PUTNAM DIVERSIFIED INCOME TRUST
Prospectus Supplement dated October 7, 1996
to Class A, B and M Prospectus dated February 1, 1996
At a meeting held on July 31, 1996, shareholders of the fund
approved a number of changes to the fundamental investment
restrictions of the fund, including the elimination of certain
restrictions. As a result, the fund may now:
-- acquire more than 10% of the outstanding voting
securities of any issuer with respect to 25% of its
total assets; and
-- invest more than 5% of its total assets in securities
of any issuer with respect to 25% of its total assets.
(Investments in obligations issued or guaranteed as to
interest or principal by the U.S. government or its
agencies or instrumentalities are not subject to any
limitation.)
The policies set forth above are fundamental and may not be
changed without shareholder approval. See the statement of
additional information of the fund for the full text of these
policies as well as the fund's other fundamental policies, some
of which were also changed by vote of shareholders.
To the extent the fund invests a significant portion of its
assets in the securities of a particular issuer, the fund will be
subject to an increased risk of loss if the market value of such
issuer's securities declines.
****************
The third paragraph under the heading "How the fund is managed"
is replaced with the following:
The following officers of Putnam Investment Management, Inc.
("Putnam Management") have had primary responsibility for the
day-to-day management of the fund's portfolio since the years
stated below:
Business experience
Year (at least 5 years)
---- ---------------------
Jin W. Ho 1996 Employed as an investment
Managing Director professional by Putnam
Management since 1983.
D. William Kohli 1994 Employed as an investment
Managing Director professional by Putnam
Management since 1994.
Prior to September 1994,
Mr. Kohli was Executive
Vice President and Co-
Director of Global Bond
Management and, from 1988
to 1993, was Senior
Portfolio Manager at
Franklin
Advisors/Templeton
Investment Counsel.
Michael Martino 1994 Employed as an investment
Managing Director professional by Putnam
Management since 1994.
Prior to March 1994, Mr.
Martino was employed by
Back Bay Advisors as
Executive Vice President
and Chief Investment
Officer from 1992 to
1994, and Senior Vice
President and Senior
Portfolio Manager from
1990 to 1992.
Neil J. Powers 1994 Employed as an investment
Vice President professional by Putnam
Management since 1986.
Mark J. Siegel 1994 Employed as an investment
Vice President professional by Putnam
Management since 1993.
Prior to June 1993, Mr.
Siegel was Vice President
of Salomon Brothers
International, Ltd.
****************
The second and third paragraph and the first sentence of the
fourth paragraph under the heading "How to buy shares -- Class A
shares" is replaced with the following:
There is no initial sales charge on purchases of class A
shares of $1 million or more. However, a CDSC of 1.00% or
0.50%, respectively, will be imposed on redemptions (other
than redemptions by certain participant-directed qualified
retirement plans, which are subject to a two-year CDSC of
1.00%, as described below) within the first or second year
after purchase.
<PAGE>
There are also no initial sales charges on class A shares
purchased by participant-directed qualified retirement plans
with at least 200 eligible employees. A CDSC of 1.00% will,
however, be imposed upon the redemption of shares purchased
after July 31, 1996 at net asset value by a participant-
directed qualified retirement plan (including a plan with at
least 200 eligible employees) that initially invested less
than $20 million in Putnam funds and other investments
managed by Putnam Management or its affiliates and that
sells 90% or more of the amount initially invested within
two years after its initial purchase.
Any CDSC will be based on the lower of the shares' cost and
current net asset value. Any shares acquired by
reinvestment of distributions will be redeemed without a
CDSC.
Shares purchased by certain investors (including
participant-directed qualified retirement plans with at
least 200 eligible employees) investing $1 million or more
who have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described
below are not subject to the CDSC.
28514 10/96
