SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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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/ / Preliminary Proxy Statement
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/ / Preliminary Additional Materials
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/ X / Definitive Proxy Statement
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/ / Definitive Additional Materials
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/ / Soliciting Material Pursuant to Sec. 240.14a-11(e) or
- ---- Sec. 240.14a-12
PUTNAM TAX-FREE INCOME TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
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/ x / $125 per Exchange Act Rules 0-11(c)(1)(ii),
- ---- 14a-6(i)(1), or 14a-6(i)(2).
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/ / $500 per each party to the controversy pursuant
- ---- to Exchange Act Rule 14a-6(i)(3).
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/ / Fee computed on table below per Exchange Act Rules
- ---- 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11:
(4) Proposed maximum aggregate value of transaction:
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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:
PUTNAM TAX-FREE INCOME TRUST
(INCLUDING ITS TWO PORTFOLIO SERIES,
PUTNAM TAX-FREE INSURED FUND AND
PUTNAM TAX-FREE HIGH YIELD FUND)
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
February 22 , 1994
Dear Shareholder:
You are cordially invited to attend the 1994 Meeting of
Shareholders of the Trust, which will be held on May 5, 1994 at
1:00 p.m., Boston time, on the eighth floor of One Post Office
Square, Boston, Massachusetts.
THE MATTERS TO BE ACTED UPON AT THE MEETING -- (1) ELECTING
TRUSTEES, (2) RATIFYING THE TRUSTEES' SELECTION OF PRICE
WATERHOUSE AS INDEPENDENT AUDITORS OF THE TRUST FOR ITS CURRENT
FISCAL YEAR AND (3) FOR PUTNAM TAX-FREE HIGH YIELD FUND ONLY,
CONSIDERING AN AMENDMENT TO THE TRUST'S MANAGEMENT CONTRACT
INCREASING THE MANAGEMENT FEE PAYABLE BY THE FUND TO PUTNAM
INVESTMENT MANAGEMENT, INC. ("PUTNAM MANAGEMENT") -- ARE
DESCRIBED IN THE ATTACHED NOTICE AND PROXY STATEMENT.
Following a comprehensive review of the management fees
paid to Putnam Management by the Putnam funds , new
Management Contracts have been implemented for most of
the Putnam funds during the past several years. These new
Contracts provided for an increase in the management fees payable
by some funds and a decrease in the fees payable by others. On
an overall basis, the fee changes have resulted in a net
increase in the aggregate management fees paid to Putnam
Management by the Putnam funds.
Consistent with these fee changes for other Putnam
funds, the Trustees are recommending an increase in the
management fee payable by Putnam Tax-Free High Yield Fund to
Putnam Management. In the case of Putnam Tax-Free Insured Fund,
the Trustees are not recommending any change in the management
fee payable to Putnam Management. Your Trustees feel that the
proposed new Management Contract is fair to both the shareholders
and to Putnam Management and will help to assure for the future
the high quality of management services which the Fund has
received in the past. As Trustees we have concluded that the
proposed new Contract is in the best interests of shareholders of
Putnam Tax-Free High Yield Fund and recommend that they vote in
favor of its approval.
Although we would like very much to have each shareholder
attend the 1994 Meeting, we realize this is not possible.
Whether or not you plan to be present at the meeting, WE NEED
YOUR VOTE. WE URGE YOU TO COMPLETE, SIGN AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY. A POSTAGE-PAID ENVELOPE IS ENCLOSED FOR
THIS PURPOSE.
If you return your proxy promptly, you can help your Trust
avoid the expense of follow-up mailings to achieve a quorum so
that the meeting can be held. If you decide between now and May
that you can attend the meeting in person, you can revoke your
proxy at that time and vote your shares at the meeting. If your
shares are held in street name, only your bank or broker can vote
your shares, and only upon receipt of your specific instructions.
Please contact the person responsible for your account and
instruct him or her to execute a proxy card today.
We look forward to seeing you at the meeting or receiving
your proxy so that your shares may be voted at the meeting.
Sincerely yours,
/s/George Putnam
George Putnam, Chairman
PUTNAM TAX-FREE INCOME TRUST
(INCLUDING ITS TWO PORTFOLIO SERIES,
PUTNAM TAX-FREE INSURED FUND AND
PUTNAM TAX-FREE HIGH YIELD FUND)
NOTICE OF THE 1994 MEETING OF SHAREHOLDERS
To The Shareholders of Putnam Tax-Free Income Trust:
The 1994 Meeting of Shareholders of Putnam Tax-Free Income
Trust (the "Trust") will be held on May 5, 1994 at 1:00 p.m.,
Boston time, on the eighth floor of One Post Office Square,
Boston, Massachusetts, for the following purposes:
1. Electing Trustees, as described in Part I of the
attached Proxy Statement. (p.1)
2. Ratifying or rejecting the selection of independent
accountants as auditors for the Trust for the current
fiscal year, as described in Part II of the attached
Proxy Statement. (p.12)
3. Approving or disapproving an amendment to the
Management Contract between the Trust and Putnam
Investment Management, Inc., as set forth in Exhibit B
and as described in Part III of the attached Proxy
Statement. (To be voted on by Putnam Tax-Free High
Yield Fund shareholders only.) (p.12)
4. Such other matters 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
ELIZABETH T. KENNAN A.J.C. SMITH
LAWRENCE J. LASSER W. NICHOLAS THORNDIKE
February 22 , 1994
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED
PROXY IN THE ENCLOSED ENVELOPE SO YOU WILL
BE REPRESENTED AT THE MEETING.
PUTNAM TAX-FREE INCOME TRUST
(INCLUDING ITS TWO PORTFOLIO SERIES,
PUTNAM TAX-FREE INSURED FUND AND
PUTNAM TAX-FREE HIGH YIELD FUND)
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
PROXY STATEMENT
THE ENCLOSED PROXY IS SOLICITED BY THE TRUSTEES OF PUTNAM
TAX-FREE INCOME TRUST (the "Trust") (including its two portfolio
series, Putnam Tax-Free Insured Fund and Putnam Tax-Free High
Yield Fund (the "Funds") for use at the 1994 Meeting of
Shareholders to be held on May 5, 1994, and at any adjournments
thereof, for the purposes set forth in the accompanying Notice of
Meeting of Shareholders. Shareholders of record at the close of
business on February 11, 1994 are entitled to be present and to
vote at the meeting or any adjourned session thereof. The Notice
of Meeting, proxy and this Proxy Statement have been mailed to
such shareholders of record on or about February 25 , 1994.
A copy of the Annual Report of the Trust for its most recent
fiscal year, including financial statements, has previously been
mailed to shareholders. A representative of Price Waterhouse,
auditors of the Trust, is expected to be present at the meeting
with the opportunity to make statements and to respond to
appropriate questions.
Each share of beneficial interest is entitled to one vote.
Shares represented by duly executed proxies will be voted for the
election of the persons named herein as Trustees, unless such
authority has been withheld. With respect to the other matters
specified in the proxy, shares will be voted in accordance with
the instructions made. If no instructions are made, the proxy
will be voted for the matters specified in the proxy. Proxies
may be revoked at any time before they are voted by a written
revocation received by the Clerk of the Trust, by properly
executing a later-dated proxy or by attending the meeting and
voting in person.
I. ELECTION OF TRUSTEES
The Trustees have fixed the number of Trustees for election
at this meeting at twelve. The nominees for Trustees of the
Trust who are proposed for election at the meeting, their ages,
and a description of their principal occupations are set forth
below. All the nominees have been recommended by the Nominating
Committee, which consists solely of Trustees who are not
"interested persons" (as defined in the Investment Company Act of
1940) of the Trust or Putnam Investment Management,
Inc., the Trust's investment manager ("Putnam
Management") . All the nominees are presently Trustees of the
Trust. Each of the current Trustees was elected by the
shareholders in July, 1993 (except for Mrs. Baxter, who was
elected by the Trustees effective January 6, 1994). All of the
Trustees are also Trustees of all of the other Putnam
funds , except that Jameson Adkins Baxter and A.J.C. Smith do
not currently serve as Trustees of Putnam California Investment
Grade Municipal Trust, Putnam Investment Grade Municipal Trust
II, Putnam Investment Grade Intermediate Municipal Trust, Putnam
Managed High Yield Trust, Putnam Municipal Opportunities Trust
and Putnam New York Investment Grade Municipal Trust . Except
as shown, the principal occupations and business experience for
the last five years of the nominees have been with the employers
indicated, although in some cases they have held different
positions with such employers.
The term of office of each person elected as a Trustee will
be until the next meeting held for the purpose of electing
Trustees and until his or her successor is elected and qualified.
Each of the nominees has agreed to serve as a Trustee if elected.
If any of the nominees should be unavailable for election at the
time of the meeting (which is not presently anticipated), the
persons named as proxies may vote for other persons in their
discretion, or the Trustees may vote to fix the number of
Trustees at fewer than twelve.
PRINCIPAL OCCUPATION
NOMINEE FOR LAST FIVE YEARS
Jameson Adkins Baxter (50) President, Baxter Associates, Inc.
(consultants to management).
Prior to 1992 Vice President and
Principal, Regency Group, Inc. and
Consultant, The First Boston
Corporation. Also, Director, Banta
Corporation, Avondale Federal
Savings Bank and ASHTA Chemicals,
Inc. Chairman of the Board of
Trustees, Mount Holyoke College.
President of the Board of Trustees,
Emma Willard School and Member of
Board of Governors, Good Shepherd
Hospital.
Hans H. Estin (65) Vice Chairman, North American
Management Corp. (a registered
investment adviser). Also,
Director, The Boston Company, Inc.
and Boston Safe Deposit and Trust
Company. Member, Massachusetts
General Hospital. Trustee, New
England Aquarium.
John A. Hill (52) Chairman and Managing Director,
First Reserve Corporation (a
registered investment adviser).
Prior to 1989, General Partner,
Meridien Capital Corporation (a
venture capital investment firm).
Also, Director, Snyder Oil
Corporation, Maverick Tube
Corporation, PetroCorp
Incorporated, various private
companies controlled by First
Reserve Corporation and various
First Reserve Funds.
Elizabeth T. Kennan (55) President, Mount Holyoke College.
Also, Director, NYNEX Corporation,
Northeast Utilities, the Kentucky
Home Life Insurance Companies and
Talbots. Trustee, University of
Notre Dame.
PRINCIPAL OCCUPATION
NOMINEE FOR LAST FIVE YEARS
*Lawrence J. Lasser (51) Vice President of the Putnam funds.
President, Chief Executive Officer
and Director of Putnam Investments,
Inc. and Putnam Management.
Director, Marsh & McLennan
Companies, Inc. and INROADS/Central
New England Inc. Member, Board of
Overseers, Museum of Science,
Museum of Fine Arts and Isabella
Stewart Gardner Museum, Boston.
Also, Trustee, Beth Israel Hospital
and Buckingham, Browne and Nichols
School.
Robert E. Patterson (48) Executive Vice President of Cabot
Partners Limited Partnership (a
registered investment adviser to
institutional clients in the
acquisition and management of their
real estate portfolios). Also,
Trustee, Joslin Diabetes Center.
From May, 1987 to October, 1990,
Executive Vice President of Cabot,
Cabot & Forbes Realty Advisors,
Inc. (predecessor of Cabot Partners
Limited Partnership).
Donald S. Perkins (66) Director of various corporations,
including American Telephone &
Telegraph Company, AON Corp.,
Cummins Engine Company, Inc.,
Illinois Power Co., Inland Steel
Industries, Inc., K mart
Corporation, LaSalle Street Fund,
Inc., Springs Industries, Inc. and
Time Warner Inc. Also, Trustee and
Vice Chairman, Northwestern
University. Chairman, The Hospital
Research and Education Trust.
Member, The Business Council.
Founding Chairman, the Civic
Committee of the Commercial Club of
Chicago.
William F. Pounds (65) Vice Chairman. Professor of
Management, Alfred P. Sloan School
of Management, Massachusetts
Institute of Technology. Director,
IDEXX Laboratories, Inc., M/A-COM,
Inc., EG&G, Inc., Perseptive
Biosystems, Inc., Management
Sciences For Health, Inc. and Sun
Company, Inc. Also, Trustee,
Museum of Fine Arts, Boston and
PRINCIPAL OCCUPATION
NOMINEE FOR LAST FIVE YEARS
Overseer, WGBH Educational
Foundation.
*George Putnam (67) Chairman and President of the
Putnam funds. Chairman and
Director of Putnam Management and
Putnam Mutual Funds. Also,
Director, The Boston Company, Inc.,
Boston Safe Deposit and Trust
Company, Freeport-McMoRan, Inc.,
General Mills, Inc., Houghton
Mifflin Company, Marsh & McLennan
Companies, Inc., and Rockefeller
Group, Inc. Trustee, Massachusetts
General Hospital, McLean Hospital,
Vincent Memorial Hospital, WGBH
Educational Foundation, The
Colonial Williamsburg Foundation
and Museum of Fine Arts, Boston.
*George Putnam, III (42) President, New Generation Research,
Inc. (publisher of financial
information). Director, World
Environment Center and
Massachusetts Audubon Society.
Trustee, Sea Education Association
and St. Mark's School.
Also, Overseer, New England Medical
Center.
*A.J.C. Smith (59) Chairman and Chief Executive
Officer, Marsh & McLennan
Companies, Inc. Also, Trustee of
The American Institute for
Chartered Property Casualty
Underwriters, the Central Park
Conservancy and the Carnegie Hall
Society.
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*Nominees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the 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. Mr. Putnam, Mr. Lasser and Mr.
Smith are deemed "interested persons" of the Trust, Putnam
Management and Putnam Mutual Funds by virtue of their positions
as officers of the Trust or officers or directors of Putnam
Management, Putnam Mutual Funds, or their parent, Marsh &
McLennan Companies, Inc., or their ownership of stock of Marsh &
McLennan Companies, Inc. Mr. George Putnam, III, Mr. Putnam's
son, is also an "interested person" of the Trust, Putnam
Management and Putnam Mutual Funds. The balance of the nominees
are not "interested persons."
PRINCIPAL OCCUPATION
NOMINEE FOR LAST FIVE YEARS
W. Nicholas Thorndike (60) Director of various corporations
and charitable organizations,
including Providence Journal Co.
and Courier Corporation. Also,
Trustee and President,
Massachusetts General Hospital.
Trustee, Bradley Real Estate Trust,
Eastern Utilities Associates and
Northeastern University. Prior to
December, 1988, Chairman of the
Board and Managing Partner of
Wellington Management
Company/Thorndike, Doran, Paine &
Lewis (a registered investment
adviser).
Each Trustee of the Trust receives an annual fee, and an
additional fee for each Trustees' meeting attended. Trustees who
are not "interested persons" of Putnam Management and who serve
on committees of the Trustees receive additional fees for
attendance at certain committee meetings. The annual fee paid,
the number of Trustees' meetings held and the aggregate fees paid
to all Trustees are set forth in "Trustees and Officers
Information" below.
The Trust's Trustees have approved Retirement Guidelines for
Trustees of the Putnam funds. These guidelines provide generally
that a Trustee who retires after reaching age 72 and who has at
least 10 years of continuous service will be eligible to receive
a retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and, except as
otherwise determined by the Trustees, will be an annual cash
benefit equal to one-half of the Trustee retainer paid by the
Trust at the time of retirement. Several retired Trustees of the
Trust are currently receiving retirement benefits pursuant to
these Guidelines and it is anticipated that the current Trustees
of the Trust will receive similar benefits upon their retirement.
The Trustees of the Trust reserve the right to amend or terminate
such Guidelines and the related payments at any time, and may
modify or waive the foregoing eligibility requirements when
deemed appropriate.
The Agreement and Declaration of Trust of the Trust provides
that the Trust 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
Trust, 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 Trust or that such indemnification
would relieve any officer or Trustee of any liability to the
Trust or its shareholders arising by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties. The Trust, 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 the Trust include only Trustees who are not
"interested persons" of the Trust or Putnam Management. The
Audit Committee recommends to the Trustees the independent public
accountants to be selected for the Trust. It also reviews the
performance, scope of work and compensation of such accountants,
and reviews with such accountants the quality, accounting
controls, procedures and adequacy of the accounting services
rendered to the Trust by Putnam Management and by the Trust's
investor servicing agent and custodian. The Audit Committee
reports to the Trustees the results of its inquiries. The Audit
Committee currently consists of Messrs. Estin (Chairman),
Perkins, Putnam, III (without vote), Smith (without vote) and
Mrs. Kennan.
The Nominating Committee consists only of Trustees who are
not "interested persons" of the Trust or Putnam Management. It
recommends to the Trustees persons to be elected as Trustees and
as Chairman, Vice Chairman, President and certain other officers
of the Trust. The Nominating Committee will consider individuals
proposed by a shareholder for election as a Trustee.
Shareholders wishing to submit the name of any individual must
submit in writing a brief description of the proposed nominee's
business experience and other information relevant to the
qualifications of the individual to serve as a Trustee of the
Trust. The Nominating Committee currently consists of Mrs.
Kennan and Dr. Pounds (Co-chairmen), Mrs. Baxter, and Messrs.
Estin, Hill, Patterson, Perkins and Thorndike.
The number of meetings of the Audit and Nominating
Committees in the Trust's most recent fiscal year is set forth in
"Trustees and Officers Information" below.
TRUSTEES AND OFFICERS INFORMATION
The shareholdings of each Trustee in the Funds for Class B
shares are shown below. No Trustee owned any Class A shares of
the Funds. Unless noted below, each Trustee has sole investment
power and sole voting power with respect to his or her shares of
a Fund and no Trustee owns 1% or more of the outstanding shares
of a Fund.
OWNERSHIP OF OWNERSHIP OF
YEAR FIRST CLASS B SHARES OF ALL
ELECTED AS SHARES OF THE PUTNAM FUNDS
TRUSTEES TRUSTEE TRUST AS OF 1/14/94 AS OF 1/14/94*
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PUTNAM PUTNAM
TAX-FREE TAX-FREE
HIGH YIELD INSURED
FUND Fund
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Jameson Adkins Baxter 1994 100
100 600
Hans H. Estin 1985 364 335 34,183
John A. Hill 1985 155 146 155,023
Elizabeth T. Kennan 1992 215 213 11,690
Lawrence J. Lasser 1992 19,756 105 486,022
Robert E. Patterson 1985 450 427 59,606
Donald S. Perkins 1985 203 186 267,723
William F. Pounds 1985 174 162 344,538
George Putnam 1985 6,951 6,4121,208,521
George Putnam, III 1985 1,012 931 58,219
A.J.C. Smith 1986 138 134 29,012
W. Nicholas Thorndike 1992 106 10447,377
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* Does not include shares of Putnam Capital Manager
Trust, Putnam Daily Dividend Trust, Putnam Tax Exempt Money
Market Fund, Putnam California Tax Exempt Money Market Fund, and
Putnam New York Tax Exempt Money Market Fund.
As of January 14, 1994, the Trustees and officers of the
Trust owned in the aggregate 29,958 Class B shares
of Putnam Tax-Free High Yield Fund comprising less than 1%
of the outstanding Class B shares of that Fund on that date and
9,255 Class B shares of Putnam Tax-Free Insured Fund
comprising less than 1% of the outstanding Class B shares
of that Fund on that date. With respect to all of these
shares, the Trustees and officers individually have sole
investment power and sole voting power .
FOR THE FISCAL YEAR ENDED JULY 31, 1993
MEETINGS OF THE TRUSTEES DURING THE YEAR
Full Board of Trustees meetings: 11
Audit Committee meetings: 4
Nominating Committee meetings: 2
TRUSTEES' FEES
Annual retainer fee per Trustee: $3,950
Additional attendance fee per
Trustees' meeting: $60
Aggregate fees paid to all Trustees for the
year*: $49,551
*Includes both annual fees and fees for attendance at Trustees'
meetings and certain meetings of committees of the Trustees.
These committees include: Compensation, Legal, Administration;
Audit; Closed-End Funds; Distribution; Pricing/Brokerage/Special
Investments; Communication and Service; Contract; Executive;
Board Policy and Nominating; and Proxy.
In addition to George Putnam and Lawrence J. Lasser, the
officers of the Trust are Charles E. Porter, Executive Vice
President, Patricia C. Flaherty, Senior Vice President, Gordon H.
Silver, Gary N. Coburn, James E. Erickson, Richard P. Wyke,
Triet M. Nguyen (Messrs. Wyke and Nguyen are the Trust's
Portfolio Managers), William N. Shiebler (President of Putnam
Mutual Funds), John R. Verani and Paul M. O'Neil, each of whom
serves as a Vice President, John D. Hughes, Vice President and
Treasurer, and Beverly Marcus, Clerk of the Trust. All of the
officers of the Trust 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 Mutual Funds), Messrs. Putnam, George Putnam, III, Lasser
and Smith (nominees for Trustees of the Trust), as well as the
officers of the Trust, will benefit from the management fees,
distribution fees, underwriting commissions, custodian fees, and
investor servicing fees paid or allowed by the Funds.
PUTNAM INVESTMENT MANAGEMENT, INC. Putnam Management and
its affiliates, Putnam Mutual Funds, the principal underwriter
for shares of the Trust, and Putnam Fiduciary Trust Company, the
Trust'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
brokering, consulting and investment management businesses. A
certified balance sheet of Putnam Management is attached
to this Proxy Statement as Exhibit A .
The directors of Putnam Management are George Putnam,
Lawrence J. Lasser and Gordon H. Silver. Mr. Lasser is the
principal executive officer of Putnam Management. The principal
occupations of Messrs. Putnam, Lasser and Silver are as officers
and directors of Putnam Management and certain of its corporate
affiliates. The address of Putnam Management and the business
address of the directors and officers of Putnam Management is One
Post Office Square, Boston, Massachusetts 02109.
In addition to its services to the Trust, Putnam Management
acts as investment adviser or subadviser of other publicly-owned
investment companies having differing investment objectives. For
the names of such funds and the current rates of Putnam
Management's annual fees as adviser or subadviser of such funds,
see Schedule A to this Proxy Statement.
Putnam Management is also affiliated with The Putnam
Advisory Company, Inc., which together with subsidiaries
furnishes investment advice to domestic and foreign institutional
clients and foreign mutual funds. Another affiliate, Putnam
Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers.
The advisory fees charged by such firms to their institutional
clients are generally at lower rates than those charged the
Putnam funds. The services performed and responsibilities
assumed by these firms for such clients are, however, not as
extensive as those performed or assumed by Putnam Management for
the Putnam funds.
Some officers and directors of Putnam Management, including
some who are officers of the Trust, serve as officers or
directors of some of these affiliates. Putnam Management may
also enter into other businesses.
THE MANAGEMENT CONTRACT. Putnam Management serves as
investment manager of the Trust pursuant to a Management
Contract. The management fee payable under the Contract is
described in Schedule A to this Proxy Statement. The fees paid
to Putnam Management in the most recent fiscal year are shown in
"Trust Information" below.
Under the Contract, subject to such policies as the Trustees
may determine, Putnam Management, at its expense, furnishes
continuously an investment program for the Trust and makes
investment decisions on behalf of the Trust. Subject to the
control of the Trustees, Putnam Management manages, supervises
and conducts the other affairs and business of the Trust,
furnishes office space and equipment, provides bookkeeping and
clerical services (including determination of the Trust's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the Trust's
portfolio securities. Putnam Management may place Trust
portfolio transactions with broker-dealers that furnish Putnam
Management, without cost to it, certain brokerage and research
services of value to Putnam Management and its affiliates in
advising the Trust and other clients. In so doing, Putnam
Management may cause the Trust to pay greater brokerage
commissions than it might otherwise pay. See "Brokerage and
research services" below.
The Trust also pays, or reimburses Putnam Management for,
the compensation and related expenses of certain officers of the
Trust and their assistants. Currently, the Trust is reimbursing
Putnam Management for a portion of the compensation and related
expenses of certain officers of the Trust who provide certain
administrative services to the Trust and the other Putnam funds,
each of which bears an allocated share of the costs. The
aggregate amount of all such payments and reimbursements is
determined annually by the Trustees, and the amount paid in the
most recent fiscal year is set forth in "Trust Information"
below. Putnam Management pays all other salaries of officers of
the Trust. The Trust pays all expenses not assumed by Putnam
Management including, without limitation, auditing, legal,
custodial, investor servicing agent and shareholder reporting
expenses.
The Contract provides that Putnam Management shall not be
subject to any liability to the Trust or to any shareholder of
the Trust for any act or omission in the course of or connected
with rendering services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties.
The Contract may be terminated as to any Fund without
penalty upon 30 days' written notice by Putnam Management, by the
Trustees of the Trust, or by the affirmative vote of the holders
of a "majority of the outstanding voting securities" of that
Fund (as defined in the Investment Company Act of 1940). It
may be amended as to either Fund only by an affirmative vote of
the holders of a majority of the outstanding voting securities of
such Fund and by a majority of the Trustees who are not
"interested persons" of the Trust or Putnam Management.
The Contract will terminate automatically if it is assigned,
or unless its continuance is approved at least annually by either
the Trustees or shareholders of the Funds and in either case by a
majority of the Trustees who are not "interested persons" of
Putnam Management or the Trust.
INVESTMENT DECISIONS. Investment decisions for the Trust
and for the other investment advisory clients of Putnam
Management and its affiliates are made with a view to achieving
each client's respective investment objectives. Investment
decisions are the product of many factors in addition to basic
suitability for the particular client involved. Thus, a
particular security may be bought and sold for clients even
though it could have been bought or sold for other clients at the
same time. Likewise, a particular security may be bought for
some clients when other clients are selling the security. In
some cases, one client may sell a particular security to another
client. When two or more clients simultaneously purchase or sell
the same security, each day's transactions in the security are,
insofar as possible, averaged as to price and allocated between
the clients in a manner which in the opinion of Putnam Management
is equitable to each and in accordance with the total amount of
the security being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for
one or more clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the Trust of
negotiated brokerage commissions. Such commissions vary among
different brokers. A particular broker may charge different
commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often
involve the payment of fixed brokerage commissions, which may be
higher than those in the United States. There is generally no
stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Trust usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities
will be with the issuer or with underwriters of or dealers in
those securities, acting as principal. Accordingly, those funds
would not ordinarily pay significant brokerage commissions with
respect to securities transactions.
It has for many years been a common practice in the
investment advisory business for advisers of investment companies
and other institutional investors to receive brokerage and
research services (as defined in the Securities Exchange Act of
1934, as amended (the "1934 Act")), from broker-dealers that
execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, Putnam Management
receives brokerage and research services and other similar
services from many broker-dealers with which Putnam Management
places the Trust's portfolio transactions and from third parties
with which these broker-dealers have arrangements. These
services include such matters as general economic and market
reviews, industry and company reviews, evaluations of
investments, recommendations as to the purchase and sale of
investments, newspapers, magazines, pricing services, quotation
services, news services and personal computers utilized by Putnam
Management's managers and analysts. Where the services referred
to above are not used exclusively by Putnam Management for
research purposes, Putnam Management, based upon its own
allocations of expected use, bears the portion of the cost of
these services that directly relates to their non-research use.
Some of these services are of value to Putnam Management and its
affiliates in advising various of their clients (including the
Trust), although not all of these services are necessarily useful
and of value in managing the Trust. The management fee paid by
the Trust is not reduced because Putnam Management and its
affiliates receive these services even though Putnam Management
might otherwise be required to purchase some of these services
for cash.
Putnam Management places all orders for the purchase and
sale of portfolio investments for the Trust and buys and sells
investments for the Trust through a substantial number of brokers
and dealers. In so doing, Putnam Management uses its best
efforts to obtain for the Trust the most favorable price and
execution available, except to the extent it may be permitted to
pay higher brokerage commissions as described below. In seeking
the most favorable price and execution, Putnam Management, having
in mind the Trust's best interests, considers all factors it
deems relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market for the
security or other investment, the amount of the commission, the
timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the Trust to pay
a broker-dealer which provides "brokerage and research
services" (as defined in the 1934 Act) to Putnam Management an
amount of disclosed commission for effecting securities
transactions on stock exchanges and other transactions for the
Trust on an agency basis in excess of the commission which
another broker-dealer would have charged for effecting that
transaction. Putnam Management's authority to cause the Trust to
pay any such greater commissions is also subject to such policies
as the Trustees may adopt from time to time. Putnam Management
does not currently intend to cause the Trust to make such
payments. It is the position of the staff of the Securities and
Exchange Commission that Section 28(e) does not apply to the
payment of such greater commissions in "principal" transactions.
Accordingly, Putnam Management will use its best efforts to
obtain the most favorable price and execution available with
respect to such transactions, as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the Trust, less any direct expenses approved by
the Trustees, shall be recaptured by the Trust through a
reduction of the fee payable by the Trust under the Management
Contract. Putnam Management seeks to recapture for the Trust
soliciting dealer fees on the tender of the Trust's portfolio
securities in tender or exchange offers. Any such fees which may
be recaptured are likely to be minor in amount.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Trustees may determine, Putnam Management may
consider sales of shares of the Trust (and, if permitted by law,
of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the Trust.
PAYMENTS TO AFFILIATES OF PUTNAM MANAGEMENT. Putnam Mutual
Funds is the principal underwriter of shares of the Trust and of
the other continuously offered Putnam funds. Putnam Fiduciary
Trust Company is the Trust's investor servicing agent and
custodian. The amount of sales charges retained by Putnam Mutual
Funds and the investor servicing fees and custodian fees paid to
Putnam Fiduciary Trust Company in the Trust's most recent fiscal
year are set forth in "Trust Information" below.
Under the terms of its Class A Distribution Plan, the Trust
compensates Putnam Mutual Funds at the annual rate of up to 0.35%
of the average net assets of each Fund attributable to Class A
shares, although a limit of 0.20% is currently in effect.
Payments under the Class A Plan compensate Putnam Mutual Funds
for service provided and expenses incurred by it in promoting the
sale of shares of the Trust, reducing redemptions or maintaining
or improving services provided to shareholders by Putnam Mutual
Funds or by dealers. The fee paid to Putnam Mutual Funds under
the Plan in the Trust's most recent fiscal year is set forth in
"Trust Information" below.
Under the terms of its Class B Distribution Plan, the Trust
compensates Putnam Mutual Funds at the annual rate of up to 1.00%
of the average net assets of each Fund attributable to Class B
shares. The purpose of the Class B Plan is to permit the Trust
to compensate Putnam Mutual Funds for services provided and
expenses incurred by it in promoting the sale of Class B shares
of the Trust, including commissions and service fees paid by it
to dealers. The fee paid to Putnam Mutual Funds under the Plan
in the Trust's most recent fiscal year is set forth in "Trust
Information" below.
TRUST INFORMATION
ASSETS OF THE TRUST; SHARES OUTSTANDING
Net assets of each Fund as of January 14, 1994
Insured Fund $ 607,104,976
High Yield Fund $1,839,524,282
Class A shares of each Fund outstanding and
authorized to vote as of February 11, 1994
Insured Fund 9,660,781 shares
High Yield Fund 22,683,060 shares
Class B shares of each Fund outstanding and
authorized to vote as of February 11, 1994
Insured Fund 29,315,960 shares
High Yield Fund 100,568,990 shares
Persons beneficially owning
more than 5% of each Fund's Class A shares
as of January 31, 1994
Insured Fund NONE
High Yield Fund NONE
Persons beneficially owning
more than 5% of each Fund's Class B shares
as of January 31, 1994
Insured Fund NONE
High Yield Fund NONE
FOR THE FISCAL YEAR ENDED JULY 31, 1993
MANAGEMENT CONTRACT
The Management Contract dated July 26, 1985,
as amended December 21, 1988 and as further
amended July 11, 1991, was approved by the
shareholders of Putnam Tax-Free High Yield Fund
on December 8, 1988, and by the shareholders of
Putnam Tax-Free Insured Fund on July 11, 1991,
and was last approved by the Trustees on
January 7, 1994.
Management fee paid to Putnam Management
for the fiscal year $9,076,137
Reimbursement paid by the Trust to Putnam
Management for compensation, related expenses
and employee benefit plan contributions
for the Trust's Executive Vice President
(Charles E. Porter), Senior Vice President
(Patricia C. Flaherty), Clerk (Beverly
Marcus) and those who assist them $44,046
PAYMENTS TO AFFILIATES
Sales charges on sales of Class A
shares retained by Putnam Mutual Funds
after payments to selling broker-dealers
(No Class A shares were outstanding during
this period) NONE
Deferred sales charges on Class A share
redemptions retained by Putnam Mutual Funds
(No Class A shares were outstanding during
this period) NONE
Deferred sales charges on Class B share
redemptions retained by Putnam Mutual Funds $1,937,388
Payments under Class A Distribution Plan to
Putnam Mutual Funds (No Class A shares were
outstanding during this period) NONE
Payments under Class B Distribution Plan to
Putnam Mutual Funds $14,346,484
Investor servicing and custodian fees
paid to Putnam Fiduciary Trust Company
(after application of credits) $1,707,473
BROKERAGE
Total Trust payments to broker-dealers as
commissions on agency transactions $513,528
Total Trust payments to broker-dealers as
commissions on underwritten transactions$2,995,625
Putnam Management, on behalf of Putnam Tax-Free Insured
Fund, placed agency and underwritten transactions having an
approximate aggregate dollar value of $9,112,575 (6.75% of the
Fund's agency and underwritten transactions, on which
approximately $66,588 of commissions were incurred) with brokers
and dealers to recognize research, statistical and quotation
services Putnam Management considered to be particularly useful
to it and its affiliates.
Putnam Management, on behalf of Putnam Tax-Free High Yield
Fund, placed agency and underwritten transactions having an
approximate aggregate dollar value of $57,123,323 (15.11% of the
Fund's agency and underwritten transactions, on which
approximately $381,063 of commissions were incurred) with brokers
and dealers to recognize research, statistical and quotation
services Putnam Management considered to be particularly useful
to it and its affiliates.
II. RATIFICATION OR REJECTION OF SELECTION OF
INDEPENDENT AUDITORS
Price Waterhouse, 160 Federal Street, Boston, Massachusetts,
independent accountants, has been selected by the Trustees as
auditors of the Trust for the current fiscal year. Unless
otherwise indicated, the proxy will be voted in favor of
ratifying the selection of Price Waterhouse as auditors.
III. APPROVAL OR DISAPPROVAL OF AN AMENDMENT TO
THE MANAGEMENT CONTRACT
(TO BE VOTED ON BY SHAREHOLDERS OF
PUTNAM TAX-FREE HIGH YIELD FUND ONLY)
The Trustees of the Trust are recommending that shareholders
of Putnam Tax-Free High Yield Fund approve an amendment to the
Management Contract between the Trust and Putnam Management,
which provides for an increase in the management fees payable to
Putnam Management. The proposed amended Contract (a copy of
which is set forth as Exhibit B hereto) is identical in all other
substantive respects to the existing Contract . The
proposed amendment to the Contract is described below under "The
Proposed Amended Management Contract".
REASONS FOR THE PROPOSAL. In October 1990, Putnam Management
submitted a proposal to the Trustees for a comprehensive revision
of the management fees paid to it by the Putnam funds. This
proposal included certain structural changes in the funds' fee
arrangements with Putnam Management. Although management fees
for certain funds would have been reduced under Putnam
Management's proposal, it involved a net increase in the
aggregate management fees paid to it by the Putnam funds overall.
The Trustees, acting primarily through their Contract
Committee, which consists solely of Trustees who are not
"interested persons" of the Putnam funds or of Putnam Management,
carefully reviewed Putnam Management's proposal. This Committee
met on numerous occasions to evaluate the proposal and was
assisted in that process by the funds' legal counsel and an
independent consultant engaged by the Committee. The Committee
considered, among other things, the nature and quality of the
services being provided by Putnam Management, including the
relative complexity of management of each fund, and information
comparing the recent investment performance, management fees and
other expenses paid by each fund with those of comparable funds
managed by other investment advisers. The Committee also
considered information provided by Putnam Management regarding
the profitability of its current and proposed management fee
arrangements with each fund (without regard to costs incurred by
Putnam Management and its affiliates in connection with the
marketing of shares), as well as the benefits to Putnam
Management and its affiliates resulting from the fact that
affiliates of Putnam Management currently serve as shareholder
servicing agent, distributor and custodian for each of the Putnam
funds pursuant to separate contractual arrangements.
Following discussion of these and other relevant factors
between representatives of Putnam Management and the Contract
Committee, Putnam Management modified its proposal in several
respects and on January 17, 1991, the Contract Committee voted
unanimously to recommend approval of this revised proposal by the
Trustees. This revised proposal established the general outlines
of a comprehensive restructuring of the management fee
arrangements for all of the Putnam funds. The proposed new fee
arrangements included proposed fee increases for certain funds,
as well as fee decreases for other funds. Under this proposal,
however, a new management fee would be implemented for a
particular fund only if the Trustees determined that such fee
would be fair and reasonable in light of the particular facts and
circumstances pertaining to that fund. The Contract Committee
advised Putnam Management that, in making this determination, the
Trustees would generally expect to consider all relevant factors
but would place special weight on the comparative investment
performance and expense levels of a fund and similar competitive
funds. On February 8, 1991, the Trustees of the Putnam funds,
including those Trustees who are not "interested persons" of the
funds or Putnam Management, unanimously approved the
recommendations of the Contract Committee.
Since that time, management fee changes have been adopted by
most of the Putnam funds pursuant to the general
principles established as a result of the foregoing
discussions. Such changes have included both increases and
decreases, but on the whole have resulted in a net increase in
the overall fees paid to Putnam Management by the Putnam funds.
The Trustees have determined that, consistent with the fee
changes recently approved by shareholders of other funds, it
would be appropriate at this time to implement revised management
fee structures for Putnam Tax-Free High Yield Fund and certain
other Putnam funds. Accordingly, on February 4 , 1994, the
Trustees of the Trust , including those Trustees who are
not "interested persons" of the Trust or Putnam
Management, voted to submit a proposed amended Management
Contract for approval by shareholders of Putnam Tax-Free High
Yield Fund. The current fee arrangements for the Putnam funds
and the changes being proposed for certain funds at this time are
set forth in Schedule A.
THE PROPOSED AMENDED MANAGEMENT CONTRACT. A description of
the existing Management Contract, the services provided
thereunder, the procedures for its termination and renewal, other
services provided by Putnam Management and its affiliates, and
information concerning brokerage and related matters is set forth
in Part I above. The proposed amended Management Contract is
identical in all substantive respects to the existing Contract,
except for the proposed change in management fee.
Under the amended Management Contract, the annual management
fee paid by Putnam Tax-Free High Yield Fund under the Trust's
Management Contract with Putnam Management would be increased as
follows:
EXISTING FEE PROPOSED FEE
First $100 Million 0.70% First $500 Million 0.65%
Next $100 Million 0.60% Next $500 Million 0.55%
Next $300 Million 0.50% Next $500 Million 0.50%
Next $500 Million 0.45% Over $1.5 Billion 0.45%
Over $1.0 Billion 0.425%
If the proposed new fee rate had been in effect for the
Fund's last two fiscal years, Putnam Tax-Free High Yield Fund
would have paid annual management fees as follows:
EXISTING FEE PROPOSED FEE
(Fiscal Year Ended July 31) (Fiscal Year Ended
July 31)
1992 $4,317,379 1992
$5,104,574
1993 $6,015,521 1993
$7,135,907
Based upon net assets of Putnam Tax-Free High Yield Fund as of
January 14, 1994 of $1,839,524,282 , the effective annual
management fee rate under the proposed fee schedule would be
.545% as compared to .468% under the existing
schedule. Also, based upon its internal cost allocations
described above, Putnam Management estimates that its after-tax
profit margin for managing that Fund in calendar 1993
would have been 44% under the proposed fee schedule.
Putnam Management estimates that its after-tax profit margin
for managing that Fund was 41% in calendar 1992 and 42% in
calendar 1993. These estimates are based on Putnam Management's
internal allocations, which it believes to be reasonable, of
costs related to services provided under its Management Contract
with each of the Putnam funds (excluding costs relating to
marketing of shares). Such allocations include consideration of
numbers of personnel, time spent, expenses and relative net
assets for each of the Putnam funds. Other allocation methods
might produce different results.
The Trustees believe that the proposed new management fee is
fair and reasonable and in the best interests of the shareholders
of Putnam Tax-Free High Yield Fund. Accordingly, the Trustees
recommend that the shareholders of that Fund vote
for approval of the proposed amendment to the Contract.
REQUIRED VOTE. Approval of the amendment to the
Management Contract will require the affirmative vote of a
"majority of the outstanding voting securities" of Putnam Tax-
Free High Yield Fund, which for this purpose means the
affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of that Fund or (2) 67% or more of the
shares present at the meeting if more than 50% of the outstanding
shares are present at the meeting in person or by proxy.
If the shareholders of Putnam Tax-Free High Yield
Fund do not approve the amendment to the Contract, the
existing Management Contract will continue in effect.
IV. MISCELLANEOUS
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 such proposals at the Meeting. Votes cast by proxy or
in person at the meeting will be counted by persons appointed by
the Trust as tellers for the Meeting.
The twelve nominees for election as Trustees at the Meeting
who receive the greatest number of votes properly cast for the
election of Trustees shall be elected Trustees. A majority of
the votes properly cast on the matter is necessary to ratify the
selection of independent auditors.
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. The tellers will
count 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) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a
quorum. 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 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 the
Trust 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 Trust 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 the solicitation of
proxies by mail, Trustees of the Trust and employees of Putnam
Management, Putnam Fiduciary Trust Company and Putnam Mutual
Funds may solicit proxies in person or by telephone. The Trust
may also arrange to have votes recorded by telephone. If this
procedure were subject to a successful legal challenge, such
votes would not be counted at the meeting. Persons holding
shares as nominees will upon request be reimbursed for their
reasonable expenses in sending soliciting material to their
principals. The Trust has retained at its expense Tritech
Services, Four Corporate Place, Corporate Park 287, Piscataway,
NJ, 08854 , to aid in the solicitation of nominee accounts for
a fee not to exceed $13,000 plus reasonable out-of-pocket
expenses.
DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS FOR SUBSEQUENT
MEETINGS OF SHAREHOLDERS. The Trust's Agreement and Declaration
of Trust does not provide for annual meetings of shareholders,
and the Trust does not currently intend to hold such a meeting in
1995. Shareholder proposals for inclusion in the proxy statement
for any subsequent meeting must be received by the Trust within a
reasonable period of time prior to any such 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 one or more 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 any of
such 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 such adjournment
those proxies which they are entitled to vote in favor of such
proposals. They will vote against any such adjournment those
proxies required to be voted against any of such proposals. The
Trust pays the costs of any additional solicitation and of any
adjourned session.
SCHEDULE A
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.45% of the first Putnam California Tax Exempt Money
$500 million of average Market Fund
net assets, 0.35% of the ($44,334,493)
next $500 million, 0.30%
of the next $500 million, Putnam New York Tax Exempt Money
and 0.25% of any excess Market Fund
over $1.5 billion ($52,623,258)
Putnam Tax Exempt Money Market Fund
($83,336,595)
- ----------------------------------------------------------------
0.50% of the first $100 Putnam Daily Dividend Trust
million of average net ($761,566,600)
assets, 0.40% of the next
$100 million, 0.35% of the
next $300 million, 0.325%
of the next $500 million,
and 0.30% of any excess
over $1.0 billion
- ----------------------------------------------------------------
0.50% of the first $100 Putnam Income Fund
million of average net ($947,247,333)
assets, 0.40% of the next
$100 million, and 0.35%
of any excess over $200
million
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.50% of the first Putnam Municipal Opportunities Trust
$500 million of average ($275,893,957)*+
net assets, 0.43% of the
next $500 million, 0.39% Putnam Investment Grade Intermediate
of the next $500 million, Municipal Trust+
and 0.35% of any excess ($47,974,242)
over $1.5 billion
*If dividends payable on the Preferred Shares during any dividend
period plus expenses attributable to the Preferred Shares for
that period exceed the gross income of the Trust during that
period attributable to the investment of the proceeds of the
Preferred Shares, then the fee payable to Putnam Management for
that period will be reduced by an amount equal to the product of
such excess and a fraction, the numerator of which shall be the
fee otherwise payable to Putnam Management pursuant to the
Management Contract and the denominator of which shall be the sum
of the fee otherwise payable to Putnam Management pursuant to the
Management Contract and the administrative service fee otherwise
payable to Putnam Management under the Administrative Services
Contract between the Trust and Putnam Management; provided,
however, that the amount of such reduction for any such dividend
period shall not exceed the amount determined by multiplying (i)
the aggregate liquidation preference of the average number of
shares of Preferred Shares outstanding during the dividend period
by (ii) the percentage of the aggregate net asset value of the
Trust which the fee payable to Putnam Management during such
dividend period pursuant to the Management Contract would
constitute without giving effect to such reduction.
+Under its Administrative Services Contract with Putnam
Management, the Trust will pay Putnam Management a quarterly fee
based on the Trust's average net asset value at the annual rate
of 0.20% of the first $500 million of average net assets, 0.17%
of the next $500 million, 0.16% of the next $500 million, and
0.15% of any excess over $1.5 billion.
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
Putnam Investment Grade Municipal
Trust III*+
($57,362,575)
- -----------------------------------------------------------------
0.55% of the first Putnam Managed High Yield Trust+
$500 million of average ($107,340,180)
net assets, 0.48% of the
next $500 million, 0.44%
of the next $500 million,
and 0.40% of any excess
over $1.5 billion
*If dividends payable on any Preferred Shares during any dividend
period plus expenses attributable to the Preferred Shares for
that period exceed the gross income of the Trust during that
period attributable to the investment of the proceeds of the
Preferred Shares, then the management fee payable to Putnam
Management for that period will be reduced by an amount equal to
the product of such excess and a fraction, the numerator of which
shall be the fee otherwise payable to Putnam Management pursuant
to the Management Contract and the denominator of which shall be
the sum of the fee otherwise payable to Putnam Management
pursuant to the Management Contract and the administrative
service fee otherwise payable to Putnam Management under the
Administrative Services Contract between the Trust and Putnam
Management; provided, however, that the amount of such reduction
for any such dividend period shall not exceed the amount
determined by multiplying (i) the aggregate liquidation
preference of the average number of Preferred Shares outstanding
during the dividend period, by (ii) the percentage of the
aggregate net asset value of the Trust which the fee payable to
Putnam Management during such dividend period pursuant to the
Management Contract would constitute without giving effect to
such reduction.
+Under its Administrative Services Contract with Putnam
Management, the Trust will pay Putnam Management a quarterly fee
based on the Trust's average net asset value at the annual rate
of 0.20% of the first $500 million of average net assets, 0.17%
of the next $500 million, 0.16% of the next $500 million, and
0.15% of any excess over $1.5 billion.
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.60% of average net Putnam Capital Manager Trust:
assets
PCM Global Growth Fund
($370,453,221)
PCM U.S. Government and High
Quality Bond Fund
($761,342,633)
PCM Utilities Growth and Income
Fund
($441,808,102)
- -----------------------------------------------------------------
0.60% of the first $1.0 Putnam Balanced Government Fund
billion, 0.50% of the ($118,253,105)
next $500 million, and
0.45% of any excess over
$1.5 billion
- -----------------------------------------------------------------
0.60% of the first $500 Putnam American Government Income
million of average net Fund
assets, 0.50% of the next ($3,184,041,953)
$1.0 billion, 0.45% of
the next $1.0 billion,
0.40% of the next $4.5
billion, 0.375% of the
next $2.5 billion, and
0.35% of any excess over
$9.5 billion
- -----------------------------------------------------------------
0.60% of the first $500 Putnam Adjustable Rate U.S.
million of average net Government Fund
assets, 0.50% of the ($219,920,741)
next $500 million, 0.45%
of the next $500 million, Putnam Arizona Tax Exempt Income Fund
and 0.40% of any excess ($164,602,160)
over $1.5 billion
Putnam California Tax Exempt Income
Fund
($3,928,161,474)
Putnam Florida Tax Exempt Income Fund
($337,785,119)
Putnam Massachusetts Tax Exempt
Income Fund II
($276,397,559)
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
Putnam Michigan Tax Exempt Income
Fund II
($138,268,735)
Putnam Minnesota Tax Exempt Income
Fund II
($102,450,381)
Putnam New Jersey Tax Exempt Income
Fund
($296,031,748)
Putnam New York Tax Exempt Income
Fund
($2,473,240,359)
Putnam Ohio Tax Exempt Income Fund II
($212,261,241)
Putnam Pennsylvania Tax Exempt Income
Fund
($182,372,738)
Putnam Tax Exempt Income Fund
($2,633,898,870)
Putnam Tax-Free Income Trust:
Putnam Tax-Free Insured Fund
($607,104,976)
Putnam Texas Tax Exempt Income Fund
($18,304,313)
Putnam U.S. Government Income Trust
($6,673,258,745)
- -----------------------------------------------------------------
0.60% of the first $100 The George Putnam Fund of Boston
million of average net ($963,846,570)
assets, 0.50% of the next
$100 million, 0.40% of the
next $300 million, 0.325%
of the next $500 million,
and 0.30% of any excess
over $1.0 billion
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.65% of the first $500 Putnam Capital Appreciation Fund
million of average net ($2,637,582)
assets, 0.55% of the next
$500 million, 0.50% of the Putnam Capital Growth and Income Fund
next $500 million, and ($2,307,508)
0.45% of any excess over
$1.5 billion Putnam Corporate Asset Trust
($141,784,710)
Putnam Dividend Growth Fund
($56,727,952)
The Putnam Fund for Growth and Income
($7,629,373,662)
Putnam Growth Fund
($2,925,482)
Putnam Investors Fund
($857,844,481)
Putnam Managed Income Trust
($529,986,688)
Putnam Municipal Income Fund
($1,234,588,229)
Putnam New York Tax Exempt
Opportunities Fund
($179,803,733)
Putnam Research Analysts Fund
($3,565,415)
Putnam Vista Fund
($609,519,619)
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.70% of average net Putnam High Yield Municipal Trust*
assets ($248,434,940)
Putnam Investment Grade Municipal
Trust**
($405,392,830)
Putnam Tax-Free Health Care Fund
($208,001,605)
*If dividends payable on the Trust's Preferred Shares during any
dividend payment period plus expenses attributable to the
Preferred Shares for that period exceed the portion of the
Trust's net income attributable to the liquidation value of the
Preferred Shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount
of the excess (but not more than an amount equal to 0.70% of the
liquidation preference of the Preferred Shares outstanding during
the period).
**If dividends payable on the Trust's Preferred Shares during any
dividend period plus expenses attributable to the Preferred
Shares for that period exceed the portion of the Trust's net
income and net short-term capital gains (but not long-term
capital gains) attributable to the investment of the proceeds of
the Preferred Shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount
of the excess (but not more than an amount equal to 0.70% of the
liquidation preference of the Preferred Shares outstanding during
the period).
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.70% of the first $500 Putnam Asset Allocation Funds
million of average net ($100,000)
assets, 0.60% of the next
$500 million. 0.55% of the Putnam California Investment Grade
next $500 million, and Municipal Trust*
0.50% of any excess over ($88,923,244)
$1.5 billion
Putnam Diversified Income Trust
($2,297,489,552)
Putnam Energy-Resources Trust
($120,368,665)
Putnam Health Sciences Trust
($836,384,010)
Putnam High Yield Trust
($3,767,606,142)
Putnam Investment Grade Municipal
Trust II*
($271,330,779)
Putnam Managed Municipal Income
Trust**
($648,010,653)
Putnam New Opportunities Fund
($711,022,663)
*If dividends payable on the Trust's Remarketed Preferred Shares
during any dividend payment period plus any expenses attributable
to the Remarketed Preferred Shares for that period exceed the
Trust's net income attributable to the liquidation value of the
Remarketed Preferred Shares during that period, then the fee
payable to Putnam Management for that period will be reduced by
the amount of the excess, but not more than .70% (or such lower
percentage as reflects the applicable reduction in the management
fee if the net asset value of the Trust exceeds $500 million) of
the liquidation preference of the Remarketed Preferred Shares
outstanding during the period.
**If dividends payable on the Trust's Preferred Shares during any
dividend period plus expenses attributable to the Preferred
Shares for that period exceed the portion of the Trust's net
income and net short-term capital gains (but not long-term
capital gains) attributable to the investment of the proceeds of
the Preferred Shares during that period, then the fee payable to
Putnam Management for that period will be reduced by the amount
of the excess (but not more than an amount equal to 0.70% of the
liquidation preference of the Preferred Shares outstanding during
the period).
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
Putnam New York Investment Grade
Municipal Trust*
($52,308,034)
Putnam OTC Emerging Growth Fund
($441,207,585)
Putnam Utilities Growth and Income
Fund
($1,218,903,641)
Putnam Voyager Fund
($3,582,267,828)
- -----------------------------------------------------------------
0.75% of the first $500 Putnam Dividend Income Fund**
million of average net ($179,328,916)
assets, 0.65% of the next
$500 million, 0.60% of the Putnam High Income Convertible and
next $500 million, and Bond Fund
0.55% of any excess over ($127,243,750)
$1.5 billion
*If dividends payable on the Trust's Preferred Shares during any
dividend payment period plus any expenses attributable to the
Preferred Shares for that period exceed the Trust's net income
attributable to the liquidation value of the Preferred Shares
during that period, then the fee payable to Putnam Management for
that period will be reduced by the amount of the excess, but not
more than .70% (or such lower percentage as reflects the
applicable reduction in the management fee if the net asset value
of the Trust exceeds $500 million) of the liquidation preference
of the Preferred Shares outstanding during that period.
**If dividends payable on the Fund's Preferred Shares during any
dividend payment period plus any expenses attributable to the
Preferred Shares for that period, as determined by the Trustees,
exceed the portion of the Fund's net income and net short-term
capital gains (but not long-term capital gains) attributable to
the proceeds of the Preferred Shares during that period, then the
fee payable to Putnam Management for that period will be reduced
by the amount of the excess (but not more than the fee that
otherwise would have been payable to Putnam Management for such
period attributable to the aggregate liquidation preference of
the Preferred Shares outstanding during the period).
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
Putnam Intermediate Government Income
Trust
($585,326,488)
Putnam Master Income Trust
($512,377,793)
Putnam Master Intermediate Income
Trust
($351,066,553)
Putnam Premier Income Trust
($1,274,359,881)
- -----------------------------------------------------------------
0.75% of the first $100 Putnam Federal Income Trust
million of average net ($575,984,754)
assets, 0.65% of the next
$100 million, 0.55% of the
next $300 million, 0.45% of
the next $500 million, and
0.40% of any excess over
$1.0 billion
- -----------------------------------------------------------------
0.75% of the first $100 Putnam Equity Income Fund
million of average net ($350,285,532)
assets, 0.65% of the next
$100 million, 0.55% of
the next $300 million,
0.50% of the next $1.0
billion, 0.45% of the
next $1.0 billion, and
0.40% of any excess over
$2.5 billion
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.80% of the first $500 Putnam Asia Pacific Growth Fund
million of average net ($125,677,134)
assets, 0.70% of the next
$500 million, 0.65% of the Putnam Europe Growth Fund
next $500 million, and ($40,143,627)
0.60% of any excess over
$1.5 billion Putnam Global Governmental Income
Trust
($581,213,035)
Putnam Global Growth Fund
($1,454,942,793)
Putnam Overseas Growth Fund
($4,324,287)
- -----------------------------------------------------------------
0.70% of the first $100 Putnam Convertible Income-Growth
million of average net Trust
assets, 0.60% of the next ($723,370,814)
$100 million, 0.50% of the
next $300 million, 0.45% Putnam Tax-Free Income Trust:
of the next $500 million, Putnam Tax-Free High Yield Fund
and 0.425% of any excess ($1,839,524,282)
over $1.0 billion
Proposed to be changed to
0.65% of the first $500
million of average net
assets, 0.55% of the next
$500 million, 0.50% of the
next $500 million, and 0.45%
of any excess over $1.5 billion
- -----------------------------------------------------------------
0.70% of the first $100 Putnam High Yield Advantage Fund
million of average net ($777,018,178)
assets, 0.60% of the next
$100 million, 0.50% of the
next $300 million, 0.45%
of the next $500 million,
and 0.425% of any excess
over $1.0 billion
Proposed to be changed to
0.70% of the first $500
million of average net
assets, 0.60% of the next
$500 million, 0.55% of the
next $500 million, and 0.50%
of any excess over $1.5 billion
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.60% of average net Putnam Capital Manager Trust:
assets
PCM Diversified Income Fund
Proposed to be changed to ($90,975,973)
0.70% of the first $500
million of average net PCM Global Asset Allocation Fund
assets, 0.60% of the next ($307,014,463)
$500 million, 0.55% of the
next $500 million, and PCM High Yield Fund
0.50% of any excess over ($303,940,888)
$1.5 billion
PCM Voyager Fund
($688,872,095)
- -----------------------------------------------------------------
0.60% of average net Putnam Capital Manager Trust:
assets
PCM Growth and Income Fund
Proposed to be changed to ($1,447,672,413)
0.65% of the first $500
million of average net
assets, 0.55% of the next
$500 million, 0.50% of the
next $500 million, and 0.45%
of any excess over $1.5
billion
- -----------------------------------------------------------------
0.35% of average net Putnam Capital Manager Trust:
assets
PCM Money Market Fund
Proposed to be changed to ($128,062,886)
0.45% of the first $500
million of average net
assets, 0.35% of the next
$500 million, 0.30% of the
next $500 million, and 0.25%
of any excess over $1.5
billion
- ----------------------------------------------------------------
0.635% of average net Nomura Dividend Income Fund, Inc.
assets ($75,028,027)
NAME OF FUND
MANAGEMENT FEE RATE (NET ASSETS AS OF JANUARY 14, 1994)
0.75% of the first $200 Lincoln National Putnam Master
million of average net Fund, Inc.*
assets, 0.70% of the next ($158,623,774)
$200 million, and 0.68%
of any excess over $400
million
- -----------------------------------------------------------------
0.50% of average net CIGNA Annuity Equity Fund
assets ($32,863,516)
CIGNA Annuity Growth and Income Fund
($6,512,311)
CIGNA Annuity Aggressive Equity Fund
($2,661,742)
- -----------------------------------------------------------------
FUNDS IN REGISTRATION OR IN INITIAL PUBLIC OFFERING AS OF JANUARY
14, 1994:
Putnam Qualified Dividend Income Fund
($0)
*Management fee paid by the Fund to its investment advisor.
Putnam Management, as subadviser, receives annually from the
investment advisor the greater of (a) $40,000 or (b) 0.47% of the
first $200 million of average net assets, 0.42% of the next $200
million, and 0.40% of any excess over $400 million.
GENERAL. Except for fees paid by Putnam OTC Emerging
Growth Fund and Putnam Tax-Free Income Trust, all of the above
fees are payable quarterly, based on the average net assets of
the fund as determined at the close of each business day (or for
Putnam Intermediate Government Income Trust, Putnam High Yield
Municipal Trust, Putnam Investment Grade Municipal Trust, Putnam
Managed Municipal Income Trust, Putnam Investment Grade
Intermediate Municipal Trust, Putnam High Income Convertible and
Bond Fund, Putnam Managed High Yield Trust, Putnam Master Income
Trust, Putnam Master Intermediate Income Trust, Putnam Premier
Income Trust, Putnam Dividend Income Fund, Putnam Tax-Free Health
Care Fund, Putnam Investment Grade Municipal Trust II, Putnam
Investment Grade Municipal Trust III, Putnam California
Investment Grade Municipal Trust, Putnam Municipal Opportunities
Trust, Putnam New York Investment Grade Municipal Trust, and
Nomura Dividend Income Fund, Inc., at the close of each business
week) during the quarter, at the annual rates shown. For Putnam
OTC Emerging Growth Fund and Putnam Tax-Free Income Trust, fees
are payable monthly at the end of each month, based on valuations
during the month. For the Putnam funds, such fees are in
addition to the compensation of Trustees and certain officers and
other expenses borne by each fund, as described in the Proxy
Statement under "The Management Contract."
Except for fees paid by Nomura Dividend Income Fund,
Inc., the compensation payable to Putnam Management is subject to
reduction or reimbursement to the extent that expenses of a fund
in any fiscal year exceed the limits on investment company
expenses imposed by any statute or regulatory authority in any
jurisdiction where shares of the fund are qualified for offer and
sale. The term "expenses" is defined in the statutes and
regulations of such jurisdictions and, generally speaking,
excludes brokerage commissions, taxes, interest and extraordinary
expenses. The only limitation in effect as of the date of this
Proxy Statement is 2.5% of the first $30 million of average net
assets, 2% of the next $70 million and 1.5% of the remaining
average net assets. The fee payable to Putnam Management is also
subject to reduction by the amount of certain possible
commissions, fees, brokerage or similar payments received by
Putnam Mutual Funds, less expenses approved by the Trustees of
the fund in respect of purchases and sales of fund portfolio
investments.
ADDITIONAL REDUCTIONS APPLICABLE TO CERTAIN FUNDS. In
the case of certain funds, the Management Contracts provide that
Putnam Management's compensation shall be reduced to the extent
that annual expenses of the fund exceed any expense limitation
which Putnam Management may, by written notice to the fund,
declare to be effective. Currently, Putnam Management has
assumed the following expense limitations:
0.90% of average daily net assets for the following fund:
Putnam Texas Tax Exempt Income Fund
1.00% of average daily net assets for the following funds:
Putnam Asset Allocation Funds
Putnam Growth Fund
Putnam Capital Appreciation Fund
Putnam Capital Growth and Income Fund
CIGNA Annuity Equity Fund
CIGNA Annuity Growth and Income Fund
CIGNA Annuity Aggressive Equity Fund
1.20% of average daily net assets for the following fund:
Putnam Capital Manager Trust:
PCM Diversified Income Fund
1.50% of average daily net assets for the following fund:
Putnam Research Analysts Fund
and 1.90% of average daily net assets for the following fund:
Putnam Overseas Growth Fund
Expenses subject to the foregoing limitations are
generally exclusive of brokerage commissions, interest, taxes,
deferred organizational and extraordinary expenses, if any, and
expenses incurred pursuant to Distribution Plan(s), if any, under
SEC Rule 12b-1.
H:\shared\proxy\working\swing294
EXHIBIT A
PUTNAM INVESTMENT MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1993
ASSETS:
Cash $ 300
Investments (note 2) 50,000
Investment management fees receivable 60,817,927
Accounts receivable from affiliates (note 6) 1,819,578
Prepaid expenses and other assets 2,759,786
Property and equipment - net (notes 2 & 3) 5,105,571
------------
TOTAL ASSETS $70,553,162
============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable and accrued
expenses (note 5) $ 20,704,486
Accounts payable to affiliate 916
------------
TOTAL LIABILITIES 20,705,402
------------
STOCKHOLDER'S EQUITY:
Common stock - $1 par value; authorized
and outstanding, 1,000 shares 1,000
Paid-in surplus 4,696,665
Retained earnings 45,150,095
------------
TOTAL STOCKHOLDER'S EQUITY 49,847,760
------------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $70,553,162
============
See notes to balance sheet.
PUTNAM INVESTMENT MANAGEMENT, INC.
NOTES TO BALANCE SHEET
1. CORPORATE AFFILIATION
Putnam Investment Management, Inc. (the Company) is a
wholly-owned subsidiary of Putnam Investments, Inc., (the
Parent), which is a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc. (MMC).
The Company's primary business is to provide investment
advisory services to Putnam-sponsored mutual funds. In
connection with providing these services, the Company
receives a management fee which is based upon the average
net asset value of the respective fund to which the services
are provided.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Investments consist of time deposits held by an affiliate.
Investments are recorded at the lower of cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Office and
data processing equipment are depreciated using the straight-line
method over their estimated useful lives of four to ten years.
Leasehold improvements are amortized using the straight-line
method over ten years or the period covered by the lease,
whichever is less. Additions, renewals and betterments of
property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to income when incurred.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Office and data processing equipment $ 3,610,612
Less accumulated depreciation (2,244,442)
------------
1,366,170
------------
Leasehold improvements 6,051,063
Less accumulated amortization (2,311,662)
------------
3,739,401
------------
Property and equipment - net $ 5,105,571
============
4. INCOME TAXES
In accordance with the provisions of STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 109 - ACCOUNTING FOR
INCOME TAXES, the Company records a current liability or
asset for the estimated taxes payable or refundable on tax
returns for the current year and a deferred tax liability or
asset for the estimated future tax effects attributable to
temporary differences.
The Company, through MMC, files its federal tax return
as a member of a consolidated group. The Parent allocates
its current and deferred tax provision or benefit to the
Company in a manner which is representative of how the
Company would compute its provision as a separate entity.
Under an agreement with the Parent, the Company pays
the Parent each month for the amount of its net current and
deferred tax provision. If the Company has a net tax
benefit, the Parent pays the Company that amount. The
Parent then assumes responsibility for the payment of all
taxes in accordance with federal, state and local laws. As
a result of this agreement, the Company has no current or
deferred tax liability or asset reflected in its balance
sheet at December 31, 1993.
5. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company, the Parent and affiliates sponsor a
profit-sharing plan (the Plan) covering substantially all
employees, providing for annual contributions as determined
by the Board of Directors. Contributions payable to the
Plan at December 31, 1993 were $557,000.
RETIREE HEALTH CARE PLAN
MMC provides a health care plan which covers all
eligible retirees of the Company and its affiliates. The
Parent subsidizes a portion of the cost of the plan. The
Parent allocates its cost of the plan to the Company and its
affiliates in a manner which management believes reflects
the actual cost of the plan on an accrual basis.
6. RELATED PARTY TRANSACTIONS
The Company shares office facilities and personnel with
other wholly-owned subsidiaries of the Parent. Accordingly,
the related costs of such arrangements have been allocated
among the various subsidiaries in a manner which management
believes is representative of the actual costs incurred.
Accounts receivable from affiliates primarily
represents advances made to the Parent in connection with the
Parent's cash management policy.
In 1993 the Company paid a dividend of $100,000,000 to
the Parent.
INDEPENDENT AUDITORS' REPORT
Putnam Investment Management, Inc.
We have audited the accompanying balance sheet of Putnam
Investment Management, Inc. (a wholly-owned subsidiary of Putnam
Investments, Inc.) as of December 31, 1993. This financial
statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the balance sheet is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the
balance sheet provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all
material respects, the financial position of Putnam Investment
Management, Inc. at December 31, 1993 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE
February 10, 1994
Boston, Massachusetts
EXHIBIT B
PUTNAM TAX-FREE INCOME TRUST
MANAGEMENT CONTRACT
Additions are indicated by (( )); deletions by // //
Management Contract dated as of July 26, 1985, as amended
//December 21, 1988, and as further amended July 11, 1991// ((AND
RESTATED AS OF MAY , 1994)), between PUTNAM TAX-FREE INCOME
TRUST, a Massachusetts business trust (the "Fund"), and //THE
PUTNAM MANAGEMENT COMPANY, INC.// ((PUTNAM INVESTMENT MANAGEMENT,
INC.)), a Delaware corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an investment program for the Fund, will determine what
investments shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Fund and its stated investment objectives, policies and
restrictions, and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies
which the Trustees may from time to time determine and shall
exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the Fund's
net asset value, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for the
Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Manager, bearing in
mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the
Trustees of the Fund may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for (i) the
compensation of the Vice Chairman and Treasurer of the Fund and
of persons assisting him in these offices, as determined from
time to time by the Trustees of the Fund, (ii) the compensation
in whole or in part of such other officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the Fund, and (iii) the cost of suitable office
space, utilities, support services and equipment of the Vice
Chairman and Treasurer and persons assisting him and, as
determined from time to time by the Trustees of the Fund, all or
a part of such cost attributable to the other officers and
persons assisting them whose compensation is paid in whole or in
part by the Fund. The Fund will pay the fees, if any, of the
Trustees of the Fund.
(e) The Manager shall pay all expenses incurred in
connection with the organization of the Fund and the initial
public offering and sale of its shares of beneficial interest,
provided that upon the issuance and sale of such shares to the
public pursuant to the offering, and only in such event, the Fund
shall become liable for, and to the extent requested reimburse
the Manager for, registration fees payable to the Securities and
Exchange Commission and for an additional amount not exceeding
$62,500 per series of the Fund as its agreed share of such
expenses.
(f) The Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Manager pursuant
to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Fund may be a shareholder,
director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common
control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have
an interest in the Fund. It is also understood that the Manager
and any person controlled by or under common control with the
Manager have and may have advisory, management, service or other
contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and paid monthly
at the following annual rates applicable to the average net asset
value of each series of the Fund (a "Series"): Putnam Tax-Free
Insured Fund - 0.60% of the first $500 million, 0.50% of the next
$500 million; 0.45% of the next $500 million and 0.40% of any
excess; Putnam Tax-Free High Yield Fund - //.7% of the first $100
million, .6% of the next $100 million, .5% of the next $300
million, .45% of the next $500 million and .425% of any excess//
((0.65% OF THE FIRST $500 MILLION, 0.55% OF THE NEXT $500
MILLION, 0.50% OF THE NEXT $500 MILLION AND 0.45% OF ANY EXCESS
OVER $1.5 BILLION)). Such fee computed with respect to the net
asset value of each of the Series shall be paid from the assets
of such Series. Such average net asset value of each Series
shall be determined by taking an average of all of the
determinations of such net asset value during such month at the
close of business on each business day during such month while
this Contract is in effect. Such fee shall be payable for each
month within 15 days after the close of such month and shall
commence accruing as of the date of the initial issuance of
shares of the Fund to the public.
The fees payable to the Manager pursuant to this Section 3
shall be reduced by any commissions, fees, brokerage or similar
payments received by the Manager or any affiliated person of the
Manager in connection with the purchase and sale of portfolio
investments of the particular Series, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund or of any Series, if
applicable, for any fiscal year should exceed the expense
limitation on investment company expenses imposed by any statute
or regulatory authority of any jurisdiction in which shares of
the Fund are qualified for offer or sale, the compensation due
the Manager for such fiscal year shall be reduced by the amount
of excess by a reduction or refund thereof. In the event that
the expenses of any Series exceed any expense limitation which
the Manager may, by written notice to the Fund, voluntarily
declare to be effective subject to such terms and conditions as
the Manager may prescribe in such notice, the compensation due
the Manager shall be reduced, and, if necessary, the Manager
shall assume expenses of the Series to the extent required by the
terms and conditions of such expense limitation.
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment; and this
Contract shall not be amended as to any Series unless such
amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Series, and by the
vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the Trustees of the
Fund who are not interested persons of the Fund or of the
Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect as to each Series
continuously thereafter (unless terminated automatically as set
forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract as to any Series or as to the Fund as a whole by not
more than sixty days' nor less than thirty days' written notice
delivered or mailed by registered mail, postage prepaid, to the
other party, or
(b) If (i) the Trustees of the Fund or the shareholders by
the affirmative vote of a majority of the outstanding shares of
the Series and (ii) a majority of the Trustees of the Fund who
are not interested persons of the Fund or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the
continuance of this Contract, then this Contract shall
automatically terminate as to Putnam Tax-Free High Yield Fund at
the close of business on January 31, //1990// ((1996)) and as to
Putnam Tax-Free Insured Fund at the close of business on January
31, 1993, or the expiration of one year from the effective date
of the last such continuance, whichever is later; provided,
however, that if the continuance of this Contract is submitted to
the shareholders of a Series for their approval and such
shareholders fail to approve such continuance as provided herein,
the Manager may continue to serve hereunder in a manner
consistent with the Investment Company Act of 1940 and the Rules
and Regulations thereunder.
Action by the Fund under (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the one or more
Series affected.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares of the Fund or the Series"
means the affirmative vote, at a duly called and held meeting of
shareholders of the Fund or the Series, as the case may be, (a)
of the holders of 67% or more of the shares of the Fund or the
Series, as the case may be, present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50%
of the outstanding shares of the Fund or the Series, as the case
may be, entitled to vote at such meeting are present in person or
by proxy, or (b) of the holders of more than 50% of the
outstanding shares of the Fund or the Series, as the case may be,
entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment Company
Act of 1940 and the Rules and Regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities
and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules
and Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Fund.
IN WITNESS WHEREOF, PUTNAM TAX-FREE INCOME TRUST and //THE
PUTNAM MANAGEMENT COMPANY, INC.// ((PUTNAM INVESTMENT MANAGEMENT,
INC.)) have each caused this instrument to be signed in duplicate
in its behalf by its President or a Vice President thereunto duly
authorized, all as of the day and year first above written.
PUTNAM TAX-FREE INCOME TRUST
By: ---------------------------
//THE PUTNAM MANAGEMENT COMPANY, INC.//
((PUTNAM INVESTMENT MANAGEMENT, INC.))
By: ---------------------------
PUTNAM TAX-FREE INCOME TRUST PROXY BALLOT
PUTNAM TAX-FREE HIGH YIELD FUND
PROXY FOR THE MEETING OF
SHAREHOLDERS, MAY 5, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE FUND.
The undersigned hereby appoints George Putnam, Hans H. Estin and
William F. Pounds, 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 Tax-Free Income Trust on May 5, 1994, at 1:00 p.m.,
Boston time, and at any adjournments thereof, all of the shares
of the Fund which the undersigned would be entitled to vote if
personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR ELECTING TRUSTEES AS SET
FORTH IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3. IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears on this card. All
joint owners should sign. When signing as executor,
administrator, attorney, trustee or guardian or as
custodian for a minor, please give full title as such. If
a corporation, please sign in full corporate name and
indicate the signer's office. If a partner, sign in the
partnership name.
Please fold at perforation before detaching
- ------------------------------------------------------------------------------------------------------------------------
----
Please mark your choices / X / in blue or black ink.
----
(Control #)
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES FOR TRUSTEES AND FOR THE PROPOSALS LISTED BELOW.
1. ELECTION OF TRUSTEES: NOMINEES: PROPOSAL TO: FOR AGAINST ABSTAIN
---- FOR electing all the J. A. Baxter 2.RATIFY THE SELECTION ----
/ / nominees H. H. Estin OF PRICE WATERHOUSE / /
---- (EXCEPT AS MARKED TO J. A. Hill AS AUDITORS. ----
- ----
THE CONTRARY BELOW). E. T. Kennan
L. J. Lasser 3. APPROVE A NEW MANAGEMENT CONTRACT ---- ----
----
R. E. Patterson INCREASING THE MANAGEMENT FEES / / /
/ / /
D. S. Perkins PAYABLE TO PUTNAM INVESTMENT ---- ---- ----
W. F. Pounds MANAGEMENT, INC.
---- WITHHOLD authority G. Putnam
/ / to vote for all G. Putnam, III
---- nominees. A.J. C. Smith
W. N. Thorndike
TO WITHHOLD AUTHORITY TO
VOTE FOR AN INDIVIDUAL
NOMINEE, WRITE THAT
NOMINEE'S NAME BELOW.
--------------------------
--------------------------
Please be sure to sign and date this Proxy. (Account #) (Shares #)
............................./ .......................... Date .......... (Name & Address)
Shareholder sign here Co-owner sign here
Please fold at perforation before detaching
/TABLE
(Detachable attachment to proxy card; Page 3 is on the same side as page 1;
and Page 4 is on the reverse side, i.e., the same side as Page 2.)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Putnam Logo)
CHANGE OF ADDRESS NOTIFICATION. Please use this form to inform 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 executed Proxy in the
enclosed envelope.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
....................................................... .......................................................
....................................................... .......................................................
Telephone ............................................. ......................................................
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Dear Shareholder: (Name and Address)
YOUR VOTE IS IMPORTANT. Please help us to eliminate the
expense of follow-up mailings by executing and returning
this Proxy as soon as possible. A postage-paid
business reply envelope is enclosed for your convenience.
Thank you! (Account #)
PRELIMINARY COPY FOR THE INFORMATION OF
THE SECURITIES AND EXCHANGE COMMISSION ONLY
PUTNAM TAX-FREE INCOME TRUST PROXY BALLOT
PUTNAM TAX-FREE INSURED FUND
PROXY FOR THE MEETING OF
SHAREHOLDERS, MAY 5, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE FUND.
The undersigned hereby appoints George Putnam, Hans H. Estin and
William F. Pounds, 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 Tax-Free Income Trust on May 5, 1994, at 1:00 p.m.,
Boston time, and at any adjournments thereof, all of the shares
of the Fund which the undersigned would be entitled to vote if
personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR ELECTING TRUSTEES AS SET
FORTH IN PROPOSAL 1 AND FOR PROPOSAL 2. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears on this card. All
joint owners should sign. When signing as executor,
administrator, attorney, trustee or guardian or as
custodian for a minor, please give full title as such. If
a corporation, please sign in full corporate name and
indicate the signer's office. If a partner, sign in the
partnership name.
Please fold at perforation before detaching
- ------------------------------------------------------------------------------------------------------------------------
----
Please mark your choices / X / in blue or black ink.
----
(Control #)
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES FOR TRUSTEES AND FOR THE PROPOSAL LISTED BELOW.
1. ELECTION OF TRUSTEES: NOMINEES: PROPOSAL TO: FOR AGAINST ABSTAIN
---- FOR electing all the J. A. Baxter 2.RATIFY THE SELECTION ----
/ / nominees H. H. Estin OF PRICE WATERHOUSE / /
---- (EXCEPT AS MARKED TO J. A. Hill AS AUDITORS. ----
- ----
THE CONTRARY BELOW). E. T. Kennan
L. J. Lasser
R. E. Patterson
D. S. Perkins
W. F. Pounds
---- WITHHOLD authority G. Putnam
/ / to vote for all G. Putnam, III
---- nominees. A.J.C. Smith
W. N. Thorndike
TO WITHHOLD AUTHORITY TO
VOTE FOR AN INDIVIDUAL
NOMINEE, WRITE THAT
NOMINEE'S NAME BELOW.
--------------------------
--------------------------
Please be sure to sign and date this Proxy. (Account #) (Shares #)
............................./ .......................... Date .......... (Name & Address)
Shareholder sign here Co-owner sign here
Please fold at perforation before detaching
/TABLE
(Detachable attachment to proxy card; Page 3 is on the same side as page 1;
and Page 4 is on the reverse side, i.e., the same side as Page 2.)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Putnam Logo)
CHANGE OF ADDRESS NOTIFICATION. Please use this form to inform 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 executed Proxy in the
enclosed envelope.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
....................................................... .......................................................
....................................................... .......................................................
Telephone ............................................. ......................................................
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Dear Shareholder: (Name and Address)
YOUR VOTE IS IMPORTANT. Please help us to eliminate the
expense of follow-up mailings by executing and returning
this Proxy as soon as possible. A postage-paid
business reply envelope is enclosed for your convenience.
Thank you! (Account #)