-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AShfkgRHJMD9IUN+9E4GGZKsoT5FRtmkkeuNPtppe/YwFAdBBUgZSTpP8hu50iZs aaP6FZgLLztb+Z92VHWnsQ== 0000868648-96-000005.txt : 19960816 0000868648-96-000005.hdr.sgml : 19960816 ACCESSION NUMBER: 0000868648-96-000005 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND /MA/ CENTRAL INDEX KEY: 0000868648 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046661045 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-37214 FILM NUMBER: 96614896 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921471 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM OVERSEAS GROWTH FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND DATE OF NAME CHANGE: 19901107 497 1 DEFINITIVE INFORMATION PROSPECTUS NOVEMBER 1, 1995 , as revised AUGUST 12, 1996 Putnam International Growth Fund Class A, B and M shares INVESTMENT STRATEGY: GROWTH This prospectus explains concisely what you should know before investing in Putnam International Growth Fund (the "fund"). Please read it carefully and keep it for future reference. You can find more detailed information in the November 1, 1995 statement of additional information (the "SAI"), as amended from time to time. For a free copy of the SAI or other information, call Putnam Investor Services at 1-800-225- 1581. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. BOSTON * LONDON * TOKYO ABOUT THE FUND Expenses summary .............................................................. This section describes the sales charge, management fees, and annual operating expenses that apply to the fund's various classes of shares. Use it to help you estimate the impact of transaction costs on your investment over time. Financial highlights .............................................................. Study this table to see, among other things, how the fund performed each year for the past 10 years or since it began investment operations if it has been in operation for less than 10 years. Objective .............................................................< /R>. Read this section to make sure the fund's objective is consistent with your own. How the fund pursues its objective .............................................................< /R>. This section explains in detail how the fund seeks its investment objective. Risk factors. All investments entail some risk. Read this section to make sure you understand certain risks that may be involved when investing in the fund. How performance is shown ............................. ............................. .... This section describes and defines the measures used to assess the fund's performance. All data are based on the fund's past investment results and do not predict future performance. How the fund is managed .......................... ................................ .... Consult this section for information about the fund's management, allocation of the fund's expenses, and how purchases and sales of securities are made for the fund. Organization and history .............................................................< /R>. In this section, you will learn when the fund was introduced, how it is organized, how it may offer shares, and who its Trustee are. ABOUT YOUR INVESTMENT Alternative sales arrangements ................................ .......................... .... Read this section for descriptions of the classes of shares this prospectus offers and for points you should consider when making your choice. How to buy shares .......................... ................................ .... This section describes the ways you may purchase shares and tells you the minimum amounts required to open various types of accounts. It explains how sales charges are determined and how you may become eligible for reduced sales charges on each class of shares. Distribution plans .......................... ................................ .... This section tells you what distribution fees are charged against each class of shares. How to sell shares .............................................................. In this section you can learn how to sell shares of the fund, either directly to the fund or through an investment dealer. How to exchange shares .............................................................< /R>. Find out in this section how you may exchange shares of the fund for shares of other Putnam funds. The section also explains how exchanges can be made without sales charges and the condition under which sales charges may be required. How the fund values its shares .......................... ................................ .... This section explains how the fund determines the value of its shares. How the fund makes distributions to shareholders; tax information .............................................................. This section describes the various options you have in choosing how to receive dividends from the fund. It also discusses the federal tax status of the payments and counsels shareholders to seek specific advice about their own situation. ABOUT PUTNAM INVESTMENTS, INC. Read this section to learn more about the companies that provide marketing, investment management, and shareholder account services to Putnam funds and their shareholders. About the fund EXPENSES SUMMARY Expenses are one of several factors to consider when investing. The following table summarizes your maximum transaction costs from investing in the fund and expenses incurred based on the most recent fiscal year. The examples show the cumulative expenses attributable to a hypothetical $1,000 investment over specified periods. Class A Class B Class M shares shares shares Shareholder transaction expenses Maximum sales charge imposed on purchases (as a percentage of offering price) 5.75% NONE* 3.50%* Deferred sales charge 5.0% in the first (as a percentage year, declining of the lower of to 1.0% in the original purchase sixth year, and price or redemption eliminated proceeds) NONE** thereafter NONE Annual fund operating expenses (as a percentage of average net assets) Total fund Management 12b-1 Other operating fees fees expenses expenses - ---------- ----- ------------------ Class A 0.80% 0.25% 0.56% 1.61% Class B 0.80% 1.00% 0.61% 2.41% Class M 0.80% 0.75% 0.61% 2.16% The table is provided to help you understand the expenses of investing in the fund and your share of the operating expenses that the fund incurs. The 12b-1 fees for class M shares reflect amounts currently payable under the class M distribution plan. For class M shares management fees and "Other expenses" are based on the corresponding expenses for class B shares. Examples Your investment of $1,000 would incur the following expenses, assuming 5% annual return and, except as indicated, redemption at the end of each period: 1 3 5 10 year years years years Class A $73 $105 $140 $238 Class B $74 $105 $149 $255*** Class B (no redemption) $24 $ 75 $129 $255*** Class M $56 $100 $147 $276 The examples do not represent past or future expense levels. Actual expenses may be greater or less than those shown. Federal regulations require the examples to assume a 5% annual return, but actual annual return varies. * The higher 12b-1 fees borne by class B and class M shares may cause long-term shareholders to pay more than the economic equivalent of the maximum permitted front-end sales charge on class A shares. ** A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares that were purchased without an initial sales charge . See "How to buy shares -Class A shares." *** Reflects conversion of class B shares to class A shares (which pay lower ongoing expenses) approximately eight years after purchase. See "Alternative sales arrangements." FINANCIAL HIGHLIGHTS The following table presents per share financial information for class A, B and M shares. This information has been audited and reported on by the fund's independent accountants. The "Report of independent accountants" and financial statements included in the fund's annual report to shareholders for the 1995 fiscal year are incorporated by reference into this prospectus. The fund's annual report, which contains additional unaudited performance information, is available without charge upon request. Financial highlights (For a share outstanding during the period) (The table appears on page 5a) Financial Highlights (For a share outstanding throughout the period)
For the period For the period December 1, 1994 December 1, 1994 (commencement (commencemnt of operations) to Year ended of operations) to June 30 June 30 June 30 1996 1995 1996 1995 1994 Class M Class B Net asset value, beginning of period $11.87 $11.82 $11.78 Investment operations Net investment income (loss) .03 .01 (.01)(a)(b) Net realized and unrealized gain (loss) on investments .36 .34 .05 Total from investments operations .39 .35 .04 Distributions to shareholders from: Net investment income -- -- -- Net realized gain on investment (.11) (.11) -- In excess of net realized gains on investments (.06) (.06) -- Total distributions (.17) (.17) -- Net asset value, end of period $12.09 $12.00 $11.82 Total investment return at net asset value (%)(c) 3.33(d) 3.00 .34(d) Net assets, end of period (in thousands) $1,777 $25,892 $2470 Ratio of expenses to average net assets (%) 1.61(a)(d) 2.41(a) .15(a)(b)(d) Ratio of net investment income (loss) to average net assets (%) .58(a)(d) .23(a) (.06)(a)(b)(d) Portfolio turnover (%) 25.83 25.83 96.13 Financial highlights (continued) For the period February 28, 1991 (commencement of operations) to Year ended June 30 June 30 1996 1995 1994 1993 1992 1991 Class A $11.83 $9.58 $8.82 $8.18 $8.63 .08 (.06)(a) .07(a) .06 .07(a) .36 2.53 .69 .71 (.52) .44 2.47 .76 .77 (.45) -- -- -- (.13) -- (.11) (.22) -- -- -- (.06) -- -- -- -- (.17) (.22) -- (.13) -- $12.10 $11.83 $9.58 $8.82 $8.18 3.76 25.81 8.62 9.52 (5.21)(d) $32,856 $8,781 $2,859 $2,502 $2,054 1.61(a) 2.17(a) 1.80(a) 1.98 .78(a)(d) .97(a) (.17)(a) .81(a) .76 .86(a)(d) 25.83 96.13 80.92 82.45 14.54(d) (a) Reflects an expense limitation applicable during the period. As a result of such limitation, expenses for class A shares of the fund for the periods ended June 30, 1994, June 30, 1993 and June 30, 1991 reflect per share reductions of approximately $0.03, $0.05 and $0.10, respectively. Expenses for class B shares of the fund for the period ended June 30, 1994 reflect a reduction of less than $0.01 per share. Expenses for classes A, B, and M shares of the fund for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share. (b) Per share net investment income for class B shares for the period ended June 30, 1994 has been determined on the basis of the weighted average number of shares outstanding for the period. (c) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (d) Not annualized.
OBJECTIVE Putnam International Growth Fund seeks capital appreciation. The fund is designed for investors seeking capital appreciation primarily through a diversified portfolio of equity securities of companies located in a country other than the United States . The fund is not intended to be a complete investment program, and there is no assurance it will achieve its objective. HOW THE FUND PURSUES ITS OBJECTIVE Basic investment strategy The Putnam International Growth Fund seeks its objective by investing primarily in equity securities of companies located in a country other than the United States . The fund's investments will normally include common stocks, preferred stocks, securities convertible into common or preferred stocks, and warrants to purchase common or preferred stocks. The fund may also invest to a lesser extent in debt securities and other types of investments if Putnam Investment Management, Inc., the fund's investment adviser ("Putnam Management"), believes purchasing them would help achieve the fund's objective. The fund will , under normal circumstances , invest at least 65% of its total assets in issuers located in at least three different countries other than the United States . The fund may hold a portion of its assets in cash or money market instruments. The fund will consider an issuer of securities to be "located in a country other than the United States " if it is organized under the laws of a country other than the United States and has a principal office outside the United States , or if it derives 50% or more of its total revenues from business outside the United States . The fund may invest in securities of issuers in emerging markets, as well as more developed markets. Investing in emerging markets generally involves more risks then in investing in developed markets. See "Risk factors" below. The fund will not limit its investments to any particular type of company. The fund may invest in companies, large or small, whose earnings are believed to be in a relatively strong growth trend, or in companies in which significant further growth is not anticipated but whose market value per share is thought to be undervalued. It may invest in small and relatively less well- known companies which meet these characteristics. At times Putnam Management may judge that conditions in the international securities markets make pursuing the fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies, primarily designed to reduce fluctuations in the value of the fund's assets. In implementing these "defensive" strategies, the fund may invest without limit in securities of any kind, including securities traded primarily in U.S. markets, and in cash and money market instruments. It is impossible to predict when, or for how long, the fund will use these alternative strategies. Risk factors Putnam Management believes that the securities markets of many nations move relatively independently of one another, because business cycles and other economic or political events that influence one country's securities markets may have little effect on securities markets in other countries. By investing in a diversified portfolio of foreign securities, Putnam Management attempts to reduce the risks associated with being invested in the economy of only one country. The countries which Putnam Management believes offer attractive opportunities for investment may change from time to time. The fund may seek investment opportunities among securities of large, widely traded companies as well as securities of smaller, less well known companies. Smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks. They may have limited product lines, markets for financial resources, or may depend on a limited management group. Their securities may trade less frequently and in limited volume. As a result, the prices of these securities may fluctuate more than prices of securities of larger, more established companies. Foreign investments can involve risks that may not be present in domestic investments. Since foreign securities are normally denominated and traded in foreign currencies, the values of the fund's assets may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. There may be less information publicly available about a foreign company than about a U. S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable with those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U. S. companies. Foreign brokerage commissions and other fees are also generally higher than those in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in those countries. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit investment in securities of certain issuers located in those countries. Special tax considerations apply to foreign securities. The risks described above are typically increased for investments in securities principally traded in, or issued by issuers located in underdeveloped and developing nations, which are sometimes referred to as "emerging markets." See also "Portfolio turnover," "Risk factors in options and futures transactions" and "Other investment practices" below. Portfolio turnover The length of time the fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the fund is known as "portfolio turnover." 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 generally involves some expense to the fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates for the life of the fund are shown in the section, "Financial highlights." Options and futures portfolio strategies The fund may engage in a variety of transactions involving the use of options and futures contracts and in foreign currency exchange transactions for purposes of increasing its investment return or hedging against market changes. The fund may seek to increase its current return by writing covered call options and covered put options on its portfolio securities or other securities in which it may invest. The fund receives a premium from writing a call or put option, which increases the fund's return if the option expires unexercised or is closed out at a net profit. The fund may also buy and sell put and call options on such securities for hedging purposes. When the fund writes a call option on a portfolio security, it gives up the opportunity to profit from any increase in the price of the security above the exercise price of the option; when it writes a put option, the fund takes the risk that it will be required to purchase a security from the option holder at a price above the current market price of the security. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund may also from time to time buy and sell combinations of put and call options on the same underlying security to earn additional income. The fund may buy and sell index futures contracts for hedging purposes. An "index future" is a contract to buy or sell units of a particular index at an agreed price on a specified future date. Depending on the change in value of the index between the time when the fund enters into and terminates an index future transaction, the fund realizes a gain or loss. The fund may also purchase and sell call and put options on index futures or on indices in addition or as an alternative to purchasing or selling index futures or, to the extent permitted by applicable law, to earn additional income. The fund may also purchase warrants, issued by banks and other financial institutions, whose values are based on the values from time to time of one or more securities indices. Foreign currency exchange transactions. The fund may engage in foreign currency exchange transactions to protect against uncertainty in the level of future currency exchange rates. Putnam Management expects to engage in foreign currency exchange transactions in connection with the purchase and sale of portfolio securities ("transaction hedging") and to protect against changes in the value of specific portfolio positions ("position hedging"). The fund may engage in transaction hedging to protect against a change in foreign currency exchange rates between the date on which the fund contracts to purchase or sell a security and the settlement date, or to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. If conditions warrant, the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and may purchase and sell foreign currency futures contracts as a hedge against changes in foreign currency exchange rates between the trade and settlement dates on particular transactions and not for speculation. A foreign currency forward contract is a negotiated agreement to exchange currency at a future time at a rate or rates that may be higher or lower than the spot rate. Foreign currency futures contracts are standardized exchange-traded contracts and have margin requirements. For transaction hedging purposes, the fund may also purchase and sell call and put options on foreign currency futures contracts and on foreign currencies. The fund may engage in position hedging to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in value of a currency in which securities the fund intends to buy are denominated). For position hedging purposes, the fund may purchase or sell foreign currency futures contacts, foreign currency forward contracts, and options on foreign currency futures contracts and on foreign currencies. In connection with position hedging, the fund may also purchase or sell foreign currency on a spot basis. 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. The currencies of certain countries are not widely traded, and the foreign currency exchange transactions described above may not be available with respect to those currencies. Risk factors in options and futures transactions Options and futures transactions involve costs and may result in losses. Options and futures transactions involve certain special risks, including the risks that the fund may be unable at times to close out such positions, that transactions may not accomplish their purposes because of imperfect market correlations, or that Putnam Management may not forecast market movements correctly. The effective use of options and futures strategies depends on the fund's ability to terminate options and futures positions at times when Putnam Management deems it desirable to do so. Although the fund will enter into an option or futures contract position only if Putnam Management believes that a liquid secondary market exists for such option or futures contract, there is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. The fund generally expects that its options and futures contract transactions will be conducted on recognized exchanges. In certain instances, however, the fund may purchase and sell options in the over-the-counter markets. The fund's ability to terminate options in over-the-counter markets may be more limited than for exchange-traded options and may also involve the risk that securities dealers participating in such transactions would be unable to meet their obligations to the fund. The use of options and futures strategies also involves the risk of imperfect correlation between movements in the prices of options and futures contracts and movements in the value of the underlying securities, securities index or foreign currency, or in the prices of the securities or currency that are the subject of a hedge. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The successful use of these strategies further depends on the ability of Putnam Management to forecast market movements correctly. Because the markets for certain options and futures contracts in which the fund will invest (including markets located in foreign countries) are relatively new and still developing and may be subject to regulatory restraints, the fund's ability to engage in transactions using such investments may be limited. The fund's ability to engage in hedging transactions may be limited by certain regulatory requirements and tax considerations. The fund's hedging transactions may affect the character or amount of the fund's distributions. A more detailed explanation of futures and options transactions, including the risks associated with them, is included in the SAI. Other investment practices The fund may also engage in the following investment practices, each of which involves certain special risks. The SAI contains more detailed information about these practices, including limitations designed to reduce these risks. Securities loans, repurchase agreements and forward commitments. The fund may lend portfolio securities amounting to not more than 25% of its assets to broker-dealers and may enter into repurchase agreements on up to 25% of its assets. These transactions must be fully collateralized at all times. The fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to the fund if the other party should default on its obligation and the fund is delayed or prevented from recovering the collateral or completing the transaction. Derivatives Certain of the instruments in which the fund will invest such as futures contracts, options and forward contracts, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risk involved in their use is included elsewhere in this prospectus and in the SAI. Limiting investment risk Specific investment restrictions help the fund limit investment risks for its shareholders. These restrictions prohibit the fund from: acquiring more than 10% of the voting securities of any one issuer.* They also prohibit the fund from investing more than: (a) 5% of its total assets in securities of any one issuer (other than U.S. government securities); provided that, with respect to investments in securities issued by foreign governments, this limitation shall apply only to 75% of the fund's total assets;* (b) 5% of its net assets in companies that, together with any predecessors, have been in operation less than three years (other than U.S. government securities);* (c) 25% of its total assets in any one industry (except securities of the U.S. government or its agencies or instrumentalities);* or (d) 15% of its net assets in any combination of securities that are not readily marketable, in securities restricted as to resale, (excluding securities determined by the Trustees (or the person designated the Trustees to make such determinations) to be readily marketable) and repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk(*) above are summaries of fundamental investment policies. See the SAI for the full text of these policies and the fund's other fundamental investment policies. Except for investment policies designated as fundamental in this prospectus or the SAI, the investment policies described in this prospectus and in the SAI are not fundamental investment policies. The Trustees may change any non-fundamental investment policies without shareholder approval. As a matter of policy, the Trustees would not materially change the fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN The fund's investment performance may from time to time be included in advertisements about the fund. "Total return" for the one-, five- and ten-year periods (or for the life of a class, if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the fund invested at the maximum public offering price (in the case of class A and class M shares) or reflecting the deduction of any applicable contingent deferred sales charge (in the case of class B shares). Total return may also be presented for other periods or based on investment at reduced sales charge levels. Any quotation of investment performance not reflecting the maximum initial sales charge or contingent deferred sales charge would be reduced if the sales charge were used. All data are based on past investment results and do not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of the fund's portfolio, the fund's operating expenses and which class of shares the investor purchases. Investment performance also often reflects the risks associated with the fund's investment objective and policies. These factors should be considered when comparing the fund's investment results with those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. The fund's performance may be compared to that of various indexes. See the SAI. HOW THE FUND IS MANAGED The Trustees of the fund are responsible for generally overseeing the conduct of the fund's 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. The fund pays Putnam Management a quarterly fee for these services based on the fund's average net assets. See "Expenses summary" and the SAI. The following officer of Putnam Management has had primary responsibility for the day-to-day management of the fund's portfolio since the year stated below: Recent experience Year (at least 5 years) ---- ------------------ Justin Scott 1991 Employed as an investment Managing Director professionsl by Putnam Management since 1988. The fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses, and payments under its distribution plans (which are in turn allocated to the relevant class of shares). The fund also reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of the fund's securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker- dealers. ORGANIZATION AND HISTORY Putnam International Growth Fund is a Massachusetts business trust organized on October 5, 1990. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. Prior to August 12, 1996, the fund was known as Putnam Overseas Growth Fund. The fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. Shares of the fund may be divided without shareholder approval into two or more series of shares representing separate investment portfolios. Any such series of shares may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. The fund's shares are not currently divided into series. The fund's shares are currently divided into three classes. Only the fund's class A, B and M shares are offered by this prospectus. The fund may also offer other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of each class 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. If you own fewer shares than a minimum amount set by the Trustees (presently 20 shares), the fund may choose to redeem your shares. You will receive at least 30 days' written notice before the fund redeems your shares, and you may purchase additional shares at any time to avoid a redemption. The fund may also redeem shares if you own shares above a maximum amount set by the Trustees. There is presently no maximum, but the Trustees may establish one at any time, which could apply to both present and future shareholders. The fund's Trustees: George Putnam,* Chairman . President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; William F. Pounds, Vice Chairman . Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology ; Jameson Adkins Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice Chairman, North American Management Corp.; John A. Hill, Chairman and Managing Director, First Reserve Corporation; Ronald J. Jackson, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; Elizabeth T. Kennan, President Emeritus and Professor, Mount Holyoke College; Lawrence J. Lasser,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; Robert E. Patterson, Executive Vice President and Director of Acquisitions , Cabot Partners Limited Partnership; Donald S. Perkins,* Director of various corporations, including Cummins Engine Company, Lucent Technologies, Inc., Springs Industries, Inc. and Time Warner Inc.; George Putnam, III,* President, New Generation Research, Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. Smith,* Chairman and Chief Executive Officer , Marsh & McLennan Companies, Inc.; and W. Nicholas Thorndike, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Eastern Utilities Associates. The Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the fund, Putnam Management or Putnam Mutual Funds. About Your Investment ALTERNATIVE SALES ARRANGEMENTS This prospectus offers investors three classes of shares that bear sales charges in different forms and amounts and that bear different levels of expenses: Class A shares. An investor who purchases class A shares pays a sales charge at the time of purchase. As a result, class A shares are not subject to any charges when they are redeemed, except for sales at net asset value that are subject to a contingent deferred sales charge ("CDSC"). Certain purchases of class A shares qualify for reduced sales charges. Class A shares bear a lower 12b-1 fee than class B and class M shares. See "How to buy shares -- Class A shares" and "Distribution plans." Class B shares. Class B shares are sold without an initial sales charge, but are subject to a CDSC if redeemed within a specified period after purchase. Class B shares also bear a higher 12b-1 fee than class A and class M shares. Class B shares automatically convert into class A shares, based on relative net asset value, approximately eight years after purchase. For more information about the conversion of class B shares, see the SAI. This discussion will include information about how shares acquired through reinvestment of distributions are treated for conversion purposes. The discussion will also note certain circumstances under which a conversion may not occur. Class B shares provide an investor the benefit of putting all of the investor's dollars to work from the time the investment is made. Until conversion, class B shares will have a higher expense ratio and pay lower dividends than class A and class M shares because of the higher 12b-1 fee. See "How to buy shares -- Class B shares" and "Distribution plans." Class M shares. An investor who purchases class M shares pays a sales charge at the time of purchase that is lower than the sales charge applicable to class A shares. Certain purchases of class M shares qualify for reduced sales charges. Class M shares bear a 12b-1 fee that is lower than class B shares but higher than class A shares. Class M shares are not subject to any CDSC and do not convert into any other class of shares. See "How to buy shares -- Class M shares" and "Distribution plans." Which arrangement is best for you? The decision as to which class of shares provides a more suitable investment for an investor depends on a number of factors, including the amount and intended length of the investment. Investors making investments that qualify for reduced sales charges might consider class A or class M shares. Investors who prefer not to pay an initial sales charge might consider class B shares. Orders for class B shares for $250,000 or more will be treated as orders for class A shares or declined. For more information about these sales arrangements, consult your investment dealer or Putnam Investor Services. Shares may only be exchanged for shares of the same class of another Putnam fund. See "How to exchange shares." HOW TO BUY SHARES You can open a fund account with as little as $500 and make additional investments at any time with as little as $50. You can buy fund shares three ways - through most investment dealers, through Putnam Mutual Funds (at 1-800-225-1581), or through a systematic investment plan. If you do not have a dealer, Putnam Mutual Funds can refer you to one. Buying shares through Putnam Mutual Funds. Complete an order form and write a check for the amount you wish to invest, payable to the fund. Return the completed form and check to Putnam Mutual Funds, which will act as your agent in purchasing shares through your designated investment dealer. Buying shares through systematic investing. You can make regular investments of $25 or more per month through automatic deductions from your bank checking account. Application forms are available from your investment dealer or through Putnam Investor Services. Shares are sold at the public offering price based on the net asset value next determined after Putnam Investor Services receives your order. In most cases, in order to receive that day's public offering price, Putnam Investor Services must receive your order before the close of regular trading on the New York Stock Exchange. If you buy shares through your investment dealer, the dealer must receive your order before the close of regular trading on the New York Stock Exchange to receive that day's public offering price. Class A shares The public offering price of class A shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, in its discretion, allocates the entire amount to your investment dealer: Sales charge Amount of as a percentage of: sales charge ------------------- reallowed to Net dealers as a Amount of transaction amount Offering percentage of at offering price ($) invested price offering price - ---------------------------------------------------------------- Under 50,000 6.10% 5.75% 5.00% 50,000 but under 100,000 4.71 4.50 3.75 100,000 but under 250,0003.63 3.50 2.75 250,000 but under 500,0002.56 2.50 2.00 500,000 but under 1,000,000 2.04 2.00 1.75 - ---------------------------------------------------------------- There is no initial sales charge on purchases of class A shares of $1 million or more. However, a CDSC of 1.00% or 0.50%, respectively, will be imposed on redemptions (other than redemptions by certain participant-directed qualified retirement plans, which are subject to a two-year CDSC of 1.00%, as described below) within the first or second year after purchase . There are also no initial sales charges on Class A shares purchased by participant-directed qualified retirement plans with at least 200 eligible employees. A CDSC of 1.00% will, however, be imposed upon the redemption of shares purchased after July 31, 1996 at net asset value by a participant-directed qualified retirement plan (including a plan with at least 200 eligible employees) that initially invested less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates and that sells 90% or more of the amount initially invested within two years after its initial purchase. Any CDSC will be based on the lower of the shares' cost and current net asset value. Any shares acquired by reinvestment of distributions will be redeemed without a CDSC. Shares purchased by certain investors investing $1 million or more who have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission as described below are not subject to the CDSC. In determining whether a CDSC is payable, shares not subject to any charge will be redeemed first . Putnam Mutual Funds receives the entire amount of any CDSC you pay. See the SAI for more information about the CDSC. Except as stated below, Putnam Mutual Funds pays investment dealers of record commissions on sales of class A shares of $1 million or more based on an investor's cumulative purchases during the one-year period beginning with the date of the initial purchase at net asset value. Each subsequent one-year measuring period for these purposes will begin with the first net asset value purchase following the end of the prior period. Such commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. On sales at net asset value to a participant-directed qualified retirement plan initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates (including a plan with at least 200 eligible employees), Putnam Mutual Funds pays commissions during each one-year measuring period, determined as described above , at the rate of 1.00% of the first $2 million, 0.80% of the next $1 million and 0.50% thereafter. On sales at net asset value to all other participant-directed qualified retirement plans, Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales at the rate of 0.15%. Class B shares Class B shares are sold without an initial sales charge, although a CDSC will be imposed if you redeem shares within a specified period after purchase, as shown in the table below. The following types of shares may be redeemed without charge at any time: (i) shares acquired by reinvestment of distributions and (ii) shares otherwise exempt from the CDSC, as described in "How to buy shares - -- General" below. For other shares, the amount of the charge is determined as a percentage of the lesser of the current market value or the cost of shares being redeemed. Year 1 2 3 4 5 6 7+ - -------------------------------------------------------------- Charge 5% 4% 3% 3% 2% 1% 0% In determining whether a CDSC is payable on any redemption, the fund will first redeem shares not subject to any charge, and then shares held longest during the CDSC period. For this purpose, the amount of any increase in a share's value above its initial purchase price is not regarded as a share exempt from the CDSC. Thus, when a share that has appreciated in value is redeemed during the CDSC period, a CDSC is assessed only on its initial purchase price. For information on how sales charges are calculated if you exchange your shares, see "How to exchange shares." Putnam Mutual Funds receives the entire amount of any CDSC you pay. Class M shares The public offering price of class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, at its discretion, allocates the entire amount to your investment dealer. Sales charge Amount of as a percentage of: sales charge --------------------- reallowed to Net dealers as a Amount of transaction amount Offering percentage of at offering price ($) invested price offering price - --------------------------------------------------------------- Under 50,000 3.63% 3.50% 3.00% 50,000 but under 100,000 2.56 2.50 2.00 100,000 but under 250,000 1.52 1.50 1.00 250,000 but under 500,000 1.01 1.00 1.00 500,000 and above NONE NONE NONE - --------------------------------------------------------------- General You may be eligible to buy class A shares and class M shares at reduced sales charges. Consult your investment dealer or Putnam Mutual Funds for details about Putnam's combined purchase privilege, cumulative quantity discount, statement of intention, group sales plan, employee benefit plans, and other plans. Sales charges will not apply to class M shares purchased with redemption proceeds received within the prior 90 days from non- Putnam mutual funds on which the investor paid a front-end or a contingent deferred sales charge and to class M shares purchased beginning December 1, 1995 by participant-directed qualified retirement plans with at least 50 eligible employees. The fund may also sell class M shares at net asset value to members of qualified groups. The fund may sell class A, class B and class M shares at net asset value without an initial sales charge or a CDSC to the fund's current and retired Trustees (and their families), current and retired employees (and their families) of Putnam Management and affiliates, registered representatives and other employees (and their families) of broker-dealers having sales agreements with Putnam Mutual Funds, employees (and their families) of financial institutions having sales agreements with Putnam Mutual Funds (or otherwise having an arrangement with a broker-dealer or financial institution with respect to sales of fund shares), financial institution trust departments investing an aggregate of $1 million or more in Putnam funds, clients of certain administrators of tax- qualified plans, tax-qualified plans when proceeds from repayments of loans to participants are invested (or reinvested) in Putnam funds, "wrap accounts" for the benefit of clients of broker- dealers, financial institutions or financial planners adhering to certain standards established by Putnam Mutual Funds, and investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by the closed- end fund. In addition, the fund may sell shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition by the fund of assets of an investment company or personal holding company, and the CDSC will be waived on redemptions of shares arising out of death or disability or in connection with certain withdrawals from IRA or other retirement plans. Up to 12% of the value of class B shares subject to a systematic withdrawal plan may also be redeemed each year without a CDSC. See the SAI. The SAI contains additional information about purchasing the fund's shares at reduced sales charges. Shareholders of other Putnam funds may be entitled to exchange their shares for, or reinvest distributions from their funds in, shares of the fund at net asset value. If you are considering redeeming or exchanging shares or transferring shares to another person shortly after purchase, you should pay for those shares with a certified check to avoid any delay in redemption, exchange or transfer. Otherwise the fund may delay payment until the purchase price of those shares has been collected or, if you redeem by telephone, until 15 calendar days after the purchase date. To eliminate the need for safekeeping, the fund will not issue certificates for your shares unless you request them. Putnam Mutual Funds will from time to time, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. DISTRIBUTION PLANS Class A distribution plan. The class A plan provides for payments by the fund to Putnam Mutual Funds at the annual rate of up to 0.35% of average net assets attributable to class A shares. The Trustees currently limit payments under the class A plan to the annual rate of 0.25% of such assets. Putnam Mutual Funds makes quarterly payments to qualifying dealers (including, for this purpose, certain financial institutions) to compensate them for services provided in connection with sales of class A shares and the maintenance of shareholder accounts. The payments are based on the average net asset value of class A shares attributable to shareholders for whom the dealers are designated as the dealer of record. This calculation excludes until one year after purchase shares purchased at net asset value, known as "NAV shares," by shareholders investing $1 million. Also excluded until one year after purchase are NAV shares purchased by participant-directed qualified retirement plans with at least 200 eligible employees, or prior to December 1, 1995, plans sponsored by employers with than 750 employees. NAV shares are not subject to the one-year exclusion provision in cases where certain shareholders who invested $1 million or more have made arrangements with Putnam Mutual Funds and the dealer of record waived the sales commission. Except as stated below, Putnam Mutual Funds makes the quarterly payments at the annual rate of 0.25% of such average net asset value for class A shares. For participant-directed qualified retirement plans initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates, Putnam Mutual Funds' payments to qualifying dealers on NAV shares are 100% of the rate stated above if average plan assets in Putnam funds (excluding money market funds) during the quarter are less than $20 million, 60% of the stated rate if average plan assets are at least $20 million but under $30 million, and 40% of the stated rate if average plan assets are $30 million or more. For all other participant-directed qualified retirement plans purchasing NAV shares, Putnam Mutual Funds makes quarterly payments to qualifying dealers at the annual rate of 0.10% of the average net asset value of such shares. Class B and class M distribution plans. The class B and class M plans provide for payments by the fund to Putnam Mutual Funds at the annual rate of up to 1.00% of average net assets attributable to class B shares and class M shares, as the case may be. The Trustees currently limit payments under the class M plan to the annual rate of 0.75% of such assets. Although class B shares are sold without an initial sales charge, Putnam Mutual Funds pays a sales commission equal to 4.00% of the amount invested to dealers who sell class B shares. These commissions are not paid on exchanges from other Putnam funds or on sales to investors exempt from the CDSC. The amount paid to dealers at the time of the sale of class M shares is set forth above under "How to buy shares -- Class M shares." In addition, to further compensate dealers (including qualifying financial institutions) for services provided in connection with sales of class B shares and class M shares and the maintenance of shareholder accounts, Putnam Mutual Funds makes quarterly payments to qualifying dealers. The payments are based on the average net asset value of class B shares and class M shares attributable to shareholders for whom the dealers are designated as the dealer of record. Putnam Mutual Funds makes the payments at an annual rate of 0.25% of such average net asset value of class B shares and class M shares, as the case may be. Putnam Mutual Funds also pays to dealers, as additional compensation with respect to the sale of class M shares, 0.40% of such average net asset value of class M shares. For class M shares, the total annual payment to dealers equals 0.65% of such average net asset value. General. Payment under the plans are intended to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of fund shares, including the payments to dealers mentioned above. Putnam Mutual Funds may suspend or modify such payments to dealers. The payments are also subject to the continuation of the relevant distribution plan, the terms of service agreements between dealers and Putnam Mutual Funds, and any applicable limits imposed by the National Association of Securities Dealers, Inc. HOW TO SELL SHARES You can sell your shares to the fund any day the New York Stock Exchange is open, either directly to the fund or through your investment dealer. The fund will only redeem shares for which it has received payment. Selling shares directly to the fund. Send a signed letter of instruction or stock power form to Putnam Investor Services, along with any certificates that represent shares you want to sell. The price you will receive is the next net asset value calculated after the fund receives your request in proper form less any applicable CDSC. In order to receive that day's net asset value, Putnam Investor Services must receive your request before the close of regular trading on the New York Stock Exchange. If you sell shares having a net asset value of $100,000 or more, the signatures of registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the SAI for more information about where to obtain a signature guarantee. Stock power forms are available from your investment dealer, Putnam Investor Services and many commercial banks. If you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, a signature guarantee is required. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for details. 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 may use Putnam's Telephone Redemption Privilege to redeem shares valued up to $100,000 from your account unless you have notified Putnam Investor Services of an address change within the preceding 15 days. Unless an investor indicates otherwise on the account application, Putnam Investor Services will be authorized to act upon redemption and transfer instructions received by telephone from a shareholder, or any person claiming to act as his or her representative, who can provide Putnam Investor Services with his or her account registration and address as it appears on Putnam Investor Services' records. Putnam Investor Services will employ these and other reasonable procedures to confirm that instructions communicated by telephone are genuine; if it fails to employ reasonable procedures, Putnam Investor Services may be liable for any losses due to unauthorized or fraudulent instructions. For information, consult Putnam Investor Services. During periods of unusual market changes and shareholder activity, you may experience delays in contacting Putnam Investor Services by telephone. In this event, you may wish to submit a written redemption request, as described above, or contact your investment dealer, as described below. The Telephone Redemption Privilege is not available if you were issued certificates for shares that remain outstanding. The Telephone Redemption Privilege may be modified or terminated without notice. Selling shares through your investment dealer. Your dealer must receive your request before the close of regular trading on the New York Stock Exchange to receive that day's net asset value. Your dealer will be responsible for furnishing all necessary documentation to Putnam Investor Services, and may charge you for its services. HOW TO EXCHANGE SHARES You can exchange your shares for shares of the same class of certain other Putnam funds at net asset value beginning 15 days after purchase. Not all Putnam funds offer all classes of shares. If you exchange shares subject to a CDSC, the transaction will not be subject to the CDSC. However, when you redeem the shares acquired through the exchange, the redemption may be subject to the CDSC, depending upon when you originally purchased the shares. The CDSC 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 CDSC applicable to your class of shares. For purposes of computing the CDSC, 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 exchange. To exchange your shares, simply complete an Exchange Authorization Form and send it to Putnam Investor Services. The form is available from Putnam Investor Services. For federal income tax purposes, an exchange is treated as a sale of shares and generally results in a capital gain or loss. A Telephone Exchange Privilege is currently available for amounts up to $500,000. Putnam Investor Services' procedures for telephonic transactions are described above under "How to sell shares." The Telephone Exchange Privilege is not available if you were issued certificates for shares that remain outstanding. Ask your investment dealer or Putnam Investor Services for prospectuses of other Putnam funds. Shares of certain Putnam funds are not available to residents of all states. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of the fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such action to the extent required by law. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW THE FUND VALUES ITS SHARES The fund calculates the net asset value of a share of each class by dividing the total value of its assets, less liabilities, by the number of its shares outstanding. Shares are valued as of the close of regular trading on the New York Stock Exchange each day the exchange is open. Portfolio securities for which market quotations are readily available are valued at market value. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rates or at such other rates as the Trustees may determine in computing net asset value. As a result, fluctuations in the value of such currencies in relation to the U.S. dollar will affect the net asset value of fund shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION The fund distributes any net investment income at least annually and any net realized capital gains at least anually. Distributions from net investment income, if any, are expected to be small. Distributions from capital gains are made after applying any available capital loss carryovers. Distributions paid on class A shares will generally be greater than those paid on class B and class M shares because expenses attributable to class B and class M shares will generally be higher. You can choose from three distribution options: - - Reinvest all distributions in additional shares without a sales charge; - - Receive distributions from net investment income in cash while reinvesting capital gains distributions in additional shares without a sales charge; or - - Receive all distributions in cash. You can change your distribution option by notifying Putnam Investor Services in writing. If you do not select an option when you open your account, all distributions will be reinvested. All distributions not paid in cash will be reinvested in shares of the class on which the distributions are paid. You will receive a statement confirming reinvestment of distributions in additional shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. If a check representing a fund distribution is not cashed within a specified period, Putnam Investor Services will notify you that you have the option of requesting another check or reinvesting the distribution in the fund or in another Putnam fund. If Putnam Investor Services does not receive your election, the distribution will be reinvested in the fund. Similarly, if correspondence sent by the fund or Putnam Investor Services is returned as "undeliverable," fund distributions will automatically be reinvested in the fund or in another Putnam fund. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements that are necessary for it to be relieved of federal taxes on income and gains it distributes to shareholders. The fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. All fund distributions will be taxable to you as ordinary income, except that any distributions of net long-term capital gains will be taxable as such, regardless of how long you have held the shares. Distributions will be taxable as described above whether received in cash or in shares through the reinvestment of distributions. Early in each year Putnam Investor Services will notify you of the amount and tax status of distributions paid to you for the preceding year. Fund transactions in foreign currencies and hedging activities will likely produce a difference between book income and taxable income. This difference may cause a portion of the fund's income distributions to constitute a return of capital for tax purposes or require the fund to make distributions exceeding book income to qualify as a regulated investment company for tax purposes. Shareholders who are U.S. citizens or residents may be able to claim a foreign tax credit or deduction on their U.S. income tax returns with respect to foreign taxes paid by the fund. If at the end of the fund's fiscal year more than 50% of the value of the fund's total assets represents securities of foreign corporations, the fund intends to make an election permitted by the Internal Revenue Code to treat any foreign taxes it paid as paid by its shareholders. In this case, shareholders who are U.S. citizens, U.S. corporations and, in some cases, U.S. residents generally will be required to include in U.S. taxable income their pro rata share of such taxes, but may then generally be entitled to claim a foreign tax credit or deduction (but not both) for their share of such taxes. The foregoing is a summary of certain federal income tax consequences of investing in the fund. You should consult your tax adviser to determine the precise effect of an investment in the fund on your particular tax situation (including possible liability for state and local taxes). About Putnam Investments, Inc. Putnam Management has been managing mutual funds since 1937. Putnam Mutual Funds is the principal underwriter of the fund and of other Putnam funds. Putnam Fiduciary Trust Company is the fund's custodian. Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the fund's investor servicing and transfer agent. Putnam Management, Putnam Mutual Funds, and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a publicly- owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. 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 ($25 or more) on any business day of the month except for the 29th, 30th, or 31st. The amount will be automatically transferred from your checking or savings account. SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more monthly, quarterly, or semiannually from an account valued at $10,000 or more. Your automatic withdrawal may be made on any business day of the month except for the 29th, 30th, or 31st. SYSTEMATIC EXCHANGE Transfer assets automatically from one Putnam account to another on a regular, prearranged basis. There is no additional charge for this service. FREE EXCHANGE PRIVILEGE Exchange money between Putnam funds in the same class of shares without charge. 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. Investors may not maintain, within the same fund, simultaneous plans for systematic investment or exchange and systematic withdrawal or exchange. These privileges are subject to change or termination. For more information about any of these services and privileges, call your investment advisor or a Putnam customer service representative toll-free at 1-800-225-1581. Putnam Family of Funds PUTNAM GROWTH FUNDS Putnam Asia Pacific Growth Fund Putnam Capital Appreciation Fund Putnam Diversified Equity Trust Putnam Europe Growth Fund Putnam Global Growth Fund Putnam Health Sciences Trust Putnam International New Opportunities Fund Putnam Investors Fund Putnam Natural Resources Fund Putnam New Opportunities Fund Putnam OTC Emerging Growth Fund Putnam Overseas Growth Fund Putnam Vista Fund Putnam Voyager Fund Putnam Voyager Fund II PUTNAM GROWTH AND INCOME FUNDS Putnam Balanced Retirement Fund Putnam Convertible Income-Growth Trust Putnam Equity Income Fund The George Putnam Fund of Boston The Putnam Fund for Growth and Income Putnam Growth and Income Fund II Putnam New Value Fund Putnam Utilities Growth and Income Fund PUTNAM INCOME FUNDS Putnam American Government Income Fund Putnam Diversified Income Trust Putnam Diversified Income Trust II Putnam Federal Income Trust Putnam Global Governmental Income Trust Putnam High Yield Advantage Fund Putnam High Yield Trust Putnam Income Fund Putnam Intermediate U.S. Government Income Fund Putnam Preferred Income Fund Putnam U.S. Government Income Trust PUTNAM TAX-FREE INCOME FUNDS Putnam Municipal Income Fund Putnam Tax Exempt Income Fund Putnam Tax-Free High Yield Fund Putnam Tax-Free Insured Fund Putnam State tax-free income funds+ Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, and Pennsylvania LIFESTAGE(SM) FUNDS Putnam Asset Allocation Funds -- three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments seeking to help maximize your return and reduce your risk. The three portfolios: Balanced Portfolio Conservative Portfolio Growth Portfolio PUTNAM MONEY MARKET FUNDS Putnam Money Market Fund Putnam California Tax Exempt Money Market Fund Putnam New York Tax Exempt Money Market Fund Putnam Tax Exempt Money Market Fund +Not available in all states. Please call your financial advisor or Putnam to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Read it carefully before you invest or send money. PUTNAM INTERNATIONAL GROWTH FUND One Post Office Square Boston, MA 02109 FUND INFORMATION: INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 INVESTOR SERVICING AGENT Putnam Investor Services Mailing address: P.O. Box 41203 Providence, RI 02940-1203 CUSTODIAN Putnam Fiduciary Trust Company One Post Office Square Boston, MA 02109 LEGAL COUNSEL Ropes & Gray One International Place Boston, MA 02110 INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P. One Post Office Square Boston, MA 02109 PUTNAMINVESTMENTS One Post Office Square Boston, Massachusetts 02109 Toll-free 1-800-225-1581 PUTNAM INTERNATIONAL GROWTH FUND One Post Office Square, Boston, MA 02109 Class A shares INVESTMENT STRATEGY: GROWTH PROSPECTUS-NOVEMBER 1, 1995 as revised AUGUST 12, 1996 This prospectus explains concisely what you should know before investing in class A shares of Putnam International Growth Fund (the "fund") which are offered without a sales charge through eligible employer-sponsored defined contribution plans ("defined contribution plans"). Please read it carefully and keep it for future reference. You can find more detailed information about the fund in the November 1, 1995 statement of additional information (the "SAI"), as amended from time to time. For a free copy of the SAI or for other information, including a prospectus regarding class A shares for other investors, call Putnam Investor Services at 1-800-752-9894. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PUTNAMINVESTMENTS Putnam Defined Contribution Plans ABOUT THE FUND Expenses summary. ......................................... Financial highlights. ..................................... Objective. ................................................ How the fund pursues its objective. ....................... Risk factors.... ....................................... How performance is shown. ................................. How the fund is managed. .................................. Organization and history. ................................. ABOUT YOUR INVESTMENT How to buy shares. ........................................ Distribution plan. ........................................ How to sell shares. ....................................... How to exchange shares. ................................... How the fund values its shares. ........................... How the fund makes distributions to shareholders; tax information. ........................................ ABOUT PUTNAM INVESTMENTS, INC. ............................ About the Fund EXPENSES SUMMARY Expenses are one of several factors to consider when investing in the fund. The following table summarizes expenses attributable to class A shares based. The example shows the cumulative expenses attributable to a hypothetical $1,000 investment in class A shares of the fund over specified periods. Annual fund operating expenses (as a percentage of average net assets) Management fees 0.80% 12b-1 fees 0.25% Other expenses 0.56% Total fund operating expenses 1.61% The table is provided to help you understand the expenses of investing in the fund and your share of the operating expenses that the fund incurs. Example Your investment of $1,000 would incur the following expenses, assuming 5% annual return and redemption at the end of each period: 1 3 5 10 year years years years $16 $51 $88 $191 The example does not represent past or future expense levels, and actual expenses may be greater or less than those shown. Federal regulations require the example to assume a 5% annual return, but actual annual return varies. The example does not reflect any charges or expenses related to your employer's plan. FINANCIAL HIGHLIGHTS The following table presents per share financial information for class A shares. This information has been derived from the fund's financial statements, which have been audited and reported on by the fund's independent accountants. The "Report of independent accountants" and financial statements included in the fund's annual report to shareholders for the 1995 fiscal year are incorporated by reference into this prospectus. The fund's annual report, which contains additional unaudited performance information, is available without charge upon request. Financial highlights (for a share outstanding throughout the period) (The table appears on pages 3a) Financial highlights (For a share outstanding throughout the period) For the period February 28, 1991 (commencement of operations) to Year ended June 30 June 30 1995 1994 1993 1992 1991 Class A Net asset value, Beginning of period$11.83 $9.58 $8.82 $8.18 $8.63 Investment operations Net investment income (loss) .08 (.06)(a) .07(a) .06 .07(a) Net realized and unrealized gain (loss) on investments .36 2.53 .69 .71 (.52) Total from investment operations .44 2.47 .76 .77 (.45) Distributions to shareholders from: Net investment income -- -- -- (.13) -- Net realized gain on investments (.11) (.22) -- -- -- In excess of net realized gain on investments (.06) -- -- -- -- Total distributions (.17) (.22) -- (.13) -- Net asset value, end of period $12.10 $11.83 $9.58 $8.82 $8.18 Total investment return at net asset value (%)(c) 3.76 25.81 8.62 9.52 (5.21)(c) Net assets, end of period (in thousands) $32,856 $8,781 $2,859 $2,502 $2,054 Ratio of expenses to average net assets (%) 1.61(a) 2.17(a) 1.80(a) 1.98 .78(a)(c) Ratio of net investment income (loss) to average net assets (%) .97(a) (.17)(a) .81(a) .76 .86(a)(c) Portfolio turnover (%) 25.83 96.13 80.92 82.45 14.54(c) (a) Reflects an expense limitation applicable during the period. As a result of such limitation, expenses for class A shares of the fund for the periods ended June 30, 1994, June 30, 1993 and June 30, 1991 reflect per share reductions of approximately $0.03, $0.05 and $0.10, respectively. Expenses for class A shares of the fund for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share. (b)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charge. (c) Not annualized. OBJECTIVE Putnam International Growth Fund seeks capital appreciation. The fund is designed for investors seeking capital appreciation primarily through a diversified portfolio of equity securities of companies located in a country other than the United States . The fund is not intended to be a complete investment program, and there is no assurance that it will achieve its objective. HOW THE FUND PURSUES ITS OBJECTIVE Basic investment strategy The fund seeks its objective by investing primarily in equity securities of companies located in a country other than the United States . The fund's investments will normally include common stocks, preferred stocks, securities convertible into common or preferred stocks, and warrants to purchase common or preferred stocks. The fund may also invest to a lesser extent in debt securities and other types of investments if Putnam Investment Management, Inc., the fund's investment manager ("Putnam Management"), believes purchasing them would help achieve the fund's objective. The fund will, under normal circumstances, invest at least 65% of its total assets in issuers located in at least three different countries other than the United States . The fund may hold a portion of its assets in cash or money market instruments. The fund will consider an issuer of securities to be "located in a country other than the United States " if it is organized under the laws of a country other than the United States and has a principal office outside the United States , or if it derives 50% or more of its total revenues from business outside the United States . The fund may invest in securities of issuers in emerging markets, as well as more developed markets. Investing in emerging markets generally involves more risks than in investing in developed markets. See "Risk factors" below. The fund will not limit its investments to any particular type of company. The fund may invest in companies, large or small, whose earnings are believed to be in a relatively strong growth trend, or in companies in which significant further growth is not anticipated but whose market value per share is thought to be undervalued. It may invest in small and relatively less well- known companies which meet these characteristics. At times Putnam Management may judge that conditions in the international securities markets make pursuing the fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies, primarily designed to reduce fluctuations in the value of the fund's assets. In implementing these "defensive" strategies, the fund may invest without limit in securities of any kind, including securities traded primarily in U.S. markets and in cash and money market instruments. It is impossible to predict when, or for how long, the fund will use these alternative strategies. Risk factors Putnam Management believes that the securities markets of many nations move relatively independently of one another, because business cycles and other economic or political events that influence one country's securities markets may have little effect on securities markets in other countries. By investing in a diversified portfolio of foreign securities, Putnam Management attempts to reduce the risks associated with being invested in the economy of only one country. The countries which Putnam Management believes offer attractive opportunities for investment may change from time to time. The fund may seek investment opportunities among securities of large, widely traded companies as well as securities of smaller, less well known companies. Smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks. They may have limited product lines, markets for financial resources, or may depend on a limited management group. Their securities may trade less frequently and in limited volume. As a result, the prices of these securities may fluctuate more than prices of securities of larger, more established companies. Foreign investments can involve risks that may not be present in domestic investments. Since foreign securities are normally denominated and traded in foreign currencies, the values of the fund's assets may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. There may be less information publicly available about a foreign company than about a U. S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable with those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U. S. companies. Foreign brokerage commissions and other fees are also generally higher than those in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the fund assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of the investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit investments in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above are typically increased for investments in securities principally traded in, or issued by issuers located in, under-developed and developing nations, which are sometimes referred to as "emerging markets." See also "Portfolio turnover." "Risk factors in options and futures transactions" and "Other investment practices" below. Portfolio turnover The length of time the fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the fund is known as "portfolio turnover." 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 generally involves some expense to the fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates for the life of the fund are shown in the section, "Financial highlights." Options and futures portfolio strategies The fund may engage in a variety of transactions involving the use of options and futures contracts and in foreign currency exchange transactions for purposes of increasing its investment return or hedging against market changes. The fund may seek to increase its current return by writing covered call options and covered put options on its portfolio securities or other securities in which it may invest. The fund receives a premium from writing a call or put option, which increases the fund's return if the option expires unexercised or is closed out at a net profit. The fund may also buy and sell put and call options on such securities for hedging purposes. When the fund writes a call option on a portfolio security, it gives up the opportunity to profit from any increase in the price of the security above the exercise price of the option; when it writes a put option, the fund takes the risk that it will be required to purchase a security from the option holder at a price above the current market price of the security. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund may also from time to time buy and sell combinations of put and call options on the same underlying security to earn additional income. The fund may buy and sell index futures contracts for hedging purposes. An "index future" is a contract to buy or sell units of a particular index at an agreed price on a specified future date. Depending on the change in value of the index between the time when the fund enters into and terminates an index future transaction, the fund realizes a gain or loss. The fund may also purchase and sell call and put options on index futures or on indices in addition or as an alternative to purchasing or selling index futures or, to the extent permitted by applicable law, to earn additional income. The fund may also purchase warrants, issued by banks and other financial institutions, whose values are based on the values from time to time of one or more securities indices. Foreign currency exchange transactions. The fund may engage in foreign currency exchange transactions to protect against uncertainty in the level of future currency exchange rates. Putnam Management expects to engage in foreign currency exchange transactions in connection with the purchase and sale of portfolio securities ("transaction hedging") and to protect against changes in the value of specific portfolio positions ("position hedging"). The fund may engage in transaction hedging to protect against a change in foreign currency exchange rates between the date on which the fund contracts to purchase or sell a security and the settlement date, or to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. If conditions warrant, the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and may purchase and sell foreign currency futures contracts as a hedge against changes in foreign currency exchange rates between the trade and settlement dates on particular transactions and not for speculation. A foreign currency forward contract is a negotiated agreement to exchange currency at a future time at a rate or rates that may be higher or lower than the spot rate. Foreign currency futures contracts are standardized exchange-traded contracts and have margin requirements. For transaction hedging purposes, the fund may also purchase and sell call and put options on foreign currency futures contracts and on foreign currencies. The fund may engage in position hedging to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in value of a currency in which securities the fund intends to buy are denominated). For position hedging purposes, the fund may purchase or sell foreign currency futures contacts, foreign currency forward contracts, and options on foreign currency futures contracts and on foreign currencies. In connection with position hedging, the fund may also purchase or sell foreign currency on a spot basis. 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. The currencies of certain countries are not widely traded, and the foreign currency exchange transactions described above may not be available with respect to those currencies. Risk factors in options and futures transactions Options and futures transactions involve costs and may result in losses. Options and futures transactions involve certain special risks, including the risks that the fund may be unable at times to close out its positions, that transactions may not accomplish their purpose because of imperfect market correlations, or that Putnam Management may not forecast market movements correctly. The effective use of options and futures strategies depends on the fund's ability to terminate options and futures positions at times when Putnam Management deems it desirable to do so. Although the fund will enter into an option or futures contract position only if Putnam Management believes that a liquid secondary market exists for such option or futures contract, there is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. The fund generally expects that its options and futures contract transactions will be conducted on recognized exchanges. In certain instances, however, the fund may purchase and sell options in the over-the-counter markets. The fund's ability to terminate options in over-the-counter markets may be more limited than for exchange-traded options and may also involve the risk that securities dealers participating in such transactions would be unable to meet their obligations to the fund. The use of options and futures strategies also involves the risk of imperfect correlation between movements in the prices of options and futures contracts and movements in the value of the underlying securities, securities index or foreign currency, or in the prices of the securities or currency that are the subject of a hedge. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The successful use of these strategies further depends on the ability of Putnam Management to forecast market movements correctly. Because the markets for certain options and futures contracts in which the fund will invest (including markets located in foreign countries) are relatively new and still developing and may be subject to regulatory restraints, the fund's ability to engage in transactions using such investments may be limited. The fund's ability to engage in hedging transactions may be limited by certain regulatory requirements and tax considerations. The fund's hedging transactions may affect the character or amount of the fund's distributions. A more detailed explanation of futures and options transactions, including the risks associated with them, is included in the SAI. Other investment practices The fund may also engage in the following investment practices, each of which involve certain special risks. The SAI contains more detailed information about these practices, including limitations designed to reduce these risks. Securities loans, repurchase agreements and forward commitments. The fund may lend portfolio securities amounting to not more than 25% of its assets to broker-dealers and may enter into repurchase agreements on up to 25% of its assets. These transactions must be fully collateralized at all times. The fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to the fund if the other party should default on its obligation and the fund is delayed or prevented from recovering the collateral or completing the transaction. Derivatives Certain of the instruments in which the fund will invest such as futures contracts, options and forward contracts, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risk involved in their use is included elsewhere in this prospectus and in the SAI. Limiting investment risk Specific investment restrictions help the fund limit investment risks for its shareholders. These restrictions prohibit the fund from acquiring more than 10% of the voting securities of any one issuer.* They also prohibit the fund from investing more than: (a) 5% of its total assets in securities of any one issuer (other than U.S. government securities); provided that, with respect to investments in securities issued by foreign governments, this limitation shall apply only to 75% of the fund's total assets;* (b) 5% of its net assets in companies that, together with any predecessors, have been in operation less than three years (other than U.S. government securities);* (c) 25% of its total assets in any one industry (except securities of the U.S. government or its agencies or instrumentalities);* or (d) 15% of its net assets in any combination of securities that are not readily marketable, in securities restricted as to resale, (excluding securities that have been determined by the Trustees (or the person designated by the Trustees to make such determinations) to be readily marketable), and repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk(*) above are summaries of fundamental investment policies. See the SAI for the full text of these policies and the fund's other fundamental investment policies. Except for investment policies designated as fundamental in this prospectus or the SAI, the investment policies described in this prospectus and in the SAI are not fundamental investment policies. The Trustees may change any non-fundamental investment policies without shareholder approval. As a matter of policy, the Trustees would not materially change the fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN The fund's investment performance may from time to time be included in advertisements about the fund. "Total return" for the one-, five- and ten-year periods (or for the life of the class A shares of the fund, if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the fund invested at the maximum public offering price. Total return may also be presented for other periods or based on investment at reduced sales charge levels. Any quotation of investment performance not reflecting the maximum initial sales charge would be reduced if the sales charge were used. All data are based on past investment results and do not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of the fund's portfolio, the fund's operating expenses and which class of shares the investor purchases. Investment performance also often reflects the risks associated with the fund's investment objective and policies. These factors should be considered when comparing the fund's investment results with those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. The fund's performance may be compared to that of various indexes. See the SAI. Because shares sold through eligible defined contribution plans are sold without a sales charge, quotations of investment performance reflecting the deduction of a sales charge will be lower than the actual investment performance on shares purchased through such plans. HOW THE FUND IS MANAGED The Trustees of the fund are responsible for generally overseeing the conduct of the fund's 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. The fund pays Putnam Management a quarterly fee for these services based on the fund's average net assets. See "Expenses summary" and the SAI. The following officer of Putnam Management has had primary responsibility for the day-to-day management of the fund's portfolio since the year stated below: Business experience Year (at least 5 years) ---- -------------------- -- Justin Scott 1991 Employed as an investment Managing Director professional by Putnam Management since 1988. The fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses, and payments under its distribution plans (which are in turn allocated to the relevant class of shares). The fund also reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of the fund's securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker- dealers. ORGANIZATION AND HISTORY Putnam International Growth Fund is a Massachusetts business trust organized on October 5, 1990. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. Prior to August 12, 1996, the fund was known as Putnam Overseas Growth Fund. The fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. Shares of the fund may be divided without shareholders approval into two or more series of shares representing separate investment portfolios. Any such series of shares may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. The fund's shares are not currently divided into series. The fund's shares are currently divided into three classes. Only the fund's class A shares are offered by this prospectus. The fund also offers other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of each class 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. If you own fewer shares than a minimum amount set by the Trustees (presently 20 shares), the fund may choose to redeem your shares. You will receive at least 30 days' written notice before the fund redeems your shares, and you may purchase additional shares at any time to avoid a redemption. The fund may also redeem shares if you own shares above a maximum amount set by the Trustees. There is presently no maximum, but the Trustees may establish one at any time, which could apply to both present and future shareholders. The fund's Trustees: George Putnam,* Chairman. President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; William F. Pounds, Vice Chairman. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; Jameson Adkins Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice Chairman, North American Management Corp.; John A. Hill, Chairman and Managing Director, First Reserve Corporation; Ronald J. Jackson, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; Elizabeth T. Kennan, President Emeritus and Professor, Mount Holyoke College; Lawrence J. Lasser,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; Robert E. Patterson, Executive Vice President and Director of Acquisitions , Cabot Partners Limited Partnership; Donald S. Perkins,* Director of various corporations, including Cummins Engine Company, Lucent Technologies, Inc., Springs Industries, Inc. and Time Warner Inc.; George Putnam, III,* President, New Generation Research, Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. Smith,* Chairman and Chief Executive Officer , Marsh & McLennan Companies, Inc.; and W. Nicholas Thorndike, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Eastern Utilities Associates. The Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the fund, Putnam Management or Putnam Mutual Funds. About Your Investment HOW TO BUY SHARES All orders to purchase shares must be made through your employer's defined contribution plan. For more information about how to purchase shares of the fund through your employer's plan or limitations on the amount that may be purchased, please consult your employer. Shares are sold to eligible defined contribution plans at the net asset value per share next determined after receipt of an order by Putnam Mutual Funds. Orders must be received by Putnam Mutual Funds before the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. In order to be eligible to purchase shares at net asset value, defined contribution plans must initially invest at least $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates . Defined contribution plans participating in a "multi-fund" program approved by Putnam Mutual Funds may include amounts invested in the other mutual funds participating in such program for purposes of determining whether the plan may purchase class A shares at net asset value. Eligible plans may make additional investments of any amount at any time. To eliminate the need for safekeeping, the fund will not issue certificates for your shares. On sales of shares at net asset value to defined contribution plans initially investing at least $20 million in Putnam funds and other investments managed by Putnam Management , Putnam Mutual Funds pays commissions on the shares initially purchased and on subsequent net quarterly sales at the rate of 0.15%. Putnam Mutual Funds will from time to time, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. DISTRIBUTION PLAN Class A distribution plan. The class A plan provides for payments by the fund to Putnam Mutual Funds at the annual rate of up to 0.35% of average net assets attributable to class A shares. The Trustees currently limit payments under the class A plan to the annual rate of 0.25% of such assets. Putnam Mutual Funds makes quarterly payments to qualifying dealers (including, for this purpose, certain financial institutions) to compensate them for services provided in connection with sales of class A shares and the maintenance of shareholder accounts. The payments are based on the average net asset value of class A shares attributable to shareholders for whom the dealers are designated as the dealer of record. This calculation excludes until one year after purchase shares purchased at net asset value, known as "NAV shares", by shareholders investing $1 million or more. NAV shares are not subject to the one-year exclusion provision in cases where certain shareholders who invested $1 million or more have made arrangements with Putnam Mutual Funds and the dealer of record waived the sales commission. For all defined contribution plans initially investing at least $20 million in Putnam funds and other investments managed by Putnam Management , Putnam Mutual Funds makes quarterly payments to qualifying dealers at the annual rate of 0.10% of the average net asset value of such shares. Payment under the plan is intended to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of fund shares, including the payments to dealers mentioned above. Putnam Mutual Funds may suspend or modify such payments to dealers. The payments are also subject to the continuation of the distribution plan, the terms of service agreements between dealers and Putnam Mutual Funds, and any applicable limits imposed by the National Association of Securities Dealers, Inc. HOW TO SELL SHARES Subject to any restrictions imposed by your employer's plan, you can sell your shares through the plan to the fund any day the New York Stock Exchange is open. For more information about how to sell shares of the fund through your employer's plan, including any charges that may be imposed by the plan, please consult with your employer. Your plan administrator must send a signed letter of instruction to Putnam Investor Services. The price you will receive is the next net asset value calculated after the fund receives your request in proper form. All requests must be received by the fund prior to the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. If your plan sells shares having a net asset value of $100,000 or more, the signatures of registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the SAI for more information about where to obtain a signature guarantee. The fund generally provides payment for redeemed shares the business day after the 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. The fund will only redeem shares for which it has received payment. HOW TO EXCHANGE SHARES Subject to any restrictions contained in your plan, you can exchange your shares for shares of other Putnam funds available through your plan at net asset value. Contact your plan administrator or Putnam Investor Services on how to exchange your shares or how to obtain prospectuses of other Putnam funds in which you may invest. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of the fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such action to the extent required by law. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW THE FUND VALUES ITS SHARES The fund calculates the net asset value of a share of each class by dividing the total value of its assets, less liabilities, by the number of its shares outstanding. Shares are valued as of the close of regular trading on the New York Stock Exchange each day the Exchange is open. Portfolio securities for which market quotations are readily available are valued at market value. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rates or at such other rates as the Trustees may determine in computing net asset value. As a result, fluctuations in the value of such currencies in relation to the U.S. dollar will affect the net asset value of fund shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION The fund distributes any net investment income and any net realized capital gains at least annually. Distributions from net investment income, if any, are expected to be small. Distributions from capital gains are made after applying any available capital loss carryovers. The terms of your plan will govern how your plan may receive distributions from the fund. Generally, periodic distributions from the fund to your plan are reinvested in additional fund shares, although your 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 another option is not selected, all distributions will be reinvested in additional fund shares. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements that are necessary for it to be relieved of federal taxes on income and gains it distributes. The fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. Generally, fund distributions are taxable as ordinary income, except that any distributions of net long-term capital gains will be taxed as such. However, distributions by the fund to employer-sponsored defined contribution 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 adviser 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. The foregoing is a summary of certain federal income tax consequences of investing in the fund. You should consult your tax adviser to determine the precise effect of an investment in the fund on your particular tax situation (including possible liability for state and local taxes). ABOUT PUTNAM INVESTMENTS, INC. Putnam Management has been managing mutual funds since 1937. Putnam Mutual Funds is the principal underwriter of the fund and of other Putnam funds. Putnam Defined Contribution Plans is a division of Putnam Mutual Funds. Putnam Fiduciary Trust Company is the fund's custodian. Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the fund's investor servicing and transfer agent. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are located at One Post Office Square, Boston, Massachusetts 02109 and are subsidiaries of Putnam Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. PUTNAM INTERNATIONAL GROWTH FUND One Post Office Square, Boston, MA 02109 Class Y shares INVESTMENT STRATEGY: GROWTH PROSPECTUS- NOVEMBER 1, 1995, as revised AUGUST 12, 1996 This prospectus explains concisely what you should know before investing in class Y shares of Putnam International Growth Fund (the "fund"). Please read it carefully and keep it for future reference. You can find more detailed information about the fund in the November 1, 1995 statement of additional information (the "SAI"), as amended from time to time. For a free copy of the SAI or other information, call Putnam Investor Services at 1-800-752-9894. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PUTNAMINVESTMENTS Putnam Defined Contribution Plans ABOUT THE FUND Expenses summary . . . . . . . . . . . . . . . Objective. . . . . . . . . . . . . . . . . . . How the fund pursues its objective . . . . . . Risk factors . . . . . . . . . . . . . . . How performance is shown . . . . . . . . . . . How the fund is managed. . . . . . . . . . . . Organization and history . . . . . . . . . . . ABOUT YOUR INVESTMENT How to buy shares. . . . . . . . . . . . . . . How to sell shares . . . . . . . . . . . . . . How to exchange shares . . . . . . . . . . . . How the fund values its shares . . . . . . . . How the fund makes distributions to shareholders; tax information. . . . . . . . . . . . . . ABOUT PUTNAM INVESTMENTS, INC. . . . . . . . . . . . . About the Fund EXPENSES SUMMARY Expenses are one of several factors to consider when investing in the fund. The following table summarizes estimated expenses attributable to class Y shares. The example shows the cumulative expenses attributable to a hypothetical $1,000 investment in class Y shares of the fund over specified periods. Annual fund operating expenses (as a percentage of average net assets) Management fees 0.80% Other expenses 0.61% Total fund operating expenses 1.41% The table is provided to help you understand the expenses of investing in the fund and your share of the operating expenses that the fund incurs. Management fees and "Other expenses" are based on the operating expenses for the fund's class B shares. Example Your investment of $1,000 would incur the following expenses, assuming 5% annual return and redemption at the end of each period: 1 3 5 10 year years years years $14 $45 $77 $169 The example does not represent past or future expense levels. Actual expenses may be greater or less than those shown. Federal regulations require the example to assume a 5% annual return, but actual annual return varies. The example does not reflect any changes or expenses related to your employer's plan. OBJECTIVE Putnam International Growth Fund seeks capital appreciation. The fund is designed for investors seeking capital appreciation primarily through a diversified portfolio of equity securities of companies located in a country other than the United States . The fund is not intended to be a complete investment program, and there is no assurance that it will achieve its objective. HOW THE FUND PURSUES ITS OBJECTIVE Basic investment strategy The fund seeks its objective by investing primarily in equity securities of companies located in a country other than the United States . The fund's investments will normally include common stocks, preferred stocks, securities convertible into common or preferred stocks, and warrants to purchase common or preferred stocks. The fund may also invest to a lesser extent in debt securities and other types of investments if Putnam Investment Management, Inc., the fund's investment manager ("Putnam Management"), believes purchasing them would help achieve the fund's objective. The fund will, under normal circumstances, invest at least 65% of its total assets in issuers located in at least three different countries other than the United States . The fund may hold a portion of its assets in cash or money market instruments. The fund will consider an issuer of securities to be "located in a country other than the United States " if it is organized under the laws of a country other than the United States and has a principal office outside the United States , or if it derives 50% or more of its total revenues from business outside the United States . The fund may invest in securities of issuers in emerging markets, as well as more developed markets. Investing in emerging markets generally involves more risks than investing in developed markets. See "Risk factors" below. The fund will not limit its investments to any particular type of company. The fund may invest in companies, large or small, whose earnings are believed to be in a relatively strong growth trend, or in companies in which significant further growth is not anticipated but whose market value per share is thought to be undervalued. It may invest in small and relatively less well- known companies which meet these characteristics. At times Putnam Management may judge that conditions in the international securities markets make pursuing the fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies, primarily designed to reduce fluctuations in the value of the fund's assets. In implementing these "defensive" strategies, the fund may invest without limit in securities of any kind, including securities traded primarily in U.S. markets, and in cash and money market instruments. It is impossible to predict when, or for how long, the fund will use these alternative strategies. Risk factors Putnam Management believes that the securities markets of many nations move relatively independently of one another, because business cycles and other economic or political events that influence one country's securities markets may have little effect on securities markets in other countries. By investing in a diversified portfolio of foreign securities, Putnam Management attempts to reduce the risks associated with being invested in the economy of only one country. The countries which Putnam Management believes offer attractive opportunities for investment may change from time to time. The fund may seek investment opportunities among securities of large, widely traded companies as well as securities of smaller, less well-known companies. Smaller companies may present greater opportunities for capital appreciation, but may also involve greater risks. They may have limited product lines, markets for financial resources, or may depend on a limited management group. Their securities may trade less frequently and in limited volume. As a result, the prices of these securities may fluctuate more than prices of securities of larger, more established companies. Foreign investments can involve risks that may not be present in domestic investments. Since foreign securities are normally denominated and traded in foreign currencies, the values of the fund's assets may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. There may be less information publicly available about a foreign company than about a U. S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable with those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U. S. companies. Foreign brokerage commissions and other fees are also generally higher than those in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of fund assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit investments in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above are typically increased for investments in securities principally traded in, or issued by issuers located in, underdeveloped and developing nations, which are sometimes referred to as "emerging markets." See also "Portfolio turnover,"Risk factors in options and futures transactions" and "Other investment practices" below. Portfolio turnover The length of time the fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the fund is known as "portfolio turnover." 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 generally involves some expense to the fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates for fiscal 1995 and 1994 were 25.83% and 96.13%, respectively. Options and futures portfolio strategies The fund may engage in a variety of transactions involving the use of options and futures contracts and in foreign currency exchange transactions for purposes of increasing its investment return or hedging against market changes. The fund may seek to increase its current return by writing covered call options and covered put options on its portfolio securities or other securities in which it may invest. The fund receives a premium from writing a call or put option, which increases the fund's return if the option expires unexercised or is closed out at a net profit. The fund may also buy and sell put and call options on such securities for hedging purposes. When the fund writes a call option on a portfolio security, it gives up the opportunity to profit from any increase in the price of the security above the exercise price of the option; when it writes a put option, the fund takes the risk that it will be required to purchase a security from the option holder at a price above the current market price of the security. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund may also from time to time buy and sell combinations of put and call options on the same underlying security to earn additional income. The fund may buy and sell index futures contracts for hedging purposes. An "index future" is a contract to buy or sell units of a particular index at an agreed price on a specified future date. Depending on the change in value of the index between the time when the fund enters into and terminates an index future transaction, the fund realizes a gain or loss. The fund may also purchase and sell call and put options on index futures or on indices in addition or as an alternative to purchasing or selling index futures or, to the extent permitted by applicable law, to earn additional income. The fund may also purchase warrants, issued by banks and other financial institutions, whose values are based on the values from time to time of one or more securities indices. Foreign currency exchange transactions. The fund may engage in foreign currency exchange transactions to protect against uncertainty in the level of future currency exchange rates. Putnam Management expects to engage in foreign currency exchange transactions in connection with the purchase and sale of portfolio securities ("transaction hedging") and to protect against changes in the value of specific portfolio positions ("position hedging"). The fund may engage in transaction hedging to protect against a change in foreign currency exchange rates between the date on which the fund contracts to purchase or sell a security and the settlement date, or to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. If conditions warrant, the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and may purchase and sell foreign currency futures contracts as a hedge against changes in foreign currency exchange rates between the trade and settlement dates on particular transactions and not for speculation. A foreign currency forward contract is a negotiated agreement to exchange currency at a future time at a rate or rates that may be higher or lower than the spot rate. Foreign currency futures contracts are standardized exchange-traded contracts and have margin requirements. For transaction hedging purposes, the fund may also purchase and sell call and put options on foreign currency futures contracts and on foreign currencies. The fund may engage in position hedging to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in value of a currency in which securities the fund intends to buy are denominated). For position hedging purposes, the fund may purchase or sell foreign currency futures contracts, foreign currency forward contracts, and options on foreign currency futures contracts and on foreign currencies. In connection with position hedging, the fund may also purchase or sell foreign currency on a spot basis. 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. The currencies of certain countries are not widely traded, and the foreign currency exchange transactions described above may not be available with respect to those currencies. Risk factors in options and futures transactions Options and futures transactions involve costs and may result in losses. Options and futures transactions involve certain special risks, including the risks that the fund may be unable at times to close out such positions, that transactions may not accomplish their purposes because of imperfect market correlations, or that Putnam Management may not forecast market movements correctly. The effective use of options and futures strategies depends on the fund's ability to terminate options and futures positions at times when Putnam Management deems it desirable to do so. Although the fund will enter into an option or futures contract position only if Putnam Management believes that a liquid secondary market exists for such option or futures contract, there is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. The fund generally expects that its options and futures contract transactions will be conducted on recognized exchanges. In certain instances, however, the fund may purchase and sell options in the over-the-counter markets. The fund's ability to terminate options in over-the-counter markets may be more limited than for exchange-traded options and may also involve the risk that securities dealers participating in such transactions would be unable to meet their obligations to the fund. The use of options and futures strategies also involves the risk of imperfect correlation between movements in the prices of options and futures contracts and movements in the value of the underlying securities, securities index or foreign currency, or in the prices of the securities or currency that are the subject of a hedge. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The successful use of these strategies further depends on the ability of Putnam Management to forecast market movements correctly. Because the markets for certain options and futures contracts in which the fund will invest (including markets located in foreign countries) are relatively new and still developing and may be subject to regulatory restraints, the fund's ability to engage in transactions using such investments may be limited. The fund's ability to engage in hedging transactions may be limited by certain regulatory requirements and tax considerations. The fund's hedging transactions may affect the character or amount of the fund's distributions. A more detailed explanation of futures and options transactions, including the risks associated with them, is included in the SAI. Other investment practices The fund may also engage in the following investment practices, each of which involves certain special risks. The SAI contains more detailed information about these practices, including limitations designed to reduce these risks. Securities loans, repurchase agreements and forward commitments. The fund may lend portfolio securities amounting to not more than 25% of its assets to broker-dealers and may enter into repurchase agreements on up to 25% of its assets. These transactions must be fully collateralized at all times. The fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to the fund if the other party should default on its obligation and the fund is delayed or prevented from recovering the collateral or completing the transaction. Derivatives Certain of the instruments in which the fund will invest, such as futures contracts, options and forward contracts, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in this prospectus and in the SAI. Limiting investment risk Specific investment restrictions help the fund limit investment risks for its shareholders. These restrictions prohibit the fund from acquiring more than 10% of the voting securities of any one issuer.* They also prohibit the fund from investing more than: (a) 5% of its total assets in securities of any one issuer (other than U.S. government securities); provided that, with respect to investments in securities issued by foreign governments, this limitation shall apply only to 75% of the fund's total assets;* (b) 5% of its net assets in companies that, together with any predecessors, have been in operation less than three years (other than U.S. government securities);* (c) 25% of its total assets in any one industry (except securities of the U.S. government or its agencies or instrumentalities);* or (d) 15% of its net assets in any combination of securities that are not readily marketable, in securities restricted as to resale (excluding securities determined by the Trustees (or the person designated by the Trustees to make such determinations) to be readily marketable), and in repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk (*) above are summaries of fundamental investment policies. See the SAI for the full text of these policies and the fund's other fundamental investment policies. Except for investment policies designated as fundamental in this prospectus or the SAI, the investment policies described in this prospectus and in the SAI are not fundamental policies. The Trustees may change any non- fundamental investment policies without shareholder approval. As a matter of policy, the Trustees would not materially change the fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN Investment performance may from time to time be included in advertisements about class Y shares. "Total return" for the one-, five- and ten-year periods (or for the life of the class Y shares, if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the fund. Total return may also be presented for other periods. All data are based on past investment results and does not predict future performance. Investment performance, which will vary, is based on many factors, including market conditions, the composition of the fund's portfolio, the fund's operating expenses and which class of shares the investor purchases. Investment performance also often reflects the risks associated with the fund's investment objective and policies. These factors should be considered when comparing the fund's investment results with those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. The fund's performance may be compared to that of various indexes. See the SAI. HOW THE FUND IS MANAGED The Trustees of the fund are responsible for generally overseeing the conduct of the fund's 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. The fund pays Putnam Management a quarterly fee for these services based on the fund's average net assets. See "Expenses summary" and the SAI. The following officer of Putnam Management has had primary responsibility for the day-to-day management of the fund's portfolio since the year stated below: Business experience Year (at least 5 years) ---- ------------------- Justin Scott 1991 Employed as an investment Managing Director professional by Putnam Management since 1988. The fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses, and payments under its distribution plans (which are in turn allocated to the relevant class of shares). The fund also reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of the fund's securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker- dealers. ORGANIZATION AND HISTORY Putnam International Growth Fund is a Massachusetts business trust organized on October 5, 1990. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. Prior to August 12, 1996, the fund was known as Putnam Overseas Growth Fund. The fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. Shares of the fund may be divided without shareholder approval into two or more series of shares representing separate investment portfolios. Any such series of shares may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. The fund's shares are not currently divided into series. The fund's shares are currently divided into four classes. Only the fund's class Y shares are offered by this prospectus. The fund also offers other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of each class 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. If you own fewer shares than a minimum amount set by the Trustees (presently 20 shares), the fund may choose to redeem your shares. You will receive at least 30 days' written notice before the fund redeems your shares, and you may purchase additional shares at any time to avoid a redemption. The fund may also redeem shares if you own shares above a maximum amount set by the Trustees. There is presently no maximum, but the Trustees may establish one at any time, which could apply to both present and future shareholders. The fund's Trustees: George Putnam,* Chairman. President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; William F. Pounds, Vice Chairman. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology ; Jameson Adkins Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice Chairman, North American Management Corp.; John A. Hill, Chairman and Managing Director, First Reserve Corporation; Ronald J. Jackson, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; Elizabeth T. Kennan, President Emeritus and Professor, Mount Holyoke College; Lawrence J. Lasser,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; Robert E. Patterson, Executive Vice President and Director of Acquisitions , Cabot Partners Limited Partnership; Donald S. Perkins,* Director of various corporations, including Cummins Engine Company, Lucent Technologies, Inc., Springs Industries, Inc. and Time Warner Inc.; George Putnam, III,* President, New Generation Research, Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. Smith,* Chairman and Chief Executive Officer , Marsh & McLennan Companies, Inc.; and W. Nicholas Thorndike, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Eastern Utilities Associates. The Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the fund, Putnam Management or Putnam Mutual Funds. About Your Investment HOW TO BUY SHARES All orders to purchase shares must be made through your employer's defined contribution plan. For more information about how to purchase shares of the fund through your employer's plan or limitations on the amount that may be purchased, please consult your employer. Shares are sold to eligible defined contribution plans at the net asset value per share next determined after receipt of an order by Putnam Mutual Funds. Orders must be received by Putnam Mutual Funds before the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. Class Y shares are available to defined contribution plans whose investment in Putnam funds and other assets managed by Putnam Management or its affiliates, combined with such investments by the plan's sponsor and the sponsor's other employee benefit plans, equals at least $250 million. Defined contribution plans that elect to buy class Y shares upon attaining eligibility will receive class Y shares in place of any class A shares then owned. Class Y shares are also available to defined contribution plans whose sponsor confirms a good faith expectation that investments in Putnam-managed assets by the sponsor and its employee benefit plans will attain $250 million (using the higher of purchase price or current market value) within one year of the initial purchase of class Y shares, and agrees that class Y shares may be redeemed and class A shares purchased if that level is not attained. To eliminate the need for safekeeping, the fund will not issue certificates for your shares. Putnam Mutual Funds will from time to time, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. HOW TO SELL SHARES Subject to any restrictions imposed by your employer's plan, you can sell your shares through the plan to the fund any day the New York Stock Exchange is open. For more information about how to sell shares of the fund through your employer's plan, including any charges that may be imposed by the plan, please consult with your employer. Your plan administrator must send a signed letter of instruction to Putnam Investor Services. The price you will receive is the next net asset value calculated after the fund receives your request in proper form. All requests must be received by the fund prior to the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. If you sell shares having a net asset value of $100,000 or more, the signatures of registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the SAI for more information about where to obtain a signature guarantee. The fund generally provides payment for redeemed shares the business day after the 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. The fund will only redeem shares for which it has received payment. HOW TO EXCHANGE SHARES Subject to any restrictions contained in your plan, you can exchange your shares for shares of other Putnam funds available through your plan at net asset value. Contact your plan administrator or Putnam Investor Services on how to exchange your shares or how to obtain prospectuses of other Putnam funds in which you may invest. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of the fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such action to the extent required by law. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW THE FUND VALUES ITS SHARES The fund calculates the net asset value of a share of each class by dividing the total value of its assets, less liabilities, by the number of its shares outstanding. Shares are valued as of the close of regular trading on the New York Stock Exchange each day the Exchange is open. Portfolio securities for which market quotations are readily available are valued at market value. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rates or at such other rates as the Trustees may determine in computing net asset value. As a result, fluctuations in the value of such currencies in relation to the U.S. dollar will affect the net asset value of fund shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION The fund distributes any net investment income and any net realized capital gains at least annually. Distributions from net investment income, if any, are expected to be small. Distributions from capital gains are made after applying any available capital loss carryovers. The terms of your plan will govern how your plan may receive distributions from the fund. Generally, periodic distributions from the fund to your plan are reinvested in additional fund shares, although your 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 another option is not selected, all distributions will be reinvested in additional fund shares. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements that are necessary for it to be relieved of federal taxes on income and gains it distributes. The fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. Generally, fund distributions are taxable as ordinary income, except that any distributions of net long-term capital gains will be taxed as such. However, distributions by the fund to employer-sponsored defined contribution 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 adviser 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. The foregoing is a summary of certain federal income tax consequences of investing in the fund. You should consult your tax adviser to determine the precise effect of an investment in the fund on your particular tax situation (including possible liability for state and local taxes). ABOUT PUTNAM INVESTMENTS, INC. Putnam Management has been managing mutual funds since 1937. Putnam Mutual Funds is the principal underwriter of the fund and of other Putnam funds. Putnam Defined Contribution Plans is a division of Putnam Mutual Funds. Putnam Fiduciary Trust Company is the fund's custodian. Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the fund's investor servicing and transfer agent. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are located at One Post Office Square, Boston, Massachusetts 02109 and are subsidiaries of Putnam Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. Differences between the typeset (printed) Class A, Class B and Class M prospectus and the EDGAR filing version. 1. Pagination is different in printed prospectus. 2. Table of Contents is on Page 1 of printed prospectus. 3. Section headings and subheadings in the printed prospectus are printed in boldface type with colored ink 4. The first page of the printed prospectus contains an illustration of the balance scales, the Putnam logo. 5. Each page of printed text between Page 1 and the back cover has a header identifying the major section of the Prospectus (i.e. "About the Fund" or "About your investment") discussed on that page. Differences between the typeset Defined Contribution and Class Y (printed) prospectus and the EDGAR filing version. 1. Pagination is different in printed prospectus 2. Section headings and subheadings in the printed prospectus are printed in boldface type 3. The first few descriptive lines of certain paragraphs, and certain other emphasized phrases, are printed in boldface type 4. In the printed prospectus, the dashes at the beginning of certain sentences are replaced by a solid box 5. The first page of the printed prospectus contains a box with an illustration of the balance scales, the Putnam logo -----END PRIVACY-ENHANCED MESSAGE-----