A SPECIAL LETTER TO SHAREHOLDERS OF PUTNAM TAX-FREE HIGH YIELD
FUND May 9, 1994
Dear Shareholder:
You recently received a proxy statement requesting your vote on
matters relating to Putnam Tax-Free High Yield Fund. Our records
show you have not yet voted. Your vote is very important. In
the next several days, representatives of the Fund will try to
contact you by telephone to receive your voting instructions.
The proxy statement sent to you included a proposal to increase
management fees for the Fund. In the last several years, the
Trustees of the Putnam funds have conducted a comprehensive
review of the management fees paid to Putnam Management by the
Putnam funds. As a result of this review, many Putnam funds have
adopted new management contracts, some providing for an increase
in management fees, and others for a decrease in management fees.
Overall, the fee changes have resulted in a net increase.
Shareholders often ask what management fees pay for. In addition
to recordkeeping and other administrative functions, these fees
pay for management of a fund's portfolio of investments,
including research used in buying and selling securities. Before
a fund's management fees can be raised, the fund's Trustees must
agree that the change is in the best interests of shareholders.
In this particular instance, the Trustees carefully considered
expense and performance information both within Putnam's family
of funds and relative to comparable funds managed by other fund
groups. Following this review, the Trustees concluded that the
proposed new management fee schedule for your Fund is in the best
interests of shareholders, and thus recommended that shareholders
vote for its approval.
At your Fund's shareholder meeting last week, action on this
proposal was adjourned until June 2 to permit solicitation of
additional proxies. As part of this effort, the Fund is offering
shareholders like yourself who have not yet voted the opportunity
to use our vote-by-phone program. (See the back of this letter.)
In closing, we ask you to consider this proposal carefully. Your
vote is important to us. Thank you.
Sincerely,
<PAGE>
INFORMATION ON PUTNAM INVESTMENTS' VOTE-BY-PHONE PROGRAM:
The telephone voting procedure is designed to authenticate your
identity, to allow you to authorize the voting of your shares in
accordance with your instructions and to confirm that your
instruction have been properly recorded. If these procedures
were subject to successful legal challenge, such votes would not
be counted at the Fund's shareholder meeting to be held on June
2, 1994. The Fund has not sought to obtain an opinion of counsel
on this matter and we are unaware of any such challenge at this
time.
We will call you on a recorded line at the phone number Putnam
Investments has in its records for your account, and ask you for
your Social Security number or other identifying information.
You will then be given an opportunity to authorize proxies to
vote your shares at the meeting in accordance with your instruc
tions. To ensure your instructions have been recorded correctly,
you will also receive a confirmation of your instructions in the
mail.
A special toll-free number will be available in case the informa-
tion contained in the confirmation is incorrect. If you decide
after you have voted that you want to attend the Fund's share
holder meeting in person, you can revoke your proxy at that time
and vote your shares at the meeting. If you no longer have a
copy of your proxy statement, you can call us at xxx-xxx-xxxx and
a copy will be promptly forwarded to you.
<PAGE>
William N. Shiebler
Senior Managing Director
Putnam Mutual Funds
President
One Post Office Square
Boston, Massachusetts 02109
PUTNAMINVESTMENTS
May 9, 1994
Dear Investment Colleague:
In March, we mailed proxy materials to shareholders of Putnam
Convertible Income-Growth Trust, Putnam Tax-Free High Yield Fund
and Putnam Federal Income Trust, asking for their votes on
various issues. As of today, we have not received a sufficient
number of returned proxies to pass some of the issues in
question.
As a result, we are mailing letters (attached) to the sharehold
ers of these funds who did not return their proxies to explain
these items and to inform them of an upcoming opportunity to
vote-by-phone. We will not be contacting shareholders who voted
no or who abstained. A few days after the shareholder letters
arrive, we will be calling them regarding the opportunity to
vote-by-phone. Telephone solicitation and voting is common
practice when time is of the essence.
The issues at hand are:
* PUTNAM CONVERTIBLE INCOME-GROWTH TRUST - Approval of a
management fee increase
* PUTNAM TAX-FREE HIGH YIELD FUND - Approval of a management
fee increase
* PUTNAM FEDERAL INCOME TRUST - Approval of additional
classes of shares
Should you have any questions on these issues, please call a
Putnam Broker Operations representative at 1-800-354-2228.
Sincerely,
William N. Shiebler
