Prospectus Supplement 38365 11/97
dated November 10, 1997 to Prospectus dated November 30, 1996, as
revised May 30, 1997:
The following replaces the third paragraph of the section
entitled "Basic investment strategy":
THE FUND INVESTS PRIMARILY IN HIGH-YIELDING, HIGHER-RISK,
LOWER-RATED TAX-EXEMPT SECURITIES CONSTITUTING A PORTFOLIO
THAT PUTNAM INVESTMENT MANAGEMENT, INC., THE FUND'S
INVESTMENT MANAGER ("PUTNAM MANAGEMENT"), BELIEVES DOES NOT
INVOLVE UNDUE RISK TO INCOME OR PRINCIPAL. Differing yields
on tax-exempt securities of the same maturity are a function
of several factors, including the relative financial
strength of the issuers. High yields are generally
available from securities in the lower categories of
nationally recognized securities rating agencies (such as
Baa or MIG-4 or lower by Moody's Investors Service, Inc.
("Moody's") and BBB or SP-3 or lower by Standard & Poor's
("S&P")), or from unrated securities of comparable quality.
Securities rated below BBB and Baa (and comparable unrated
securities) are commonly known as "junk bonds," and are
considered to be of poor standing and predominantly
speculative. The fund may invest up to 10% of its total
assets in securities rated below Ca or CC by each of the
agencies rating the security, including securities in the
lowest rating category of each rating agency, and in unrated
securities that Putnam Management determines are of
comparable quality. Such securities may be in default and
are generally regarded by the rating agencies as having
extremely poor prospects of ever attaining any real
investment standing. The fund is not subject to any other
restrictions based on securities ratings. The rating
services' descriptions of securities in the lower rating
categories, including their speculative characteristics, are
set forth in the appendix to this prospectus. The foregoing
investment limitations will be measured at the time of
purchase and, to the extent that a security is assigned a
different rating by one or more of the various rating
agencies, Putnam Management will use the highest rating
assigned by any agency.
