VOTE BY PHONE CONFIRMATION LETTER
(WRITTEN)
VOTE CONFIRMATION
(Shareholder name & address of record)
PUTNAM ADJUSTABLE RATE U.S. GOVERNMENT FUND
Meeting of Shareholders October 3, 1996
Account:
Shares:
Votes Received: (list proposal as on proxy card)
(FOR) (AGAINST) (ABSTAIN)
Dear Shareholder:
In connection with the above-referenced Meeting of Shareholders,
this notice will confirm that your shares have been voted as
indicated above in accordance with your telephone instructions.
If any of the information is incorrect, please call 1-800-735-
3428 immediately, and in any event no later than 5:00 P.M.
Eastern Daylight Time, on October 2, 1996.
Thank you for your cooperation.
Very truly yours,
(Solicitation Agent)
Vote-By-Phone Solicitation Script for
Putnam Adjustable Rate U.S. Government Fund
This script provides information to the shareholder and solicits
their vote by phone, to be confirmed by written confirmation.
Good Morning/Afternoon/Evening. May I please speak with (name of
shareholder)?
I am representing Putnam Investments in Boston. I am calling in
connection with the upcoming shareholder meeting for Putnam
Adjustable Rate U.S. Government Fund for which you recently
received a combined prospectus/proxy statement requesting your
vote.
To verify that I am speaking with the shareholder of record, may
I confirm that you are (name of shareholder of record) and that
your address of record is (address of record)?
(If the person is unwilling to confirm this information, thank
them for their time and terminate the call.)
We noted that we have not yet received your proxy card. Do you
have any questions regarding the proposal being presented at the
meeting that I can clarify for you?
(If there are questions regarding the proposal, please refer to
the Q & A attached.)
Would you like to vote by telephone?
(If not, ask the shareholder if they would like another proxy
card, thank them for their time and terminate the call. If so,
proceed as follows:)
We previously sent you a letter describing our procedures for
voting your shares by telephone.
I will now paraphrase the proxy card so that you can provide us
with your voting instructions. The proxy card generally states
the following:
By authorizing your shares to be voted at the meeting you are
approving George Putnam, Hans H. Estin, and Robert E. Patterson,
and each of them separately, as proxies, with power of
substitution, and authorizing them to represent and vote your
shares, at the meeting of shareholders of Putnam Adjustable Rate
U.S. Government Fund, on October 3, 1996, at 2:00 p.m., Boston
time, and at any adjournments thereof.
When properly authorized, this proxy will be voted in the manner
directed by the shareholder. In their discretion, the proxies
are authorized to vote upon such other matters as may properly
come before the meeting.
The proxy card requests your vote on the following proposal, for
which the Trustees are recommending a vote in favor. That
proposal is to:
Approve an Agreement and Plan of Reorganization providing
for the transfer of all of the assets of Putnam Adjustable
Rate U.S. Government Fund (which we'll call the "Adjustable
Rate Fund") to Putnam Intermediate U.S. Government Income
Fund (which we'll call the "Intermediate Fund") in exchange
for shares of the Intermediate Fund and the assumption by
the Intermediate Fund of all of the liabilities of the
Adjustable Rate Fund, and the distribution of such shares to
the shareholders of the Adjustable Rate Fund in complete
liquidation of the Adjustable Rate Fund.
How would you like to vote on this proposal?
Would you like to vote for the proposal, against the
proposal, or would you like to abstain from voting on
this proposal?
Thank you.
I will now repeat your instructions:
You voted: (For, Against, Abstained from) the proposal to
approve the Agreement and Plan of Reorganization.
Is this correct?
Thank you. We will be sending you a written confirmation of your
vote. Please call us if the information on the confirmation is
incorrect.
Q&A for Putnam Adjustable Rate U.S. Government Fund
On approximately August 19, 1996, a combined prospectus/proxy
statement was sent to shareholders of Putnam Adjustable Rate U.S.
Government Fund. Listed below are answers to the questions and
concerns shareholders are likely to have regarding the merger
proposal for this fund, followed by answers and information
regarding each issue.
1. What is being proposed?
The Trustees of the Funds are recommending that shareholders
approve the merger of Putnam Adjustable Rate U.S. Government Fund
into the Putnam Intermediate U.S. Government Income Fund. The
merger is proposed to be accomplished pursuant to an Agreement
and Plan of Reorganization providing for the transfer of all of
the assets of the Putnam Adjustable Rate U.S. Government Fund to
the Putnam Intermediate U.S. Government Income Fund in exchange
for shares of the Putnam Intermediate U.S. Government Income Fund
and for the assumption by the Putnam Intermediate U.S. Government
Income Fund of all of the liabilities of the Putnam Adjustable
Rate U.S. Government Fund. The completion of these transactions,
followed by the distribution of the Putnam Intermediate U.S.
Government Income Fund shares received by the Putnam Adjustable
Rate U.S. Government Fund to its shareholders, will result in the
complete liquidation of the Putnam Adjustable Rate U.S.
Government Fund.
2. What will happen to my shares of Putnam Adjustable Rate U.S.
Government Fund?
If the merger is approved, your shares will, in effect, be
exchanged on a tax-free basis for shares of the Putnam
Intermediate U.S. Government Income Fund with an equal aggregate
net asset value on the date of the merger.
3. When would the merger occur?
If approved by the shareholders at their October 3, 1996 meeting,
it is expected that the merger would occur as soon as possible
after that time.
4. Why are the Trustees proposing the merger?
The Trustees of Putnam Adjustable Rate U.S. Government Fund
recommend approval of the merger because the merger offers
shareholders of Putnam Adjustable Rate U.S. Government Fund the
opportunity to pursue a similar investment objective in a fund
that has greater investment flexibility and that Putnam
Investment Management, Inc., believes has greater potential, over
the long term, to become significantly larger and to achieve
possible economies of scale and lower expenses.
5. How do the investment objectives, policies and restrictions
of the two funds compare?
While the merger would combine two funds with very similar
overall investment strategies, Putnam Intermediate U.S.
Government Income Fund can be expected to have a higher portfolio
dollar-weighted average maturity and duration. Both funds seek
as high a level of current income as Putnam Investment
Management, Inc., believes is consistent with the preservation of
capital. The combined prospectus/proxy statement contains a
detailed comparison of the investment policies and risks
associated with investments in Putnam Intermediate U.S.
Government Income Fund.
6. How do the risks of investing in the funds compare?
Because the Funds share similar investment objectives and
policies, the risks of an investment in the Putnam Intermediate
U.S. Government Income Fund are similar to the risks of an
investment in the Putnam Adjustable Rate U.S. Government Fund,
except for the risks associated with investments by the Putnam
Intermediate U.S. Government Income Fund in a portfolio of
potentially longer-term securities, including possible increased
sensitivity to changes in interest rates. A more detailed
description of certain risks associated with an investment in the
Putnam Intermediate U.S. Government Income Fund is contained in
the Putnam Intermediate U.S. Government Income Fund Prospectus.
7. How do the fees and expenses of the two funds compare, and
what are they estimated to be following the merger?
The Funds currently have nearly identical management fees and
"other expenses." On assets in excess of $500 million, however,
the marginal management fee paid by the Putnam Intermediate U.S.
Government Income Fund would exceed that of the Putnam Adjustable
Rate U.S. Government Fund by 0.10% of average net assets less
than $1 billion and 0.05% of average net assets in excess of $1
billion. As of May 31, 1996, the Putnam Intermediate U.S.
Government Income Fund and the Putnam Adjustable Rate U.S.
Government Fund had net assets of $98,490,677 and $93,012,832,
respectively.
8. Are there any federal income tax consequences as a result of
the proposed merger?
No. As a result of the merger, no gain or loss will be
recognized by Putnam Adjustable Rate U.S. Government Fund or its
shareholders for federal income tax purposes.
9. Do the distribution policies of the two funds differ?
No. Each of the funds distributes any net investment income at
least monthly and any net realized capital gains at least
annually.
(If shareholder holds certificated shares, add the
following):
If you hold certificates for your Putnam Adjustable Rate
U.S. Government Fund shares, you should return them to the fund.
Failure to do so will affect your ability to take certain actions
with respect to the shares you receive in the merger, including
redemption and exchanges. While you hold certificates, you will
receive all cash dividends and other distributions on shares of
the Putnam Intermediate U.S. Government Income Fund in additional
shares, regardless of your election.
10. Do the procedures for purchasing, redeeming and exchanging
shares of the two funds differ?
No. The procedures for purchasing and redeeming shares of each
Fund, and for exchanging shares of each Fund for shares of other
Putnam funds, are identical.
The Putnam Adjustable Rate U.S. Government Fund currently offers
two classes of shares and the Putnam Intermediate U.S. Government
Income Fund currently offers four classes of shares. Shares of
both Funds may be purchased either through investment dealers
that have sales agreements with Putnam Mutual Funds Corp.
("Putnam Mutual Funds") or directly through Putnam Mutual Funds
at prices based on net asset value, plus varying sales charges,
depending on the class and number of shares purchased.
Reinvestment of distributions by the Funds are made at net asset
value for all classes of shares.
Shares of each Fund may be redeemed any day the New York Stock
Exchange is open at their net asset value next determined after
receipt by the Fund of a properly completed redemption request,
either directly by the Fund or through an investment dealer.
Shares of both Funds may be exchanged after a ten-day holding
period for shares of the same class of certain other Putnam
funds.
11. Will the number of shares I own change?
Yes, but the total value of the shares of the Putnam Intermediate
U.S. Government Income Fund you receive will, at the time of the
merger, equal the total value of the shares of the Putnam
Adjustable Rate U.S. Government Fund that you hold at the time of
the merger. Even though the net asset value per share of each
Fund is different, the total value of a shareholder's holdings
will not change as a result of the merger.
12. How will I be notified of the outcome of the merger?
If the proposed merger is approved by shareholders, you will
receive confirmation after the reorganization is completed,
indicating your new account number. If the merger is not
approved, you will be notified, and the results of the meeting
will be provided in the next annual report of the Putnam
Adjustable Rate U.S. Government Fund.
s:\mergers\a76scp