SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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Filed by the Registrant / X /
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Filed by a Party other than the Registrant / /
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CHECK THE APPROPRIATE BOX:
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/ / Preliminary Proxy Statement
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/ / Preliminary Additional Materials
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/ X / Definitive Proxy Statement
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/ / Definitive Additional Materials
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/ / Soliciting Material Pursuant to Sec. 240.14a-11(e) or
- ---- Sec. 240.14a-12
PUTNAM EQUITY INCOME FUND
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
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/ x / $125 per Exchange Act Rules 0-11(c)(1)(ii),
- ---- 14a-6(i)(1), or 14a-6(i)(2).
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/ / $500 per each party to the controversy pursuant
- ---- to Exchange Act Rule 14a-6(i)(3).
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/ / Fee computed on table below per Exchange Act Rules
- ---- 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:
(4) Proposed maximum aggregate value of transaction:
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/ / Check box if any part of the fee is offset as provided
- ---- by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed: <PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM EQUITY INCOME FUND
THE DOCUMENT YOU HOLD IN YOUR HANDS CONTAINS YOUR PROXY STATEMENT
AND PROXY CARD. A PROXY CARD IS, IN ESSENCE, A BALLOT. WHEN YOU
VOTE YOUR PROXY, IT TELLS US HOW TO VOTE ON YOUR BEHALF ON
IMPORTANT ISSUES RELATING TO YOUR FUND. IF YOU COMPLETE AND SIGN
THE PROXY, WE'LL VOTE IT EXACTLY AS YOU TELL US. IF YOU SIMPLY
SIGN THE PROXY, WE'LL VOTE IT IN ACCORDANCE WITH THE TRUSTEES'
RECOMMENDATIONS ON PAGES 5 AND 6 .
WE URGE YOU TO SPEND A COUPLE OF MINUTES WITH THE PROXY
STATEMENT, FILL OUT YOUR PROXY CARD, AND RETURN IT TO US. WHEN
SHAREHOLDERS DON'T RETURN THEIR PROXIES IN SUFFICIENT NUMBERS, WE
HAVE TO INCUR THE EXPENSE OF FOLLOW-UP SOLICITATIONS, WHICH CAN
COST YOUR FUND MONEY.
WE WANT TO KNOW HOW YOU WOULD LIKE TO VOTE AND WELCOME YOUR
COMMENTS. PLEASE TAKE A FEW MOMENTS WITH THESE MATERIALS AND
RETURN YOUR PROXY TO US.
(PUTNAM LOGO APPEARS HERE)
BOSTON * LONDON * TOKYO
<PAGE>
TABLE OF CONTENTS
A Message from the Chairman. . . . . . . . . . . . . . . . . . . . . . . .1
Notice of Shareholder Meeting. . . . . . . . . . . . . . . . . . . 3
Trustees' Recommendations. . . . . . . . . . . . . . . . . . . . . 5
PROXY CARD ENCLOSED
If you have any questions, please contact us at the special toll-
free number we have set up for you (1-800-225-1581) or call your
financial adviser.
<PAGE>
A MESSAGE FROM THE CHAIRMAN
(Photograph of George Putnam appears here)
Dear Shareholder:
I am writing to you to ask for your vote on important questions
that affect your investment in your fund. While you are, of
course, welcome to join us at your fund's meeting, most
shareholders cast their vote by filling out and signing the
enclosed proxy. We are asking for your vote on the
following matters:
1. ELECTING TRUSTEES TO OVERSEE YOUR FUND;
2. RATIFYING THE SELECTION BY THE TRUSTEES OF THE INDEPENDENT
AUDITORS OF YOUR FUND FOR ITS CURRENT FISCAL YEAR;
3 . APPROVING A NEW MANAGEMENT CONTRACT BETWEEN YOUR FUND
AND PUTNAM INVESTMENT MANAGEMENT, INC., INCLUDING AN
INCREASE IN THE MANAGEMENT FEE PAYABLE BY YOUR FUND ;
AND
4. APPROVING A NUMBER OF CHANGES TO YOUR FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS, INCLUDING THE
ELIMINATION OF CERTAIN OF THESE RESTRICTIONS.
A word about the management fee increase. A fee increase is
proposed only after a great deal of thought and analysis on the
part of the Trustees. For several years the Trustees have been
carefully studying the management fees, investment performance,
and expense ratios of each of the Putnam funds and also major
competing funds. This comprehensive review resulted in
recommendations for fee increases for some funds and decreases
for others. After giving careful consideration to your
fund's superior investment performance in recent years, the
Trustees are recommending the approval of a new management fee
which conforms to the fees of similar Putnam funds. The new
management fee will result in an increase of $0.04 in annual
expenses for each $100 invested. Your Trustees believe that this
increase, the first since 1982, will provide Putnam Investment
Management, Inc. with a fee that is fair and reasonable when
compared with the fees paid to other high-quality fund managers.
We encourage you to support the Trustees' recommendations.
Although we would like very much to have each shareholder attend
their fund's meeting, we realize this is not possible. Whether
or not you plan to be present, we need your vote. We urge you to
complete, sign, and return the enclosed proxy card promptly. A
postage-paid envelope is enclosed.
I'm sure that you, like most people, lead a busy life and are
tempted to put this proxy aside for another day. Please don't.
When shareholders don't return their proxies, their fund may have
to incur the expense of follow-up solicitations. All
shareholders benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and
consideration that I am sure you will give this important matter.
If you have questions about the proposals, contact your financial
adviser or call a Putnam customer service representative
at
1-800-225-1581.
Sincerely yours,
(signature of George Putnam)
George Putnam, Chairman
<PAGE>
PUTNAM EQUITY INCOME FUND
NOTICE OF A MEETING OF SHAREHOLDERS
THIS IS THE FORMAL AGENDA FOR YOUR FUND'S SHAREHOLDER MEETING.
IT TELLS YOU WHAT MATTERS WILL BE VOTED ON AND THE TIME AND PLACE
OF THE MEETING, IF YOU CAN ATTEND IN PERSON.
To the Shareholders of Putnam Equity Income Fund:
A Meeting of Shareholders of your fund will be held on July 11,
1996 at 2:00 p.m., Boston time, on the eighth floor of One Post
Office Square, Boston, Massachusetts, to consider the following:
1. ELECTING TRUSTEES. SEE PAGE 7 .
2. RATIFYING THE SELECTION BY THE TRUSTEES OF THE INDEPENDENT
AUDITORS OF YOUR FUND FOR ITS CURRENT FISCAL YEAR. SEE
PAGE 23.
3. APPROVING A NEW MANAGEMENT CONTRACT BETWEEN YOUR FUND AND
PUTNAM INVESTMENT MANAGEMENT, INC., INCLUDING AN INCREASE IN
THE MANAGEMENT FEE PAYABLE BY THE FUND. SEE PAGE 23 .
4.A . Approving an amendment to the fund's fundamental
investment restriction with respect to
diversification of investments. See page
31 .
4.B . APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION WITH RESPECT TO OWNING 10%
OF THE SECURITIES OF A SINGLE ISSUER. SEE PAGE
33 .
4.C . Approving an amendment to the fund's fundamental
investment restriction with respect to making
loans through repurchase agreements and securities
loans. See page 35 .
4.D . Approving an amendment to the fund's fundamental
investment restriction relating to investments in
real estate. See page 36 .
4.E. Approving the elimination of the fund's fundamental
investment restriction with respect to investments in
securities of issuers in which management of the fund
or Putnam Investment Management, Inc. owns
securities. See page 38.
4.F. Approving the elimination of the fund's fundamental
investment restriction with respect to margin transactions.
See page 39.
4.G. Approving the elimination of the fund's fundamental
investment restriction with respect to short sales. See
page 40.
4.H. Approving the elimination of the fund's fundamental
investment restriction which limits the fund's ability to
pledge assets. See page 42.
5. TRANSACTING OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson A. Baxter Donald S. Perkins
Hans H. Estin George Putnam, III
John A. Hill Eli Shapiro
Elizabeth T. Kennan A.J.C. Smith
Lawrence J. Lasser W. Nicholas Thorndike
Robert E. Patterson
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT
THE MEETING.
April 25 , 1996
<PAGE>
PROXY STATEMENT
THIS DOCUMENT WILL GIVE YOU THE INFORMATION YOU NEED TO VOTE ON
THE MATTERS LISTED ON THE PREVIOUS PAGE. MUCH OF THE INFORMATION
IN THE PROXY STATEMENT IS REQUIRED UNDER RULES OF THE SECURITIES
AND EXCHANGE COMMISSION (SEC); SOME OF IT IS TECHNICAL. IF THERE
IS ANYTHING YOU DON'T UNDERSTAND, PLEASE CONTACT US AT OUR
SPECIAL TOLL-FREE NUMBER, 1-800-225-1581, OR CALL YOUR FINANCIAL
ADVISER.
WHO IS ASKING FOR MY VOTE?
THE ENCLOSED PROXY IS SOLICITED BY THE TRUSTEES OF PUTNAM EQUITY
INCOME FUND for use at the Meeting of Shareholders of the fund to
be held on July 11, 1996, and, if your fund's meeting is
adjourned, at any later meetings, for the purposes stated in the
Notice of Meeting (see previous page).
HOW DO YOUR FUND'S TRUSTEES RECOMMEND THAT SHAREHOLDERS VOTE ON
THESE PROPOSALS?
The Trustees recommend that you vote
1. FOR THE ELECTION OF ALL NOMINEES;
2. FOR SELECTING COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT
AUDITORS OF YOUR FUND;
3. FOR APPROVAL OF THE NEW MANAGEMENT CONTRACT INCREASING
THE FEES PAYABLE TO PUTNAM INVESTMENT MANAGEMENT, INC.;
4.A. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO DIVERSIFICATION OF INVESTMENTS;
4.B. FOR AMENDING THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION WITH RESPECT TO OWNING 10%
OF THE SECURITIES OF A SINGLE ISSUER;
4.C. FOR AMENDING THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION WITH RESPECT TO MAKING
LOANS THROUGH REPURCHASE AGREEMENTS AND SECURITIES
LOANS;
4.D. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION RELATING TO INVESTMENTS IN REAL ESTATE;
4.E. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENTS IN SECURITIES OF
ISSUERS IN WHICH MANAGEMENT OF THE FUND OR PUTNAM INVESTMENT
MANAGEMENT, INC. OWNS SECURITIES;
4.F. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO MARGIN TRANSACTIONS;
4.G. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO SHORT SALES; AND
4.H. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WHICH LIMITS THE FUND'S ABILITY TO PLEDGE
ASSETS .
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on April 12,
1996, are entitled to be present and to vote at the meeting or
any adjourned meeting. The Notice of Meeting, the proxy, and the
Proxy Statement have been mailed to shareholders of record on or
about May 2 , 1996.
Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.
<PAGE>
THE PROPOSALS
I. ELECTION OF TRUSTEES
WHO ARE THE NOMINEES FOR TRUSTEES?
The Nominating Committee of the Trustees recommends that the
number of Trustees be fixed at thirteen and that you vote for the
election of the nominees described below. Each nominee is
currently a Trustee of your fund and of the other Putnam funds.
The Nominating Committee of the Trustees consists solely of
Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of your fund or of Putnam
Investment Management, Inc., your fund's investment manager
("Putnam Management").
JAMESON ADKINS BAXTER
[INSERT PICTURE]
Ms. Baxter, age 52, is the President of Baxter Associates, Inc.,
a management and financial consulting firm which she founded in
1986. During that time, she was also a Vice President and
Principal of the Regency Group, Inc., and a Consultant to First
Boston Corporation, both of which are investment banking firms.
From 1965 to 1986, Ms. Baxter held various positions in
investment banking and corporate finance at First Boston.
Ms. Baxter currently also serves as a Director of Banta
Corporation, Avondale Federal Savings Bank, and ASHTA Chemicals,
Inc. She is also the Chairman Emeritus of the Board of Trustees
of Mount Holyoke College, having previously served as Chairman
for five years and as a Board member for thirteen years; an
Honorary Trustee and past President of the Board of Trustees of
the Emma Willard School; and Chair of the Board of Governors of
Good Shepherd Hospital. Ms. Baxter is a graduate of Mount
Holyoke College.
HANS H. ESTIN
[INSERT PICTURE]
Mr. Estin, age 67, is a Chartered Financial Analyst and the Vice
Chairman of North American Management Corp., a registered
investment adviser serving individual clients and their families.
Mr. Estin currently also serves as a Director of The Boston
Company, Inc., a registered investment adviser which provides
administrative and investment management services to mutual funds
and other institutional investors, and Boston Safe Deposit and
Trust Company; a Corporation Member of Massachusetts General
Hospital; and a Trustee of New England Aquarium. He previously
served as the Chairman of the Board of Trustees of Boston
University and is currently active in various other civic
associations, including the Boys & Girls Clubs of Boston, Inc.
Mr. Estin is a graduate of Harvard College and holds honorary
doctorates from Merrimack College and Boston University.
JOHN A. HILL
[INSERT PICTURE]
Mr. Hill, age 54, is the Chairman and Managing Director of First
Reserve Corporation, a registered investment adviser investing in
companies in the world-wide energy industry on behalf of
institutional investors.
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate
Director of the Office of Management and Budget and Deputy
Administrator of the Federal Energy Administration.
Mr. Hill currently also serves as a Director of Snyder Oil
Corporation, an exploration and production company which he
founded, Maverick Tube Corporation, a manufacturer of structural
steel, pipe and well casings, PetroCorp Incorporated, an
exploration and production company, Weatherford Enterra, Inc., an
oil field service company, various private companies controlled
by First Reserve Corporation, and various First Reserve Funds.
He is also a Member of the Board of Advisors of Fund Directions.
He is currently active in various business associations,
including the Economic Club of New York, and lectures on energy
issues in the United States and Europe. Mr. Hill is a graduate
of Southern Methodist University.
ELIZABETH T. KENNAN
[INSERT PICTURE]
Ms. Kennan, age 58, is President Emeritus and Professor of Mount
Holyoke College. From 1978 through June 1995, she was President
of Mount Holyoke College. From 1966 to 1978, she was on the
faculty of Catholic University, where she taught history and
published numerous articles.
Ms. Kennan currently also serves as a Director of NYNEX
Corporation, a telecommunications company, Northeast Utilities,
the Kentucky Home Life Insurance Companies, and Talbots, a
women's clothing retailer. She also serves as a Member of The
Folger Shakespeare Library Committee. She is currently active in
various educational and civic associations, including the
Committee on Economic Development and the Council on Foreign
Relations. Ms. Kennan is a graduate of Mount Holyoke College,
the University of Washington and St. Hilda College at Oxford
University and holds several honorary doctorates.
LAWRENCE J. LASSER*
[INSERT PICTURE]
Mr. Lasser, age 53, is the Vice President of your fund and the
other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, Inc. and Putnam
Management since 1985, having begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh &
McLennan Companies, Inc., the parent company of Putnam
Management, and INROADS/Central New England, Inc., a job market
internship program for minority high school and college students.
He is a Member of the Board of Overseers of the Museum of
Science, the Museum of Fine Arts and the Isabella Stewart Gardner
Museum in Boston. He is also a Trustee of the Beth Israel
Hospital and Buckingham, Browne and Nichols School. Mr. Lasser
is a graduate of Antioch College and Harvard Business School.
ROBERT E. PATTERSON
[INSERT PICTURE]
Mr. Patterson, age 51, is the Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership, a
registered investment adviser which manages real estate
investments for institutional investors. Prior to 1990, he was
the Executive Vice President of Cabot, Cabot & Forbes Realty
Advisors, Inc., the predecessor company of Cabot Partners. Prior
to that, he was a Senior Vice President of the Beal Companies, a
real estate management, investment and development company. He
has also worked as an attorney and held various positions in
state government, including the founding Executive Director of
the Massachusetts Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin
Diabetes Center and as a Director of Brandywine Trust Company.
Mr. Patterson is a graduate of Harvard College and Harvard Law
School.
DONALD S. PERKINS*
[INSERT PICTURE]
Mr. Perkins, age 69, is the retired Chairman of the Board of
Jewel Companies, Inc., a diversified retailer, where among other
roles he served as President, Chief Executive Officer and
Chairman of the Board from 1965 to 1980. He currently also
serves as a Director of various other public corporations,
including AON Corp., an insurance company, Cummins Engine
Company, Inc., an engine and power generator equipment
manufacturer and assembler, Current Assets L.L.C., a corporation
providing financial staffing services, Illinova and Illinois
Power Co., Inland Steel Industries, Inc., LaSalle Street Fund,
Inc., a real estate investment trust, Lucent Technologies
Inc., Springs Industries, Inc., a textile manufacturer, and
Time Warner, Inc., one of the nation's largest media
conglomerates. He previously served as a director of several
other major public corporations, including Corning Glass Works,
Eastman Kodak Company, Firestone Tire & Rubber Company and Kmart
Corporation.
Mr. Perkins currently also serves as a Trustee and Vice Chairman
of Northwestern University and as a Trustee of the Hospital
Research and Education Trust. He is currently active in various
civic and business associations, including the Business Council
and the Civic Committee of the Commercial Club of Chicago, of
which he is the founding Chairman. Mr. Perkins is a graduate of
Yale University and Harvard Business School and holds an honorary
Doctorate from Loyola University of Chicago.
WILLIAM F. POUNDS
[INSERT PICTURE]
Dr. Pounds, age 68, is the Vice Chairman of your fund and of the
other Putnam funds. He has been a Professor of Management at the
Alfred P. Sloan School of Management at the Massachusetts
Institute of Technology since 1961 and served as Dean of that
School from 1966 to 1980. He previously served as Senior Advisor
to the Rockefeller Family and Associates and was a past Chairman
of Rockefeller & Co., Inc., a registered investment adviser which
manages Rockefeller family assets, and Rockefeller Trust Company.
Dr. Pounds currently also serves as a Director of IDEXX
Laboratories, Inc. , EG&G, Inc., Perseptive Biosystems,
Inc., Management Sciences For Health, Inc. and Sun Company, Inc.
He is also a Trustee of the Museum of Fine Arts in Boston; an
Overseer of WGBH Educational Foundation, and a Fellow of The
American Academy of Arts and Sciences. He previously served as a
director of Fisher-Price, Inc., a major toy manufacturer and
General Mills, Inc., a major manufacturer and distributor of food
products. Dr. Pounds is a graduate of Carnegie Mellon
University.
GEORGE PUTNAM*
[INSERT PICTURE]
Mr. Putnam, age 69, is the Chairman and President of your fund
and of the other Putnam funds. He is the Chairman and a Director
of Putnam Management and Putnam Mutual Funds Corp. and a director
of Marsh & McLennan, their parent company. Mr. Putnam is the son
of the founder of the Putnam funds and Putnam Management and has
been employed in various capacities by Putnam Management since
1951, including Chief Executive Officer from 1961 to 1973. He is
a former Overseer and Treasurer of Harvard University; a past
Chairman of the Harvard Management Company; and a Trustee
Emeritus of Wellesley College and Bradford College.
Mr. Putnam currently also serves as a Director of The Boston
Company, Inc., Boston Safe Deposit and Trust Company, Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and
Gas, Inc., mining and natural resources companies, General Mills,
Inc., a major manufacturer of food products, Houghton Mifflin
Company, a major publishing company, and Rockefeller Group, Inc.,
a real estate manager. He is also a Trustee of Massachusetts
General Hospital, McLean Hospital, Vincent Memorial Hospital,
WGBH Educational Foundation , the Museum of Fine Arts and
the Museum of Science in Boston; the New England Aquarium ;
an Overseer of Northeastern University; and a Fellow of The
American Academy of Arts and Sciences. Mr. Putnam is a graduate
of Harvard College and Harvard Business School and holds honorary
doctorates from Bates College and Harvard University.
GEORGE PUTNAM, III*
[INSERT PICTURE]
Mr. Putnam, age 44, is the President of New Generation Research,
Inc., a publisher of financial advisory and other research
services relating to bankrupt and distressed companies, and New
Generation Advisers, Inc., a registered investment adviser which
provides advice to private funds specializing in investments in
such companies. Prior to founding New Generation in 1985, Mr.
Putnam was an attorney with the Philadelphia law firm Dechert
Price & Rhoads.
Mr. Putnam currently also serves as a Director of the
Massachusetts Audubon Society. He is also a Trustee of the Sea
Education Association and St. Mark's School and an Overseer of
the New England Medical Center. Mr. Putnam is a graduate of
Harvard College, Harvard Business School and Harvard Law School.
ELI SHAPIRO
[INSERT PICTURE]
Dr. Shapiro, age 79, is the Alfred P. Sloan Professor of
Management, Emeritus at the Alfred P. Sloan School of Management
at the Massachusetts Institute of Technology, having served on
the faculty of the Sloan School for eighteen years. He
previously was also on the faculty of Harvard Business School,
The University of Chicago School of Business and Brooklyn
College. During his academic career, Dr. Shapiro authored
numerous publications concerning finance and related topics. He
previously served as the President and Chief Executive of the
National Bureau of Economic Research and also provided economic
and financial consulting services to various clients.
Dr. Shapiro is a past Director of many companies, including
Nomura Dividend Income Fund, Inc., a privately held registered
investment company managed by Putnam Management, Reece
Corporation, a sewing machine manufacturer, Commonwealth
Mortgage, Dexter Corporation, a manufacturer of plastics and
related products, Avis Corporation, a car rental company,
Connecticut Bank and Trust Company, Connecticut National Gas
Corporation, the Federal Home Loan Bank of Boston, where he
served as Chairman from 1977 to 1989, Travelers' Corporation, an
insurance company, and Norlin Corporation, a musical instrument
manufacturer; and a past Trustee of Mount Holyoke College and the
Putnam funds (from 1984 to 1989).
Dr. Shapiro is a Fellow of The American Academy of Arts and
Sciences and is active in various professional and civic
associations, including the American Economic Association, the
American Finance Association and the Council on Foreign
Relations. Dr. Shapiro is a graduate of Brooklyn College and
Columbia University.
A.J.C. SMITH*
[INSERT PICTURE]
Mr. Smith, age 62, is the Chairman and Chief Executive Officer of
Marsh & McLennan Companies, Inc. He has been employed by Marsh &
McLennan and related companies in various capacities since 1961.
Mr. Smith is a Director of the Trident Corp., and he also serves
as a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, The American Institute for Chartered Property
Underwriters, and is a Founder of the Museum of Scotland Society.
He was educated in Scotland and is a Fellow of the Faculty of
Actuaries in Edinburgh, a Fellow of the Canadian Institute of
Actuaries, a Fellow of the Conference of Actuaries in Public
Practice, an Associate of the Society of Actuaries, a Member of
the American Academy of Actuaries, the International Actuarial
Association and the International Association of Consulting
Actuaries.
<PAGE>
W. NICHOLAS THORNDIKE**
[INSERT PICTURE]
Mr. Thorndike, age 63, serves as a Director of various
corporations and charitable organizations, including Data General
Corporation, a computer and high technology company, Bradley Real
Estate, Inc., a real estate investment firm, Providence Journal
Co., a newspaper publisher and owner of television stations, and
Courier Corporation, a book binding and printing company. He is
also a Trustee of Eastern Utilities Associates, Massachusetts
General Hospital, where he previously served as chairman and
president, and Northeastern University.
Prior to December 1988, he was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike,
Doran, Paine & Lewis, a registered investment adviser which
manages mutual funds and institutional assets. He also
previously served as a Trustee of the Wellington Group of Funds
(now The Vanguard Group) and was the Chairman and a Director of
Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
- ----------------------------
* Nominees who are or may be deemed to be "interested persons"
(as defined in the Investment Company Act of 1940) of your
fund, Putnam Management, and Putnam Mutual Funds Corp.
("Putnam Mutual Funds"), the principal underwriter for all
the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Putnam, Lasser, and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of your fund, or directors of
Putnam Management, Putnam Mutual Funds, or Marsh & McLennan
Companies, Inc., the parent company of Putnam Management and
Putnam Mutual Funds. Mr. George Putnam, III, Mr. Putnam's
son, is also an "interested person" of your fund, Putnam
Management, and Putnam Mutual Funds. Mr. Perkins may be
deemed to be an "interested person" of your fund because of
his service as a director of a certain publicly held company
that include registered broker-dealer firms among its
subsidiaries. Neither your fund nor any of the other Putnam
funds currently engages in any transactions with such firms
except that certain of such firms act as dealers in the
retail sale of shares of certain Putnam funds in the
ordinary course of their business. The balance of the
nominees are not "interested persons."
** In February 1994 Mr. Thorndike accepted appointment as a
successor trustee of certain private trusts in which he has
no beneficial interest. At that time he also became
Chairman of the Board of two privately owned corporations
controlled by such trusts, serving in that capacity until
October 1994. These corporations filed voluntary petitions
for relief under Chapter 11 of the U.S. Bankruptcy Code in
August 1994.
Except as indicated above, the principal occupations and business
experience of the nominees for the last five years have been with
the employers indicated, although in some cases they have held
different positions with those employers. Except for Dr. Shapiro
and Ms. Baxter, all the nominees were elected by the shareholders
in September 1992. Ms. Baxter and Dr. Shapiro were elected by
the other Trustees in January 1994 and April 1995, respectively.
As indicated above, Dr. Shapiro also previously served as a
Trustee of the Putnam funds from 1984 to 1989. The 13 nominees
for election as Trustees at the shareholder meeting of your fund
who receive the greatest number of votes will be elected Trustees
of your fund. The Trustees serve until their successors are
elected and qualified. Each of the nominees has agreed to serve
as a Trustee if elected. If any of the nominees is unavailable
for election at the time of the meeting, which is not
anticipated, the Trustees may vote for other nominees at their
discretion, or the Trustees may recommend that the shareholders
fix the number of Trustees at less than 13 for your fund.
WHAT ARE THE TRUSTEES' RESPONSIBILITIES?
Your fund's Trustees are responsible for the general oversight of
your fund's business and for assuring that your fund is managed
in the best interests of its shareholders. The Trustees
periodically review your fund's investment performance as well as
the quality of other services provided to your fund and its
shareholders by Putnam Management and its affiliates, including
administration, custody, distribution and investor servicing. At
least annually, the Trustees review the fees paid to Putnam
Management and its affiliates for these services and the overall
level of your fund's operating expenses. In carrying out these
responsibilities, the Trustees are assisted by an independent
administrative staff and by your fund's auditors and legal
counsel, which are selected by the Trustees and are independent
of Putnam Management and its affiliates.
DO THE TRUSTEES HAVE A STAKE IN YOUR FUND?
The Trustees believe it is important that each Trustee have a
significant investment in the Putnam funds. The Trustees
allocate their investments among the more than 99 Putnam funds
based on their own investment needs. The Trustees' aggregate
investments in the Putnam funds total over $45 million.
The table below lists each Trustee's current investments in the
fund and in the Putnam funds as a group.
<PAGE>
SHARE OWNERSHIP BY TRUSTEES
YEAR FIRST NUMBER OF
ELECTED AS NUMBER OF SHARES OF
TRUSTEE OF SHARES OF THE ALL PUTNAM
THE PUTNAM FUND OWNED FUNDS OWNED
TRUSTEES FUNDS AS OF 3/15/96* AS OF 3/15/96**
- -----------------------------------------------------------------------------
Jameson A. Baxter 1994 767 303,417
Hans H. Estin 1972 491 346,438
John A. Hill 1985 7913(1) 1,358,924
Elizabeth T. Kennan 1992 312 314,395
Lawrence J. Lasser 1992 104,504(2) 8,864,380
Robert E. Patterson 1984 863 737,582
Donald S. Perkins 1982 3,664 2,126,688
William F. Pounds 1971 9,066 4,706,601
George Putnam 1957 6,308 20,996,054
George Putnam, III 1984 1,653 3,405,083
Eli Shapiro 1995+ --- 926,071
A.J.C. Smith 1986 330 1,090,348
W. Nicholas Thorndike 1992 116 743,637
- -------------------------------------------------------------------------------
* Except as noted below, each Trustee has sole investment power and sole
voting power with respect to his or her shares of the fund.
** These holdings do not include shares of Putnam money market funds.
+ Dr. Shapiro previously served as a Trustee of the Putnam funds from 1984
to 1989.
(1) Includes 2,779 shares in which Mr. Hill has no economic interest.
(2) Includes 75,801 shares in which Mr. Lasser has no economic interest.
As of March 15, 1996, the Trustees and officers of the fund owned a total of
259,771 shares of the fund, comprising less than 1% of its outstanding
shares on that date. A total of 38,363 of these shares are held by
certain "interested" Trustees and officers of your fund and Putnam Management
in their Putnam Investments, Inc. Profit Sharing Retirement Plan
accounts . Each individual accountholder has sole investment
power and shared voting power with respect to his/her account.
WHAT ARE SOME OF THE WAYS IN WHICH THE TRUSTEES REPRESENT SHAREHOLDER INTERESTS?
The Trustees believe that, as substantial investors in the Putnam funds,
their interests are closely aligned with those of individual shareholders.
Among other ways, the Trustees seek to represent shareholder interests:
by carefully reviewing your fund's investment performance on an individual
basis with your fund's managers;
by also carefully reviewing the quality of the various other services
provided to the funds and their shareholders by Putnam Management and its
affiliates;
by discussing with senior management of Putnam Management steps being taken
to address any performance deficiencies;
by reviewing the fees paid to Putnam Management to ensure that such fees
remain reasonable and competitive with those of other mutual funds, while at
the same time providing Putnam Management sufficient resources to continue to
provide high quality services in the future;
by monitoring potential conflicts between the funds and Putnam Management and
its affiliates to ensure that the funds continue to be managed in the best
interests of their shareholders;
by also monitoring potential conflicts among funds to ensure that
shareholders continue to realize the benefits of participation in a large and
diverse family of funds.
<PAGE>
HOW OFTEN DO THE TRUSTEES MEET?
The Trustees meet each month (except August) over a two-day period to review the
operations of your fund and of the other Putnam funds. A portion of these
meetings is devoted to meetings of various Committees of the board which focus
on particular matters. These include: the Contract Committee, which reviews all
contractual arrangements with Putnam Management and its affiliates; the
Communication and Service Committee, whichreviews the quality of services
provided by your fund's investor servicing agent, custodian and distributor;
the Pricing, Brokerage and Special Investments Committee, which reviews matters
relating to valuation of securities, best execution, brokerage costs and
allocations and new investment techniques; the Audit Committee, which reviews
accounting policies and the adequacy of internal controls and supervises the
engagement of the funds' auditors; the Compensation, Administration and Legal
Affairs Committee, which reviews the compensation of the Trustees and their
administrative staff and supervises the engagement of the funds' independent
counsel; and the Nominating Committee, which is responsible for selecting
nominees for election as Trustees.
Each Trustee generally attends at least two formal committee meetings during
such monthly meeting of the Trustees. During 1995, the average Trustee
participated in approximately 40 committee and board meetings. In addition,
the Trustees meet in small groups with Chief Investment Officers and Portfolio
Managers to review recent performance and the current investment climate for
selected funds. These meetings ensure that each fund's performance is reviewed
in detail at least twice a year. The Contract Committee typically meets on
several additional occasions during the year to carry out its
responsibilities. Other Committees, including an Executive Committee, may also
meet on special occasions as the need arises.
WHAT ARE THE TRUSTEES PAID FOR THEIR SERVICES?
Your fund pays each Trustee a fee for his or her services. Each Trustee also
receives fees for serving as Trustee of the other Putnam funds. The Trustees
periodically review their fees to assure that such fees continue to be
appropriate in light of their responsibilities as well as in relation to fees
paid to trustees of other mutual fund complexes. The fees paid to each Trustee
by your fund and by all of the Putnam funds are shown below:
<PAGE>
COMPENSATION TABLE
Total
Aggregate compensation
compensation from all
Trustees from the fund* Putnam funds**
- --------------------------------------------------------------
Jameson A. Baxter $1,043 $150,854
Hans H. Estin 1,048 150,854
John A. Hill*** 1,041 149,854
Elizabeth T. Kennan 1,043 148,854
Lawrence J. Lasser 1,043 150,854
Robert E. Patterson 1,058 152,854
Donald S. Perkins 1,044 150,854
William F. Pounds 1,041 149,854
George Putnam 1,048 150,854
George Putnam, III 1,048 150,854
Eli Shapiro**** 656 95,372
A.J.C. Smith 1,036 149,854
W. Nicholas Thorndike 1,058 152,854
* Includes an annual retainer and an attendance fee for each meeting attended.
** Reflects total payments received from all Putnam funds in the most recent
calendar year. As of December 31, 1995, there were 99 funds in the Putnam
family.
*** Includes compensation deferred pursuant to a Trustee Compensation Deferral
Plan. The total amount of deferred compensation payable to Mr. Hill by all
Putnam funds as of November 30, 1995 was $47,586, including income earned on
such amounts.
**** Elected as a Trustee in April 1995.
Your fund's Trustees have approved Retirement Guidelines for Trustees of the
Putnam funds. These guidelines provide generally that a Trustee who retires
after reaching age 72 and who has at least 10 years of continuous service will
be eligible to receive a retirement benefit from each Putnam fund for which he
or she served as a Trustee. The amount and form of such benefit is subject to
determination annually by the Trustees and, unless otherwise determined by the
Trustees, will be an annual cash benefit payable for life equal to one-half of
the Trustee retainer fees paid by each fund at the time of retirement.
Several retired Trustees are currently receiving benefits pursuant to the
Guidelines and it is anticipated that the current Trustees will receive
similar benefits upon their retirement. A Trustee who retired in calendar 1995
and was eligible to receive benefits under these Guidelines would have received
an annual benefit of $66,749, based upon the aggregate retainer fees
paid by the Putnam funds for such year. The Trustees reserve the
right to amend or terminate such Guidelines and the related payments
at any time, and may modify or waive the foregoing eligibility
requirements when deemed appropriate.
For additional information about your fund, including further
information about its Trustees and officers, please see "Further
Information About Your Fund," on page 48 .
PUTNAM INVESTMENTS
Putnam Investment Management, Inc. and its affiliates, Putnam Mutual
Funds, the principal underwriter for shares of your fund and Putnam
Fiduciary Trust Company, your fund's investor servicing agent and
custodian, are wholly owned by Putnam Investments, Inc., One Post
Office Square, Boston, Massachusetts 02109, a holding company that
is in turn wholly owned by Marsh & McLennan Companies, Inc., which
has executive offices at 1166 Avenue of the Americas, New York, New
York 10036. Marsh & McLennan Companies, Inc., and its operating
subsidiaries are professional services firms with insurance and
reinsurance brokering, consulting, and investment management
businesses.
2. SELECTION OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, independent accountants, has been selected by the
Trustees as auditors of your fund for the current fiscal year.
Among the country's preeminent accounting firms, this firm also
serves as the auditor for approximately half of the other funds in
the Putnam family. It was selected primarily on the basis of its
expertise as auditors of investment companies, the quality of its
audit services, and the competitiveness of the fees charged for
these services.
A majority of the votes on the matter is necessary to ratify the
selection of auditors. A representative of the independent auditors
is expected to be present at the meeting to make statements and to
respond to appropriate questions.
3 . APPROVAL OF A NEW MANAGEMENT CONTRACT
The Trustees of your fund recommend that shareholders approve a new
management contract with Putnam Management, which provides for an
increase in the management fees payable by the fund to Putnam
Management. The proposed contract, which is attached as Exhibit A,
is identical in all substantive respects to the existing contract,
except as noted below. Further information about both the current
and proposed management contract, the termination and renewal
procedures, the services provided by Putnam Management and its
affiliates, and information concerning brokerage and related matters
can be found under "Additional Information Relating to Management
Contract Approval" on page 49 .
WHAT DO MANAGEMENT FEES PAY FOR?
Management fees pay Putnam Management for the services it provides
in conducting the day-to-day operations of the fund. These include
providing the personnel, equipment, and office facilities necessary
for the management of the fund's investment portfolio, determining
the fund's daily net asset value, maintaining the accounts and
records of the fund, preparation of reports to shareholders,
compliance with regulatory requirements, and general administration
of the fund's affairs.
WHY DID PUTNAM MANAGEMENT RECOMMEND A NEW MANAGEMENT FEE SCHEDULE TO
THE TRUSTEES?
In recent years, Putnam Management has noted a general increase in
the complexity of the investment process and in the competition for
talented investment personnel. Putnam Management recommended the
new management fee schedule for the fund to help ensure that
Putnam Management receives fees for its services that are
competitive with fees paid to high-quality investment managers by
other mutual funds. Putnam Management believes that maintaining
competitive management fees will, over the longer term, enable it to
continue to provide high-quality management services to your fund
and to the other funds in the Putnam group. Putnam Management also
notes that your fund's current management fee schedule has not been
increased since 1982.
HOW DID YOUR FUND'S TRUSTEES ARRIVE AT THE PROPOSED MANAGEMENT FEE?
Several years ago, the Trustees undertook a comprehensive review of
the management fees paid by the Putnam funds. This review was
conducted largely through the Contract Committee of the Trustees,
which consists solely of independent Trustees who have no financial
interest in Putnam Management. As a result of this review, the
Trustees and Putnam Management reached agreement on a system of
model fee schedules for the various types of funds in the Putnam
group. These model fee schedules have now been implemented for most
of the Putnam funds. The proposed new fee schedule for the fund is
identical to that which has been implemented for many other Putnam
funds.
The Trustees and Putnam Management also reached a general
understanding that these model fee schedules should be implemented
for a particular fund only following consideration of the fund's
comparative investment performance and expense levels. After
reviewing comparative data on competitive funds and noting, among
other things, the fund's strong relative performance, the Trustees
concluded that it would be appropriate to implement a model fee
schedule for your fund at this time. The Trustees have
indicated that they will continue to look closely at the fund's
comparative performance and expense levels in their future annual
reviews of the fund's management contract.
WHAT FACTORS DID THE TRUSTEES CONSIDER?
The Trustees placed primary emphasis upon the nature and quality of
the services being provided by Putnam Management, including, in
particular, the strong relative investment performance of the fund
in recent years. In this regard, the Trustees also considered the
relative complexity of managing the fund, and a comparison of recent
management fees and other expenses paid by the fund with
those of similar funds managed by other investment advisers.
The Trustees also considered, among other things, information
provided by Putnam Management regarding the profitability of its
current and proposed management fee arrangements with the fund
(without regard to costs incurred by Putnam Management and its
affiliates in connection with the marketing of shares), the benefits
to Putnam Management and its affiliates resulting from the fact that
affiliates of Putnam Management currently serve as shareholder
servicing agent, distributor, and custodian for each of the Putnam
funds pursuant to separate contractual arrangements, and Putnam
Management's placing of portfolio transactions to recognize research
and brokerage services.
Information about certain of the factors considered by the Trustees
is set forth below and in the section "Additional Information
Relating to Management Contract Approval" on page 49 .
Following consideration of these and the other factors , the
Trustees of your fund, including all of the independent Trustees,
unanimously approved the proposed new contract.
HOW HAS PUTNAM EQUITY INCOME FUND PERFORMED?
As part of any decision regarding management fees, shareholders
should consider how the fund has performed. The chart that
follows shows how $10,000 invested in Putnam Equity Income Fund
class A shares (with dividends reinvested) would have grown to
$28,357 over a ten-year period. Performance data in the chart
does not reflect the deduction of the maximum sales charge of
5.75%.
GROWTH OF A $10,000 INVESTMENT
(INSERT MOUNTAIN GRAPH HERE)
PLOT POINTS: 11/30/85 10,000
11/30/86 11,773
11/30/87 9,968
11/30/88 12,781
11/30/89 15,050
11/30/90 13,461
11/30/91 16,036
11/30/92 17,906
11/30/93 20,960
11/30/94 21,294
11/30/95 28,357
ANNUAL AVERAGE TOTAL RETURN AS OF 11/30/95
CLASS A SHARES AT NAV
10 years 10.99%
5 years 16.07%
3 years 16.56%
1 year 33.17%
CLASS M SHARES AT NAV
Life (since 12/2/94) 32.89%
CLASS B SHARES NO REDEMPTION
REDEMPTION
Life (since 9/13/93) 13.88% 12.71%
1 year 32.30% 27.30%
Performance assumes reinvestment of distributions at net asset
value, represents past results, and does not account for taxes or
for payments under the fund's class A distribution plan before its
inception in 1990. Performance data for periods before March 11,
1991 do not reflect operation under the fund's current investment
objective and policies. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
The annual average total return for class A shares
for the one-, three-, five- and ten-year periods ended November 30,
1995 was 25.49%, 14.29%, 14.71% and 10.33%, respectively, adjusted
to reflect the deduction of the maximum sales charge of 5.75%.
Class B share performance shown above reflects the maximum
contingent deferred sales charge of 5% for 1 year and 4% for life of
class if shares were redeemed on November 30, 1995. The
total return for class M shares from inception on December
2, 1994 through November 30, 1995 was 28.19% , adjusted to
reflect the deduction of the maximum sales charge of 3.50%.
HOW HAS PUTNAM EQUITY INCOME FUND PERFORMED IN COMPARISON TO SIMILAR
FUNDS?
Another way of evaluating the performance of your fund is to compare
it to other equity income funds. In reviewing the fund's relative
performance, your Trustees and Putnam Management compare it to other
funds with similar investment objectives and strategies. When
evaluated in that group, the total return of the class A shares of
the fund ranked in the top 10% of 87 such funds for
the twelve months ended November 30, 1995, in the top 7% of
63 such funds for the three years ended November 30, 1995 and
in the top 36% of 51 such funds for the five years ended
November 30, 1995.
WHAT IS THE EFFECT OF THE NEW MANAGEMENT FEE SCHEDULE?
Under the new management contract, the annual management fee paid by
your fund to Putnam Management would be increased as follows:
Existing Fee Proposed Fee
FIRST $100 MILLION 0.75% FIRST $500 MILLION 0.65%
NEXT $100 MILLION 0.65% NEXT $500 MILLION 0.55%
NEXT $300 MILLION 0.55% NEXT $500 MILLION 0.50%
NEXT $1 BILLION 0.50% NEXT $5 BILLION 0.45%
NEXT $1 BILLION 0.45% NEXT $5 BILLION 0.425%
OVER $2.5 BILLION 0.40% NEXT $5 BILLION 0.405%
NEXT $5 BILLION 0.39%
THEREAFTER 0.38%
Based on net assets of the fund at January 31, 1996 of $525,722,692,
the effective annual management fee rate under the proposed fee
schedule would be 0.645% as compared to 0.605% under the existing
schedule. This represents an effective increase of $0.04 in
annual expenses for each $100 invested in the fund. The new
management fee schedule, like the old, provides for lower management
fee rates as the fund's assets increase.
For its fiscal year ended November 30, 1995, the fund paid
management fees to Putnam Management of $2,488,268. If the proposed
new management contract had been in effect for the year, the fund
would have paid fees of $2,586,134, which is an increase of 3.9%.
The following tables summarize the expenses incurred by the fund in
the most recent fiscal year and restates these expenses on a
pro forma basis, reflecting the implementation of the new fee
schedule. The expenses shown do not reflect the application of
credits related to brokerage service and expense offset arrangements
that reduce certain fund expenses.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
(ACTUAL)
TOTAL FUND
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- ---------- ----- -------------------
Class A 0.62% 0.25% 0.26% 1.13%
Class B 0.62% 1.00% 0.25% 1.87%
Class M 0.62% 0.75% 0.23% 1.60%
(PRO FORMA)
TOTAL FUND
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES EXPENSES
- ---------- ----- -------------------
Class A 0.65% 0.25% 0.26% 1.16%
Class B 0.65% 1.00% 0.25% 1.90%
Class M 0.65% 0.75% 0.23% 1.63%
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:
(ACTUAL)
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A $68 $91 $116 $187
CLASS B $69 $89 $121 $200*
CLASS B (NO REDEMPTION) $19 $59 $101 $200*
CLASS M $51 $84 $119 $218
<PAGE>
(PRO FORMA)
1 3 5 10
YEAR YEARS YEARS YEARS
CLASS A $69 $92 $118 $191
CLASS B $69 $90 $123 $203*
CLASS B (NO REDEMPTION) $19 $60 $103 $203*
CLASS M $51 $85 $121 $222
*Reflects conversion of class B shares to class A shares (which
pay lower ongoing expenses) approximately eight years after
purchase.
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.
ARE THERE ANY OTHER PROPOSED CHANGES?
The only other substantive changes in the new management contract
relate to the payment by the fund of the compensation and related
expenses of certain officers of the fund.
The existing contract requires the fund to reimburse Putnam
Management for the compensation and related expenses of the fund's
Vice Chairman and such other officers of the fund and their
assistants as the Trustees of the fund may determine. Since January
1, 1992, the administrative duties previously performed by the
office of Vice Chairman have been divided among various other
officers of the fund. As a result, the new contract provides for
the payment by the fund of the compensation and related expenses of
such officers of the fund and their assistants as the Trustees may
determine.
WHAT PERCENTAGE OF SHAREHOLDERS' VOTES ARE REQUIRED TO PASS THE
PROPOSAL?
Approval of the new management contract will require the "yes" vote
of a "majority of the outstanding voting securities" of the fund, as
provided in the Investment Company Act of 1940. For this purpose,
this means the "yes" vote of the lesser of (1) more than 50% of the
outstanding shares of the fund or (2) 67% or more of the shares
present at the meeting, if more than 50% of the outstanding shares
are present at the meeting in person or by proxy. If the
shareholders do not approve the new contract, the existing
management contract will continue in effect.
THE TRUSTEES BELIEVE THAT THE PROPOSED NEW MANAGEMENT FEE IS FAIR
AND REASONABLE AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE
FUND. ACCORDINGLY, THE TRUSTEES RECOMMEND THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE PROPOSED NEW CONTRACT.
4.
PROPOSALS A-H.
As described in the following proposals, the Trustees are
recommending that shareholders approve a number of changes to the
fund's fundamental investment restrictions, including the
elimination of certain restrictions. The purpose of these proposed
changes is to increase the fund's investment flexibility and to
bring the fund's policies more in line with those of many other
Putnam funds. Several of these changes reflect the elimination of
certain restrictive policies which were required at one time by
various state securities authorities but which are no longer
required under current regulations.
The adoption of any of these proposals is not contingent on the
adoption of any other proposal.
4.A. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO DIVERSIFICATION OF INVESTMENTS
The Trustees are recommending that the fund's fundamental investment
restriction relating to the diversification of its investments be
revised to grant the fund the maximum investment flexibility
permitted by the Investment Company Act of 1940 ("1940 Act"). Under
the 1940 Act, the fund, as a diversified fund, generally may not,
with respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer (except U.S.
government securities). The remaining 25% of the fund's total
assets is not subject to this restriction
The fund's current restriction is more restrictive, and states that
the fund may not:
"Invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the fund taken
at current value would be invested in the securities of such
issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest and principal
by the U.S. government or its agencies or instrumentalities."
The proposed amended fundamental investment restriction is set forth
below.
<PAGE>
"The fund may not ...
With respect to 75% of its total assets, invest in the
securities of any issuer if, immediately after such
investment,
more than 5% of the total assets of the fund
(taken at current value) would be invested in the securities
of such issuer; provided that this limitation does not apply
to obligations issued or guaranteed as to interest or
principal by the U.S. government or its agencies or
instrumentalities."
If the proposed change is approved, the fund will be able to invest
up to 25% of its total assets in the securities of any one issuer.
The amended restriction would continue to exclude from its
limitations U.S. government securities. Following the amendment,
the fund would continue to be a diversified investment company for
purposes of the 1940 Act.
Putnam Management recommended the proposed change to the Trustees
because the amendment will enhance the fund's investment
flexibility. The proposed amendment will enable the fund to invest
a greater percentage of its assets in securities that Putnam
Management believes offer the potential for current income.
However, during times when Putnam Management invests a higher
percentage of the fund's assets in one or more issuers, the value of
the fund's shares may fluctuate more widely than the value of shares
of a portfolio investing in a larger number of issuers.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote
of
the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
4.B. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO OWNING 10% OF THE SECURITIES OF A SINGLE ISSUER
The Trustees are recommending that the fund's fundamental investment
restriction with respect to investment in the securities of a single
issuer be revised to grant the fund the maximum flexibility
permitted under the 1940 Act. The 1940 Act prohibits a diversified
fund such as the fund from investing, with respect to 75% of its
total assets, in the securities of an issuer if as a result it would
own more than 10% of the outstanding voting securities of that
issuer. The fund's current investment restriction, which is more
restrictive than the 1940 Act, states that the fund may not:
"Acquire more than 10% of the voting securities of any issuer or
more than 10% of any class of securities of any issuer. (For
these purposes all preferred stocks of an issuer are regarded as
a single class, and all debt securities of an issuer are regarded
as a single class. This restriction does not limit the extent to
which the fund may write or purchase options.)"
The proposed amended fundamental investment restriction is set forth
below.
"The fund may not ...
With respect to 75% of its total assets, acquire more than 10%
of the outstanding voting securities of any issuer."
Putnam Management recommended this proposed change because it
believes that limiting this restriction to voting securities and 75%
of the fund's assets will enhance investment flexibility. Putnam
Management has advised the Trustees that the current restriction
could prevent the fund from investing in certain opportunities to
the fullest extent that Putnam Management believes would best serve
the fund's investment objective.
The amendment removes any restriction on the amount of a class of an
issuer's securities that the fund may purchase, although the fund
will only be able to purchase 10% of the voting securities of an
issuer with respect to 25% of the fund's total assets.
To the extent the fund individually or with other funds and accounts
managed by Putnam Management or its affiliates owns all or a major
portion of the outstanding securities of a particular issuer, under
adverse market or economic conditions or in the event of adverse
changes in the financial condition of the issuer the fund could find
it more difficult to sell these securities when Putnam Management
believes it advisable to do so, or may be able to sell the
securities only at prices lower than if they were more widely held.
In addition, certain of the companies in which the fund may invest a
greater portion of its assets following the amendment could have
relatively small equity market capitalizations (e.g., under $1
billion). Such companies often have limited product lines, markets
or financial resources. They may trade less frequently and in
limited volume, and only in the over-the-counter market or on a
regional securities exchange. As a result, the securities of these
companies may fluctuate in value more than those of larger, more
established companies. Under such circumstances, it may also be
more difficult to determine the fair value of such securities for
purposes of computing the fund's net asset value.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
<PAGE>
4.C. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO MAKING LOANS THROUGH REPURCHASE AGREEMENTS AND
SECURITIES LOANS
The Trustees are recommending that the fund's fundamental investment
restriction with respect to making loans be revised to remove the
asset limitations on the fund's ability to enter into repurchase
agreements and securities loans. The current restriction states
that the fund may not:
"Make loans, except by purchase of debt obligations in which
the fund may invest consistent with its investment policies,
by entry into repurchase agreements with respect to not more
than 25% of its total assets, or through the lending of its
portfolio securities with respect to not more than 25% of its
total assets."
The proposed amended fundamental investment restriction is set forth
below.
"The fund may not ...
Make loans, except by purchase of debt obligations in which
the fund may invest consistent with its investment policies,
by
entering into repurchase agreements,
or by lending its
portfolio securities."
Following the amendment, the fund may, consistent with its
investment objective and policies, enter into such transactions
without limit. Putnam Management recommended this amendment to the
Trustees because it believes that the increased investment
flexibility could assist the fund in achieving its investment
objective, because repurchase agreements and securities loans often
offer opportunities for increased investment return.
When the fund enters into a repurchase agreement, it typically
purchases a security for a relatively short period (usually not more
than one week), which the seller agrees to repurchase at a fixed
time and price, representing the fund's cost plus interest. When
the fund enters into a securities loan, it lends certain of its
portfolio securities to broker-dealers or other parties and
typically receives an interest payment in return. These
transactions must be fully collateralized at all times, and involve
some risk to the fund if the other party should default on its
obligation. If the other party in these transactions should become
involved in bankruptcy or insolvency proceedings, it is possible
that the fund may be treated as an unsecured creditor and be
required to return the underlying collateral to the other party's
estate.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
4.D. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
RELATING TO INVESTMENTS IN REAL ESTATE
The
Trustees
are recommending that the fund's fundamental investment
restriction relating to investments in real estate be revised to
permit the fund to acquire and dispose of real estate acquired
through the exercise of rights in certain debt obligations held by
the fund. The fund's current fundamental restriction does not
permit the fund to purchase or sell real estate directly, although
the fund may invest in a variety of securities the value of which is
dependent upon the value of real estate. The current restriction
states that the fund may not:
"Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities
which are secured by interests in real estate and securities
representing interests in real estate."
The proposed amended fundamental investment restriction is set forth
below.
"The fund may not ...
Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities
which are secured by interests in real estate, and securities
which represent interests in real estate, and it may acquire
and dispose of real estate or interests in real estate
acquired through the exercise of its rights as a holder of
debt obligations secured by real estate or interests therein."
Putnam Management believes that the amendment will allow the fund to
take full advantage of rights it may have as a holder of certain
debt obligations which are secured by real estate. The amended
restriction
would allow the fund to own real estate directly as a
result of the exercise of its rights in connection with debt
obligations it owns. In such cases, the ability to acquire and
dispose of real estate may serve to protect the fund during times
where an issuer of debt securities is otherwise unable to meet its
obligations.
To the extent the fund holds real estate-related securities, it will
be subject to the risks associated with the real estate market.
These risks may include declines in the value of real estate,
changes in general or local economic conditions, overbuilding,
difficulty in completing construction, increased competition,
changes in zoning laws, increases in property taxes and operating
expenses, and variations in rental income. Generally, increases in
interest rates will increase the costs of obtaining financing, which
may result in a decrease in the value of such investments.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
4.E. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN SECURITIES OF ISSUERS IN WHICH
MANAGEMENT OF THE FUND OR PUTNAM MANAGEMENT OWNS SECURITIES
The Trustees are recommending eliminating the fund's fundamental
investment restriction which prevents the fund from investing in the
securities of issuers in which management of the fund or Putnam
Management owns a certain percentage of securities. The current
restriction states that the fund may not:
"Invest in securities of any issuer, if, to the knowledge of
the fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the securities of that issuer together beneficially
own more than 5%."
The fund originally adopted this restriction to comply with certain
state securities law requirements, and the restriction is currently
required by only one state, but is not required to be a fundamental
policy. If this proposal is approved, the Trustees intend to
replace this fundamental restriction with an identical non-
fundamental investment restriction to comply with the remaining
state's requirements.
Putnam Management recommended to the Trustees making this policy
non-fundamental to provide the fund with maximum flexibility to
modify or eliminate the policy if no longer required under state
law. If the restriction were no longer required, the Trustees could
eliminate the restriction to increase the fund's investment
flexibility without the need for further shareholder approval. If
the restriction were eliminated, the fund would be able to invest in
the securities of any issuer without regard to ownership in such
issuer by management of the fund or Putnam Management, except to the
extent prohibited by the fund's investment policies or the 1940 Act.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
4.F. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO MARGIN TRANSACTIONS
The Trustees are recommending that the fund's fundamental investment
restriction with respect to margin transactions be eliminated. The
current restriction states that the fund may not:
"Purchase securities on margin, except such short-term credits
as may be necessary for the clearance of purchases and sales
of securities, and except that it may make margin payments in
connection with financial futures contracts or related
options."
The fund originally adopted this restriction to comply with certain
state securities law requirements, and the restriction is currently
required by only one state, but is not required to be a fundamental
policy. If the proposal is approved, the Trustees intend to replace
this fundamental restriction with an identical non-fundamental
investment restriction to comply with the remaining state's
requirement.
Putnam Management recommended to the Trustees making this policy
non-fundamental to provide the fund with maximum flexibility to
modify or eliminate the policy if no longer required under state
law. If the restriction were no longer required, the Trustees could
eliminate the restriction to increase the fund's investment
flexibility without the need for further shareholder approval.
However, the fund's potential use of margin transactions beyond
transactions in financial futures and options and for the clearance
of purchases and sales of securities, including the use of margin in
ordinary securities transactions, is generally limited by the
current position taken by the Staff of the SEC that margin
transactions with respect to securities are prohibited under Section
18 of the 1940 Act because they create senior securities. "Margin
transactions" involve the purchase of securities with money borrowed
from a broker, with cash or eligible securities being used as
collateral against the loan. The fund's ability to engage in margin
transactions is also limited by its investment policies, which
permit the fund to borrow money in limited circumstances and only
from banks.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
<PAGE>
4.G. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO SHORT SALES
The Trustees are recommending that the fund's fundamental investment
restriction with respect to short sales be eliminated. The current
restriction
is required under certain state securities laws but is
not required to be a fundamental policy.
The current restriction states that the fund may not:
"Make short sales of securities or maintain a short position
for the account of the fund unless at all times when a short
position is open it either owns an equal amount of such
securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable
for securities of the same issue as, and equal in amount to,
the securities sold short. (It is presently anticipated that
such sales would be made only for federal income tax purposes;
such sales would not be made of securities subject to
outstanding options.)"
If this proposal is approved, the Trustees intend to replace this
fundamental restriction with the following substantially similar
non-fundamental restriction:
"The fund may not ...
Make short sales of securities or maintain a short position
for the account of the fund unless at all times when a short
position is open it owns an equal amount of such securities or
owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and in equal amount to, the
securities sold short."
Under the proposed new non-fundamental restriction, the fund would
only be permitted to enter into short sales where the fund owns or
has the right to acquire at no added cost securities identical to
those sold short (an investment technique known as a short sale
"against the box"). However, the fund would not be limited to
engaging in short sales for federal income tax purposes, as provided
in the current restriction. The fund would not be permitted to
engage in short sales other than short sales "against the box".
Putnam Management recommended to the Trustees making this policy
non-fundamental to provide the fund with maximum flexibility to
modify or eliminate the policy if no longer required under state
law. If the restriction were no longer required, the Trustees could
change or remove the restriction to increase the fund's investment
flexibility without the need for further shareholder approval.
In a typical short sale, the fund borrows securities from a broker
that it anticipates will decline in value in order to sell to a
third party. The fund becomes obligated to return securities of the
same issue and quantity at some future date, and it realizes a loss
to the extent the securities increase in value and a profit to the
extent the securities decline in value (after including any
associated costs). Since the value of a particular security can
increase without limit, the fund could potentially realize losses
with respect to short sales that are not "against the box" that are
greater than the value of the securities at the time they are sold
short. The fund would collateralize its short position by
delivering to the broker an amount equal to the proceeds of the
short sale and an additional margin amount as required by law. In
addition, if such non-fundamental investment restriction is modified
or removed and the fund engages in short sales other than short
sales "against the box", current SEC guidelines would require the
fund to maintain in a segregated account cash, U.S. government
securities or other liquid high grade debt obligations equal to the
current market value of the securities sold short minus the margin
amount delivered to the broker. The value of the segregated account
would be marked to market daily to reflect any changes in value of
the fund's short position.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
4.H. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WHICH LIMITS THE FUND'S ABILITY TO PLEDGE ASSETS
The Trustees are recommending that the fund's fundamental investment
restriction which limits the fund's ability to pledge its assets be
eliminated. The current restriction states that the fund may not:
"Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 15% of its total assets (taken at cost)
and then only to secure borrowings permitted by restriction 1
above. (For the purposes of this restriction, collateral
arrangements with respect to margin for financial futures
contracts or related options and the deposit of underlying
securities and other assets in escrow in connection with the
writing of call or put options are not deemed to be a pledge
or other encumbrance of assets)." [Restriction 1 referred to
in this restriction allows the fund to borrow money in an
amount up to 10% of its total assets to meet redemption
requests or for other extraordinary or emergency purposes.]
The fund originally adopted this restriction to comply with certain
state securities law requirements, and the restriction is currently
required by only one state, but is not required to be a fundamental
policy. If the proposal is approved, the Trustees intend to replace
this fundamental restriction with the following non-fundamental
investment restriction to comply with the remaining state's
requirement.
"The fund may not ...
Pledge, hypothecate, mortgage or otherwise encumber its assets
in excess of 33 1/3% of its total assets (taken at cost) in
connection with permitted borrowings."
This proposal would increase the fund's ability to pledge assets to
up to one-third of its total assets. Putnam Management recommended
this proposal to the Trustees because it believes that the fund's
current limits on pledging may conflict with the fund's ability to
borrow money to meet redemption requests or for extraordinary or
emergency purposes. This conflict arises because banks may require
borrowers such as the fund to pledge assets in order to
collateralize the amount borrowed. Often, these collateral
requirements are for amounts larger than the principal amount of the
loan. If the fund needed to borrow the maximum amount permitted by
its policies (currently 10% of its total assets), it might be
possible that a bank would require collateral in excess of 15% of
the fund's total assets. Therefore, the limit on pledging assets
may have the effect of reducing the amount that the fund may borrow
in these situations. In addition, the proposed amendment only
restricts the fund in connection with pledges of assets with respect
to borrowings; other activities, such as collateral arrangements
with respect to certain forward commitments, which could be deemed
to be pledges or other encumbrances, will not be restricted.
Putnam Management recommended making this policy non-fundamental to
provide the fund with maximum flexibility to modify or eliminate the
policy if no longer required under state law. If the restriction
were no longer required, the Trustees could modify or eliminate the
restriction to increase the fund's investment flexibility without
the need for further shareholder approval.
Pledging assets does not entail certain risks. To the extent that
the fund pledges its assets, the fund may have less flexibility in
liquidating its assets. If a large portion of the fund's assets
were involved, the fund's ability to meet redemption requests or
other obligations could be delayed.
REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
<PAGE>
FURTHER INFORMATION ABOUT VOTING AND THE SHAREHOLDER MEETING
QUORUM AND METHODS OF TABULATION. Thirty percent of the shares
entitled to vote -- present in person or represented by proxy --
constitutes a quorum for the transaction of business with respect to
any proposal at the meeting (unless otherwise noted in the proxy
statement). Shares represented by proxies that reflect abstentions
and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a
quorum. Votes cast by proxy or in person at the meeting will be
counted by persons appointed by your fund as tellers for the
meeting.
The tellers will count the total number of votes cast "for" approval
of the proposals for purposes of determining whether sufficient
affirmative votes have been cast. With respect to the election of
Trustees and selection of auditors, neither abstentions nor broker
non-votes have any effect on the outcome of the proposal. With
respect to any other proposals, abstentions and broker non-votes
have the effect of a negative vote on the proposal.
OTHER BUSINESS. The Trustees know of no other business to be
brought before the meeting. However, if any other matters properly
come before the meeting, it is their intention that proxies that do
not contain specific restrictions to the contrary will be voted on
such matters in accordance with the judgment of the persons named as
proxies in the enclosed form of proxy.
SIMULTANEOUS MEETINGS. The meeting of shareholders of your fund is
called to be held at the same time as the meetings of shareholders
of certain of the other Putnam funds. It is anticipated that all
meetings will be held simultaneously. If any shareholder at the
meeting objects to the holding of a simultaneous meeting and moves
for an adjournment of the meeting to a time promptly after the
simultaneous meetings, the persons named as proxies will vote in
favor of such adjournment.
SOLICITATION OF PROXIES. In addition to soliciting proxies by mail,
Trustees of your fund and employees of Putnam Management, Putnam
Fiduciary Trust Company, and Putnam Mutual Funds may solicit proxies
in person or by telephone. Your fund may also arrange to have votes
recorded by telephone. The telephone voting procedure is designed
to authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been
properly recorded. Your fund has been advised by counsel that these
procedures are consistent with the requirements of applicable law.
If these procedures were subject to a successful legal challenge,
such votes would not be counted at the meeting. Your fund is
unaware of any such challenge at this time. Shareholders would be
called at the phone number Putnam Investments has in its records for
their accounts, and would be asked for their Social Security number
or other identifying information. The shareholders would then be
given an opportunity to authorize proxies to vote their shares at
the meeting in accordance with their instructions. To ensure that
the shareholders' instructions have been recorded correctly, they
will also receive a confirmation of their instructions in the mail.
A special toll-free number will be available in case the information
contained in the confirmation is incorrect.
Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with this
policy, your fund may solicit proxies from shareholders who have not
voted their shares or who have abstained from voting.
Persons holding shares as nominees will upon request be reimbursed
for their reasonable expenses in soliciting instructions from their
principals. Your fund has retained at its expense Tritech Services,
Four Corporate Place, Corporate Park 287, Piscataway, New Jersey
08854, to aid in the solicitation of instructions for nominee
accounts for a fee not to exceed $7,500 plus reasonable out-
of-pocket expenses. Your fund has also retained D. F. King & Co.,
Inc., 77 Water Street, New York, New York 10005, to aid in the
solicitation instructions for registered accounts, for a fee not to
exceed $10,000 , plus reasonable out-of-pocket expenses for
mailing and phone costs.
REVOCATION OF PROXIES. Proxies, including proxies given by
telephone, may be revoked at any time before they are voted by a
written revocation received by the Clerk of your fund, by properly
executing a later-dated proxy or by attending the meeting and voting
in person.
DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS FOR SUBSEQUENT MEETINGS
OF SHAREHOLDERS. Your fund's Agreement and Declaration of Trust
does not provide for annual meetings of shareholders, and your fund
does not currently intend to hold such a meeting in 1997.
Shareholder proposals for inclusion in the proxy statement for any
subsequent meeting must be received by your fund within a reasonable
period of time prior to any such meeting.
ADJOURNMENT. If sufficient votes in favor of any of the proposals
set forth in the Notice of the Meeting are not received by the time
scheduled for the meeting, the persons named as proxies may propose
adjournments of the meeting for a period or periods of not more than
60 days in the aggregate to permit further solicitation of proxies
with respect to any of such proposals. Any adjournment will require
the affirmative vote of a majority of the votes cast on the question
in person or by proxy at the session of the meeting to be adjourned.
The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of such
proposals. They will vote against any such adjournment those
proxies required to be voted against any of such proposals. Your
fund pays the costs of any additional solicitation and of any
adjourned session. Any proposals for which sufficient favorable
votes have been received by the time of the meeting may be acted
upon and considered final regardless of whether the meeting is
adjourned to permit additional solicitation with respect to any
other proposal.
FINANCIAL INFORMATION. YOUR FUND WILL FURNISH, WITHOUT CHARGE, TO
YOU UPON REQUEST A COPY OF THE FUND'S ANNUAL REPORT FOR ITS MOST
RECENT FISCAL YEAR, AND A COPY OF ITS SEMIANNUAL REPORT FOR ANY
SUBSEQUENT SEMIANNUAL PERIOD. SUCH REQUESTS MAY BE DIRECTED TO
PUTNAM INVESTOR SERVICES, P.O. BOX 41203, PROVIDENCE, RI 02940-1203
OR 1-800-225-1581.
FURTHER INFORMATION ABOUT YOUR FUND
LIMITATION OF TRUSTEE LIABILITY. The Agreement and Declaration of
Trust of your fund provides that the fund will indemnify its
Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of
their offices with the fund, except if it is determined in the
manner specified in the Agreement and Declaration of Trust that they
have not acted in good faith in the reasonable belief that their
actions were in the best interests of the fund or that such
indemnification would relieve any officer or Trustee of any
liability to the fund or its shareholders arising by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. Your fund, at its expense, provides
liability insurance for the benefit of its Trustees and officers.
AUDIT AND NOMINATING COMMITTEES. The voting members of the Audit
Committee of your fund include only Trustees who are not "interested
persons" of the fund or by reason of any affiliation with Putnam
Investments and its affiliates. The Audit Committee currently
consists of Messrs. Estin (Chairman), Perkins (without vote),
Putnam, III (without vote), Shapiro, Smith (without vote), and Ms.
Kennan. The Nominating Committee consists only of Trustees who are
not "interested persons" of your fund or Putnam Management. The
Nominating Committee currently consists of Dr. Pounds and Ms. Kennan
(Co-chairpersons), Ms . Baxter, and Messrs. Estin, Hill,
Patterson, Shapiro, and Thorndike.
<PAGE>
OFFICERS AND OTHER INFORMATION. In addition to George Putnam and
Lawrence J. Lasser, the officers of your fund are as follows:
Year first
elected to
Name (age) Office office
- -----------------------------------------------------------------
Charles E. Porter (57) Executive Vice President 1992
Patricia C. Flaherty (49) Senior Vice President 1993
John D. Hughes (61) Senior Vice President
& Treasurer 1992
Gordon H. Silver (48) Vice President 1992
Peter Carman (54) Vice President 1994
Brett C. Browchuk (33) Vice President 1994
Thomas V. Reilly (49) Vice President 1992
Edward P. Bousa* (37) Vice President 1993
Rosemary H. Thomsen* (35) Vice President 1995
Kenneth J. Taubes* (36) Vice President 1995
William N. Shiebler** (54) Vice President 1992
John R. Verani (56) Vice President 1992
Paul M. O'Neil (42) Vice President 1992
Beverly Marcus (51) Clerk 1992
- -----------------------------------------------------------------
* One of the fund's portfolio managers
** President of Putnam Mutual Funds
All of the officers of your fund are employees of Putnam Management
or its affiliates. Because of their positions with Putnam
Management or its affiliates or their ownership of stock of Marsh &
McLennan Companies, Inc., the parent corporation of Putnam
Management and Putnam Mutual Funds, Messrs. Putnam, George Putnam,
III, Lasser and Smith (nominees for Trustees of your fund), as well
as the officers of your fund, will benefit from the management fees,
distribution fees, underwriting commissions, custodian fees, and
investor servicing fees paid or allowed by the fund.
ADDITIONAL INFORMATION RELATING TO MANAGEMENT CONTRACT APPROVAL
FURTHER INFORMATION ABOUT PUTNAM INVESTMENT MANAGEMENT, INC. AND ITS
PROPOSED MANAGEMENT CONTRACT. Putnam Management and its affiliates,
Putnam Mutual Funds, the principal underwriter for shares of your
fund, and Putnam Fiduciary Trust Company, your fund's investor
servicing agent and custodian, are wholly owned by Putnam
Investments, Inc., One Post Office Square, Boston, Massachusetts
02109, a holding company that is in turn wholly owned by Marsh &
McLennan Companies, Inc., which has executive offices at 1166 Avenue
of the Americas, New York, New York 10036. Marsh & McLennan
Companies, Inc., and its operating subsidiaries are professional
services firms with insurance and reinsurance brokering, consulting
and investment management businesses.
The directors of Putnam Management are George Putnam, Lawrence J.
Lasser, and Gordon H. Silver. Mr. Lasser is the principal executive
officer of Putnam Management. The principal occupations of Messrs.
Putnam, Lasser, and Silver are as officers and directors of Putnam
Management and certain of its corporate affiliates. The address of
Putnam Management and the business address of the directors and
officers of Putnam Management is One Post Office Square, Boston,
Massachusetts 02109.
In addition to the services it provides to your fund, Putnam
Management acts as investment adviser or subadviser of other
publicly owned investment companies having differing investment
objectives. For the names of such funds having investment
objectives similar to those of your fund and the current rates of
Putnam Management's annual fees as adviser or subadviser of such
funds, see Exhibit B in this Proxy Statement.
Putnam Management is also affiliated with The Putnam Advisory
Company, Inc., which together with its subsidiaries furnishes
investment advice to domestic and foreign institutional clients and
mutual funds. Another affiliate, Putnam Fiduciary Trust Company,
provides investment advice to institutional clients under its
banking and fiduciary powers. The advisory fees charged by such
firms to their institutional clients are generally at lower rates
than those charged to the Putnam funds. The services performed and
responsibilities assumed by these firms for such clients are,
however, not as extensive as those performed or assumed by Putnam
Management for the Putnam funds.
Some officers and directors of Putnam Management, including some who
are officers of your fund, serve as officers or directors of some of
these affiliates. Putnam Management may also enter into other
businesses.
THE MANAGEMENT CONTRACT. Putnam Management serves as investment
manager of your fund pursuant to a Management Contract. The
management fee payable under the Contract is described above in
Proposal 3 . The fees paid to Putnam Management in the most
recent fiscal year are shown below.
Under the Contract, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes continuously
an investment program for your fund and makes investment decisions
on behalf of your fund. Subject to the control of the Trustees,
Putnam Management manages, supervises, and conducts the other
affairs and business of your fund, furnishes office space and
equipment, provides bookkeeping and clerical services (including
determination of your fund's net asset value, but excluding
shareholder accounting services) and places all orders for the
purchase and sale of your fund's portfolio securities. Putnam
Management may place fund portfolio transactions with broker-dealers
that furnish Putnam Management, without cost to it, certain
brokerage and research services of value to Putnam Management and
its affiliates in advising your fund and other clients. In so
doing, Putnam Management may cause your fund to pay greater
brokerage commissions than it might otherwise pay.
Your fund also pays, or reimburses Putnam Management for, the
compensation and related expenses of certain officers of your fund
and their assistants. Currently, your fund reimburses Putnam
Management for a portion of the compensation and related expenses of
certain officers of your fund who provide certain administrative
services to your fund and the other Putnam funds, each of which
bears an allocated share of the costs. The aggregate amount of all
such payments and reimbursements is determined annually by the
Trustees, and the amount paid in the most recent fiscal year is set
forth below. Putnam Management pays all other salaries of officers
of your fund. Your fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing, legal,
custodial, investor servicing agent, and shareholder reporting
expenses.
The Contract provides that Putnam Management shall not be subject to
any liability to your fund or to any shareholder of your fund for
any act or omission in the course of or connected with rendering
services thereunder in the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of its obligations
and duties.
The Contract may be terminated without penalty upon 30 days' written
notice by Putnam Management, by the Trustees, or by the affirmative
vote of the holders of a "majority of the outstanding voting
securities" of the fund (as defined in the Investment Company Act of
1940). It may be amended only by an affirmative vote of the holders
of a majority of the outstanding voting securities of your fund and
by a majority of the Trustees who are not "interested persons" of
your fund or Putnam Management.
The Contract will terminate automatically if it is assigned, or
unless its continuance is approved at least annually by either the
Trustees or shareholders of the fund and in either case by a
majority of the Trustees who are not "interested persons" of Putnam
Management or your fund.
PAYMENTS TO AFFILIATES OF PUTNAM MANAGEMENT. Putnam Mutual Funds is
the principal underwriter of shares of your fund and of the other
continuously offered Putnam funds. Putnam Fiduciary Trust Company
is your fund's investor servicing agent and custodian. The amount
of sales charges retained by Putnam Mutual Funds and the investor
servicing fees and custodian fees paid to Putnam Fiduciary Trust
Company in your fund's most recent fiscal year are set forth below.
Under its class A Distribution Plan, your fund may make payments to
Putnam Mutual Funds at the annual rate of up to 0.35% of the average
net assets of the fund attributable to class A shares. At present,
payments under the Plan are limited to the annual rate of 0.25% of
average net assets. Under its class B and class M Distribution
Plans, your fund compensates 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, although for class M shares,
a limit of 0.75% of average net assets is currently in effect.
Payments under the plans compensate Putnam Mutual Funds for services
provided and expenses incurred by it in promoting the sale of shares
of your fund, reducing redemptions or maintaining or improving
services provided to shareholders by Putnam Mutual Funds or by
dealers. The fees paid to Putnam Mutual Funds under the plans in
your fund's most recent fiscal year are set forth in "Further
Information About Your Fund. " A substantial portion of
payments made to Putnam Mutual Funds under these plans is used to
pay or reimburse Putnam Mutual Funds for payment of service fees
paid to investment dealers for their ongoing services to
shareholders.
ASSETS AND SHARES OUTSTANDING OF YOUR FUND
AS OF MARCH 29, 1996
Net assets $562,355,765
Class A shares outstanding
and authorized to vote 37,264,086 shares
Class B shares outstanding
and authorized to vote 10,165,870 shares
Class M shares outstanding
and authorized to vote 874,016 shares
Persons beneficially owning more than 5%
of the fund's class A shares None
Persons beneficially owning more than 5%
of the fund's class B shares None
Persons beneficially owning more than 5%
of the fund's class M shares None
For the Fiscal Year Ended November 30, 1995
MANAGEMENT CONTRACT
- --------------------------------------------------------------
The management contract dated
May 2, 1986, was approved by the
shareholders on May 1, 1986
and was last approved by
the Trustees on January 4, 1996.
<PAGE>
Management fee
paid to Putnam Management $2,488,268
Reimbursement paid by your fund to Putnam
Management for compensation and related expenses
including employee benefit plan contributions
for your fund's Executive Vice President
(Charles E. Porter), Senior Vice President
(Patricia C. Flaherty), Clerk (Beverly Marcus),
and their assistants $9,508
PAYMENTS TO AFFILIATES
- --------------------------------------------------------------
Sales charges on sales of class A shares
retained by Putnam Mutual Funds
after payments to selling broker-dealers $145,866
Sales charges on sales of class M shares
retained by Putnam Mutual Funds
after payments to selling broker-dealers $14,424
Deferred sales charges on class A share
redemptions retained by Putnam Mutual Funds $638
Deferred sales charges on class B share
redemptions retained by Putnam Mutual Funds $91,028
Payments under Class A Distribution Plan
to Putnam Mutual Funds $858,831
Payments under Class B Distribution
Plan to Putnam Mutual Funds $511,456
Payments under Class M Distribution Plan
to Putnam Mutual Funds $25,091
Investor servicing and custodian fees
paid to Putnam Fiduciary Trust Company
(before application of credits, if any) $735,690
<PAGE>
EXHIBIT A
This exhibit provides the management contract and the proposed
additions and deletions. The existing additions are indicated by
the ((BOLDFACE)) and deletions are indicated by //italics//.
//PUTNAM OPTION INCOME TRUST//
((PUTNAM EQUITY INCOME FUND))
MANAGEMENT CONTRACT
Management Contract dated as of //May 2, 1986// ((JULY , 1996))
between PUTNAM //OPTION INCOME TRUST// ((EQUITY INCOME FUND)), a
Massachusetts business trust (the "Fund"), and //THE PUTNAM
MANAGEMENT COMPANY, INC.// ((PUTNAM INVESTMENT MANAGEMENT, INC.)), a
//Delaware// ((MASSACHUSETTS)) corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it
is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Fund, will determine what //securities//
((INVESTMENTS)) shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by the
officers and personnel referred to in Section 1(d), the Manager will
also manage, supervise and conduct the other affairs and business of
the Fund and matters incidental thereto. In the performance of its
duties, the Manager will comply with the provisions of the Agreement
and Declaration of Trust and By-laws of the Fund and its stated
investment objectives, policies and restrictions, and will use its
best efforts to safeguard and promote the welfare of the Fund and to
comply with other policies which the Trustees may from time to time
determine, and shall exercise the same care and diligence expected
of the Trustees.
(b) The Manager, at its expense, except as such expense is paid
by the Fund as provided in Section 1(d), will furnish (1) all
necessary investment and management facilities, including salaries
of personnel, required for it to execute its duties faithfully; (2)
suitable office space for the Fund; and (3) administrative
facilities, including bookkeeping, clerical personnel and equipment
necessary for the efficient conduct of the affairs of the Fund,
including determination of the Fund's net asset value, but excluding
shareholder accounting services. Except as otherwise provided in
Section 1(d), the Manager will pay the compensation, if any, of the
officers of the Fund.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Fund's account
with brokers or dealers selected by the Manager. In the selection
of such brokers or dealers and the placing of such orders, the
Manager shall use its best efforts to obtain for the Fund the most
favorable price and execution available, except to the extent it may
be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to
obtain for the Fund the most favorable price and execution
available, the Manager, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including
by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission,
the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the
broker or dealer involved and the quality of service rendered by the
broker or dealer in other transactions. Subject to such policies as
the Trustees ((OF THE FUND)) may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty created
by this Contract or otherwise solely by reason of its having caused
the Fund to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for
effecting a portfolio investment transaction in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction, if the Manager determines in good faith
that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker
or dealer, viewed in terms of either that particular transaction or
the Manager's overall responsibilities with respect to the Fund and
to other clients of the Manager as to which the Manager exercises
investment discretion. The Manager agrees that in connection with
purchases or sales of portfolio investments for the Fund's account,
neither the Manager nor any officer, director, employee or agent of
the Manager shall act as a principal or receive any commission other
than as provided in Section 3.
//(d) The Fund will pay or reimburse the Manager for (i) the
compensation of the Vice Chairman and Treasurer of the Fund and of
persons assisting him in these offices, as determined from time to
time by the Trustees of the Fund, (ii) the compensation in whole or
in part of such other officers of the Fund and persons assisting
them as may be determined from time to time by the Trustees of the
Fund, and (iii) the cost of suitable office space, utilities,
support services and equipment of the Vice Chairman and Treasurer
and persons assisting him and, as determined from time to time by
the Trustees of the Fund, all or a part of such costs attributable
to the other officers and persons assisting them whose compensation
is paid in whole or in part by the Fund. The Fund will pay the
fees, if any, of the Trustees of the Fund.//
<PAGE>
(((D) THE FUND WILL PAY OR REIMBURSE THE MANAGER FOR THE
COMPENSATION IN WHOLE OR IN PART OF SUCH OFFICERS OF THE FUND AND
PERSONS ASSISTING THEM AS MAY BE DETERMINED FROM TIME TO TIME BY THE
TRUSTEES OF THE FUND. THE FUND WILL ALSO PAY OR REIMBURSE THE
MANAGER FOR ALL OR PART OF THE COST OF SUITABLE OFFICE SPACE,
UTILITIES, SUPPORT SERVICES AND EQUIPMENT ATTRIBUTABLE TO SUCH
OFFICERS AND PERSONS, AS MAY BE DETERMINED IN EACH CASE BY THE
TRUSTEES OF THE FUND. THE FUND WILL PAY THE FEES, IF ANY, OF THE
TRUSTEES OF THE FUND.))
(e) The Manager shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Manager pursuant to this
Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers
and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, the Manager, and in any
person controlled by or under common control with the Manager, and
that the Manager and any person controlled by or under common
control with the Manager may have an interest in the Fund. It is
also understood that the Manager and //persons// ((ANY PERSON))
controlled by or under common control with the Manager have and may
have advisory, management((,)) service or other contracts with other
organizations and persons, and may have other interests and
//businesses// ((BUSINESS)).
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses
borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of
Section 1, a fee, computed and paid quarterly at the //following//
annual //rates// ((RATE OF)):
//(a) 0.75% of the first $100 million of the average net asset
value of the Fund;
(b) 0.65% of the next $100 million of such average net asset
value;
(c) 0.55% of the next $300 million of such average net asset
value;
(d) 0.5% of the next $1 billion of such average net asset value;
(e) 0.45% of the next $1 billion of such average net asset value;
and
(f) 0.4% of any amount over $2.5 billion of such average net
asset value.//
(((A) 0.65% OF THE FIRST $500 MILLION OF THE AVERAGE NET ASSET
VALUE OF THE FUND;
(B) 0.55% OF THE NEXT $500 MILLION OF SUCH AVERAGE NET ASSET
VALUE;
(C) 0.50% OF THE NEXT $500 MILLION OF SUCH AVERAGE NET ASSET
VALUE;
(D) 0.45% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET VALUE;
(E) 0.425% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET
VALUE;
(F) 0.405% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET
VALUE;
(G) 0.39% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET VALUE;
AND
(H) 0.38% OF ANY AMOUNT THEREAFTER.))
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value during
such quarter at the close of business on each business day during
such quarter while this Contract is in effect. Such fee shall be
payable for each fiscal quarter within 30 days after the close of
such quarter.
The fees payable by the Fund to the Manager pursuant to this Section
3 shall be reduced by any commissions, fees, brokerage or similar
payments received by the Manager or any affiliated person of the
Manager in connection with the purchase and sale of portfolio
investments of the Fund, less any direct expenses approved by the
Trustees incurred by the Manager or any affiliated person of the
Manager in connection with obtaining such payments.
In the event that expenses of the Fund for any fiscal year should
exceed the expense limitation on investment company expenses imposed
by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are qualified for offer or sale, the compensation
due the Manager for such fiscal year shall be reduced by the amount
of excess by a reduction or refund thereof.
If the Manager shall serve for less than the whole of a quarter, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF
THIS CONTRACT.
This //contract// ((CONTRACT)) shall automatically terminate,
without the payment of any penalty, in the event of its assignment;
and this Contract shall not be amended unless such amendment be
approved at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Fund who are not interested persons
of the Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This //contract// ((CONTRACT)) shall become effective upon its
execution, and shall remain in full force and effect continuously
thereafter (unless terminated automatically as set forth in Section
4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract
by not more than sixty days' nor less than thirty days'
written notice delivered or mailed by registered mail,
postage prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the shareholders by the
affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees of the Fund who
are not interested persons of the Fund or of the Manager, by
vote cast in person at a meeting called for the purpose of
voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract
shall automatically terminate at the close of business on
//January 31, 1988 or// ((THE SECOND ANNIVERSARY OF ITS
EXECUTION, OR UPON)) the expiration of one year from the
effective date of the last such continuance, whichever is
later.
Action by the Fund under (a) above may be taken either (i) by vote
of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 //shall//
((WILL)) be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a
majority of the outstanding shares of the Fund" means the
affirmative vote, at a duly called and held meeting of shareholders
of the Fund, (a) of the holders of 67% or more of the shares of the
Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares
of the Fund entitled to vote at such meeting are present in
//persons// ((PERSON)) or by proxy, or (b) of the holders of more
than 50% of the outstanding shares of the Fund entitled to vote at
such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their
respective meanings defined in the Investment Company Act of 1940
and the Rules and Regulations thereunder (((THE "1940 ACT"))),
subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a
manner consistent with the //Investment Company Act of// 1940
((ACT,)) and the Rules and Regulations thereunder; and the term
"brokerage and research services" shall have the meaning given in
the Securities Exchange Act of 1934 and the Rules and Regulations
thereunder.
7. NONLIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations
and duties hereunder, the Manager shall not be subject to any
liability to the Fund, or to any shareholder of the Fund, for any
act or omission in the course of, or connected with, rendering
services hereunder.
8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its date, and supersedes
the Management Contract dated //May 1, 1984// ((MAY 2, 1986)).
9. LIMITATION OF LIABILITY OF THE TRUSTEES((, OFFICERS,)) AND
SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund is on
file with the Secretary of //the// ((STATE OF THE)) Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and not
individually and that the obligations of ((OR ARISING OUT OF)) this
instrument are not binding upon any of the Trustees((, OFFICERS)) or
shareholders//,// individually but are binding only upon the assets
and property of the Fund.
<PAGE>
IN WITNESS WHEREOF, PUTNAM //OPTION INCOME TRUST// ((EQUITY INCOME
FUND)) and //THE PUTNAM MANAGEMENT COMPANY, INC.// ((PUTNAM
INVESTMENT MANAGEMENT, INC.)) have each caused this instrument to be
signed in duplicate on its behalf by its President or a Vice
President thereunto duly authorized, all as of the day and year
first above written.
//PUTNAM OPTION INCOME TRUST//
((PUTNAM EQUITY INCOME FUND))
By: --------------------------
//THE PUTNAM MANAGEMENT COMPANY, INC.//
((PUTNAM INVESTMENT MANAGEMENT, INC.))
By: --------------------------
<PAGE>
EXHIBIT B
MANAGEMENT FEE RATE NAME OF FUND
(BASED ON AVERAGE NET ASSETS) (NET ASSETS AS OF MARCH 29, 1996)
0.65% of the first $500 million Putnam Balanced Retirement
of average net assets, 0.55% of Fund
($504,336,866) the next $500 million, 0.50%
of the next $500 million, 0.45%
of any excess over $1.5 billion
0.65% of the first $500 million Putnam Convertible Income-Growth
of average net assets, 0.55% Trust ($945,584,420)
of the next $500 million, 0.50%
of the next $500 million, and
0.45% of any excess over $1.5
billion
0.60% of the first $100 million The George Putnam Fund of Boston
of average net assets, 0.50% of ($1,975,561,290)
the next $100 million, 0.40% of
the next $300 million, 0.325% of
the next $500 million, and 0.30%
of any excess over $1.0 billion
Proposed to be changed to 0.65%
of the first $500 million of
average net assets, 0.55% of the
next $500 million, 0.50% of the
next $500 million, 0.45% of the
next $5 billion, 0.425% of the
next $5 billion, 0.405% of the
next $5 billion, 0.39% of the
next $5 billion, and 0.38%
thereafter
0.65% of the first $500 million The Putnam Fund for Growth
of average net assets, 0.55% and Income
($16,450,325,286)
of the next $500 million, 0.50%
of the next $500 million, 0.45% Putnam Growth and Income Fund II
of the next $5 billion, 0.425% ($821,639,347)
of the next $5 billion, 0.405%
of the next $5 billion, 0.39% Putnam Investment Funds:
of the next $5 billion, and Putnam Balanced Fund
0.38% thereafter ($2,104,239)
<PAGE>
PUTNAMINVESTMENTS
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAMINVESTMENTS
THIS IS YOUR PROXY CARD.
PLEASE VOTE THIS PROXY, SIGN IT BELOW, AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED. YOUR VOTE IS IMPORTANT.
HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or
telephone number or to provide us with your comments. Detach this
form from the proxy ballot and return it with your signed proxy in
the enclosed envelope.
Street
- --------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------
Telephone
- --------------------------------------------------------------------
DO YOU HAVE ANY COMMENTS?
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense of
follow-up mailings by signing and returning this proxy as soon as
possible. A postage-paid envelope is enclosed for your convenience.
THANK YOU!
- --------------------------------------------------------------------
Please fold at perforation before detaching
<PAGE>
Proxy for a meeting of shareholders, July 11, 1996, for PUTNAM
EQUITY INCOME FUND.
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE FUND.
The undersigned shareholder hereby appoints George Putnam, Hans H.
Estin, and Robert E. Patterson, and each of them separately,
proxies, with power of substitution, and hereby authorizes them to
represent and to vote, as designated below, at the meeting of
shareholders of Putnam Equity Income Fund on July 11, 1996, at 2:00
p.m., Boston time, and at any adjournments thereof, all of the
shares of the fund that the undersigned shareholder would be
entitled to vote if personally present.
IF YOU COMPLETE AND SIGN THE PROXY, WE'LL VOTE IT EXACTLY AS YOU
TELL US. IF YOU SIMPLY SIGN THE PROXY, IT WILL BE VOTED FOR
ELECTING TRUSTEES AS SET FORTH IN PROPOSAL 1 AND FOR PROPOSALS 2,
3 AND 4.A .-H. IN THEIR DISCRETION, THE PROXIES WILL
ALSO BE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS THAT MAY COME
BEFORE THE MEETING.
Note:If you have questions on any of the proposals, please call
1-800-225-1581.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you
are a joint owner, each of you should sign. When signing as
executor, administrator, attorney, trustee, or guardian, or as
custodian for a minor, please give your full title as such. If you
are signing for a corporation, please sign the full corporate name
and indicate the signer's office. If you are a partner, sign in the
partnership name.
- --------------------------------------------------------------------
Shareholder sign here Date
- --------------------------------------------------------------------
Co-owner sign here Date
<PAGE>
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES FOR
TRUSTEES AND FOR THE PROPOSALS LISTED BELOW:
PLEASE MARK YOUR CHOICES / X / IN BLUE OR BLACK INK.
1. PROPOSAL TO ELECT TRUSTEES
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A.
Hill, E.T. Kennan, L.J. Lasser, R.E. Patterson, D.S. Perkins,
W.F. Pounds, G. Putnam, G. Putnam, III, E. Shapiro, A.J.C.
Smith, W.N. Thorndike.
/ / FOR electing all the nominees
(EXCEPT AS MARKED TO THE CONTRARY BELOW.)
/ / WITHHOLD authority to vote for all nominees
TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES, WRITE
THOSE NOMINEES' NAMES BELOW:
- -------------------------------------------------------------
PROPOSAL TO:
2. RATIFY THE SELECTION FOR AGAINST
ABSTAIN
OF COOPERS & LYBRAND / / /
/ / /
L.L.P. AS AUDITORS.
3. APPROVE A NEW / / / / / /
MANAGEMENT CONTRACT
INCREASING THE FEES
PAYABLE TO
PUTNAM INVESTMENT
MANAGEMENT, INC.
4.A. Amend the / / / / / /
fund's fundamental
investment restriction
with respect to
diversification of
investments.
4.B. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
OWNING 10% OF THE SECURITIES
OF A SINGLE ISSUER.
4.C. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO MAKING
LOANS THROUGH REPURCHASE
AGREEMENTS AND SECURITIES
LOANS.
4.D. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
RELATING TO INVESTMENTS
IN REAL ESTATE.
4.E. Eliminate the / / / / / /
fund's fundamental
investment restriction
with respect to
investments in securities
of issuers in which
management of the fund or
Putnam Investment Management,
Inc. owns securities.
4.F. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO MARGIN
TRANSACTIONS.
4.G. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO SHORT
SALES.
4.H. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
which limits the fund's
ability to pledge assets.
