SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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Filed by the Registrant / X /
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Filed by a party other than the Registrant / /
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Check the appropriate box:
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/ X / Preliminary Proxy Statement
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/ / Confidential, for Use of the Commission Only (as
- ---- permitted by Rule 14a-6(e) (2))
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/ / Definitive Proxy Statement
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/ / Definitive Additional Materials
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/ / Soliciting Material Pursuant to Sec. 240.14a-11(c) or
- ---- Sec. 240.14a-12
PUTNAM MASTER INTERMEDIATE INCOME TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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/ X / No fee required
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/ / Fee computed on table below per Exchange Act Rule 14a
- ---- 6(i)(1) and 0-11
<PAGE>
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided
- ---- by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM MASTER INTERMEDIATE INCOME TRUST
The document you hold in your hands contains your proxy statement
and proxy card. A proxy card is, in essence, a ballot. When you
vote your proxy, it tells us how to vote on your behalf on
important issues relating to your fund. If you complete and sign
the proxy, we'll vote it exactly as you tell us. If you simply
sign the proxy, we'll vote it in accordance with the Trustees'
recommendations on pages and .
We urge you to spend a couple of minutes with the proxy
statement, fill out your proxy card, and return it to us. When
shareholders don't return their proxies in sufficient numbers, we
have to incur the expense of follow-up solicitations, which can
cost your fund money.
We want to know how you would like to vote and welcome your
comments. Please take a few moments with these materials and
return your proxy to us.
(PUTNAM LOGO APPEARS HERE)
BOSTON * LONDON * TOKYO
<PAGE>
Table of contents
A Message from the Chairman. . . . . . . . . . . . . . . . . . . . . . . .1
Notice of Shareholder Meeting. . . . . . . . . . . . . . . . . . . . . . .2
Trustees' Recommendations. . . . . . . . . . . . . . . . . . . . . . . .. 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 adviser.
<PAGE>
A Message from the Chairman
(Photograph of George Putnam appears here)
Dear Shareholder:
I am writing to you to ask for your vote on important questions
that affect your investment in your fund. While you are, of
course, welcome to join us at your fund's meeting, most
shareholders cast their vote by filling out and signing the
enclosed proxy. We are asking for your vote on the following
matters: (1) fixing the number of Trustees and electing your
fund's Trustees; (2) ratifying your fund's independent auditors;
and (3) considering whether to convert your fund from a closed-
end fund to an open-end fund.
Your Trustees unanimously recommend that shareholders vote "For"
the first two proposals. On the third proposal, whether to
convert Putnam Master Intermediate Income Trust to an open-end
fund, the Trustees, including the Trustees who are not affiliated
with the fund's manager, unanimously recommend that shareholders
vote "Against" the conversion. The third proposal is on the
agenda as a result of provisions in your fund's governing legal
documents which require that shareholders be given the
opportunity to consider a conversion in the event the fund's
shares trade at a greater than 10% discount from net asset value
over a specified time.
The Trustees believe that remaining as a closed-end fund provides
significant ongoing investment benefits that are not available to
open-end funds. In general, if the fund remains a closed-end
fund, the portfolio manager can continue to manage the fund with
a steadier, longer term perspective, without the short-term
pressures from sales and redemptions of fund shares typically
experienced by open-end funds. In addition, a conversion to
open-end status, while ending the discount, is likely to result
in a lower yield because of increased fund expenses which appears
to be inconsistent with the fund's investment objective.
The Fund's favorable performance serves as evidence of the
benefits of the closed-end structure. For the one, three, and
five year periods ended March 31, 1997 and for the period since
inception in April, 1988 through March 31, 1997 the fund's
performance (measured at net asset value) places it in the top
% of a universe of high yield, global fixed income and
intermediate government funds used by the Trustees to evaluate
the fund's performance. (See page of the enclosed proxy
statement for more information on performance).
Your Trustees continue to explore various ways of increasing
investor interest in the fund which may help over time to reduce
discounts. Recent efforts in this regard include a change in
dividend policy designed to enhance the stability of the fund's
dividends and a policy permitting periodic repurchases of shares
in the market when discount levels make such purchases an
attractive investment.
In light of these reasons, the Trustees do not believe that the
current level of discounts justifies the fundamental changes
which would result from conversion, and are therefore
recommending that you vote against the conversion.
Although we would like very much to have each shareholder attend
his or her fund's meeting, we realize this is not possible.
Whether or not you plan to be present, we need your vote. We
urge you to complete, sign, and return the enclosed proxy card
promptly. A postage-paid envelope is enclosed.
I'm sure that you, like most people, lead a busy life and are
tempted to put this proxy aside for another day. Please don't.
When shareholders do not return their proxies, their fund may
have to incur the expense of follow-up solicitations. All
shareholders benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and
consideration that I am sure you will give this important matter.
If you have questions about the proposals, contact your financial
adviser or call a Putnam customer service representative at
1-800-225-1581.
Sincerely yours,
(signature of George Putnam)
George Putnam, Chairman
<PAGE>
PUTNAM MASTER INTERMEDIATE INCOME TRUST
Notice of a Meeting of Shareholders
This is the formal agenda for your fund's shareholder meeting.
It tells you what matters will be voted on and the time and place
of the meeting, if you can attend in person.
To the Shareholders of Putnam Master Intermediate Income Trust:
A Meeting of Shareholders of your fund will be held on July 10,
1997 at 2:00 p.m., Boston time, on the eighth floor of One Post
Office Square, Boston, Massachusetts, to consider the following:
1. Fixing the number of Trustees and electing Trustees. See
page .
2. Ratifying the selection by the Trustees of the independent
auditors of your fund for its current fiscal year. See
page .
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 .
4. Transacting other business as may properly come before the
meeting.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson A. Baxter Robert E. Patterson
Hans H. Estin Donald S. Perkins
John A. Hill George Putnam, III
Ronald J. Jackson A.J.C. Smith
Elizabeth T. Kennan W. Nicholas Thorndike
Lawrence J. Lasser
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT
THE MEETING.
May , 1997<PAGE>
Proxy Statement
This document will give you the information you need to vote on
the matters listed on the previous pages. Much of the
information in the proxy statement is required under rules of the
Securities and Exchange Commission ("SEC"); some of it is
technical. If there is anything you don't understand, please
contact us at our special toll-free number, 1-800-225-1581, or
call your financial adviser.
Who is asking for my vote?
The enclosed proxy is solicited by the Trustees of Putnam Master
Intermediate Income Trust for use at the Meeting of Shareholders
of the fund to be held on July 10, 1997, and, if your fund's
meeting is adjourned, at any later meetings, for the purposes
stated in the Notice of Meeting (see previous pages).
How do your fund's Trustees recommend that shareholders vote on
these proposals?
The Trustees recommend that you vote
1. For fixing the number of Trustees as proposed and the
election of all nominees;
2. For ratifying the selection of Coopers & Lybrand L.L.P. as
the independent auditors of your fund; and
3. Against converting your fund from closed-end to open-end
status and authorizing certain related amendments to your
fund's Agreement and Declaration of Trust.
Who is eligible to vote?
Shareholders of record at the close of business on May 12, 1997,
are entitled to be present and to vote at the meeting or any
adjourned meeting. The Notice of Meeting, the proxy, and the
Proxy Statement have been mailed to shareholders of record on or
about May , 1997.
Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.
<PAGE>
The Proposals
I. ELECTION OF TRUSTEES
Who are the nominees for Trustees?
The Nominating Committee of the Trustees recommends that the
number of Trustees be fixed at thirteen and that you vote for the
election of the nominees described below. Each nominee is
currently a Trustee of your fund and of the other Putnam funds.
The Nominating Committee of the Trustees consists solely of
Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of your fund or of Putnam
Investment Management, Inc., your fund's investment manager
("Putnam Management").
Jameson Adkins Baxter
[Insert Picture]
Ms. Baxter, age 53, is the President of Baxter Associates, Inc.,
a management and financial consulting firm which she founded in
1986. During that time, she was also a Vice President and
Principal of the Regency Group, Inc., and a Consultant to First
Boston Corporation, both of which are investment banking firms.
From 1965 to 1986, Ms. Baxter held various positions in
investment banking and corporate finance at First Boston.
Ms. Baxter currently also serves as a Director of Banta
Corporation, Avondale Financial Corp., and ASHTA Chemicals, Inc.
She is also the Chairman Emeritus of the Board of Trustees of
Mount Holyoke College, having previously served as Chairman for
five years and as a Board member for thirteen years; an Honorary
Trustee and past President of the Board of Trustees of the Emma
Willard School; and Chair of the Board of Governors of Good
Shepherd Hospital. Ms. Baxter is a graduate of Mount Holyoke
College.
Hans H. Estin
[Insert Picture]
Mr. Estin, age 68, is a Chartered Financial Analyst and the Vice
Chairman of North American Management Corp., a registered
investment adviser serving individual clients and their families.
Mr. Estin currently also serves as a Corporation Member of The
Schepens Eye Research Institute; and a Trustee of New England
Aquarium. He previously served as the Chairman of the Board of
Trustees of Boston University and is currently active in various
other civic associations, including the Boys & Girls Clubs of
Boston, Inc. Mr. Estin is a graduate of Harvard College and
holds honorary doctorates from Merrimack College and Boston
University.
John A. Hill
[Insert Picture]
Mr. Hill, age 55, is the Chairman and Managing Director of First
Reserve Corporation, a registered investment adviser investing in
companies in the world-wide energy industry on behalf of
institutional investors.
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate
Director of the Office of Management and Budget and Deputy
Administrator of the Federal Energy Administration.
Mr. Hill currently also serves as a Director of Snyder Oil
Corporation, an exploration and production company which he
founded, Maverick Tube Corporation, a manufacturer of structural
steel, pipe and well casings, TransMontaingne Oil Company, a
refined oil product pipeline and distributor company, Weatherford
Enterra, Inc., an oil field service company, various private
companies controlled by First Reserve Corporation, and various
First Reserve Funds. He is also a Member of the Board of
Advisors of Fund Directions. He is currently active in various
business associations, including the Economic Club of New York,
and lectures on energy issues in the United States and Europe.
Mr. Hill is a graduate of Southern Methodist University.
Ronald J. Jackson
[Insert Picture]
Mr. Jackson, age 53, was Chairman of the Board, President and
Chief Executive Officer of Fisher-Price, Inc., a major toy
manufacturer, from 1990 to 1993. He previously served as
President and Chief Executive Officer of Stride-Rite, Inc., a
manufacturer and distributor of footwear, from 1989 to 1990, and
as President and Chief Executive Officer of Kenner Parker Toys,
Inc., a major toy and game manufacturer, from 1985 to 1987.
Prior to that, he held various financial and marketing positions
at General Mills, Inc. from 1966 to 1985, including Vice
President, Controller and Vice President of Marketing for Parker
Brothers, a toy and game company, and President of Talbots, a
retailer and direct marketer of women's apparel.
Mr. Jackson currently serves as a Director of Safety 1st, Inc., a
company which markets a wide range of child care and safety
products. He also serves as a Trustee of Salem Hospital and the
Peabody Essex Museum. Mr. Jackson is a graduate of Michigan
State University Business School.
Elizabeth T. Kennan
[Insert Picture]
Ms. Kennan, age 59, is President Emeritus and Professor of Mount
Holyoke College. From 1978 through June 1995, she was President
of Mount Holyoke College. From 1966 to 1978, she was on the
faculty of Catholic University, where she taught history and
published numerous articles.
Ms. Kennan currently also serves as a Director of NYNEX
Corporation, a telecommunications company, Northeast Utilities,
the Kentucky Home Life Insurance Companies, and Talbots. She
also serves as a Member of The Folger Shakespeare Library
Committee. She is currently active in various educational and
civic associations. Ms. Kennan is a graduate of Mount Holyoke
College, the University of Washington and St. Hilda College at
Oxford University and holds several honorary doctorates.
Lawrence J. Lasser*
[Insert Picture]
Mr. Lasser, age 54, is the Vice President of your fund and the
other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, Inc. and Putnam
Management since 1985, having begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh &
McLennan Companies, Inc., the parent company of Putnam
Management, and the United Way of Massachusetts Bay. He is a
Member of the Board of Overseers of the Museum of Fine Arts in
Boston, The Council on Foreign Relations, and a Member of the
Board of Governors and Executive Committee at the Investment
Company Institute. He is also a Trustee of the Beth
Israel\Deaconess Medical Center in Boston. Mr. Lasser is a
graduate of Antioch College and Harvard Business School.
Robert E. Patterson
[Insert Picture]
Mr. Patterson, age 52, is the Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership, a
registered investment adviser which manages real estate
investments for institutional investors. Prior to 1990, he was
the Executive Vice President of Cabot, Cabot & Forbes Realty
Advisors, Inc., the predecessor company of Cabot Partners. Prior
to that, he was a Senior Vice President of the Beal Companies, a
real estate management, investment and development company. He
has also worked as an attorney and held various positions in
state government, including the founding Executive Director of
the Massachusetts Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin
Diabetes Center and as a Director of Brandywine Trust Company.
Mr. Patterson is a graduate of Harvard College and Harvard Law
School.
Donald S. Perkins*
[Insert Picture]
Mr. Perkins, age 70, is the retired Chairman of the Board of
Jewel Companies, Inc., a diversified retailer, where among other
roles he served as President, Chief Executive Officer and
Chairman of the Board from 1965 to 1980. He currently also
serves as a Director of various other public corporations,
including AON Corp., an insurance company, Cummins Engine
Company, Inc., an engine and power generator equipment
manufacturer and assembler, Current Assets L.L.C., a corporation
providing financial staffing services, LaSalle Street Fund, Inc.
and LaSalle U.S. Realty Income and Growth Fund, Inc., real estate
investment trusts, Lucent Technologies Inc., Ryerson Tull, Inc.,
America's largest steel service corporation, Springs Industries,
Inc., a textile manufacturer, and Time Warner, Inc., one of the
nation's largest media conglomerates. He previously served as a
Director of several other major public corporations, including
Corning Glass Works, Eastman Kodak Company, Firestone Tire &
Rubber Company and Kmart Corporation.
Mr. Perkins currently also serves as a Trustee and Vice Chairman
of Northwestern University and as a Trustee of the Hospital
Research and Education Trust. He is currently active in various
civic and business associations, including the Business Council
and the Civic Committee of the Commercial Club of Chicago, of
which he is the founding Chairman. Mr. Perkins is a graduate of
Yale University and Harvard Business School and holds an honorary
doctorate from Loyola University of Chicago.
William F. Pounds
[Insert Picture]
Dr. Pounds, age 69, is the Vice Chairman of your fund and of the
other Putnam funds. He has been a Professor of Management at the
Alfred P. Sloan School of Management at the Massachusetts
Institute of Technology since 1961 and served as Dean of that
School from 1966 to 1980. He previously served as Senior Advisor
to the Rockefeller Family and Associates and was a past Chairman
of Rockefeller & Co., Inc., a registered investment adviser which
manages Rockefeller family assets, and Rockefeller Trust Company.
<PAGE>
Dr. Pounds currently also serves as a Director of IDEXX
Laboratories, Inc., PerSeptive Biosystems, Inc., Management
Sciences For Health, Inc. and Sun Company, Inc. He is also a
Trustee of the Museum of Fine Arts in Boston; an Overseer of WGBH
Educational Foundation, and a Fellow of The American Academy of
Arts and Sciences. He previously served as a Director of Fisher-
Price, Inc. and General Mills, Inc. Dr. Pounds is a graduate of
Carnegie-Mellon University.
George Putnam*
[Insert Picture]
Mr. Putnam, age 70, is the Chairman and President of your fund
and of the other Putnam funds. He is the Chairman and a Director
of Putnam Management and Putnam Mutual Funds Corp. and a Director
of Marsh & McLennan, their parent company. Mr. Putnam is the son
of the founder of the Putnam funds and Putnam Management and has
been employed in various capacities by Putnam Management since
1951, including Chief Executive Officer from 1961 to 1973. He is
a former Overseer and Treasurer of Harvard University; a past
Chairman of the Harvard Management Company; and a Trustee
Emeritus of Wellesley College and Bradford College.
Mr. Putnam currently also serves as a Director of Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and
Gas, Inc., mining and natural resources companies, and Houghton
Mifflin Company, a major publishing company. He is also a
Trustee of Massachusetts General Hospital, McLean Hospital,
Vincent Memorial Hospital, WGBH Educational Foundation, the
Museum of Fine Arts and the Museum of Science in Boston; the New
England Aquarium; an Overseer of Northeastern University; and a
Fellow of The American Academy of Arts and Sciences. Mr. Putnam
is a graduate of Harvard College and Harvard Business School and
holds honorary doctorates from Bates College and Harvard
University.
George Putnam, III*
[Insert Picture]
Mr. Putnam, age 45, is the President of New Generation Research,
Inc., a publisher of financial advisory and other research
services relating to bankrupt and distressed companies, and New
Generation Advisers, Inc., a registered investment adviser which
provides advice to private funds specializing in investments in
such companies. Prior to founding New Generation in 1985, Mr.
Putnam was an attorney with the Philadelphia law firm Dechert
Price & Rhoads.
Mr. Putnam currently also serves as a Director of the
Massachusetts Audubon Society and The Boston Family Office,
L.L.C., a registered investment advisor that provides financial
services to individuals and families. He is also a Trustee of
the Sea Education Association and St. Mark's School and an
Overseer of the New England Medical Center. Mr. Putnam is a
graduate of Harvard College, Harvard Business School and Harvard
Law School.
A.J.C. Smith*
[Insert Picture]
Mr. Smith, age 63, is the Chairman and Chief Executive Officer of
Marsh & McLennan Companies, Inc. He has been employed by Marsh &
McLennan and related companies in various capacities since 1961.
Mr. Smith is a Director of the Trident Corp., and he also serves
as a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, the Educational Broadcasting Corporation, the
Economic Club of New York, the U.S. Chamber of Commerce, and is a
Founder of the Museum of Scotland Society. He was educated in
Scotland and is a Fellow of the Faculty of Actuaries in
Edinburgh, a Fellow of the Canadian Institute of Actuaries, a
Fellow of the Conference of Actuaries, an Associate of the
Society of Actuaries, a Member of the American Academy of
Actuaries, the International Actuarial Association and the
International Association of Consulting Actuaries.
W. Nicholas Thorndike**
[Insert Picture]
Mr. Thorndike, age 64, serves as a Director of various
corporations and charitable organizations, including Data General
Corporation, a computer and high technology company, Bradley Real
Estate, Inc., a real estate investment firm, Providence Journal
Co., a newspaper publisher, and Courier Corporation, a book
binding and printing company. He is also a Trustee of Eastern
Utilities Associates, Massachusetts General Hospital, where he
previously served as chairman and president, and Northeastern
University.
Prior to December 1988, he was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike,
Doran, Paine & Lewis, a registered investment adviser which
manages mutual funds and institutional assets. He also
previously served as a Trustee of the Wellington Group of Funds
(now The Vanguard Group) and was the Chairman and a Director of
Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
<PAGE>
- ----------------------------
* Nominees who are or may be deemed to be "interested persons"
(as defined in the Investment Company Act of 1940) of your
fund, Putnam Management, and Putnam Mutual Funds Corp.
("Putnam Mutual Funds"), the principal underwriter for all
the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Putnam, Lasser, and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of your fund, or directors of
Putnam Management, Putnam Mutual Funds, or Marsh & McLennan
Companies, Inc., the parent company of Putnam Management and
Putnam Mutual Funds. Mr. George Putnam, III, Mr. Putnam's
son, is also an "interested person" of your fund, Putnam
Management, and Putnam Mutual Funds. Mr. Perkins may be
deemed to be an "interested person" of your fund because of
his service as a director of a certain publicly held company
that includes registered broker-dealer firms among its
subsidiaries. Neither your fund nor any of the other Putnam
funds currently engages in any transactions with such firms
except that certain of such firms act as dealers in the
retail sale of shares of certain Putnam funds in the
ordinary course of their business. The balance of the
nominees are not "interested persons."
** In February 1994 Mr. Thorndike accepted appointment as a
successor trustee of certain private trusts in which he has
no beneficial interest. At that time he also became
Chairman of the Board of two privately owned corporations
controlled by such trusts, serving in that capacity until
October 1994. These corporations filed voluntary petitions
for relief under Chapter 11 of the U.S. Bankruptcy Code in
August 1994.
Except as indicated above, the principal occupations and business
experience of the nominees for the last five years have been with
the employers indicated, although in some cases they have held
different positions with those employers. Except for Mr.
Jackson, all the nominees were elected by the shareholders in
July 1996. Mr. Jackson was elected by the other Trustees in May
1996. The 13 nominees for election as Trustees at the
shareholder meeting of your fund who receive the greatest number
of votes will be elected Trustees of your fund. The Trustees
serve until their successors are elected and qualified. Each of
the nominees has agreed to serve as a Trustee if elected. If any
of the nominees is unavailable for election at the time of the
meeting, which is not anticipated, the Trustees may vote for
other nominees at their discretion, or the Trustees may recommend
that the shareholders fix the number of Trustees at less than 13
for your fund.
What are the Trustees' responsibilities?
Your fund's Trustees are responsible for the general oversight of
your fund's business and for assuring that your fund is managed
in the best interests of its shareholders. The Trustees
periodically review your fund's investment performance as well as
the quality of other services provided to your fund and its
shareholders by Putnam Management and its affiliates, including
administration, custody, distribution and investor servicing. At
least annually, the Trustees review the fees paid to Putnam
Management and its affiliates for these services and the overall
level of your fund's operating expenses. In carrying out these
responsibilities, the Trustees are assisted by an independent
administrative staff and by your fund's auditors and legal
counsel, which are selected by the Trustees and are independent
of Putnam Management and its affiliates.
Do the Trustees have a stake in your fund?
The Trustees believe it is important that each Trustee have a
significant investment in the Putnam funds. The Trustees
allocate their investments among the more than 96 Putnam funds
based on their own investment needs. The Trustees' aggregate
investments in the Putnam funds total over $58 million. The
table below lists each Trustee's current investments in the fund
and in the Putnam funds as a group based on beneficial ownership.
Except as otherwise noted, each Trustee has sole voting power and
sole investment power with respect to his or her shares.
<PAGE>
Share Ownership by Trustees
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year first Number of
elected as Number of shares of
Trustee of shares of the all Putnam
the Putnam fund owned funds owned
Trustees funds as of 3/10/97 as of 3/10/97 (1)
- ------------------------------------------------------------------------------------------
Jameson A. Baxter 1994 121 51,712
Hans H. Estin 1972 664 29,276
John A. Hill 1985 100 144,950
Ronald J. Jackson 1996 200 (2) 125,879
Elizabeth T. Kennan 1992 222 (3) 31,361
Lawrence J. Lasser 1992 100 453,662
Robert E. Patterson 1984 300 63,232
Donald S. Perkins 1982 1,180 150,366
William F. Pounds 1971 500 300,959
George Putnam 1957 2,307 1,764,018
George Putnam, III 1984 500 310,620
A.J.C. Smith 1986 200 (4) 37,947
W. Nicholas Thorndike 1992 154 81,800
- ------------------------------------------------------------------------------------------
(1) These holdings do not include shares of Putnam money market funds.
(2) Mr. Jackson has shared investment power and shared voting power with respect to such
shares.
(3) Mrs. Kennan is the custodian of a trust which owns 122 of these shares and in which
she has no economic interest.
(4) Mr. Smith has shared investment power and shared voting power with respect to such
shares.
As of March 10, 1997, the Trustees and officers of the fund owned a total of 6,549
shares of the fund, comprising less than 1% of its outstanding shares on that date.
</TABLE>
What are some of the ways in which the Trustees represent
shareholder interests?
The Trustees believe that, as substantial investors in the Putnam
funds, their interests are closely aligned with those of
individual shareholders. Among other ways, the Trustees seek to
represent shareholder interests:
by carefully reviewing your fund's investment
performance on an individual basis with your fund's
managers;
by also carefully reviewing the quality of the various
other services provided to the funds and their
shareholders by Putnam Management and its affiliates;
by discussing with senior management of Putnam
Management steps being taken to address any performance
deficiencies;
by reviewing the fees paid to Putnam Management to
ensure that such fees remain reasonable and competitive
with those of other mutual funds, while at the same
time providing Putnam Management sufficient resources
to continue to provide high quality services in the
future;
by monitoring potential conflicts between the funds and
Putnam Management and its affiliates to ensure that the
funds continue to be managed in the best interests of
their shareholders; and
by also monitoring potential conflicts among funds to
ensure that shareholders continue to realize the
benefits of participation in a large and diverse family
of funds.
How often do the Trustees meet?
The Trustees meet each month (except August) over a two-day
period to review the operations of your fund and of the other
Putnam funds. A portion of these meetings is devoted to meetings
of various Committees of the board which focus on particular
matters. These currently include: the Committee of Independent
Trustees, which conducts an annual review of all contractual
arrangements with Putnam Management and its affiliates; the
Contract Committee, which reviews such matters on an interim
basis during the course of the year; the Communication and
Service Committee, which reviews the quality of services provided
by your fund's investor servicing agent, custodian and
distributor; the Pricing, Brokerage and Special Investments
Committee, which reviews matters relating to valuation of
securities, best execution, brokerage costs and allocations and
new investment techniques; the Audit Committee, which reviews
accounting policies and the adequacy of internal controls and
supervises the engagement of the funds' auditors; the
Compensation, Administration and Legal Affairs Committee, which
reviews the compensation of the Trustees and their administrative
staff and supervises the engagement of the funds' independent
counsel; the Nominating Committee, which is responsible for
selecting nominees for election as Trustees, and the Closed-end
Fund Committee, which is responsible for reviewing special issues
applicable to closed-end funds such as your fund.
Each Trustee generally attends at least two formal committee
meetings during each regular meeting of the Trustees. During
1996, the average Trustee participated in approximately 40
committee and board meetings. In addition, the Trustees meet in
small groups with Chief Investment Officers and Portfolio
Managers to review recent performance and the current investment
climate for selected funds. These meetings ensure that each
fund's performance is reviewed in detail at least twice a year.
The Committee of Independent Trustees and the Contract Committee
typically meet on several additional occasions during the year to
carry out their responsibilities. Other Committees, including an
Executive Committee, may also meet on special occasions as the
need arises.
What are the Trustees paid for their services?
Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other
Putnam funds. The Trustees periodically review their fees to
assure that such fees continue to be appropriate in light of
their responsibilities as well as in relation to fees paid to
trustees of other mutual fund complexes. The Compensation
Committee, which consists solely of Trustees not affiliated with
Putnam Management, estimates that Committee and Trustee meeting
time together with the appropriate preparation requires the
equivalent of at least three business days per Trustee meeting.
The following table shows the year each Trustee was first elected
a Trustee of the Putnam funds, the fees paid to each Trustee by
the fund for fiscal 1996 and the fees paid to each Trustee by all
of the Putnam funds during calendar year 1996:
<PAGE>
COMPENSATION TABLE
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
Pension or Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees fund(1) fund expenses(2) upon retirement(3) funds(4)
Jameson A. Baxter $1,021 $0 $85,646 $172,291(5)
Hans H. Estin 1,015 0 85,646 171,291
John A. Hill 1,012 0 85,646 170,791(5)
Ronald J. Jackson(6) 325 0 85,646 94,807(5)
Elizabeth T. Kennan 1,015 0 85,646 171,291
Lawrence J. Lasser 1,006 0 85,646 169,791
Robert E. Patterson 1,074 0 85,646 182,291
Donald S. Perkins 1,009 0 85,646 170,291
William F. Pounds(7) 1,074 0 98,146 197,291
George Putnam 1,015 0 85,646 171,291
George Putnam, III 1,015 0 85,646 171,291
A.J.C. Smith 1,006 0 85,646 169,791
W. Nicholas Thorndike 1,069 0 85,646 181,291
(1) Includes an annual retainer and an attendance fee for each meeting attended.
(2) The Trustees approved a Retirement Plan for Trustees of the Putnam funds on October 1,
1996. Prior to that date, voluntary retirement benefits were paid to certain retired
Trustees.
(3) Assumes that each Trustee retires at the normal retirement date. Estimated benefits for
each Trustee are based on Trustee fee rates in effect during calendar 1996.
(4) As of December 31, 1996, there were 96 funds in the Putnam family.
(5) Includes compensation deferred pursuant to a Trustee Compensation Deferral Plan.
(6) Elected as a Trustee in May 1996.
(7) Includes additional compensation for service as Vice Chairman of the Putnam funds.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"), each Trustee who retires with at least five years of
service as a Trustee of the funds is entitled to receive an
annual retirement benefit equal to one-half of the average annual
compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is payable
during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years
of service. A death benefit is also available under the Plan
which assures that the Trustee and his or her beneficiaries will
receive benefit payments for the lesser of an aggregate period of
(i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that
are not "interested persons" of the fund, as defined in the
Investment Company Act of 1940) may terminate or amend the Plan
at any time, but no termination or amendment will result in a
reduction in the amount of benefits (i) currently being paid to a
Trustee at the time of such termination or amendment, or (ii) to
which a current Trustee would have been entitled to receive had
he or she retired immediately prior to such termination or
amendment.
For additional information about your fund, including further
information about its Trustees and officers, please see "Fund
Information," on page .
Putnam Investments
Putnam Investment Management, Inc. and its affiliate, Putnam
Fiduciary Trust Company, your fund's investor servicing agent and
custodian, are wholly owned by Putnam Investments, Inc., One Post
Office Square, Boston, Massachusetts 02109, a holding company
that is in turn wholly owned by Marsh & McLennan Companies, Inc.,
which has executive offices at 1166 Avenue of the Americas, New
York, New York 10036. Marsh & McLennan Companies, Inc. and its
operating subsidiaries are professional services firms with
insurance and reinsurance brokerage, consulting, and investment
management businesses.
The Trustees recommend that you vote "FOR" all Nominees.
2. RATIFICATION OF INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, independent accountants, has been selected by the
Trustees as the independent auditor of your fund for the current
fiscal year. Among the country's preeminent accounting firms,
this firm also serves as the auditor for approximately half of
the other funds in the Putnam family. It was selected primarily
on the basis of its expertise as auditors of investment
companies, the quality of its audit services, and the
competitiveness of its fees.
A majority of the votes on the matter is necessary to ratify the
selection of auditors. A representative of the independent
auditors is expected to be present at the meeting to make
statements and to respond to appropriate questions.
The Trustees recommend that you vote "FOR" Proposal 2.
3. APPROVAL OR DISAPPROVAL OF THE CONVERSION OF YOUR FUND FROM
CLOSED-END TO OPEN-END STATUS AND CERTAIN RELATED AMENDMENTS
TO YOUR FUND'S AGREEMENT AND DECLARATION OF TRUST
What is being considered under this item?
Shareholders will have the opportunity to vote at the meeting on
the question of whether your fund should be converted from a
closed-end fund to an open-end fund. The Trustees, as discussed
in more detail below, unanimously recommend that shareholders
vote against converting your fund to an open-end fund. This
recommendation is based on the Trustees' view that, as a closed-
end fund, your fund is afforded significant investment
advantages.
If approved, the conversion would result in the "delisting" of
your fund's shares from the New York Stock Exchange where they
currently may be bought or sold at prevailing market prices. The
shares would then become redeemable directly from your fund at
net asset value, eliminating any discount of market price to net
asset value. Other differences between closed-end and open-end
investment companies are described below.
A conversion from closed-end to open-end status would also
require a number of changes in the Agreement and Declaration of
Trust (the "Declaration of Trust") under which your fund was
established. Accordingly, approval of this proposal would also
authorize your fund's Trustees to make such amendments as they
may deem necessary to operate your fund in open-end form if this
proposal is approved. These changes are described in greater
detail below.
Why is this question being submitted to shareholders now?
Your fund's governing legal documents require that shareholders
of your fund be given the opportunity to vote on a proposal to
convert your fund from closed-end to open-end status if the
fund's shares have traded at an average discount of more than 10%
from their net asset value during the last twelve calendar weeks
of the preceding fiscal year (measured as of the last trading day
in each such week). For the twelve-week period ended September
30, 1996, your fund's shares traded at an average discount of
11.81%, requiring that this proposal be submitted to
shareholders. A similar vote was held at the 1996 annual meeting
of shareholders. At that meeting shareholders voted to retain
closed-end status as follows:
Percentage of
Voted
----------------
For Open-ending 22.7%
Against Open-ending 68.4%
Abstain 8.9%
What is the recommendation of the Trustees?
The Trustees regularly review the overall performance and trading
information for Putnam's closed-end funds. At meetings held in
February, April and May 1997, the Trustees of your fund carefully
evaluated the fund's investment performance and the trading
history of its shares since its inception in April, 1988, and
information about the possible advantages and disadvantages of
such a conversion. For the reasons described below, the Trustees
of your fund have unanimously concluded that the conversion of
your fund to open-end status would not be in the best long-term
interests of shareholders. Accordingly, the Trustees of your
fund unanimously recommend that shareholders vote "AGAINST" this
proposal.
Why are the Trustees recommending a vote against a conversion?
The Trustees of your fund are recommending a vote against
converting your fund to open-end status for the following
reasons:
The Trustees believe that your fund's closed-end status
provides significant investment benefits not available
to open-end fund investors. Because your fund's shares
are not redeemable, your fund is not required to
maintain short-term, lower yielding investments in
anticipation of possible redemptions, but can be fully
invested in higher-yielding securities in pursuit of
the fund's investment objective. Furthermore, as a
closed-end fund, your fund does not experience the cash
flows associated with sales and redemptions of open-end
fund shares. As a result, your fund's portfolio
manager does not have to invest additional cash from
new sales at times when market conditions are
unfavorable or sell securities to meet redemptions at
inopportune times.
<PAGE>
The Trustees believe that your fund has achieved
favorable investment results for its shareholders over
its life as a closed-end fund, which demonstrates the
benefits of the closed-end structure. See "How has
your fund performed?" below. The Trustees believe
that, in deciding whether to make major structural
changes, the long-term performance of your fund is an
important factor to consider.
The Trustees believe that your fund's operating
expenses are likely to increase if your fund is
converted to open-end status. First, as an open-end
fund, your fund would be required, as a practical
matter, to make a continuous public offering of its
shares in order to offset redemptions and maintain the
economies of scale available at its current size. The
Trustees expect that in order to market your fund's
shares effectively and to conform generally to sales
practices of competing dealer-sold funds, following a
conversion to open-end status, the Trustees would
likely recommend that shareholders approve the adoption
of a distribution plan under Rule 12b-1. Such a plan
would permit your fund to pay annual distribution fees
of up to 0.35% of your fund's net assets. If such
distribution plan were approved, the Trustees would
expect to authorize the payment of distribution fees at
the annual rate of 0.25% of net assets, as is the case
with similar open-end Putnam funds. In addition, all
shareholders would bear the brokerage and other
transactional costs associated with purchases and sales
of securities in response to the sale or redemption of
shares if your fund were converted to open-end status
(except to the extent that the Trustees decide to
impose a temporary redemption fee, as described below).
Second, in addition to the likelihood of increased
fees, it is also possible that the Fund might shrink
following conversion to open-end status, resulting in
increased expense ratios. Open-end funds, since they
continually issue new shares, have the ability to
increase in size. This growth could result in
efficiencies in spreading fixed costs over a larger
pool of assets. However, since they continually redeem
shares, open-end funds can also shrink. Putnam
Management has advised the Trustees that it is likely
that your fund might experience significant redemptions
following any conversion, thereby shrinking in size.
Depending on the number and size of the redemptions and
sales of new shares, increased expense ratios could
result for either temporary or indefinite periods.
<PAGE>
Although converting to open-end status would provide a
potential short-term gain as a result of the
elimination of the discount, it would not further the
fund's investment objective of seeking high current
income. Indeed, in light of the potential loss of the
advantages of closed-end status and the increase of
expenses likely following a conversion, conversion
would result in a lower yield for the shareholders.
This fact appears to be inconsistent with the fund's
investment objective.
Putnam Management has advised the Trustees that in its
opinion discount levels in recent years have been
influenced by general market conditions favoring equity
securities over fixed-income securities. Most similar
closed-end fund shares have traded at a discount for
the past two or three years. The fact that your fund's
shares trade at a discount is not the result of a
specific problem relating to your fund but a more
general industry wide phenomenon.
The need to sell securities to meet redemptions may
have adverse tax consequences to shareholders remaining
in your fund. If your fund sells securities to meet
redemptions and realizes a gain for tax purposes, your
fund will be required to allocate the tax gain to all
shareholders, not simply to those redeeming.
The Trustees regularly review information regarding trading
activity in the fund's shares, including discount levels. The
Trustees continue to explore various ways of increasing investor
interest in the fund which may help over time to reduce
discounts. Efforts in this regard include a recent change in
dividend policy which is designed to enhance the stability of the
fund's monthly dividend. Under this revised policy the Trustees
of the fund expect to establish dividend levels based on a
consideration of all investment earnings anticipated to be
available for distribution. Barring unforeseen developments,
such dividend levels would be reviewed and subject to change only
at the end of each calendar year. In addition, the Trustees have
authorized the repurchase of fund shares in open market
transactions at times when discount levels make such purchases an
attractive investment for the fund. Such purchases may also have
the effect of temporarily reducing discount levels, but are not
believed to influence discounts materially over the longer term.
However, 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 disadvangeges of potential discounts.
In addition, many shareholders have purchased their shares at a
discount and thus have not been significantly affected by the
current discount level. Consequently, the Trustees do not
believe that recent discount levels should be viewed as grounds
for depriving shareholders of the advantages of the closed-end
structure.
In light of the reasons set forth above, the Trustees do not
believe that the current discount justifies the fundamental
changes which would result from a conversion to open-end status,
and the Trustees unanimously recommend that shareholders vote
against this proposal.
Proposed Merger
On May 2, 1997, the Trustees approved in principle a proposal to
merge Putnam Intermediate Government Income Trust ("PGT"), a
closed-end fund with approximately $530,000,000 in assets, into
your fund. The combination would be effected through a purchase
by your fund of the assets of PGT in exchange for shares of your
fund with an aggregate net asset value equal to the assets
purchased. Your fund would be the surviving fund and its
investment policies would govern the investment operations of the
combined entity.
The purpose of the merger is to combine two similar funds into
one larger entity. The larger fund is expected to have a lower
expense ratio due to a decrease in the effective management fee
rate, which may improve the fund's yield. There can be no
assurance, of course, that the merger will result in lower
expenses or a higher yield for the fund. The merger is not
scheduled to occur until October 1997 and is subject to several
conditions, including approval of PGT's shareholders. No
shareholder approval is required for your fund to complete the
merger.
If shareholders were to vote to convert the fund to open-end
status, the Trustees would reconsider the merger proposal in
light of the changed circumstances.
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:
<PAGE>
Total Return (Annualized) Through March 31, 1997
Since
inception
1 year 3 years 5 years April, 1988
Net Asset
Value 8.64% 8.05% 9.37% 9.32%
Market
Value 10.36% 7.63% 7.33% 6.97%*
* Market value performance from inception, unlike net asset
value performance, reflects the cost of the dealer
commission upon initial sale.
Of course, relative performance is also important. In addition
to reviewing the fund's overall performance, the Trustees
regularly review the fund's performance compared to that of a
group of comparable funds. The current group used by the
Trustees is high yield, global fixed income and intermediate
government open-end funds, with each category weighted equally.
Using this comparison, the fund was ranked in the following
percentiles for the periods ending March 31, 1997:
Since
inception
1 year 3 years 5 years April, 1988
Percentile* 37% 49% 21% 33%
* Percentile reflects relative standing with 1% being the
highest relative performance and 100% being the lowest. The
rankings set forth above are based on total return, reflecting
changes in net asset value adjusted for reinvestment of capital
gains and income dividends. They do not reflect changes in
market price of shares in the case of closed-end funds or, for
any fund, the deduction of sales charges. Past performance is no
guarantee of future performance.
What are the principal differences between a closed-end and open-
end fund?
In evaluating this proposal, shareholders may wish to consider
the following differences between closed-end and open-end funds:
Changes in capital. Closed-end funds raise their
capital through an initial public offering and
generally do not raise additional capital after that
time. Closed-end funds therefore have limited
opportunities to gain additional economies of scale
through growth of assets. At the same time, because
shares of closed-end funds cannot be redeemed, the risk
of higher expense ratios resulting from a decline in
assets is also limited.
Open-end funds, in contrast, generally engage in a
continuous public offering of their shares, which
provides the opportunity for growth of assets and
reduced expense ratios. However, because shares of
open-end funds are generally redeemable at any time,
such funds face the risk of higher expense ratios if
significant redemptions are not offset by sales of new
shares.
Sale of shares. Shares of open-end funds may be
redeemed at any time at their net asset value
(subject only to the right of the fund to withhold
payment for up to seven days or, with the permission of
the SEC, to suspend redemptions under emergency
conditions). In contrast, shares of closed-end funds
are not redeemable and can generally be bought and sold
at current market prices only on the exchange on which
such funds are listed. Thus, converting your fund from
closed-end to open-end status would eliminate the
current discount between market price and net asset
value, but would also eliminate the possibility that
your fund's shares might trade at a premium in the
future. Shareholders who wish to dispose of shares
would receive a higher price at net asset value than if
shares remained at a discount.
Regulatory requirements. Both closed-end and open-end
funds are registered with the SEC under the Investment
Company Act of 1940 and, with certain differences
relating largely to the sale and redemption of shares,
are generally subject to the same regulatory
requirements of that Act. Your fund's shares are
listed for trading on the New York Stock Exchange.
That listing would be terminated in the event of a
conversion to open-end status. Since open-end funds
generally engage in a continuous public offering of
their shares they are required to maintain current
registrations under federal and state securities laws,
which involves additional costs.
Annual shareholder meetings. Your fund is currently
required by the rules of the New York Stock Exchange to
hold annual meetings of shareholders for the purpose of
electing Trustees and ratifying the selection of
auditors. As noted above, conversion of your fund to
open-end status would result in termination of the
fund's listing on the New York Stock Exchange with the
result that your fund would no longer be required to
hold annual meetings. In such event, your fund expects
that meetings would be held only on an as-needed basis.
Investment flexibility. As noted above, the cash flows
associated with sales and redemptions of open-end fund
shares, as well as the need to maintain cash reserves
in anticipation of possible redemptions, might tend to
reduce the investment flexibility of open-end funds.
Shareholder privileges. Shareholders of your fund
currently have the option of participating in the
fund's Dividend Reinvestment Plan, under which cash
distributions paid by your fund are generally
reinvested through the purchase of additional fund
shares at market prices, which currently reflect a
discount from net asset value. (At times when your
fund's shares are trading at a premium over their net
asset value, such reinvestments are made at the higher
of net asset value or 95% of market value.) If the
fund were to convert to open-end status, shareholders
would no longer be able to reinvest dividends at a
price below net asset value per share. Shareholders of
open-end Putnam funds have the option to reinvest their
distributions in additional shares at net asset value
at all times.
Shareholders of open-end funds in the Putnam family of
funds currently have the privilege of exchanging their
investment at net asset value and without sales charges
for shares of more than 63 open-end funds in the Putnam
group. Shareholders of your fund currently do not have
that privilege.
What other possible consequences might result from conversion of
your fund to open-end status?
In addition to those matters described above, shareholders should
consider the following possible consequences of conversion of
your fund to open-end status:
Significant redemptions following a conversion would
require your fund to sell portfolio securities. These
transactions would involve brokerage and other
transaction costs and could result in the recognition
of capital gains for federal income tax purposes. Such
costs and liabilities would be borne by all
shareholders and not just those redeeming shares,
(except to the extent that the Trustees decide to
impose a temporary redemption fee, as described below).
Certain legal, accounting and other costs would be
incurred in connection with the conversion of your fund
to open-end status. Although it is difficult to
estimate these costs with precision, these costs are
estimated to be at least $100,000. Based on your
fund's current size it is not anticipated that these
costs would materially increase your fund's expense
ratio.
The Trustees reserve the right to impose a temporary
redemption fee of up to 2.00% of the value of shares
redeemed for a period of up to one year following the
fund's conversion to an open-end investment company.
The Trustees may impose this fee if they believe that
immediately following a conversion to open-end status
there would likely be significant redemptions of shares
that would disrupt long-term portfolio management of
the fund and dilute the interests of the remaining
shareholders. Imposition of a redemption fee may deter
certain redemptions and would compensate remaining
long-term shareholders for the costs of the liquidation
of a significant percentage of the fund's portfolio.
The fund will notify shareholders in writing prior to
the imposition of any temporary redemption fee.
What changes would be made in your fund's Declaration of Trust if
shareholders vote to convert the fund to open-end status?
Conversion of your fund from a closed-end to an open-end fund
would require certain changes to your fund's Declaration of Trust
and, therefore, a vote in favor of such conversion would also
authorize the Trustees to amend your fund's Declaration of Trust
to reflect such changes. These changes would bring your fund's
Declaration of Trust more in line with most other Putnam open-end
funds.
The Declaration of Trust would be amended to require your fund to
purchase all shares offered to it for redemption at a price equal
to the net asset value of the shares next determined, less any
redemption charge fixed by the Trustees. In addition, the fund
would be authorized, at its option, to redeem shares held in a
shareholder's account at net asset value if at any time a
shareholder owned shares in an amount either less than or greater
than, as the case may be, an amount determined by the Trustees.
Notwithstanding this provision, all shares would be redeemable at
a shareholder's option.
<PAGE>
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 technical and non-
material changes to the Declaration of Trust and conforming
changes to your fund's Bylaws if the shareholders vote in favor
of the conversion.
What percentage of shareholders' votes are required to approve
the conversion?
Approval of the conversion of your fund to open-end status and of
the related amendments to your fund's Declaration of Trust will
require the "yes" vote of a majority of your fund's outstanding
shares entitled to vote.
If such conversion is approved, the conversion would become
effective following compliance with all necessary regulatory
requirements under federal and state law. Your fund would seek
to complete this process as soon as reasonably practicable, but
it is estimated that this process may require at least several
months.
If the conversion is not approved, will the fund continue in its
current form?
Yes. In the event that shareholders do not approve the
conversion of your fund to open-end status, your fund would
continue to operate as a closed-end fund. Shareholders would be
given the opportunity to vote on a proposed conversion to open-
end status in future years if your fund's shares again traded 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. A majority of the shares
entitled to vote -- present in person or represented by proxy --
constitutes a quorum for the transaction of business with respect
to any proposal at the meeting (unless otherwise noted in the
proxy statement). Shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by brokers
or nominees as to which (i) instructions have not been received
from the beneficial owners or the persons entitled to vote and
(ii) the broker or nominee does not have the discretionary voting
power on a particular matter) will be counted as shares that are
present and entitled to vote on the matter for purposes of
determining the presence of a quorum. Votes cast by proxy or in
person at the meeting will be counted by persons appointed by
your fund as tellers for the meeting.
The tellers will count the total number of votes cast "for"
approval of the proposals for purposes of determining whether
sufficient affirmative votes have been cast. With respect to the
election of Trustees and selection of auditors, neither
abstentions nor broker non-votes have any effect on the outcome
of the proposal. With respect to any other proposals,
abstentions and broker non-votes have the effect of a negative
vote on the proposal.
Other business. The Trustees know of no other business to be
brought before the meeting. However, if any other matters
properly come before the meeting, it is their intention that
proxies that do not contain specific restrictions to the contrary
will be voted on such matters in accordance with the judgment of
the persons named as proxies in the enclosed form of proxy.
Simultaneous meetings. The meeting of shareholders of your fund
is called to be held at the same time as the meetings of
shareholders of certain of the other Putnam funds. It is
anticipated that all meetings will be held simultaneously. If
any shareholder at the meeting objects to the holding of a
simultaneous meeting and moves for an adjournment of the meeting
to a time promptly after the simultaneous meetings, the persons
named as proxies will vote in favor of such adjournment.
Solicitation of proxies. In addition to soliciting proxies by
mail, Trustees of your fund and employees of Putnam Management,
Putnam Fiduciary Trust Company, and Putnam Mutual Funds may
solicit proxies in person or by telephone. Your fund may also
arrange to have votes recorded by telephone. The telephone
voting procedure is designed to authenticate shareholders'
identities, to allow shareholders to authorize the voting of
their shares in accordance with their instructions and to confirm
that their instructions have been properly recorded. Your fund
has been advised by counsel that these procedures are consistent
with the requirements of applicable law. If these procedures
were subject to a successful legal challenge, such votes would
not be counted at the meeting. Your fund is unaware of any such
challenge at this time. Shareholders would be called at the
phone number Putnam Investments has in its records for their
accounts, and would be asked for their Social Security number or
other identifying information. The shareholders would then be
given an opportunity to authorize proxies to vote their shares at
the meeting in accordance with their instructions. To ensure
that the shareholders' instructions have been recorded correctly,
they will also receive a confirmation of their instructions in
the mail. A special toll-free number will be available in case
the information contained in the confirmation is incorrect.
Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with this
policy, your fund may solicit proxies from shareholders who have
not voted their shares or who have abstained from voting.
Persons holding shares as nominees will upon request be
reimbursed for their reasonable expenses in soliciting
instructions from their principals. Your fund has retained at
its expense D. F. King & Co. Inc., 77 Water Street, New York, NY
10005, to aid in the solicitation of instructions for registered
and nominee accounts, for a fee not to exceed $5,000 plus
reasonable out-of-pocket expenses for mailing and phone costs.
Revocation of proxies. Proxies, including proxies given by
telephone, may be revoked at any time before they are voted by a
written revocation received by the Clerk of your fund, by
properly executing a later-dated proxy or by attending the
meeting and voting in person.
Date for receipt of shareholders' proposals for the next annual
meeting. It is anticipated that your fund's next annual meeting
of shareholders will be held in July 1998. Shareholder proposals
must be received by your fund before December 17, 1997, to be
included in your fund's proxy statement for the next annual
meeting.
Adjournment. If sufficient votes in favor of any of the
proposals set forth in the Notice of 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 which
they are entitled to vote in favor of such proposals. They will
vote against adjournment those proxies required to be voted
against such proposals. Your fund pays the costs of any
additional solicitation and of any adjourned session. Any
proposals for which sufficient favorable votes have been received
by the time of the meeting may be acted upon and considered final
regardless of whether the meeting is adjourned to permit
additional solicitation with respect to any other proposal.
Financial information. Your fund will furnish to you upon
request, without charge, a copy of the fund's annual report for
its most recent fiscal year, and a copy of its semiannual report
for any subsequent semiannual period. Such requests may be
directed to Putnam Investor Services, P.O. Box 41203, Providence,
RI 02940-1203 or 1-800-225-1581.
Fund Information
Limitation of Trustee liability. The Agreement and Declaration
of Trust of your fund provides that the fund will indemnify its
Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved
because of their offices with the fund, except if it is
determined in the manner specified in the Agreement and
Declaration of Trust that they have not acted in good faith in
the reasonable belief that their actions were in the best
interests of the fund or that such indemnification would relieve
any officer or Trustee of any liability to the fund or its
shareholders arising by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties.
Your fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
Audit and Nominating Committees. The voting members of the Audit
Committee of your fund include only Trustees who are not
"interested persons" of the fund by reason of any affiliation
with Putnam Investments and its affiliates. The Audit Committee
currently consists of Messrs. Estin (Chairman), Jackson, Perkins
(without vote), Putnam, III (without vote), Smith (without vote),
and Ms. Kennan. The Nominating Committee consists only of
Trustees who are not "interested persons" of your fund or Putnam
Management. The Nominating Committee currently consists of Dr.
Pounds and Ms. Kennan (Co-chairpersons), Ms. Baxter, and Messrs.
Estin, Hill, Jackson, Patterson, and Thorndike.
Officers and other information. In addition to George Putnam and
Lawrence J. Lasser, the officers of your fund are as follows:
Year first
elected to
Name (age) Office office
- -----------------------------------------------------------------
Charles E. Porter (58) Executive Vice President 1989
Patricia C. Flaherty (50) Senior Vice President 1993
John D. Hughes (62) Senior Vice President
& Treasurer 1987
Gordon H. Silver (49) Vice President 1990
Gary N. Coburn (50) Vice President 1988
William J. Curtin (37) Vice President 1997
Gail S. Attridge* (35) Vice President 1997
Jennifer E. Leichter* (36) Vice President 1990
Kenneth J. Taubes* (39) Vice President 1997
D. William Kohli (36) Vice President 1994
William N. Shiebler** (55) Vice President 1991
John R. Verani (57) Vice President 1990
Paul M. O'Neil (43) Vice President 1992
Beverly Marcus (52) Clerk 1988
- -----------------------------------------------------------------
* One of the fund's portfolio managers
** President of Putnam Mutual Funds
All of the officers of your fund are employees of Putnam
Management or its affiliates. Because of their positions with
Putnam Management or its affiliates or their ownership of stock
of Marsh & McLennan Companies, Inc., Messrs. Putnam, George
Putnam, III, Lasser and Smith (nominees for Trustees of your
fund), as well as the officers of your fund, will benefit from
the management fees, custodian fees, and investor servicing fees
paid or allowed by the fund.
Assets and shares outstanding of your fund
as of March 31, 1997
Net assets $325,711,409
Common shares outstanding
and authorized to vote 38,448,138 shares
5% beneficial ownership of your fund as of March 31, 1997
Persons beneficially owning more than 5%
of the fund's Common shares None
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581 <PAGE>
PUTNAMINVESTMENTS
This is your PROXY CARD.
Please vote this proxy, sign it below, and return it promptly in
the envelope provided. Your vote is important.
Please fold at perforation before detaching
- -----------------------------------------------------------------
Proxy for a meeting of shareholders to be held on July 10, 1997,
for Putnam Master Intermediate Income Trust.
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints George Putnam, Hans
H. Estin, and Robert E. Patterson, and each of them separately,
Proxies, with power of substitution, and hereby authorizes them
to represent and to vote, as designated below, at the meeting of
shareholders of Putnam Master Intermediate Income Trust on July
10, 1997, at 2:00 p.m., Boston time, and at any adjournments
thereof, all of the shares of the fund that the undersigned
shareholder would be entitled to vote if personally present.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you
are a joint owner, each owner should sign. When signing as an
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 ballot and return it with your signed
proxy in the enclosed envelope.
Street
- -----------------------------------------------------------------
City
State Zip
- -----------------------------------------------------------------
Telephone
- -----------------------------------------------------------------
DO YOU HAVE ANY COMMENTS?
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the
expense of follow-up mailings by signing and returning
this proxy as soon as possible. A postage-paid envelope is
enclosed for your convenience.
THANK YOU!
- -----------------------------------------------------------------
Please fold at perforation before detaching
<PAGE>
If you complete and sign the proxy, we'll vote it exactly as you
tell us. If you simply sign the proxy, it will be voted FOR
electing Trustees as set forth in Proposal 1, FOR Proposal 2 and
AGAINST Proposal 3. In their discretion, the Proxies will also
be authorized to vote upon such other matters that may come
before the meeting.
THE TRUSTEES RECOMMEND A VOTE FOR FIXING THE NUMBER OF TRUSTEES
AND ELECTING ALL OF THE NOMINEES FOR TRUSTEES:
Please mark your choices / X / in blue or black ink.
The Trustees recommend that you vote "FOR" all Nominees
1. Proposal to elect Trustees
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A.
Hill, R.J. Jackson, E.T. Kennan, L.J. Lasser, R.E.
Patterson, D.S. Perkins, W.F. Pounds, G. Putnam, G. Putnam,
III, A.J.C. Smith and W.N. Thorndike.
/ / FOR fixing the number of Trustees and electing all the
nominees (except as marked to the contrary below.)
To withhold authority to vote for one or more of the
nominees, write those nominees' names below:
------------------------------------------------------------
/ / WITHHOLD authority to vote for all nominees
The Trustees recommend that you vote "FOR" Proposal 2.
2. Proposal to ratify FOR AGAINST ABSTAIN
the selection of / / / / / /
Coopers & Lybrand
L.L.P. as auditors
of your fund.
The Trustees recommend that you vote "AGAINST" Proposal 3.
3. Proposal to convert
your fund from closed- / / / / / /
end to open-end status
and authorize certain
related amendments to
the Agreement and
Declaration of Trust.
Note: If you have questions on any of the Proposals, please
call 1-800-225-1581.
