PUTNAM INCOME FUND, PRE 14A, 1996-05-17

PUTNAM INCOME FUND
PRE 14A, 1996-05-17
OIL ROYALTY TRADERS

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
----
Filed by the Registrant / X /
----
----
Filed by a Party other than the Registrant / /
----
CHECK THE APPROPRIATE BOX:
----
/ X / Preliminary Proxy Statement
- ----
----
/ / Preliminary Additional Materials
- ----
----
/ / Definitive Proxy Statement
- ----
----
/ / Definitive Additional Materials
- ----
----
/ / Soliciting Material Pursuant to Sec. 240.14a-11(e) or
- ---- Sec. 240.14a-12

PUTNAM INCOME FUND
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
----
/ x / $125 per Exchange Act Rules 0-11(c)(1)(ii),
- ---- 14a-6(i)(1), or 14a-6(i)(2).
----
/ / $500 per each party to the controversy pursuant
- ---- to Exchange Act Rule 14a-6(i)(3).
----
/ / Fee computed on table below per Exchange Act Rules
- ---- 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which
transaction applies:

(2) Aggregate number of securities to which
transaction applies:

(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:

(4) Proposed maximum aggregate value of transaction:

----
/ / Check box if any part of the fee is offset as provided
- ---- by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed: <PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM INCOME FUND

THE DOCUMENT YOU HOLD IN YOUR HANDS CONTAINS YOUR PROXY STATEMENT
AND PROXY CARD. A PROXY CARD IS, IN ESSENCE, A BALLOT. WHEN YOU
VOTE YOUR PROXY, IT TELLS US HOW TO VOTE ON YOUR BEHALF ON
IMPORTANT ISSUES RELATING TO YOUR FUND. IF YOU COMPLETE AND SIGN
THE PROXY, WE'LL VOTE IT EXACTLY AS YOU TELL US. IF YOU SIMPLY
SIGN THE PROXY, WE'LL VOTE IT IN ACCORDANCE WITH THE TRUSTEES'
RECOMMENDATIONS ON PAGES AND .

WE URGE YOU TO SPEND A COUPLE OF MINUTES WITH THE PROXY
STATEMENT, FILL OUT YOUR PROXY CARD, AND RETURN IT TO US. WHEN
SHAREHOLDERS DON'T RETURN THEIR PROXIES IN SUFFICIENT NUMBERS, WE
HAVE TO INCUR THE EXPENSE OF FOLLOW-UP SOLICITATIONS, WHICH CAN
COST YOUR FUND MONEY.

WE WANT TO KNOW HOW YOU WOULD LIKE TO VOTE AND WELCOME YOUR
COMMENTS. PLEASE TAKE A FEW MOMENTS WITH THESE MATERIALS AND
RETURN YOUR PROXY TO US.

(PUTNAM LOGO APPEARS HERE)
BOSTON * LONDON * TOKYO
<PAGE>
TABLE OF CONTENTS

A Message from the Chairman. . . . . . . . . . . . . . . . . . . . . . . .1

Notice of Shareholder Meeting. . . . . . . . . . . . . . . . . . . . . . .3

Trustees' Recommendations. . . . . . . . . . . . . . . . . . . . . . . . .5

PROXY CARD ENCLOSED

If you have any questions, please contact us at the special toll-
free number we have set up for you (1-800-225-1581) or call your
financial adviser.
<PAGE>
A MESSAGE FROM THE CHAIRMAN

(Photograph of George Putnam appears here)

Dear Shareholder:

I am writing to you to ask for your vote on important questions
that affect your investment in your fund. While you are, of
course, welcome to join us at your fund's meeting, most
shareholders cast their vote by filling out and signing the
enclosed proxy. We are asking for your vote on the following
matters:

1. ELECTING TRUSTEES TO OVERSEE YOUR FUND;

2. RATIFYING THE SELECTION BY THE TRUSTEES OF THE INDEPENDENT
AUDITORS OF YOUR FUND FOR ITS CURRENT FISCAL YEAR; AND

3. APPROVING A NUMBER OF CHANGES TO YOUR FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS, INCLUDING THE ELIMINATION OF
CERTAIN OF THESE RESTRICTIONS.

Although we would like very much to have each shareholder attend
their fund's meeting, we realize this is not possible. Whether
or not you plan to be present, we need your vote. We urge you to
complete, sign, and return the enclosed proxy card promptly. A
postage-paid envelope is enclosed.

I'm sure that you, like most people, lead a busy life and are
tempted to put this proxy aside for another day. Please don't.
When shareholders don't return their proxies, their fund may have
to incur the expense of follow-up solicitations. All
shareholders benefit from the speedy return of proxies.

Your vote is important to us. We appreciate the time and
consideration that I am sure you will give this important matter.
If you have questions about the proposals, contact your financial
adviser or call a Putnam customer service representative at
1-800-225-1581.

Sincerely yours,

(signature of George Putnam)
George Putnam, Chairman

<PAGE>
PUTNAM INCOME FUND
NOTICE OF A MEETING OF SHAREHOLDERS

THIS IS THE FORMAL AGENDA FOR YOUR FUND'S SHAREHOLDER MEETING.
IT TELLS YOU WHAT MATTERS WILL BE VOTED ON AND THE TIME AND PLACE
OF THE MEETING, IF YOU CAN ATTEND IN PERSON.

To the Shareholders of Putnam Income Fund:

A Meeting of Shareholders of your fund will be held on July 31,
1996 at 2:00 p.m., Boston time, on the eighth floor of One Post
Office Square, Boston, Massachusetts, to consider the following:

1. ELECTING TRUSTEES. SEE PAGE .

2. RATIFYING THE SELECTION BY THE TRUSTEES OF THE INDEPENDENT
AUDITORS OF YOUR FUND FOR ITS CURRENT FISCAL YEAR. SEE
PAGE .

3.A. APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO DIVERSIFICATION OF INVESTMENTS.
SEE PAGE .

3.B. APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENTS IN THE SECURITIES OF
A SINGLE ISSUER. SEE PAGE .

3.C. APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO MAKING LOANS THROUGH PURCHASES
OF DEBT OBLIGATIONS, REPURCHASE AGREEMENTS AND SECURITIES
LOANS. SEE PAGE .

3.D. APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENTS IN REAL ESTATE. SEE
PAGE .

3.E. APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO CONCENTRATION OF ITS ASSETS.
SEE PAGE .

3.F. APPROVING AN AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENTS IN COMMODITIES. SEE
PAGE .

3.G. APPROVING THE ELIMINATION OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION WITH RESPECT TO INVESTMENTS IN
ISSUERS WITH LESS THAN THREE YEARS OF OPERATIONS. SEE
PAGE .
<PAGE>
3.H. Approving the elimination of the fund's fundamental
investment restriction with respect to investments in
securities of issuers in which management of the fund or
Putnam Investment Management, Inc. owns securities. See
page .

3.I. Approving the elimination of the fund's fundamental
investment restriction with respect to margin transactions.
See page .

3.J. Approving the elimination of the fund's fundamental
investment restriction with respect to short sales. See
page .

3.K. Approving the elimination of the fund's fundamental
investment restriction which limits the fund's ability to
pledge assets. See page .

3.L. Approving the elimination of the fund's fundamental
investment restrictions with respect to investments in
illiquid securities. See page .

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
Ronald J. Jackson Eli Shapiro
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.

May , 1996
<PAGE>
PROXY STATEMENT

THIS DOCUMENT WILL GIVE YOU THE INFORMATION YOU NEED TO VOTE ON
THE MATTERS LISTED ON THE PREVIOUS PAGE. MUCH OF THE INFORMATION
IN THE PROXY STATEMENT IS REQUIRED UNDER RULES OF THE SECURITIES
AND EXCHANGE COMMISSION (SEC); SOME OF IT IS TECHNICAL. IF THERE
IS ANYTHING YOU DON'T UNDERSTAND, PLEASE CONTACT US AT OUR
SPECIAL TOLL-FREE NUMBER, 1-800-225-1581, OR CALL YOUR FINANCIAL
ADVISER.

WHO IS ASKING FOR MY VOTE?

THE ENCLOSED PROXY IS SOLICITED BY THE TRUSTEES OF PUTNAM INCOME
FUND for use at the Meeting of Shareholders of the fund to be
held on July 31, 1996, and, if your fund's meeting is adjourned,
at any later meetings, for the purposes stated in the Notice of
Meeting (see previous page).

HOW DO YOUR FUND'S TRUSTEES RECOMMEND THAT SHAREHOLDERS VOTE ON
THESE PROPOSALS?

The Trustees recommend that you vote

1. FOR THE ELECTION OF ALL NOMINEES;

2. FOR SELECTING COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT
AUDITORS OF YOUR FUND;

3.A. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO DIVERSIFICATION OF INVESTMENTS;

3.B. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO INVESTMENTS IN THE SECURITIES OF A SINGLE
ISSUER;

3.C. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO MAKING LOANS THROUGH PURCHASES OF DEBT
OBLIGATIONS, REPURCHASE AGREEMENTS AND SECURITIES LOANS;

3.D. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO INVESTMENTS IN REAL ESTATE;

3.E. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO CONCENTRATION OF ITS ASSETS;

3.F. FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO INVESTMENTS IN COMMODITIES OR COMMODITY
CONTRACTS;

3.G. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENTS IN ISSUERS WITH LESS
THAN THREE YEARS OF OPERATIONS;

3.H. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENTS IN SECURITIES OF
ISSUERS IN WHICH MANAGEMENT OF THE FUND OR PUTNAM INVESTMENT
MANAGEMENT, INC. OWNS SECURITIES;

3.I. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO MARGIN TRANSACTIONS;

3.J. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO SHORT SALES;

3.K. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WHICH LIMITS THE FUND'S ABILITY TO PLEDGE
ASSETS; AND

3.L. FOR ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS WITH RESPECT TO INVESTMENTS IN ILLIQUID
SECURITIES.

WHO IS ELIGIBLE TO VOTE?

Shareholders of record at the close of business on May 3, 1996,
are entitled to be present and to vote at the meeting or any
adjourned meeting. The Notice of Meeting, the proxy, and the
Proxy Statement have been mailed to shareholders of record on or
about May , 1996.

Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.

THE PROPOSALS

I. ELECTION OF TRUSTEES

WHO ARE THE NOMINEES FOR TRUSTEES?

The Nominating Committee of the Trustees recommends that the
number of Trustees be fixed at fourteen and that you vote for the
election of the nominees described below. Each nominee is
currently a Trustee of your fund and of the other Putnam funds.

The Nominating Committee of the Trustees consists solely of
Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of your fund or of Putnam
Investment Management, Inc., your fund's investment manager
("Putnam Management").

JAMESON ADKINS BAXTER
[INSERT PICTURE]

Ms. Baxter, age 52, is the President of Baxter Associates, Inc.,
a management and financial consulting firm which she founded in
1986. During that time, she was also a Vice President and
Principal of the Regency Group, Inc., and a Consultant to First
Boston Corporation, both of which are investment banking firms.
From 1965 to 1986, Ms. Baxter held various positions in
investment banking and corporate finance at First Boston.

Ms. Baxter currently also serves as a Director of Banta
Corporation, Avondale Federal Savings Bank, and ASHTA Chemicals,
Inc. She is also the Chairman Emeritus of the Board of Trustees
of Mount Holyoke College, having previously served as Chairman
for five years and as a Board member for thirteen years; an
Honorary Trustee and past President of the Board of Trustees of
the Emma Willard School; and Chair of the Board of Governors of
Good Shepherd Hospital. Ms. Baxter is a graduate of Mount
Holyoke College.

HANS H. ESTIN
[INSERT PICTURE]

Mr. Estin, age 67, is a Chartered Financial Analyst and the Vice
Chairman of North American Management Corp., a registered
investment adviser serving individual clients and their families.
Mr. Estin currently also serves as a Director of The Boston
Company, Inc., a registered investment adviser which provides
administrative and investment management services to mutual funds
and other institutional investors, and Boston Safe Deposit and
Trust Company; a Corporation Member of Massachusetts General
Hospital; and a Trustee of New England Aquarium. He previously
served as the Chairman of the Board of Trustees of Boston
University and is currently active in various other civic
associations, including the Boys & Girls Clubs of Boston, Inc.
Mr. Estin is a graduate of Harvard College and holds honorary
doctorates from Merrimack College and Boston University.

JOHN A. HILL
[INSERT PICTURE]

Mr. Hill, age 54, is the Chairman and Managing Director of First
Reserve Corporation, a registered investment adviser investing in
companies in the world-wide energy industry on behalf of
institutional investors.
<PAGE>
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate
Director of the Office of Management and Budget and Deputy
Administrator of the Federal Energy Administration.

Mr. Hill currently also serves as a Director of Snyder Oil
Corporation, an exploration and production company which he
founded, Maverick Tube Corporation, a manufacturer of structural
steel, pipe and well casings, PetroCorp Incorporated, an
exploration and production company, Weatherford Enterra, Inc., an
oil field service company, various private companies controlled
by First Reserve Corporation, and various First Reserve Funds.
He is also a Member of the Board of Advisors of Fund Directions.
He is currently active in various business associations,
including the Economic Club of New York, and lectures on energy
issues in the United States and Europe. Mr. Hill is a graduate
of Southern Methodist University.

RONALD J. JACKSON
[INSERT PICTURE]

Mr. Jackson, age 52, was Chairman of the Board, President and
Chief Executive Officer of Fisher-Price, Inc., a major toy
manufacturer, from 1990 to 1993. He previously served as
President and Chief Executive Officer of Stride-Rite, Inc., a
manufacturer and distributor of footwear, from 1989 to 1990, and
as President and Chief Executive Officer of Kenner Parker Toys,
Inc., a major toys and games manufacturer, from 1985 to 1987.
Prior to that, he held various financial and marketing positions
at General Mills, Inc. from 1966 to 1985, including Vice
President, Controller and Vice President of Marketing for Parker
Brothers, a toy and game company, and President of Talbot's, a
retailer and direct marketer of women's apparel.

Mr. Jackson currently serves as a Trustee of Salem Hospital and
an Overseer of the Peabody Essex Museum. He previously served as
a Director of a number of public companies including Fisher-
Price, Inc., Kenner Parker Toys, Inc., and Mattel, Inc., major
toy manufacturers, and Stride-Rite, Inc. Mr. Jackson is a
graduate of Michigan State University Business School.

ELIZABETH T. KENNAN
[INSERT PICTURE]

Ms. Kennan, age 58, is President Emeritus and Professor of Mount
Holyoke College. From 1978 through June 1995, she was President
of Mount Holyoke College. From 1966 to 1978, she was on the
faculty of Catholic University, where she taught history and
published numerous articles.

Ms. Kennan currently also serves as a Director of NYNEX
Corporation, a telecommunications company, Northeast Utilities,
the Kentucky Home Life Insurance Companies, and Talbots, a
women's clothing retailer. She also serves as a Member of The
Folger Shakespeare Library Committee. She is currently active in
various educational and civic associations, including the
Committee on Economic Development and the Council on Foreign
Relations. Ms. Kennan is a graduate of Mount Holyoke College,
the University of Washington and St. Hilda College at Oxford
University and holds several honorary doctorates.

LAWRENCE J. LASSER*
[INSERT PICTURE]

Mr. Lasser, age 53, is the Vice President of your fund and the
other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, Inc. and Putnam
Management since 1985, having begun his career there in 1969.

Mr. Lasser currently also serves as a Director of Marsh &
McLennan Companies, Inc., the parent company of Putnam
Management, and INROADS/Central New England, Inc., a job market
internship program for minority high school and college students.
He is a Member of the Board of Overseers of the Museum of
Science, the Museum of Fine Arts and the Isabella Stewart Gardner
Museum in Boston. He is also a Trustee of the Beth Israel
Hospital and Buckingham, Browne and Nichols School. Mr. Lasser
is a graduate of Antioch College and Harvard Business School.

ROBERT E. PATTERSON
[INSERT PICTURE]

Mr. Patterson, age 51, is the Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership, a
registered investment adviser which manages real estate
investments for institutional investors. Prior to 1990, he was
the Executive Vice President of Cabot, Cabot & Forbes Realty
Advisors, Inc., the predecessor company of Cabot Partners. Prior
to that, he was a Senior Vice President of the Beal Companies, a
real estate management, investment and development company. He
has also worked as an attorney and held various positions in
state government, including the founding Executive Director of
the Massachusetts Industrial Finance Agency.

Mr. Patterson currently also serves as Chairman of the Joslin
Diabetes Center and as a Director of Brandywine Trust Company.
Mr. Patterson is a graduate of Harvard College and Harvard Law
School.

DONALD S. PERKINS*
[INSERT PICTURE]

Mr. Perkins, age 69, is the retired Chairman of the Board of
Jewel Companies, Inc., a diversified retailer, where among other
roles he served as President, Chief Executive Officer and
Chairman of the Board from 1965 to 1980. He currently also
serves as a Director of various other public corporations,
including AON Corp., an insurance company, Cummins Engine
Company, Inc., an engine and power generator equipment
manufacturer and assembler, Current Assets L.L.C., a corporation
providing financial staffing services, Illinova and Illinois
Power Co., Inland Steel Industries, Inc., LaSalle Street Fund,
Inc., a real estate investment trust, Lucent Technologies Inc.,
Springs Industries, Inc., a textile manufacturer, and Time
Warner, Inc., one of the nation's largest media conglomerates.
He previously served as a director of several other major public
corporations, including Corning Glass Works, Eastman Kodak
Company, Firestone Tire & Rubber Company and Kmart Corporation.

Mr. Perkins currently also serves as a Trustee and Vice Chairman
of Northwestern University and as a Trustee of the Hospital
Research and Education Trust. He is currently active in various
civic and business associations, including the Business Council
and the Civic Committee of the Commercial Club of Chicago, of
which he is the founding Chairman. Mr. Perkins is a graduate of
Yale University and Harvard Business School and holds an honorary
doctorate from Loyola University of Chicago.

WILLIAM F. POUNDS
[INSERT PICTURE]

Dr. Pounds, age 68, is the Vice Chairman of your fund and of the
other Putnam funds. He has been a Professor of Management at the
Alfred P. Sloan School of Management at the Massachusetts
Institute of Technology since 1961 and served as Dean of that
School from 1966 to 1980. He previously served as Senior Advisor
to the Rockefeller Family and Associates and was a past Chairman
of Rockefeller & Co., Inc., a registered investment adviser which
manages Rockefeller family assets, and Rockefeller Trust Company.

Dr. Pounds currently also serves as a Director of IDEXX
Laboratories, Inc., EG&G, Inc., Perseptive Biosystems, Inc.,
Management Sciences For Health, Inc. and Sun Company, Inc. He is
also a Trustee of the Museum of Fine Arts in Boston; an Overseer
of WGBH Educational Foundation, and a Fellow of The American
Academy of Arts and Sciences. He previously served as a director
of Fisher-Price, Inc., a major toy manufacturer and General
Mills, Inc., a major manufacturer and distributor of food
products. Dr. Pounds is a graduate of Carnegie Mellon
University.

GEORGE PUTNAM*
[INSERT PICTURE]

Mr. Putnam, age 69, is the Chairman and President of your fund
and of the other Putnam funds. He is the Chairman and a Director
of Putnam Management and Putnam Mutual Funds Corp. and a director
of Marsh & McLennan, their parent company. Mr. Putnam is the son
of the founder of the Putnam funds and Putnam Management and has
been employed in various capacities by Putnam Management since
1951, including Chief Executive Officer from 1961 to 1973. He is
a former Overseer and Treasurer of Harvard University; a past
Chairman of the Harvard Management Company; and a Trustee
Emeritus of Wellesley College and Bradford College.

Mr. Putnam currently also serves as a Director of The Boston
Company, Inc., Boston Safe Deposit and Trust Company, Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and
Gas, Inc., mining and natural resources companies, General Mills,
Inc., a major manufacturer of food products, Houghton Mifflin
Company, a major publishing company, and Rockefeller Group, Inc.,
a real estate manager. He is also a Trustee of Massachusetts
General Hospital, McLean Hospital, Vincent Memorial Hospital,
WGBH Educational Foundation and the Museum of Fine Arts and the
Museum of Science in Boston; the New England Aquarium; an
Overseer of Northeastern University; and a Fellow of The American
Academy of Arts and Sciences. Mr. Putnam is a graduate of
Harvard College and Harvard Business School and holds honorary
doctorates from Bates College and Harvard University.

GEORGE PUTNAM, III*
[INSERT PICTURE]

Mr. Putnam, age 44, is the President of New Generation Research,
Inc., a publisher of financial advisory and other research
services relating to bankrupt and distressed companies, and New
Generation Advisers, Inc., a registered investment adviser which
provides advice to private funds specializing in investments in
such companies. Prior to founding New Generation in 1985, Mr.
Putnam was an attorney with the Philadelphia law firm Dechert
Price & Rhoads.

Mr. Putnam currently also serves as a Director of the
Massachusetts Audubon Society. He is also a Trustee of the Sea
Education Association and St. Mark's School and an Overseer of
the New England Medical Center. Mr. Putnam is a graduate of
Harvard College, Harvard Business School and Harvard Law School.

<PAGE>
ELI SHAPIRO
[INSERT PICTURE]

Dr. Shapiro, age 79, is the Alfred P. Sloan Professor of
Management, Emeritus at the Alfred P. Sloan School of Management
at the Massachusetts Institute of Technology, having served on
the faculty of the Sloan School for eighteen years. He
previously was also on the faculty of Harvard Business School,
The University of Chicago School of Business and Brooklyn
College. During his academic career, Dr. Shapiro authored
numerous publications concerning finance and related topics. He
previously served as the President and Chief Executive of the
National Bureau of Economic Research and also provided economic
and financial consulting services to various clients.

Dr. Shapiro is a past Director of many companies, including
Nomura Dividend Income Fund, Inc., a privately held registered
investment company managed by Putnam Management, Reece
Corporation, a sewing machine manufacturer, Commonwealth
Mortgage, Dexter Corporation, a manufacturer of plastics and
related products, Avis Corporation, a car rental company,
Connecticut Bank and Trust Company, Connecticut National Gas
Corporation, the Federal Home Loan Bank of Boston, where he
served as Chairman from 1977 to 1989, Travelers' Corporation, an
insurance company, and Norlin Corporation, a musical instrument
manufacturer; and a past Trustee of Mount Holyoke College and the
Putnam funds (from 1984 to 1989).

Dr. Shapiro is a Fellow of The American Academy of Arts and
Sciences and is active in various professional and civic
associations, including the American Economic Association, the
American Finance Association and the Council on Foreign
Relations. Dr. Shapiro is a graduate of Brooklyn College and
Columbia University.

A.J.C. SMITH*
[INSERT PICTURE]

Mr. Smith, age 62, is the Chairman and Chief Executive Officer of
Marsh & McLennan Companies, Inc. He has been employed by Marsh &
McLennan and related companies in various capacities since 1961.
Mr. Smith is a Director of the Trident Corp., and he also serves
as a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, The American Institute for Chartered Property
Underwriters, and is a Founder of the Museum of Scotland Society.
He was educated in Scotland and is a Fellow of the Faculty of
Actuaries in Edinburgh, a Fellow of the Canadian Institute of
Actuaries, a Fellow of the Conference of Actuaries in Public
Practice, an Associate of the Society of Actuaries, a Member of
the American Academy of Actuaries, the International Actuarial
Association and the International Association of Consulting
Actuaries.

W. NICHOLAS THORNDIKE**
[INSERT PICTURE]

Mr. Thorndike, age 63, serves as a Director of various
corporations and charitable organizations, including Data General
Corporation, a computer and high technology company, Bradley Real
Estate, Inc., a real estate investment firm, Providence Journal
Co., a newspaper publisher and owner of television stations, and
Courier Corporation, a book binding and printing company. He is
also a Trustee of Eastern Utilities Associates, Massachusetts
General Hospital, where he previously served as chairman and
president, and Northeastern University.

Prior to December 1988, he was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike,
Doran, Paine & Lewis, a registered investment adviser which
manages mutual funds and institutional assets. He also
previously served as a Trustee of the Wellington Group of Funds
(now The Vanguard Group) and was the Chairman and a Director of
Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College.

- ----------------------------

* Nominees who are or may be deemed to be "interested persons"
(as defined in the Investment Company Act of 1940) of your
fund, Putnam Management, and Putnam Mutual Funds Corp.
("Putnam Mutual Funds"), the principal underwriter for all
the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Putnam, Lasser, and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of your fund, or directors of
Putnam Management, Putnam Mutual Funds, or Marsh & McLennan
Companies, Inc., the parent company of Putnam Management and
Putnam Mutual Funds. Mr. George Putnam, III, Mr. Putnam's
son, is also an "interested person" of your fund, Putnam
Management, and Putnam Mutual Funds. Mr. Perkins may be
deemed to be an "interested person" of your fund because of
his service as a director of a certain publicly held company
that includes registered broker-dealer firms among its
subsidiaries. Neither your fund nor any of the other Putnam
funds currently engages in any transactions with such firms
except that certain of such firms act as dealers in the
retail sale of shares of certain Putnam funds in the
ordinary course of their business. The balance of the
nominees are not "interested persons."

** In February 1994, Mr. Thorndike accepted appointment as a
successor trustee of certain private trusts in which he has
no beneficial interest. At that time he also became
Chairman of the Board of two privately owned corporations
controlled by such trusts, serving in that capacity until
October 1994. These corporations filed voluntary petitions
for relief under Chapter 11 of the U.S. Bankruptcy Code in
August 1994.

Except as indicated above, the principal occupations and business
experience of the nominees for the last five years have been with
the employers indicated, although in some cases they have held
different positions with those employers. Except for Mr. Jackson
and Dr. Shapiro, all the nominees were elected by the
shareholders and by the other Trustees in April 1995. As
indicated above, Dr. Shapiro also previously served as a Trustee
of the Putnam funds from 1984 to 1989. The 14 nominees for
election as Trustees at the shareholder meeting of your fund who
receive the greatest number of votes will be elected Trustees of
your fund. The Trustees serve until their successors are elected
and qualified. Each of the nominees has agreed to serve as a
Trustee if elected. If any of the nominees is unavailable for
election at the time of the meeting, which is not anticipated,
the Trustees may vote for other nominees at their discretion, or
the Trustees may recommend that the shareholders fix the number
of Trustees at less than 14 for your fund.

WHAT ARE THE TRUSTEES' RESPONSIBILITIES?

Your fund's Trustees are responsible for the general oversight of
your fund's business and for assuring that your fund is managed
in the best interests of its shareholders. The Trustees
periodically review your fund's investment performance as well as
the quality of other services provided to your fund and its
shareholders by Putnam Management and its affiliates, including
administration, custody, distribution and investor servicing. At
least annually, the Trustees review the fees paid to Putnam
Management and its affiliates for these services and the overall
level of your fund's operating expenses. In carrying out these
responsibilities, the Trustees are assisted by an independent
administrative staff and by your fund's auditors and legal
counsel, which are selected by the Trustees and are independent
of Putnam Management and its affiliates.
<PAGE>
DO THE TRUSTEES HAVE A STAKE IN YOUR FUND?

The Trustees believe it is important that each Trustee have a
significant investment in the Putnam funds. The Trustees
allocate their investments among the more than 99 Putnam funds
based on their own investment needs. The Trustees' aggregate
investments in the Putnam funds total over $53 million. The
table below lists each Trustee's current investments in the fund
and in the Putnam funds as a group.<PAGE>
<TABLE>
<CAPTION>
SHARE OWNERSHIP BY TRUSTEES+

YEAR FIRST NUMBER OF
ELECTED AS NUMBER OF SHARES OF
TRUSTEE OF SHARES OF THE ALL PUTNAM
THE PUTNAM FUND OWNED FUNDS OWNED
TRUSTEES FUNDS AS OF 4/25/96* AS OF 4/25/96**
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Jameson A. Baxter 1994
Hans H. Estin 1972
John A. Hill 1985
Elizabeth T. Kennan 1992
Lawrence J. Lasser 1992
Robert E. Patterson 1984
Donald S. Perkins 1982
William F. Pounds 1971
George Putnam 1957
George Putnam, III 1984
Eli Shapiro 1995++
A.J.C. Smith 1986
W. Nicholas Thorndike 1992
- ------------------------------------------------------------------------------------------
+ Ronald J. Jackson became a Trustee of the fund effective May 3, 1996 and does not own
any shares of the fund.

++ Dr. Shapiro previously served as a Trustee of the Putnam funds from 1984 to 1989.

* Except as noted below, each Trustee has sole investment power and sole voting power
with respect to his or her shares of the fund.

** These holdings do not include shares of Putnam money market funds.

<PAGE>
As of April 25, 1996, the Trustees and officers of the fund owned a total of shares
of the fund, comprising less than 1% of its outstanding shares on that date. A total of
of these shares are held by certain "interested" Trustees and officers of your
fund and Putnam Management in their Putnam Investments, Inc. Profit Sharing Retirement
Plan accounts. Each individual accountholder has sole investment power and shared voting
power with respect to his/her account.
</TABLE>

WHAT ARE SOME OF THE WAYS IN WHICH THE TRUSTEES REPRESENT
SHAREHOLDER INTERESTS?

The Trustees believe that, as substantial investors in the Putnam
funds, their interests are closely aligned with those of
individual shareholders. Among other ways, the Trustees seek to
represent shareholder interests:

by carefully reviewing your fund's investment
performance on an individual basis with your fund's
managers;

by also carefully reviewing the quality of the various
other services provided to the funds and their
shareholders by Putnam Management and its affiliates;

by discussing with senior management of Putnam
Management steps being taken to address any performance
deficiencies;

by reviewing the fees paid to Putnam Management to
ensure that such fees remain reasonable and competitive
with those of other mutual funds, while at the same
time providing Putnam Management sufficient resources
to continue to provide high quality services in the
future;

by monitoring potential conflicts between the funds and
Putnam Management and its affiliates to ensure that the
funds continue to be managed in the best interests of
their shareholders;

by also monitoring potential conflicts among funds to
ensure that shareholders continue to realize the
benefits of participation in a large and diverse family
of funds.

HOW OFTEN DO THE TRUSTEES MEET?

The Trustees meet each month (except August) over a two-day
period to review the operations of your fund and of the other
Putnam funds. A portion of these meetings is devoted to meetings
of various Committees of the board which focus on particular
matters. These include: the Contract Committee, which reviews
all contractual arrangements with Putnam Management and its
affiliates; the Communication and Service Committee, which
reviews the quality of services provided by your fund's investor
servicing agent, custodian and distributor; the Pricing,
Brokerage and Special Investments Committee, which reviews
matters relating to valuation of securities, best execution,
brokerage costs and allocations and new investment techniques;
the Audit Committee, which reviews accounting policies and the
adequacy of internal controls and supervises the engagement of
the funds' auditors; the Compensation, Administration and Legal
Affairs Committee, which reviews the compensation of the Trustees
and their administrative staff and supervises the engagement of
the funds' independent counsel; and the Nominating Committee,
which is responsible for selecting nominees for election as
Trustees.

Each Trustee generally attends at least two formal committee
meetings during such monthly meeting of the Trustees. During
1995, the average Trustee participated in approximately 40
committee and board meetings. In addition, the Trustees meet in
small groups with Chief Investment Officers and Portfolio
Managers to review recent performance and the current investment
climate for selected funds. These meetings ensure that each
fund's performance is reviewed in detail at least twice a year.
The Contract Committee typically meets on several additional
occasions during the year to carry out its responsibilities.
Other Committees, including an Executive Committee, may also meet
on special occasions as the need arises.

WHAT ARE THE TRUSTEES PAID FOR THEIR SERVICES?

Your fund pays each Trustee a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other
Putnam funds. The Trustees periodically review their fees to
assure that such fees continue to be appropriate in light of
their responsibilities as well as in relation to fees paid to
trustees of other mutual fund complexes. The fees paid to each
Trustee by your fund and by all of the Putnam funds are shown
below:
<PAGE>
COMPENSATION TABLE +

Total
Aggregate compensation
compensation from all
Trustees from the fund* Putnam funds**
- --------------------------------------------------------------
Jameson A. Baxter $1,856 $150,854
Hans H. Estin 1,864 150,854
John A. Hill*** 1,841 149,854
Ronald J. Jackson N/A N/A
Elizabeth T. Kennan 1,847 148,854
Lawrence J. Lasser 1,864 150,854
Robert E. Patterson 1,880 152,854
Donald S. Perkins 1,864 150,854
William F. Pounds 1,835 149,854
George Putnam 1,864 150,854
George Putnam, III 1,864 150,854
Eli Shapiro**** 954 95,372
A.J.C. Smith 1,851 149,854
W. Nicholas Thorndike 1,880 152,854

+ Ronald J. Jackson became a Trustee of the fund effective May
3, 1996 and has received no compensation from the fund or the
other Putnam funds.

* Includes an annual retainer and an attendance fee for each
meeting attended.

** Reflects total payments received from all Putnam funds in the
most recent calendar year. As of December 31, 1995, there
were 99 funds in the Putnam family.

*** Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. The total amount of deferred
compensation payable to Mr. Hill by all Putnam funds as of
October 31, 1995 was $37,322, including income earned on such
amounts.

**** Elected as a Trustee in April 1995.

Your fund's Trustees have approved Retirement Guidelines for
Trustees of the Putnam funds. These guidelines provide generally
that a Trustee who retires after reaching age 72 and who has at
least 10 years of continuous service will be eligible to receive a
retirement benefit from each Putnam fund for which he or she served
as a Trustee. The amount and form of such benefit is subject to
determination annually by the Trustees and, unless otherwise
determined by the Trustees, will be an annual cash benefit payable
for life equal to one-half of the Trustee retainer fees paid by each
fund at the time of retirement. Several retired Trustees are
currently receiving benefits pursuant to the Guidelines and it is
anticipated that the current Trustees will receive similar benefits
upon their retirement. A Trustee who retired in calendar 1995 and
was eligible to receive benefits under these Guidelines would have
received an annual benefit of $66,749, based upon the aggregate
retainer fees paid by the Putnam funds for such year. The Trustees
reserve the right to amend or terminate such Guidelines and the
related payments at any time, and may modify or waive the foregoing
eligibility requirements when deemed appropriate.

For additional information about your fund, including further
information about its Trustees and officers, please see "Further
Information About Your Fund," on page .

PUTNAM INVESTMENTS

Putnam Investment Management, Inc. and its affiliates, Putnam Mutual
Funds, the principal underwriter for shares of your fund and Putnam
Fiduciary Trust Company, your fund's investor servicing agent and
custodian, are wholly owned by Putnam Investments, Inc., One Post
Office Square, Boston, Massachusetts 02109, a holding company that
is in turn wholly owned by Marsh & McLennan Companies, Inc., which
has executive offices at 1166 Avenue of the Americas, New York, New
York 10036. Marsh & McLennan Companies, Inc., and its operating
subsidiaries are professional services firms with insurance and
reinsurance brokering, consulting, and investment management
businesses.

2. SELECTION OF INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, independent accountants, has been selected by the
Trustees as the auditor of your fund for the current fiscal year.
Among the country's preeminent accounting firms, this firm also
serves as the auditor for approximately half of the other funds in
the Putnam family. It was selected primarily on the basis of its
expertise as auditors of investment companies, the quality of its
audit services, and the competitiveness of the fees charged for
these services.

A majority of the votes on the matter is necessary to ratify the
selection of auditors. A representative of the independent auditors
is expected to be present at the meeting to make statements and to
respond to appropriate questions.

3.
PROPOSALS A-L.

As described in the following proposals, the Trustees are
recommending that shareholders approve a number of changes to the
fund's fundamental investment restrictions, including the
elimination of certain restrictions. The purpose of these proposed
changes is to increase the fund's investment flexibility and to
bring the fund's policies more in line with those of many other
Putnam funds. Several of these changes reflect the elimination of
certain restrictive policies which were required at one time by
various state securities authorities but which are no longer
required under current regulations.

The adoption of any of these proposals is not contingent on the
adoption of any other proposal.

3.A. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO DIVERSIFICATION OF INVESTMENTS

The Trustees are recommending that the fund's fundamental investment
restriction relating to the diversification of its investments be
revised to grant the fund the maximum investment flexibility
permitted by the Investment Company Act of 1940 ("1940 Act"). Under
the 1940 Act, the fund, as a diversified fund, generally may not,
with respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer (except U.S.
government securities). The remaining 25% of the fund's total
assets is not subject to this restriction.

The fund's current restriction is more restrictive, and states that
the fund may not:

"Purchase any security (other than government obligations)
if, as a result, more than 5% of the current value of the
fund's total net assets would be invested in securities of
that issuer."

The proposed amended fundamental investment restriction is set forth
below.

The fund may not ...

With respect to 75% of its total assets, invest in the
securities of any issuer if, immediately after such

investment,
more than 5% of the total assets of the
fund (taken at current value) would be invested in the
securities of such issuer; provided that this
limitation does not apply to obligations issued or
guaranteed as to interest or
principal by the U.S.
government or its agencies or instrumentalities."

If the proposed change is approved, the fund will be able to invest
up to 25% of its total assets in the securities of any one issuer.
The amended restriction would continue to exclude from its
limitations U.S. government securities and would clarify, consistent
with the 1940 Act, that U.S. government securities include those
securities guaranteed as to principal or interest by the U.S.
government or its agencies or instrumentalities. Following the
amendment, the fund would continue to be a diversified investment
company for purposes of the 1940 Act.

Putnam Management believes this amendment will enhance the fund's
investment flexibility. The proposed amendment will enable the fund
to invest a greater percentage of its assets in securities that
Putnam Management believes offer the potential for high current
income. However, during times when Putnam Management invests a
higher percentage of the fund's assets in one or more issuers, the
value of the fund's shares may fluctuate more widely than the value
of shares of a portfolio investing in a larger number of issuers.

3.B. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN THE SECURITIES OF A SINGLE ISSUER

The Trustees are recommending that the fund's fundamental investment
restriction with respect to investment in the securities of a single
issuer be revised to grant the fund the maximum flexibility
permitted under the 1940 Act. The 1940 Act prohibits a diversified
fund such as the fund from investing, with respect to 75% of its
total assets, in the securities of an issuer if as a result it would
own more than 10% of the outstanding voting securities of that
issuer. The fund's current investment restriction, which is more
restrictive than the 1940 Act, states that the fund may not:

"Acquire more than 10% of any one class of the securities of
an issuer. (For this purpose all preferred stocks of an
issuer are regarded as a single class, and all debt
securities of an issuer are regarded as a single class.)"

The proposed amended fundamental investment restriction is set forth
below.

"The fund may not ...

With respect to 75% of its total assets, acquire more
than 10% of the outstanding voting securities of any
issuer."

Putnam Management believes that limiting this restriction to voting
securities and 75% of the fund's assets will enhance investment
flexibility. Putnam Management has advised the Trustees that the
current restriction could prevent the fund from investing in certain
opportunities to the fullest extent that Putnam Management believes
would best serve the fund's investment objective.

The amendment removes all restrictions on the amount of a class of
an issuer's securities that the fund may purchase, and enables the
fund to purchase more than 10% of the voting securities of an issuer
with respect to 25% of the fund's total assets.
To
the extent the
fund individually or with other funds and accounts managed by Putnam
Management or its affiliates owns all or a major portion of the
outstanding securities of a particular issuer, under adverse market
or economic conditions or in the event of adverse changes in the
financial condition of the issuer the fund could find it more
difficult to sell these securities when Putnam Management believes
it advisable to do so, or may be able to sell the securities only at
prices lower than if they were more widely held. In addition,
certain of the companies in which the fund may invest a greater
portion of its assets following the amendment could have relatively
small equity market capitalizations (e.g., under $1 billion). Such
companies often have limited product lines, markets or financial
resources. They may trade less frequently and in limited volume,
and only in the over-the-counter market or on a regional securities
exchange. As a result, the securities of these companies may
fluctuate in value more than those of larger, more established
companies. Under such circumstances, it may also be more difficult
to determine the fair value of such securities for purposes of
computing the fund's net asset value.

3.C. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO MAKING LOANS THROUGH PURCHASES OF DEBT
OBLIGATIONS, REPURCHASE AGREEMENTS AND SECURITIES LOANS

The Trustees are recommending that the fund's fundamental investment
restriction with respect to making loans be revised to remove the
asset limitations on the fund's ability to enter into repurchase
agreements and securities loans and to reflect the current
formulation for debt securities used by many other Putnam funds.
The current restriction states that the fund may not:

"Make loans, except by purchase of bonds, notes or other
similar debt securities (which may be subject to the 15%
limitation on securities restricted as to resale or the 5%
limitation on unmarketable securities -- see restrictions 6
and 12), by entry into repurchase agreements with respect to
not more than 25% of its total assets, or through the lending
of its portfolio securities with respect to not more than 25%
of its total assets. "
<PAGE>
The proposed amended fundamental investment restriction is set forth
below.

"The fund may not ...

Make loans, except by purchase of debt obligations in
which the fund may invest consistent with its
investment policies, by
entering into repurchase
agreements,
or by lending its portfolio securities
."

Following the amendment, the fund may, consistent with its
investment objective and policies, purchase all types of debt
obligations and enter into repurchase agreements and securities
loans without limit. Putnam Management recommended this amendment
to the Trustees because it believes that the increased investment
flexibility could assist the fund in achieving its investment
objective, because repurchase agreements and securities loans often
offer opportunities for increased investment return.

When the fund enters into a repurchase agreement, it typically
purchases a security for a relatively short period (usually not more
than one week), which the seller agrees to repurchase at a fixed
time and price, representing the fund's cost plus interest. When
the fund enters into a securities loan, it lends certain of its
portfolio securities to broker-dealers or other parties and
typically receives an interest payment in return. These
transactions must be fully collateralized at all times, but involve
some risk to the fund if the other party should default on its
obligation. If the other party in these transactions should become
involved in bankruptcy or insolvency proceedings, it is possible
that the fund may be treated as an unsecured creditor and be
required to return the underlying collateral to the other party's
estate.

3.D. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN REAL ESTATE

The

Trustees
are recommending that the fund's fundamental investment
restriction relating to investments in real estate be revised to
permit the fund to acquire and dispose of real estate acquired
through the exercise of rights in certain debt obligations held by
the fund. The fund's current fundamental restriction does not
permit the fund to purchase or sell real estate directly, although
the fund may invest in a variety of securities the value of which is
dependent upon the value of real estate. The current restriction
states that the fund may not:

"Buy or sell real estate, but it may purchase securities of
companies which deal in real estate, including securities of
real estate investment trusts, and may purchase securities
which are secured by interests in real estate."

The proposed amended fundamental investment restriction is set forth
below.

"The fund may not ...

Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate,
securities which are secured by interests in real
estate, and securities which represent interests in
real estate, and it may acquire and dispose of real
estate or interests in real estate acquired through
the exercise of its rights as a holder of debt
obligations secured by real estate or interests
therein."

Putnam Management believes that the amendment will allow the fund to
take full advantage of rights it may have as a holder of certain
debt obligations which are secured by real estate. The amended

restriction
would allow the fund to own real estate directly as a
result of the exercise of its rights in connection with debt
obligations it owns. In such cases, the ability to acquire and
dispose of real estate may serve to protect the fund during times
where an issuer of debt securities is otherwise unable to meet its
obligations.

To the extent the fund holds real estate-related securities, it will
be subject to the risks associated with the real estate market.
These risks may include declines in the value of real estate,
changes in general or local economic conditions, overbuilding,
difficulty in completing construction, increased competition,
changes in zoning laws, increases in property taxes and operating
expenses, and variations in rental income. Generally, increases in
interest rates will increase the costs of obtaining financing, which
may result in a decrease in the value of such investments.

<PAGE>
3.E. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO CONCENTRATION OF ITS ASSETS

The Trustees are recommending that the fund's fundamental investment
restriction regarding concentration be revised to make it clear that
the fund may invest more than 25% of its assets in the securities of
the U.S. government, its agencies or instrumentalities. The current
restriction states that the fund may not:

"Invest more than 25% of its assets in any one industry."

The proposed amended fundamental restriction is set forth below.

"The fund may not ...

Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as
a result of such purchase, more than 25% of the fund's
total assets would be invested in any one industry."

Putnam Management believes that this amendment will make it clear
that the fund may invest in the securities of the U.S. government or
its agencies or instrumentalities without regard to the 25% limit.
Putnam Management believes that the current restriction does not
prevent the fund from investing in such securities without limit,
because the SEC takes the position that government issuers,
including agencies and instrumentalities, are not members of any
industry. However, to avoid any possible ambiguity in the future,
Putnam Management believes that this clarification should be made at
this time.

3.F. AMENDING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION WITH
RESPECT TO INVESTMENTS IN COMMODITIES.

The Trustees are recommending that the fund's fundamental investment
restriction regarding investments in commodities be revised to
permit the fund to invest in financial futures contracts and options
transactions. The current restriction states that the fund may not:

"Buy or sell commodities or commodity contracts."

The proposed amended fundamental restriction is set forth below.

"The fund may not ...

Purchase or sell commodities or commodity contracts,
except that the fund may purchase and sell financial
futures contracts and options."

If the proposal is approved, the fund will be able to engage in a
variety of transactions involving the use of financial futures and
options. Putnam Management believes the enhanced investment
flexibility could assist the fund in achieving its investment
objective, because such strategies often offer opportunities for
hedging and increased investment return. The fund might buy and
sell financial futures contracts in order to hedge against changes
in the value of securities it owns or expects to purchase or to
hedge against changes in interest rates. The fund might also buy
and sell (otherwise known as "write") call and put options on
futures contracts for similar purposes. In addition, to the extent
permitted by applicable law, the fund may engage in financial
futures and options transactions for purposes other than hedging,
such as a substitute for direct investment in securities. The fund
might also buy and sell foreign currency futures and options.

A FUTURES CONTRACT is a contract to buy or sell a commodity, such as
a security, a currency, or a unit of an index, at an agreed upon
price at a specified future date. A futures contract sale creates
an obligation of the seller to deliver the type of financial
instrument called for in the contract at the agreed upon price on
the specified date. A futures contract purchase creates an
obligation of the purchaser to take delivery of the type of
financial instrument called for in the contract at the agreed upon
price on the specified date. Depending on the change in the value
of the commodity between the time the fund enters into and
terminates a futures contract, the fund realizes a gain or loss. An
OPTION on a futures contract gives its holder the right, in return
for a premium paid, to assume a position in a futures contract at
the specified option exercise price at any time during the period of
the option. If an option purchased by the fund expired unexercised,
the fund's loss would be limited to the price it paid for the option
(known as the "premium"). Where the fund writes an option, however,
the fund's loss would not be so limited, and would be equal to the
change in the value of the futures contract position between the
time the fund writes the option and the option's exercise. In
connection with futures and options transactions, the fund would be
required to make initial margin payments and subsequent payments,
called "variation margin," each day depending on the value of the
fund's position in any such contract.

Futures and options transactions involve costs and may result in
losses. Certain risks arise because of the possibility of imperfect
correlations between movements in the prices of futures and options
and movements in the prices of the underlying commodity or of the
portfolio securities that are the subject of a hedge. The
successful use by the fund of futures and options strategies further
depends on the ability of Putnam Management to forecast market
movements correctly. Other risks arise from the fund's potential
inability to close out such positions. There can be no assurance
that the fund will be able to effect closing transactions at any
particular time or at an acceptable price. The fund's ability to
terminate option positions established in the over-the-counter
market may be more limited than for exchange traded options and may
also involve the risk that securities dealers participating in such
transactions would fail to meet their obligations to the fund. The
use of futures and options for purposes other than hedging entails
greater risks.

3.G. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO INVESTMENTS IN ISSUERS WITH LESS THAN THREE
YEARS OF OPERATIONS

The Trustees are recommending that the fund's fundamental investment
restriction which limits the fund's investments in issuers with
limited operating histories, which are sometimes referred to as
"unseasoned issuers," be eliminated. The current restriction states
that the fund may not:

"Invest in securities of an issuer which, together with any
predecessor, has been in operation for less than three years,
[and in equity securities of issuers for which market
quotations are not readily available (but excluding
restricted securities limited by restriction 12 below)] if,
as a result, more than 5% of the fund's current net assets
would then be invested in such securities."

Certain state securities laws impose restrictions on the fund's
ability to invest in unseasoned issuers, but these limitations are
less restrictive than the fund's current restriction and are not
required to be contained in a fundamental policy. For these
reasons, Putnam Management believes that the fund's current
restriction is unnecessarily restrictive and should be eliminated.

The section of the restriction in brackets is proposed to be
eliminated by proposal 3.L.

The fund originally adopted this restriction to comply with certain
state securities
requirements, and while the
restriction is
currently required by only one
state, it
is not required to be a
fundamental policy. If this proposal is approved, the Trustees
intend to replace this restriction with the following non-
fundamental investment restriction to comply with the remaining
state's requirement.

"The fund may not . . .

"Invest in securities of an issuer which, together with any
predecessors, controlling persons, general partners and
guarantors, have a record of less than three years'
continuous business operation or relevant business
experience, if, as a result, the aggregate of such
investments would exceed 5% of the value of the fund's net
assets; provided, however, that this restriction shall not
apply to any obligations of the U.S. government or its
instrumentalities or agencies."

Following such amendment, the fund will, consistent with
the

state

requirement, have the ability to invest up to 5% of its assets in
the securities of unseasoned issuers without regard to its
investments in equity securities for which market quotations are not
readily available. The restriction will also exempt certain U.S.
government securities from its limitations to provide the fund with
maximum investment
flexibility. Putnam Management believes that
this enhanced flexibility could assist the fund in achieving its
objective, since unseasoned issuers could offer the potential for
greater investment return.

Putnam
Management believes making this policy non-fundamental will
provide the fund with maximum flexibility to modify or eliminate the
policy if no longer required under state law. If the restriction
were no longer required, the Trustees could change or eliminate the
restriction to increase the fund's investment flexibility without
the need for further shareholder approval.

Companies which have been in operation for less than three years
include start-up companies and other companies with limited
operating histories, many of which would have relatively small
equity market capitalizations (e.g., under $1
billion).
Although
these companies may provide greater opportunities for capital
growth, they also involve greater risk. These companies often have
limited product lines, markets or financial resources. They may
trade less frequently and in limited volume, and only in the over-
the-counter market or on a regional securities exchange. As a
result, the securities of these companies may fluctuate in value
more than those of larger, more established companies.

REQUIRED VOTE. Approval of this proposal requires the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of
the fund, or (2) 67% or more of the shares of the fund present at
the meeting if more than 50% of the outstanding shares of the fund
are present at the meeting in person or by proxy.
<PAGE>
3.H. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO INVESTMENTS IN SECURITIES OF ISSUERS IN WHICH
MANAGEMENT OF THE FUND OR PUTNAM INVESTMENT MANAGEMENT, INC.
OWNS SECURITIES

The Trustees are recommending eliminating the fund's fundamental
investment restriction which prevents the fund from investing in the
securities of issuers in which management of the fund or Putnam
Management owns a certain percentage of securities. The current
restriction states that the fund may not:

"Invest in securities of any company, if to the knowledge of
the fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the shares or securities of that company together own
more than 5%."

The fund originally adopted this restriction to comply with certain
state securities law requirements, and the restriction is currently
required by only one state, but is not required to be a fundamental
policy. If this proposal is approved, the Trustees intend to
replace this fundamental restriction with an identical non-
fundamental investment restriction to comply with the remaining
state's requirements.

Putnam Management believes that making this policy non-fundamental
will provide the fund with maximum flexibility to modify or
eliminate the policy if no longer required under state law. If the
restriction was no longer required, the Trustees could eliminate the
restriction to increase the fund's investment flexibility without
the need for further shareholder approval. If the restriction was
eliminated, the fund would be able to invest in the securities of
any issuer without regard to ownership in such issuer by management
of the fund or Putnam Management, except to the extent prohibited by
the fund's investment policies or the 1940 Act.

3.I. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO MARGIN TRANSACTIONS

The Trustees are recommending that the fund's fundamental investment
restriction with respect to margin transactions be eliminated.
"Margin transactions" involve the purchase of securities with money
borrowed from a broker, with cash or eligible securities being used
as collateral against the loan. The current restriction states that
the fund may not:

"Purchase securities on margin [or make short sales]."

The section of the restriction in brackets is proposed to be
eliminated by proposal 3.J.

The fund originally adopted this restriction to comply with certain
state securities law requirements, and the restriction is currently
required by only one state, but is not required to be a fundamental
policy. If the proposal is approved, the Trustees intend to replace
this fundamental restriction with the following non-fundamental
investment restriction to comply with the remaining state's
requirement.

"Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases
and sales of securities, and except that it may make margin
payments in connection with financial futures contracts or
options."

The new restriction contains an exception for short-term credits,
which are specifically excluded from the 1940 Act's general
prohibition on margin transactions. The restriction also contains
an exception for margin in connection with futures and related
options transactions, which is different from that of margin in
securities transactions because it does not involve the borrowing of
funds to finance the transactions. Rather, such margin payments are
similar to a performance bond or good faith deposit which would be
returned to the fund upon termination of the contract, assuming all
contractual obligations have been satisfied. Putnam Management
believes that making this policy non-fundamental will provide the
fund with maximum flexibility to modify or eliminate the policy if
no longer required under state law. If the restriction was no
longer required, the Trustees could eliminate the restriction to
increase the fund's investment flexibility without the need for
further shareholder approval. However, the fund's potential use of
margin transactions beyond transactions in financial futures and
options and for the clearance of purchases and sales of securities,
including the use of margin in ordinary securities transactions, is
generally limited by the current position taken by the Staff of the
SEC that margin transactions with respect to securities are
prohibited under Section 18 of the 1940 Act because they create
senior securities. The fund's ability to engage in margin
transactions is also limited by its investment policies, which
generally permit the fund to borrow money in limited circumstances
and only from banks.

3.J. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WITH RESPECT TO SHORT SALES

The Trustees are recommending that the fund's fundamental investment
restriction with respect to short sales be eliminated. The current

restriction
states that the fund may not:

"[Purchase securities on margin] or make short sales."

The section of the restriction in brackets is proposed to be
eliminated by proposal 3.I.

The fund originally adopted this restriction to comply with certain
state securities law requirements, and while the restriction is
currently required by one state, it is not required to be a
fundamental policy. If this proposal is approved, the Trustees
intend to replace this fundamental restriction with the following
non-fundamental restriction:

"The fund may not ...

Make short sales of securities or maintain a short
position for the account of the fund unless at all
times when a short position is open it owns an equal
amount of such securities or owns securities which,
without payment of any further consideration, are
convertible into or exchangeable for securities of the
same issue as, and in equal amount to, the securities
sold short."

Under the proposed new restriction, the fund would be permitted to
enter into short sales where the fund owns or has the right to
acquire at no added cost securities identical to those sold short
(an investment technique known as a short sale "against the box").
Putnam Management believes that this enhanced investment flexibility
could assist the fund in meeting its objective, as short sales
"against the box" may be used to hedge against a decline in the
value of securities held by the fund. The fund would not be
permitted to engage in short sales other than short sales "against
the box."

In
a typical short
sale,
the fund borrows securities from a broker
that it anticipates will decline in value in order to sell to a
third party. The fund becomes obligated to return securities of the
same issue and quantity at some future date, and it realizes a loss
to the extent the securities increase in value and a profit to the
extent the securities decline in value (after including any
associated costs). Since the value of a particular security can
increase without limit, the fund could potentially realize losses
with respect to short sales that are not "against the box" that are
significantly greater than the value of the securities at the time
they are sold short. The fund would collateralize its short
position by delivering to the broker an amount equal to the proceeds
of the short sale and an additional margin amount as required by
law. In addition, if such non-fundamental investment restriction is
modified or removed and the fund engages in short sales other than
short sales "against the box," current SEC guidelines would require
the fund to maintain in a segregated account cash, U.S. government
securities or other liquid high-grade debt obligations equal to the
current market value of the securities sold short minus the margin
amount delivered to the broker. The value of the segregated account
would be marked to market daily to reflect any changes in value of
the fund's short position.

3.K. ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
WHICH LIMITS THE FUND'S ABILITY TO PLEDGE ASSETS

The Trustees are recommending that the fund's fundamental investment
restriction which limits the fund's ability to pledge its assets be
eliminated. The current restriction states that the fund may not:

"Pledge more than 15% of its total assets (taken at cost),
except in connection with the writing of call options. (The
deposit in escrow of underlying securities in connection with
the writing of options is not deemed by the fund to be a
pledge or other encumbrance.)"

Certain state securities laws impose limitations on the fund's
ability to pledge its assets, but these limitations are much less
restrictive than the fund's current restriction, and are not
required to be contained in a fundamental policy. For these
reasons, Putnam Management believes that the fund's current
restriction is unnecessarily restrictive and should be eliminated.
If the proposal is approved, the Trustees intend to replace this
fundamental restriction with the following non-fundamental
investment restriction to comply with the current state
requirements.
<PAGE>
"The fund may not ...

Pledge, hypothecate, mortgage or otherwise encumber
its assets in excess of 33 1/3%
of its total assets
(taken at cost) in connection with permitted
borrowings."

This proposal would increase the fund's ability to pledge assets to
up to one-third of its total assets. In addition, the proposed new
restriction only restricts the fund in connection with pledges of
assets with respect to borrowings; other activities which could be
deemed to be pledges or other encumbrances, such as collateral
arrangements with respect to certain forward commitments will not be
restricted. Putnam Management believes that the enhanced
flexibility could assist the fund in achieving its investment
objective. Further, Putnam Management believes that the fund's
current limits on pledging may conflict with the fund's ability to
borrow money to meet redemption requests or for extraordinary or
emergency purposes. This conflict arises because banks may require
borrowers such as the fund to pledge assets in order to
collateralize the amount borrowed. Often, these collateral
requirements are for amounts larger than the principal amount of the
loan. If the fund needed to borrow the maximum amount permitted by
its policies (currently 10% of its gross assets), it might be
possible that a bank would require collateral in excess of 15% of
the fund's gross assets. Therefore, the limit on pledging assets
may have the effect of reducing the amount that the fund may borrow
in these situations.

Putnam Management believes making this policy non-fundamental will
provide the fund with maximum flexibility to modify or eliminate the
policy if no longer required under state law. If the restriction
was no longer required, the Trustees could modify or eliminate the
restriction to increase the fund's investment flexibility without
the need for further shareholder approval.

Pledging assets does entail certain risks. To the extent that the
fund pledges its assets, the fund may have less flexibility in
liquidating its assets. If a large portion of the fund's assets
were involved, the fund's ability to meet redemption requests or
other obligations could be delayed.

3
.L.
ELIMINATING THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
WITH RESPECT TO INVESTMENTS IN ILLIQUID SECURITIES

The Trustees are recommending that the fund's fundamental investment
restrictions which limit the fund's investments in illiquid
securities, including securities restricted as to resale
("restricted securities") and securities for which market quotations
are not readily available, be eliminated. The current fundamental
investment restrictions state that the fund may not:

"Invest [in securities of an issuer which, together with any
predecessor, has been in operation for less than three years,
and] in equity securities of issuers for which market
quotations are not readily available (but excluding
restricted securities limited by restriction 12 below) if, as
a result, more than 5% of the fund's current net assets would
then be invested in such securities."

"Purchase securities the disposition of which is restricted
under federal securities laws if as a result such investments
would exceed 15% of the value of the fund's current net
assets, excluding restricted securities that have been
determined by the Trustees of the fund (or the person
designated by them to make such determinations) to be readily
marketable."

The section of the first restriction in brackets is proposed to be
eliminated by proposal 3.G.

Putnam Management believes the restrictions are no longer necessary
in light of current regulatory requirements and the fund's current
investment policies. The Staff of the Securities and Exchange
Commission ("SEC") currently takes the position that an illiquid
security is a security which is not readily marketable, rather than
a security for which market quotations are not readily available as
contained in one restriction. This SEC position is expressed in the
fund's current non-fundamental investment restriction which
prohibits the fund from investing more than 15% of its net assets in
any combination of (a) securities which are not readily marketable,
(b) securities restricted as to resale (excluding securities
determined by the Trustees of the fund (or the person designated by
the Trustees of the fund to make such determinations) to be readily
marketable), and (c) repurchase agreements maturing in more than
seven days. Unlike the current fundamental investment restrictions,
this non-fundamental investment restriction applies to all types of
investments, not just securities, and includes other types of
illiquid investments, such as repurchase agreements. If the
proposal is approved, the fund will be able to invest more than 5%
of its net assets in equity securities for which market quotations
are not readily available although such investments will be limited
if such securities are considered illiquid.

Putnam Management believes that the fund may benefit from the added
flexibility of having the fund's policy with respect to illiquid
securities contained in a single non-fundamental investment
restriction. In the future, the fund will be able to respond more
quickly to legal, regulatory and market developments regarding
illiquid securities (which might result in the removal of the
restriction) because further shareholder approval will not be
required to bring the policy in line with these developments.

To the extent the fund invests in illiquid investments, the fund may
encounter difficulty in determining the fair value of such
securities for purposes of computing the fund's net asset value. In
addition, the fund could encounter difficulty in satisfying
redemption requests within seven days if it could not readily
dispose of its illiquid investments.

FURTHER INFORMATION ABOUT VOTING AND THE SHAREHOLDER MEETING

QUORUM AND METHODS OF TABULATION. Thirty percent of the shares
entitled to vote -- present in person or represented by proxy --
constitutes a quorum for the transaction of business with respect to
any proposal at the meeting (unless otherwise noted in the proxy
statement). Shares represented by proxies that reflect abstentions
and "broker non-votes" (i.e., shares held by brokers or nominees as
to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a
quorum. Votes cast by proxy or in person at the meeting will be
counted by persons appointed by your fund as tellers for the
meeting.

The tellers will count the total number of votes cast "for" approval
of the proposals for purposes of determining whether sufficient
affirmative votes have been cast. With respect to the election of
Trustees and selection of auditors, neither abstentions nor broker
non-votes have any effect on the outcome of the proposal. With
respect to any other proposals, abstentions and broker non-votes
have the effect of a negative vote on the proposal.

OTHER BUSINESS. The Trustees know of no other business to be
brought before the meeting. However, if any other matters properly
come before the meeting, it is their intention that proxies that do
not contain specific restrictions to the contrary will be voted on
such matters in accordance with the judgment of the persons named as
proxies in the enclosed form of proxy.

SIMULTANEOUS MEETINGS. The meeting of shareholders of your fund is
called to be held at the same time as the meetings of shareholders
of certain of the other Putnam funds. It is anticipated that all
meetings will be held simultaneously. If any shareholder at the
meeting objects to the holding of a simultaneous meeting and moves
for an adjournment of the meeting to a time promptly after the
simultaneous meetings, the persons named as proxies will vote in
favor of such adjournment.

SOLICITATION OF PROXIES. In addition to soliciting proxies by mail,
Trustees of your fund and employees of Putnam Management, Putnam
Fiduciary Trust Company, and Putnam Mutual Funds may solicit proxies
in person or by telephone. Your fund may also arrange to have votes
recorded by telephone. The telephone voting procedure is designed
to authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been
properly recorded. Your fund has been advised by counsel that these
procedures are consistent with the requirements of applicable law.
If these procedures were subject to a successful legal challenge,
such votes would not be counted at the meeting. Your fund is
unaware of any such challenge at this time. Shareholders would be
called at the phone number Putnam Investments has in its records for
their accounts, and would be asked for their Social Security number
or other identifying information. The shareholders would then be
given an opportunity to authorize proxies to vote their shares at
the meeting in accordance with their instructions. To ensure that
the shareholders' instructions have been recorded correctly, they
will also receive a confirmation of their instructions in the mail.
A special toll-free number will be available in case the information
contained in the confirmation is incorrect.

Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with this
policy, your fund may solicit proxies from shareholders who have not
voted their shares or who have abstained from voting.

Persons holding shares as nominees will upon request be reimbursed
for their reasonable expenses in soliciting instructions from their
principals. Your fund has retained at its expense D.F. King, to aid
in the solicitation of instructions for registered and nominee
accounts for a fee not to exceed $10,000, plus reasonable out-of-
pocket expenses for mailing and phone costs.

REVOCATION OF PROXIES. Proxies, including proxies given by
telephone, may be revoked at any time before they are voted by a
written revocation received by the Clerk of your fund, by properly
executing a later-dated proxy or by attending the meeting and voting
in person.

DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS FOR SUBSEQUENT MEETINGS
OF SHAREHOLDERS. Your fund's Agreement and Declaration of Trust
does not provide for annual meetings of shareholders, and your fund
does not currently intend to hold such a meeting in 1997.
Shareholder proposals for inclusion in the proxy statement for any
subsequent meeting must be received by your fund within a reasonable
period of time prior to any such meeting.

ADJOURNMENT. If sufficient votes in favor of any of the proposals
set forth in the Notice of the Meeting are not received by the time
scheduled for the meeting, the persons named as proxies may propose
adjournments of the meeting for a period or periods of not more than
60 days in the aggregate to permit further solicitation of proxies
with respect to any of such proposals. Any adjournment will require
the affirmative vote of a majority of the votes cast on the question
in person or by proxy at the session of the meeting to be adjourned.
The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of such
proposals. They will vote against any such adjournment those
proxies required to be voted against any of such proposals. Your
fund pays the costs of any additional solicitation and of any
adjourned session. Any proposals for which sufficient favorable
votes have been received by the time of the meeting may be acted
upon and considered final regardless of whether the meeting is
adjourned to permit additional solicitation with respect to any
other proposal.

FINANCIAL INFORMATION. YOUR FUND WILL FURNISH, WITHOUT CHARGE, TO
YOU UPON REQUEST A COPY OF THE FUND'S ANNUAL REPORT FOR ITS MOST
RECENT FISCAL YEAR, AND A COPY OF ITS SEMIANNUAL REPORT FOR ANY
SUBSEQUENT SEMIANNUAL PERIOD. SUCH REQUESTS MAY BE DIRECTED TO
PUTNAM INVESTOR SERVICES, P.O. BOX 41203, PROVIDENCE, RI 02940-1203
OR 1-800-225-1581.

FURTHER INFORMATION ABOUT YOUR FUND

LIMITATION OF TRUSTEE LIABILITY. The Agreement and Declaration of
Trust of your fund provides that the fund will indemnify its
Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of
their offices with the fund, except if it is determined in the
manner specified in the Agreement and Declaration of Trust that they
have not acted in good faith in the reasonable belief that their
actions were in the best interests of the fund or that such
indemnification would relieve any officer or Trustee of any
liability to the fund or its shareholders arising by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. Your fund, at its expense, provides
liability insurance for the benefit of its Trustees and officers.
<PAGE>
AUDIT AND NOMINATING COMMITTEES. The voting members of the Audit
Committee of your fund include only Trustees who are not "interested
persons" of the fund or by reason of any affiliation with Putnam
Investments and its affiliates. The Audit Committee currently
consists of Messrs. Estin (Chairman), Perkins (without vote),
Putnam, III (without vote), Shapiro, Smith (without vote), and Ms.
Kennan. The Nominating Committee consists only of Trustees who are
not "interested persons" of your fund or Putnam Management. The
Nominating Committee currently consists of Dr. Pounds and Ms. Kennan
(Co-chairpersons), Ms. Baxter, and Messrs. Estin, Hill, Patterson,
Shapiro, and Thorndike.

OFFICERS AND OTHER INFORMATION. In addition to George Putnam and
Lawrence J. Lasser, the officers of your fund are as follows:

Year first
elected to
Name (age) Office office
- -----------------------------------------------------------------
Charles E. Porter (57) Executive Vice President 1989
Patricia C. Flaherty (49) Senior Vice President 1993
John D. Hughes (61) Senior Vice President
& Treasurer 1987
Gordon H. Silver (48) Vice President 1990
Gary N. Coburn (49) Vice President 1988
Alan J. Bankart (44) Vice President 1986
D. William Kohli* (35) Vice President 1994
Kenneth J. Taubes* (38) Vice President 1995
Rosemary H. Thomsen* (35) Vice President 1994
William N. Shiebler** (54) Vice President 1991
John R. Verani (56) Vice President 1987
Paul M. O'Neil (42) Vice President 1992
Beverly Marcus (51) Clerk 1981
- -----------------------------------------------------------------
* One of the fund's portfolio managers
** President of Putnam Mutual Funds

All of the officers of your fund are employees of Putnam Management
or its affiliates. Because of their positions with Putnam
Management or its affiliates or their ownership of stock of Marsh &
McLennan Companies, Inc., the parent corporation of Putnam
Management and Putnam Mutual Funds, Messrs. Putnam, George Putnam,
III, Lasser and Smith (nominees for Trustees of your fund), as well
as the officers of your fund, will benefit from the management fees,
distribution fees, underwriting commissions, custodian fees, and
investor servicing fees paid or allowed by the fund.
<PAGE>
ASSETS AND SHARES OUTSTANDING OF YOUR FUND
AS OF MAY 3, 1996

Net assets $1,415,859,645

Class A shares outstanding
and authorized to vote 144,668,727 shares

Class B shares outstanding
and authorized to vote 43,890,720 shares

Class M shares outstanding
and authorized to vote 2,025,275 shares

Class Y shares outstanding
and authorized to vote 18,648,776 shares

5% BENEFICIAL OWNERSHIP OF YOUR FUND AS OF APRIL 30, 1996

Persons beneficially owning more than 5%
of the fund's class A shares

Persons beneficially owning more than 5%
of the fund's class B shares

Persons beneficially owning more than 5%
of the fund's class M shares

Persons beneficially owning more than 5%
of the fund's class Y shares

<PAGE>
PUTNAMINVESTMENTS
THE PUTNAM FUNDS

One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAMINVESTMENTS

THIS IS YOUR PROXY CARD.

PLEASE VOTE THIS PROXY, SIGN IT BELOW, AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED. YOUR VOTE IS IMPORTANT.

HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or
telephone number or to provide us with your comments. Detach this
form from the proxy ballot and return it with your signed proxy in
the enclosed envelope.

Street
- --------------------------------------------------------------------

City State Zip
- --------------------------------------------------------------------

Telephone
- --------------------------------------------------------------------

DO YOU HAVE ANY COMMENTS?

- --------------------------------------------------------------------

DEAR SHAREHOLDER:

Your vote is important. Please help us to eliminate the expense of
follow-up mailings by signing and returning this proxy as soon as
possible. A postage-paid envelope is enclosed for your convenience.

THANK YOU!
- --------------------------------------------------------------------
Please fold at perforation before detaching
<PAGE>
Proxy for a meeting of shareholders, July 31, 1996, 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 Robert E. Patterson, and each of them separately,
proxies, with power of substitution, and hereby authorizes them to
represent and to vote, as designated below, at the meeting of
shareholders of Putnam Income Fund on July 31, 1996, at 2:00 p.m.,
Boston time, and at any adjournments thereof, all of the shares of
the fund that the undersigned shareholder would be entitled to vote
if personally present.

IF YOU COMPLETE AND SIGN THE PROXY, WE'LL VOTE IT EXACTLY AS YOU
TELL US. IF YOU SIMPLY SIGN THE PROXY, IT WILL BE VOTED FOR
ELECTING TRUSTEES AS SET FORTH IN PROPOSAL 1 AND FOR PROPOSALS 2 AND
3.A.-L. IN THEIR DISCRETION, THE PROXIES WILL ALSO BE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS THAT MAY COME BEFORE THE MEETING.

Note: If you have questions on any of the proposals, please call
1-800-225-1581.

PLEASE BE SURE TO SIGN AND DATE THIS PROXY.

Please sign your name exactly as it appears on this card. If you
are a joint owner, each of you should sign. When signing as
executor, administrator, attorney, trustee, or guardian, or as
custodian for a minor, please give your full title as such. If you
are signing for a corporation, please sign the full corporate name
and indicate the signer's office. If you are a partner, sign in the
partnership name.

- --------------------------------------------------------------------
Shareholder sign here Date

- --------------------------------------------------------------------
Co-owner sign here Date
<PAGE>
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES FOR
TRUSTEES AND FOR THE PROPOSALS LISTED BELOW:

PLEASE MARK YOUR CHOICES / X / IN BLUE OR BLACK INK.

1. PROPOSAL TO ELECT TRUSTEES
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A.
Hill, R.J. Jackson, E.T. Kennan, L.J. Lasser, R.E. Patterson,
D.S. Perkins, W.F. Pounds, G. Putnam, G. Putnam, III, E.
Shapiro, A.J.C. Smith, W.N. Thorndike.

/ / FOR electing all the nominees
(EXCEPT AS MARKED TO THE CONTRARY BELOW.)

/ / WITHHOLD authority to vote for all nominees

TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES, WRITE
THOSE NOMINEES' NAMES BELOW:

- -------------------------------------------------------------

PROPOSAL TO:

2. RATIFY THE SELECTION FOR AGAINST ABSTAIN
OF COOPERS & LYBRAND
L.L.P. AS AUDITORS. / / / / / /

3.A. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
DIVERSIFICATION OF
INVESTMENTS.

3.B. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
INVESTMENTS IN THE
SECURITIES OF A SINGLE
ISSUER.

3.C. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO MAKING
LOANS THROUGH PURCHASES
OF DEBT OBLIGATIONS,
REPURCHASE AGREEMENTS
AND SECURITIES LOANS.
<PAGE>
3.D. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
INVESTMENTS IN REAL ESTATE.

3.E. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
CONCENTRATION OF ITS
ASSETS.

3.F. AMEND THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
INVESTMENTS IN COMMODITIES.

3.G. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
INVESTMENTS IN ISSUERS
WITH LESS THAN THREE YEARS
OF OPERATIONS.

3.H. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO
INVESTMENTS IN SECURITIES
OF ISSUERS IN WHICH
MANAGEMENT OF THE FUND OR
PUTNAM INVESTMENT MANAGEMENT,
INC. OWNS SECURITIES.

3.I. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO MARGIN
TRANSACTIONS.

3.J. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WITH RESPECT TO SHORT
SALES.
<PAGE>
3.K. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION
WHICH LIMITS THE FUND'S
ABILITY TO PLEDGE ASSETS.

3.L. ELIMINATE THE / / / / / /
FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS
WITH RESPECT TO INVESTMENTS
IN ILLIQUID SECURITIES.