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:
-----
/ / Preliminary Proxy Statement
-----
-----
/ / Confidential, for Use of the Commission Only (as permitted by
----- Rule 14a-6(e) (2))
-----
/ X / Definitive Proxy Statement
-----
-----
/ / Definitive Additional Materials
-----
-----
/ / 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):
-1-
<PAGE>
-----
/ X / No fee required
-----
-----
/ / Fee computed on table below per Exchange Act Rule 14a 6(i)(1)
----- 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 (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:
-----
/ / Fee paid previously with preliminary materials.
-----
-----
/ / 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:
-2-
<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 page 4.
We urge you to spend a couple of minutes with the proxy statement, and
either fill out your proxy card and return it to us via the mail, or
record your voting instructions via the Internet. 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]
<PAGE>
Table of contents
A Message from the Chairman................................................ 1
Notice of Shareholder Meeting.............................................. 3
Trustees' Recommendations.................................................. 4
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 advisor.
-----------------------------------------------
<PAGE>
A Message from the Chairman
Dear Shareholder:
[Photo of John A. Hill]
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 either filling
out and signing the enclosed proxy card or by voting via the Internet.
Instructions are listed at the top of your proxy card. We are asking for
your vote on the following matters: (1) fixing the number of Trustees and
electing your fund's Trustees; (2) ratifying the selection of your fund's
independent auditors; and (3) converting 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, your Trustees, unanimously recommend that
shareholders vote "Against" the conversion. This third proposal is on the
agenda as a result of provisions in your fund's governing legal documents
that require that shareholders be given the opportunity to consider a
conversion in the event the fund's shares trade at a discount from net
asset value greater than 10% over a specified period of 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. Under some circumstances this flexibility
can allow a closed-end fund to out-perform an open-end fund with a similar
investment strategy. 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 would be inconsistent with the fund's
investment objective of seeking high current income consistent with
preservation of capital.
1
<PAGE>
Despite the advantages of maintaining your fund's closed-end status, you
would receive a short-term benefit if the fund were converted to open-end
status. As of August 11, 2000 shares of your fund were traded at an 11.90%
discount to their net asset value. Upon conversion of the fund, your shares
would be redeemable at their net asset value with no discount subject to
the imposition by the Trustees of a redemption fee payable to the fund. Of
course, the size of the discount fluctuates, and may be greater or less
than 11.90% at the time any conversion goes into effect. While it may
appear that your shares of the fund would increase in value by 12% upon
conversion, transaction costs involved with selling a portion of your
fund's portfolio would reduce this gain.
The Trustees do not believe that the current level of discounts justifies
the fundamental changes that would result from conversion, and are
therefore recommending that you vote against the conversion.
Although we would like very much to have you attend your fund's meeting, we
realize this may not be possible. Whether or not you plan to be present, we
need your vote. We urge you to record your voting instructions on the
Internet or 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, your 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 advisor or call a Putnam customer
service representative at 1-800-225-1581.
Sincerely yours,
/s/ John A. Hill
----------------------
John A. Hill, Chairman
2
<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 5,
2000 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 6.
2. Ratifying the selection by the Trustees of the independent auditors of your
fund for its current fiscal year. See page 21.
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.
By the Trustees
John A. Hill, Chairman
George Putnam, III, President
<TABLE>
<S> <C>
Jameson A. Baxter John H. Mullin, III
Hans H. Estin Robert E. Patterson
Ronald J. Jackson A.J.C. Smith
Paul L. Joskow W. Thomas Stephens
Elizabeth T. Kennan W. Nicholas Thorndike
Lawrence J. Lasser
</TABLE>
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED OR RECORD YOUR VOTING INSTRUCTIONS VIA THE
INTERNET SO YOU WILL BE REPRESENTED AT THE MEETING.
August 26, 2000
3
<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 advisor.
> Who is asking for your 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 5, 2000 and, if the fund's meeting is adjourned, at any later
meetings, for the purposes stated in the Notice of Annual Meeting (see
previous page). The Notice of Meeting, the proxy, and the Proxy Statement
are being mailed on or about August 28, 2000.
> 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 KPMG LLP 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.
4
<PAGE>
> Who is eligible to vote?
Shareholders of record at the close of business on July 14, 2000 are
entitled to be present and to vote at the meeting or any adjourned meeting.
Each share is entitled to one vote. Shares represented by duly executed
proxies will be voted in accordance with your 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
your fund's meeting, your shares will be voted at the Trustees' discretion.
5
<PAGE>
The Proposals
Nominees for Trustees
I. ELECTION OF TRUSTEES
> Who are the nominees for Trustees?
The Board Policy and Nominating Committee of the Trustees of your fund
recommends that the number of Trustees be fixed at 13 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 Board Policy and Nominating Committee of the Trustees of your fund
makes recommendations concerning the Trustees of your fund. The Board
Policy and Nominating Committee 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
[Photo of Jameson Adkins Baxter]
Ms. Baxter, age 57, is the President of Baxter Associates, Inc., a
management consulting and private investment firm that 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,
Ryerson Tull 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; Member of the Board of Governors of Good Shepherd Hospital;
and Chair of the National Center for Non-profit Boards. Ms. Baxter is a
graduate of Mount Holyoke College.
6
<PAGE>
Nominees for Trustees
> Hans H. Estin
[Photo of Hans H. Estin]
Mr. Estin, age 72, is a Chartered Financial Analyst and the Vice Chairman
of North American Management Corp., a registered investment advisor serving
individual clients and their families. Mr. Estin currently also serves as a
Corporation Member of The Schepens Eye Research Institute and as 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
[Photo of John A. Hill]
Mr. Hill, age 58, is Chairman of the Trustees. He is the Vice-Chairman and
Managing Director of First Reserve Corporation, a registered investment
advisor 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 Santa Fe Snyder
Corporation, an exploration and production company, TransMontaingne Oil
Company, a refined oil product pipeline and distribution company and
various private companies controlled by First Reserve Corporation. He is
also a Member of the Board of Advisors of Fund Directions. He is currently
active in various business associations, including the
7
<PAGE>
Nominees for Trustees
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
[Photo of Ronald J. Jackson]
Mr. Jackson, age 56, retired as Chairman of the Board, President and Chief
Executive Officer of Fisher-Price, Inc., a major toy manufacturer, in 1993,
a position which he held since 1990. 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 is a graduate of Michigan
State University Business School.
> Paul L. Joskow*
[Photo of Paul L. Joskow]
Dr. Joskow, age 53, is Elizabeth and James Killian Professor of Economics
and Director of the Center for Energy and Environmental Policy Research at
the Massachusetts Institute of Technology. He has published five books and
numerous articles on topics in industrial organization, government
regulation of industry, and competition policy. Dr. Joskow currently serves
as a Director of the New England Electric System, a public utility holding
company, State Farm Indemnity Company, an automobile insurance company, and
the Whitehead Institute for Biomedical Research, a non-profit research
institution. He has been President of the Yale University Council since
1993.
8
<PAGE>
Nominees for Trustees
Dr. Joskow is active on industry restructuring, environmental, energy,
competition, and privatization policies and has served as an advisor to
governments and corporations around the world.
Dr. Joskow is a graduate of Cornell University and Yale University. He is a
Fellow of the Econometric Society and the American Academy of Arts and
Sciences.
> Elizabeth T. Kennan
[Photo of Elizabeth T. Kennan]
Dr. Kennan, age 62, is President Emeritus 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, published numerous articles, and directed the post-doctoral
programs in Patristic and Medieval Studies.
Dr. Kennan currently serves as a Director of Northeast Utilities, Talbots
and Cambus-Kenneth Bloodstock, a corporation involved in thoroughbred horse
breeding and farming. She is a Member of The Folger Shakespeare Library
Committee and a Trustee of Franklin Pierce College. Dr. Kennan previously
served as a director of Bell Atlantic Corporation, Chastain Real Estate,
and Kentucky Home Life Insurance. Active in various educational and civic
associations, Dr. Kennan is a graduate of Mount Holyoke College, the
University of Washington, and St. Hilda's College, Oxford University. She
holds several honorary doctorates.
> Lawrence J. Lasser*
[Photo of Lawrence J. Lasser]
Mr. Lasser, age 57, is a Vice President of your fund and each of 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.
9
<PAGE>
Nominees for Trustees
Mr. Lasser currently also serves as a Director of Marsh & McLennan
Companies, Inc., the parent company of Putnam Management. He is a Member of
the Board of Directors of the United Way of Massachusetts Bay, a Member of
the Board of Governors of the Investment Company Institute, a Trustee of
the Museum of Fine Arts, Boston, a Trustee and Member of the Finance and
Executive Committees of the Beth Israel Deaconess Medical Center, Boston
and a Member of the CareGroup Board of Managers Investment Committee, the
Council on Foreign Relations, and the Commercial Club of Boston. Mr. Lasser
is a graduate of Antioch College and Harvard Business School.
> John H. Mullin, III
[Photo of John H. Mullin, III]
Mr. Mullin, age 59, is Chairman and CEO of Ridgeway Farm, a limited
liability company engaged in timber activities and farming. Prior to
establishing Ridgeway Farm in 1989, Mr. Mullin was a Managing Director of
Dillon, Read & Co. Inc., an investment banking firm.
Mr. Mullin currently serves as a Director of Graphic Packaging
International Corp., a company engaged in the manufacture of packaging
products; Alex. Brown Realty, Inc., a real estate investment company; CP&L
Energy, a public utility company; and The Liberty Corporation, a company
engaged in the life insurance and broadcasting industries. Mr. Mullin
previously served as a Director of Dillon, Read & Co. Inc., Adolph Coors
Company, Crystal Brands, Inc., Fisher-Price, Inc., Mattel, Inc. and The
Ryland Group, Inc. Mr. Mullin is a Trustee Emeritus of Washington & Lee
University where he served as Chairman of the Investment Committee. Mr.
Mullin is a graduate of Washington & Lee University and The Wharton
Graduate School at the University of Pennsylvania.
10
<PAGE>
Nominees for Trustees
> Robert E. Patterson
[Photo of Robert E. Patterson]
Mr. Patterson, age 55, is the President and a Trustee of Cabot Industrial
Trust, a publicly traded real estate investment trust. Prior to February
1998, he was Executive Vice President and Director of Acquisitions of Cabot
Partners Limited Partnership, a registered investment advisor which managed
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, a Trustee of SEA Education Association and a Director of Brandywine
Trust Company. Mr. Patterson is a graduate of Harvard College and Harvard
Law School.
> George Putnam, III*
[Photo of George Putnam, III]
Mr. Putnam, age 48, is the President of your Fund and each of the other
Putnam Funds. He is also 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 advisor 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.
11
<PAGE>
Nominees for Trustees
Mr. Putnam currently also serves as a Director of The Boston Family Office,
L.L.C., a registered investment advisor that provides financial advice to
individuals and families. He is also a Trustee of the SEA Education
Association and St. Mark's School. Mr. Putnam is a graduate of Harvard
College, Harvard Business School and Harvard Law School.
> A.J.C. Smith*
[Photo of A.J.C. Smith]
Mr. Smith, age 66, is a Director of Marsh & McLennan Companies, Inc. From
May 1992 to November 1999 he served as the Company's Chairman and Chief
Executive Officer and from November 1999 to May 2000, he served as
Chairman. He has been employed by Marsh & McLennan and related companies in
various capacities since 1961. Mr. Smith is a Director of the Trident
Corp.; a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, the Educational Broadcasting Corporation, the Economic Club of
New York, and the U.S. Chamber of Commerce; a Member of the Board of
Overseers of the Joan and Sanford I. Weill Graduate School of Medical
Sciences of Cornell University; and 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. Thomas Stephens
[Photo of W. Thomas Stephens]
Mr. Stephens, age 57, was, until 1999, the President and Chief Executive
Officer of MacMillan Bloedel Limited, a forest products and building
materials company.
In 1996, Mr. Stephens retired as Chairman of the Board of Directors,
President and Chief Executive Officer of Johns Manville Corporation.
12
<PAGE>
Nominees for Trustees
Mr. Stephens serves as a Director for Qwest Communications, a
communications company, New Century Energies, a public utility company,
TransCanada Pipelines, and Fletcher Challenge Canada, a paper manufacturer.
Mr. Stephens has B.S. and M.S. degrees from the University of Arkansas.
> W. Nicholas Thorndike
[Photo of W. Nicholas Thorndike]
Mr. Thorndike, age 67, serves as a Director of various corporations and
charitable organizations, including 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 Cabot Industrial Trust and Northeastern University, a member of
the Advisory Board of New England Electric Systems, and an Honorary Trustee
of Massachusetts General Hospital, where he previously served as chairman
and president.
Prior to December 1988, Mr. Thorndike was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike, Doran, Paine &
Lewis, a registered investment advisor that 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 Retail Management, Inc. ("Putnam Retail Management"), the principal
underwriter for all the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Lasser, Putnam III, and Smith are deemed "interested
persons" by virtue of their positions as officers or affiliates of your
fund, or directors of Putnam Management, Putnam Retail Management, or Marsh
& McLennan Companies, Inc., the parent company of Putnam Management and
Putnam Retail Management.
13
<PAGE>
Mr. Joskow is not currently an "interested person" of your fund but could
be deemed by the Securities and Exchange Commission to be an "interested
person" on account of his prior consulting relationship with National
Economic Research Associates, Inc. a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc., which was terminated as of August 31, 1998.
The balance of the nominees are not "interested persons."
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 1999. 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 fix the number of Trustees at less than 13
for your fund.
The address for each of the current Trustees and each of the nominees is
One Post Office Square, Boston, Massachusetts 02109.
> 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, and investor servicing. At least
annually, the Trustees review the fees paid to Putnam Management and its
affiliates for these services and the
14
<PAGE>
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 114 Putnam funds based on their own investment needs.
The Trustees' aggregate investments in the Putnam funds total over $29
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.
15
<PAGE>
Share Ownership by Trustees
Number of shares owned as of May 31, 2000:
<TABLE>
<CAPTION>
Year first All Putnam
elected as funds Putnam
Trustee of (including Master
the Putnam notional Income
Trustees funds shares)(1)(2) Trust
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Jameson A. Baxter 1994 161,048 135
Hans H. Estin 1972 35,915 932
John A. Hill 1985 231,092 1,500
Ronald J. Jackson 1996 165,186(3) 200(3)
Paul L. Joskow 1997 52,285 100
Elizabeth T. Kennan 1992 27,584(4) 167(4)
Lawrence J. Lasser 1992 521,035 100
John H. Mullin, III 1997 73,938 100
Robert E. Patterson 1984 91,400 300
George Putnam, III 1984 516,910 500
A.J.C. Smith 1986 46,333(5) 200(5)
W. Thomas Stephens 1997 139,100 100
W. Nicholas Thorndike 1992 85,531 215
</TABLE>
(1) These holdings do not include shares of Putnam money market funds.
(2) Notional shares represent economic interests in a fund acquired by the
Trustees pursuant to the terms of the Trustee Compensation Deferral Plan,
and they do not have any voting power. None of the Trustees held notional
shares in your fund.
(3) Mr. Jackson has shared investment power and shared voting power with
respect to such shares.
(4) Dr. Kennan is the custodian of a trust which owns all of these shares and
in which she has no economic interest.
(5) Mr. Smith has shared investment power and shared voting power with respect
to such shares.
As of May 31, 2000, the Trustees and officers of Putnam Master Income Trust
owned a total of 4,549 shares, comprising less than 1% of the outstanding
shares of such fund on that date.
16
<PAGE>
> 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:
o by carefully reviewing your fund's investment performance on an
individual basis with your fund's managers;
o by also carefully reviewing the quality of the various other services
provided to the funds and their shareholders by Putnam Management and
its affiliates;
o by discussing with senior management of Putnam Management steps being
taken to address any performance deficiencies;
o by conducting an in-depth review of the fees paid by your fund and by
negotiating with 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;
o by reviewing brokerage costs and fees, allocations among brokers, soft
dollar expenditures and similar expenses of each fund;
o 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
o 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
17
<PAGE>
meetings of various committees of the board which focus on particular
matters. These currently include: the Contract Committee, which reviews all
the contractual arrangements with Putnam Management and its affiliates; the
Communication, Service and Marketing Committee, which reviews the quality
of services provided by your fund's investor servicing agent and custodian;
the Brokerage and Custody Committee, which reviews matters relating to
custody of securities, best execution, brokerage costs and allocations and
new investment techniques; the Audit Committee, which reviews procedures
for the valuation of securities, the funds' accounting policies and the
adequacy of internal controls and supervises the engagement of the funds'
auditors; the Board Policy and Nominating Committee, which is composed of
non-interested Trustees and which reviews the compensation of the Trustees
and their administrative staff, supervises the engagement of the funds'
independent counsel and selects nominees for election as Trustees; the
Distribution and Closed-End Funds Committee, which is responsible for
reviewing special issues applicable to closed-end funds such as your fund,
and the Pricing Committee, which reviews procedures for the valuation of
securities.
Each Trustee generally attends at least two formal committee meetings
during each regular meeting of the Trustees. During 1999, 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 your
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.
18
<PAGE>
> What are the Trustees paid for their services?
Each Trustee of your fund 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 Board
Policy and Nominating 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 its
most recent fiscal year and the fees paid to each Trustee by all of the
Putnam funds during calendar year 1999:
19
<PAGE>
PUTNAM MASTER INCOME TRUST
Compensation Table
<TABLE>
<CAPTION>
Estimated
Pension or annual
retirement benefits
benefits from all
Aggregate accrued as Putnam Total
compensation part of funds compensation
from the fund upon from all
Trustee fund(1) expenses retirement(2) Putnam funds(3)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jameson A. Baxter $789 $180 $ 95,000 $191,000(4)
Hans H. Estin 785 402 95,000 190,000
John A. Hill 902 204 115,000 239,750(4)(5)
Ronald J. Jackson 800 251 95,000 193,500(4)
Paul L. Joskow 785 102 95,000 191,000(4)
Elizabeth T. Kennan 785 266 95,000 190,000
Lawrence J. Lasser 781 203 95,000 189,000
John H. Mullin, III 810 153 95,000 196,000(4)
Robert E. Patterson 786 138 95,000 190,250
George Putnam, III 785 94 95,000 190,000
A.J.C. Smith 777 294 95,000 188,000
W. Thomas Stephens 777 143 95,000 188,000(4)
W. Nicholas Thorndike 785 373 95,000 190,000
</TABLE>
(1) Includes an annual retainer and an attendance fee for each meeting
attended.
(2) 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 1999.
(3) As of December 31, 1999, there were 114 funds in the Putnam family.
(4) Includes compensation deferred pursuant to a Trustee Compensation Deferral
Plan.
(5) Includes additional compensation for service as Vice Chairman of the Putnam
funds. Mr. Hill became Chairman of the Board of Trustees on July 1, 2000.
20
<PAGE>
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 by the funds 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 compensated by the funds. 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 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 36.
2. RATIFICATION OF INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, independent
accountants, has been selected by the Trustees as the independent auditors
of your fund for the current fiscal year. The Audit Committee of the Board
of Trustees unanimously approved the selection of KPMG in June of 2000, and
the Trustees unanimously approved such selection in July of 2000. Among the
country's preeminent accounting firms, this firm also serves as the
auditors for several 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.
21
<PAGE>
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. 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. Your 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.
22
<PAGE>
> 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 29, 1999, your fund's shares traded at an average discount of
11.04%, requiring that this proposal be submitted to shareholders. A
similar vote was held at the 1996 and 1997 annual meetings of shareholders.
At those meetings shareholders voted to retain closed-end status as
follows:
1997 Annual Meeting
Percentage of Shares Voted
<TABLE>
<S> <C>
For Open-ending 17.90%
Against Open-ending 76.03%
Abstain 6.07%
</TABLE>
1996 Annual Meeting
Percentage of Shares Voted
<TABLE>
<S> <C>
For Open-ending 21.20%
Against Open-ending 71.90%
Abstain 6.90%
</TABLE>
> What is the recommendation of the Trustees?
The Trustees regularly review the overall performance and trading
information for your fund and all of the Putnam closed-end funds. At
meetings held in May and June of this year, the Trustees of your fund
carefully evaluated the fund's investment performance, the trading history
of its shares since its inception in December 1987, and information about
the possible advantages and disadvantages of converting to an open-end
fund. For the reasons described below, the Trustees of your fund have
unanimously concluded that the conversion of your fund to open-end status
would
23
<PAGE>
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:
o The Trustees believe that your fund's closed-end status provides
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.
o The Trustees believe that your fund's operating expenses are likely to
increase if it is converted to open-end status. 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 a distribution plan were approved,
the
24
<PAGE>
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 by your fund 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).
o It is possible that redemptions by shareholders would cause your fund
to shrink following conversion to open-end status, and, everything
else being equal, thereby resulting in an increased expense ratio for
remaining shareholders. However open-end funds, which continually
offer new shares to the public, also have the ability to increase in
size. Growth in your fund's size could result in efficiencies and
spread fixed costs over a larger pool of assets. Putnam Management has
advised the Trustees that it is likely that your fund would experience
significant net redemptions following any conversion, thereby
shrinking in size. Depending on the size of future redemptions or
sales, increased expense ratios could result for either temporary or
indefinite periods.
o 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 make capital gain
distributions and allocate the tax gain to all shareholders, not
simply to those redeeming.
o In light of the potential loss of the advantages of closed-end status
and the potential increase of expenses that would likely follow,
conversion could result in a lower yield for the shareholders. This
result is inconsistent with the fund's investment objective of seeking
high current income consistent with preservation of capital.
25
<PAGE>
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. 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, especially in light of the fact
that historically the fund's discount levels fluctuate and have not always
been as large as they currently are.
> Are there any advantages to converting the fund to open-end status?
Yes. By converting to an open-end fund, your fund would immediately offer
you the ability to redeem your shares at their net asset value less any
redemption fee that the Trustees may impose. As of August 11, 2000 the
price of your shares in the fund represented a discount of 11.90% to their
net asset value. This means that if you sold shares on August 11, 2000 you
would receive only 88.10% of your pro rata share of your fund's assets. If
the fund were converted, you would be able to receive 100% of your pro rata
share less any redemption fee imposed by the Trustees. This would represent
a one-time increase in the value of your shares.
The Trustees have also considered the potential decrease in expense ratio
that would arise if your fund grows in size as a result of net sales of new
shares. As an open-end fund your fund would constantly be offering new
shares to the public. If more new shares are sold than redeemed, the fund
could grow in size, resulting in a lower effective management fee and a
lower expense ratio. As stated above, Putnam Management has advised the
Trustees that Putnam Management does not expect that the fund would grow in
size following a conversion to open-end status.
26
<PAGE>
After considering the reasons set forth above, the Trustees do not believe
that the current discount justifies the fundamental changes that would
result from a conversion to open-end status. 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 June 30, 2000
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value 4.20% 2.82% 6.01% 9.20%
Market Value -3.13% 0.04% 5.19% 8.92%
</TABLE>
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. To compare the
funds, the Trustees use a formula that assigns a weighting to three
factors: yield, total return and risk. Based on this formula your fund was
ranked at approximately the midpoint of funds in its peer group as of
December 31, 1999.
> 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:
o 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,
27
<PAGE>
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.
o 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. Shareholders who wish to dispose of shares
would receive a higher price at net asset value than if shares
remained at a discount.
o 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.
28
<PAGE>
o 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.
o 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.
o 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 75 open-end funds in
the Putnam group. Shareholders of your fund currently do not have that
privilege.
29
<PAGE>
> What other possible consequences might result from conversion of your fund
to open-end status?
In addition to those matters described above, you should consider the
following possible consequences of conversion of your fund to open-end
status:
o 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.
o 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.
30
<PAGE>
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 or sales 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 were 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
31
<PAGE>
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.
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 prop-
32
<PAGE>
erly come before the meeting, it is their intention that proxies that do
not contain specific restrictions to the contrary will be voted on such
matters in accordance with the judgment of the persons named as proxies in
the enclosed form of proxy.
Solicitation of proxies. In addition to soliciting proxies by mail,
Trustees of your fund and employees of Putnam Management, Putnam Fiduciary
Trust Company and Putnam Retail Management may solicit proxies in person or
by telephone. Your fund may also arrange to have voting instructions
recorded by telephone. The telephone voting procedure is designed to
authenticate shareholders' identities, to allow them 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.
Shareholders may have the opportunity to submit their voting instructions
via the Internet by utilizing a program provided by a third party vendor
hired by Putnam Management. The giving of such a proxy will not affect your
right to vote in person should you decide to attend the meeting. To vote
via the Internet, you will need the 14-digit "control" number that appears
on your proxy card. To use the Internet, please access the Internet address
found on your proxy card on the World
33
<PAGE>
Wide Web. The Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders to give their voting
instructions, and to confirm that shareholders' instructions have been
recorded properly. Shareholders voting via the Internet should understand
that there may be costs associated with Internet access, such as usage
charges from Internet access providers and telephone companies, that must
be borne by the shareholders.
Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with that 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., Inc., 77 Water
Street, New York, New York 10005, to aid in the solicitation instructions
for nominee accounts, for a fee not to exceed $3,000 plus reasonable
out-of-pocket expenses for mailing and phone costs. The expenses of the
preparation of proxy statements and related materials, including printing
and delivery costs, are borne by your fund.
Revocation of proxies. Proxies, including proxies given by telephone or
over the Internet, may be revoked at any time before they are voted either
(i) by a written revocation received by the Associate Clerk of your fund,
(ii) by properly executing a later-dated proxy, (iii) by recording
later-dated voting instructions via the Internet or (iv) by attending the
meeting and voting in person.
Date for receipt of shareholders' proposals for the next annual meeting. It
is currently anticipated that your fund's next annual meeting of
shareholders will be held in October 2001. Shareholder proposals to be
included in the proxy statement for that meeting must be received by your
fund before March 28, 2001. Shareholders who wish to make a proposal at the
2001
34
<PAGE>
annual meeting--other than one that will be included in the fund's proxy
materials--should notify the fund no later than June 5, 2001. The Board
Policy and Nominating Committee will also consider nominees recommended by
shareholders of the fund to serve as Trustees, provided that shareholders
submit their recommendations by the above date. If a shareholder who wishes
to present a proposal fails to notify the fund by that date, the proxies
solicited for the meeting will have discretionary authority to vote on the
shareholder's proposal if it is properly brought before the meeting. If a
shareholder makes a timely notification, the proxies may still exercise
discretionary voting authority under circumstances consistent with the
SEC's proxy rules.
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 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 that 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's most recent Annual Report, dated October
31, 1999 and filed with the Securities and Exchange Commission on December
16, 1999 is hereby incorporated by reference into this Proxy Statement. In
addition, the Semi-Annual Report dated April 30, 2000 and filed with the
Securities and Exchange Commission on June 20, 2000 is hereby
35
<PAGE>
incorporated by reference into this Proxy Statement. Your fund will furnish
to you upon request and 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.
Fund Information
Putnam Investments. Putnam Investment Management, Inc., the fund's
investment manager, and its affiliates, Putnam Retail Management, Inc., the
fund's principal underwriter, and Putnam Fiduciary Trust Company, the
fund's investor servicing agent and custodian (collectively, the "Putnam
companies"), are owned by Putnam Investments, Inc., a holding company that
is, except for a minority stake owned by employees, in turn owned by Marsh
& McLennan Companies, Inc., a leading professional services firm that
includes risk and insurance services, investment management and consulting
businesses. The address of Putnam Investments, Inc. and each of the Putnam
companies is One Post Office Square, Boston, Massachusetts 02109. The
address of the executive offices of Marsh & McLennan Companies, Inc. is
1166 Avenue of the Americas, New York, New York 10036.
Limitation of Trustee liability. The 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 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
36
<PAGE>
disregard of his or her duties. Your fund, at its expense, provides
liability insurance for the benefit of its Trustees and officers.
Audit Committee and Board Policy and Nominating Committee. The members of
the Audit Committee of your fund include only Trustees who are not
"interested persons" of the fund or Putnam Management. The Audit Committee
currently consists of Dr. Kennan and Messrs. Estin, Mullin and Stephens
(Chairman). The Board Policy and Nominating Committee consists only of
Trustees who are not "interested persons" of your fund or Putnam
Management. The Board Policy and Nominating Committee currently consists of
Dr. Kennan (Chairperson), Messrs. Hill, Patterson and Thorndike. During the
Fund's last fiscal year, the Audit Committee met eight times, and the Board
Policy and Nominating Committee met three times.
Officers and other information. 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 Retail Management, Messrs. 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, custodian fees, and investor
servicing fees paid or allowed by the fund. In addition to George Putnam,
III and Lawrence J. Lasser, the officers of your fund are as follows:
37
<PAGE>
Putnam Master Income Trust
<TABLE>
<CAPTION>
Year first
elected
Name (age) Office to office
--------------------------------------------------------------------------------
<S> <C> <C>
Charles E. Porter (61) Executive Vice President 1989
Patricia C. Flaherty (53) Senior Vice President 1993
John D. Hughes (65) Senior Vice President
& Treasurer 1989
Gordon H. Silver (52) Vice President 1990
David L. Waldman* (34) Vice President 1998
Richard A. Monaghan** (45) Vice President 1999
John R. Verani (60) Vice President 1989
--------------------------------------------------------------------------------
</TABLE>
*The fund's portfolio manager
**President of Putnam Retail Management
Assets and shares outstanding of your fund as of May 31, 2000
Net assets: $393,544,122
Common shares outstanding and authorized to vote: 53,095,749.188 shares
5% beneficial ownership of your fund as of May 31, 2000
Persons beneficially owning more than 5% of the fund's shares none
38
<PAGE>
PUTNAM INVESTMENTS [logo]
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
62709 8/00
<PAGE>
PUTNAMINVESTMENTS (Logo)
P.O. Box 9131
Hingham, MA 02043-9131
FOR YOUR CONVENIENCE YOU MAY RECORD YOUR VOTING INSTRUCTIONS VIA THE INTERNET OR
BY RETURNING THIS PROXY CARD BY MAIL
Your vote is very important. If you choose to record your voting instructions
via the Internet, visit the website at www.proxyweb.com/Putnam. Please refer to
the instructions below. Your voting instructions will be immediately confirmed
if you provide your e-mail address.
To record your voting instructions on the Internet
1. Read the proxy statement.
2. Go to www.proxyweb.com/Putnam.
3. Enter the 14-digit control number printed on your proxy card.
4. Follow the instructions on the site.
If you submit your voting instructions on the Internet, do not return your proxy
card.
This is your PROXY CARD.
To vote by mail, please record your voting instructions on this proxy card, 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 5, 2000 for Putnam
Master Income Trust.
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints John A. Hill, Hans H. Estin, and
Robert E. Patterson, and each of them separately, Proxies, with power of
substitution, and hereby authorizes them to represent such shareholder and to
vote, as designated below, at the meeting of shareholders of Putnam Master
Income Trust on October 5, 2000, 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.
-1-
<PAGE>
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
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 card and
return it with your signed proxy in the enclosed envelope.
Name
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Street
--------------------------------------------------------------------------------
City State Zip
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telephone
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DO YOU HAVE ANY COMMENTS?
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-2-
<PAGE>
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense of follow-up
mailings by signing and returning this proxy card or by recording your voting
instructions via the Internet as soon as possible. A postage-paid envelope is
enclosed for your convenience.
THANK YOU!
PLEASE FOLD AT PERFORATION BEFORE DETACHING
If you complete and sign the proxy, we'll vote exactly as you tell us. The
Proxies are authorized to vote in their discretion upon any matters as may
properly come before the meeting or at any adjournments of the meeting.
If you simply sign the proxy, or fail to provide your voting instructions on
a proposal, the Proxies will vote FOR fixing the number of Trustees as
set forth in Proposal 1, FOR Proposal 2 and AGAINST Proposal 3.
THE TRUSTEES RECOMMEND A VOTE FOR FIXING THE NUMBER OF TRUSTEES AND
ELECTING ALL THE NOMINEES:
Please vote by filling in the appropriate boxes below.
1. Proposal to fix the number of Trustees and elect all nominees. The nominees
for Trustees are: J.A. Baxter, H.H. Estin, J.A. Hill, R.J. Jackson, P.L.
Joskow, E.T. Kennan, L.J. Lasser, J.H. Mullin, III, R.E. Patterson, G.
Putnam, III, A.J.C. Smith, W.T. Stephens and W.N. Thorndike.
/ / FOR fixing the number of Trustees as proposed 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 the
name(s) of the nominee(s) below:
---------------------------------------------------------------------------
/ / WITHHOLD authority to vote for all nominees
THE TRUSTEES RECOMMEND A VOTE FOR PROPOSAL 2:
<TABLE>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C>
2. Proposal to ratify / / / / / /
the selection of KPMG LLP
as the independent auditors of your fund.
</TABLE>
THE TRUSTEES RECOMMEND A VOTE AGAINST PROPSAL 3:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
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.
</TABLE>
Note: If you have questions on any of the proposals, please call
1-800-225-1581.
-4-
