PUTNAM TAX-FREE HIGH YIELD FUND
Prospectus Supplement dated
February 6, 1995
to Prospectus dated December 1, 1994
The second paragraph of the section entitled "Distribution Plans
- - Class B and Class M Distribution Plans" is replaced by the
following:
Although Class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested (including a prepaid service fee of 0.25% of the
amount invested) to dealers who sell Class B shares. These
commissions are not paid on exchanges from other Putnam funds and
sales to investors exempt from the CDSC. The amount paid to
dealers at the time of the sale of Class M shares is set forth
above under "How to buy shares -- Class M shares." In addition,
in order to further compensate dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class B shares and Class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers based on the
average net asset value of Class B shares and Class M shares
which are attributable to shareholders for whom the dealers are
designated as the dealer of record, except for the first year's
service fees, which are prepaid as described above. Putnam
Mutual Funds makes such payments at an annual rate of 0.20% of
such average net asset value for Class B shares outstanding as of
March 31, 1990, 0.25% of such average net asset value for Class B
shares acquired after that date and 0.25% of such average net
asset value for Class M shares (including shares acquired through
reinvestment of dividends). In addition, Putnam Mutual Funds
also pays to dealers, as additional compensation with respect to
the sale of Class M shares, 0.15% of such average net asset value
of Class M shares. For Class M shares, the total annual payment
to dealers equals 0.40% of such average net asset value.
s:\shared\funds\suppleme\a81supp
