PUTNAM TAX EXEMPT INCOME FUND
Prospectus Supplement dated August 1, 1996
to Prospectus dated February 1, 1996
At a shareholder meeting to be held on September 5, 1996, the
shareholders of the fund are being asked to approve amendments to
the fund's fundamental investment restrictions, including the
elimination of certain restrictions. If these amendments are
approved, the fund will be able to:
Invest
more than 5% of the total assets in the securities of
any issuer (other than obligations issued or guaranteed as
to interest or
principal by the U.S. government or its
agencies or instrumentalities) with respect to 25% of its
total assets.
The policy set forth above is fundamental and may not be changed
without shareholder approval. See the Statement of Additional
Information of the fund for the full text of this policy as well
as the fund's other fundamental policies, some of which are also
proposed to be amended at the upcoming meeting.
To the extent the fund invests a significant portion of its
assets in the securities of a particular issuer, such fund will
be subject to an increased risk of loss if the market value of
such issuer's securities decline.
If shareholders do not ultimately approve some or all of the
proposed changes, the prospectus will be revised accordingly.
********
The third paragraph under the heading "How the fund is managed"
is replaced with the following:
The following officers of Putnam Investment Management, Inc.
("Putnam Management") have had primary responsibility for the
day-to-day management of the fund's portfolio since the years
stated below:
Business experience
Year (at least 5 years)
----- -------------------------
Blake E. Anderson 1996 Employed as an investment
Managing Director professional by Putnam
Management since 1987.
James E. Erickson 1996 Employed as an investment
Managing Director professional by Putnam
Management since 1978.
26994 8/96
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