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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/ / Confidential, for Use of the Commission Only (as
- ---- permitted by Rule 14a-6(e) (2))
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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(c) or
- ---- Sec. 240.14a-12
PUTNAM AMERICAN GOVERNMENT INCOME FUND
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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/ X / No fee required
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/ / Fee computed on table below per Exchange Act Rule 14a
- ---- 6(i)(1) and 0-11
<PAGE>
(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
(set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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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 AMERICAN GOVERNMENT 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 page 5 .
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 your fund's Trustees; (2) ratifying the
selection of your fund's independent auditors; (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; (4) approving an amendment to the fund's
fundamental investment restriction with respect to borrowing and
(5) approving an amendment to the fund's fundamental investment
restriction with respect to lending.
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. Several years ago the Trustees completed a
careful study of the management fees, investment performance and
expense ratios of each of the Putnam funds and also major
competing funds. This comprehensive review resulted in fee
increases for some funds and decreases for others. In certain
cases, including your fund, the Trustees concluded that a fee
increase would be appropriate only if the fund were able to
improve its competitive investment performance. After giving
careful consideration to your fund's 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
approximately $0.03 in annual expenses for each $100 invested.
Your Trustees believe that this increase, the first since the
fund's inception in 1986, 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
his or her 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 do not 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 AMERICAN GOVERNMENT 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 American Government Income Fund:
A Meeting of Shareholders of your fund will be held on March 5,
1998 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 26 .
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 26 .
4. Approving an amendment to the fund's fundamental investment
restriction with respect to borrowing. See page 35 .
5. Approving an amendment to the fund's fundamental investment
restriction with respect to making loans. See page
38 .
6. Transacting other business as may properly come before the
meeting.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson A. Baxter John H. Mullin, III
Hans H. Estin Robert E. Patterson
Paul L. Joskow Donald S. Perkins
John A. Hill George Putnam, III
Ronald J. Jackson A.J.C. Smith
Elizabeth T. Kennan W. Thomas Stephens
Lawrence J. Lasser W. Nicholas Thorndike
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.
December 24 , 1997<PAGE>
Proxy Statement
This document will give you the information you need to vote on
the matters listed on the previous pages . 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
American Government Income Fund for use at the Meeting of
Shareholders of the fund to be held on March 5, 1998, 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 ratifying the selection of Price Waterhouse LLP 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. For amending the fund's fundamental investment restriction
with respect to borrowing; and
5. For amending the fund's fundamental investment restriction
with respect to making loans .
Who is eligible to vote?
Shareholders of record at the close of business on December 5,
1997 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 are being mailed to shareholders of record on or
about December 29 , 1997.
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.
The Proposals
I. ELECTION OF TRUSTEES
Who are the nominees for Trustees?
The Nominating Committee of the Trustees has fixed the number of
Trustees at sixteen and recommends 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 54, 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 Financial Corp., 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 69, 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 Corporation Member of The
Schepens Eye Research Institute; 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 55, 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, TransMontaingne Oil Company, a
refined oil product pipeline and distribution 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.
Ronald J. Jackson
[Insert Picture]
Mr. Jackson, age 54 , was Chairman of the Board, President
and Chief Executive Officer of Fisher-Price, Inc., a major toy
manufacturer, from 1990 to 1993. He previously served as
President and Chief Executive Officer of Stride-Rite, Inc., a
manufacturer and distributor of footwear, from 1989 to 1990, and
as President and Chief Executive Officer of Kenner Parker Toys,
Inc., a major toy and game manufacturer, from 1985 to 1987.
Prior to that, he held various financial and marketing positions
at General Mills, Inc. from 1966 to 1985, including Vice
President, Controller and Vice President of Marketing for Parker
Brothers, a toy and game company, and President of Talbots, a
retailer and direct marketer of women's apparel.
Mr. Jackson currently serves as a Trustee of Salem Hospital and
the Peabody Essex Museum. Mr. Jackson is a graduate of Michigan
State University Business School.
<PAGE>
Paul L. Joskow*
[Insert Picture]
Dr. Joskow, age 50, is Professor of Economics and Management and
Head of the Department of Economics at the Massachusetts
Institute of Technology where he has been on the faculty since
1972. From 1979 to 1980 he was a Visiting Professor at the
Kennedy School of Government at Harvard University and from 1985
to 1986 he was a Fellow at the Center for Advanced Study in the
Behavioral Sciences at Stanford University. He has published
three books and numerous articles on topics dealing with
industrial organization, government regulation of industry, and
competition policy.
Dr. Joskow currently serves as a Director of the New England
Electric System, a public utility holding company, State Farm
Indemnity Company, an automobile insurance company, and the
Whitehead Institute for Biomedical Research, a non-profit
research institution. He has been President of the Yale
University Council since 1993. From 1990 to 1994 he served as
Chairman of the Research Advisory Board of the Committee for
Economic Development. Dr. Joskow is active on industry
restructuring, environmental, energy, competition, and
privatization policies and has served as an advisor to
governments and corporations around the world. He has been a
consultant to National Economic Research Associates, Inc. since
1972 on these and related issues.
Dr. Joskow is a graduate of Cornell University and Yale
University. He is a Fellow of the Econometric Society and the
American Academy of Arts and Sciences.
Elizabeth T. Kennan
[Insert Picture]
Ms. Kennan, age 59, 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 Bell Atlantic,
a telecommunications company, Northeast Utilities, the Kentucky
Home Life Insurance Companies, and Talbots. She also serves as a
Member of The Folger Shakespeare Library Committee. She is
currently active in various educational and civic associations.
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 55, 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 the United Way of Massachusetts Bay. He is a
Member of the Board of Overseers of the Museum of Fine Arts in
Boston, The Council on Foreign Relations, and a Member of the
Board of Governors and Executive Committee at the Investment
Company Institute. He is also a Trustee of the Beth
Israel\Deaconess Medical Center in Boston. Mr. Lasser is a
graduate of Antioch College and Harvard Business School.
John H. Mullin, III
[Insert Picture]
Mr. Mullin, age 56, is Chairman and CEO of Ridgeway Farm, a
limited liability company engaged in timber activities and
farming. Prior to establishing Ridgeway Farm, Mr. Mullin was a
Managing Director of Dillon, Read & Co. Inc., an investment
banking firm.
Mr. Mullin currently serves as a Director of ACX Technologies,
Inc., a company engaged in the manufacture of industrial ceramics
and packaging products; Alex . Brown Realty, Inc., a real
estate investment company; The Liberty Corporation, a company
engaged in the life insurance and broadcasting industries; and
The Ryland Group, Inc., a national homebuilder. Mr. Mullin
previously served as a Director of Dillon, Read & Co. Inc.,
Adolph Coors Company, Crystal Brands, Inc., Fisher-Price, Inc.
and Mattel Inc. Mr. Mullin is a Trustee Emeritus of Washington &
Lee University where he served as Chairman of the Investment
Committee. Mr. Mullin is a graduate of Washington & Lee
University and The Wharton Graduate School at the University of
Pennsylvania.
Robert E. Patterson
[Insert Picture]
Mr. Patterson, age 52, 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 70, 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, LaSalle Street Fund, Inc.
and LaSalle U.S. Realty Income and Growth Fund, Inc., real estate
investment trusts, Lucent Technologies Inc., Ryerson Tull, Inc.,
America's largest steel service corporation, 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 69, 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<PAGE>
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., 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. and General Mills, Inc. Dr. Pounds is a graduate of
Carnegie-Mellon University.
George Putnam*
[Insert Picture]
Mr. Putnam, age 71, 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 Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and
Gas, Inc., mining and natural resources companies and Houghton
Mifflin Company, a major publishing company. He is also a
Trustee of Massachusetts General Hospital, McLean Hospital,
Vincent Memorial Hospital, WGBH Educational Foundation and 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 46, 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.
<PAGE>
Mr. Putnam currently also serves as a Director of the
Massachusetts Audubon Society and The Boston Family Office,
L.L.C., a registered investment advisor that provides financial
advice to individuals and families. 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.
A.J.C. Smith*
[Insert Picture]
Mr. Smith, age 63, 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 Educational Broadcasting Corporation, the
Economic Club of New York, the U.S. Chamber of Commerce, 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, 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.
W. Thomas Stephens
[Insert Picture]
Mr. Stephens, age 55, is the President and Chief Executive
Officer of MacMillan Bloedel Ltd. Mr. Stephens retired in 1996
as Chairman of the Board of Directors, President and Chief
Executive Officer of Johns Manville Corporation, an insulation
and roofing systems company. He also served as Executive Vice
President and Chief Financial Officer of Manville and in total
had 27 years of experience with Manville and its predecessor
companies.
Mr. Stephens serves as a Director for Mail-Well Inc., a supplier
of envelopes and high-quality printing services, Qwest
Communications, a fiber optics manufacturer, The Eagle Picher
Trust, a trust established to fund the settlement of asbestos-
related claims, and New Century Energies, a public utility
company. Mr. Stephens is a Member of the Colorado Forum and
Trustee of the Denver Art Museum and The University of Arkansas
Advisory Council. He is currently a Visiting Professor at the
Graduate School of Business at the University of Colorado. Mr.
Stephens is a graduate of the University of Arkansas.
W. Nicholas Thorndike**
[Insert Picture]
Mr. Thorndike, age 64, 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 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 includes 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. Mr. Joskow is not
currently an "interested person" of your fund but could be
deemed by the Securities and Exchange Commission to be an
"interested person" on account of his consulting
relationship with National Economic Research Associates,
Inc. which is a wholly-owned subsidiary of Marsh & McLennan
Companies, Inc. 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 Messrs.
Jackson , Joskow, Mullin and Stephens, all the nominees
were elected by the shareholders in September 1996. Messrs.
Jackson and Stephens were elected by the other Trustees in May
1996 and September 1997, respectively , and Messrs. Joskow and
Mullin were elected by the other Trustees in November 1997 .
The 16 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 fix the
number of Trustees at less than 16 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 96 Putnam funds
based on their own investment needs. The Trustees' aggregate
investments in the Putnam funds total over $61 million.
The table below lists each Trustee's current investments in the
fund and in the Putnam funds as a group based on beneficial
ownership. Except as otherwise noted, each Trustee has sole
voting power and sole investment power with respect to his or her
shares.
<TABLE> <CAPTION>
<PAGE>
Share Ownership by Trustees
<S> <C> <C> <C> <C>
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 11/10/97 as of 11/10/97 (1)
- ------------------------------------------------------------------------------------------
Jameson A. Baxter 1994 129 80,476
Hans H. Estin 1972 267 29,964
John A. Hill 1985 276 143,484
Ronald J. Jackson 1996 118 127,631
Paul L. Joskow 1997 111 213(2)
Elizabeth T. Kennan 1992 356 23,615
Lawrence J. Lasser 1992 151 565,535
John H. Mullin, III 1997 103 211(2)
Robert E. Patterson 1984 717 62,967
Donald S. Perkins 1982 1,462 171,814
William F. Pounds 1971 963 321,042
George Putnam 1957 13,027 1,796,131
George Putnam, III 1984 1,897 368,213
A.J.C. Smith 1986 715 52,325
W. Thomas Stephens 1997 101 3,304
W. Nicholas Thorndike 1992 163 82,204
- ------------------------------------------------------------------------------------------
</TABLE>
(1) These holdings do not include shares of Putnam money market funds.
(2) Elected as a Trustee in November 1997.
As of November 10, 1997, the Trustees and officers of the fund owned
a total of 22,542 shares of the fund, comprising less than 1% of
its outstanding shares on that date.
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; and
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.
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 currently include: the Committee of Independent
Trustees, which conducts an annual review of all contractual
arrangements with Putnam Management and its affiliates; the
Contract Committee, which reviews such matters on an interim
basis during the course of the year; the Communication and
Service Committee, which reviews 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; the Nominating Committee, which is responsible for
selecting nominees for election as Trustees and the Closed-end
Fund Committee, which is responsible for reviewing special issues
applicable to closed-end funds .
Each Trustee generally attends at least two formal committee
meetings during each regular meeting of the Trustees. During
1997 , 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 Committee of Independent Trustees and the Contract Committee
typically meet on several additional occasions during the year to
carry out their 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?
Each Trustee receives 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 Compensation
Committee, which consists solely of Trustees not affiliated with
Putnam Management, estimates that Committee and Trustee meeting
time together with the appropriate preparation requires the
equivalent of at least three business days per Trustee meeting.
The following table shows the fees paid to each Trustee by the
fund for fiscal 1997 and the fees paid to each Trustee by all of
the Putnam funds during calendar year 1996:<PAGE>
COMPENSATION TABLE
<TABLE> <CAPTION>
<S> <C> <C> <C> <C> <C>
Pension or Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees fund(1) fund expenses upon retirement(2) funds(3)
Jameson A. Baxter $2,353 $ 786
$85,646 $172,291 (4)
Hans H. Estin 2,328 2,540 85,646 171,291
John A. Hill (4) 2,341 950 85,646 170,791
Ronald J. Jackson (4)(5) 2,353 140 85,646 94,807
Paul L. Joskow (6) --- --- --- ---
Elizabeth T. Kennan 2,330 1,637 85,646 171,291
Lawrence J. Lasser 2,309 1,227 85,646 169,791
John H. Mullin, III (6) --- --- --- ---
Robert E. Patterson 2,353 761 85,646 182,291
Donald S. Perkins 2,353 2,763 85,646 170,291
William F. Pounds (7) 2,683 2,612 98,146 197,291
George Putnam 2,342 2,914 85,646 171,291
George Putnam, III 2,332 501 85,646 171,291
A.J.C. Smith 2,283 1,700 85,646 169,791
W. Thomas Stephens (4)(8) 165 --- --- ---
W. Nicholas Thorndike 2,353 2,351 85,646 181,291
(1) Includes an annual retainer and an attendance fee for each meeting attended.
(2)
Assumes that each Trustee retires at the normal retirement date. Estimated
benefits for each Trustee are based on Trustee fee rates in effect during
calendar 1996.
(3)
As of December 31, 1996, there were 96 funds in the Putnam family.
(4)
Includes compensation deferred pursuant to a Trustee Compensation
Deferral Plan. The total amounts of deferred compensation payable by the
fund to Mr. Hill, Mr. Jackson and Mr. Stephens as of September 30, 1997
were $8,571, $4,005 and $143, respectively, including income earned on such
amounts.
(5)
Elected as a Trustee in May 1996.
(6)
Elected as a Trustee in November 1997.<PAGE>
(7)
Includes additional compensation for service as Vice
Chairman of the Putnam funds.
(8)
Elected as a Trustee in September 1997.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"), each Trustee who retires with at least five years of
service as a Trustee of the funds is entitled to receive an
annual retirement benefit equal to one-half of the average annual
compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is payable
during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years
of service. A death benefit is also available under the Plan
which assures that the Trustee and his or her beneficiaries will
receive benefit payments for the lesser of an aggregate period of
(i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that
are not "interested persons" of the fund, as defined in the
Investment Company Act of 1940) may terminate or amend the Plan
at any time, but no termination or amendment will result in a
reduction in the amount of benefits (i) currently being paid to a
Trustee at the time of such termination or amendment, or (ii) to
which a current Trustee would have been entitled to receive had
he or she retired immediately prior to such termination or
amendment.
For additional information about your fund, including further
information about its Trustees and officers, please see "Fund
Information," on page 43 .
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
brokerage, consulting, and investment management businesses.
2. RATIFICATION OF INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts,
independent accountants, has been selected by the Trustees as the
independent auditor 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 its fees.
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.
On September 18, 1997 Coopers & Lybrand L.L.P. and Price
Waterhouse LLP announced plans to merge their practices
worldwide. Coopers & Lybrand L.L.P. and Price Waterhouse LLP
expect the merger, which has been approved by the partners
of both organizations and is subject to approval by the
regulators, to become effective in early 1998.
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
44 .
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 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 never been increased and is lower than the fees paid
to managers of many competitive funds.
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 in recent
years 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
44 .
Following consideration of these and the other factors described
above, the Trustees of your fund, including all of the
independent Trustees, unanimously approved the proposed new
contract.
How has the 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 the fund s class A shares
(with dividends reinvested) would have grown to $21,037 over a
ten-year period. Performance data at net asset value (NAV) in
the chart does not reflect the deduction of the maximum sales
charge of 4.75% for class A shares. Performance data which
deducted the sales charge would be lower than the performance
indicated in the chart.
GROWTH OF A $10,000 INVESTMENT
(insert mountain graph here)
9/30/87 10,000
9/30/88 11,197
9/30/89 12,318
9/30/90 12,905
9/30/91 14,775
9/30/92 15,893
9/30/93 17,038
9/30/94 16,346
9/30/95 18,540
9/30/96 19,214
9/30/97 21,037
<PAGE>
<TABLE><CAPTION>
Average annual total return
for periods ended September 30, 1997
Class A Class B Class M Lehman
Inception date: 3/1/85 5/20/94 2/14/95 Bros.
Intermediate
Total Treasury
return NAV POP+ NAV CDSC++ NAV POP+ Index*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year 9.49% 4.27% 8.72% 3.72% 9.45% 5.91% 7.75%
3 years 8.77 7.02 7.87 7.00 8.55 7.34 7.77
5 years 5.77 4.76 4.92 4.62 5.52 4.81 5.83
10 years 7.72 7.20 6.82 6.82 7.40 7.04 8.34
Life of fund 7.90 7.48 6.96 6.96 7.54 7.26 8.92
</TABLE>[CAPTION]
*Lehman Brothers Intermediate Treasury Index is an unmanaged list of
Treasury bonds; it is used as a general gauge of the market for
intermediate-term fixed-income treasury securities. The index does
not take into account brokerage commissions or other costs, may include
bonds different from those in the fund, and may pose different risks than
the fund. Securities indexes assume reinvestment of all distributions and
interest payments, and the performance of the fund will differ. It is not
possible to invest directly in an index.
+Returns at public offering price ("POP") reflect the deduction of
the current maximum initial sales charges of 4.75% for class A shares
and 3.25% for class M shares.
++Returns at CDSC reflect the deduction of the applicable contingent
deferred sales charge ("CDSC") , which is 5% in the first year, declining
to 1% in the sixth year, and is eliminated thereafter.
Returns shown for class B and class M shares for periods prior to
their inception are derived from the historical performance of
class A shares, adjusted to reflect both the deduction of the
initial sales charge or CDSC, if any, currently applicable to
each class , where appropriate, and the higher operating
expenses applicable to such shares.
Returns shown for class A shares have not been adjusted to
reflect payments under the class A distribution plan prior to its
implementation. All returns assume reinvestment of distributions
at net asset value and represent past performance; they do not
guarantee future results. 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.
As a result of a change in the fund's investment objectives
and policies and distribution policies effective November 1,
1992, performance data prior to that time does not reflect
the fund's performance under its current investment objectives
and policies or its current distribution policies.
How has the fund performed in comparison to similar funds?
Another way of evaluating the performance of your fund is to
compare it to other government 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 as follows:
For periods ended 9/30/97
1 year top 20% of 180 funds
3 years top 29% of 133 funds
5 years top 49% of 79 funds
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:
<PAGE>
Proposed Fee* Existing Fee*
- -----------------------------------------------------------------
0.65% of the first $500 million 0.60% of the first $500 million
0.55% of the next $500 million 0.50% of the next $1 billion
0.50% of the next $500 million 0.45% of the next $1 billion
0.45% of the next $5 billion 0.40% of the next $4.5 billion
0.425% of the next $5 billion 0.375% of the next $2.5 billion
0.405% of the next $5 billion 0.35% of any amount over $9.5
0.39% of the next $5 billion billion
0.38% of any amount thereafter
* Based on average net assets
Based on average net assets of the fund for the fiscal
year ended September 30, 1997 of approximately $1.693
billion the effective annual management fee rate under the
proposed fee schedule would be 0.553% as compared to
0.521% under the existing schedule. This represents an
increase of approximately $0.03 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 September 30, 1997, the fund paid
management fees to Putnam Management of $8,812,467. If the
proposed new management contract had been in effect for the year,
the fund would have paid fees of $9,367,426, which is an increase
of approximately 6.3%.
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 proposed
fee schedule.
Annual fund operating expenses
(as a percentage of average net assets)
(Actual)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
- ---------- ----- -------------------
Class A0.52% 0.25% 0.20% 0.97%
Class B0.52% 1.00% 0.20% 1.72%
Class M0.52% 0.50% 0.20% 1.22%
<PAGE>
(Pro Forma)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
- ---------- ----- -------------------
Class A0.55% 0.25% 0.20% 1.00%
Class B0.55% 1.00% 0.20% 1.75%
Class M0.55% 0.50% 0.20% 1.25%
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:
<PAGE>
(Actual)
1 3 5 10
year years years years
- -----------------------------------------------------------------
Class A $57 $77 $99 $161
Class B $67 $84 $113 $183*
Class B (no redemption) $17 $54 $93 $183*
Class M $45 $70 $97 $175
(Pro Forma)
1 3 5 10
year years years years
- -------------------------------------------------------------------
Class A $57 $78 $100 $164
Class B $68 $85 $115 $186*
Class B (no redemption) $18 $55 $95 $186*
Class M $45 $71 $99 $179
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.
* Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase.
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. The new contract
will not result in an increase in the amount the fund reimburses
Putnam Management.
<PAGE>
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. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO BORROWING.
The Trustees are recommending that the fund's fundamental
investment restriction with respect to borrowing be revised to
reflect the standard restriction expected to be used by other
Putnam funds and to grant the fund the maximum flexibility
permitted by the Investment Company Act of 1940, as amended (the
"1940 Act"). Under the 1940 Act, the fund may borrow up to
33 1/3% of its total assets. The fund's current restriction is
more restrictive, and states that the fund may not:
"Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is
made, and then only from banks as a temporary measure to
facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely
disposition of portfolio investments or for extraordinary or
emergency purposes. Such borrowings will be repaid before any
additional investments are purchased."
The proposed fundamental investment restriction is set forth
below.
"The fund may not...
Borrow money in excess of 33 1/3% of the value of its total
assets (not including the amount borrowed) at the time the
borrowing is made."
If the proposed change is approved, the fund will be able to
borrow up to the 1940 Act limit. The fund will no longer be
restricted to borrowing only for redemption requests or for
extraordinary or emergency purposes, and would not be limited to
borrowing only from banks. The new restriction would not
prohibit the fund from borrowing for leveraging purposes,
although Putnam Management currently has no intention of
borrowing for such purposes. If the fund were to borrow money
for the purposes of leverage, its net assets would tend to
increase or decrease at a greater rate with market changes than
if leverage were not used.
Putnam Management
believes that this enhanced flexibility could
assist the fund in achieving its investment objective.
In
circumstances in which the fund's available cash is not
sufficient to meet, among other things, shareholder redemptions,
Putnam Management believes that it may be advantageous at times
for the fund to borrow money instead of raising cash by selling
its portfolio securities, which could be disruptive to the fund's
investment strategy.
In a separate proposal (see Proposal 5 below), shareholders of
the fund are being asked to approve an amendment to the fund's
restriction on lending. The proposed revisions would , subject
to the limitations discussed below, permit the fund to
participate in a proposed " interfund lending program,"
which would allow the fund, through a master loan agreement, to lend
available cash to and borrow from other Putnam funds.
As stated above, the fund may currently borrow money only from banks. When
the fund borrows money from a bank, it typically pays interest on
such borrowing at a higher rate than the rate available from
investments in repurchase agreements. The fund would be able to
borrow money under the interfund lending program only if the rate
on the loan is more favorable to the fund than the interest rates
otherwise available for short-term bank loans, in addition to
being more favorable to the lending fund than available
repurchase agreement rates. Putnam Management believes that the
ability to engage in such borrowing transactions will allow the
fund to pay lower interest rates on its borrowings. The fund
could, in certain circumstances, have its loan recalled by a
lending fund on one day's notice. In these circumstances, the
fund might have to borrow from a bank at a higher interest rate
if loans were not available from other Putnam funds.
Since the Putnam funds may be considered affiliated parties, interfund
lending may be prohibited by the 1940 Act and an interfund lending
program would be implemented only upon receipt of an exemptive order of
the Securities and Exchange Commission.
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<PAGE>
outstanding shares of the fund are present at the meeting in
person or by proxy.
5.
AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO MAKING LOANS .
The Trustees are recommending that the fund's fundamental
investment restriction with respect to making loans be revised to
reflect the standard restriction expected to be used by other
Putnam funds and to clarify that the fund is permitted
(subject to the limitations discussed above) to
participate in the proposed interfund lending program described
in Proposal 4
. 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 entering into repurchase agreements, or by lending its
portfolio securities."
The proposed 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
(including without limitation debt obligations issued by other
Putnam funds), by entering into repurchase agreements, or by
lending its portfolio securities."
If the proposal is approved, the fund would be able to
participate in an interfund lending program and
make loans to other Putnam funds.
As stated in Proposal 4, the fund would only make loans under the program if
it could receive an interest rate higher than those available for
repurchase agreements. There is a risk that the fund could experience a
delay in obtaining prompt repayment of a loan and, unlike repurchase
agreements, the fund would not necessarily have received collateral for its
loan. A delay in obtaining prompt payment could cause the fund to miss an
investment opportunity or to incur costs to borrow money to replace the
delayed payment.
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 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.
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 D. F. King & Co., Inc., 77 Water Street, New York,
New York 10005, to aid in the solicitation of instructions for
nominee accounts, for a fee not to exceed $12,500 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
1999. 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 those 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 adjournment those proxies which
they are entitled to vote in favor of such proposals. They will
vote against adjournment those proxies required to be voted
against 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 to you upon
request, without charge, 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.
Fund Information
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 by reason of any affiliation
with Putnam Investments and its affiliates. The Audit Committee
currently consists of Messrs. Estin (Chairman), Jackson, Perkins
(without vote), Putnam, III (without vote), 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, Jackson, Joskow, Mullin, Patterson, Stephens
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 (58) Executive Vice President 1989
Patricia C. Flaherty (50) Senior Vice President 1993
John D. Hughes (62) Senior Vice President
& Treasurer 1987
Gordon H. Silver (50) Vice President 1990
Gary N. Coburn (51) Vice President 1988
William J. Curtin (37) Vice President 1996
David L. Waldman (31) Vice President 1997
Michael Martino* (44) Vice President 1994
William N. Shiebler** (55) Vice President 1991
John R. Verani (58) Vice President 1987
Paul M. O'Neil (44) Vice President 1992
Beverly Marcus (53) Clerk 1985
- -----------------------------------------------------------------
* Portfolio manager
** 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., Messrs. Putnam, 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 0.50% 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 November 28, 1997
Net assets $1,569,179,394
Class A shares outstanding
and authorized to vote 176,005,227 shares
Class B shares outstanding
and authorized to vote 3,784,690 shares
Class M shares outstanding
and authorized to vote 142,708 shares
5% beneficial ownership of your fund as of November 28 ,
1997
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 : Harold Azmelian,
Philip Arpiarian & Armen Kalbian TTEE,
Holy Cross Church Endowment Trust,
104 Highpoint Avenue, Weehauken, NJ 07087-5603;
owned 22,881.200 shares or 16.03%.
Mary Erwin Olive TTEE, Dorothy S. King
Irrevocable Trust, P.O. Box 53334, Fayetteville,
NC 28305-3334; owned 13,980.002 shares or
9.8%.
For the Fiscal Year Ended September 30, 1997
Management Contract
- -----------------------------------------------------------------
The management contract dated
December 8, 1989 was approved by the
shareholders on December 7, 1989 and
was last approved by the Trustees on
June 6, 1997.
Management fee
paid to Putnam Management $8,812,467
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 $21,409
Payments to affiliates
- -----------------------------------------------------------------
Sales charges on sales of class A shares
retained by Putnam Mutual Funds
after payments to selling broker-dealers $70,001
Sales charges on sales of class M shares
retained by Putnam Mutual Funds
after payments to selling broker-dealers $505
Deferred sales charges on class A share
redemptions retained by Putnam Mutual Funds $473
Deferred sales charges on class B share
redemptions retained by Putnam Mutual Funds $79,855
Payments under Class A Distribution Plan
to Putnam Mutual Funds $4,153,229
Payments under Class B Distribution
Plan to Putnam Mutual Funds $270,734
Payments under Class M Distribution Plan
to Putnam Mutual Funds $5,672
Investor servicing and custodian fees
paid to Putnam Fiduciary Trust Company
(before application of credits, if any) $2,756,418<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 AMERICAN GOVERNMENT INCOME FUND))
//PUTNAM HIGH INCOME GOVERNMENT TRUST//
MANAGEMENT CONTRACT
Management Contract dated as of ((March , 1998)) //December
8, 1989// between ((PUTNAM AMERICAN GOVERNMENT INCOME FUND))
//PUTNAM HIGH INCOME GOVERNMENT TRUST//, a Massachusetts business
trust (the "Fund"), and ((PUTNAM INVESTMENT MANAGEMENT, INC.))
//THE PUTNAM MANAGEMENT COMPANY, INC.//, a ((Massachusetts))
//Delaware// 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
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 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.))
<PAGE>
//(d) The Fund will pay or reimburse the Manager for (i)
the compensation of the Vice Chairman of the Fund and of persons
assisting him in this office, 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 persons
assisting him and, as determined from time to time by the
Trustees of the Fund, all or a part of such cost 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.//
(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 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 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:
//(a) 0.60% of the first $500 million of average net
asset value of the Fund;
(b) 0.50% of the next $1 billion of such average net asset
value;
(c) 0.45% of the next $1 billion of such average net asset
value;
(d) 0.40% of the next $4.5 billion of such average net
asset value;
(e) 0.375% of the next $2.5 billion of such average net
asset value; and
(f) 0.35% of any amount over $9.5 billion of such average
net asset value.//
(((a) 0.65% of the first $500 million of 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 fees
shall be payable for each fiscal quarter within 30 days after the
close of such quarter and shall commence accruing as of the date
of the initial issuance of shares of the Fund to the public.
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
affiliate((d 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. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to
the Fund, voluntarily declare to be effective subject to such
terms and conditions as the Manager may prescribe in such notice,
the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund to the
extent required by the terms and conditions of such expense
limitation.
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 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 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 ((the second
anniversary of its execution or upon)) //January 31, 1991 or//
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 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 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. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its date, and
supersedes the Management Contract dated ((December 8, 1989))
//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 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.
IN WITNESS WHEREOF, ((PUTNAM AMERICAN GOVERNMENT INCOME
FUND)) //PUTNAM HIGH INCOME GOVERNMENT TRUST// and ((PUTNAM
INVESTMENT MANAGEMENT, INC.)) //THE PUTNAM MANAGEMENT COMPANY,
INC.// have each caused this instrument to be signed in duplicate
((in)) //on// its behalf by its President or a Vice President
thereunto duly authorized, all as of the day and year first above
written.
((PUTNAM AMERICAN GOVERNMENT
INCOME FUND))
//PUTNAM HIGH INCOME GOVERNMENT TRUST//
By ------------------------------
((PUTNAM INVESTMENT MANAGEMENT, INC.))
//THE PUTNAM MANAGEMENT COMPANY, INC.//
By ------------------------------
<PAGE>
EXHIBIT
B
This exhibit provides a list of Putnam funds having
investment objectives similar to Putnam American
Government Income Fund and lists the current rates of annual fees
paid to Putnam Management as adviser or subadvisor.
MANAGEMENT FEE RATE NAME OF FUND
(based on average net assets) (net assets as of
November 28, 1997)
0.65% of the first $500 million Putnam Income Fund
($2,462,065,319)
0.55% of the next $500 million PVT U.S. Government and High
0.50% of the next $500 million Quality Bond Fund
($779,654,356)
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
0.38% of any amount thereafter
0.60% of the first $500 million Putnam American Government
0.50% of the next $1 billion Income Fund
($1,569,179,394)
0.45% of the next $1 billion
0.40% of the next $4.5 billion
0.375% of the next $2.5 billion
0.35% of any amount thereafter
Proposed to be changed to
0.65% of the first $500 million
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
0.38% of any amount thereafter
0.75% of the first $100 million Putnam Federal Income Trust
0.65% of the next $100 million ($357,948,495)
0.55% of the next $300 million
0.45% of the next $500 million
0.40% of any amount thereafter
Proposed to be changed to
0.65% of the first $500 million
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
0.38% of any amount thereafter
0.60% of the first $1 billion Putnam Intermediate U.S.
0.50% of the next $500 million Government Income Fund
($330,193,698)
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
0.38% of any amount thereafter
0.57% of the first $500 million Putnam U.S. Government
0.475% of the next $500 million Income Trust
($3,414,175,137)
0.4275% of the next $500 million
0.38% of any amount thereafter
<PAGE>
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581 <PAGE>
PUTNAMINVESTMENTS Logo
This is your PROXY CARD.
Please vote this proxy, sign it below, and return it promptly in
the envelope provided. Your vote is important.
Proxy for a meeting of shareholders to be held on March 5,
1998 for Putnam American Government 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 American Government Income Fund on March
5, 1998, 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.
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 owner 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>
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!
<PAGE>
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 each
of the other Proposals. In their discretion, the Proxies will
also be authorized to vote upon such other matters that may
properly come before the meeting.
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE
NOMINEES FOR TRUSTEES AND FOR THE OTHER PROPOSALS LISTED BELOW:
Please vote by filling in the appropriate boxes below .
1. Proposal to elect Trustees
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A.
Hill, R.J. Jackson, P.L. Joskow, E.T. Kennan, L.J.
Lasser, J.H. Mullin, R.E. Patterson, D.S. Perkins,
W.F. Pounds, G. Putnam, G. Putnam, III, A.J.C. Smith, W.T.
Stephens and W.N. Thorndike.
/ / FOR electing all the nominees (except as marked to
the contrary below.)
To withhold authority to vote for one or more of the
nominees, write those nominees' names below:
------------------------------------------------------------
/ / WITHHOLD authority to vote for all nominees
FOR AGAINST ABSTAIN
2. Proposal to ratify / / / / / /
the selection of
Price Waterhouse LLP
as the independent auditors
of your fund.
3. Approve a new management / / / / / /
contract increasing the
fees payable to Putnam
Investment Management,
Inc.
4. Approve an amendment / / / / / /
to the fund's funda-
mental investment
restriction with
respect to borrowing.
5. Approve an amendment / / / / / /
to the fund's funda-
mental investment
restriction with
respect making loans.
Note: If you have questions on any of the Proposals, please
call 1-800-225-1581 .
