SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant / X /
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
/ / 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):
/X/ No fee required
/ / 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:
/ / 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:
<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.
[scale logo]
<PAGE>
Table of contents
<TABLE>
<S> <C>
A Message from the Chairman................................................ (1)
Notice of Shareholder Meeting.............................................. (3)
Trustees' Recommendations.................................................. (4)
Proxy card enclosed
</TABLE>
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
[Photo of John A. Hill]
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 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, 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 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 July 3, 2000 shares of your fund were traded at a 12.55% 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 12.55% at the time any conversion
goes into effect. While it may appear that your shares of the fund would
increase in value by 14% 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 adviser 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 18, 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).
> 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. The Notice
of Meeting, the proxy, and the Proxy Statement are being mailed on or about
August 21, 2000.
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
1. 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 57, 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 55, 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 52, 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 61, 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 58, 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 ACX Technologies, Inc., a
company engaged in the manufacture of packaging products; Alex. Brown Realty,
Inc., a real estate investment company; Carolina Power and Light, 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 54, 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 65, is the Chairman of Marsh & McLennan Companies, Inc. From
May 1992 to November 1999 he served as the Company's Chairman and Chief
Executive Officer. 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 66, 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 Closed-end Funds
and Variable Trust 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 $956 $180 $ 95,000 $191,000(4)
Hans H. Estin 846 402 95,000 190,000
John A. Hill 836 204 115,000 239,750(4)(5)
Ronald J. Jackson 927 251 95,000 193,500(4)
Paul L. Joskow 836 102 95,000 191,000(4)
Elizabeth T. Kennan 927 266 95,000 190,000
Lawrence J. Lasser 827 203 95,000 189,000
John H. Mullin, III 836 153 95,000 196,250(4)
Robert E. Patterson 841 138 95,000 190,250
George Putnam, III 841 94 95,000 190,000
A.J.C. Smith 814 294 95,000 188,000
W. Thomas Stephens 839 143 95,000 188,000(4)
W. Nicholas Thorndike 846 373 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 17.9%
Against Open-ending 76.02%
Abstain 6.0%
</TABLE>
1996 Annual Meeting
Percentage of Shares Voted
<TABLE>
<S> <C>
For Open-ending 21.2%
Against Open-ending 71.8%
Abstain 6.9%
</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 0.20% 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 July 3, 2000 the price of
your shares in the fund represented a discount of 12.55% to their net asset
value. This means that if you sold shares on July 3, 2000 you would receive
only 87.45% 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 May 31, 2000
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value 1.21% 2.44% 5.51% 9.19 %
Market Value -7.07% -0.90% 4.46% 8.41%*
</TABLE>
*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. 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
(27)
<PAGE>
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.
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.
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 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
(34)
<PAGE>
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 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.
(35)
<PAGE>
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, is 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 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
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 and Stephens (Chairman). The Board
Policy and Nominating Committee consists only of Trustees who are not
"interested
(36)
<PAGE>
persons" of your fund or Putnam Management. The Board Policy and Nominating
Committee currently consists of Dr. Kennan (Chairperson), Messrs. Hill,
Patterson and Thorndike.
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:
<TABLE>
<CAPTION>
Putnam Master Income Trust
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
(37)
<PAGE>
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
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?
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-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:
FOR AGAINST ABSTAIN
<PAGE>
2. Proposal to ratify / / / / / /
the selection of
KPMG LLP
as the independent auditors of your fund.
THE TRUSTEES RECOMMEND A VOTE AGAINST PROPOSAL 3:
FOR AGAINST ABSTAIN
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.
