IMPORTANT INFORMATION
FOR SHAREHOLDERS IN THE
PUTNAM 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 3.
While investors sometimes find a proxy statement intimidating,
we are, in fact, asking for your vote on just a
few matters. So we urge you to spend a few 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. . . . . . . . . .2
Trustees' Recommendations. . . . . . . . . . . .3
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]
I am writing to you to ask for your vote on important questions
that affect your investment in Putnam Income Fund. We
would like your vote on three matters:
1. ELECTING TRUSTEES TO OVERSEE PUTNAM INCOME FUND ;
2. RATIFYING THE SELECTION BY THE TRUSTEES OF
COOPERS & LYBRAND
L.L.P.
AS
INDEPENDENT
AUDITORS OF THE
FUND FOR ITS
CURRENT FISCAL
YEAR; AND
3. APPROVING A NEW MANAGEMENT CONTRACT BETWEEN THE FUND
AND PUTNAM
INVESTMENT
MANAGEMENT,
INC. ,
INCLUDING AN
INCREASE IN THE
MANAGEMENT
FEE.
A word about the management fee increase. A fee increase is
proposed only after a great deal of thought and analysis on the
part of the Trustees. For several years the Trustees have been
carefully studying the management fees, investment performance,
and expense ratios of each of the Putnam funds and also major
competing funds. This comprehensive review resulted in
recommendations for fee increases for some funds and deceases for
others. The new management fee for Putnam Income Fund will
result in an increase of $0.23 in annual expenses for each $100
invested, or a little less than 1/4 of 1%. Your Trustees believe
that this increase, the first since 1982, will provide Putnam
Investment Management, Inc. with a fee that is fair and
reasonable when compared with the fees paid to other high-quality
fund managers. We encourage you to support the Trustees'
recommendations .
Your vote is important to us. We appreciate the time and
consideration I am sure you will give this important
matter. If you have questions about the proposals call 1-800-
225-1581.
Sincerely yours,
//signature of George Putnam//
George Putnam, Chairman
<PAGE>
PUTNAM INCOME FUND
NOTICE OF THE 1995 MEETING OF SHAREHOLDERS
THIS IS THE FORMAL AGENDA FOR THE SHAREHOLDER MEETING. IT TELLS
YOU WHAT MATTERS WILL BE VOTED ON AND THE TIME AND PLACE OF THE
MEETING.
To the Shareholders of Putnam Income Fund:
The 1995 Meeting of Shareholders of Putnam Income Fund
will be held on April 6, 1995, 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 4.
2. RATIFYING THE SELECTION OF COOPERS & LYBRAND L.L.P.
AS AUDITORS FOR THE FUND FOR THE CURRENT FISCAL YEAR. SEE PAGE
12 .
3. APPROVING A NEW MANAGEMENT CONTRACT BETWEEN THE FUND AND
PUTNAM INVESTMENT MANAGEMENT, INC. , INCREASING THE FEES
PAYABLE TO PUTNAM INVESTMENT MANAGEMENT, INC. SEE PAGE
12 .
4. TRANSACTING OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson A. Baxter Robert E. Patterson
Hans H. Estin Donald S. Perkins
John A. Hill George Putnam, III
Elizabeth T. Kennan A.J.C. Smith
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.
January 13, 1995
<PAGE>
PROXY STATEMENT
THIS DOCUMENT WILL GIVE YOU THE INFORMATION YOU NEED TO VOTE ON
THE MATTERS LISTED ON THE PREVIOUS PAGE. MUCH OF THE INFORMATION
IN THE PROXY STATEMENT IS REQUIRED UNDER RULES OF THE SECURITIES
AND EXCHANGE COMMISSION (SEC); SOME OF IT IS TECHNICAL. IF
THERE IS ANYTHING YOU DON'T UNDERSTAND, PLEASE CONTACT US AT OUR
SPECIAL TOLL-FREE NUMBER, 1-800-225-1581 , OR CALL YOUR
FINANCIAL ADVISER .
WHO IS ASKING FOR MY VOTE?
THE ENCLOSED PROXY IS SOLICITED BY THE TRUSTEES OF PUTNAM INCOME
FUND for use at the 1995 Meeting of Shareholders to be
held on April 6 , and, if the meeting is adjourned, at any
later meetings, for the purposes stated in the Notice of Meeting
(see previous page).
HOW DO THE 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 THE RATIFICATION OF THE SELECTION OF COOPERS &
LYBRAND L.L.P. AS INDEPENDENT AUDITORS
FOR THE FUND, AND
3. FOR APPROVAL OF THE NEW MANAGEMENT CONTRACT ,
INCREASING THE FEES PAYABLE TO PUTNAM INVESTMENT
MANAGEMENT, INC .
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on January 6,
1995, are entitled to be present and to vote at the meeting
or any adjourned meeting. The Notice of Meeting, the proxy, and
the proxy statement have been mailed to shareholders of record on
or about January 17, 1995 .
Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.
<PAGE>
THE PROPOSALS
1. ELECTION OF TRUSTEES
WHAT ARE THE TRUSTEES' RESPONSIBILITIES?
The fund's Trustees are responsible for the general oversight of
the fund's business and for assuring that the fund is managed
in the best interests of its shareholders. The Trustees meet
regularly to review the fund's investment performance as
well as the quality of other services being provided to the fund
and its shareholders by Putnam Management and its affiliates,
including administration, custody, distribution and investor
servicing . At least annually, the Trustees review the
compensation paid to Putnam Management and its affiliates for
these services and the overall level of expenses incurred in the
fund's operations. In carrying out these responsibilities, the
Trustees are assisted by an independent administrative staff and
by the fund's auditors and legal counsel, which are
selected by the Trustees and are independent of Putnam Management
and its affiliates.
WHO ARE THE FUND'S TRUSTEES?
The 12 nominees for election as Trustees at the
shareholder meeting who receive the greatest number of votes will
be elected Trustees. All nominees have been recommended by the
nominating committee, which consists solely of Trustees
who are not "interested persons" (as defined in the Investment
Company Act of 1940) of the fund or of Putnam Investment
Management, Inc., the fund's investment manager ("Putnam
Management"). All the nominees are presently Trustees of the fund
and were elected by the shareholders in September 1992
(except for Mrs. Baxter, who was elected by the Trustees in
January 1994). All of the Trustees of this fund are also
Trustees of all other Putnam funds, except Mrs. Baxter and Mr.
Smith, who do not currently serve as Trustees of Putnam Managed
High Yield Trust.
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 vote to fix the number of Trustees at less than 12 .
<PAGE>
NOMINEES FOR TRUSTEES
JAMESON ADKINS BAXTER [Photograph of Jameson Baxter]
President, Baxter Associates, Inc. (consultants to management).
Prior to 1992, Vice President and Principal, Regency Group, Inc.
and Consultant, The First Boston Corporation. Also, Director,
Banta Corporation, Avondale Federal Savings Bank , and
ASHTA Chemicals, Inc. Chairman Emeritus of the Board of Trustees,
Mount Holyoke College. Member of Board of Governors, Good
Shepherd Hospital. Age, 51 .
HANS H. ESTIN [Photograph of Hans Estin]
Vice Chairman, North American Management Corp. (a registered
investment adviser). Also, Director, The Boston Company,
Inc. , and Boston Safe Deposit and Trust Company. Member,
Massachusetts General Hospital. Trustee, New England Aquarium.
Age, 66 .
JOHN A. HILL [Photograph of John Hill]
Chairman and Managing Director, First Reserve Corporation (a
registered investment adviser). Prior to 1989, General Partner,
Meridien Capital Corporation (a venture capital investment firm).
Also, Director, Snyder Oil Corporation, Maverick Tube
Corporation, PetroCorp Incorporated, various private companies
controlled by First Reserve Corporation, and various First
Reserve Funds. Age, 52.
ELIZABETH T. KENNAN [photograph of Elizabeth Kennan]
President, Mount Holyoke College. Also, Director, NYNEX
Corporation, Northeast Utilities, the Kentucky Home Life
Insurance Companies , and Talbots. Trustee, University of
Notre Dame. Age, 56.
<PAGE>
NOMINEES FOR TRUSTEES
LAWRENCE J. LASSER * [Photograph of Lawrence
Lasser]
President, Chief Executive Officer , and Director of Putnam
Investments, Inc. , and Putnam Management. Vice President
of the Putnam funds. Director, Marsh & McLennan Companies,
Inc. , and INROADS/Central New England Inc. Member, Board
of Overseers, Museum of Science, Museum of Fine Arts , and
Isabella Stewart Gardner Museum, Boston. Also, Trustee, Beth
Israel Hospital and Buckingham, Browne and Nichols School. Age,
52 .
ROBERT E. PATTERSON [Photograph of Robert Patterson]
Executive Vice President of Cabot Partners Limited Partnership (a
registered investment adviser). Also, Vice Chairman, Joslin
Diabetes Center. Director, Brandywine Trust Company. From
May 1987 to October 1990, Executive Vice President
of Cabot, Cabot & Forbes Realty Advisors, Inc. (predecessor of
Cabot Partners Limited Partnership). Age, 49.
DONALD S. PERKINS [Photograph of Donald Perkins]
Director of various corporations, including American Telephone &
Telegraph Company, AON Corp., Cummins Engine Company, Inc.,
Illinois Power Co., Inland Steel Industries, Inc., K mart
Corporation, LaSalle Street Fund, Inc., Springs Industries,
Inc. , and Time Warner Inc. Also, Trustee and Vice
Chairman, Northwestern University. Chairman, The Hospital
Research and Education Trust. Member, The Business Council.
Founding Chairman, the Civic Committee of the Commercial Club of
Chicago. Age, 67.
WILLIAM F. POUNDS [Photograph of William Pounds]
Vice Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology. Director,
IDEXX Laboratories, Inc., M/A-COM, Inc., EG&G, Inc., Perseptive
Biosystems, Inc., Management Sciences For Health, Inc. ,
and Sun Company, Inc. Also, Trustee, Museum of Fine Arts, Boston,
and Overseer, WGBH Educational Foundation. Age, 66.
GEORGE PUTNAM * [Photograph of George Putnam]
Chairman and President of the Putnam funds. Chairman and Director
of Putnam Management and Putnam Mutual Funds Corp . Also,
Director, The Boston Company, Inc., Boston Safe Deposit and Trust
Company, Freeport-McMoRan, Inc., General Mills, Inc., Houghton
Mifflin Company, Marsh & McLennan Companies, Inc., and
Rockefeller Group, Inc. Trustee, Massachusetts General Hospital,
McLean Hospital, Vincent Memorial Hospital, WGBH Educational
Foundation, The Colonial Williamsburg Foundation, and Museum of
Fine Arts, Boston. Age, 68 .
NOMINEES FOR TRUSTEES
GEORGE PUTNAM, III * [Photograph of George Putnam, III]
President, New Generation Research, Inc. (publisher of financial
information). Director, World Environment Center and
Massachusetts Audubon Society. Trustee, Sea Education Association
and St. Mark's School. Also, Overseer, New England Medical
Center. Age, 43 .
A.J.C. SMITH * [Photograph of A.J.C. Smith]
Chairman and Chief Executive Officer, Marsh & McLennan Companies,
Inc. Also, Trustee of The American Institute for Chartered
Property Casualty Underwriters, the Central Park
Conservancy , and the Carnegie Hall Society. Age, 60.
W. NICHOLAS THORNDIKE ** [Photograph of W. Nicholas
Thorndike]
Director of various corporations and charitable organizations,
including Data General Corporation, Bradley Real Estate,
Inc., Providence Journal Co. and Courier Corporation. Also,
Trustee, Eastern Utilities Associates, Massachusetts
General Hospital , and Northeastern University. Prior to
December 1988, Chairman of the Board and Managing Partner
of Wellington Management Company/Thorndike, Doran, Paine & Lewis
(a registered investment adviser). Age, 61.
NOTE: Except as indicated, 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.
* Nominees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the 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 the 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 the fund , Putnam
Management, and Putnam Mutual Funds. 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.
DO THE TRUSTEES HAVE A STAKE IN THE 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 80 Putnam funds based on
their own investment needs. The table below lists the Trustees'
current investments in the fund and in the Putnam funds as a
group.
SHARE OWNERSHIP BY TRUSTEES
Number of
Number of shares of all
Year first shares of the Putnam funds
elected as fund owned as owned as of
Trustees Trustee of 11/30/94* 11/30/94* *
- -----------------------------------------------------------------
JAMESON ADKINS BAXTER 1994 105 9,060
HANS H. ESTIN 1972 577 28,843
JOHN A. HILL 1985 500 88,090
ELIZABETH T. KENNAN 1992 190 15,550
LAWRENCE J. LASSER 1992 123 180,043
ROBERT E. PATTERSON 1984 4,685 57,381
DONALD S. PERKINS 1982 5,704 240,503
WILLIAM F. POUNDS 1971 22,289 359,138
GEORGE PUTNAM 1964 44,276++ 1,273,126
GEORGE PUTNAM, III 1984 3,232 65,948
A.J.C. SMITH 1986 184 30,602
W. NICHOLAS THORNDIKE 1992 123 8,022
*As of November 30 , 1994, the Trustees and officers of the
fund owned a total of 98,283 shares of the fund comprising
less than 1% of the outstanding shares of the fund on that date.
With respect to 60,572 of these shares, which are held for
their individual accounts in the Putnam Investments, Inc. Profit
Sharing Retirement Plan, a Trustees who is an
"interested persons" of the fund and Putnam Management and
certain officers of the fund each individually has sole
investment power and shared voting power. With respect to the
remainder of these shares, the Trustees and officers individually
have sole investment power and sole voting power.
+These holdings do not include shares of Putnam money market
funds.
++Mr. Putnam has sole investment power and shared
voting power with respect to all of these shares which
are held for his individual account in Putnam
Investments, Inc. Profit Sharing Retirement Plan.
<PAGE>
HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID?
The Trustees generally meet monthly (except in August) over a
two-day period to review the operations of the fund and of the
other Putnam funds. A portion of these meetings is devoted to
meetings of various Committees of the board which focus on
particular matters. These include the Contract Committee which
reviews all contractual arrangements with Putnam Management and
its affiliates; the Communication and Service Committee which
reviews the quality of services provided by the fund's investor
servicing agent, custodian and distributor; the Pricing,
Brokerage and Special Investments Committee which reviews matters
relating to valuation of securities, brokerage 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
compensation of the trustees and their administrative staff and
supervises the engagement of the fund's independent counsel;
their administrative staff and supervises the engagement of the
fund's independent counsel; and the Nominating Committee which is
responsible for selecting nominees for election as Trustees. The
Contract Committee which is responsible for selecting nominees
for election as Trustees. The Contract Committee typically meets
on several additional occasions during the year to carry out its
responsibilities.
Each Trustee receives fees from the fund and also receives
fees for serving as a 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 tables below show the
number of meetings of the Trustees and certain committees during
the past fiscal year, as well as the fees paid to the Trustees
for their services.
MEETINGS OF THE TRUSTEES
For the Fiscal Year Ended October 31, 1994
FULL BOARD OF TRUSTEES MEETINGS 11
AUDIT COMMITTEE MEETINGS 3
NOMINATING COMMITTEE MEETINGS 1
TRUSTEES' FEES
For the Fiscal Year Ended October 31, 1994
ANNUAL RETAINER FEE PER TRUSTEE $1,540
ADDITIONAL ATTENDANCE FEE PER TRUSTEES' MEETING $25
AGGREGATE FEES PAID TO ALL TRUSTEES FOR THE YEAR* $26,419
*Includes both annual fees and fees for attendance at Trustees'
meetings and certain committee meetings.
For additional information regarding indemnification and
retirement benefits available to Trustees and the operations of
the Audit and Nominating Committees of the board, please see
"Further Information About the Fund" on page 27.
For additional information about the fund , including
further information about its Trustees and officers and about
Putnam Management, the fund's investment adviser, please
see "Further Information About Putnam Investment
Management, Inc." on page 21.
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. , One Post Office Square, Boston,
Massachusetts, independent accountants, has been selected by the
Trustees as auditors of the fund for the current fiscal year.
Coopers & Lybrand L.L.P. , one of the country's preeminent
accounting firms, also serves as the auditor for approximately
half of the other funds in the Putnam family. Coopers & Lybrand
L.L.P. was selected primarily on the basis of its
expertise as auditors of investment companies, the quality of its
audit services, and the competitiveness of the fees charged for
these services.
A majority of the votes cast on the matter is necessary to
ratify the selection of independent auditors. A representative of
Coopers & Lybrand L.L.P. is expected to be present at the
meeting to make statements and respond to appropriate questions.
3. APPROVAL OF A NEW MANAGEMENT CONTRACT
The Trustees of the fund recommend that shareholders approve a
new management contract between the fund and Putnam Management,
which provides for an increase in the management fees payable to
Putnam Management. The proposed contract, which is attached as
Exhibit C, 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
"Further Information About Putnam Investment
Management, Inc." on page 21 .
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?
Putnam Management believes that the new management fee schedule
will help ensure that Putnam Management receives fees for its
services that are competitive with fees paid by other mutual
funds to high - quality investment managers. 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 believes that
maintaining competitive management fees will, over the longer
term, enable it to continue to provide high - quality
management services to the fund and to the other funds in the
Putnam group. Putnam Management also notes that the fund's
current management fee schedule has not been changed since 1982
and is substantially lower than the fees paid to managers of
competitive funds .
HOW DID THE FUND'S TRUSTEES ARRIVE AT THE PROPOSED
MANAGEMENT FEE?
Several years ago, the Trustees undertook a comprehensive review
of the management fees paid by the Putnam funds. This review was
conducted largely through the Contract Committee of the Trustees,
which consists solely of independent Trustees who have no
financial interest in Putnam Management. As a result of this
review, the Trustees and Putnam Management reached agreement on a
system of model fee schedules for the various types of funds in
the Putnam group. These model fee schedules have now been
implemented for most of the Putnam funds. The proposed new fee
schedule for the fund is identical to that which has been
implemented for many other Putnam funds.
The Trustees and Putnam Management also reached a general
understanding that these model fee schedules should be
implemented for a particular fund only following consideration of
the fund's comparative investment performance and expense levels.
After reviewing comparative data on competitive funds and
noting, among other things, the fund's strong relative
performance, the Trustees concluded that the Putnam Income Fund
was entitled to implement the model fee schedule. 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 the relative complexity of managing each fund, and a
comparison of recent investment performance, management
fees , and other expenses paid by each 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 each fund
(without regard to costs incurred by Putnam Management and its
affiliates in connection with the marketing of shares) as
well as 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. Following consideration of these and
the other factors described above, the Trustees of the fund,
including all of the independent Trustees, unanimously approved
the proposed new contract on September 9 , 1994.
HOW HAS THE PUTNAM INCOME FUND PERFORMED?
As part of any decision regarding management fees, shareholders
may wish to consider how the fund has performed. The chart
that follows shows how $10,000 of class A shares
of Putnam Income Fund would have grown to $25,853
over
a ten - year period with dividends reinvested.
[mountain graph appears here]
GROWTH OF A $10,000 INVESTMENT
Class A share performance
Plot points:
10/31/85 11,890
10/31/86 13,649
10/31/87 13,744
10/31/88 15,813
10/31/89 17,504
10/31/90 17,863
10/31/91 21,087
10/31/92 23,587
10/31/93 26,974
10/31/94 25,853
TOTAL RETURN
AS OF 10/31/94 ANNUALIZED
CLASS A SHARES RETURN
10 years 9.96%
5 years 8.11
3 years 7.03
1 year -4.16<PAGE>
ANNUALIZED ANNUALIZED
CLASS B SHARES RETURN IF YOU RETURN IF YOU
DID NOT REDEEM DID REDEEM
Since inception (3/1/93) 1.10% -1.06%
1 year - 4.98% -9.41%
Performance assumes reinvestment of distributions at net asset
value, represents past results, and does not account for taxes or
for payments under the fund's class A share distribution plan
prior to its inception in 1990. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
The average annual total return for Class A shares for the
one-, three-, five-, and ten-year periods ended October 31, 1994
was -8.74%, 5.30%, 7.08%, and 9.42%, respectively, adjusted
to reflect the deduction of the maximum sales charge of 4.75%.
Class B share performance shown above reflects the maximum
contingent deferred sales charge of 5% for 1 year and 4% for life
of class, if shares were redeemed on October 31, 1994. There were
no Class M shares outstanding during such periods. The
cumulative total return for Class Y shares since the inception of
the class on May 16, 1994 through October 31, 1994 was -0.35%.
HOW HAS THE PUTNAM INCOME FUND PERFORMED IN COMPARISON TO SIMILAR
FUNDS?
Another way of evaluating the performance of the Putnam Income
Fund is to compare it to other fixed-income funds. In reviewing
the Fund's relative performance, your Trustees and Putnam
Management compare the Putnam Income Fund to other funds with
similar investment objectives and strategies. When evaluated in
that group, the total return of the Class A shares of the Putnam
Income Fund ranked in the top 21% of 43 such funds for the twelve
months ended October 31, 1994, in the top 24% of 42 such funds
for the three years ended October 31, 1994 and in the top 17% of
41 such funds for the five years ended October 31, 1994. This
means that for all three periods the Fund's Class A total return
was in the top quarter of this group. In addition, the dividend
yield of the Putnam Income Fund for the twelve months ended
October 31, 1994 ranked in the top 21% of this group.
WHAT IS THE EFFECT OF THE NEW MANAGEMENT FEE SCHEDULE?
Under the new management contract, the annual management fee paid
by the fund to Putnam Management would be increased as follows:
Existing Fee Proposed Fee
FIRST $100 MILLION 0.50% FIRST $500 MILLION 0.65%
NEXT $100 MILLION 0.40% NEXT $500 MILLION 0.55%
OVER $200 MILLION 0.35% NEXT $500 MILLION 0.50%
NEXT $5 BILLION 0.45%
NEXT $5 BILLION 0.425%
NEXT $5 BILLION 0.405%
NEXT $5 BILLION 0.39%
THEREAFTER 0.38%
Based upon net assets of the fund as of November 30, 1994 of
$947,628,099 , the effective annual management fee rate under
the proposed fee schedule would be .60% as compared to
.37% under the existing schedule. This represents an
increase of $0.23 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 years ended October 31, 1993 and October
31, 1994 , the fund paid management fees to Putnam
Management of $2,868,583 and $3,505,928 , respectively.
If the proposed new management contract had been in effect for
those years, the fund would have paid fees of $4,696,423 and
$5,695,029, respectively .
ARE THERE ANY OTHER PROPOSED CHANGES?
The only other substantive changes in the new management contract
relate to the payment by the fund of the compensation and related
expenses of certain officers of the fund.
The existing contract requires the fund to reimburse Putnam
Management for the compensation and related expenses of the
fund's Vice Chairman and such other officers of the fund and
their assistants as the Trustees of the fund may determine. Since
January 1, 1992, the administrative duties previously performed
by the office of Vice Chairman have been divided among
various other officers of the fund. As a result, the new contract
provides for the payment by the fund of the compensation and
related expenses of such officers of the fund and their
assistants as the Trustees may determine.
WHAT PERCENTAGE OF SHAREHOLDERS' VOTES ARE REQUIRED TO PASS THE
PROPOSAL?
Approval of the new management contract will require the "yes"
vote of a "majority of the outstanding voting securities" of the
fund, as provided in the Investment Company Act of 1940. For this
purpose, this means the "yes" vote of the lesser of (1) more than
50% of the outstanding shares of the fund or (2) 67% or more of
the shares present at the meeting, if more than 50% of the
outstanding shares are present at the meeting in person or by
proxy. If the shareholders do not approve the new contract, the
existing management contract will continue in effect.
THE TRUSTEES BELIEVE THAT THE PROPOSED NEW MANAGEMENT FEE IS FAIR
AND REASONABLE AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF
THE FUND. ACCORDINGLY, THE TRUSTEES RECOMMEND THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE PROPOSED NEW CONTRACT.
FURTHER INFORMATION ABOUT VOTING AND THE SHAREHOLDER
MEETING
QUORUM AND METHODS OF TABULATION. Thirty percent of the shares
entitled to vote - - present in person or represented by
proxy - - constitutes a quorum for the transaction of
business with respect to any proposal at the meeting (unless
otherwise noted in the proxy statement.) Shares
represented by proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which
(i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on a
particular matter) will be counted as shares that are
present and entitled to vote on the matter for purposes of
determining the presence of a quorum. Votes cast by proxy or in
person at the meeting will be counted by persons appointed by the
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 the fund and employees of Putnam Management,
Putnam Fiduciary Trust Company , and Putnam Mutual Funds
may solicit proxies in person or by telephone. The 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. The 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. The 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
numbers 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.
Persons holding shares as nominees will upon request be
reimbursed for their reasonable expenses in soliciting
instructions from their principals. The fund has retained at its
expense Tritech Services, Four Corporate Place, Corporate Park
287, Piscataway, New Jersey 08854 , to aid in the
solicitation of instructions for nominee accounts for a
fee not to exceed $8,500 plus reasonable out-of-pocket
expenses. The fund has also retained D.F. King & Co., Inc., 77
Water Street, New York, New York 10005, to aid in the
solicitation of instructions for registered accounts for a fee
not to exceed $15,000 plus reasonable out-of-pocket expenses for
mailing and phone costs.
REVOCATION OF PROXIES. Proxies, including proxies given by
telephone, may be revoked at any time before they are voted by a
written revocation received by the Clerk of the 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. The fund's Agreement and Declaration of
Trust does not provide for annual meetings of shareholders, and
the fund does not currently intend to hold such a meeting in
1996 . Shareholder proposals for inclusion in the proxy
statement for any subsequent meeting must be received by the fund
within a reasonable period of time prior to any such meeting.
ADJOURNMENT. If sufficient votes in favor of any of the proposals
set forth in the Notice of the Meeting are not received by the
time scheduled for the meeting, the persons named as proxies may
propose adjournments of the meeting for a period or periods of
not more than 60 days in the aggregate to permit further
solicitation of proxies with respect to any of such proposals.
Any adjournment will require the affirmative vote of a majority
of the votes cast on the question in person or by proxy at the
session of the meeting to be adjourned. The persons named as
proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor of such proposals. They
will vote against any such adjournment those proxies required to
be voted against any of such proposals. The 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. A copy of the fund's annual report for its
most recent fiscal year, including financial statements, has
previously been mailed to shareholders.
FURTHER INFORMATION ABOUT PUTNAM INVESTMENT MANAGEMENT,
INC.
PUTNAM INVESTMENT MANAGEMENT, INC. and its affiliates,
Putnam Mutual Funds , the principal underwriter for shares of
the fund, and Putnam Fiduciary Trust Company, the 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. A certified balance sheet of Putnam Management as
of December 31, 1993 is attached to this Proxy Statement as
Exhibit A -1, and an uncertified balance sheet of Putnam
Management as of September 30, 1994 is attached as Exhibit A-2.
To Putnam Management's knowledge, there has been no material
adverse change in its financial condition since September 30,
1994. Proxies solicited by the Trustees for the meeting will not
be voted for approval of any proposal to be voted on by the
shareholders unless (a)(1) in the Trustees' judgment, there has
been no material adverse change in Putnam Management's financial
condition between September 30, 1994 and December 31, 1994, and
(2) the fund has received a certificate from the President or a
Senior Vice President of Putnam Management, dated April 6, 1995,
that, to his or her knowledge, there has been no material adverse
change in Putnam Management's financial condition since December
31, 1994, except as otherwise disclosed to the shareholders in
additional proxy solicitation materials, or (b) the fund shall
have mailed to all shareholders or record a certified balance
sheet of Putnam Management as of December 31, 1994 and given the
shareholders the opportunity to revoke any proxies previously
furnished.
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 its services to the 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 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 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 the 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 the fund pursuant to a Management Contract. The
management fee payable under the Contract is described in Exhibit
B to this Proxy Statement. The fees paid to Putnam Management in
the most recent fiscal year are shown below under "Further
Information About the Fund ."
Under the Contract, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the fund and makes
investment decisions on behalf of the fund. Subject to the
control of the Trustees, Putnam Management manages, supervises
and conducts the other affairs and business of the fund,
furnishes office space and equipment, provides bookkeeping and
clerical services (including determination of the fund's
net asset value, but excluding shareholder accounting services)
and places all orders for the purchase and sale of the 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 the
fund and other clients. In so doing, Putnam Management may cause
the fund to pay greater brokerage commissions than it might
otherwise pay. See "Brokerage and research services" below.
The fund also pays, or reimburses Putnam Management for, the
compensation and related expenses of certain officers of the fund
and their assistants. Currently, the fund reimburses Putnam
Management for a portion of the compensation and related expenses
of certain officers of the fund who provide certain
administrative services to the 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 under "Further
Information About the Fund ." Putnam Management pays
all other salaries of officers of the fund. The 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 the fund or to any shareholder of the 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 of the fund,
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 the fund and by a majority of the Trustees
who are not "interested persons" of the 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 the fund.
INVESTMENT DECISIONS. Investment decisions for the fund and for
the other investment advisory clients of Putnam Management and
its affiliates are made with a view to achieving each client's
respective investment objectives. Investment decisions are the
product of many factors in addition to basic suitability for the
particular client involved. Thus, a particular security may be
bought or sold for some clients even though it could have
been bought or sold for other clients at the same time. Likewise,
a particular security may be bought for some clients when other
clients are selling the security. In some cases, one client may
sell a particular security to another client. When two or more
clients simultaneously purchase or sell the same security, each
day's transactions in the security are, insofar as possible,
averaged as to price and allocated between the clients in a
manner which in the opinion of Putnam Management is equitable to
each and in accordance with the total amount of the security
being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets , and
other agency transactions involve the payment by the fund of
negotiated brokerage commissions. Such commissions vary among
different brokers. A particular broker may charge different
commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often
involve the payment of fixed brokerage commissions, which may be
higher than those in the United States. There is generally no
stated commission in the case of securities traded in the over-
the-counter markets, but the price paid by the fund usually
includes an undisclosed dealer commission or markup . In
underwritten offerings, the price paid by the fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by the fund will be with the issuer or with
underwriters of or dealers in those securities, acting as
principal. Accordingly, the fund will not ordinarily pay
significant brokerage commissions with respect to securities
transactions.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive "brokerage and research
services" (as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act")), from broker-dealers that execute
portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements.
Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from
many broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties with which
these broker-dealers have arrangements. These services include
such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as
to the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services , and
personal computers utilized by Putnam Management's managers and
analysts. Where the services referred to above are not used
exclusively by Putnam Management for research purposes, Putnam
Management, based upon its own allocations of expected use, bears
the portion of the cost of these services that directly relates
to their non-research use. Some of these services are of value to
Putnam Management and its affiliates in advising various of their
clients (including the fund), although not all of these services
are necessarily useful and of value in managing the fund. The
management fee paid by the fund is not reduced because Putnam
Management and its affiliates receive these services even though
Putnam Management might otherwise be required to purchase some of
these services for cash.
Putnam Management places all orders for the purchase and sale of
portfolio investments for the fund and buys and sells investments
for the fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses 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 as described below. In seeking the most favorable
price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other
investment, 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-dealer involved , and the quality of service
rendered by the broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the fund to pay
a broker-dealer that provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the fund on an agency
basis in excess of the commission which another broker-
dealer would have charged for effecting that transaction. Putnam
Management's authority to cause the fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the fund to make such payments except to the
extent necessary, in its judgment, to obtain the overall best net
price and execution for the fund's portfolio transactions. It is
the position of the staff of the Securities and Exchange
Commission that Section 28(e) does not apply to the payment of
such greater commissions in "principal" transactions.
Accordingly, Putnam Management will use its best efforts to
obtain the most favorable price and execution available with
respect to such transactions, as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a reduction of
the fee payable by the fund under the Management Contract. Putnam
Management seeks to recapture for the fund soliciting dealer fees
on the tender of the fund's portfolio securities in tender or
exchange offers. Any such fees which may be recaptured are likely
to be minor in amount.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. , and subject to
seeking the most favorable price and execution available and such
other policies as the Trustees may determine, Putnam Management
may consider sales of shares of the fund (and, if permitted by
law, of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the fund.
PAYMENTS TO AFFILIATES OF PUTNAM MANAGEMENT. Putnam Mutual Funds
is the principal underwriter of shares of the fund and of the
other continuously offered Putnam funds. Putnam Fiduciary
Trust Company is the 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 the fund's most recent fiscal
year are set forth in "Further Information About the
Fund ."
Under its Class A Distribution Plan, the 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. At present,
payments under the plan are limited to the annual rate of
0.25%. Payments under the Class A Distribution Plan compensate
Putnam Mutual Funds for services provided and expenses
incurred by it in promoting the sale of shares of the fund,
reducing redemptions or maintaining or improving services
provided to shareholders by Putnam Mutual Funds or by dealers.
The fee paid to Putnam Mutual Funds under the Plan in the fund's
most recent fiscal year is set forth in "Further Information
About the Fund."
Under its Class B and Class M Distribution
Plans , the fund compensates Putnam Mutual Funds at the
annual rate of up to 1.00% of the average net assets of the fund
attributable to class B shares and class M shares, as
the case may be , including commissions and services fees paid
by it to dealers. At present, payments under the Class M Plan
are limited to 0.50%. The purpose of the Class B and Class
M Plans is to permit the fund to compensate Putnam Mutual
Funds for services provided and expenses incurred by it in
promoting the sale of class B shares and class M shares.
The fee paid to Putnam Mutual Funds under the Plans in the
fund's most recent fiscal year is set forth in "Further
Information About the 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.
FURTHER INFORMATION ABOUT THE FUND
TRUSTEE COMPENSATION. Each Trustee of the fund receives an annual
fee, and an additional fee for each Trustees' meeting attended.
Trustees who are not "interested persons" of Putnam Management
and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings. The annual fee
paid, the number of Trustees' meetings held , and the
aggregate fees paid to all Trustees are set forth in the section
on Trustees' compensation under Proposal 1.
The fund's Trustees have approved Retirement Guidelines for
Trustees of the Putnam funds. These guidelines provide generally
that a Trustee who retires after reaching age 72 and who has at
least 10 years of continuous service will be eligible to receive
a retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and,
except as otherwise determined by the Trustees, will be an annual
cash benefit equal to one-half of the Trustee retainer paid by
the fund at the time of retirement. Several retired Trustees of
the fund are currently receiving retirement benefits pursuant to
these Guidelines and it is anticipated that the current Trustees
of the fund will receive similar benefits upon their retirement.
The Trustees of the fund reserve the right to amend or terminate
such Guidelines and the related payments at any time, and may
modify or waive the foregoing eligibility requirements when
deemed appropriate.
The Agreement and Declaration of Trust of the 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. The 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 the fund include only Trustees who are not
"interested persons" of the fund or Putnam Management. The Audit
Committee recommends to the Trustees the independent public
accountants to be selected as auditors for the fund. It also
reviews the performance, scope of work , and compensation
of such auditors , and reviews with such auditors the
quality, accounting controls, procedures , and adequacy of
the accounting services rendered to the fund by Putnam Management
and by the fund's investor servicing agent and custodian. The
Audit Committee reports to the Trustees the results of its
inquiries. The Audit Committee currently consists of Messrs.
Estin (Chairman), Perkins, Putnam, III (without vote), Smith
(without vote) , and Mrs. Kennan.
The Nominating Committee consists only of Trustees who are not
"interested persons" of the fund or Putnam Management. It
recommends to the Trustees persons to be elected as Trustees and
as Chairman, Vice Chairman, President , and certain other
officers of the fund. The Nominating Committee will consider
individuals proposed by a shareholder for election as a Trustee.
Shareholders wishing to submit the name of any individual must
submit in writing a brief description of the proposed nominee's
business experience and other information relevant to the
qualifications of the individual to serve as a Trustee of the
fund. The Nominating Committee currently consists of Mrs. Kennan
and Dr. Pounds (Co-chairpersons), Mrs. Baxter, and Messrs. Estin,
Hill, Patterson, Perkins and Thorndike.
In addition to George Putnam and Lawrence J. Lasser, the officers
of the fund are Charles E. Porter, Executive Vice President,
Patricia C. Flaherty, Senior Vice President, Gordon H. Silver,
Gary N. Coburn, Alan J. Bankart, Rosemary Thomsen, F. Mark
Turner, D. William Kohli, Kenneth J. Taubes, the fund's
portfolio manager, William N. Shiebler, President of Putnam
Mutual Funds, John R. Verani, and Paul M. O'Neil, each of whom
serves as a Vice President, John D. Hughes, Vice President and
Treasurer, and Beverly Marcus, Clerk of the fund. All of the
officers of the fund are employees of Putnam Management or its
affiliates. Because of their positions with Putnam Management or
its affiliates or their ownership of stock of Marsh & McLennan
Companies, Inc., the parent corporation of Putnam Management and
Putnam Mutual Funds, Messrs. Putnam, Putnam, III, Lasser,
and Smith (nominees for Trustees of the fund), as well as the
officers of the fund, will benefit from the management fees,
distribution fees, underwriting commissions, custodian fees, and
investor servicing fees paid or allowed by the fund.
ASSETS OF THE FUND
SHARES OUTSTANDING
Net assets of the fund as of November 30, 1994$947,628,099
Class A shares of the fund outstanding
and authorized to vote as of
November 30, 1994
118,887,054 shares
Class B shares of the fund outstanding
and authorized to vote as of
November 30, 1994
26,360,396 shares
Class M shares of the fund outstanding
and authorized to vote as of
November 30, 1994 155 shares
Class Y shares of the fund outstanding
and authorized to vote as of
November 30, 1994 1,188,678 shares
Persons beneficially owning more than
5% of the fund's class A shares as of
November 30, 1994 NONE
Persons beneficially owning more than
5% of the fund's class B shares as of
November 30, 1994
NONE
Persons beneficially owning more than
5% of the fund's class M shares as of
November 30, 1994: Putnam Investments, Inc.
One Post Office Square, Boston, Massachusetts,
02109; owned 155 shares representing 100%
of the outstanding class M shares
Persons beneficially owning more than
5% of the fund's class Y shares as of
November 30, 1994 NONE
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1994
MANAGEMENT CONTRACT
The management contract dated
November 5, 1982 , was approved by the
shareholders on that date and was
last approved by the Trustees
on January 6, 1995 .
Management fee paid to Putnam
Management $3,505,928
Reimbursement paid by the fund to Putnam
Management for compensation and related
expenses including employee benefit plan
contributions for the fund's Executive
Vice President (Charles E. Porter),
Senior Vice President (Patricia C. Flaherty),
Clerk (Beverly Marcus) , and their
assistants.
$9,739
PAYMENTS TO AFFILIATES
Sales charges on sales of class A shares
retained by Putnam Mutual Funds after
payments to selling broker-dealers $526,779
Sales charges on sales of class M shares
retained by Putnam Mutual Funds after
payments to selling broker-dealers
(Class M shares were not in existence
during this period) NONE
Deferred sales charges on class A share
redemptions retained by Putnam
Mutual Funds $10,970
Deferred sales charges on class B share
redemptions retained by Putnam
Mutual Funds $542,560
Payments under Class A Distribution Plan to
Putnam Mutual Funds $1,985,789
Payments under Class B Distribution Plan
to Putnam Mutual Funds $1,466,438
Payments under Class M Distribution Plan to
Putnam Mutual Funds (Class M shares were not NONE
in existence during this period)
Investor servicing and custodian fees
paid to Putnam Fiduciary Trust Company
(after application of credits , if any) $1,489,397
BROKERAGE*
Total fund payments to broker-dealers as
commissions on agency transactions $1,730,430
Total fund payments to broker-dealers as
commissions on underwritten transactions $212,500
<PAGE>
EXHIBIT A-1
PUTNAM INVESTMENT MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1993
ASSETS:
Cash $ 300
Investments (note 2) 50,000
Investment management fees receivable 60,817,927
Accounts receivable from affiliates (note 6) 1,819,578
Prepaid expenses and other assets 2,759,786
Property and equipment - net (notes 2 & 3) 5,105,571
------------
TOTAL ASSETS $70,553,162
============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable and accrued
expenses (note 5) $ 20,704,486
Accounts payable to affiliate 916
------------
TOTAL LIABILITIES 20,705,402
------------
STOCKHOLDER'S EQUITY:
Common stock - $1 par value; authorized
and outstanding, 1,000 shares 1,000
Paid-in surplus 4,696,665
Retained earnings 45,150,095
------------
Total stockholder's equity 49,847,760
------------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $70,553,162
============
See notes to balance sheet.
<PAGE>
PUTNAM INVESTMENT MANAGEMENT, INC.
NOTES TO BALANCE SHEET
1. CORPORATE AFFILIATION
Putnam Investment Management, Inc. (the Company) is a wholly
owned subsidiary of Putnam Investments, Inc., (the Parent),
which is a wholly owned subsidiary of Marsh & McLennan
Companies, Inc. (MMC).
The Company's primary business is to provide investment
advisory services to Putnam-sponsored mutual funds. In
connection with providing these services, the Company
receives a management fee which is based upon the average
net asset value of the respective fund to which the services
are provided.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS. Investments consist of time deposits held by
Putnam Fiduciary Trust Company, an affiliate. Investments
are recorded at the lower of cost or market.
PROPERTY AND EQUIPMENT. Property and equipment are recorded
at cost. Office and data processing equipment are
depreciated using the straight-line method over their
estimated useful lives of four to ten years. Leasehold
improvements are amortized using the straight-line method
over ten years or the period covered by the lease, whichever
is less. Additions, renewals, and betterments of property
and equipment are capitalized. Expenditures for maintenance
and repairs are charged to income when incurred.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Office and data processing equipment $ 3,610,612
Less accumulated depreciation (2,244,442)
------------
1,366,170
------------
Leasehold improvements 6,051,063
Less accumulated amortization (2,311,662)
------------
3,739,401
------------
Property and equipment - net $ 5,105,571
============<PAGE>
4. INCOME TAXES
In accordance with the provisions of Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes,
the Company records a current liability or asset for the
estimated taxes payable or refundable on tax returns for the
current year and a deferred tax liability or asset for the
estimated future tax effects attributable to temporary
differences.
The Company, through MMC, files its federal tax return as a
member of a consolidated group. The Parent allocates its
current and deferred tax provision or benefit to the Company
in a manner which is representative of how the Company would
compute its provision as a separate entity.
Under an agreement with the Parent, the Company pays the
Parent each month for the amount of its net current and
deferred tax provision. If the Company has a net tax
benefit, the Parent pays the Company that amount. The
Parent then assumes responsibility for the payment of all
taxes in accordance with federal, state and local laws. As
a result of this agreement, the Company has no current or
deferred tax liability or asset reflected in its balance
sheet at December 31, 1993.
5. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN. The Company, the Parent and affiliates
sponsor a profit-sharing plan (the Plan) covering
substantially all employees, providing for annual
contributions as determined by the Board of Directors.
Contributions payable to the Plan at December 31, 1993 were
$557,000.
RETIREE HEALTH CARE PLAN. MMC provides a health care plan
which covers all eligible retirees of the Company and its
affiliates. The Parent subsidizes a portion of the cost of
the plan. The Parent allocates its cost of the plan to the
Company and its affiliates in a manner which management
believes reflects the actual cost of the plan on an accrual
basis.
6. RELATED PARTY TRANSACTIONS
The Company shares office facilities and personnel with
other wholly owned subsidiaries of the Parent. Accordingly,
the related costs of such arrangements have been allocated
among the various subsidiaries in a manner which management
believes is representative of the actual costs incurred.
<PAGE>
Accounts receivable from affiliates primarily represents
advances made to the Parent in connection with the Parent's
cash management policy.
In 1993 the Company paid a dividend of $100,000,000 to the
Parent.
<PAGE>
INDEPENDENT AUDITORS' REPORT
PUTNAM INVESTMENT MANAGEMENT, INC.
We have audited the accompanying balance sheet of Putnam
Investment Management, Inc. (a wholly owned subsidiary of Putnam
Investments, Inc.) as of December 31, 1993. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the balance sheet is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the
balance sheet provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all
material respects, the financial position of Putnam Investment
Management, Inc. at December 31, 1993 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 10, 1994
Boston, Massachusetts
<PAGE>
EXHIBIT A-2
PUTNAM INVESTMENT MANAGEMENT, INC.
BALANCE SHEET
SEPTEMBER 30, 1994
(UNAUDITED)
ASSETS:
Cash $ 300
Investments (note 2) 50,000
Investment management fees receivable 68,476,655
Accounts receivable from affiliates (note 6) 103,307,814
Prepaid expenses and other assets 2,274,796
Property and equipment - net (notes 2 & 3) 5,434,638
------------
TOTAL ASSETS $179,544,203
============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable and accrued
expenses (note 5) $ 30,055,860
Accounts payable to affiliate 916
------------
Total Liabilities 30,056,776
------------
STOCKHOLDER'S EQUITY:
Common stock - $1 par value; authorized
and outstanding, 1,000 shares 1,000
Paid-in surplus 4,696,665
Retained earnings 144,789,762
------------
Total stockholder's equity 149,487,427
------------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $179,544,203
============
See notes to balance sheet.
<PAGE>
PUTNAM INVESTMENT MANAGEMENT, INC.
NOTES TO BALANCE SHEET
(UNAUDITED)
1. CORPORATE AFFILIATION
Putnam Investment Management, Inc. (the Company) is a wholly
owned subsidiary of Putnam Investments, Inc., (the Parent),
which is a wholly owned subsidiary of Marsh & McLennan
Companies, Inc. (MMC).
The Company's primary business is to provide investment
advisory services to Putnam-sponsored mutual funds. In
connection with providing these services, the Company
receives a management fee which is based upon the average
net asset value of the respective fund to which the services
are provided.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS. Investments consist of time deposits held by
Putnam Fiduciary Trust Company, an affiliate. Investments
are recorded at cost.
PROPERTY AND EQUIPMENT. Property and equipment are recorded
at cost. Office and data processing equipment are
depreciated using the straight-line method over their
estimated useful lives of four to ten years. Leasehold
improvements are amortized using the straight-line method
over ten years or the period covered by the lease, whichever
is less. Additions, renewals, and betterments of property
and equipment are capitalized. Expenditures for maintenance
and repairs are charged to income when incurred.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Office and data processing equipment $4,664,662
Less accumulated depreciation (2,501,227)
------------
2,163,435
------------
Leasehold improvements 6,050,967
Less accumulated amortization (2,779,764)
------------
3,271,203
------------
Property and equipment - net $ 5,434,638
============<PAGE>
4. INCOME TAXES
In accordance with the provisions of Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes,
the Company records a current liability or asset for the
estimated taxes payable or refundable on tax returns for the
current year and a deferred tax liability or asset for the
estimated future tax effects attributable to temporary
differences.
The Company, through MMC, files its federal tax return as a
member of a consolidated group. The Parent allocates its
current and deferred tax provision or benefit to the Company
in a manner which is representative of how the Company would
compute its provision as a separate entity.
Under an agreement with the Parent, the Company pays the
Parent each month for the amount of its net current and
deferred tax provision. If the Company has a net tax
benefit, the Parent pays the Company that amount. The
Parent then assumes responsibility for the payment of all
taxes in accordance with federal, state and local laws. As
a result of this agreement, the Company has no current or
deferred tax liability or asset reflected in its balance
sheet at September 30, 1994.
5. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN. The Company, the Parent and affiliates
sponsor a profit-sharing plan (the Plan) covering
substantially all employees, providing for annual
contributions as determined by the Board of Directors.
Contributions payable to the Plan at September 30, 1994 were
$472,000.
RETIREE HEALTH CARE PLAN. MMC provides a health care plan
which covers all eligible retirees of the Company and its
affiliates. The Parent subsidizes a portion of the cost of
the plan. The Parent allocates its cost of the plan to the
Company and its affiliates in a manner which management
believes reflects the actual cost of the plan on an accrual
basis.
6. RELATED PARTY TRANSACTIONS
The Company shares office facilities and personnel with
other wholly owned subsidiaries of the Parent. Accordingly,
the related costs of such arrangements have been allocated
among the various subsidiaries in a manner which management
believes is representative of the actual costs incurred.
<PAGE>
Accounts receivable from affiliates primarily represents
advances made to the Parent in connection with the Parent's
cash management policy.
<PAGE>
EXHIBIT B
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.45% of the first Putnam California Tax Exempt Money
$500 million of average Market Fund
net assets, 0.35% of the ($57,233,636)
next $500 million, 0.30%
of the next $500 million, Putnam Capital Manager Trust:
and 0.25% of any excess PCM Money Market Fund
over $1.5 billion ($262,332,405)
Putnam New York Tax Exempt Money
Market Fund
($47,244,513)
Putnam Tax Exempt Money Market Fund
($91,022,724)
- ----------------------------------------------------------------
0.50% of the first $100 Putnam Money Market Fund
million of average net ($1,426,344,876)
assets, 0.40% of the next
$100 million, 0.35% of the
next $300 million, 0.325%
of the next $500 million,
and 0.30% of any excess
over $1.0 billion
- ----------------------------------------------------------------
0.50% of the first $100 Putnam Income Fund
million of average net ($947,628,099)
assets, 0.40% of the next
$100 million, and 0.35%
of any excess over $200
million
Proposed to be changed to
0.65% of the first $500
million of average net
assets, 0.55% of the next
$500 million, 0.50% of the
next $500 million, 0.45%
of the next $5 billion, 0.425%
of the next $5 billion; 0.405%
of the next $5 billion, 0.39%
of the next $5 billion, and
0.38% thereafter
<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.50% of the first Putnam Municipal Opportunities
$500 million of average Trust*+
net assets, 0.43% of the ($238,307,106)
next $500 million, 0.39% Putnam Investment Grade Intermediate
of the next $500 million, Municipal Trust+
and 0.35% of any excess ($41,972,312)
over $1.5 billion
*If dividends payable on the Preferred Shares during any dividend
period plus expenses attributable to the Preferred Shares for
that period exceed the gross income of the Trust during that
period attributable to the investment of the proceeds of the
Preferred Shares, then the fee payable to Putnam Management for
that period will be reduced by an amount equal to the product of
such excess and a fraction, the numerator of which shall be the
fee otherwise payable to Putnam Management pursuant to the
Management Contract and the denominator of which shall be the sum
of the fee otherwise payable to Putnam Management pursuant to the
Management Contract and the administrative service fee otherwise
payable to Putnam Management under the Administrative Services
Contract between the Trust and Putnam Management; provided,
however, that the amount of such reduction for any such dividend
period shall not exceed the amount determined by multiplying (i)
the aggregate liquidation preference of the average number of
shares of Preferred Shares outstanding during the dividend period
by (ii) the percentage of the aggregate net asset value of the
Trust which the fee payable to Putnam Management during such
dividend period pursuant to the Management Contract would
constitute without giving effect to such reduction.
+Under its Administrative Services Contract with Putnam
Management, the Trust will pay Putnam Management a quarterly fee
based on the Trust's average net asset value at the annual rate
of 0.20% of the first $500 million of average net assets, 0.17%
of the next $500 million, 0.16% of the next $500 million, and
0.15% of any excess over $1.5 billion. <PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
Putnam Investment Grade Municipal
Trust III*+
($57,603,262)
- -----------------------------------------------------------------
0.55% of the first Putnam Managed High Yield Trust+
$500 million of average ($93,104,504)
net assets, 0.48% of the
next $500 million, 0.44%
of the next $500 million,
and 0.40% of any excess
over $1.5 billion
*If dividends payable on any Preferred Shares during any dividend
period plus expenses attributable to the Preferred Shares for
that period exceed the gross income of the Trust during that
period attributable to the investment of the proceeds of the
Preferred Shares, then the management fee payable to Putnam
Management for that period will be reduced by an amount equal to
the product of such excess and a fraction, the numerator of which
shall be the fee otherwise payable to Putnam Management pursuant
to the Management Contract and the denominator of which shall be
the sum of the fee otherwise payable to Putnam Management
pursuant to the Management Contract and the administrative
service fee otherwise payable to Putnam Management under the
Administrative Services Contract between the Trust and Putnam
Management; provided, however, that the amount of such reduction
for any such dividend period shall not exceed the amount
determined by multiplying (i) the aggregate liquidation
preference of the average number of Preferred Shares outstanding
during the dividend period, by (ii) the percentage of the
aggregate net asset value of the Trust which the fee payable to
Putnam Management during such dividend period pursuant to the
Management Contract would constitute without giving effect to
such reduction.
+Under its Administrative Services Contract with Putnam
Management, the Trust will pay Putnam Management a quarterly fee
based on the Trust's average net asset value at the annual rate
of 0.20% of the first $500 million of average net assets, 0.17%
of the next $500 million, 0.16% of the next $500 million, and
0.15% of any excess over $1.5 billion. <PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.57% of the first $500 Putnam U.S. Government Income Trust
million of average net ($4,700,976,488)
assets, 0.475% of the next
$500 million, 0.4275% of the
next $500 million, and 0.38%
of any excess over $1.5
billion
- -----------------------------------------------------------------
0.60% of average net Putnam Capital Manager Trust:
assets
PCM Global Growth Fund
($651,666,674)
PCM U.S. Government and High
Quality Bond Fund
($634,773,635)
PCM Utilities Growth and Income
Fund
($381,803,288)
- -----------------------------------------------------------------
0.60% of the first $1.0 Putnam Balanced Government Fund
billion, 0.50% of the ($75,342,610)
next $500 million, and
0.45% of any excess over
$1.5 billion
- -----------------------------------------------------------------
0.60% of the first $500 Putnam American Government Income
million of average net Fund
assets, 0.50% of the next ($2,287,085,427)
$1.0 billion, 0.45% of
the next $1.0 billion,
0.40% of the next $4.5
billion, 0.375% of the
next $2.5 billion, and
0.35% of any excess over
$9.5 billion
- -----------------------------------------------------------------
0.60% of the first $500 Putnam Adjustable Rate U.S.
million of average net Government Fund
assets, 0.50% of the ($143,167,073)
next $500 million, 0.45%
of the next $500 million, Putnam Arizona Tax Exempt Income Fund
and 0.40% of any excess ($145,209,618)
over $1.5 billion
<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
Putnam California Tax Exempt Income
Trust:
Putnam California Intermediate
Tax Exempt Fund
($6,385,471)
Putnam California Tax Exempt
Income Fund
($3,351,552,421)
Putnam Florida Tax Exempt Income Fund
($286,635,795)
Putnam Intermediate Tax Exempt Fund
($9,088,395)
Putnam Massachusetts Tax Exempt
Income Fund II
($254,646,211)
Putnam Michigan Tax Exempt Income
Fund II
($134,370,669)
Putnam Minnesota Tax Exempt Income
Fund II
($100,476,378)
Putnam New Jersey Tax Exempt Income
Fund
($270,563,403)
Putnam New York Tax Exempt Income
Trust:
Putnam New York Tax Exempt Income
Fund
($2,071,436,821)
Putnam New York Intermediate Tax
Exempt Fund
($2,566,884)
Putnam Ohio Tax Exempt Income Fund II
($203,478,980)
Putnam Pennsylvania Tax Exempt Income
Fund
($189,547,811)
<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
Putnam Tax Exempt Income Fund
($2,276,495,003)
Putnam Tax-Free Income Trust:
Putnam Tax-Free Insured Fund
($525,112,084)
- -----------------------------------------------------------------
0.60% of the first $100 The George Putnam Fund of Boston
million of average net ($1,133,499,445)
assets, 0.50% of the next
$100 million, 0.40% of the
next $300 million, 0.325%
of the next $500 million,
and 0.30% of any excess
over $1.0 billion
- -----------------------------------------------------------------
0.60% of the first $500 Putnam New York Tax Exempt
million of average net Opportunities Fund
assets, 0.50% of the ($173,709,603)
next $500 million, 0.45%
of the next $500 million,
0.40% of the next $5 billion,
0.375% of the next $5 billion,
0.355% of the next $5 billion,
0.340% of the next $5 billion,
and 0.330% thereafter
- -----------------------------------------------------------------
0.65% of the first $500 Putnam Capital Appreciation Fund
million of average net ($42,106,190)
assets, 0.55% of the next
$500 million, 0.50% of the Putnam Capital Growth and Income Fund
next $500 million, and ($2,177,988)
0.45% of any excess over
$1.5 billion
Putnam Capital Manager Trust:
PCM Growth and Income Fund
($1,858,714,048)
Putnam Convertible Income-Growth
Trust
($703,005,143)
Putnam Corporate Asset Trust
($118,577,155)
Putnam Dividend Growth Fund
($54,582,244)
<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
Putnam Growth Fund
($2,952,424)
Putnam Investors Fund
($788,572,641)
Putnam Managed Income Trust
($442,098,773)
Putnam Municipal Income Fund
($1,176,827,665)
Putnam Research Analysts Fund
($3,002,450)
Putnam Tax-Free Income Trust:
Putnam Tax-Free High Yield Fund
($1,746,272,791)
Putnam Vista Fund
($808,701,091)
- -----------------------------------------------------------------
0.65% of the first Putnam Investment Funds:
$500 million of average Putnam Balanced Fund
net assets, 0.55% of the ($20,000)*
next $500 million, 0.50%
of the next $500 million, The Putnam Fund for Growth & Income
0.45% of the next $5 ($9,023,333,776)
billion, 0.425% of the next
$5 billion, 0.405% of the next
$5 billion, 0.39% of Putnam Growth and Income Fund II
the next $5 billion, ($100,000)
and 0.38% thereafter
- -----------------------------------------------------------------
*As of December 13, 1994<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.70% of average net Putnam High Yield Municipal Trust*
assets ($224,783,680)
Putnam Investment Grade Municipal
Trust**
($364,847,615)
Putnam Tax-Free Health Care Fund
($185,433,781)
*If dividends payable on the Trust's Preferred Shares during any
dividend payment period plus expenses attributable to the
Preferred Shares for that period exceed the portion of the
Trust's net income attributable to the liquidation value of the
Preferred Shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount
of the excess (but not more than an amount equal to 0.70% of the
liquidation preference of the Preferred Shares outstanding during
the period).
**If dividends payable on the Trust's Preferred Shares during any
dividend period plus expenses attributable to the Preferred
Shares for that period exceed the portion of the Trust's net
income and net short-term capital gains (but not long-term
capital gains) attributable to the investment of the proceeds of
the Preferred Shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount
of the excess (but not more than an amount equal to 0.70% of the
liquidation preference of the Preferred Shares outstanding during
the period).
<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.70% of the first $500 Putnam Asset Allocation Funds:
million of average net Balanced Portfolio
assets, 0.60% of the next ($230,296,527)
$500 million, 0.55% of the
next $500 million, and Conservative Portfolio
0.50% of any excess over ($74,710,886)
$1.5 billion
Growth Portfolio
($116,547,112)
Putnam California Investment Grade
Municipal Trust*
($76,613,808)
Putnam Capital Manager Trust:
PCM Diversified Income Fund
($214,467,273)
PCM Global Asset Allocation Fund
($410,253,418)
PCM High Yield Fund
($315,206,046)
PCM New Opportunities Fund
($56,410,337)
PCM Voyager Fund
($982,552,557)
Putnam Diversified Income Trust
($3,045,603,878)
Putnam Diversified Equity Trust
($126,879,897)
Putnam Health Sciences Trust
($860,596,124)
Putnam High Yield Advantage Fund
($691,418,334)
*If dividends payable on the Trust's Remarketed Preferred Shares
during any dividend payment period plus any expenses attributable
to the Remarketed Preferred Shares for that period exceed the
Trust's net income attributable to the liquidation value of the
Remarketed Preferred Shares during that period, then the fee
payable to Putnam Management for that period will be reduced by
the amount of the excess, but not more than .70% (or such lower
percentage as reflects the applicable reduction in the management
fee if the net asset value of the Trust exceeds $500 million) of
the liquidation preference of the Remarketed Preferred Shares
outstanding during the period.
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
Putnam High Yield Trust
($3,270,559,379)
Putnam Investment Grade Municipal
Trust II*
($239,388,482)
Putnam Natural Resources Fund
($132,799,947)
Putnam Managed Municipal Income
Trust**
($580,489,122)
Putnam New Opportunities Fund
($1,397,948,290)
*If dividends payable on the Trust's Remarketed Preferred Shares
during any dividend payment period plus any expenses attributable
to the Remarketed Preferred Shares for that period exceed the
Trust's net income attributable to the liquidation value of the
Remarketed Preferred Shares during that period, then the fee
payable to Putnam Management for that period will be reduced by
the amount of the excess, but not more than .70% (or such lower
percentage as reflects the applicable reduction in the management
fee if the net asset value of the Trust exceeds $500 million) of
the liquidation preference of the Remarketed Preferred Shares
outstanding during the period.
**If dividends payable on the Trust's Preferred Shares during any
dividend period plus expenses attributable to the Preferred
Shares for that period exceed the portion of the Trust's net
income and net short-term capital gains (but not long-term
capital gains) attributable to the investment of the proceeds of
the Preferred Shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount
of the excess (but not more than an amount equal to 0.70% of the
liquidation preference of the Preferred Shares outstanding during
the period).<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
Putnam New York Investment Grade
Municipal Trust*
($46,217,408)
Putnam OTC Emerging Growth Fund
($559,945,967)
Putnam Utilities Growth and Income
Fund
($1,005,134,347)
Putnam Voyager Fund
($4,577,449,043)
- -----------------------------------------------------------------
0.70% of the first $500 Putnam Investment Funds:
million of average net Putnam Basic Value Fund
assets, 0.60% of the ($20,000)**
next $500 million, 0.55%
of the next $500 million, Putnam Real Estate Opportunities
0.50% of the next $5 billion, Fund ($20,000)**
0.475% of the next $5 billion,
0.455% of the next $5 billion,
0.44% of the next $5 billion,
and 0.43% thereafter
*If dividends payable on the Trust's Preferred Shares during any
dividend payment period plus any expenses attributable to the
Preferred Shares for that period exceed the Trust's net income
attributable to the liquidation value of the Preferred Shares
during that period, then the fee payable to Putnam Management for
that period will be reduced by the amount of the excess, but not
more than .70% (or such lower percentage as reflects the
applicable reduction in the management fee if the net asset value
of the Trust exceeds $500 million) of the liquidation preference
of the Preferred Shares outstanding during that period.
**As of December 13, 1994
<PAGE>
- -----------------------------------------------------------------
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.75% of the first $500 Putnam Dividend Income Fund*
million of average net ($135,615,099)
assets, 0.65% of the next
$500 million, 0.60% of the Putnam High Income Convertible and
next $500 million, and Bond Fund
0.55% of any excess over ($114,030,035)
$1.5 billion
Putnam Intermediate Government Income
Trust
($525,253,307)
Putnam Master Income Trust
($453,557,806)
Putnam Master Intermediate Income
Trust
($309,984,355)
Putnam Premier Income Trust
($1,127,541,794)
- -----------------------------------------------------------------
0.75% of the first $100 Putnam Federal Income Trust
million of average net ($438,738,869)
assets, 0.65% of the next
$100 million, 0.55% of the
next $300 million, 0.45% of
the next $500 million, and
0.40% of any excess over
$1.0 billion
- -----------------------------------------------------------------
0.75% of the first $100 Putnam Equity Income Fund
million of average net ($335,726,937)
assets, 0.65% of the next
$100 million, 0.55% of
the next $300 million,
0.50% of the next $1.0
billion, 0.45% of the
next $1.0 billion, and
0.40% of any excess over
$2.5 billion
- ----------------------------------------------------------------
*If dividends payable on the Fund's Preferred Shares during any
dividend payment period plus any expenses attributable to the
Preferred Shares for that period, as determined bt the Trustees,
exceed the portion of the Fund's net income and net short-term
capital gains (but not long-term capital gains) attributable to
the proceeds of the Preferred Shares during that period, then the
fee payable to Putnam Management for that period will be reduced
by the amount of the excess (but not more than the fee that
otherwise would have been payable to Putnam Management for such
period attributable to the aggregate liquidation preference of
the Preferred Shares outstanding during the period).
<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.80% of the first $500 Putnam Asia Pacific Growth Fund
million of average net ($268,047,258)
assets, 0.70% of the next
$500 million, 0.65% of the Putnam Europe Growth Fund
next $500 million, and ($119,740,583)
0.60% of any excess over
$1.5 billion Putnam Global Governmental Income
Trust
($469,742,132)
Putnam Global Growth Fund
($2,249,182,212)
Putnam Overseas Growth Fund
($35,818,399)
- -----------------------------------------------------------------
0.80% of the first $500 Putnam Investment Funds:
million of average net Putnam Global Utilities Fund
assets, 0.70% of the next ($20,000)*
$500 million, 0.65% of the
next $500 million, 0.60%
of the next $5 billion,
0.575% of the next $5 billion,
0.555% of the next $5 billion,
0.54% of the next $5 billion,
and 0.53% thereafter
- -----------------------------------------------------------------
1.20% of the first $500 Putnam Investment Funds:
million of average net Putnam International New
assets, 1.10% of the next Opportunities Fund
$500 million, 1.05% of the ($20,000)*
next $500 million, 1.00% of
the next $5 billion, 0.975% of
the next $5 billion, 0.955%
of the next $5 billion, 0.94%
of the next $5 billion, and
0.93% thereafter
- -----------------------------------------------------------------
0.635% of average net Nomura Dividend Income Fund, Inc.
assets ($38,918,773)
- -----------------------------------------------------------------
*As of December 13, 1994<PAGE>
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF NOVEMBER 30, 1994)
0.75% of the first $200 Lincoln National Putnam Master
million of average net Fund, Inc.*
assets, 0.70% of the next ($197,764,064)
$200 million, and 0.68%
of any excess over $400
million
- -----------------------------------------------------------------
0.50% of average net CIGNA Annuity Equity Fund
assets ($22,618,763)
CIGNA Annuity Growth and Income Fund
($78,087,953)
CIGNA Annuity Aggressive Equity Fund
($2,344,781)
- -----------------------------------------------------------------
FUNDS IN REGISTRATION OR IN INITIAL PUBLIC OFFERING
Putnam Qualified Dividend Income Fund
($0)
Putnam Short-Term Investment-Grade Bond Fund
($0)
*Management fee paid by the Fund to its investment advisor.
Putnam Management, as subadviser, receives annually from the
investment advisor the greater of (a) $40,000 or (b) 0.47% of the
first $200 million of average net assets, 0.42% of the next $200
million, and 0.40% of any excess over $400 million.
<PAGE>
GENERAL. Except for fees paid by Putnam OTC Emerging Growth Fund
and Putnam Tax-Free Income Trust, all of the above fees are
payable quarterly, based on the average net assets of the fund as
determined at the close of each business day (or for Putnam
Intermediate Government Income Trust, Putnam High Yield Municipal
Trust, Putnam Investment Grade Municipal Trust, Putnam Managed
Municipal Income Trust, Putnam Investment Grade Intermediate
Municipal Trust, Putnam High Income Convertible and Bond Fund,
Putnam Managed High Yield Trust, Putnam Master Income Trust,
Putnam Master Intermediate Income Trust, Putnam Premier Income
Trust, Putnam Dividend Income Fund, Putnam Tax-Free Health Care
Fund, Putnam Investment Grade Municipal Trust II, Putnam
Investment Grade Municipal Trust III, Putnam California
Investment Grade Municipal Trust, Putnam Municipal Opportunities
Trust, Putnam New York Investment Grade Municipal Trust, and
Nomura Dividend Income Fund, Inc., at the close of each business
week) during the quarter, at the annual rates shown. For Putnam
OTC Emerging Growth Fund and Putnam Tax-Free Income Trust, fees
are payable monthly at the end of each month, based on valuations
during the month. For the Putnam funds, such fees are in
addition to the compensation of Trustees and certain officers and
other expenses borne by each fund, as described in the Proxy
Statement under "The Management Contract."
Except for fees paid by Nomura Dividend Income Fund, Inc., the
compensation payable to Putnam Management is subject to reduction
or reimbursement to the extent that expenses of a fund in any
fiscal year exceed the limits on investment company expenses
imposed by any statute or regulatory authority in any
jurisdiction where shares of the fund are qualified for offer and
sale. The term "expenses" is defined in the statutes and
regulations of such jurisdictions and, generally speaking,
excludes brokerage commissions, taxes, interest and extraordinary
expenses. The only limitation in effect as of the date of this
Proxy Statement is 2.5% of the first $30 million of average net
assets, 2% of the next $70 million and 1.5% of the remaining
average net assets. The fee payable to Putnam Management is also
subject to reduction by the amount of certain possible
commissions, fees, brokerage or similar payments received by
Putnam Mutual Funds, less expenses approved by the Trustees of
the fund in respect of purchases and sales of fund portfolio
investments.
ADDITIONAL REDUCTIONS APPLICABLE TO CERTAIN FUNDS. In the case
of certain funds, the Management Contracts provide that Putnam
Management's compensation shall be reduced to the extent that
annual expenses of the fund exceed any expense limitation which
Putnam Management may, by written notice to the fund, declare to
be effective. Currently, Putnam Management has assumed the
following expense limitations:
<PAGE>
0.60% of average daily net assets for the following fund:
Putnam Global Utilities Fund
0.65% of average daily net assets for the following funds:
Putnam California Intermediate Tax Exempt Fund
Putnam New York Intermediate Tax Exempt Fund
0.70% of average daily net assets for the following fund:
Putnam Balanced Fund
0.80% of average daily net assets for the following fund:
Putnam Intermediate Tax Exempt Fund
1.00% of average daily net assets for the following funds:
Putnam Basic Value Fund
Putnam Growth Fund
Putnam Capital Appreciation Fund
Putnam Real Estate Opportunities Fund
CIGNA Annuity Equity Fund
CIGNA Annuity Growth and Income Fund
CIGNA Annuity Aggressive Equity Fund
1.15% of average daily net assets for the following funds:
Putnam International New Opportunities Fund
Putnam Short-Term Investment-Grade Bond Fund
1.20% of average daily net assets for the following fund:
Putnam Capital Manager Trust:
PCM New Opportnities Fund
and 1.50% of average daily net assets for the following fund:
Putnam Research Analysts Fund
Expenses subject to the foregoing limitations are generally
exclusive of brokerage commissions, interest, taxes, deferred
organizational and extraordinary expenses, if any, and expenses
incurred pursuant to Distribution Plan(s), if any, under SEC Rule
12b-1.
<PAGE>
EXHIBIT C
PUTNAM INCOME FUND
MANAGEMENT CONTRACT
This exhibit provides the management contract and
the proposed additions and deletions. The additions are
indicated by the BOLDFACE and deletions are indicated by
[italics].
Management Contract dated as of [November 5, 1982] APRIL ,
1995 between PUTNAM INCOME FUND, a Massachusetts business
trust (the "Fund"), and [THE PUTNAM MANAGEMENT COMPANY, INC.]
PUTNAM INVESTMENT MANAGEMENT, INC., a [ Delaware ]
MASSACHUSETTS corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Fund, will determine what 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.
<PAGE>
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Fund's account
with brokers or dealers selected by the Manager. In the selection
of such brokers or dealers and the placing of such orders, the
Manager shall use its best efforts to obtain for the Fund the
most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions
for brokerage and research services as described below. In using
its best efforts to obtain for the Fund the most favorable price
and execution available, the Manager, bearing in mind the Fund's
best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the
amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience
and financial stability of the broker or dealer involved and the
quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the
Fund may determine, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Contract
or otherwise solely by reason of its having caused the Fund to
pay a broker or dealer that provides brokerage and research
services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction, if the Manager determines in good
faith that such amount of commission was reasonable in relation
to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with
respect to the Fund and to other clients of the Manager as to
which the Manager exercises investment discretion. The Manager
agrees that in connection with purchases or sales of portfolio
investments for the Fund's account, neither the Manager nor any
officer, director, employee or agent of the Manager shall act as
a principal or receive any commission other than as provided in
Section 3.
[(d) The Fund will pay or reimburse the Manager for (i) the
compensation of the Vice Chairman and Treasurer of the Fund and
of persons assisting him in these offices, as determined from
time to time by the Trustees of the Fund, (ii) the compensation
in whole or in part of such other officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the Fund, and (iii) the cost of suitable office
space, utilities, support services and equipment of the Vice
Chairman and Treasurer and persons assisting him and, as
determined from time to time by the Trustees of the Fund, all or
a part of such 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.]
(D) THE FUND WILL PAY OR REIMBURSE THE MANAGER FOR THE
COMPENSATION IN WHOLE OR IN PART OF SUCH OFFICERS OF THE FUND AND
PERSONS ASSISTING THEM AS MAY BE DETERMINED FROM TIME TO TIME BY
THE TRUSTEES OF THE FUND. THE FUND WILL ALSO PAY OR REIMBURSE THE
MANAGER FOR ALL OR PART OF THE COST OF SUITABLE OFFICE SPACE,
UTILITIES, SUPPORT SERVICES AND EQUIPMENT ATTRIBUTABLE TO SUCH
OFFICERS AND PERSONS, AS MAY BE DETERMINED IN EACH CASE BY THE
TRUSTEES OF THE FUND. THE FUND WILL PAY THE FEES, IF ANY, OF THE
TRUSTEES OF THE FUND.
(e) The Manager shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Manager pursuant to
this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers
and employees of the Fund may be a shareholder, director, officer
or employee of, or be otherwise interested in, the Manager, and
in any person controlled by or under common control with the
Manager, and that the Manager and any person controlled by or
under common control with the Manager may have an interest in the
Fund. It is also understood that the Manager and any person
controlled by or under common control with the Manager have and
may have advisory, management, service or other contracts with
other organizations and persons, and may have other interests and
businesses.
<PAGE>
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 rate[s] OF:
[(a) 0.5% of the first $100 million of the average net asset
value of the Fund;
(b) 0.4% of the next $100 million of such average net asset
value; and
(c) 0.35% of any excess over $200 million of such average net
asset value.]
(A) 0.65% OF THE FIRST $500 MILLION OF THE AVERAGE NET
ASSET VALUE OF THE FUND;
(B) 0.55% OF THE NEXT $500 MILLION OF SUCH AVERAGE NET
ASSET VALUE;
(C) 0.50% OF THE NEXT $500 MILLION OF SUCH AVERAGE NET
ASSET VALUE;
(D) 0.45% OF THE NEXT $5 BILLION OF SUCH AVERAGE
NET ASSET VALUE;
(E) 0.425% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET
VALUE;
(F) 0.405% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET
VALUE;
(G) 0.39% OF THE NEXT $5 BILLION OF SUCH AVERAGE NET ASSET
VALUE; AND
(H) 0.38% OF ANY EXCESS THEREAFTER .
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value
during such quarter at the close of business on each business day
during such quarter while this Contract is in effect. Such fee
shall be payable for each fiscal quarter within 30 days after the
close of such quarter.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such [commissions] 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 such excess by a reduction or
refund thereof.
If the Manager shall serve for less than the whole of a quarter,
the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract 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, [ January 31, 1984]
or UPON the expiration of one year from the
effective date of the last such continuance, whichever is later.
Action by the Fund under (a) above may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will be
without the payment of any penalty.
[6.] CREDIT AGAINST MANAGEMENT FEES PURSUANT TO LITIGATION
SETTLEMENT.
The Manager will for a period of ten (10) consecutive years
commencing at the close of the Fund's last fiscal quarter which
ends more than twelve (12) months after the Effective Date of the
Stipulation of Settlement, dated December 28, 1972, in the action
entitled Martin Marcus v. George Putnam, et al., C.A. No. 67-41-F
(D. Mass.), as the "Effective Date" is defined in the Stipulation
of Settlement, provide an annual credit in the amount of $19,236
per year as more fully set forth hereinafter against the fee
payable by the Fund to the Manager pursuant to Section 3. Each
succeeding annual credit shall be effected on each of the
succeeding nine (9) anniversary dates following the first such
credit. Nothing contained in this Section 6 shall be deemed to
provide or imply that the terms of this Contract may not be
terminated or, with the approval of the shareholders of the Fund,
be varied, modified or amended in any or all their particulars,
including any increase or decrease in the advisory fees otherwise
payable hereunder.]
[7]. 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.
[8]. 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.
<PAGE>
[9]. 8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its date, and
supersedes the Management Contract dated [April 26, 1979]
NOVEMBER 5, 1982.
[10.] 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] 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 INCOME FUND and [THE PUTNAM
MANAGEMENT COMPANY, INC.] PUTNAM INVESTMENT MANAGEMENT, INC. have
each caused this instrument to be signed in duplicate in its
behalf by its President or a Vice President thereunto duly
authorized, all as of the day and year first above written.
PUTNAM INCOME FUND
By---------------------------------------
[THE PUTNAM MANAGEMENT COMPANY, INC.]
PUTNAM INVESTMENT MANAGEMENT, INC.
By------------------------------------------<PAGE>
PUTNAMINVESTMENTS
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
PUTNAMINVESTMENTS
<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.
Please fold at perforation before detaching
- -----------------------------------------------------------------
Proxy for a meeting of shareholders, April 6, 1995 , for
PUTNAM 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 William F. Pounds, 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 Income Fund on April 6, 1995 , 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 of you
should sign. When signing as
executor, administrator,
attorney, trustee, or guardian, or
as custodian for a minor, please
give your full title as such. If
you are signing for a corporation,
please sign the full corporate
name and indicate the signer's
office. If you are a partner,
sign 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!
- -----------------------------------------------------------------
Please fold at perforation before detaching
<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 PROPOSALS 2
AND 3. THE PROXIES WILL ALSO BE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES
FOR TRUSTEES AND FOR THE PROPOSALS LISTED BELOW:
PLEASE MARK YOUR CHOICES X IN BLUE OR BLACK INK.
1. PROPOSAL TO ELECT TRUSTEES
The nominees for Trustee are: J.A. Baxter, H.H. Estin,
J.A. Hill, E.T. Kennan, L.J. Lasser, R.E. Patterson, D.S.
Perkins, W.F. Pounds, G. Putnam, G. Putnam, III, A.J.C.
Smith, W.N. Thorndike.
FOR electing all the nominees (EXCEPT AS MARKED TO
THE
CONTRARY BELOW.)
WITHHOLD authority to vote for all nominees
TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES,
WRITE THOSE NOMINEES' NAMES BELOW :
---------------------------- ------------------------------
- ------
2. PROPOSAL TO RATIFY THE
SELECTION OF COOPERS & FOR AGAINST ABSTAIN
LYBRAND L.L.P. AS [BOX] [BOX]
[BOX]
AUDITORS.
3. PROPOSAL TO APPROVE A
NEW MANAGEMENT CONTRACT , [BOX] [BOX] [BOX]
INCREASING THE MANAGEMENT
FEES PAYABLE TO PUTNAM
INVESTMENT MANAGEMENT, INC.
NOTE: If you have questions on any of the proposals,
please call 1-800-225-1581.
