50142 2/99
PROSPECTUS SUPPLEMENT
dated February 5, 1999 to:
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PUTNAM HIGH QUALITY BOND FUND
Prospectuses dated February 28, 1998
PROPOSED MERGER OF FUND
The Trustees of Putnam High Quality Bond Fund (the "fund"), have
approved in principle the merger of the fund into Putnam American
Government Income Fund ("American Government"). Under the
proposal the fund's assets would be transferred to American
Government in return for shares of American Government with equal
total net asset value. These American Government shares would be
distributed pro rata to shareholders of the fund. Current fund
shareholders would become shareholders of American Government and
receive shares of American Government with an equal net asset
value to shares of the fund at the time of the merger.
The proposed merger is still subject to definitive approval by
the Trustees of the fund and approval by shareholders at a
shareholders' meeting expected to be held in July. No assurance
can be given that the merger will occur.
The investment objective of American Government is to seek high
current income with preservation of capital as a secondary
objective. American Government primarily invests (with a minimum
of 65% of assets) in securities issued or guaranteed by the US
Government or one of its agencies or instrumentalities. The
principal difference between the fund and American Government is
that, unlike the fund, American Government does not invest in
corporate or foreign debt.
If the Trustees approve definitive arrangements concerning the
merger, a full description of American Government and the terms
of the proposed merger will be contained in proxy materials to be
mailed to shareholders of the fund later this year.
In light of the proposal, sales of fund shares to new investors
are expected to be suspended on or about February 26, 1999
although then existing investors will be permitted to make
additional investments after that date.
