A. Charitable or Religious Exception. Putnam employees may serve as a fiduciary with respect to a religious or charitable trust or foundation, so long as the employee abides by the spirit of the Code of Ethics and the Policy Statements with respect to any investment activity over which he has any discretion or input. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such a religious or charitable trust or foundation unless the employee is responsible for day-to-day portfolio management of the account.
B. Family Trust or Estate Exception. Putnam employees may serve as a fiduciary with respect to a family trust or estate, as long as the employee abides by all of the Rules of the Code of Ethics with respect to any investment activity over which he has any discretion.
COMMENT
The roles permissible under this Rule may carry with them the obligation to invest assets prudently. Once again, Putnam employees are cautioned that they may not be able to fulfill their duties in that respect while abiding by the Code of Ethics and the Policy Statements.
Rule 9: Investment Clubs
No Putnam employee may be a member of any investment club.
COMMENT
This Rule guards against the danger that a Putnam employee may be in violation of the Code of Ethics and the Policy Statements by virtue of his personal securities transactions in or through an entity that is not bound by the restrictions imposed by this Code of Ethics and the Policy Statements. Please note that this restriction also applies to the spouse of a Putnam employee and any relatives of a Putnam employee living in the same household as the employee, as their transactions are covered by the Code of Ethics. (See page 2.)
Rule 10: Business Negotiations for Putnam Investments
No Putnam employee may become involved in a personal capacity in consultations or negotiations for corporate financing, acquisitions, or other transactions for outside companies (whether or not held by any Putnam client), nor negotiate nor accept a fee in
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connection with these activities without obtaining the prior written permission of the Chief Executive Officer of Putnam Investments.
Rule 11: Accurate Records
No employee may create, alter, or destroy (or participate in the creation, alteration, or destruction of) any record that is intended to mislead anyone or to conceal anything that is, or is reasonably believed to be, improper. In addition, all employees responsible for the preparation, filing, or distribution of any regulatory filings or public communications must ensure that such filings or communications are timely, complete, fair, accurate, and understandable.
COMMENTS
· In many cases, this is not only a matter of company policy and ethical behavior but also required by law. Our books and records must accurately reflect the transactions represented and their true nature. For example, records must be accurate as to the recipient of all payments; expense items, including personal expense reports, must accurately reflect the true nature of the expense. No unrecorded fund or asset shall be established or maintained for any reason.
· All financial books and records must be prepared and maintained in accordance with generally accepted accounting principles and Putnams existing accounting controls, to the extent applicable.
Rule 12: Family Members Conflict Policy
No employee or member of an employees immediate family shall have any direct or indirect personal financial interests in companies that do business with Putnam, unless such interest is disclosed and approved by the Code of Ethics Officer. Investment holdings in public companies that are not material to the employee are excluded from this prohibition. The Code also provides more detailed supplemental rules to address potential conflicts of interests that may arise if members of employees families are closely involved in doing business with Putnam.
Corporate Purchase of Goods and Services Putnam will not acquire goods and services from any firm in which a member of an employees immediate family serves as the sales representative in a senior management capacity or has an ownership interest with the supplier firm (excluding normal investment holdings in public companies) without permission from the Director of Procurement and the Code of Ethics Officer. Any employee who is aware of a proposal to purchase goods and services from a firm at which a member of the employees immediate family meets one of the previously mentioned conditions must notify the Director of Procurement and the Code of Ethics Officer.
Portfolio Trading Putnam will not allocate any trades for a portfolio to any firm that employs a member of an employees immediate family as a sales representative to Putnam (in a primary, secondary, or backup role). Any Putnam employee who is aware that an immediate family member serves as a broker-dealers sales representative to Putnam should inform the Code of Ethics Officer.
Definition of Immediate Family (specific to Rule 12) Immediate family of an employee means (1) spouse or domestic partner of the employee, (2) any child, sibling, or parent of an employee and any person married to a child, sibling, or parent of an employee, and (3) any other person who lives in the same household as the employee.
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Rule 13: Affiliated Entities
Non-Putnam affiliates (NPAs), listed below in the last comment, provide investment advisory services. No employee shall:
(a) Directly or indirectly seek to influence the purchase, retention or disposition of, or exercise of voting consent, approval, or similar rights with respect to any portfolio security in any account or fund advised by the NPA and not by Putnam;
(b) Transmit any information regarding the purchase, retention or disposition of, or exercise of voting, consent, approval, or similar rights with respect to any portfolio security held in a Putnam or NPA client account to any personnel of the NPA;
(c) Transmit any trade secrets, proprietary information, or confidential information of Putnam to the NPA unless doing so has a valid business purpose and is in accord with any relevant procedures established by Putnam relating to such disclosures;
(d) Use confidential information or trade secrets of the NPA for the benefit of the employee, Putnam, or any other NPA; or
(e) Breach any duty of loyalty to the NPA derived from the employees service as a director or officer of the NPA.
COMMENTS
· Sections (a) and (b) of the Rule are designed to help ensure that the portfolio holdings of Putnam clients and clients of the NPA need not be aggregated for purposes of determining beneficial ownership under Section 13(d) of the Securities Exchange Act or applicable regulatory or contractual investment restrictions that incorporate such definition of beneficial ownership. Persons who serve as directors or officers of both Putnam and an NPA should take care to avoid even inadvertent violations of Section (b). Section (a) does not prohibit a Putnam employee who serves as a director or officer of the NPA from seeking to influence the modification or termination of a particular investment product or strategy in a manner that is not directed at any specific securities. Sections (a) and (b) do not apply when a Putnam affiliate serves as an advisor or sub-advisor to the NPA or one of its products, in which case normal Putnam aggregation rul es apply.
· As a separate entity, any NPA may have trade secrets or confidential information that it would not choose to share with Putnam. This choice must be respected.
· When Putnam employees serve as directors or officers of an NPA, they are subject to common law duties of loyalty to the NPA, despite their Putnam employment. In general, this means that when performing their duties as NPA directors or officers, they must act in the best interest of the NPA and its shareholders. Putnams Legal and Compliance Department will assist any Putnam employee who is a director or officer of an NPA and has questions about the scope of his or her responsibilities to the NPA.
· Entities that are currently non-Putnam affiliates within the scope of this Rule are: Nissay Asset Management Co., Ltd., LP and PanAgora Asset Management, Inc. (PanAgora).
· Putnam and PanAgora also maintain an information barrier between the investment professionals of each organization regarding investment and trading information.
Rule 14: Computer and Network Use Policy
No employee shall use computers, the Internet, e-mail, instant messaging, phones, fax machines and/or the mail service in a manner that is inconsistent with their use as set forth
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in Putnams Employee Handbook. No employee shall introduce a computer virus or computer code that may result in damage to Putnams information or computer systems.
COMMENT
Putnams policy statements relating to these matters are contained in the Computer and Network Use Policy section within the Employee Handbook. The online Employee Handbook is also available directly on the Intranet site at: http://intranet/employee_handbook.
Rule 15: CFA Institute Code of Ethics and Standards of Professional Conduct
All employees must follow and abide by the spirit of the Code of Ethics and the Standards of Professional Conduct of the CFA Institute. The text of the CFA Institute Code of Ethics and Standards of Professional Conduct are set forth in Appendix D.
Rule 16: Privacy Policy
Except as provided below, no employee may disclose to any outside organization or person any non-public personal information about any individual who is a current or former shareholder of any Putnam retail or institutional fund, or current or former client of a Putnam company. All employees shall follow the security procedures as established from time to time by a Putnam company to protect the confidentiality of all shareholder and client account information.
Except as Putnams Legal and Compliance Department may expressly authorize, no employee shall collect any non-public personal information about a prospective or current shareholder of a Putnam fund or prospective or current client of a Putnam company, other than through an account application (or corresponding information provided by the shareholders financial representative) or in connection with executing shareholder or client transactions, nor shall any information be collected other than the following: name, address, telephone number, Social Security number, and investment, broker, and transaction information.
EXCEPTIONS
A. Putnam Employees. Non-public personal information may be disclosed to a Putnam employee in connection with processing transactions or maintaining accounts for shareholders of a Putnam fund and clients of a Putnam company, to the extent that access to such information is necessary to the performance of that employees job functions.
B. Shareholder Consent Exception. Non-public personal information about a shareholders or clients account may be provided to a non-Putnam organization at the specific request of the shareholder or client or with the shareholders or clients prior written consent.
C. Broker or Advisor Exception. Non-public personal information about a shareholders or clients account may be provided to the shareholders or clients broker of record.
D. Third-Party Service Provider Exception. Non-public personal information may be disclosed to a service provider that is not affiliated with a Putnam fund or Putnam company only when such disclosure is necessary for the service provider to perform the specific services contracted for, and only (a) if the service provider executes Putnams standard confidentiality agreement, or (b) pursuant to an agreement containing a confidentiality provision that has been approved by the Legal and Compliance Department. Examples of
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such service providers include proxy solicitors and proxy vote tabulators, mail services, and providers of other administrative services, and Information Services Division consultants who have access to non-public personal information.
COMMENTS
· Non-public personal information is any information that personally identifies a shareholder of a Putnam fund or client of a Putnam company and is not derived from publicly available sources. This privacy policy applies to shareholders or clients who are individuals, not institutions. However, as a general matter, all information that we receive about a shareholder of a Putnam fund or client of a Putnam company shall be treated as confidential. No employee may sell or otherwise provide shareholder or client lists or any other information relating to a shareholder or client to any marketing organization.
· All Putnam employees with access to shareholder or client account information must be trained in and follow Putnams security procedures designed to safeguard that information from unauthorized use. For example, a telephone representative must be trained in and follow Putnams security procedures to verify the identity of a caller requesting account information.
· Any questions regarding this privacy policy should be directed to Putnams Legal and Compliance Department. A violation of this policy will be subject to the sanctions imposed for violations of Putnams Code of Ethics.
· Employees must report any violation of this policy or any possible breach of the confidentiality of client information, whether intentional or accidental, to the managing director in charge of the employees business unit. Managing directors who are notified of such a violation or possible breach must immediately report it in writing to Putnams Chief Compliance Officer and, in the event of a breach of computerized data, Putnams Chief Technology Officer.
Rule 17: Anti-money Laundering Policy
No employee may engage in any money laundering activity or facilitate any money laundering activity through the use of any Putnam account or client account. Any situations giving rise to a suspicion that attempted money laundering may be occurring in any account must be reported immediately to the managing director in charge of the employees business unit. Managing directors who are notified of such a suspicion of money laundering activity must immediately report it in writing to Putnams Chief Compliance Officer and Chief Financial Officer.
Rule 18: Record Retention
All employees must comply with the record retention requirements applicable to the business unit. Employees should check with their managers or the Chief Administrative Officer of their division to determine what record retention requirements apply to their business unit.
For PIL employees, The Code of Ethics incorporates any relevant requirements of the U.K. regulator, the Financial Services Authority (FSA), and will be amended from time to time to reflect any U.K. regulatory changes as required.
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Section IV Reporting Requirements
Reporting of Personal Securities Transactions
Rule 1: Broker Confirmations and Statements
Each Putnam employee shall ensure that copies of all confirmations for securities transactions for personal brokerage accounts, and brokerage account statements are sent to the Legal and Compliance Department Code of Ethics Administrator. (For the purpose of this Rule, securities shall also include ETFs, futures, and other derivatives on broad-based market indexes excluded from the pre-clearance requirement.) Statements and confirmations are required for Putnam funds not held at Putnam or in a Putnam retirement plan, as well as for U.S. mutual funds sub-advised by Putnam.
Putnam employees must disclose their brokerage accounts in the PTA system and complete all required information, which will facilitate the instructions to the broker.
IMPLEMENTATION
A. Putnam employees should contact the Code of Ethics Administrator for a 407 letter instructing the broker to mail copies of confirmations and statements directly to Putnam. It is the employees responsibility to follow up with the broker on a reasonable basis to ensure that instructions are being followed.
B. Upon hire and within a designated time frame, Putnam employees are required to establish their broker profiles in PTA.
C. Specific procedures apply to employees of PIL. Employees of PIL should contact the London Code of Ethics Administrator.
D. Failure of a broker-dealer to comply with the instructions of a Putnam employee to send confirmations and statements shall be a violation by the Putnam employee of this Rule. Similarly, failure by an employee to report the existence of a personal account and, if the account is opened after joining Putnam, failure to obtain proper authorization to establish the account shall be a violation of this Rule.
E. Statements and confirmations must also be sent for members of an employees immediate family, including statements from a family members 401(k)/Profit Sharing Plan at another employer.
F. Employees are not required to provide broker confirmations and statements for MMC transactions in Putnams 401(k)/Profit Sharing and Stock Purchase Plan accounts.
COMMENTS
· Transactions for personal accounts is defined broadly to include more than transactions in accounts under an employees own name. (See Definitions.)
· Statements and confirmations are required for all personal securities transactions, whether or not exempted or excepted by this Code.
· To the extent that a Putnam employee has investment authority over securities transactions of a family trust or estate, confirmations of those transactions must also be made, unless the employee has received a prior written exception from the Code of Ethics Officer.
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Rule 2: Access Person Quarterly Transaction Report
Every Access Person shall file a quarterly report within fifteen calendar days of the end of each quarter, recording all purchases and sales of securities for personal accounts as defined in the Definitions section. (For the purpose of this Rule, reportable securities also include exchange-traded funds (ETFs), futures, and any option on a security or securities index, including broad-based market indexes excluded from the pre-clearance requirement, and transactions in Putnam open-end funds if the account for the Putnam funds is not held at Putnam or in a Putnam retirement plan and for transactions in U.S. mutual funds sub-advised by Putnam.)
IMPLEMENTATION
It is mandatory that all Access Persons file a quarterly transaction report in the PTA online system. The form shall contain a representation that employees have complied fully with all provisions of the Code of Ethics.
The date for each transaction required to be disclosed in the quarterly report is the trade date for the transaction, not the settlement date.
Planned absences, i.e., vacations, leaves (other than certain medical leaves), or business trips, are not valid excuses for providing late reports. Failure to meet the deadline violates the Codes rules and sanctions may be imposed.
COMMENT
If the requirement to file a quarterly report applies to you and you fail to report within the required 15-day period, monetary fines or harsher sanctions will be imposed. It is the responsibility of the employee to request an early report if he has knowledge of a planned absence, i.e., vacation, business trip, or leave.
Rule 3: Access Person Initial/Annual Holdings Report
Access Persons must disclose their personal securities holdings in the Code of Ethics monitoring system, PTA, upon commencement of employment (within ten days of hire) and thereafter on an annual basis. These SEC requirements are mandatory and designed to facilitate the monitoring of personal securities transactions. Putnams Code of Ethics Administrator provides Access Persons with instructions regarding their submissions and certifications of these reports in PTA.
Non-Access Persons must disclose their brokerage accounts within 30 days of hire.
Rule 4: Certifications
All employees are required to submit a certification in PTA annually attesting to compliance with all of the conditions of the Code of Ethics.
Rule 5: Outside Business Affiliations
The details of an outside business affiliation must be disclosed in PTA under Certifications/Disclosures/Outside Business Affiliations. (See Section III, Rule 7.)
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Rule 6: Reporting of Irregular Activity
If a Putnam employee suspects that fraudulent, illegal, or other irregular activity (including violations of the Code of Ethics) might be occurring at Putnam, the activity should be reported immediately to the managing director in charge of that employees business unit. Managing directors who are notified of any such activity must immediately report it in writing to Putnams Chief Financial Officer and Putnams Chief Compliance Officer.
An employee who does not feel comfortable reporting this activity to the managing director may instead contact the Chief Compliance Officer, the Putnam or MMC Ethics hotlines, or the Ombudsman.
Contact information for these hotlines is located on the PTA home page and on the Chief Compliance Officers intranet site.
Rule 7: Ombudsman
Putnam has established the office of the corporate ombudsman as a resource to help employees address legal or ethical issues in the workplace and to allow employees to voice concerns or seek clarity on issues. The Ombudsman provides a confidential, independent, and impartial source to employees to discuss potential violations of law or of company standards without fear of retribution, and serves as a neutral party with no vested interest in a particular outcome. The Ombudsman is available on an anonymous basis by calling 1-866-ombuds7 (866-662-8377) or by calling 1-617-760-8246.
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Section V Education Requirements
Every Putnam employee has an obligation to fully understand the rules and requirements of the Code of Ethics.
Rule 1: Distribution of Code
A copy of the Code of Ethics will be distributed to every Putnam employee at least annually. All Access Persons will be required to certify annually that they have read, understood, and will comply with the provisions of the Code of Ethics, including the Codes Policy Statement Concerning Insider Trading Prohibitions.
Rule 2: Annual Training Requirement
Every employee will be required to complete training on Putnams Code of Ethics on an annual basis.
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Section VI Compliance and Appeal Procedures
A. Restricted List
No employee may engage in a personal securities transaction without prior clearance.
B. Consultation of Restricted List
It is the responsibility of each employee to pre-clear through PTA or consult with the Code of Ethics Administrator, prior to engaging in a personal securities transaction, to determine if the security he proposes to trade is on the Restricted List and, if so, whether it is subject to the large-cap exception.
C. Request for Determination
An employee who has a question concerning the applicability of the Code of Ethics to a particular situation shall request a determination from the Code of Ethics Officer before engaging in the conduct or personal securities transaction about which he has a question.
If the question pertains to a personal securities transaction, the request shall state for whose account the transaction is proposed, the relationship of that account to the employee, the security proposed to be traded, the proposed price and quantity, the entity with whom the transaction will take place (if known), and any other information or circumstances of the trade that could have a bearing on the Code of Ethics Officers determination. If the question pertains to other conduct, the request for determination shall give sufficient information about the proposed conduct to assist the Code of Ethics Officer in ascertaining the applicability of the Code. In every instance, the Code of Ethics Officer may request additional information, and may decline to render a determination if the information provided is insufficient.
The Code of Ethics Officer shall make every effort to render a determination promptly.
No perceived ambiguity in the Code of Ethics shall excuse any violation. Any person who believes the Code to be ambiguous in a particular situation should request a determination from the Code of Ethics Officer.
D. Request for Ad Hoc Exemption
Any employee who wishes to obtain an ad hoc exemption under Section I.D., Rule 2, should request from the Code of Ethics Officer an exemption in writing in advance of the conduct or transaction sought to be exempted. In the case of a personal securities transaction, the request for an ad hoc exemption shall give the same information about the transaction required in a request for determination under Section VII.C., and should state why the proposed personal securities transaction would be unlikely to affect a highly institutional market, or is unrelated economically to securities to be purchased, sold, or held by any Putnam client. In the case of other conduct, the request shall give information sufficient for the Code of Ethics Officer to ascertain whether the conduct raises questions of propriety or conflict of interest, real or apparent.
The Code of Ethics Officer shall make reasonable efforts to promptly render a written determination concerning the request for an ad hoc exemption.
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E. Appeal to Code of Ethics Officer with Respect to Restricted List
If an employee ascertains that a security that he wishes to trade for his personal account appears on the Restricted List, and thus the transaction is prohibited, he may appeal the prohibition to the Code of Ethics Officer by submitting a written memorandum containing the same information as would be required in a request for a determination. The Code of Ethics Officer shall make every effort to respond to the appeal promptly.
F. Information Concerning Identity of Compliance Personnel
The names of Code of Ethics personnel are available by contacting the Legal and Compliance Department and will be published on Putnams intranet site.
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Section VII Sanctions
Sanction Guidelines
The Code of Ethics Oversight Committee is responsible for setting sanctions policies for violating the Code. The Committee has adopted the following minimum monetary sanctions for violations of the Code. These sanctions apply even if the exception results from inadvertence rather than intentional misbehavior. The Code of Ethics Officer is authorized to impose the minimum sanction on employees without further Committee action. However, the sanctions noted below are only minimums and the Committee reserves the right to impose additional sanctions such as higher monetary sanctions, trading bans, suspension, or termination of employment as it determines to be appropriate.
A. The minimum sanction per violation of the following Rules is disgorgement of
any profits or payment of avoided losses and the following payments:
Section I.A., Rule 1 (Pre-clearance and Restricted List)
Section I.B., Rule 1 (Short selling)
Section I.B., Rule 2 (IPOs)
Section I.B., Rule 3 (Private Placements)
Section I.B., Rule 4 (Trading with Inside Information)
Section I.B., Rules 6-8 (Holding and Trading of Putnam Funds)
Section II, Rule 2 (7-Day Rule)
Section II, Rule 3 (Blackout Rule)
Section II, Rule 4 (Contra-Trading Rule)
Section II, Rule 5 (Trading for Personal Benefit)
Officer Level | SMD/MD | SVP/VP | AVP/non-officer |
| |||
1st violation | $ 500 | $250 | $ 50 |
| |||
2nd | $1,000 | $500 | $100 |
| |||
3rd | Minimum monetary sanction as above with ban on all new personal | ||
individual investments. | |||
| |||
B. The minimum sanction for violations of all other | |||
Rules in the Code is as follows: | |||
| |||
Officer Level | SMD/M | SVP/VP | AVP/non-officer |
D | |||
| |||
1st violation | $100 | $ 50 | $25 |
| |||
Subsequent | $200 | $100 | $50 |
|
The reference period for determining whether a violation is initial or subsequent will be five years.
NOTE
The Committees belief that an employee has violated the Code of Ethics intentionally will result in more severe sanctions than outlined in the guidelines above. The Code of Ethics
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Oversight Committee retains the right to increase or decrease the sanctions for a particular violation in light of the circumstances.
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Appendix A: Insider Trading Prohibitions Policy Statement
Putnam has always forbidden trading by its employees on material non-public information (inside information). Tough federal laws make it important for Putnam to state that prohibition in the strongest possible terms, and to establish, maintain, and enforce written policies and procedures to prevent the use of material non-public information.
Unlawful trading while in possession of inside information can be a crime. Federal law provides that an individual convicted of trading on inside information may go to jail for a period of time. There is also significant monetary liability for an inside trader; the Securities and Exchange Commission can seek a court order requiring a violator to pay back profits, as well as penalties substantially greater than those profits. In addition private plaintiffs can seek recovery for harm suffered by them. The inside trader is not the only subject to liability. In certain cases, controlling persons of inside traders, including supervisors of inside traders or Putnam itself, can be liable for large penalties.
Section I. of this Policy Statement contains rules concerning inside information. Section II. contains a discussion of what constitutes unlawful insider trading.
Neither material, non-public information nor unlawful insider trading is easy to define. Section II. of this Policy Statement gives a general overview of the law in this area. However, the legal issues are complex and must be resolved by the Code of Ethics Officer. If an employee has any doubt as to whether she has received material, non-public information, she must consult with the Code of Ethics Officer prior to using that information in connection with the purchase or sale of a security for his own account or the account of any Putnam client, or communicating the information to others. A simple rule of thumb is if you think the information is not available to the public at large, dont disclose it to others and dont trade securities to which the inside information relates.
An employee aware of, or in possession of, inside information must report it immediately to the Code of Ethics Officer. If an employee has failed to consult the Code of Ethics Officer, Putnam will not excuse employee misuse of inside information on the grounds that the employee claims to have been confused about this Policy Statement or the nature of the information in his possession.
If Putnam determines, in its sole discretion, that an employee has failed to abide by this Policy Statement, or has engaged in conduct that raises a significant question concerning insider trading, he will be subject to disciplinary action, including termination of employment.
There are no exceptions to this policy statement, and no one is exempt.
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Appendix A: Definitions: Insider Trading
Code of Ethics Administrator The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, non-discretionary administration of this Policy Statement. The Code of Ethics Administrator is Laura Rose.
Code of Ethics Officer The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Code. The Code of Ethics Officer shall be the Chief Compliance Officer or such other person as is designated by the Chief Executive Officer of Putnam Investments. If the Code of Ethics Officer is unavailable, the Deputy Code of Ethics Officer shall act in his stead. The Code of Ethics Officer is Tony Ruys de Perez. The Deputy Code of Ethics Officer is Kathleen Griffin.
Immediate family Spouse, domestic partner, minor children, or other relatives living in the same household as the Putnam employee.
Purchase or sale of a security Any acquisition or transfer of any interest in the security for direct or indirect consideration, including the writing of an option.
Putnam Any or all of Putnam Investments Trust, and its subsidiaries, any one of which shall be a Putnam company.
Putnam client Any client of the Putnam mutual funds, or any advisory, trust, or other client for whom Putnam manages money.
Putnam employee (or employee) Any employee of Putnam.
Security Anything defined as a security under federal law. The term includes any type of equity or debt security, any interest in a business trust or partnership, and any rights relating to a security, such as put and call options, warrants, convertible securities, and securities indexes. (Note: The definition of security in this Insider Trading Prohibitions Policy Statement varies significantly from that in the Code of Ethics. For example, the definition in this Policy Statement specifically includes all securities of any type.)
Transaction for a personal account (or personal securities transaction) Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a domestic partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f ) for any account other than a Putnam client account that receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. Officers and employees of PIL must also consult the relevant procedures on compliance with U.K. insider dealing legislation set forth in PILs Compliance Manual.
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Appendix A Section I: Rules Concerning Inside Information
Rule 1: Inside Information
No Putnam employee shall purchase or sell any security listed on the Inside Information List (the Red List) either for his personal account or for a Putnam client.
IMPLEMENTATION
When an employee contacts the Code of Ethics Administrator seeking clearance for a personal securities transaction, the Code of Ethics Administrators response as to whether a security appears on the Restricted List will include securities on the Red List.
COMMENT
This Rule is designed to prohibit any employee from trading a security while Putnam may have inside information concerning that security or the issuer. Every trade, whether for a personal account or for a Putnam client, is subject to this Rule.
Rule 2: Material Non-public Information
No Putnam employee shall purchase or sell any security, either for a personal account or for the account of a Putnam client, while in possession of material, non-public information concerning that security or the issuer, without the prior written approval of the Code of Ethics Officer.
IMPLEMENTATION
In order to obtain prior written approval of the Code of Ethics Officer, a Putnam employee should follow the reporting steps prescribed in Rule 3.
COMMENTS
· Rule 1 concerns the conduct of an employee when Putnam possesses material, non-public information. Rule 2 concerns the conduct of an employee who herself possesses material, non-public information about a security that is not yet on the Red List.
· If an employee has any question as to whether information she possesses is material and/or non-public information, she must contact the Code of Ethics Officer immediately in accordance with Rule 3 prior to purchasing or selling any security related to the information or communicating the information to others. The Code of Ethics Officer shall have the sole authority to determine what constitutes material, non-public information for the purposes of this Policy Statement.
Rule 3: Reporting of Material Non-public Information
Any Putnam employee who believes he is aware of or has received material, non-public information concerning a security or an issuer shall immediately report the information to the Code of Ethics Officer, the Deputy Code of Ethics Officer, or in their absence, a lawyer in the Putnam Legal and Compliance Department and to no one else. After reporting the information, the Putnam employee shall comply strictly with Rule 2 by not trading in the security without the prior written approval of the Code of Ethics Officer and shall (a) take
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precautions to ensure the continued confidentiality of the information and (b) refrain from communicating the information in question to any person.
IMPLEMENTATION
A. In order to make any use of potential material non-public information, including purchasing or selling a security or communicating the information to others, an employee must communicate that information to the Code of Ethics Officer in a way designed to prevent the spread of such information. Once the employee has reported potential material non-public information to the Code of Ethics Officer, the Code of Ethics Officer will evaluate whether information constitutes material non-public information, and whether a duty exists that makes use of such information improper. If the Code of Ethics Officer determines either (a) that the information is not material or is public, or (b) that use of the information is proper, he will issue a written approval to the employee specifically authorizing trading while in possession of the information, if the employee so requests. If the Code of Ethics Officer determines (a) that the information may be nonpublic and material, and (b) that use of such information may be improper, he will place the security that is the subject of such information on the Red List.
B. An employee who reports potential inside information to the Code of Ethics Officer should expect that the Code of Ethics Officer will need significant information, and time to gather such information, to make the evaluation, including information about (a) the manner in which the employee acquired the information, and (b) the identity of individuals to whom the employee has revealed the information, or who have otherwise learned the information. In appropriate situations, the Code of Ethics Officer will normally place the affected security or securities on the Red List pending the completion of his evaluation.
C. If an employee possesses documents, disks, or other materials containing the potential inside information, an employee must take precautions to ensure the confidentiality of the information in question. Those precautions include (a) putting documents containing such information out of the view of a casual observer, and (b) securing files containing such documents or ensuring that computer files reflecting such information are secure from viewing by others.
D. Members of the executive board of directors and members of the Chief Financial Officers staff may not trade securities of MMC in the period from the end of each calendar quarter to the date of announcement of MMCs earnings for such quarter.
COMMENT
While all employees must pre-clear trades of MMC securities and make sure they are not in possession of material inside information about MMC when trading, certain employees who may receive information about Putnams earnings are subject to the rules above concerning trading blackout periods.
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Appendix A Section II: Overview of Insider Trading
Introduction
This section of the Policy Statement provides guidelines for employees as to what may constitute inside information. It is possible that in the course of her employment, an employee may receive inside information. No employee should misuse that information, either by trading for her own account or by communicating the information to others.
What constitutes unlawful insider trading?
The basic definition of unlawful insider trading is trading on material non-public information (also called inside information) by an individual who has a duty not to take advantage of the information. The following sections help explain the definition.
What is material information?
Trading on inside information is not a basis for liability unless the information is material. Information is material if a reasonable person would attach importance to the information in determining his course of action with respect to a security. Information that is reasonably likely to affect the price of a companys securities is material, but effect on price is not the sole criterion for determining materiality. Information that employees should consider material includes, but is not limited to, dividend changes, earnings estimates, changes in previously released earnings estimates, reorganization, recapitalization, asset sales, plans to commence a tender offer, merger or acquisition proposals or agreements, major litigation, liquidity problems, significant contracts, and extraordinary management developments.
Material information does not have to relate to a companys business. For example, a court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a reporter for the Wall Street Journal was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Journals Heard on the Street column and whether those reports would be favorable or not.
What is non-public information?
Information is non-public until it has been effectively communicated to, and sufficient opportunity has existed for it to be absorbed by, the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission, or appearing in Dow Jones, Reuters, the Wall Street Journal, or other publications of general circulation would be considered public.
Who has a duty not to take advantage of inside information?
Unlawful insider trading occurs only if there is a duty not to take advantage of material non-public information. When there is no such duty, it is permissible to trade while in possession of such information. Questions as to whether a duty exists are complex, are fact specific, and must be answered by a lawyer. If you have any doubt, err on the side of caution.
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Insiders and Temporary Insiders Corporate insiders have a duty not to take advantage of inside information. The concept of insider is broad. It includes officers, directors, and employees of a corporation. In addition, a person can be a temporary insider if she enters into a special confidential relationship with a corporation and, as a result, is given access to information concerning the corporations affairs. A temporary insider can include, among others, accounting firms, consulting firms, law firms, banks, and the employees of such organizations. Putnam would generally be a temporary insider of a corporation it advises or for which it performs other services, because typically Putnam clients expect Putnam to keep any information disclosed to it confidential.
EXAMPLE
An investment advisor to the pension fund of a large publicly traded corporation, Acme, Inc., learns from an Acme employee that Acme will not be making the minimum required annual contribution to the pension fund because of a serious downturn in Acmes financial situation. The information conveyed is material and non-public.
COMMENT
Neither the investment advisor, its employees, nor its clients can trade on the basis of that information, because the investment advisor and its employees could be considered temporary insiders of Acme.
Misappropriators Certain people who are not insiders (or temporary insiders) also have a duty not to deceptively take advantage of inside information. Included in this category is an individual who misappropriates (or takes for his own use) material non-public information in violation of a duty owed either to the corporation that is the subject of inside information or some other entity. Such a misappropriator can be held liable if he trades while in possession of that material non-public information.
EXAMPLE
The Chief Investment Officer of Acme, Inc., is aware of Acmes plans to engage in a hostile takeover of Profit, Inc. The proposed hostile takeover is material and non-public.
COMMENT
The Chief Investment Officer of Acme cannot trade in Profit, Inc.s stock for his own account. Even though he owes no duty to Profit, Inc., or its shareholders, he owes a duty to Acme not to take advantage of the information about the proposed hostile takeover by using it for his personal benefit.
Tippers and Tippees A person (the tippee) who receives material non-public information from an insider or misappropriator (the tipper) has a duty not to trade while in possession of that information if he knew, or should have known, that the information was provided by the tipper for an improper purpose and in breach of a duty owed by the tipper. In this context, it is an improper purpose for a person to provide such information for personal benefit.
EXAMPLE
The Chief Executive Officer of Acme, Inc., tells his daughter that negotiations concerning a previously announced acquisition of Acme have been terminated. This news is material and, at the time the father tells his daughter, non-public. The daughter sells her shares of Acme.
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COMMENT
The father is a tipper because he has a duty to Acme and its shareholders not to take advantage of the information concerning the breakdown of negotiations, and he has conveyed the information for an improper purpose. The daughter is a tippee and is liable for trading on inside information because she knew, or should have known, that her father was conveying the information to her for his personal benefit, and that her father had a duty not to take advantage of Acme information.
A person can be a tippee even if he did not learn the information directly from the tipper, but learned it from a previous tippee.
EXAMPLE
An employee of a law firm that works on mergers and acquisitions learns at work about impending acquisitions. She tells her friend and her friends stockbroker about the upcoming acquisitions on a regular basis. The stockbroker tells the brother of a client on a regular basis, who in turn tells two friends, A and B. A and B buy shares of the companies being acquired before the public announcement of the acquisition, and regularly profit from such purchases. A and B do not know the employee of the law firm. They do not, however, ask about the source of the information.
COMMENT
A and B, although they have never heard of the tipper, are tippees because they did not ask about the source of the information, even though they were experienced investors, and were aware that the tips they received from this particular source were accurate.
Who can be liable for insider trading?
The categories of individuals discussed above (insiders, temporary insiders, misappropriators, or tippees) can be liable if they trade while in possession of material non-public information.
In addition, individuals other than those who actually trade on inside information can be liable for trades of others. A tipper can be liable if (a) he provided the information in exchange for a personal benefit in breach of a duty, and (b) the recipient of the information (the tippee) traded while in possession of the information.
Most importantly, a controlling person can be liable if the controlling person knew or recklessly disregarded the fact that the controlled person was likely to engage in misuse of inside information and failed to take appropriate steps to prevent it. Putnam is a controlling person of its employees. In addition, certain supervisors may be controlling persons of those employees they supervise.
EXAMPLE
A supervisor of an analyst learns that the analyst has, over a long period of time, secretly received material inside information from Acme, Inc.s Chief Investment Officer. The supervisor learns that the analyst has engaged in a number of trades for his personal account on the basis of the inside information. The supervisor takes no action.
COMMENT
Even if he is not liable to a private plaintiff, the supervisor can be liable to the Securities and Exchange Commission for a civil penalty of up to three times the amount of the analysts profit.
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Penalties for insider trading
Penalties for misuse of inside information are severe, both for individuals involved in such unlawful conduct and their employers. A person who violates the insider trading laws can be subject to some or all of the types of penalties below, even if he does not personally benefit from the violation. Penalties include:
· Jail sentences, criminal monetary penalties
· Injunctions permanently preventing an individual from working in the securities industry
· Injunctions ordering an individual to disgorge profits obtained from unlawful insider trading
· Civil penalties substantially greater than the profit gained or loss avoided by the trader, even if the individual paying the penalty did not trade or did not benefit personally
· Civil penalties for the employer or other controlling person
· Damages in the amount of actual losses suffered by other participants in the market for the security at issue
Regardless of whether penalties or money damages are sought by others, Putnam will take whatever action it deems appropriate, including dismissal, if Putnam determines, in its sole discretion, that an employee appears to have committed any violation of this Policy Statement, or to have engaged in any conduct that raises significant questions about whether an insider trading violation has occurred.
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Appendix B: Policy Statement Regarding Employee Trades in
Shares of Putnam Closed-End Funds
Pre-clearance
Any purchase or sale of Putnam closed-end fund shares by a Putnam employee must be pre-cleared. A list of the closed-end funds can be obtained from the Code of Ethics Administrator.
Reporting
As with any purchase or sale of a security, duplicate confirmations and statements of all such purchases and sales must be forwarded to the Code of Ethics Administrator by the broker-dealer utilized by an employee. If you are required to file a quarterly report of all personal securities transactions, this report should include all purchases and sales of closed-end fund shares.
Special Rules Applicable to Managing Directors of Putnam Investment
Management, LLC and officers of the Putnam Funds
Please be aware that managing directors of Putnam Investment Management, Inc., the investment manager of the Putnam mutual funds, and officers of the Putnam Funds will not receive clearance to engage in any combination of purchase and sale, or sale and purchase, of the shares of a given closed-end fund within six months of each other. Therefore, purchases should be made only if you intend to hold the shares more than six months; no sales of fund shares should be made if you intend to purchase additional shares of that same fund within six months.
Certain forms are also required to be filed with the Securities and Exchange Commission in connection with purchases and sales of Putnam closed-end funds. You will be notified by the Code of Ethics Administrator if this applies to you. Please contact the Code of Ethics Officer Administrator for further information.
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Appendix C: Contra-Trading Rule Clearance Form
To: Code of Ethics Officer
From: | |
| |
Date: | |
| |
Re: Personal Securities Transaction of | |
| |
This serves as prior written approval of the personal securities transaction described below: | |
Name of portfolio manager contemplating personal trade: | |
| |
Security to be traded: | |
| |
Amount to be traded: | |
| |
Fund holding securities: | |
| |
Amount held by fund: | |
| |
Reason for personal trade: | |
| |
Specific reason sale of securities is inappropriate for fund: | |
| |
| |
| |
(Please attach additional sheets if necessary.) | |
CIO approval: | Date: |
| |
Legal/compliance approval: | Date: |
|
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Appendix D: CFA Institute Code of Ethics and Standards of
Professional Conduct
The CFA Institute Code of Ethics and Standards of Professional Conduct (Code and Standards) are fundamental to CFA Institutes values and essential to achieving its mission to lead the investment profession globally by setting high standards of education, integrity, and professional excellence. High ethical standards are critical to maintaining the publics trust in financial markets and in the investment profession.
Since their creation in the 1960s, the Code and Standards have promoted the integrity of CFA Institute members and served as a model for measuring the ethics of investment professionals globally, regardless of job function, cultural differences, or local laws and regulations. All CFA Institute members (including holders of the Chartered Financial Analyst® (CFA®) designation) and CFA candidates must abide by the Code and Standards and are encouraged to notify their employer of this responsibility. Violations may result in disciplinary sanctions by CFA Institute. Sanctions can include revocation of membership, candidacy in the CFA Program, and the right to use the CFA designation.
The Code of Ethics
Members of CFA Institute (including Chartered Financial Analyst® (CFA®) charterholders) and candidates for the CFA designation (Members and Candidates) must:
· Act with integrity, competence, diligence, and respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
· Place the integrity of the investment profession and the interests of clients above their own personal interests.
· Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
· Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
· Promote the integrity of, and uphold the rules governing, capital markets.
· Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
Standards of Professional Conduct
I. PROFESSIONALISM
A. Knowledge of the Law. Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations.
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B. Independence and Objectivity. Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Members and Candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or anothers independence and objectivity.
C. Misrepresentation. Members and Candidates must not knowingly make any misrepresentations relating to investment analysis, recommendations, actions, or other professional activities.
D. Misconduct. Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit, or commit any act that reflects adversely on their professional reputation, integrity, or competence.
II. INTEGRITY OF CAPITAL MARKETS
A. Material Non-public Information. Members and Candidates who possess material, non-public information that could affect the value of an investment must not act or cause others to act on the information.
B. Market Manipulation. Members and Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
III. DUTIES TO CLIENTS
A. Loyalty, Prudence, and Care. Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. Members and Candidates must act for the benefit of their clients and place their clients interests before their employers or their own interests. In relationships with clients, Members and Candidates must determine applicable fiduciary duty and must comply with such duty to persons and interests to whom it is owed.
B. Fair Dealing. Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities.
C. Suitability.
1. When Members and Candidates are in an advisory relationship with a client, they must:
a) Make a reasonable inquiry into a clients or prospective clients investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation or taking investment action, and must reassess and update this information regularly.
b) Determine that an investment is suitable to the clients financial situation and consistent with the clients written objectives, mandates, and constraints before making an investment recommendation or taking investment action.
c) Judge the suitability of investments in the context of the clients total portfolio.
2. When Members and Candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must only make investment recommendations or take investment actions that are consistent with the stated objectives and constraints of the portfolio.
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D. Performance Presentation. When communicating investment performance information, Members or Candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.
E. Preservation of Confidentiality. Members and Candidates must keep information about current, former, and prospective clients confidential unless:
1. The information concerns illegal activities on the part of the client or prospective client.
2. Disclosure is required by law.
3. The client or prospective client permits disclosure of the information.
IV. DUTIES TO EMPLOYERS
A. Loyalty. In matters related to their employment, Members and Candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities, divulge confidential information, or otherwise cause harm to their employer.
B. Additional Compensation Arrangements. Members and Candidates must not accept gifts, benefits, compensation, or consideration that competes with, or might reasonably be expected to create a conflict of interest with, their employers interest unless they obtain written consent from all parties involved.
C. Responsibilities of Supervisors. Members and Candidates must make reasonable efforts to detect and prevent violations of applicable laws, rules, regulations, and the Code and Standards by anyone subject to their supervision or authority.
V. INVESTMENT ANALYSIS, RECOMMENDATIONS, AND ACTION
A. Diligence and Reasonable Basis. Members and Candidates must:
1. Exercise diligence, independence, and thoroughness in analyzing investments, making investment recommendations, and taking investment actions.
2. Have a reasonable and adequate basis, supported by appropriate research and investigation, for any investment analysis, recommendation, or action.
B. Communication with Clients and Prospective Clients. Members and Candidates must:
1. Disclose to clients and prospective clients the basic format and general principles of the investment processes used to analyze investments, select securities, and construct portfolios, and must promptly disclose any changes that might materially affect those processes.
2. Use reasonable judgment in identifying which factors are important to their investment analysis, recommendations, or actions and include those factors in communications with clients and prospective clients.
3. Distinguish between fact and opinion in the presentation of investment analysis and recommendations.
C. Record Retention. Members and Candidates must develop and maintain appropriate records to support their investment analysis, recommendations, actions, and other investment-related communications with clients and prospective clients.
VI. CONFLICTS OF INTEREST
A. Disclosure of Conflicts. Members and Candidates must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and employer.
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Members and Candidates must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively.
B. Priority of Transactions. Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.
C. Referral Fees. Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received by, or paid to, others for the recommendation of products or services.
VII. RESPONSIBILITIES AS A CFA INSTITUTE MEMBER OR CFA CANDIDATE
A. Conduct as Members and Candidates in the CFA Program. Members and Candidates must not engage in any conduct that compromises the reputation or integrity of the CFA Institute or the CFA designation or the integrity, validity, or security of the CFA examinations.
B. Reference to the CFA Institute, the CFA designation, and the CFA Program. When referring to the CFA Institute, CFA Institute membership, the CFA designation, or candidacy in the CFA Program, Members and Candidates must not misrepresent or exaggerate the meaning or implications of membership in the CFA Institute, holding the CFA designation, or candidacy in the CFA Program.
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Appendix E: Inducement Policy for Putnam Investments
Limited (PIL) Employees
Inducements
Putnam Investments Limited has adopted the following procedures to enable it to comply with, and demonstrate compliance with, the requirements in this area:
Gifts, business meals, or entertainment events that are given or received (inducements) and that exceed a value of £25 (40 euros or equivalent) must be reported through the PTA system within 20 days.
PILs policy limits gifts to a value of £100 (150 euros or equivalent) per item.
No limit is applied to meals provided such meals are for business purposes, reasonable, and not lavish.
Entertainment provided to, or received from, suppliers (including brokers) is limited to a value of £150 (225 euros or equivalent). When receiving or providing entertainment to clients or potential clients, the limit of £150 (150 euros or equivalent) may be exceeded provided that such event is for business purposes, reasonable, and not lavish. Pre-clearance must be obtained from the PIL Compliance Officer.
Inducements exceeding these limits should be politely declined, explaining that PILs internal policies will not permit their acceptance.
There may be rare occasions where you are unexpectedly offered a gift or are entertained where the value exceeds the limits and it would be very discourteous to decline, or difficult to pay part of the bill yourself (such as in a members dining club). In these circumstances the gift should be handed in to the PIL Compliance Officer, who will arrange to give it to charity, or the entertainment reported immediately to the PIL Compliance Officer with an explanation of the circumstances.
Where the gift is below £100 (150 euros or equivalent) or the entertainment is below £150 (225 euros or equivalent) for any individual, no pre-clearance is necessary. Above these levels, pre-clearance is required from the PIL Compliance Officer. If you are in doubt as to whether limits might be exceeded, please err on the side of caution and seek pre-clearance.
Employees must disclose inducements in PTA where the value is above £25 (40 euros or equivalent).
Inducements below £25 (40 euros or equivalent), e.g., an umbrella, a casual drink, or a snack, need not be reported.
No more than six entertainment events per year, and no more than two events may be accepted from a single source. Meals are not included in this limit.
Where breaches of the inducement policy occur, sanctions may apply.
Employees are required to make an annual declaration that they have reported all inducements given and received, or that they have not given or received any inducements during the course of the year.
Further detailed guidance on PILs Inducement Policy is available in the PIL Compliance Manual.
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407 Letter | 2, 34 |
7-Day Rule | 3, 20, 21 |
90-Day Short-Term Rule | 3, 12, 20 |
Access Person | |
definition | 5 |
reporting requirements for | 35 |
reporting transactions/holdings | 35 |
Ad Hoc Exemption | 38 |
Affiliated Entities | 30 |
Analysts | |
special rules | 20, 21, 22 |
Annual Holdings Report | 11, 35 |
Anti-bribery/Kickback Policy | 26 |
Anti-money Laundering Policy | 33 |
Anti-trust and other laws | 24 |
Appeal Procedures | 38-39 |
Blackout Rule | |
trading by portfolio managers, | |
analysts, and CIOs | 3, 22 |
Boycott laws | 24 |
Bribes | 26 |
Broker accounts | 2, 34 |
CFA Institute Code of Ethics | 32 |
Standards of Professional Conduct | 51-54 |
Chief Investment Officer | |
special rules on trading | 22 |
Closed-end fund | 2, 5, 6, 7, 8, 49 |
Code of Ethics Administrator | 5 |
Code of Ethics Officer | 5 |
Deputy Code of Ethics Officer | 5 |
Code of Ethics | |
Oversight Committee | 5, 13, 16, 40 |
College Savings 529 Plan | 16 |
Compliance and Appeal Procedures | 38-39 |
Computer and Network Use Policy | 31 |
Confidentiality | 1, 28 |
Confirmations and broker statements | 2, 34 |
Conflicts of interest | 1, 4, 24, 57 |
Considered List Limited Sale Rule | 10 |
Contra-Trading Rule | 3, 22 |
clearance form | 50 |
Corporate/political contributions | 26-27 |
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Corporate purchase of goods and services | 30 | |
Currencies | 6 | |
Director, prohibited to serve for another entity | 28 | |
Discretionary account | 6, 10, 12 | |
Dividend reinvestment program | 18 | |
Education Requirements | 37 | |
Employees | ||
general rules for | 24-33 | |
personal political contributions | 27 | |
Entertainment Policy | 24-26 | |
Excessive trading | ||
(over 10 trades) prohibited | 2, 17 | |
Exchange traded index funds | ||
(ETFs) | 6, 7, 8, 17, 34, 35 | |
Exempted transactions | 18 | |
Family member accounts | 15 | |
Family Members Conflict Policy | 30 | |
Fiduciary | 29 | |
Fraudulent or irregular activities reporting | 35-36 | |
Gifts and Entertainment Policy | 24-26 | |
Gifts donated as securities | 11 | |
Good Until Canceled (GTC) Limit orders | 16-17 | |
Goods and services, purchasing | 30 | |
Initial holdings report | 35 | |
Initial Public Offerings (IPOs) | 12-13 | |
Inside Information | 43-44 | |
material, non-public information | 14, 43, 44, 52 | |
policy statement | 41 | |
reporting of material non-public Information | 44 | |
rules concerning | 43-44 | |
sanctions for | 40, 47 | |
Inside Information List (Red List) | 43-44 | |
Insider Trading | ||
definitions | 42 | |
explanations of | 45-48 | |
liability for | 47 | |
penalties for | 47-48 | |
policy statement | 41 | |
prohibitions policy statement | 41 | |
Investment clubs | 29 | |
Involuntary transactions | 11, 18 | |
Irregular activity reporting | 35-36 | |
Kickback Policy | 26 | |
Large Cap Exemption | 9 | |
Limit Orders | 16-17 | |
Linked accounts | 15 | |
Lobbying Policy | 27 | |
Market timing prohibition | 15 |
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Marsh & McLennan (MMC) | ||
securities | 2, 8, 11, 12, 34, 44 | |
Material information | 1, 14, 18, 41, 43-47, 52 | |
Naked options | 18 | |
Negotiations prohibition | 29 | |
Non-public information | 1, 5, 14, 18, 41, 43-47, 52 | |
Non-Putnam affiliates (NPAs) | 30 | |
Officer, prohibited to serve for another entity | 28 | |
Ombudsman | 36 | |
Options | ||
defined as securities | 11, 42 | |
naked | 18 | |
relationship to securities on | ||
Restricted or Red Lists | 11 | |
Outside business affiliations | 28, 35 | |
Partner, prohibited to serve for another entity | 28 | |
Personal securities transactions | 3 | |
partnerships, covered in | 7, 42 | |
Personal Trading Assistant (PTA) | ||
2, 6, 8, 9, 11, 15, 25, 28, 34, 35, 36, 38, 55 | ||
Political activities, contributions, lobbying | 26-27 | |
Portfolio managers, special rules on trading | 20-23 | |
Portfolio Trading | 20-23, 30 | |
Pre-clearance | 2, 8-12 | |
sanctions for failure to pre-clear properly | 40 | |
Privacy Policy | 32-33 | |
Private offerings and | ||
private placement pre-approval | 13 | |
Prohibited transactions | 12-17 | |
Putnam mutual fund restrictions | 2, 15-16 | |
90-Day Rule | 15 | |
One-Year Rule | 15-16 | |
Quarterly Report of Securities Transactions | 2, 35 | |
Records | ||
accurate records policy | 29 | |
retention policy | 33 | |
Red List | 43-44 | |
Reporting Requirements | 34-35 | |
Restricted List | 6, 8, 9, 11, 12, 38, 39, 40, 43 | |
Sanctions | 1, 16, 25, 33, 35, 40, 55 | |
Securities, donated | 11 | |
Shares by subscription, pre-clearance | 10 | |
Short selling | 2 | |
Special rules for investment professionals | 3, 20-23 | |
Spread betting | 17 | |
Tender Offers | 11 | |
Trustee | 7, 14, 28, 29, 42 | |
Trusts | 7, 42 |
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U.S. government obligations | 6 |
Violations reporting | 35 |
Warrants | 42 |
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One Post Office Square Boston, Massachusetts 02109 1-617-292-1000
www.putnam.com23917312/06
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Amendments to Putnams Code of Ethics August 2007
The following sections are rewritten in their entirety to read as follows:
Code of Ethics Overview
Short selling (page 2)
Putnam employees are prohibited from short selling any security, whether or not it is held in a Putnam client portfolio, although short selling against broad market indexes and against the box is permitted. Note, however, that short selling against the box or otherwise hedging an investment in shares of Power Corporation of Canada, Power Financial Corporation, and Great-West Lifeco Inc. stock is prohibited.
Section 1- Personal Securities Rules for All Employees
A. Pre-Clearance (page 8)
Rule 1: Pre-Clearance Requirements
Pre-clearance is required for the following securities:
● Stock of Power Corporation of Canada, Power Financial Corporation, and Great-West Lifeco Inc.
● MMC stock
● Any type or class of equity or debt security, including corporate and municipal bonds
● Any rights relating to a security, such as warrants and convertible securities
● Closed-end funds including Putnam closed-end funds. Country funds, as well as other funds that are not tied to an index, are considered closed-end funds and are subject to pre-clearance and reporting requirements, e.g., India Fund (INF), Morgan Stanley Asia Pacific Fund (APF), and Central Europe and Russia Fund (CEE). Certain closed-end funds which sometimes are referred to as closed-end ETFs, such as Blackrock (BKK), Western Asset Emerging (ESD), or Eaton Vance Muni Trust (EVN), are also subject to pre-clearance and reporting requirements.
● Any narrow-based derivative, e.g., a put-or-call option on a single security
● Any security donated as a gift to an individual or a charity
Pre-clearance is not required for:
● Open-end mutual funds
● Currencies, Treasuries (T-bills), and direct and indirect obligations of the U.S. government and its agencies
● Direct and indirect obligations of any member of the country of the Organization for Economic CoOperation and Development (OECD), commercial paper, certificates of deposit (CDs), repurchase agreements, bankers acceptances, and other money market instruments
The following are excluded from pre-clearance but not from reporting requirements:
● Exchange-traded index funds (ETFs) containing a portfolio of securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQQs, iShares, and HLDRs), and any option on a broad-based market index or an exchange-traded futures contract or option thereon.
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Rule 3: Marsh & McLennan (MMC) Securities (page 11)
All employees trading MMC securities must pre-clear the trades in the PTA system. MMC securities include stock, options, and any other securities such as debt. Sales out of the MMC Employee Stock Purchase Plan and transactions in all Putnam and MMC employee benefit and bonus plans, i.e., rebalancing or exchanging out of the 401(k)/Profit Sharing//Bonus Plan, are included in this requirement.
Pre-clearance of MMC is required when, for example, you:
● Sell MMC out of the Stock Purchase Plan
● Exchange MMC shares out of your 401(k)/Profit Sharing/Bonus Plan
● Rebalance your Putnam fund choices, which results in a buy or sell of MMC from your 401(k)/Profit Sharing/Bonus Plan
● Trade in MMC securities in other accounts held outside Putnam Investments
Pre-clearance is not required when you:
● Apply for a loan and/or make withdrawals of the stock from your 401(k)/Profit Sharing Plan
COMMENTS
All transactions of MMC require pre-clearance in PTA before you contact your broker to trade shares in an outside brokerage account or before contacting Citigroup Smith Barney to sell shares out of your Stock Purchase Plan. Also, if MMC is one of your choices in the 401(k)/Profit Sharing Plan, all exchanges out must be cleared. Even though clearance is not required for Putnam mutual funds, if you do not wish to include MMC shares when rebalancing any of your fund choices, which will result in an automatic exchange of your MMC shares, you must remember to exclude MMC shares prior to submitting your changes. If you are investing online, check the box to exclude MMC; or if you are investing by telephone with a Putnam representative, ask to exclude MMC before rebalancing the funds.
Additional MMC-related policies:
● Transactions in MMC securities that are held in Putnams internal plans are not subject to the 90-Day Short-Term Rule (applicable to Access Persons only) or to the holding periods that apply to Putnam mutual funds.
B. Prohibited Transactions (page 12)
Rule 1: Short-Selling Prohibition
Putnam employees are prohibited from short selling any security in their own account, whether or not the security is held in a Putnam client portfolio. Employees are prohibited from hedging investments made in securities of Power Corporation of Canada, Power Financial Corporation, and Great-West Lifeco Inc.
EXCEPTION
Short selling against broad market indexes (such as the Dow Jones Industrial Average, the NASDAQ index, and the S&P 100 and 500 indexes) and short selling against the box are permitted (except that short selling shares of Power Corporation of Canada, Power Financial Corporation, and Great-West Lifeco Inc. against the box is not permitted).
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Section IV Reporting Requirements
Reporting of Personal Securities Transactions
Rule 6: Reporting of Irregular Activity (pages 35 and 36)
If a Putnam employee suspects that fraudulent, illegal, or other irregular activity (including violations of the Code of Ethics) might be occurring at Putnam, the activity should be reported immediately to the managing director in charge of that employees business unit. Managing directors who are notified of any such activity must immediately report it in writing to Putnams Chief Financial Officer and Putnams Chief Compliance Officer.
An employee who does not feel comfortable reporting this activity to the managing director may instead contact the Chief Compliance Officer, the Putnam Ethics hotline, or Putnams Ombudsman.
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Appendix A Section I: Rules Concerning Inside Information (pages 43 and 44)
Rule 3: Reporting of Material Non-Public Information
Any Putnam employee who believes he is aware of or has received material, non-public information concerning a security or an issuer shall immediately report the information to the Code of Ethics Officer, the Deputy Code of Ethics Officer, or in their absence, a lawyer in the Putnam Legal and Compliance Department and to no one else. After reporting the information, the Putnam employee shall comply strictly with Rule 2 by not trading in the security without the prior written approval of the Code of Ethics Officer and shall (a) take precautions to ensure the continued confidentiality of the information, and (b) refrain from communicating the information in question to any person.
IMPLEMENTATION
A. In order to make any use of potential material non-public information, including purchasing or selling a security or communicating the information to others, an employee must communicate that information to the Code of Ethics Officer in a way designed to prevent the spread of such information. Once the employee has reported potential material non-public information to the Code of Ethics Officer, the Code of Ethics Officer will evaluate whether such information constitutes material non-public information, and whether a duty exists that makes use of such information improper. If the Code of Ethics Officer determines either (a) that the information is not material or is public, or (b) that use of the information is proper, he will issue a written approval to the employee specifically authorizing trading while in possession of the information, if the employee so requests. If the Code of Ethics Officer determines (a) that the infor mation may be non-public and material, and (b) that use of such information may be improper, he will place the security that is the subject of such information on the Red List.
B. An employee who reports potential inside information to the Code of Ethics Officer should expect that the Code of Ethics Officer will need significant information, and time to gather such information, to make the evaluation, including information about (a) the manner in which the employee acquired the information, and (b) the identity of individuals to whom the employee has revealed the information, or who have otherwise learned the information. In appropriate situations, the Code of Ethics Officer will normally place the affected security or securities on the Red List pending the completion of his evaluation.
C. If an employee possesses documents, disks, or other materials containing the potential inside information, an employee must take precautions to ensure the confidentiality of the information in question. Those precautions include (a) putting documents containing such information out of the view of a casual observer, and (b) securing files containing such documents or ensuring that computer files reflecting such information are secure from viewing by others.
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