SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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Filed by the Registrant
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Filed by a party other than the Registrant
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CHECK THE APPROPRIATE BOX :
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/ / Preliminary Proxy Statement
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/ / Confidential, for Use of the Commission Only (as
- ---- permitted by Rule 14a-6(e) (2))
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/ X / Definitive Proxy Statement
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/ / Definitive Additional Materials
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/ / Soliciting Material Pursuant to Sec. 240.14a-11(c) or
- ---- Sec. 240.14a-12
PUTNAM MASTER INCOME TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX) :
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/ X / No fee required
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/ / Fee computed on table below per Exchange Act Rule 14a
- ---- 6(i)(1) and 0-11
<PAGE>
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided
- ---- by Exchange Act Rule 0-11(a)(2) and identify the
filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration
statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM MASTER INCOME TRUST
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. . . . . . . . . . . . . . . . . .
. . . . .2
Trustees' Recommendations. . . . . . . . . . . . . . . . . . . .
. . . .[ ]
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) fixing the number of Trustees and electing your
fund's Trustees; (2) ratifying your fund's independent auditors;
and (3) considering whether to convert your fund from a closed-
end fund to an open-end fund.
Your Trustees unanimously recommend that shareholders vote
"FOR " the first two proposals. On the third proposal,
whether to convert Putnam Master Income Trust to an open-end
fund, the Trustees, including the Trustees who are not affiliated
with the fund's manager, unanimously recommend that shareholders
vote "AGAINST " the conversion. The third proposal is on
the agenda as a result of provisions in your fund's governing
legal documents which require that shareholders be given the
opportunity to consider a conversion in the event the fund's
shares trade at a greater than 10% discount from net asset value
over a specified time.
The Trustees believe that remaining a closed-end fund
provides significant investment benefits that are not available
to open-end funds. In general, if the fund remains a closed-end
fund, the portfolio manager can continue to manage the fund with
a steadier, longer term perspective without the short-term
pressures from sales and redemptions of fund shares typically
experienced by open-end funds. In addition, a conversion to
open-end status, while ending the discount, is likely to result
in a lower yield because of increased fund expenses. This result
appears to be inconsistent with the fund's investment objective
of seeking high current income.
The fund's favorable performance serves as evidence of the
benefits of the closed-end structure. For the period since
inception in December, 1987 through May 31, 1997 , the
fund's performance (measured at net asset value) places it in the
top 5% of a universe of high yield, global fixed-income and
government funds used by the Trustees to evaluate the fund's
performance. (See page 28 of the enclosed proxy statement
for more information on performance).
Your Trustees continue to explore various ways of increasing
investor interest in the fund which may help over time to reduce
discounts. Recent efforts in this regard include a change in
dividend policy designed to enhance the stability of the fund's
dividends and a policy permitting periodic repurchases of shares
in the market when discount levels make such purchases an
attractive investment.
In light of these reasons, the Trustees do not believe that the
current level of discounts justifies the fundamental changes
which would result from conversion, and are therefore
recommending that you vote against the conversion.
Although we would like very much to have each shareholder attend
his or her fund's meeting, we realize this is not possible.
Whether or not you plan to be present, we need your vote. We
urge you to complete, sign, and return the enclosed proxy card
promptly. A postage-paid envelope is enclosed.
I'm sure that you, like most people, lead a busy life and are
tempted to put this proxy aside for another day. Please don't.
When shareholders do not return their proxies, their fund may
have to incur the expense of follow-up solicitations. All
shareholders benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and
consideration that I am sure you will give this important matter.
If you have questions about the proposals, contact your financial
adviser or call a Putnam customer service representative at
1-800-225-1581.
Sincerely yours,
(signature of George Putnam)
George Putnam, Chairman
<PAGE>
PUTNAM MASTER INCOME TRUST
NOTICE OF ANNUAL 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 Master Income Trust:
The Annual Meeting of Shareholders of your fund will be held on
October 9, 1997 at 2:00 p.m., Boston time, on the eighth floor of
One Post Office Square, Boston, Massachusetts, to consider the
following:
1. FIXING THE NUMBER OF TRUSTEES AND ELECTING TRUSTEES. SEE
PAGE 7.
2. RATIFYING THE SELECTION BY THE TRUSTEES OF THE INDEPENDENT
AUDITORS OF YOUR FUND FOR ITS CURRENT FISCAL YEAR. SEE
PAGE 22.
3. APPROVING OR DISAPPROVING THE CONVERSION OF YOUR FUND FROM
CLOSED-END TO OPEN-END STATUS AND THE AUTHORIZATION OF
RELATED AMENDMENTS TO YOUR FUND'S AGREEMENT AND DECLARATION
OF TRUST. SEE PAGE 22.
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 A.J.C. Smith
Elizabeth T. Kennan W. Nicholas Thorndike
Lawrence J. Lasser
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.
August 4, 1997<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
MASTER INCOME TRUST for use at the Annual Meeting of
Shareholders of the fund to be held on October 9, 1997, and, if
your fund's meeting is adjourned, at any later meetings, for the
purposes stated in the Notice of Annual 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 fixing the number of Trustees as proposed and the
election of all nominees;
2. FOR ratifying the selection of Coopers & Lybrand,
L.L.P. as the independent auditors of your fund; and
3. AGAINST converting your fund from closed-end to open-
end status and authorizing certain related amendments to
your fund's Agreement and Declaration of Trust.
<PAGE>
WHO IS ELIGIBLE TO VOTE ?
Shareholders of record at the close of business on July 21, 1997,
are entitled to be present and to vote at the meeting or any
adjourned meeting. The Notice of Annual Meeting, the proxy, and
the Proxy Statement are being mailed to shareholders of record on
or about August 4 , 1997.
Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.
THE PROPOSALS
I. ELECTION OF TRUSTEES
WHO ARE THE NOMINEES FOR TRUSTEES ?
The Nominating Committee of the Trustees recommends that the
number of Trustees be fixed at thirteen 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 53, is the President of Baxter Associates, Inc.,
a management and financial consulting firm which she founded in
1986. During that time, she was also a Vice President and
Principal of the Regency Group, Inc., and a Consultant to First
Boston Corporation, both of which are investment banking firms.
From 1965 to 1986, Ms. Baxter held various positions in
investment banking and corporate finance at First Boston.
Ms. Baxter currently also serves as a Director of Banta
Corporation, Avondale Financial Corp., and ASHTA Chemicals, Inc.
She is also the Chairman Emeritus of the Board of Trustees of
Mount Holyoke College, having previously served as Chairman for
five years and as a Board member for thirteen years; an Honorary
Trustee and past President of the Board of Trustees of the Emma
Willard School; and Chair of the Board of Governors of Good
Shepherd Hospital. Ms. Baxter is a graduate of Mount Holyoke
College.
HANS H. ESTIN
[INSERT PICTURE ]
Mr. Estin, age 68, is a Chartered Financial Analyst and the Vice
Chairman of North American Management Corp., a registered
investment adviser serving individual clients and their families.
Mr. Estin currently also serves as a Corporation Member of The
Schepens Eye Research Institute; and a Trustee of New England
Aquarium. He previously served as the Chairman of the Board of
Trustees of Boston University and is currently active in various
other civic associations, including the Boys & Girls Clubs of
Boston, Inc. Mr. Estin is a graduate of Harvard College and
holds honorary doctorates from Merrimack College and Boston
University.
JOHN A. HILL
[INSERT PICTURE ]
Mr. Hill, age 55, is the Chairman and Managing Director of First
Reserve Corporation, a registered investment adviser investing in
companies in the world-wide energy industry on behalf of
institutional investors.
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate
Director of the Office of Management and Budget and Deputy
Administrator of the Federal Energy Administration.
Mr. Hill currently also serves as a Director of Snyder Oil
Corporation, an exploration and production company which he
founded, Maverick Tube Corporation, a manufacturer of structural
steel, pipe and well casings, TransMontaingne Oil Company, a
refined oil product pipeline and distribution company,
Weatherford Enterra, Inc., an oil field service company, various
private companies controlled by First Reserve Corporation, and
various First Reserve Funds. He is also a Member of the Board of
Advisors of Fund Directions. He is currently active in various
business associations, including the Economic Club of New York,
and lectures on energy issues in the United States and Europe.
Mr. Hill is a graduate of Southern Methodist University.
<PAGE>
RONALD J. JACKSON
[INSERT PICTURE ]
Mr. Jackson, age 53, was Chairman of the Board, President and
Chief Executive Officer of Fisher-Price, Inc., a major toy
manufacturer, from 1990 to 1993. He previously served as
President and Chief Executive Officer of Stride-Rite, Inc., a
manufacturer and distributor of footwear, from 1989 to 1990, and
as President and Chief Executive Officer of Kenner Parker Toys,
Inc., a major toy and game manufacturer, from 1985 to 1987.
Prior to that, he held various financial and marketing positions
at General Mills, Inc. from 1966 to 1985, including Vice
President, Controller and Vice President of Marketing for Parker
Brothers, a toy and game company, and President of Talbots, a
retailer and direct marketer of women's apparel.
Mr. Jackson currently serves as a Director of Safety 1st, Inc., a
company which markets a wide range of child care and safety
products. He also serves as a Trustee of Salem Hospital and the
Peabody Essex Museum. Mr. Jackson is a graduate of Michigan
State University Business School.
ELIZABETH T. KENNAN
[INSERT PICTURE ]
Ms. Kennan, age 59, is President Emeritus and Professor of Mount
Holyoke College. From 1978 through June 1995, she was President
of Mount Holyoke College. From 1966 to 1978, she was on the
faculty of Catholic University, where she taught history and
published numerous articles.
Ms. Kennan currently also serves as a Director of NYNEX
Corporation, a telecommunications company, Northeast Utilities,
the Kentucky Home Life Insurance Companies, and Talbots. She
also serves as a Member of The Folger Shakespeare Library
Committee. She is currently active in various educational and
civic associations. Ms. Kennan is a graduate of Mount Holyoke
College, the University of Washington and St. Hilda College at
Oxford University and holds several honorary doctorates.
<PAGE>
LAWRENCE J. LASSER*
[INSERT PICTURE ]
Mr. Lasser, age 54, is the Vice President of your fund and the
other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, Inc. and Putnam
Management since 1985, having begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh &
McLennan Companies, Inc., the parent company of Putnam
Management, and the United Way of Massachusetts Bay. He is a
Member of the Board of Overseers of the Museum of Fine Arts in
Boston, The Council on Foreign Relations, and a Member of the
Board of Governors and Executive Committee at the Investment
Company Institute. He is also a Trustee of the Beth
Israel\Deaconess Medical Center in Boston. Mr. Lasser is a
graduate of Antioch College and Harvard Business School.
ROBERT E. PATTERSON
[INSERT PICTURE ]
Mr. Patterson, age 52, is the Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership, a
registered investment adviser which manages real estate
investments for institutional investors. Prior to 1990, he was
the Executive Vice President of Cabot, Cabot & Forbes Realty
Advisors, Inc., the predecessor company of Cabot Partners. Prior
to that, he was a Senior Vice President of the Beal Companies, a
real estate management, investment and development company. He
has also worked as an attorney and held various positions in
state government, including the founding Executive Director of
the Massachusetts Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin
Diabetes Center and as a Director of Brandywine Trust Company.
Mr. Patterson is a graduate of Harvard College and Harvard Law
School.
DONALD S. PERKINS*
[INSERT PICTURE ]
Mr. Perkins, age 70, is the retired Chairman of the Board of
Jewel Companies, Inc., a diversified retailer, where among other
roles he served as President, Chief Executive Officer and
Chairman of the Board from 1965 to 1980. He currently also
serves as a Director of various other public corporations,
including AON Corp., an insurance company, Cummins Engine
Company, Inc., an engine and power generator equipment
manufacturer and assembler, Current Assets L.L.C., a corporation
providing financial staffing services, LaSalle Street Fund, Inc.
and LaSalle U.S. Realty Income and Growth Fund, Inc., real estate
investment trusts, Lucent Technologies Inc., Ryerson Tull, Inc.,
America's largest steel service corporation, Springs Industries,
Inc., a textile manufacturer, and Time Warner, Inc., one of the
nation's largest media conglomerates. He previously served as a
Director of several other major public corporations, including
Corning Glass Works, Eastman Kodak Company, Firestone Tire &
Rubber Company and Kmart Corporation.
Mr. Perkins currently also serves as a Trustee and Vice Chairman
of Northwestern University and as a Trustee of the Hospital
Research and Education Trust. He is currently active in various
civic and business associations, including the Business Council
and the Civic Committee of the Commercial Club of Chicago, of
which he is the founding Chairman. Mr. Perkins is a graduate of
Yale University and Harvard Business School and holds an honorary
doctorate from Loyola University of Chicago.
WILLIAM F. POUNDS
[INSERT PICTURE ]
Dr. Pounds, age 69, is the Vice Chairman of your fund and of the
other Putnam funds. He has been a Professor of Management at the
Alfred P. Sloan School of Management at the Massachusetts
Institute of Technology since 1961 and served as Dean of that
School from 1966 to 1980. He previously served as Senior Advisor
to the Rockefeller Family and Associates and was a past Chairman
of Rockefeller & Co., Inc., a registered investment adviser which
manages Rockefeller family assets, and Rockefeller Trust Company.
Dr. Pounds currently also serves as a Director of IDEXX
Laboratories, Inc., PerSeptive Biosystems, Inc., Management
Sciences For Health, Inc. and Sun Company, Inc. He is also a
Trustee of the Museum of Fine Arts in Boston; an Overseer of WGBH
Educational Foundation, and a Fellow of The American Academy of
Arts and Sciences. He previously served as a Director of Fisher-
Price, Inc. and General Mills, Inc. Dr. Pounds is a graduate of
Carnegie-Mellon University.
GEORGE PUTNAM*
[INSERT PICTURE ]
Mr. Putnam, age 70, is the Chairman and President of your fund
and of the other Putnam funds. He is the Chairman and a Director
of Putnam Management and Putnam Mutual Funds Corp. and a Director
of Marsh & McLennan, their parent company. Mr. Putnam is the son
of the founder of the Putnam funds and Putnam Management and has
been employed in various capacities by Putnam Management since
1951, including Chief Executive Officer from 1961 to 1973. He is
a former Overseer and Treasurer of Harvard University; a past
Chairman of the Harvard Management Company; and a Trustee
Emeritus of Wellesley College and Bradford College.
Mr. Putnam currently also serves as a Director of Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and
Gas, Inc., mining and natural resources companies and Houghton
Mifflin Company, a major publishing company. He is also a
Trustee of Massachusetts General Hospital, McLean Hospital,
Vincent Memorial Hospital, WGBH Educational Foundation and the
Museum of Fine Arts and the Museum of Science in Boston; the New
England Aquarium; an Overseer of Northeastern University; and a
Fellow of The American Academy of Arts and Sciences. Mr. Putnam
is a graduate of Harvard College and Harvard Business School and
holds honorary doctorates from Bates College and Harvard
University.
GEORGE PUTNAM , III*
[ INSERT PICTURE ]
Mr. Putnam, age 45, 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 and The Boston Family Office,
L.L.C., a registered investment advisor that provides financial
services to individuals and families. He is also a Trustee of
the Sea Education Association and St. Mark's School and an
Overseer of the New England Medical Center. Mr. Putnam is a
graduate of Harvard College, Harvard Business School and Harvard
Law School.
A.J.C. SMITH*
[INSERT PICTURE ]
Mr. Smith, age 63, is the Chairman and Chief Executive Officer of
Marsh & McLennan Companies, Inc. He has been employed by Marsh &
McLennan and related companies in various capacities since 1961.
Mr. Smith is a Director of the Trident Corp., and he also serves
as a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, the Educational Broadcasting Corporation, the
Economic Club of New York, the U.S. Chamber of Commerce, and is a
Founder of the Museum of Scotland Society. He was educated in
Scotland and is a Fellow of the Faculty of Actuaries in
Edinburgh, a Fellow of the Canadian Institute of Actuaries, a
Fellow of the Conference of Actuaries, an Associate of the
Society of Actuaries, a Member of the American Academy of
Actuaries, the International Actuarial Association and the
International Association of Consulting Actuaries.
W. NICHOLAS THORNDIKE**
[INSERT PICTURE ]
Mr. Thorndike, age 64, serves as a Director of various
corporations and charitable organizations, including Data General
Corporation, a computer and high technology company, Bradley Real
Estate, Inc., a real estate investment firm, Providence Journal
Co., a newspaper publisher, and Courier Corporation, a book
binding and printing company. He is also a Trustee of Eastern
Utilities Associates, Massachusetts General Hospital, where he
previously served as chairman and president, and Northeastern
University.
Prior to December 1988, he was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike,
Doran, Paine & Lewis, a registered investment adviser which
manages mutual funds and institutional assets. He also
previously served as a Trustee of the Wellington Group of Funds
(now The Vanguard Group) and was the Chairman and a Director of
Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
- ----------------------------
* Nominees who are or may be deemed to be "interested persons"
(as defined in the Investment Company Act of 1940) of your
fund, Putnam Management, and Putnam Mutual Funds Corp.
("Putnam Mutual Funds"), the principal underwriter for all
the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Putnam, Lasser, and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of your fund, or directors of
Putnam Management, Putnam Mutual Funds, or Marsh & McLennan
Companies, Inc., the parent company of Putnam Management and
Putnam Mutual Funds. Mr. George Putnam, III, Mr. Putnam's
son, is also an "interested person" of your fund, Putnam
Management, and Putnam Mutual Funds. Mr. Perkins may be
deemed to be an "interested person" of your fund because of
his service as a director of a certain publicly held company
that includes registered broker-dealer firms among its
subsidiaries. Neither your fund nor any of the other Putnam
funds currently engages in any transactions with such firms
except that certain of such firms act as dealers in the
retail sale of shares of certain Putnam funds in the
ordinary course of their business. 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. All the nominees were
elected by the shareholders in October , 1996. The 13
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 13 for your
fund.
WHAT ARE THE TRUSTEES' RESPONSIBILITIES ?
Your fund's Trustees are responsible for the general oversight of
your fund's business and for assuring that your fund is managed
in the best interests of its shareholders. The Trustees
periodically review your fund's investment performance as well as
the quality of other services provided to your fund and its
shareholders by Putnam Management and its affiliates, including
administration, custody, distribution and investor servicing. At
least annually, the Trustees review the fees paid to Putnam
Management and its affiliates for these services and the overall
level of your fund's operating expenses. In carrying out these
responsibilities, the Trustees are assisted by an independent
administrative staff and by your fund's auditors and legal
counsel, which are selected by the Trustees and are independent
of Putnam Management and its affiliates.
DO THE TRUSTEES HAVE A STAKE IN YOUR FUND ?
The Trustees believe it is important that each Trustee have a
significant investment in the Putnam funds. The Trustees
allocate their investments among the more than 96 Putnam funds
based on their own investment needs. The Trustees' aggregate
investments in the Putnam funds total over $58 million. The
table below lists each Trustee's current investments in the fund
and in the Putnam funds as a group based on beneficial ownership.
Except as otherwise noted, each Trustee has sole voting power and
sole investment power with respect to his or her shares.
<PAGE>
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 5/15/97
AS OF 5/15/97
(1)
- -----------------------------------------------------------------
- ------------------
Jameson A. Baxter 1994 122
48,336
Hans H. Estin 1972 709
29,539
John A. Hill 1985 1,500
142,061
Ronald J. Jackson 1996 200 (2)
124,601
Elizabeth T. Kennan 1992 227 (3)
26,197
Lawrence J. Lasser 1992 100
567,522
Robert E. Patterson 1984 300
63,328
Donald S. Perkins 1982 2,846
168,837
William F. Pounds 1971 500
324,764
George Putnam 1957 2,495
1,772,505
George Putnam, III 1984 500
309,877
A.J.C. Smith 1986 200 (4)
51,567
W. Nicholas Thorndike 1992 164
81,992
- -----------------------------------------------------------------
- ------------------
(1) These holdings do not include shares of Putnam money market
funds.
(2) Mr. Jackson has shared investment power and shared voting
power with respect to such
shares.
(3) Ms. Kennan is the custodian of a trust which owns 127 of
these shares and in which she
has no economic interest.
(4) Mr. Smith has shared investment power and shared voting power
with respect to such shares.
<PAGE>
As of May 15, 1997, the Trustees and officers of the fund owned a
total of 9,862 shares of the fund, comprising less than 1% of its
outstanding shares on that date.
WHAT ARE SOME OF THE WAYS IN WHICH THE TRUSTEES REPRESENT
SHAREHOLDER INTERESTS?
The Trustees believe that, as substantial investors in the Putnam
funds, their interests are closely aligned with those of
individual shareholders. Among other ways, the Trustees seek to
represent shareholder interests:
by carefully reviewing your fund's investment performance
on an individual basis with your fund's managers;
by also carefully reviewing the quality of the various
other services provided to the funds and their
shareholders by Putnam Management and its affiliates;
by discussing with senior management of Putnam Management
steps being taken to address any performance
deficiencies;
by reviewing the fees paid to Putnam Management to ensure
that such fees remain reasonable and competitive with
those of other mutual funds, while at the same time
providing Putnam Management sufficient resources to
continue to provide high quality services in the future;
by monitoring potential conflicts between the funds and
Putnam Management and its affiliates to ensure that the
funds continue to be managed in the best interests of
their shareholders; and
by also monitoring potential conflicts among funds to
ensure that shareholders continue to realize the benefits
of participation in a large and diverse family of funds.
HOW OFTEN DO THE TRUSTEES MEET ?
The Trustees meet each month (except August) over a two-day
period to review the operations of your fund and of the other
Putnam funds. A portion of these meetings is devoted to meetings
of various Committees of the board which focus on particular
matters. These currently include: the Committee of Independent
Trustees, which conducts an annual review of all contractual
arrangements with Putnam Management and its affiliates; the
Contract Committee, which reviews such matters on an interim
basis during the course of the year; the Communication and
Service Committee, which reviews the quality of services provided
by your fund's investor servicing agent, custodian and
distributor; the Pricing, Brokerage and Special Investments
Committee, which reviews matters relating to valuation of
securities, best execution, brokerage costs and allocations and
new investment techniques; the Audit Committee, which reviews
accounting policies and the adequacy of internal controls and
supervises the engagement of the funds' auditors; the
Compensation, Administration and Legal Affairs Committee, which
reviews the compensation of the Trustees and their administrative
staff and supervises the engagement of the funds' independent
counsel; the Nominating Committee, which is responsible for
selecting nominees for election as Trustees, and the Closed-end
Fund Committee, which is responsible for reviewing special issues
applicable to closed-end funds such as your fund.
Each Trustee generally attends at least two formal committee
meetings during each regular meeting of the Trustees. During
1996, the average Trustee participated in approximately 40
committee and board meetings. In addition, the Trustees meet in
small groups with Chief Investment Officers and Portfolio
Managers to review recent performance and the current investment
climate for selected funds. These meetings ensure that each
fund's performance is reviewed in detail at least twice a year.
The Committee of Independent Trustees and the Contract Committee
typically meet on several additional occasions during the year to
carry out their responsibilities. Other Committees, including an
Executive Committee, may also meet on special occasions as the
need arises.
WHAT ARE THE TRUSTEES PAID FOR THEIR SERVICES ?
Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other
Putnam funds. The Trustees periodically review their fees to
assure that such fees continue to be appropriate in light of
their responsibilities as well as in relation to fees paid to
trustees of other mutual fund complexes. The Compensation
Committee, which consists solely of Trustees not affiliated with
Putnam Management, estimates that Committee and Trustee meeting
time together with the appropriate preparation requires the
equivalent of at least three business days per Trustee meeting.
The following table shows the fees paid to each Trustee by the
fund for fiscal 1996 and the fees paid to each Trustee by all of
the Putnam funds during calendar year 1996:<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION> Pension or
Estimated Total
Aggregate retirement
annual benefits compensation
compensation benefits accrued
from all from all
from the as part of
Putnam funds Putnam
Trustees fund(1) fund expenses(2) upon
retirement(3) funds(4)
- -----------------------------------------------------------------
- --------------------------
<S> <C> <C>
<C> <C>
Jameson A. Baxter $1,111 $0
$85,646 $172,291 (5)
Hans H. Estin 1,104 0
85,646 171,291
John A. Hill 1,101 0
85,646 170,791 (5)
Ronald J. Jackson (6) 445 0
85,646 94,807 (5)
Elizabeth T. Kennan 1,106 0
85,646 171,291
Lawrence J. Lasser 1,098 0
85,646 169,791
Robert E. Patterson 1,174 0
85,646 182,291
Donald S. Perkins 1,101 0
85,646 170,291
William F. Pounds (7) 1,197 0
98,146 197,291
George Putnam 1,106 0
85,646 171,291
George Putnam, III 1,106 0
85,646 171,291
A.J.C. Smith 1,096 0
85,646 169,791
W. Nicholas Thorndike 1,168 0
85,646 181,291
(1) Includes an annual retainer and an attendance fee for each
meeting attended.
(2) The Trustees approved a Retirement Plan for Trustees of the
Putnam funds on October 1,
1996. Prior to that date, voluntary retirement benefits were
paid to certain retired
Trustees.
(3) Assumes that each Trustee retires at the normal retirement
date. Estimated benefits for
each Trustee are based on Trustee fee rates in effect during
calendar 1996.
(4) As of December 31, 1996, there were 96 funds in the Putnam
family.
(5) Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan.
(6) Elected as a Trustee in May 1996.
(7) Includes additional compensation for service as Vice Chairman
of the Putnam funds.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"),
each Trustee who retires with at least five years of service as a
Trustee of the funds is entitled to receive an annual retirement
benefit equal to one-half of the average annual compensation paid
to
such Trustee for the last three years of service prior to
retirement.
This retirement benefit is payable during a Trustee's lifetime,
beginning the year following retirement, for a number of years
equal
to such Trustee's years of service. A death benefit is also
available
under the Plan which assures that the Trustee and his or her
beneficiaries will receive benefit payments for the lesser of an
aggregate period of (i) ten years or (ii) such Trustee's total
years
of service.
The Plan Administrator (a committee comprised of Trustees that
are not
"interested persons" of the fund, as defined in the Investment
Company
Act of 1940) may terminate or amend the Plan at any time, but no
termination or amendment will result in a reduction in the amount
of
benefits (i) currently being paid to a Trustee at the time of
such
termination or amendment, or (ii) to which a current Trustee
would
have been entitled to receive had he or she retired immediately
prior
to such termination or amendment.
For additional information about your fund, including further
information about its Trustees and officers, please see "Fund
Information," on page 38.
PUTNAM INVESTMENTS
Putnam Investment Management, Inc. and its affiliates, Putnam
Mutual
Funds, the principal underwriter for shares of your fund and
Putnam
Fiduciary Trust Company, your fund's investor servicing agent and
custodian, are wholly owned by Putnam Investments, Inc., One Post
Office Square, Boston, Massachusetts 02109, a holding company
that is
in turn wholly owned by Marsh & McLennan Companies, Inc., which
has
executive offices at 1166 Avenue of the Americas, New York, New
York
10036.
Marsh & McLennan Companies, Inc. and its operating
subsidiaries
are professional services firms with insurance and reinsurance
brokerage, consulting, and investment management businesses.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" ALL NOMINEES.
2. RATIFICATION OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, independent accountants, has been selected by the
Trustees as the independent auditor of your fund for the current
fiscal year. Among the country's preeminent accounting firms,
this
firm also serves as the auditor for approximately half of the
other
funds in the Putnam family. It was selected primarily on the
basis of
its expertise as auditors of investment companies, the quality of
its
audit services, and the competitiveness of its fees.
A majority of the votes on the matter is necessary to ratify the
selection of auditors. A representative of the independent
auditors
is expected to be present at the meeting to make statements and
to
respond to appropriate questions.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 2.
3. APPROVAL OR DISAPPROVAL OF THE CONVERSION OF YOUR FUND FROM
CLOSED-END TO OPEN-END STATUS AND CERTAIN RELATED AMENDMENTS
TO
YOUR FUND'S AGREEMENT AND DECLARATION OF TRUST
WHAT IS BEING CONSIDERED UNDER THIS ITEM ?
Shareholders will have the opportunity to vote at the meeting on
the
question of whether your fund should be converted from a
closed-end
fund to an open-end fund. The Trustees, as discussed in more
detail
below, unanimously recommend that shareholders vote
AGAINST
converting your fund to an open-end fund. This recommendation is
based on the Trustees' view that, as a closed-end fund, your fund
is
afforded significant investment advantages.
If approved, the conversion would result in the "delisting" of
your
fund's shares from the New York Stock Exchange where they
currently
may be bought or sold at prevailing market prices. The shares
would
then become redeemable directly from your fund at net asset
value,
eliminating any discount of market price to net asset value.
Other
differences between closed-end and open-end investment companies
are
described below.
A conversion from closed-end to open-end status would also
require a
number of changes in the Agreement and Declaration of Trust (the
"Declaration of Trust") under which your fund was established.
Accordingly, approval of this proposal would also authorize your
fund's Trustees to make such amendments as they may deem
necessary to
operate your fund in open-end form if this proposal is approved.
These changes are described in greater detail below.
WHY IS THIS QUESTION BEING SUBMITTED TO SHAREHOLDERS NOW?
Your fund's governing legal documents require that shareholders
of
your fund be given the opportunity to vote on a proposal to
convert
your fund from closed-end to open-end status if the fund's shares
have
traded at an average discount of more than 10% from their net
asset
value during the last twelve calendar weeks of the preceding
fiscal
year (measured as of the last trading day in each such week).
For the
twelve-week period ended October 31, 1996, your fund's shares
traded
at an average discount of 11.32%, requiring that this proposal be
submitted to shareholders. A similar vote was held at the 1996
annual
meeting of shareholders. At that meeting shareholders voted to
retain
closed-end status as follows:
<PAGE>
PERCENTAGE OF SHARES VOTED
FOR OPEN-ENDING 21.2%
AGAINST OPEN-ENDING 71.7%
ABSTAIN 7.0%
WHAT IS THE RECOMMENDATION OF THE TRUSTEES ?
The Trustees regularly review the overall performance and trading
information for Putnam's closed-end funds. At meetings held in
February, April and May 1997, the Trustees of your fund carefully
evaluated the fund's investment performance and the trading
history of
its shares since its inception in December 1987, and
information about the possible advantages and disadvantages of
such a
conversion. FOR THE REASONS DESCRIBED BELOW, THE TRUSTEES OF
YOUR
FUND HAVE UNANIMOUSLY CONCLUDED THAT THE CONVERSION OF YOUR FUND
TO
OPEN-END STATUS WOULD NOT BE IN THE BEST LONG-TERM INTERESTS OF
SHAREHOLDERS. ACCORDINGLY, THE TRUSTEES OF YOUR FUND UNANIMOUSLY
RECOMMEND THAT SHAREHOLDERS VOTE "AGAINST" THIS
PROPOSAL.
WHY ARE THE TRUSTEES RECOMMENDING A VOTE AGAINST A
CONVERSION?
The Trustees of your fund are recommending a vote against
converting
your fund to open-end status for the following reasons:
The Trustees believe that your fund's closed-end
status
provides significant investment benefits not
available to
open-end fund investors. Because your fund's
shares are not
redeemable, your fund is not required to maintain
short-
term, lower-yielding investments in anticipation of
possible
redemptions, but can be fully invested in
higher-yielding
securities in pursuit of the fund's investment
objective.
Furthermore, as a closed-end fund, your fund does
not
experience the cash flows associated with sales and
redemptions of open-end fund shares. As a result,
your
fund's portfolio manager does not have to invest
additional
cash from new sales at times when market conditions
are
unfavorable or sell securities to meet redemptions
at
inopportune times.
The Trustees believe that your fund has achieved
favorable
investment results for its shareholders over its
life as a
closed-end fund, which demonstrates the benefits of
the
closed-end structure. See "How has your fund
performed?"
below. The Trustees believe that, in deciding
whether to
make major structural changes, the long-term
performance of
your fund is an important factor to consider.
The Trustees believe that your fund's operating
expenses are likely to increase if your fund is
converted to
open-end status. First, as an open-end fund, your
fund
would be required, as a practical matter, to make a
continuous public offering of its shares in order
to offset
redemptions and maintain the economies of scale
available at
its current size. The Trustees expect that in
order to
market your fund's shares effectively and to
conform
generally to sales practices of competing
dealer-sold funds,
following a conversion to open-end status, the
Trustees
would likely recommend that shareholders approve
the
adoption of a distribution plan under Rule 12b-1.
Such a
plan would permit your fund to pay annual
distribution fees
of up to 0.35% of your fund's net assets. If such
distribution plan were approved, the Trustees would
expect
to authorize the payment of distribution fees at
the annual
rate of 0.25% of net assets, as is the case with
similar
open-end Putnam funds. In addition, all
shareholders would
bear the brokerage and other transactional costs
associated
with purchases and sales of securities in response
to the
sale or redemption of shares if your fund were
converted to
open-end status (except to the extent that the
Trustees
decide to impose a temporary redemption fee, as
described
below).
Second, in addition to the likelihood of increased
fees, it
is also possible that the fund might shrink
following
conversion to open-end status, resulting in
increased
expense ratios. Open-end funds, since they
continually
issue new shares, have the ability to increase in
size.
This growth could result in efficiencies in
spreading fixed
costs over a larger pool of assets. However, since
they
continually redeem shares, open-end funds can also
shrink.
Putnam Management has advised the Trustees that it
is likely
that your fund might experience significant
redemptions
following any conversion, thereby shrinking in
size.
Depending on the number and size of the redemptions
and
sales of new shares, increased expense ratios could
result
for either temporary or indefinite periods.
Although converting to open-end status would
provide a
potential short-term gain as a result of the
elimination of
the discount, it would not further the fund's
investment
objective of seeking high current income.
Indeed, in light
of the potential loss of the advantages of
closed-end status
and the increase of expenses likely following
a conversion,
conversion could result in a lower yield for
the
shareholders. This result appears to be
inconsistent with
the fund's investment objective.
Putnam Management has advised the Trustees that in
its
opinion discount levels in recent years have been
influenced
by general market conditions favoring equity
securities over
fixed-income securities. Most similar closed-end
fund
shares have traded at a discount for the past two
or three
years. The fact that your fund's shares trade at a
discount
is not the result of a specific problem relating to
your
fund but a more general industry wide phenomenon.
The need to sell securities to meet redemptions may
have
adverse tax consequences to shareholders remaining
in your
fund. If your fund sells securities to meet
redemptions and
realizes a gain for tax purposes, your fund will be
required
to allocate the tax gain to all shareholders, not
simply to
those redeeming.
The Trustees regularly review information regarding trading
activity
in the fund's shares, including discount levels. The Trustees
continue to explore various ways of increasing investor interest
in
the fund which may help over time to reduce discounts. Efforts
in
this regard include a recent change in dividend policy which is
designed to enhance the stability of the fund's monthly dividend.
Under this revised policy the Trustees of the fund expect to
establish
dividend levels based on a consideration of all investment
earnings
anticipated to be available for distribution. Barring unforeseen
developments, such dividend levels would be reviewed and subject
to
change only at the end of each calendar year. In addition, the
Trustees have authorized the repurchase of fund shares in open
market
transactions at times when discount levels make such purchases an
attractive investment for the fund. Such purchases may also have
the
effect of temporarily reducing discount levels, but are not
believed
to influence discounts materially over the longer term.
The Trustees believe that most shareholders of your fund
purchased
their shares with a long-term investment perspective that
recognizes
the special advantages of the closed-end structure as well as the
disadvantages of potential discounts. In addition, many
shareholders
have purchased their shares at a discount and thus have not been
significantly affected by the current discount level.
Consequently,
the Trustees do not believe that recent discount levels should be
viewed as grounds for depriving shareholders of the advantages of
the
closed-end structure.
IN LIGHT OF THE REASONS SET FORTH ABOVE, THE TRUSTEES DO NOT
BELIEVE THAT THE CURRENT DISCOUNT JUSTIFIES THE FUNDAMENTAL
CHANGES
WHICH WOULD RESULT FROM A CONVERSION TO OPEN-END STATUS, AND THE
TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE AGAINST
THIS
PROPOSAL.
HOW HAS YOUR FUND PERFORMED?
The following table summarizes the annualized total return of
your
fund for the periods shown based on the net asset value and the
market
value of its shares:
TOTAL RETURN (ANNUALIZED) THROUGH MAY 31, 1997
Since
inception
1 year 3 years 5 years December 28, 1987
Net Asset 10.93% 10.29% 10.14% 10.92%
Value
Market 17.59% 10.10% 8.37 9.11% *
Value
* Market value performance from inception, unlike net asset
value
performance, reflects the cost of the dealer commission upon
initial sale.
Of course, relative performance is also important. In addition
to
reviewing the fund's overall performance, the Trustees regularly
review the fund's performance compared to that of a group of
comparable funds. The current group used by the Trustees is high
yield, global fixed-income and government open-end funds, with
each
category weighted equally. Using this comparison, the fund was
ranked
in the following percentiles for the periods ending May 31, 1997:
SINCE
INCEPTION
1 YEAR 3 YEARS 5
YEARS DECEMBER 28, 1987
Percentile* 44% 39% 10% 5%
* Percentile reflects relative standing with 1% being the
highest
relative performance and 100% being the lowest. The rankings
set
forth above are based on total return, reflecting changes in
net
asset value adjusted for reinvestment of capital gains and
income
dividends. They do not reflect changes in market price of
shares
in the case of closed-end funds or, for any fund, the
deduction
of sales charges. Past performance is no guarantee of future
performance.
WHAT ARE THE PRINCIPAL DIFFERENCES BETWEEN A CLOSED-END AND
OPEN-
END FUND?
In evaluating this proposal, shareholders may wish to consider
the
following differences between closed-end and open-end funds:
CHANGES IN CAPITAL . Closed-end funds raise
their
capital through an initial public offering and
generally do
not raise additional capital after that time.
Closed-end
funds therefore have limited opportunities to gain
additional economies of scale through growth of assets.
At
the same time, because shares of closed-end funds
cannot be
redeemed, the risk of higher expense ratios resulting
from a
decline in assets is also limited.
Open-end funds, in contrast, generally engage in a
continuous public offering of their shares, which
provides
the opportunity for growth of assets and reduced
expense
ratios. However, because shares of open-end funds are
generally redeemable at any time, such funds face the
risk
of higher expense ratios if significant redemptions are
not
offset by sales of new shares.
<PAGE>
SALE OF SHARES . Shares of open-end funds may be
redeemed at any time at their net asset value (subject
only
to the right of the fund to withhold payment for up to
seven
days or, with the permission of the SEC, to suspend
redemptions under emergency conditions). In contrast,
shares of closed-end funds are not redeemable and can
generally be bought and sold at current market prices
only
on the exchange on which such funds are listed. Thus,
converting your fund from closed-end to open-end status
would eliminate the current discount between market
price
and net asset value, but would also eliminate the
possibility that your fund's shares might trade at a
premium
in the future. Shareholders who wish to dispose of
shares
would receive a higher price at net asset value than if
shares remained at a discount.
REGULATORY REQUIREMENTS . Both closed-end and
open-
end funds are registered with the SEC under the
Investment
Company Act of 1940 and, with certain differences
relating
largely to the sale and redemption of shares, are
generally
subject to the same regulatory requirements of that
Act.
Your fund's shares are listed for trading on the New
York
Stock Exchange. That listing would be terminated in
the
event of a conversion to open-end status. Since
open-end
funds generally engage in a continuous public offering
of
their shares they are required to maintain current
registrations under federal and state securities laws,
which
involves additional costs.
ANNUAL SHAREHOLDER MEETINGS . Your fund is
currently
required by the rules of the New York Stock Exchange to
hold
annual meetings of shareholders for the purpose of
electing
Trustees and ratifying the selection of auditors. As
noted
above, conversion of your fund to open-end status would
result in termination of the fund's listing on the New
York
Stock Exchange with the result that your fund would no
longer be required to hold annual meetings. In such
event,
your fund expects that meetings would be held only on
an as-
needed basis.
INVESTMENT FLEXIBILITY . As noted above, the
cash
flows associated with sales and redemptions of open-end
fund
shares, as well as the need to maintain cash reserves
in
anticipation of possible redemptions, might tend to
reduce
the investment flexibility of open-end funds.
SHAREHOLDER PRIVILEGES . Shareholders of your
fund
currently have the option of participating in the
fund's
Dividend Reinvestment Plan, under which cash
distributions
paid by your fund are generally reinvested through the
purchase of additional fund shares at market prices,
which
currently reflect a discount from net asset value. (At
times when your fund's shares are trading at a premium
over
their net asset value, such reinvestments are made at
the
higher of net asset value or 95% of market value.) If
the
fund were to convert to open-end status, shareholders
would
no longer be able to reinvest dividends at a price
below net
asset value per share. Shareholders of open-end Putnam
funds have the option to reinvest their distributions
in
additional shares at net asset value at all times.
Shareholders of open-end funds in the Putnam family of
funds
currently have the privilege of exchanging their
investment
at net asset value and without sales charges for shares
of
more than 63 open-end funds in the Putnam group.
Shareholders of your fund currently do not have that
privilege.
WHAT OTHER POSSIBLE CONSEQUENCES MIGHT RESULT FROM CONVERSION
OF
YOUR FUND TO OPEN-END STATUS?
In addition to those matters described above, shareholders should
consider the following possible consequences of conversion of
your
fund to open-end status:
Significant redemptions following a conversion would
require
your fund to sell portfolio securities. These
transactions
would involve brokerage and other transaction costs and
could result in the recognition of capital gains for
federal
income tax purposes. Such costs and liabilities would
be
borne by all shareholders and not just those redeeming
shares, (except to the extent that the Trustees decide
to
impose a temporary redemption fee, as described below).
Certain legal, accounting and other costs would be
incurred
in connection with the conversion of your fund to
open-end
status. Although it is difficult to estimate these
costs
with precision, these costs are estimated to be at
least
$100,000. Based on your fund's current size it is not
anticipated that these costs would materially increase
your
fund's expense ratio.
The Trustees reserve the right to impose a temporary
redemption fee of up to 2.00% of the value of shares
redeemed for a period of up to one year following the
fund's
conversion to an open-end investment company. The
Trustees
may impose this fee if they believe that immediately
following a conversion to open-end status there would
likely
be significant redemptions of shares that would disrupt
long-term portfolio management of the fund and dilute
the
interests of the remaining shareholders. Imposition of
a
redemption fee may deter certain redemptions and would
compensate remaining long-term shareholders for the
costs of
the liquidation of a significant percentage of the
fund's
portfolio.
The fund will notify shareholders in writing prior to
the
imposition of any temporary redemption fee.
WHAT CHANGES WOULD BE MADE IN YOUR FUND'S DECLARATION OF TRUST
IF
SHAREHOLDERS VOTE TO CONVERT THE FUND TO OPEN-END STATUS?
Conversion of your fund from a closed-end to an open-end fund
would
require certain changes to your fund's Declaration of Trust and,
therefore, a vote in favor of such conversion would also
authorize the
Trustees to amend your fund's Declaration of Trust to reflect
such
changes. These changes would bring your fund's Declaration of
Trust
more in line with most other Putnam open-end funds.
The Declaration of Trust would be amended to require your fund to
purchase all shares offered to it for redemption at a price equal
to
the net asset value of the shares next determined, less any
redemption
charge fixed by the Trustees. In addition, the fund would be
authorized, at its option, to redeem shares held in a
shareholder's
account at net asset value if at any time a shareholder owned
shares
in an amount either less than or greater than, as the case may
be, an
amount determined by the Trustees. Notwithstanding this
provision,
all shares would be redeemable at a shareholder's option.
The Declaration of Trust would also be amended to eliminate
certain
provisions that relate specifically to the fund's closed-end
status,
such as the conversion provision that has necessitated this
proposal.
Finally, the Trustees would also make certain necessary technical
and
non-material changes to the Declaration of Trust and conforming
changes to your fund's Bylaws if the shareholders vote in favor
of the
conversion.
WHAT PERCENTAGE OF SHAREHOLDERS' VOTES ARE REQUIRED TO APPROVE
THE
CONVERSION?
Approval of the conversion of your fund to open-end status and of
the
related amendments to your fund's Declaration of Trust will
require
the "yes" vote of a majority of your fund's outstanding shares
entitled to vote.
If such conversion is approved, the conversion would become
effective
following compliance with all necessary regulatory requirements
under
federal and state law. Your fund would seek to complete this
process
as soon as reasonably practicable, but it is estimated that this
process may require at least several months.
IF THE CONVERSION IS NOT APPROVED, WILL THE FUND CONTINUE IN
ITS
CURRENT FORM?
Yes. In the event that shareholders do not approve the
conversion of
your fund to open-end status, your fund would continue to operate
as a
closed-end fund. Shareholders would be given the opportunity to
vote
on a proposed conversion to open-end status in future years if
your
fund's shares again trade at discounts sufficient to meet the
requirement of the Declaration of Trust described above.
<PAGE>
THE TRUSTEES BELIEVE THAT THE CONTINUED OPERATION OF YOUR FUND
AS A
CLOSED-END FUND IS IN THE BEST LONG-TERM INTERESTS OF
SHAREHOLDERS,
AND UNANIMOUSLY RECOMMEND A VOTE AGAINST THE CONVERSION OF YOUR
FUND
TO OPEN-END STATUS AT THIS TIME.
THE TRUSTEES RECOMMEND THAT YOU VOTE "AGAINST" PROPOSAL
3.
FURTHER INFORMATION ABOUT VOTING AND THE MEETING
QUORUM AND METHODS OF TABULATION . Thirty percent of the
shares
entitled to vote -- present in person or represented by proxy --
constitutes a quorum for the transaction of business with respect
to
any proposal at the meeting (unless otherwise noted in the proxy
statement). Shares represented by proxies that reflect
abstentions
and "broker non-votes" (i.e., shares held by brokers or nominees
as to
which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or
nominee
does not have the discretionary voting power on a particular
matter)
will be counted as shares that are present and entitled to vote
on the
matter for purposes of determining the presence of a quorum.
Votes
cast by proxy or in person at the meeting will be counted by
persons
appointed by your fund as tellers for the meeting.
The tellers will count the total number of votes cast "for"
approval
of the proposals for purposes of determining whether sufficient
affirmative votes have been cast. With respect to the election
of
Trustees and selection of auditors, neither abstentions nor
broker
non-votes have any effect on the outcome of the proposal. With
respect to any other proposals, abstentions and broker non-votes
have
the effect of a negative vote on the proposal.
OTHER BUSINESS . The Trustees know of no other business to
be
brought before the meeting. However, if any other matters
properly
come before the meeting, it is their intention that proxies that
do
not contain specific restrictions to the contrary will be voted
on
such matters in accordance with the judgment of the persons named
as
proxies in the enclosed form of proxy.
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 &
Co., 77
Water Street, New York, New York, 10005, to aid in the
solicitation of
instructions for registered and nominee accounts, for a fee not
to
exceed $5,000 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 THE NEXT
ANNUAL
MEETING . It is anticipated that your fund's next annual
meeting
of shareholders will be held in October 1998. Shareholder
proposals
must be received by your fund before April 6, 1998 to be
included in your fund's proxy statement for the next annual
meeting.
ADJOURNMENT . If sufficient votes in favor of any of the
proposals set forth in the Notice of Annual Meeting are
not
received by the time scheduled for the meeting, the persons named
as
proxies may propose adjournments of the meeting for a period or
periods of not more than 60 days in the aggregate to permit
further
solicitation of proxies with respect to those proposals. Any
adjournment will require the affirmative vote of a majority of
the
votes cast on the question in person or by proxy at the session
of the
meeting to be adjourned. The persons named as proxies will vote
in
favor of adjournment those proxies which they are entitled to
vote in
favor of such proposals. They will vote against adjournment
those
proxies required to be voted against such proposals. Your fund
pays
the costs of any additional solicitation and of any adjourned
session.
Any proposals for which sufficient favorable votes have been
received
by the time of the meeting may be acted upon and considered final
regardless of whether the meeting is adjourned to permit
additional
solicitation with respect to any other proposal.
FINANCIAL INFORMATION. YOUR FUND WILL FURNISH TO YOU UPON
REQUEST,
WITHOUT CHARGE, A COPY OF THE FUND'S ANNUAL REPORT FOR ITS MOST
RECENT
FISCAL YEAR, AND A COPY OF ITS SEMIANNUAL REPORT FOR ANY
SUBSEQUENT
SEMIANNUAL PERIOD. SUCH REQUESTS MAY BE DIRECTED TO PUTNAM
INVESTOR
SERVICES, P.O. BOX 41203, PROVIDENCE , RI 02940-1203
OR 1-
800-225-1581.
<PAGE>
FUND Information
LIMITATION OF TRUSTEE LIABILITY . The Agreement and
Declaration
of Trust of your fund provides that the fund will indemnify its
Trustees and officers against liabilities and expenses incurred
in
connection with litigation in which they may be involved because
of
their offices with the fund, except if it is determined in the
manner
specified in the Agreement and Declaration of Trust that they
have not
acted in good faith in the reasonable belief that their actions
were
in the best interests of the fund or that such indemnification
would
relieve any officer or Trustee of any liability to the fund or
its
shareholders arising by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties.
Your
fund, at its expense, provides liability insurance for the
benefit of
its Trustees and officers.
AUDIT AND NOMINATING COMMITTEES . The voting members of
the
Audit Committee of your fund include only Trustees who are not
"interested persons" of the fund by reason of any affiliation
with
Putnam Investments and its affiliates. The Audit Committee
currently
consists of Messrs. Estin (Chairman), Jackson, Perkins (without
vote),
Putnam, III (without vote), Smith (without vote), and Ms. Kennan.
The
Nominating Committee consists only of Trustees who are not
"interested
persons" of your fund or Putnam Management. The Nominating
Committee
currently consists of Dr. Pounds and Ms. Kennan
(Co-chairpersons), Ms.
Baxter, and Messrs. Estin, Hill, Jackson, Patterson, 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 (59) Executive Vice President 1989
Patricia C. Flaherty (50) Senior Vice President 1993
John D. Hughes (62) Senior Vice President
& Treasurer 1987
Gordon H. Silver (50) Vice President 1990
Gary Coburn (51) Vice President 1987
Kenneth J. Taubes (39) Vice
President 1997
Jin W. Ho (39) Vice President 1997
D. William Kohli (36) Vice President 1994
Gail S. Attridge* (35) Vice President 1997
William J. Curtin (37) Vice
President 1996
David L. Waldman (31) Vice President 1997
William N. Shiebler** (55) Vice
President 1991
John R. Verani (58) Vice
President 1987
Paul M. O'Neil (44) Vice
President 1992
Beverly Marcus (53) Clerk
1987
- -----------------------------------------------------------------
* Portfolio manager
** President of Putnam Mutual Funds
All of the officers of your fund are employees of Putnam
Management or
its affiliates. Because of their positions with Putnam
Management or
its affiliates or their ownership of stock of Marsh & McLennan
Companies, Inc., Messrs. Putnam, Putnam, III, Lasser and Smith
(nominees for Trustees of your fund), as well as the officers of
your
fund, will benefit from the management fees, distribution fees,
underwriting commissions, custodian fees, and investor servicing
fees
paid or allowed by the fund.
ASSETS AND SHARES OUTSTANDING OF YOUR FUND
AS OF JULY 14, 1997
Net assets 490,821,732
Shares outstanding
and authorized to vote 53,095,749 shares
5% BENEFICIAL OWNERSHIP OF YOUR FUND AS OF JUNE 30, 1997
Persons beneficially owning more than 5%
of the fund's shares None
<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.
Please fold at perforation before detaching
- -----------------------------------------------------------------
Proxy for a meeting of shareholders to be held on October 9, 1997
for
PUTNAM MASTER INCOME TRUST
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 Master Income Trust on October 9, 1997, at 2:00 p.m.,
Boston
time, and at any adjournments thereof, all of the shares of the
fund
that the undersigned shareholder would be entitled to vote if
personally present.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you
are
a joint owner, each owner should sign. When signing as executor,
administrator, attorney, trustee, or guardian, or as custodian
for a
minor, please give your full title as such. If you are signing
for a
corporation, please sign the full corporate name and indicate the
signer's office. If you are a partner, sign in the partnership
name.
- -----------------------------------------------------------------
Shareholder sign here Date
- -----------------------------------------------------------------
Co-owner sign here Date
<PAGE>
HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or
telephone number or to provide us with your comments. Detach
this
form from the proxy ballot and return it with your signed proxy
in the
enclosed envelope.
Street
- -----------------------------------------------------------------
City State Zip
- -----------------------------------------------------------------
Telephone
- -----------------------------------------------------------------
DO YOU HAVE ANY COMMENTS?
- -----------------------------------------------------------------
- -----------------------------------------------------------------
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense
of
follow-up mailings by signing and returning this proxy as soon as
possible. A postage-paid envelope is enclosed for your
convenience.
THANK YOU!
Please fold at perforation before detaching
- -----------------------------------------------------------------
<PAGE>
IF YOU COMPLETE AND SIGN THE PROXY, WE'LL VOTE IT EXACTLY AS
YOU
TELL US. IF YOU SIMPLY SIGN THE PROXY, IT WILL BE VOTED FOR
FIXING
THE NUMBER OF TRUSTEES AND ELECTING TRUSTEES AS SET FORTH IN
PROPOSAL
1, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3. IN THEIR
DISCRETION,
THE PROXIES WILL ALSO BE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK YOUR CHOICES / X / IN BLUE OR BLACK INK.
THE TRUSTEES RECOMMEND A VOTE "FOR" FIXING THE NUMBER OF TRUSTEES
AND
ELECTING ALL OF THE NOMINEES FOR TRUSTEES.
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, A.J.C.
Smith and W.N. Thorndike.
/ / FOR fixing the number of Trustees and electing all the
nominees
(EXCEPT AS MARKED TO THE CONTRARY BELOW.)
TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE OF THE
NOMINEES,
WRITE THOSE NOMINEES' NAMES BELOW:
------------------------------------------------------------
/ / WITHHOLD authority to vote for all nominees
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 2.
2. PROPOSAL TO RATIFY FOR AGAINST ABSTAIN
THE SELECTION OF / / / / / /
COOPERS & LYBRAND L.L.P.
AS THE INDEPENDENT AUDITORS
OF YOUR FUND.
THE TRUSTEES RECOMMEND THAT YOU VOTE "AGAINST" PROPOSAL 3.
3. PROPOSAL TO CONVERT
YOUR FUND FROM CLOSED - / / / /
/ /
END TO OPEN-END STATUS
AND AUTHORIZE CERTAIN
RELATED AMENDMENTS TO
THE AGREEMENT AND
DECLARATION OF TRUST.
NOTE : If you have questions on any of the Proposals, please
call
1-800-225-1581.
