PUTNAM FEDERAL INCOME TRUST
485B24E, 1994-02-24
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          AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
                            FEBRUARY 24, 1994    
                                                   REGISTRATION NO. 33-3903
                                                                   811-4617
- ----------------------------------------------------------------
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                             ----------------
                                 FORM N-1A
                                                                       ----
          REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933     / X /
                                                                      ---- 
                                                                       ----
                        Pre-Effective Amendment No.                   /   /
                                                                      ---- 
                                                                       ----
                  Post-Effective Amendment No.    10                  / X /
                                    and                               ---- 
                                                                       ----
            REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY       / X /
                                ACT OF 1940                            ----
                                                                       ----
                          Amendment No.    11                         / X /
                     (Check appropriate box or boxes)                  ----
                              ---------------
                        PUTNAM FEDERAL INCOME TRUST
            (Exact name of registrant as specified in charter)

            One Post Office Square, Boston, Massachusetts 02109
                 (Address of principal executive offices)

            Registrant's Telephone Number, including Area Code 
                              (617) 292-1000
                              --------------
           It is proposed that this filing will become effective
                          (check appropriate box)
 ----
/   /    immediately upon filing pursuant to paragraph (b)
- ----
 ----
/ X  /   on    March 1, 1994     pursuant to paragraph (b)
- ----     
 ----
/   /    60 days after filing pursuant to paragraph (a)
- ----
 ----
/   /    on (date) pursuant to paragraph (a) of Rule 485
- ----          
         <PAGE>
                      JOHN R. VERANI, Vice President
                        Putnam Federal Income Trust
                          One Post Office Square
                        Boston, Massachusetts 02109
                  (Name and address of agent for service)
                              ---------------
                                 Copy to:
                        JOHN W. GERSTMAYR, Esquire
                               ROPES & GRAY
                          One International Place
                        Boston, Massachusetts 02110
                          ----------------------
    The Registrant has registered an indefinite number or amount
of securities under the Securities Act of 1933 pursuant to Rule
24f-2.  A Rule 24f-2 notice for the fiscal year ended October 31,
   1993     is not required because the Registrant sold no shares 
 pursuant to Rule 24f-2 in such fiscal year. 
<PAGE>
<TABLE>
<CAPTION>
                                  CALCULATION OF REGISTRATION FEE 
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
             Proposed          Proposed
              maximum           maximum
              Amount           offering       Aggregate      Amount of
Title of securities              being        price per      offering       registration
being registeredregistered       unit*         price**          fee
- -----------------------------------------------------------------------------------------
<C>                            <C>              <C>           <C>               <C>
Shares of Beneficial 
Interest                    9,592,801     shs.   $10.66    $290,000            $100.00
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------

   * Based on offering price per share on    February 16, 1994    .
  ** Calculated pursuant to Rule 24e-2 under the Investment Company Act of 1940.  The
     total amount of securities redeemed or repurchased during the Registrant's
     previous fiscal year was    9,565,597     shares, none of which have been used for
     reductions pursuant to Rules 24e-2(a) or Rule 24f-2(c) under said Act in the
     current fiscal year, and all of which are being used for such reduction in this
     Amendment.
/TABLE
<PAGE>
   <TABLE>
<CAPTION>                           PUTNAM FEDERAL INCOME TRUST

                                       CROSS REFERENCE SHEET

                                    (as required by Rule 481(a))

   PUTNAM FEDERAL INCOME TRUST PUTNAM FEDERAL INCOME TRUST
                            (FOR DEFINED
                       CONTRIBUTION PLANS)    
PART A

N   -    1A ITEM NO.   LOCATION                            LOCATION
<C> <C>                 <C>                              <C>    

1.  Cover Page            Cover Page                    Cover Page

2.  Synopsis              Expenses summary              Expenses summary

3.  Condensed          Financial    highlights; How     Financial    highlights;     How
       Financial       performance is shown                performance is shown
    Information    

4.  General                    Objectives; How
objectives                Objectives; How objectives
    Description of     are pursued; Organization           are pursued; Organization
    Registrant         and history                      and history

5.  Management of         Expenses summary; How         Expenses summary; How   
        the Fund          the Fund     is managed;
About                     the Fund is managed; About    
                       Putnam    Investments, Inc.      Putnam Investments    , Inc.

   5A.                 Management's                     (Contained in the
Annual                 (Contained in the Annual         
    Discussion         Report of the Registrant)        Report of the Registrant)
    of Fund
    Performance
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PUTNAM FEDERAL INCOME TRUSTPUTNAM FEDERAL INCOME TRUST
                            (FOR DEFINED
                         CONTRIBUTION PLANS)
PART A

N-1A ITEM NO.          LOCATION                         LOCATION
<C> <C>                 <C>                              <C>    

6.  Capital Stock         Cover Page; Organization    
                       Cover Page; Organization   
        and    Other   and     history; How                and history; How
    Securities         distributions are made;          distributions are made;   
                           tax information                 tax information    

7.  Purchase of                How to buy shares;
   Distribution        How to buy shares; Distribution
    Securities         Plan;     How to sell shares;    
    Plan; How to sell shares;
    Being Offered      How to exchange shares:          How to exchange shares;   
                           How the Fund values its         How the Fund values its
                       shares                           shares

8.  Redemption or              How to buy shares; How
to     How to sell shares;
    Repurchase         sell shares; How to exchange        Organization and history    
                       shares; Organization and            
                           history

9.  Pending Legal              Not Applicable              Not Applicable
    Proceedings


/TABLE
<PAGE>
<TABLE>
<CAPTION>
PUTNAM FEDERAL INCOME TRUSTPUTNAM FEDERAL INCOME TRUST
                            (FOR DEFINED
                       CONTRIBUTION PLANS)    
PART B

N   -    1A ITEM NO.   LOCATION                            LOCATION
<C> <C>                 <C>                              <C>    

10. Cover Page            Cover Page                    Cover Page

11. Table of                   Cover Page                  Cover Page
    Contents    

12. General                    Organization and history    Organization and history 
    Information        (Part A)                            (Part A)
    and History    

13. Investment            How objective is              How objective is    
    Objectives                 pursued (Part A);           pursued (Part A);
    and Policies       Investment Restrictions of       Investment Restrictions of   
                           the Fund; Miscellaneous         the Fund; Miscellaneous
                       Investment Practices             Investment Practices

14. Management of              Management of the Fund      Management of the Fund
    the Registrant     (Trustees; Officers);            (Trustees; Officers);   
                           Additional Officers of          Additional Officers of
                       the Fund                         the Fund

15. Control                    Management of the Fund      Management of the Fund
    Persons and        (Trustees; Officers); Fund          (Trustees; Officers); Fund
    Principal          Charges and Expenses                Charges and Expenses
    Holders of         (Ownership of Fund Shares)          (Ownership of Fund Shares)
    Securities

/TABLE
<PAGE>
<TABLE>
<CAPTION>
PUTNAM FEDERAL INCOME TRUSTPUTNAM FEDERAL INCOME TRUST
                            (FOR DEFINED
                         CONTRIBUTION PLANS)
PART B

N-1A ITEM NO.          LOCATION                         LOCATION
<C> <C>                 <C>                              <C>    

16. Investment                 Management of the Fund      Management of the Fund
    Advisory and       (Trustees; Officers; The            (Trustees; Officers; The
    Other Services     Management Contract;                Management Contract;
                       Principal Underwriter);          Principal Underwriter);
                          Fund Charges and
Expenses;              Fund Charges and Expenses;
                          Distribution Plan;            Distribution Plan;   
                           Independent Accountants
   and                 Independent Accountants and
                       Financial Statements;            Financial Statements;
                       Custodian                        Custodian

17. Brokerage                  Management of the Fund      Management of the Fund
    Allocation         (Portfolio Transactions);        (Portfolio Transactions);   
                           Fund Charges and Expenses       Fund Charges and Expenses    

18. Capital Stock              Organization and history    Organization and history
    and Other          (Part A);    How distributions   (Part A); How distributions
    Securities         are made; tax information        are made; tax information
                       (Part A); Suspension of          (Part A); Suspension of
                       Redemptions                      Redemptions

19. Purchase,          How to buy shares (Part A);      How to sell shares (Part
    Redemption,        How to sell shares (Part A);     A); How to Buy Shares;
    and Pricing        How to exchange shares           Determination of Net Asset
    of Securities      (Part A); How to Buy             Value; Suspension of
    Being Offered      Shares; Determination of         Redemptions
                       Net Asset Value; Suspension of
                       Redemptions

</TABLE>
<TABLE>
<CAPTION>
PUTNAM FEDERAL INCOME TRUSTPUTNAM FEDERAL INCOME TRUST
                            (FOR DEFINED
                         CONTRIBUTION PLANS)
PART B

N-1A ITEM NO.          LOCATION                         LOCATION
<C> <C>                 <C>                              <C>

20. Tax Status         How distributions are made;      How distributions are made;   
                           tax information (Part A)   ; Taxes    
                       tax information (Part A); Taxes

21. Underwriters                                           Management of the
Fund                   Management of the Fund   
                           (Principal Underwriter);        (Principal Underwriter);
                       Fund Charges and Expenses        Fund Charges and Expenses

22. Calculation of             How performance is shown    How performance is shown 
    Performance        (Part A); Investment                (Part A); Investment
    Data               Performance of the Fund;            Performance of the Fund;
                       Standard Performance             Standard Performance   
                           Measures                        Measures    

23. Financial             Independent Accountants and   Independent Accountants and    
    Statements            Financial Statements          Financial Statements


PART C

    Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
   /TABLE
<PAGE>
    
   
                                       PROSPECTUS -- 
                                       
    
        MARCH 1, 1994

PUTNAM FEDERAL INCOME TRUST
INVESTMENT STRATEGY: INCOME



This Prospectus explains concisely what you should know before investing in the 
Fund. 
Please read it carefully and keep it for  future reference.  You can find more
 detailed
information about the Fund in the    March 1, 1994     Statement of Additional
Information, as amended from time to time.  For a free copy of    the Statement,
 call
Putnam Investor Services at 1-800-225-1581.  The Statement has been filed with 
the
Securities and Exchange Commission and is incorporated into this Prospectus by 
reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND 
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND 
EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR 
ADEQUACY OF THIS
PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 

   SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR 
ENDORSED BY,
ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE 
CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING  THE
 POSSIBLE
LOSS OF PRINCIPAL.

                                        BOSTON*LONDON*TOKYO<PAGE>
    PUTNAM FEDERAL 
INCOME TRUST (THE "FUND") SEEKS HIGH CURRENT INCOME P
INVESTMENTS IN U.S. GOVERNMENT SECURITIES.  THE FUND ALSO SEEKS PRESERVATION OF 
CAPITAL
AND LONG-TERM TOTAL RETURN AS SECONDARY OBJECTIVES, BUT ONLY TO THE EXTENT 
CONSISTENT WITH
HIGH CURRENT INCOME.

   THE FUND OFFERS CLASS A SHARES AND EXPECTS TO OFFER A SECOND CLASS OF SHARES:
 CLASS B
SHARES.  THE OFFERING OF CLASS B SHARES IS SUBJECT TO APPROVAL OF THE 
SHAREHOLDERS OF THE
FUND AT A MEETING TO BE HELD ON MAY 5, 1994.  PRIOR TO THAT DATE THE FUND WILL 
OFFER ONLY
CLASS A SHARES.  IF THE PROPOSAL TO OFFER CLASS B SHARES IS NOT APPROVED AT 
THE MAY
SHAREHOLDER MEETING THIS PROSPECTUS WILL BE REVISED OR SUPPLEMENTED.  EACH 
CLASS WILL BE
SOLD PURSUANT TO DIFFERENT SALES ARRANGEMENTS AND BEARS DIFFERENT EXPENSES.
  FOR MORE
INFORMATION ABOUT THE DIFFERENT SALES ARRANGEMENTS, SEE "ALTERNATIVE SALES 
ARRANGEMENTS."
FOR INFORMATION ABOUT VARIOUS EXPENSES BORNE BY EACH CLASS, SEE "EXPENSES 
SUMMARY."    
<PAGE>
ABOUT THE FUND

    Expenses summary                                                     
       .........................................................3    
    Financial highlights                                                       
       .........................................................4    
    Objectives                                                                  
       .........................................................6    
    How objectives are pursued                                                 
       .........................................................6    
    How performance is shown                                                   
       .........................................................13    
    How the Fund is managed                                                    
       .........................................................14    
    Organization and history                                 14   
     ABOUT YOUR INVESTMENT

       Alternative sales arrangements
    .........................................................16     
    How to buy shares                                                     
       .........................................................17
    Distibution Plans
    .........................................................21           
    How to sell shares                                                   
       .........................................................22    
    How to exchange shares                                                 
       .........................................................24     
    How the Fund values its shares
       .........................................................25     
    How distributions are made; tax information                 25        
    ABOUT PUTNAM INVESTMENTS, INC.                              27        
<PAGE>
ABOUT THE FUND

EXPENSES SUMMARY 

Expenses are one of several factors to consider when investing in the Fund.  
The following
table summarizes your maximum transaction costs from investing in the Fund and 
expenses
incurred by the Fund based on its most recent fiscal year.  The    Examples 
show     the
cumulative expenses attributable to a hypothetical $1,000 investment in the 
Fund over
specified periods.   

                                   CLASS A SHARES          CLASS B SHARES 
                        
                                   
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed   
    on         Purchases        (as a percentage   
    of offering price)                 4.75%                    
       NONE*                 

Deferred Sales Charge                                         5.0% in the    
(as a percentage of the lower                                 first year,    
of original         purchase              NONE**            declining to,    
price or redemption                                            1.0% in the     
proceeds)                                                     sixth year and 
                                                           eliminated
                                                           thereafter    

ANNUAL FUND OPERATING EXPENSES 
(as a percentage of average net assets) 

Management Fees                      0.57%                 0.57%    
12b   -    1 Fees                      0.25%                       1.00%     
Other Expenses                            0.23%                 0.23%    
Total Fund Operating Expenses             1.05%                 1.80%<PAGE>
    
     EXAMPLES    

Your investment of $1,000 would incur the following  expenses,   
assuming         5% annual return and         redemption at the
end of each period:

     1                    3          5        10
    year                  years      years    years



          Class A         $58           $79   $103     $170   
     
       Class B            $68        $87      $117     $192***

    
Your investment of $1,000 would incur the following expenses,    
assuming 5% annual return but no redemption:


    Class A               $58        $79      $103     $170   
           Class B        $18        $57      
$97                       $192***    
       

The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund incurs.  The     12b-1 fees for Class B shares
reflect the maximum amount payable under the Class B Distribution
Plan.  For Class B shares, management fees and "Other
expenses"     are based on the operating expenses for the Fund's
   Class A shares. The Examples     do not represent past or
future expense levels.  Actual expenses may be greater or less
than those shown.  Federal regulations require the Example to
assume a 5% annual return, but actual annual return has varied.

   * Class B shares are sold without a front-end sales charge,
but their 12b-1 fees may cause long-term shareholders to pay more
than the economic equivalent of the maximum permitted front-end  
sales charge.    

   *    * A deferred sales charge of up to 1.00% is assessed on
certain redemptions of    Class A     shares that were purchased
without an initial sales charge as part of an investment of $1
million or more.  See "How to    buy shares--Class A     shares."

   *** Reflects conversion of Class B shares to Class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase. See "How to buy shares-- Class B shares--
Conversion of Class B shares."

<PAGE>
FINANCIAL HIGHLIGHTS            

The table on the following     page     presents per share
financial information for the life of the Fund.     No Class B
shares were  outstanding during these periods.      This
information has been audited and reported on by the Fund's
independent accountants. The Report of Independent Accountants
and financial statements  included in the Fund's Annual Report to
shareholders for the     1993     fiscal year are incorporated by
reference into this Prospectus. The Fund's Annual Report   ,
which     contains additional    unaudited     performance
information    ,     will be made available without charge upon
request.

On July 11, 1991, the shareholders of the Fund approved a change
in the investment objective of the Fund to its current investment
objectives and a change in the Fund's distribution policies. The
investment objective of the Fund before that vote was to seek
high current return consistent with preservation of capital,
through investments primarily in GNMA certificates, and the Fund
invested exclusively in U.S. Government Securities (as defined
below). Under the Fund's former distribution policies, the Fund
declared a distribution each day in an amount which was based on
projections of its estimated earnings. Consequently, the
information in the table relating to the periods before July 15,
1991 does not reflect the Fund's performance under its current
investment objectives or its current distribution policies.


   FINANCIAL HIGHLIGHTS    
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<PAGE>
(The table appears on page    )    

<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

                                                                                                        FOR THE PERIOD
                                                                                   ELEVEN JUNE 2, 1986
                                                                                   MONTHS(COMMENCEMENT
                                                                                    ENDEDOF OPERATIONS
                                                           YEAR ENDED OCTOBER 31            OCTOBER 31  TO NOVEMBER 30
<S>   <C>                           <C>       <C>       <C>       <C>       <C>       <C>          <C>
     1993                          1992      1991      1990      1989      1988      1987         1986
NET ASSET VALUE,                                                                                                      
BEGINNING OF PERIOD              $10.47    $10.52     $9.90    $10.21    $10.07    $10.04       $11.46          $11.45

INVESTMENT OPERATIONS                                                                                                 
NET INVESTMENT INCOME               .83       .84       .80       .82       .84       .83          .76             .41
NET REALIZED AND UNREALIZED 
  GAIN (LOSS) ON INVESTMENTS         --     (.05)       .62     (.29)       .14       .10       (1.05)             .23

TOTAL FROM INVESTMENT OPERATIONS    .83       .79      1.42       .53       .98       .93        (.29)             .64

LESS DISTRIBUTIONS:                                                                                                   
FROM NET INVESTMENT INCOME        (.83)     (.72)     (.80)     (.82)     (.84)     (.81)        (.77)           (.42)
FROM NET REALIZED GAIN ON 
  INVESTMENTS                        --     (.12)        --        --        --        --        (.17)           (.19)
PAID-IN CAPITAL (A)                  --        --        --     (.02)        --     (.09)        (.19)           (.02)

TOTAL DISTRIBUTIONS               (.83)     (.84)     (.80)     (.84)     (.84)     (.90)       (1.13)           (.63)

NET ASSET VALUE,                                                                                                      
END OF PERIOD                    $10.47    $10.47    $10.52     $9.90    $10.21    $10.07       $10.04          $11.46

TOTAL INVESTMENT RETURN AT 
  NET ASSET VALUE (%) (B)          8.17      7.75     14.90      5.44     10.37      9.66    (2.75)(C)        11.44(C)

NET ASSETS, END OF PERIOD                                                                                             
(IN THOUSANDS)                 $600,181  $655,656  $730,319  $807,890$1,002,508$1,345,223   $2,087,744        $997,390

RATIO OF EXPENSES TO AVERAGE 
  NET ASSETS (%)                   1.05      1.11      1.17      1.13      1.09      1.01      1.00(C)         1.10(C)
RATIO OF NET INVESTMENT INCOME 
  TO AVERAGE NET ASSETS (%)        7.81      6.83      7.90      8.17      8.55      8.46      7.57(C)         6.68(C)
PORTFOLIO TURNOVER (%)           150.05    248.37    215.17    269.04    241.99     24.71    130.14(D)       149.84(D)


*FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH OCTOBER 31, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED BY THE SEC 
In
1993.

(A)SEE NOTE 1 TO THE FINANCIAL STATEMENTS. DISTRIBUTIONS ARE BASED ON PROJECTIONS OF ITS ESTIMATED NET 
INVESTMENT INCOME AND NET REA
TERM GAIN. THIS DISTRIBUTION POLICY MAY AT TIMES RESULT IN A RETURN OF CAPITAL TO SHAREHOLDERS.

(B)TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES.

(C)ANNUALIZED.

(D)NOT ANNUALIZED.

/TABLE
<PAGE>
<PAGE>
OBJECTIVES

THE FUND SEEKS HIGH CURRENT INCOME.  SECONDARY OBJECTIVES OF THE FUND ARE
PRESERVATION OF CAPITAL AND LONG-TERM TOTAL RETURN, BUT  ONLY TO THE EXTENT
CONSISTENT WITH HIGH CURRENT INCOME.  The Fund is not intended to be a
complete investment program, and there is no assurance it will achieve its
objectives.

HOW OBJECTIVES ARE PURSUED

BASIC INVESTMENT STRATEGY

THE FUND WILL SEEK ITS OBJECTIVES BY INVESTING UNDER NORMAL MARKET CONDITIONS
AT LEAST 65% OF ITS TOTAL ASSETS IN U.S.       GOVERNMENT SECURITIES.  As used
herein, the term "U.S. Government Securities" refers to debt securities issued
or guaranteed by the U.S. government, by various of its agencies, or by
various instrumentalities established or sponsored by the U.S. government. 
Certain of these obligations, including U.S. Treasury bills, notes and bonds,
mortgage participation certificates issued or guaranteed by the Government
National Mortgage Association ("Ginnie Mae"), and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States.  Other U.S. Government Securities issued by federal agencies or
government-sponsored enterprises are not supported by the full faith and
credit of the United States.  These securities include obligations supported
by the right of the issuer to borrow from the U.S. Treasury, such as
obligations of Federal Home Loan Banks, and obligations supported only by the
credit of the instrumentality, such as Federal National Mortgage Association
("Fannie Mae") bonds.

From time to time the Fund may invest a substantial portion of its assets in a
variety of mortgage-backed or other asset-backed securities, including
collateralized mortgage obligations ("CMOs").  Mortgage-backed securities
represent a participation in, or are secured by, mortgage loans.  Mortgage-
backed securities include securities issued or guaranteed by the United States
government or one of its agencies or instrumentalities, such as Ginnie Mae,
Fannie Mae or the Federal Home Loan Mortgage Corporation ("Freddie Mac");
securities issued by private issuers that represent an interest in or are
collateralized by mortgage-backed securities issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities; or securities issued
by private issuers that represent an interest in or are collateralized by
mortgage loans or mortgage-backed securities without a government guarantee
but usually having some form of private credit enhancement. Asset-backed
securities are structured like mortgage-backed securities, but instead of
mortgage loans or interests in mortgage loans, the underlying assets may
include motor vehicle installment sales or installment loan contracts, leases
of various types of real and personal property, and receivables from credit
card agreements.  The ability of an issuer of asset-backed securities to
enforce its security interest in the underlying assets may be limited.

The Fund may also invest up to 20% of its assets in debt securities issued by
U.S. corporations and up to 20% of its assets in debt securities issued or
guaranteed by foreign national, provincial, state or other governments with
taxing authority or their agencies, subject to the overall requirement
that   ,     under normal market conditions, the Fund    will     invest at
least 65% of its total assets in U.S. Government Securities        .

The Fund will only invest in non-U.S. Government Securities that are rated at
the time of purchase at least Aa by Moody's Investor Services, Inc.
   ("Moody's")     or AA by Standard & Poor's Corporation    ("S&P")    , or
in unrated securities that Putnam Investment Management, Inc., the Fund's
investment manager        ("Putnam Management")   ,     determines are of
comparable quality.     Putnam Management has proposed a change to this
investment policy that would permit the Fund to only invest in non-
U.S.Government securities that are rated at the time of purchase "investment-
grade," that is, at least Baa by Moody's or BBB by S&P or in unrated
securities that Putnam Management determines are of comparable quality.
Securities rated Baa by Moody's or BBB by S&P (and comparable unrated
securities), may have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
grade bonds. If the Fund's Trustees approve this change, it   will take
effect on March 4, 1994. If the Fund's Trustees do not approve this change,
this Prospectus will be revised.    
 
The Fund will not necessarily dispose of a security if its rating is reduced
below these levels, although Putnam Management will monitor the investment to
determine whether continued investment in the security will assist in meeting
the Fund's investment objectives.

The Fund may also hold a portion of its assets in cash or money market
instruments.

At times Putnam Management may judge that conditions in the securities markets
make pursuing the Fund's basic investment strategy inconsistent with the best
interests of its shareholders.  At such times Putnam Management may
temporarily use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets.  In implementing these
"defensive" strategies, the Fund may increase the portion of its assets
invested in money market instruments or invest in any other security that
Putnam Management considers consistent with such strategy.  It is impossible
to predict when, or for how long, the Fund will use these alternative
strategies.

FOREIGN INVESTMENTS

THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES       PRINCIPALLY
TRADED IN FOREIGN MARKETS.  The Fund may also purchase Eurodollar certificates
of deposit without regard to the 20% limit.  Since foreign securities are
normally denominated and traded in foreign currencies, the values of the
Fund's assets may be affected favorably or unfavorably by currency exchange
rates and exchange control regulations.  There may be less information
publicly available about a foreign issuer than about a U.S.  issuer, and
foreign issuers are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to those in the United
States.  The securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S.    companies    .  Foreign
brokerage commissions and other fees are also generally higher than in the
United States.  Foreign settlement procedures and trade regulations may
involve certain risks (such as delay in payment or delivery of securities or
in the recovery of the Fund's assets held abroad) and expenses not present in
the settlement of domestic investments.

In addition, there may be a possibility of nationalization or expropriation of
assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability and diplomatic developments which could
affect the value of the Fund's investments in certain foreign countries.  
Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the United States
or in other foreign countries.  The laws of some foreign countries may limit
the Fund's ability to invest in securities of certain issuers located in those
foreign countries.  Special tax considerations apply to foreign securities.

The Fund may buy or sell foreign currencies, foreign currency forward
contracts and call options on foreign currencies for hedging purposes in
connection with its foreign investments.

A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS AND SPECIAL
TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED  IN THE STATEMENT OF
ADDITIONAL INFORMATION.

PORTFOLIO TURNOVER

The length of time the Fund has held a particular security is not generally a
consideration in investment decisions.  A change in the securities held by the
Fund is known as "portfolio turnover." As a result of the Fund's investment
policies, under certain market conditions the Fund's portfolio turnover rate
may be higher than that of other mutual funds. Portfolio turnover generally
involves some expense to the Fund, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities and
reinvestment in other securities. Such transactions may result in realization
of taxable capital gains.   Portfolio turnover rates for the life of the Fund
are shown in the section "Financial highlights."

INVESTMENTS IN PREMIUM SECURITIES

The Fund may at times invest in securities bearing coupon rates higher than
prevailing market rates. Such "premium" securities are typically purchased at
prices greater than the principal amounts payable on maturity. The Fund does
not amortize the premium paid for such securities in calculating its net
investment income. As a result, the purchase of such securities provides the
Fund a higher level of investment income distributable to shareholders on a
current basis than if the Fund purchased securities bearing current market
rates of interest. Because the value of premium securities tends to approach
the principal amount as they approach maturity (or call price in the case of
securities approaching their first call date), the purchase of such securities
may increase the Fund's risk of capital loss if such securities are held to
maturity (or first call date).

During a period of declining interest rates, many of the Fund's portfolio
investments will likely bear coupon rates which are higher than the current
market rates, regardless of whether such securities were originally purchased
at a premium. Such securities would generally carry premium market values
which would be reflected in the net asset value of the Fund's shares. As a
result, an investor who purchases shares of the Fund during such periods would
initially receive higher taxable monthly distributions (derived from the
higher coupon rates payable on the Fund's investments) than might be available
from alternative investments bearing current market interest rates, but may
face an increased risk of capital loss as these higher coupon securities
approach maturity (or first call date). In evaluating the potential
performance of an investment in the Fund, investors may find it useful to
compare the Fund's current dividend rate with the Fund's "yield," which is
computed on a yield-to-maturity basis in accordance with SEC regulations and
which reflects amortization of market premiums. See "How performance is
shown."

RISK FACTORS

U.S. Government Securities are considered among the safest of fixed income
investments, but their values, like those of other debt securities, will
fluctuate with changes in interest rates.  Changes in the value of portfolio
securities will not affect interest income from those securities but will be
reflected in the Fund's net asset value.  Thus, a decrease in interest rates
will generally result in an increase in the value of the Fund's shares. 
Conversely, during periods of rising interest rates, the value of the Fund
will generally decline.  The magnitude of these fluctuations will generally be
greater when the Fund's average maturity is longer.  Because of their added
safety, the yields available from U.S. Government Securities are generally
lower than the yields available from comparable corporate debt securities.

Whereas certain U.S. Government Securities such as U.S. Treasury obligations
and GNMA certificates are backed by the full faith and credit of the U.S.
government, other mortgage-backed and asset-backed securities are subject to
varying degrees of risk of default depending upon, among other factors, the
creditworthiness of the issuer and the ability of the mortgagor or other
borrower to meet its obligations.
<PAGE>
Mortgage-backed and asset-backed securities have yield and maturity
characteristics corresponding to the underlying assets.  Thus, unlike
traditional debt securities, which may pay a fixed rate of interest until
maturity when the entire principal amount comes due, payments on mortgage-
backed and asset-backed securities include both interest and a partial payment
of principal.  In addition to scheduled loan amortization, payments of
principal may result from the voluntary prepayment, refinancing or foreclosure
of the underlying mortgage loans or other assets.  Such prepayments may
significantly shorten the effective maturities of mortgage-backed and asset-
backed securities, especially during periods of declining interest rates.

Due to their prepayment aspect, mortgage-backed and asset-backed securities
are less effective than other types of securities as a means of "locking in"
attractive long-term interest rates.  This is caused by the need to reinvest
prepayments of principal generally and the possibility of significant
unscheduled prepayments resulting from declines in interest rates.  These
prepayments would have to be reinvested at lower rates.  As a result, these
securities may have less potential for capital appreciation during periods of
declining interest rates than other securities of comparable maturities,
although they may have a comparable risk of decline in market value during
periods of rising interest rates.  At times, some of the mortgage-backed and
asset-backed securities in which the Fund may invest will have higher than
market interest rates, and will therefore be purchased at a premium above
their par value.  Unscheduled prepayments, which are made at par, will cause
the Fund to suffer a loss equal to any unamortized premium.  However, Putnam
Management believes, based upon independent historical market studies, that
such "premium" mortgage-backed and asset-backed securities are usually less
subject to a risk of decline than those sold at or below par.  This may not be
true, however, during periods of very rapidly rising interest rates.  See
"Investments in premium securities".

OPTIONS AND FUTURES PORTFOLIO STRATEGIES

THE FUND MAY ENGAGE IN A VARIETY OF TRANSACTIONS INVOLVING THE USE OF OPTIONS
AND FUTURES CONTRACTS WITH RESPECT TO PORTFOLIO SECURITIES OR OTHER SECURITIES
IN WHICH THE FUND MAY INVEST.  THE FUND MAY PURCHASE AND SELL FUTURES
CONTRACTS IN ORDER TO HEDGE AGAINST CHANGES IN THE VALUES OF SECURITIES THE
FUND OWNS OR      EXPECTS TO PURCHASE OR TO HEDGE AGAINST INTEREST RATE
CHANGES.  For example, if Putnam Management expected interest rates to
increase, the Fund might sell futures contracts on U.S. Government Securities. 
If rates were to increase, the value of U.S. Government Securities held by the
Fund would decline, but this decline would be offset in whole or in part by an
increase in the value of the Fund's positions in its futures contracts.  The
Fund may also purchase and sell call and put options on futures contracts or
on securities the Fund owns or expects to purchase in addition to or as an
alternative to purchasing and selling futures contracts or, to the extent
permitted by applicable law, to earn additional income.  The Fund may also
from time to time buy and sell combinations of put and call options on the
same underlying security to earn additional income.  The Fund will not
purchase put and call options with respect to such securities if as a result
more than 5% of its assets would at the time be invested in such options.  

OPTIONS AND FUTURES TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN  LOSSES. The
effective use of options and futures strategies  depends on the Fund's ability
to terminate options and futures positions at times when Putnam Management
deems it desirable to do so.  Although the Fund will enter into an option or
futures contract position only if Putnam Management believes that a liquid
secondary market exists for such option or futures contract, there is no
assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.  Options on certain U.S. Government
Securities are traded in significant volume on securities exchanges.  However,
other options which the Fund may purchase or sell are traded in the "over-the-
counter" market rather than on an exchange.  This means that the Fund will
enter into such option contracts with particular securities dealers who make
markets in these options.  The Fund's ability to terminate options positions
in the over-the-counter market may be more limited than for exchange-traded
options and may also involve the risk that securities dealers participating in
such transactions might fail to meet their obligations to the Fund.  However,
the Fund will engage in these transactions only if, in the opinion of Putnam
Management, the pricing mechanism and liquidity of the over-the-counter market
are satisfactory and the participants are responsible parties likely to meet
their contractual obligations.

The use of options and futures strategies also involves the risk of imperfect
correlation among movements in the values of the securities underlying the
futures and options purchased and sold by the Fund, of the option and futures
contract itself, and of the securities which are the subject of a hedge.  The
successful use of these strategies further depends on the ability of Putnam
Management to forecast interest rates and market movements correctly.

The Fund's ability to engage in options and futures transactions and to sell
related securities may be limited by tax considerations and by certain
regulatory requirements.  See "Taxes" in the Statement of Additional
Information.
<PAGE>
OTHER INVESTMENT PRACTICES

THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING INVESTMENT
PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS.  THE STATEMENT OF
ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT THESE
PRACTICES, INCLUDING LIMITATIONS DESIGNED TO REDUCE THESE RISKS.

SECURITIES LOANS    ,     REPURCHASE AGREEMENTS    AND FORWARD COMMITMENTS    
.  The Fund may lend portfolio securities amounting to not more than 25% of
its assets to broker-dealers and may enter into repurchase agreements on up to
25% of its assets.  These transactions must be fully collateralized at all
times   . The Fund may also purchase U.S. Government Securities for future
delivery, which may increase its overall investment exposure and involves a
risk of loss if the value of the securities declines prior to the settlement
date. These transactions     involve some risk to the Fund if the other party
should default on its obligation and the Fund is delayed or prevented from
recovering the collateral    or completing the transaction    .

LIMITING INVESTMENT RISK

SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT RISKS FOR ITS
SHAREHOLDERS.  THESE RESTRICTIONS PROHIBIT THE FUND FROM:  acquiring more than
10% of the voting securities of any issuer* and investing more than: (a) 5% of
its total assets in securities of any one issuer (other than U.S. Government
Securities);* (b) 10% of its net assets in securities restricted as to
resale;*   +     (c) 25% of its total assets in any one industry (U.S.
Government Securities are not considered to represent an industry);* or (d)
15% of its net assets in securities that are not readily marketable,
securities restricted as to resale (excluding securities determined by the
   Fund's     Trustees        (or the person designated by the Fund's Trustees
to make such determinations) to be readily marketable), and repurchase
agreements maturing in more than seven days.

   +  At a shareholder meeting scheduled for May 5, 1994, the shareholders of
the Fund will be asked to approve an amendment to restriction (c) such that
the restriction would provide that the Fund may not and will not:
       Purchase securities restricted as to         resale if, as a result,
                                                    such investments would
                                                    exceed 15% of the value of
                                                    the Fund's net assets,   
                                                    excluding restricted
                                                    securities that have been
                                                    determined by the Trustees
                                                         of the Fund (or the
                                                    person designated by them
                                                    to make such
                                                    determinations)    to be
                                                    readily marketable.

If the proposal is not approved at the May 5, 1994, meeting this Prospectus
will be revised or supplemented.    

Restrictions marked with an asterisk (*) above are summaries of fundamental
policies.  See the Statement of Additional Information for the full text of
these policies and the Fund's other fundamental policies.  Except for
investment policies designated as fundamental in this Prospectus or the
Statement, the investment policies described in this Prospectus and in the
Statement are not fundamental policies.  The Trustees may change any non-
fundamental investment policies without shareholder approval.  As a matter of
policy, the Trustees would not materially change the Fund's investment
objectives without shareholder approval.

HOW PERFORMANCE IS SHOWN

YIELD AND TOTAL RETURN DATA MAY FROM TIME TO TIME BE INCLUDED IN 
ADVERTISEMENTS ABOUT THE FUND.  "Yield"    for each class of shares     is
calculated by dividing the Fund's annualized net investment income per share
   of such class     during a recent 30   -    day period by the maximum
public offering price per share on the last day of that period.  For this
purpose, net investment income is calculated in accordance with SEC
regulations and may differ from the Fund's net investment income as determined
for financial reporting purposes.  SEC regulations require that net investment
income be calculated on a "yield-to-maturity" basis, which has the effect of
amortizing any premiums or discounts in the current market value of fixed-
income securities.  The Fund's current dividend rate is based on the Fund's
net investment income as determined for financial     reporting    
purposes        which     may     not reflect           amortization    in the
same manner    .  See "How objectives are pursued --Investments in premium
securities." The Fund's yield reflects the deduction of the maximum initial
sales charge     in the case of Class A shares, but does not reflect the
deduction of any contingent deferred sales charge in the case of Class B
shares    .  "Total return" for the one- and five-year periods and for the
life of the Fund    (or since commencement of the public offering of a class,
if shorter)     through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the
Fund at the maximum public offering price    (in the case of Class A shares)
or reflecting the deduction of any applicable contingent deferred sales charge
(in the case of Class B shares)    .  Total return may also be presented for
other periods or based on investment at reduced sales charge levels    or net
asset value    .  Any quotation of total return or yield not reflecting the
maximum initial sales charge or    a     contingent deferred sales charge
would be reduced if such sales charges were used.  Quotations of yield or
total return for any period when an expense limitation was in effect will be
greater than if the limitation had not been in effect.  The Fund's performance
may be compared to various indices.  See the Statement of Additional
Information.

ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES  NOT PREDICT
FUTURE PERFORMANCE.  Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio, 
        the Fund's operating expenses    and which class of shares you
purchase    .  Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies.  These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles.

HOW THE FUND IS MANAGED

THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE CONDUCT
OF THE FUND'S BUSINESS.  Subject to such policies as the Trustees may
determine, Putnam Management furnishes a continuing investment program for the
Fund and makes investment decisions on its behalf.  Subject to the control of
the Trustees, Putnam Management also manages the Fund's other affairs and
business. Max    S.     Senter, Vice President of Putnam Management and Vice
President of the Fund   ,     and Kenneth    J.     Taubes, Senior Vice
President of Putnam Management and Vice President of the Fund    , have had
primary responsibility     for the day-to-day management of the Fund's
portfolio        since    March,     1992. Mr. Senter has been employed by
Putnam Management for the past five years.    Mr. Taubes has been employed by
Putnam Management since June, 1991.     Prior to    June,     1991, Mr. Taubes
was Senior Vice President of the Finance Division of         U.S. Trust
Company        .

The Fund pays all expenses not assumed by Putnam Management, including
Trustees' fees, auditing, legal, custodial, investor servicing and shareholder
reporting expenses, and payments under its Distribution    Plans (which are in
turn allocated to the relevant class of shares)    .  The Fund also reimburses
Putnam Management for the compensation and related expenses of certain
officers of the Fund and their staff who provide administrative services to
the Fund.  The total reimbursement is determined annually by the Trustees.

Putnam Management places all orders for purchases and sales of the Fund's
securities.  In selecting broker-dealers, Putnam Management may consider
research and brokerage services furnished to it and its affiliates.  Subject
to seeking the most favorable price and execution available, Putnam Management
may consider sales of shares of the Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-dealers.

ORGANIZATION AND HISTORY 

Putnam Federal Income Trust is a Massachusetts business trust organized on
March 7, 1986.  A copy of the Agreement and Declaration of Trust, which is
governed by Massachusetts law, is on file with the Secretary of State of The
Commonwealth of Massachusetts.  Prior to July 15, 1991, the Fund was known as
Putnam GNMA Plus Trust.

The Fund is an open-end, diversified management investment company with an
unlimited number of authorized shares of beneficial interest   .  Shares of
the Fund     may, without shareholder approval, be divided into    two or
more     series of         shares            representing separate investment
portfolios. At a May 5, 1994 meeting of shareholders of the Fund, shareholders
will be requested to approve a proposal to permit the division of its    
shares    of any     series   of     shares    into two or more classes having
such preferences and special or relative rights and privileges as the Trustees
determine.  If the proposal is approved, the Fund will offer Class B shares.
Shares of each class would vote together as a single class except when
otherwise required by law or as determined by the Trustees. If such proposal
is not approved this Prospectus will be revised or supplemented    . Shares
are freely transferable, are entitled to dividends as declared by the
Trustees, and, if the Fund were liquidated, would receive the net assets of
the Fund.  The Fund may suspend the sale of shares at any time and may refuse
any order to purchase shares.  Although the Fund is not required to hold
annual meetings of its shareholders, shareholders    holding at least 10% of
the outstanding shares entitled to vote     have the right to call a meeting
to elect or remove Trustees   ,     or to take other actions as provided in
the Declaration of Trust.

If you own fewer shares than a minimum amount set by the Trustees (presently
20 shares), the Fund may choose to redeem your shares and pay you for them. 
You will receive at least 30 days' written notice before the Fund redeems your
shares, and you may purchase additional shares at any time to avoid a
redemption.  The Fund may also redeem shares if you own shares above a maximum
amount set by the Trustees.  There is presently no maximum, but the Trustees
may establish one at any time, which could apply to both present and future
shareholders.

THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the Putnam funds. 
Chairman and Director of Putnam Management and Putnam Mutual Funds Corp.
("Putnam Mutual Funds").  Director,     Marsh & McLennan Companies, Inc.;
WILLIAM F. POUNDS, VICE     CHAIRMAN. Professor of Management, Alfred P. Sloan
School of     Management, M.I.T.   ; JAMESON ADKINS BAXTER, President, Baxter  
Associates, Inc.    ; HANS H. ESTIN, Vice Chairman, North American   
Management Corporation; JOHN A. HILL, Principal and Managing     Director,
First Reserve Corporation; ELIZABETH T. KENNAN,     President, Mount Holyoke
College; LAWRENCE J. LASSER,*  Vice President of the Putnam funds. President,
Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam
Management.   Director, Marsh & McLennan Companies, Inc.; ROBERT E. PATTERSON, 
Executive Vice President,  Cabot Partners Limited Partnership;    DONALD S.
PERKINS, Director of various corporations, including    AT&T, K mart
Corporation and Time Warner Inc.; GEORGE PUTNAM,   III,* President, New
Generation Research, Inc.; A.J.C. SMITH,*    Chairman, Chief Executive Officer
and Director, Marsh & McLennan  Companies, Inc.; and W. NICHOLAS THORNDIKE,
Director of various corporations and charitable organizations, including
Providence Journal Co. Also, Trustee and President, Massachusetts General   
Hospital and Trustee of Eastern Utilities Associates. The Fund's Trustees are
also Trustees of the other Putnam funds.  Those marked with an asterisk (*)
are "interested persons" of the Fund, Putnam Management or Putnam Mutual
Funds.
<PAGE>
ABOUT YOUR INVESTMENT

   ALTERNATIVE SALES ARRANGEMENTS

The Fund offers investors Class A shares and expects to offer investors Class
B shares. These two classes of shares will bear sales charges in different
forms and amounts and will bear different levels of expenses. The offering of
Class B shares is subject to approval of the shareholders of the Fund at a
meeting to be held on May 5, 1994. Prior to that date the Fund will offer only
Class A shares. If the proposal to offer Class B shares is not approved at the
May shareholder meeting, this Prospectus will be revised or supplemented.

CLASS A SHARES.  An investor who purchases Class A shares pays a sales charge
at the time of purchase. As a result, Class A shares are not subject to any
charges when they are redeemed (except for sales at net asset value in excess
of $1 million which are subject to a contingent deferred sales charge). 
Certain purchases of Class A shares qualify for reduced sales charges.  Class
A shares currently bear a 12b-1 fee at the annual rate of 0.25% of the Fund's
average net assets attributable to Class A shares.  See "How to buy shares --
Class A shares."

CLASS B SHARES.  Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge of up to 5% if redeemed
within six years.  Class B shares also bear a higher 12b-1 fee than Class A
shares, which would be at the annual rate of 1.00% of the Fund's average net
assets attributable to Class B shares.  Class B shares will automatically
convert into Class A shares, based on relative net asset value, approximately
eight years after purchase.  Class B shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but (until conversion) will have a higher expense ratio and pay lower
dividends than Class A shares due to the higher 12b-1 fee.  See "How to buy
shares --Class B shares."

WHICH ARRANGEMENT IS BETTER FOR YOU?  The decision as to which class of shares 
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class
A shares.  Investors who prefer not to pay an initial sales charge   might
consider Class B shares.  Orders for Class B shares for $250,000 or more will
be treated as orders for Class A shares or declined.  For more information
about these sales arrangements, consult your investment dealer or Putnam
Investor Services.  Sales personnel may receive different compensation
depending on which class of shares they sell. Shares may only be exchanged for
shares of the same class of another Putnam fund.  See "How to exchange
shares".    

<PAGE>
HOW TO BUY SHARES

You can open a Fund account with as little as $500 and make additional
investments at any time with as little as $50.  You can buy Fund shares three
ways    -     through most investment dealers, through Putnam Mutual Funds (at
1-800-225-1581), or through a systematic investment plan.  If you do not have
a dealer, Putnam  Mutual Funds can refer you to one. 

BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS.  Complete an order form and return
it with a check payable to the Fund to Putnam  Mutual Funds, which will act as
your agent in purchasing shares through your designated investment dealer. 

BUYING SHARES THROUGH SYSTEMATIC INVESTING.  You can make regular investments
of $25 or more per month through automatic deductions from your bank checking
account.  Application forms are available from your investment dealer or
through Putnam Investor Services.

Shares are sold at the public offering price based on the net asset value next
determined after Putnam Investor Services receives your order. In most cases,
in order to receive that day's public offering price, Putnam Investor Services
must receive your order before the close of regular trading on the New York
Stock Exchange. If you buy shares through your investment dealer, the dealer
must receive your order before the close of regular trading on the New York
Stock Exchange         to receive that day's public offering price.

   CLASS A SHARES

The public offering price of Class A shares is the net asset value plus a
sales charge.  The Fund receives the net asset value. The sales charge varies
depending on the size of your purchase and is allocated between your
investment dealer and Putnam Mutual Funds.  The current sales charges are:    
<PAGE>
<TABLE>
<CAPTION>

The public offering price is the net asset value plus a sales charge.    The Fund receives the net asset
value.      The sales charge varies depending on the size of your purchase    and is allocated between your
investment dealer and Putnam Mutual Funds    .  The current sales charges are:

                                             SALES CHARGE            AMOUNT OF
                                      AS A PERCENTAGE OF   :       SALES CHARGE
                                          ------------------         REALLOWED
                                            NET                     TO DEALERS
        AMOUNT OF TRANSACTION             AMOUNT      OFFERING    AS A PERCENTAGE
          AT OFFERING PRICE              INVESTED       PRICEOF OFFERING PRICE   *    
- -------------------------------------------------------------------------------------
<C>           <C>            <C>            <C>          <C>            <C>
             Less than      $   50,000     4.99%        4.75%          4.25%
 $  50,000   but less than     100,000     4.71         4.50           4.00
   100,000   but less than     250,000     3.63         3.50           3.00
   250,000   but less than     500,000     2.56         2.50           2.25
   500,000   but less than   1,000,000     2.04         2.00           1.75
- -------------------------------------------------------------------------------------
/TABLE
<PAGE>
   *    At the discretion of Putnam Mutual Funds, however, the entire 
sales
charge may at times be reallowed to dealers.  The Staff of the Securities and
Exchange Commission has indicated that dealers who receive more than 90% of
the sales charge may be considered underwriters.

   There is no initial sales charge on purchases of Class A shares of
$1,000,000 or more.  However, Putnam Mutual Funds pays investment dealers of
record commissions on such sales at the rates shown in the table below. If you
redeem such shares within a certain period of time after purchase, a
contingent deferred sales charge ("CDSC") will be imposed as follows:    
<PAGE>
<TABLE>
<CAPTION>
                                                        COMMISSIONS PAID
                                            TO INVESTMENT
                                                   DEALERS OF RECORD    
        AMOUNT OF TRANSACTION                 AND           PERIOD AFTER PURCHASE
          AT OFFERING PRICE             APPLICABLE     CDSCDURING WHICH CDSC APPLIES
      -------------------------          ---------------  -------------------------
 <C>         <C>           <C>                 <C>                 <C>
   $    1,000,000                   but less than       $2,500,000    1.00% 2 years
 2,500,000  but less than  5,000,000          0.50%               1 year
 5,000,000  and over                          0.25%               1 year
/TABLE
<PAGE>
The CDSC is imposed on the lower of the cost    or the current net asset value
of the shares redeemed. Putnam Mutual Funds receives the entire amount of any
CDSC you pay. Shares owned by certain tax-qualified retirement plans may be
redeemed without charge to pay benefits. In addition, any shares acquired by
reinvestment of distributions will be redeemed without a CDSC. In determining
whether a CDSC is payable, the Fund will first redeem shares not subject to
any charge. See the Statement of Additional Information for more information
about the CDSC.

YOU MAY BE ELIGIBLE TO BUY CLASS A SHARES AT REDUCED SALES        CHARGES. 
Consult your investment dealer or Putnam Mutual Funds for details about
Putnam's Combined Purchase Privilege, Cumulative Quantity Discount, Statement
of Intention, Group Sales Plan, Employee Benefit Plans and other plans. 
Descriptions are also included in the order form and in the Statement of
Additional Information.  Shares may also be sold at net asset value to 
certain categories of investors. See "How to buy shares -- General" below.

CLASS B SHARES

Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within six years of purchase.  The following
types of shares may be redeemed without charge at any time: (i) shares
acquired by reinvestment of distributions and (ii) shares otherwise exempt
from the CDSC, as described below.  Subject to the foregoing exclusions, the
amount of the charge is determined as a percentage of the lesser of the
current market value or the cost of the shares being redeemed. Therefore, when
a share is redeemed, any increase in its value above the initial purchase
price is not subject to ay CDSC. The amount of the CDSC will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following table:


                                      
CONTINGENT DEFERRED
                                      
SALES CHARGE AS A
                                                   PERCENTAGE OF 
YEARS SINCE PURCHASE                  
DOLLAR AMOUNT
PAYMENT MADE                          
SUBJECT TO CHARGE
- -----------------------------------------------------------------

      0-1                             
 5.0%
      1-2                             
 4.0%
      2-3                             
 3.0%
      3-4                             
 3.0%
      4-5                             
 2.0%
      5-6                             
 1.0%
      6 and thereafter                
 None
<PAGE>
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the six-year period.  For information on how sales charges are
calculated if you exchange your shares, see "How to exchange shares."  Putnam
Mutual Funds receives the entire amount of any CDSC you pay.

CONVERSION OF CLASS B SHARES.  Class B shares will automatically   convert
into Class A shares at the end of the month eight years after the purchase
date, except as noted below.  Class B shares acquired by exchange from Class B
shares of another Putnam Fund will convert into Class A shares based on the
time of the initial purchase.  Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date of the
initial purchase to which such shares relate.  For this purpose, Class B
shares acquired through reinvestment of distributions will be attributed to
particular purchases of Class B shares in accordance with such procedures as
the Trustees may   determine from time to time.  The conversion of Class B
shares to Class A shares is subject to the continuing availability of a ruling
from the Internal Revenue Service or an opinion of counsel that such
conversions will not constitute taxable events for federal tax purposes. There
can be no assurance that such ruling or opinion will be available, and the
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available. In such event, Class B shares would continue to
be subject to higher expenses than Class A shares for an indefinite period.

GENERAL

The Fund may  sell Class A shares and Class B shares at net asset value
without an initial sales charge or a CDSC to the Fund's current and retired
Trustees (and their families), current and retired employees (and their
families) of Putnam Management and affiliates, registered representatives and
other employees (and their families) of broker-dealers having sales agreements
with Putnam Mutual Funds, employees (and their families) of financial
institutions having sales agreements with Putnam Mutual Funds (or otherwise
having an arrangement with a broker-dealer or financial institution with
respect to sales of Fund shares), financial institution trust departments
investing an aggregate of $1 million or more in Putnam funds, clients of
certain administrators of tax-qualified plans, employee benefit plans of
companies with more than 750 employees, tax-qualified plans when proceeds from
repayments of loans to participants are invested (or reinvested) in Putnam
funds, "wrap accounts" for the benefit of clients of broker-dealers, financial
institutions or financial planners adhering to certain standards established
by Putnam Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender offer by the
closed-end fund.  In addition, the Fund may sell shares at net asset value
without an initial sales charge or a CDSC in connection with the acquisition
by the Fund of assets of an investment company or personal holding company,
and the CDSC will be waived on redemptions of shares arising out of death or
disability or in connection with certain withdrawals from IRA or other
retirement plans.  Up to 12% of the value of Class B shares subject to a
Systematic Withdrawal Plan may also be redeemed each year without a CDSC.    
See the Statement of Additional Information.  
   Shareholders of other Putnam funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.

If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares with
a certified check to avoid any delay in redemption, exchange or transfer. 
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days
after the purchase date.  

To eliminate the need for safekeeping, the Fund will not issue certificates
for your shares unless you request them.  Putnam Mutual Funds may, at its
expense, provide additional promotional incentives or payments to dealers that
sell shares of the Putnam funds.  In some instances, these incentives or
payments may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all classes of
shares.

DISTRIBUTION PLANS

CLASS A DISTRIBUTION PLAN. The purpose of the Class A Plan is to permit the
Fund to compensate Putnam Mutual Funds for services provided and expenses
incurred by it in promoting the sale of  Class A shares of the Fund, reducing
redemptions, or maintaining or improving services provided to shareholders by
Putnam Mutual Funds or dealers.  The Class A Plan provides for payments by the
Fund to Putnam Mutual Funds at the annual rate of up to 0.35% of the Fund's
average net assets attributable to Class A shares, subject to the authority of
the Fund's Trustees to reduce the amount of payments or to suspend the Class A
Plan for such periods as they may determine.  Subject to these limitations,
the amount of such payments and the specific purposes for which they are made
shall be determined by the Trustees of the Fund.  At present, the Trustees
have approved payments under the Class A Plan at the annual rate of 0.25% of
the Fund's average net assets attributable to Class A shares for the purpose
of compensating Putnam Mutual Funds for services provided and expenses
incurred by it as principal underwriter of the Fund's Class A shares,
including payments made by it to dealers under the Service Agreements referred
to below.  Should the Trustees decide in the future to approve payments in
excess of this amount, shareholders will be notified and this Prospectus will
be revised.

In order to compensate investment dealers (including, for this purpose,
certain financial institutions) for services provided in connection with sales
of  Class A 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 A shares of the Fund which are attributable to
shareholders for whom the dealers are designated as the dealer of record. 
Putnam Mutual Funds makes such payments at the annual rate of 0.25% of such
average net asset value of such shares (including shares acquired through
reinvestment of distributions).  

CLASS B DISTRIBUTION PLAN.  The Class B Plan provides for payments by the Fund
to Putnam Mutual Funds at the annual rate of up to 1.00% of the Fund's average
net assets attributable to Class B shares, subject to the authority of the
Trustees to reduce the amount of payments or to suspend the Class B Plan for
such periods as they may determine. Putnam Mutual Funds also receives the
proceeds of any CDSC imposed on redemptions of such shares.  

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 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. 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 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 which are attributable to shareholders for whom
the dealers are designated as the dealer of record. Putnam Mutual Funds makes
such payments at an annual rate of 0.25% of such average net asset value of
such shares.  

GENERAL. Putnam Mutual Funds may suspend or modify the payments  made to
dealers described above, and such payments are subject to the continuation of
the  relevant Plan described above, the terms of Service Agreements between
dealers and Putnam Mutual Funds, and any applicable limits imposed by the
National Association of Securities Dealers, Inc. Banks and other financial
service firms may be subject to various state laws regarding the services
described above, and may be required to register as dealers pursuant to state
law.
<PAGE>
HOW TO SELL SHARES

You can sell your shares to the Fund any day the New York Stock Exchange is
open, directly to the Fund, by check or through your investment dealer.  The
Fund will only repurchase shares for which it has received payment.

SELLING SHARES DIRECTLY TO THE FUND.  Send a signed letter of instruction or
stock power form to Putnam Investor Services, along with any certificates that
represent shares you want to sell.  The price you will receive is the next net
asset value calculated after the Fund receives your request in proper form
less any applicable CDSC.  In order to receive that day's net asset value,
Putnam Investor Services must receive your request before the close of regular
trading on the New York Stock Exchange. If you sell shares having a net asset
value of $100,000 or more, the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or certain other
financial institutions.  See the Statement of Additional Information for more
information about where to obtain a signature guarantee.  Stock power forms
are available from your investment dealer, Putnam Investor Services and many
commercial banks.  If you want your redemption proceeds sent to an address
other than your address as it appears on Putnam's records, a signature
guarantee is required.  Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation, partnership, agent or
fiduciary, or a surviving joint owner.  Contact Putnam Investor Services for
details.

THE FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS DAY AFTER
YOUR REQUEST IS RECEIVED.  Under unusual circumstances, the Fund may suspend
repurchases, or postpone payment for more than seven days, as permitted by
federal securities law.

You may use Putnam's Telephone Redemption Privilege to redeem shares valued up
to $100,000 from your account unless you have notified Putnam Investor
Services of an address change within the preceding 15 days. Unless an investor
indicates otherwise on the Account Application, Putnam Investor Services will
be authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide Putnam Investor Services with his or her
account registration and address as it appears on Putnam Investor Services'
records. Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, Putnam Investor Services may be
liable for any losses due to unauthorized or fraudulent instructions.  For
information, consult Putnam Investor Services.  During periods of unusual
market changes and shareholder activity, you may experience delays in
contacting Putnam Investor Services by telephone in which case you may wish to
submit a written redemption request, as described above, or contact your
investment dealer, as described below.  The Telephone Redemption Privilege is
not available if you were issued certificates for your shares which remain
outstanding.  The Telephone Redemption Privilege may be modified or terminated
without notice.

SELLING SHARES BY CHECK.  If you would like to use the Fund's CheckWriting
Service, mark the proper box on the order form and complete the signature card
and,     if applicable,    the resolution.  Upon receiving the properly
completed order form, signature card and resolution, the Fund will provide
checks drawn on the Fund's designated bank.  These checks may be made payable
to the order of any person in the amount of $500 or more.  When a check is
presented for payment, a sufficient number of full and fractional shares in
your account will be redeemed at that day's net asset value to cover the
amount of the check. An additional amount of shares will be redeemed to cover
any applicable CDSC. Shares to be redeemed by this method may not be
represented by share certificates.

Shareholders utilizing Fund checks are subject to the Fund's designated bank's
rules governing checking accounts.  There is currently no charge to 
shareholders for the use of checks.  You should make sure that there are
sufficient shares in the account to cover the amount of any check drawn, since
the net asset value of shares will fluctuate.  If insufficient shares are in
your account, the check will be returned marked "insufficient funds," and no
shares will be redeemed.  Because dividends declared on shares held in your
account, prior redemptions, and possible changes in net asset value may cause
the value of your account to change, it is impossible to determine in advance
your account's total value.  Accordingly, you should not write a check for the
entire value of your account or close your account by writing a check.
CheckWriting is not available for Tax Qualified Retirement Plans.

SELLING SHARES THROUGH YOUR INVESTMENT DEALER.  Your dealer must receive your
request before the close of regular trading on the New York Stock Exchange and
transmit it to Putnam Mutual Funds before 5 p.m. Boston time to receive that
day's net asset value.  Your dealer will be responsible for furnishing all
necessary documentation to Putnam Investor Services, and may charge for its
services.    

HOW TO EXCHANGE SHARES 

You can exchange your shares for shares of    the same class of     certain
other Putnam funds at net asset value beginning 15 days  after
purchase   .  Not all Putnam funds offer more than one class of
shares.  If the other Putnam fund offers only one class of
shares, only Class A shares may be exchanged for such class.   
If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC.  However, when you redeem the shares
acquired through the exchange, the redemption  may be subject to
the CDSC, depending upon when you originally purchased the shares
and using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the
highest CDSC applicable to your class of shares.  For purposes of
computing the CDSC, the length of time you have owned your shares
will be measured from the date of original purchase and will not
be affected by any exchange.    

To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. 
Exchange Authorization Forms are available by calling or writing
Putnam Investor Services.  For federal income tax purposes, an
exchange is treated as a sale of shares and generally results in
a capital gain or loss.  A Telephone Exchange Privilege is
currently available for amounts up to $500,000.  Putnam Investor
Services' procedures for telephonic transactions are described
above under "How to sell shares."  The Telephone Exchange
Privilege is not available if you were issued certificates for
shares which remain outstanding.  Ask your investment dealer or
Putnam Investor Services for prospectuses of other Putnam funds. 
         Shares of certain Putnam funds are not available to
residents of all states.     

    The    exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere
with portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where the Trustees or Putnam Management
believes doing so would be in the best interests of the Fund,
the     Fund reserves the right to     revise or terminate the
exchange privilege, limit the amount or number of exchanges or
reject any exchange    . Shareholders would be notified of any
such    action to the extent required by law    . Consult Putnam
Investor Services before requesting an exchange. See the
Statement of Additional Information to find out more about the
   exchange privilege    .

HOW THE FUND VALUES ITS SHARES

THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE    OF EACH
CLASS     BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS
LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING.  SHARES ARE
VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK
EXCHANGE EACH  DAY THE EXCHANGE IS OPEN.  Portfolio securities
for which market quotations are readily available are stated at
market value.  Short-term investments that will mature in 60 days
or less are stated at amortized cost, which approximates market
value.  The market value of an exchange-listed option is
determined using the last sale price on the principal exchange on
which the option is traded or, in the absence of a sale, the mean
between the last bid and asked prices.  The values of options on
Ginnie Maes are provided by a pricing service approved by the
Trustees, which determines values of options using information
with respect to market transactions in Ginnie Maes, various
relationships between Ginnie Maes and options, and other market
factors.  The Fund believes that reliable market quotations are
generally not readily available for purposes of valuing options
on Ginnie Maes.  As a result, it is likely that most of the
values provided by the pricing service will represent
determinations of fair value rather than actual market
quotations.  The market value of other over-the-counter options
is supplied by dealers in such options, which may include dealers
with whom the Fund has options positions.  All other securities
and assets are valued at their fair value following procedures
approved by the Trustees.

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION

The Fund distributes net investment income monthly and any net
realized capital gains at least annually.  Distributions from net
capital gains are made after applying any available capital loss 
carryovers.  A capital loss carryover is currently available.  
   Distributions paid by the Fund with respect to Class A shares
will generally be greater than those paid with respect to Class B
shares because expenses attributable to Class B shares will
generally be higher.    

YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS:  (1) reinvest all
distributions in additional Fund shares without a sales charge;
(2) receive distributions from net investment income and short-
term capital gains in cash while reinvesting long-term capital
gains distributions in additional shares without a sales charge;
or (3) receive all distributions in cash.  You can change your
distribution option by notifying Putnam     Investor Services    
in writing.  If you do not select an option when you open your
account, all distributions will be reinvested.    All
distributions not paid in cash will be reinvested in shares of
the class on which the distribution was paid.     You will
receive a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs. 

   If a check representing a Fund distribution is not cashed
within a specified period, Putnam Investor Services will notify
you that you have the option of requesting another check or
reinvesting the distribution in the Fund or in another Putnam
fund.  If Putnam Investor Services does not receive your
election, the distribution will be reinvested in the Fund. 
Similarly, if correspondence sent by the Fund or Putnam Investor
Services is returned as "undeliverable,"  Fund distributions will
automatically be reinvested in the Fund or in another Putnam
fund.    

The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal 
taxes on income and gains it distributes to shareholders.  The
Fund will distribute substantially all of its ordinary income and
        capital    gain net income     on a current basis.
<PAGE>
All Fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxed as such, regardless of how long you have held the
shares.  Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.  

Early in each year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding
year.

The Fund's distributions may, to the extent they consist of
interest from securities of the U.S. government and certain of
its agencies and instrumentalities, be exempt from all state and
local income taxes, although state and local authorities may not
agree with this view.  Interest from obligations which are merely
guaranteed by the U.S. government or one of its agencies, such as
mortgage participation certificates guaranteed by GNMA, is not
entitled to this exemption.  Although there is no assurance that
any such state and local exemptions will be available, the Fund
will advise shareholders of the portion of its distributions
which might qualify for such an exemption.

The foregoing is a summary of certain federal income tax
consequences of investing in the Fund.  You should consult your
tax adviser to determine that precise effect of an investment in
the Fund on your particular tax situation    (including possible
liability for state and local taxes)    .

ABOUT PUTNAM INVESTMENTS, INC.

PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937. 
Putnam Mutual Funds is the principal underwriter of the Fund and
of other Putnam funds.  Putnam Fiduciary Trust Company is the
Fund's custodian.  Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the Fund's investor servicing and
transfer agent.

Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly-owned by Marsh & McLennan Companies, Inc., a publicly
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>

PUTNAM FEDERAL INCOME TRUST

One Post Office Square
Boston, MA  02109

FUND INFORMATION:
INVESTMENT MANAGER
                         
Putnam Investment Management, Inc.
One Post Office Square   
Boston, MA  02109        

MARKETING SERVICES       

Putnam Mutual Funds Corp.     
One Post Office Square
Boston, MA  02109

INVESTOR SERVICING AGENT 

Putnam Investor Services      
Mailing address:
P.O. Box 41203           
Providence, RI 02940-1203

CUSTODIAN                

Putnam Fiduciary Trust
Company                  
One Post Office Square   
Boston, MA  02109        


LEGAL COUNSEL

Ropes & Gray
One International Place
Boston, MA  02110

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand        
One Post Office Square   
Boston, MA  02109

PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<PAGE>
                        PUTNAM FEDERAL INCOME TRUST

                                 FORM N-1A
                                  PART B

                    STATEMENT OF ADDITIONAL INFORMATION
                              MARCH 1, 1994    

    This Statement of Additional Information is not a Prospectus
and is only authorized for distribution when accompanied or
preceded by the Prospectus of the Fund dated    March 1, 1994, as
revised from time to time    . This Statement contains
information which may be useful to investors but which is not
included in the Prospectus. If the Fund has more than one form of
current Prospectus, each reference to the Prospectus in this
Statement shall include all the Fund's Prospectuses, unless
otherwise noted.  The Statement should be read together with the
applicable Prospectus.  Investors may obtain a free copy of the
applicable Prospectus from Putnam Investor Services, Mailing
address: P.O. Box  41203-1203, Providence, RI 02940-1203.

    Part I of this Statement contains specific information about
the Fund. Part II includes information about the Fund and the
other Putnam funds.

                             TABLE OF CONTENTS
         PART I                                            PAGE

INVESTMENT RESTRICTIONS OF THE FUND. . . . . . . . . . . . . . . . . . .I-3

FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . .I-7

INVESTMENT PERFORMANCE OF THE FUND . . . . . . . . . . . . . . . . . . .I-8

ADDITIONAL OFFICERS OF THE FUND. . . . . . . . . . . . . . . . . . . . I-12

BOND RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-13

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-14

<PAGE>
         PART II

         MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . II-1

         TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-23

         MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . .II-28

         DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . .II-37

         HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . . . . .II-39

         DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . .II-50

         INVESTOR SERVICES . . . . . . . . . . . . . . . . . . . . . .II-51

         SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . . . . .II-57

         SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . . . . .II-57

         SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . .II-58

         STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . . . . .II-58

         COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . . . . .II-59

         DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .II-64

<PAGE>

                        PUTNAM FEDERAL INCOME TRUST

                    STATEMENT OF ADDITIONAL INFORMATION
                                  PART I

INVESTMENT RESTRICTIONS OF THE FUND

AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED
WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES, THE FUND MAY NOT AND WILL NOT:

    (1)  Borrow money in excess of 10% of the value (taken at
the lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes.  Such
borrowings will be repaid before any additional investments are
purchased.

    (2)  Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 15% of its total assets (taken at current
value) and then only to secure borrowings permitted by
restriction 1 above.  (The deposit of underlying securities and
other assets in escrow and other collateral arrangements in
connection with the writing of put or call options and collateral
arrangements with respect to margin for futures contracts or
options on futures contracts are not deemed to be pledges or
other encumbrances.)

    (3)  Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and
sales of securities, and except that it may make margin payments
in connection with futures contracts or options on financial
futures contracts.

    (4)  Make short sales of securities or maintain a short sale
position for the account of the Fund unless at all times when a
short position is open it owns an equal amount of such securities
or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.

    (5)  Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.

    (6)  Purchase or sell real estate, although it may purchase
securities which are secured by or represent interests in real
estate.

    (7)  Purchase or sell commodities or commodity contracts,
except futures contracts or options on futures contracts.

    (8)  Make loans, except by purchase of debt obligations in
which the Fund may invest consistent with its investment
policies, by entering into repurchase agreements with respect to
not more than 25% of its total assets (taken at current value),
or through the lending of its portfolio securities with respect
to not more than 25% of its assets.

    (9)  Invest in securities of any issuer if, to the knowledge
of the Fund, officers and Trustees of the Fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the shares of securities of that issuer together own more
than 5%.

    (10) Invest in securities of any issuer if, immediately
after such investment, more than 5% of the total assets of the
Fund (taken at current value) would be invested in the securities
of such issuer; provided that this 
limitation does not apply to U.S. Government Securities.

    (11) Acquire more than 10% of the voting securities of any
issuer.

    (12) Invest more than 25% of the value of its total assets
in any one industry.  (U.S. Government Securities are not
considered to represent an industry.)

    (13) Invest in the securities of other registered investment
companies, except as they may be acquired as part of a merger or
consolidation or acquisition of    assets.+    

    (14) Purchase securities the disposition of which is
restricted under federal securities laws, if as a result such
investments would exceed 10% of the value of the Fund's net    
assets.+    

    (15) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts.

    (16) Make investments for the purpose of gaining control of
a company's management.

    (17) Issue any class of securities which is senior to the
Fund's shares of beneficial interest.

   +  At the Fund's May 5, 1994 meeting of shareholders, the
shareholders will be requested to approve the deletion of
restriction number (13) (and its replacement by a new non-
fundamental policy that may be changed without shareholder
approval) and an amendment to restriction number (14).  The
proposed new non-fundamental policy regarding investment in
investment companies is as follows:

    Invest in the securities of other registered open-end
    investment companies, except as thy may be acquired as part
    of a merger, consolidation or acquisition of assets.

The proposed amended fundamental policy regarding restricted
securities is as follows:

    Purchase securities restricted as to resale if, as a result,
    such investments would exceed 15% of the value of the Fund's
    net assets, including restricted securities that have been
    determined by the Trustees of the Fund (or the person
    designated by them to make such determinations) to be
    readily marketable.

If the proposals are not approved, this Statement of Additional
Information will be revised.    

IT IS CONTRARY TO THE FUND'S PRESENT POLICY, WHICH MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL, TO:

    (1)  Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale (excluding securities determined by the Trustees of
the Fund (or the person designated by the Trustees of the Fund to
make such determinations) to be readily marketable), and (c)
repurchase agreements maturing in more than seven days, if, as a
result, more than 15% of the Fund's net assets (taken at current
value) would be invested in securities described in (a), (b) and
(c) above.

    (2)  Invest in warrants (other than warrants acquired by the
Fund as part of a unit or attached to securities at the time of
purchase).

    (3)  Purchase or sell real property (including limited
partnership interests), except that the Fund may (a) purchase or
sell readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest
in real estate (b) purchase or sell securities that are secured
by interests in real estate or interests therein, or (c) acquire
real estate through exercise of its rights as a holder of
obligations secured by real estate or interests therein or sell
real estate so acquired.
                           ---------------------

    Although certain of the Fund's fundamental investment
restrictions permit the Fund to borrow money to a limited extent,
the Fund does not currently intend to do so and did not do so
last year.

                           --------------------
    All percentage limitations on investments will apply at the
time of the making of an investment and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.

    The Investment Company Act of 1940 provides that a "vote of
a majority of the outstanding voting securities" of the Fund
means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Fund, or (2) 67% or more of the
shares present at a meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy.
<PAGE>
FUND CHARGES AND EXPENSES

MANAGEMENT FEES

    Under a Management Contract dated December 21, 1988, the
Fund pays a quarterly fee to Putnam Management based on the
average net assets of the Fund, as determined at the close of
each business day during the quarter, at an annual rate of 0.75%
of the first $100 million of the Fund's average net 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 amount over 
   $1     billion.  For its         1991    ,     1992    and
1993     fiscal years, pursuant to the Management Contract, the
Fund incurred fees of          $4,240,637,         $3,935,406
   and $3,690,049    , respectively.

BROKERAGE COMMISSIONS

            In fiscal 1991    and 1993    , the Fund incurred
brokerage commissions aggregating $5,000    and $5,250,
respectively,     on agency transactions.  During fiscal        
1991, the Fund incurred no underwriting commissions. In fiscal
1992,    the Fund incurred no brokerage commissions on agency
transactions.  In fiscal 1992 and 1993,     the Fund incurred
underwriting commissions of $150,453    and $11,041,
respectively    . 


ADMINISTRATIVE EXPENSE REIMBURSEMENT

    The Fund reimbursed Putnam Management    $18,998     for
administrative services in fiscal    1993,     including
   $16,968     for the compensation of certain officers of the
Fund and their staff and contributions to    the     Putnam
   Investments, Inc.     Profit Sharing    Retirement     Plan
for their benefit.

TRUSTEE FEES

    Each Trustee of the Fund receives an annual fee of
   $1,520    
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 Fund incurred
Trustees' fees aggregating    $23,727     in fiscal    1993    .

OWNERSHIP OF FUND SHARES

    At    January 31, 1994     the officers and Trustees of the
Fund as a group owned less than 1% of the outstanding shares of
the Fund, and to the knowledge of the Fund no person owned of
record or beneficially 5% or more of the shares of the Fund. 
<PAGE>
SALES CHARGES, CONTINGENT DEFERRED SALES CHARGES AND 12B-1 FEES

    During fiscal         1991    ,     1992    and 1993    ,
Putnam Mutual Funds received         $375,503   , $561,103    
and    $534,846    , respectively, in sales charges on sales of
shares of the Fund, of which it retained    $53,843,     $66,072
   and $81,446    , respectively, after allowance of dealer
concessions.  During fiscal         1991    ,     1992     and
1993    , Putnam Mutual Funds received no contingent deferred
sales charges.  During fiscal    1993    , the Fund incurred    
$1,589,632     in 12b-1 fees to Putnam Mutual Funds pursuant
   to     the Fund's Distribution Plan.


INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES

    During the    1993     fiscal year, the Fund incurred    
$1,141,033     in fees and out-of-pocket expenses for investor
servicing and custody services provided by Putnam Fiduciary Trust
Company.  

INVESTMENT PERFORMANCE OF THE FUND


STANDARD PERFORMANCE MEASURES

       The Fund's yield for the thirty-day period ended October
31,    1993     was    4.71%    .  The Fund's average annual
total return (compounded annually) for the one- and five-year
periods ended October 31,    1993     and for the life of the
Fund through    that date was +3.05%, +8.23% and +7.23%    ,
respectively, adjusted to reflect the deduction of the maximum
sales charge of 4.75%.  See "Standard Performance Measures" in
Part II of this Statement for information on how the Fund's total
return and yield are calculated.
<PAGE>
PERFORMANCE RATINGS

    For the    1993     fiscal year, the Fund was ranked
   92     of    110      U.S. government funds by Lipper
Analytical Services, Inc. and     35     of    104     government
mortgage-backed funds by     CDA/Weisenberger's     Management
Results. As of the end of the fiscal year, the Fund was given a
2-star rating (out of 5 stars) by Morningstar, Inc.  See
"Comparison of Portfolio Performance" in Part II of this
Statement for information about how these rankings are
determined.    Past performance is no guarantee of future
results.    

OTHER PERFORMANCE INFORMATION

    The tables below show the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment
in one share of the Fund during the life of the Fund.  On July
11, 1991, the shareholders of the Fund approved a change in the
investment objective of the Fund to its current investment
objectives and a change in the Fund's distribution policies. The
investment objective of the Fund before that vote was to seek
high current return consistent with preservation of capital,
through investments primarily in GNMA certificates, and the Fund
invested exclusively in U.S. Government Securities (as defined
below). Under the Fund's former distribution policies, the Fund
declared a distribution each day in an amount which was based on
projections of its estimated earnings. Consequently, the
information in the table relating to the periods before July 15,
1991 does not reflect the Fund's performance under its current
investment objectives or its current distribution policies.
This was a period of fluctuating security prices.  The tables do
not project the future performance of the Fund.

<PAGE>
<TABLE>
<CAPTION>
                                                                                          CUMULATIVE
              MAXIMUM            NET ASSET                    DISTRIBUTIONS             NET ASSET VALUE
             OFFERING              VALUE             -------------------------------      AT YEAR-END
FISCAL       PRICE AT        -----------------       FROM        FROM     FROM             WITH ALL
 YEAR        BEGINNING      BEGINNING    END OF      INVESTMENT  CAPITAL  PAID-IN        DISTRIBUTIONS
 ENDED       OF PERIOD      OF PERIOD    PERIOD      INCOME      GAINS    CAPITAL(2)      REINVESTED
- ---------------------------------------------------------------------------------------------------------
<C>            <C>            <C>         <C>          <C>        <C>      <C>               <C>
11/30/86(1)   $12.02         $11.45      $11.46       $0.42      $0.19    $0.02             $12.10
10/31/87       12.03          11.46       10.04        0.77       0.17     0.19              11.80
10/31/88       10.54          10.04       10.07        0.81         --     0.09              12.94
10/31/89       10.57          10.07       10.21        0.84         --       --              14.28
10/31/90       10.72          10.21        9.90        0.82         --     0.02              15.06
10/31/91(2)    10.39           9.90       10.52        0.80         --       --              17.30
10/31/92       11.04          10.52       10.47        0.84         --       --                
18.64            
   10/31/93    10.99          10.47       10.47        0.83         --       --              20.16    

Total distributions                               $6.13          $0.36    $0.32
                                                      -----       ----     ----
                                                      -----       ----     ----

(1) Investment operations began June 2, 1986.
(2)  Prior to July 15, 1991, the Fund's objective was to seek high current return consistent with preservation of
     capital through investment primarily in GNMA certificates, and the Fund declared a distribution each day in an    
    amount which was based on projections of its net investment income and net realized short-term gain.  This
    distribution policy at times resulted in a return of capital to shareholders. Consequently, the information in
    the table relating to the period prior to July 15, 1991 does not reflect the Fund's performance under its current
    investment objectives and policies or its current distribution policies. 
/TABLE
<PAGE>
<TABLE>
<CAPTION>
                                              PERCENTAGE CHANGES DURING LIFE OF FUND

                        PUTNAM FEDERAL INCOME TRUST                                            
                    -----------------------------------                                     
                                                                               
                  MAXIMUM OFFERING         NET ASSET VALUE                       
                    PRICE TO NET               TO NET               LEHMAN BROTHERS              CONSUMER
  FISCAL             ASSET VALUE             ASSET VALUE             TREASURY     INDEX         PRICE INDEX
   YEAR                      CUMULA-                 CUMULA-                   CUMULA-                  CUMULA-
   ENDED         ANNUAL       TIVE       ANNUAL       TIVE         ANNUAL       TIVE        ANNUAL       TIVE
- -----------------------------------------------------------------------------------------------------------------   ----
- --    
<C>                <C>         <C>         <C>        <C>          <C>          <C>           <C>        <C>
11/30/86(1)   --              +0.7%   --              +5.7%         --          +4.7%    --              +1.4% 
10/31/87          -7.2   %    -1.9        -2.5   %    +3.0          +2.3%       +7.0         +4.4%        +5.9
10/31/88          +4.5        +7.6        +9.7       +13.0          +8.7       +16.4         +4.3       +10.4
10/31/89          +5.1       +18.8       +10.4       +24.7          10.4       +28.6         +4.5       +15.3
10/31/90          +0.4       +25.3        +5.4       +31.5          +7.7       +38.5         +6.3       +22.6
10/31/91(2)       +9.5       +43.9       +14.9       +51.1         +13.2       +56.8         +2.9       +26.2
10/31/92          +2.7       +55.1        +7.8       +62.8          +9.9       +72.4         +3.2       +30.2
   10/31/93       +3.1       +67.7        +8.2       +76.1          +9.3       +88.3         +2.8       +33.8    

(1) Investment operations began June 2, 1986.
(2)  Prior to July 15, 1991, the Fund's objective was to seek high current return consistent with preservation of
     capital through investment primarily in GNMA certificates, and the Fund declared a distribution each day in an   
     amount which was based on projections of its net investment income and net realized short-term gain.  This      
                    distribution policy at times resulted in a return of capital to shareholders. Consequently, 
the information in t
    table relating to the period prior to July 15, 1991 does not reflect the Fund's performance under its current
                                investment objectives and policies or its current distribution policies.
/TABLE
<PAGE>
    The tables are not adjusted for any taxes payable on
reinvested distributions.  The total values for the Fund as of
the end of each period reflect reinvestment of all distributions
and all changes in net asset value.

      The Lehman Brothers    Treasury Bond Index is an unmanaged
list of publically issued U.S. Treasury obligations, (excluding
flower bonds and foreign-targeted issues) that are U.S. dollar
denominated, have a minimum of one year to maturity, and are
issued with over $100 million outstanding. The average quality of
bonds held in the index may differ from the average quality of
those bonds in which the Fund invests    .  The performance
figures    for     the index reflect changes    of     market
prices and reinvestment of all interest payments.  Because the
Fund is a managed portfolio investing in a    wide     variety of
        securities        , the securities it owns will not match
those in the index.


    The Consumer Price Index, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate of
inflation.  The index shows the average change in the cost of
selected consumer goods and services and does not represent a
return on an investment vehicle.

ADDITIONAL OFFICERS OF THE FUND

    In addition to the persons listed as officers of the Fund in
Part II of this Statement, the following persons are also
officers of the Fund.  Officers of Putnam Management hold the
same offices in Putnam Management's parent company,         
Putnam     Investments    , Inc.
    
    GARY N. COBURN, Vice President.  Senior Managing Director of
        Putnam Management        .  Director,         Putnam
   Investments    , Inc.  Vice President of certain of the Putnam
funds.  
    
    MAX S. SENTER, Vice President. Vice President of        
Putnam Management        .
    
    KENNETH J. TAUBES, Vice President. Senior Vice President of 
        Putnam Management        . Prior to June, 1991, Mr.
Taubes was Senior Vice President of the Finance Division of
        U.S. Trust Company        . 
<PAGE>
BOND RATINGS

The rating services' descriptions of bonds are:

MOODY'S INVESTORS SERVICE, INC.:

Aaa--Bonds which are rated Aaa are judged to be of the best
quality.  They carry the smallest degree of investment risk and
are generally referred to as "gilt edge."  Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure.  While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.

Aa--Bonds which are rated Aa are judged to be of high quality by
all standards.  Together with the Aaa group they comprise what
are generally known as high-grade bonds.  They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.

A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade
obligations.  Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade 
obligations, I.E., they are neither highly protected nor poorly
secured.  Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time.  Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.

STANDARD & POOR'S CORPORATION:

AAA--Bonds rated AAA have the highest rating assigned by Standard
& Poor's.  Capacity to pay interest and repay principal is
extremely strong.

AA--Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
<PAGE>
A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.

BBB--Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal.  Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in
this category than for bonds in higher rated categories.


INDEPENDENT ACCOUNTANTS    AND FINANCIAL STATEMENTS    


    Coopers & Lybrand are the Fund's independent accountants,
providing audit services, tax return review    and other tax
consulting     services and assistance and consultation in
connection with the review of various Securities and Exchange
Commission filings.     The Report of Independent Accountants and
financial statements included in the Fund's Annual Report for the
fiscal year ended October 31, 1993, filed electronically on
December 30, 1993 (811-4617), are incorporated by reference into
this Statement of Additional Information.  The financial
highlights            in the Prospectus and the financial
statements incorporated by reference into the Prospectus and the
Statement of Additional Information have been so included and
incorporated in reliance upon the report    of     independent
accountants, given on    their     authority         as experts
in auditing and accounting.       <PAGE>
<PAGE>




                             TABLE OF CONTENTS


     MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . . . II-1

     TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-23

     MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . . . .II-28

     DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . . . .II-37

     HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . . . . . . .II-39

     DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . .II-50

     INVESTOR SERVICES . . . . . . . . . . . . . . . . . . . . . . . .II-51

     SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . . . . . . .II-57

     SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . . . . . . .II-57

     SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . .II-58

     STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . . . . . . .II-58

     COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . . . . . . .II-59

     DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .II-64

<PAGE>


                             THE PUTNAM FUNDS
                    STATEMENT OF ADDITIONAL INFORMATION
                                  PART II

     The following information applies generally to your Fund
and to the other Putnam funds.  In certain cases the discussion
applies to some but not all of the funds or their shareholders,
and you should refer to your Prospectus to determine whether the
matter is applicable to you or your Fund.  You will also be
referred to Part I for certain information applicable to your
particular Fund.  Shareholders who purchase shares at net asset
value through employer-sponsored defined contribution plans
should also consult their employer for information about the
extent to which the matters described below apply to them.

MISCELLANEOUS INVESTMENT PRACTICES

     YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING
INVESTMENT PRACTICES ARE AVAILABLE TO YOUR FUND.  THE FACT THAT
YOUR FUND IS AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES
NOT NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO.  YOU SHOULD
DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN
THE PROSPECTUS.

SHORT-TERM TRADING

     In seeking the Fund's objective, Putnam Management will
buy or sell portfolio securities whenever Putnam Management
believes it appropriate to do so.  In deciding whether to sell a
portfolio security, Putnam Management does not consider how long
the Fund has owned the security.  From time to time the Fund will
buy securities intending to seek short-term trading profits.  A
change in the securities held by the Fund is known as "portfolio
turnover" and generally involves some expense to the Fund.  These
expenses may include brokerage commissions or dealer mark-ups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities.  If sales of
portfolio securities cause the Fund to realize net short-term
capital gains, such gains will be taxable as ordinary income.  As
a result of the Fund's investment policies, under certain market
conditions the Fund's portfolio turnover rate may be higher than
that of other mutual funds.  Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less.  The Fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the Fund's portfolio.

LOWER-RATED SECURITIES

     The Fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"), to the extent described in the
Prospectus.  The lower ratings of certain securities held by the
Fund reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal.  The inability (or perceived inability) of issuers
to make timely payment of interest and principal would likely
make the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at prices
approximating the values the Fund had placed on such securities. 
In the absence of a liquid trading market for securities held by
it, the Fund may be unable at times to establish the fair value
of such securities.  The rating assigned to a security by Moody's
Investors Service, Inc. or Standard & Poor's Corporation (or by
any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the
security.  See the Prospectus or Part I of this Statement for a
description of security ratings.

     Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates.  Thus, a decrease in interest rates will
generally result in an increase in the value of the Fund's
assets.  Conversely, during periods of rising interest rates, the
value of the Fund's assets will generally decline.  In addition,
the values of such securities are also affected by changes in
general economic conditions and business conditions affecting the
specific industries of their issuers.  Changes by recognized
rating services in their ratings of any fixed-income security and
in the ability of an issuer to make payments of interest and
principal may also affect the value of these investments. 
Changes in the value of portfolio securities generally will not
affect cash income derived from such securities, but will affect
the Fund's net asset value.  The Fund will not necessarily
dispose of a security when its rating is reduced below its rating
at the time of purchase, although Putnam Management will monitor
the investment to determine whether its retention will assist in
meeting the Fund's investment objective.

     At times, a substantial portion of the Fund's assets may
be invested in securities as to which the Fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds a major portion or all of
such securities.  Although Putnam Management generally considers
such securities to be liquid because of the availability of an 
institutional market for such securities, it is possible that,
under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer, the
Fund could find it more difficult to sell such securities when
Putnam Management believes it advisable to do so or may be able
to sell such securities only at prices lower than if such
securities were more widely held.  Under such circumstances, it
may also be more difficult to determine the fair value of such
securities for purposes of computing the Fund's net asset value. 
In order to enforce its rights in the event of a default under
such securities, the Fund may be required to take possession of
and manage assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses and
adversely affect the Fund's net asset value.  In the case of
tax-exempt funds, any income derived from the Fund's ownership or
operation of such assets would not be tax-exempt.  In addition,
the Fund's intention to qualify as a "regulated investment
company" under the Internal Revenue Code may limit the extent to
which the Fund may exercise its rights by taking possession of
such assets.

     Certain securities held by the Fund may permit the issuer
at its option to "call", or redeem, its securities.  If an issuer
were to redeem securities held by the Fund during a time of
declining interest rates, the Fund may not be able to reinvest
the proceeds in securities providing the same investment return
as the securities redeemed.

     If the Fund's Prospectus describes so-called "zero-coupon"
bonds and "payment-in-kind" bonds as possible investments, the
Fund may invest without limit in such bonds unless otherwise
specified in the Prospectus.  Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of
paying interest periodically.  Payment-in-kind bonds allow the
issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds.  Because zero-coupon
bonds do not pay current interest, their value is subject to
greater fluctuation in response to changes in market interest
rates than bonds which pay interest currently.  Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments.  Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently.  Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders.  Thus, the Fund could
be required at times to liquidate investments in order to satisfy
its dividend requirements.

     The amount of information about the financial condition of
an issuer of tax exempt securities may not be as extensive as
that which is made available by corporations whose securities are
publicly traded.  Therefore, to the extent the Fund invests in
tax exempt securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on Putnam
Management's investment analysis than would be the case if the
Fund were investing in securities in the higher rating
categories.

SECURITIES LOANS

     The Fund may make secured loans of its portfolio
securities, on either a short-term or long-term basis, amounting
to not more than 25% of its total assets, thereby realizing
additional income.  The risks in lending portfolio securities, as
with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.  As a matter of
policy, securities loans are made to broker-dealers pursuant to
agreements requiring that loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily.  The borrower pays to the Fund an
amount equal to any dividends or interest received on securities
lent.  The Fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower.  Although voting rights, or rights to consent, with
respect to the loaned securities pass to the borrower, the Fund
retains the right to call the loans at any time on reasonable
notice, and it will do so to enable the Fund to exercise voting
rights on any matters materially affecting the investment.  The
Fund may also call such loans in order to sell the securities.

FORWARD COMMITMENTS

     The Fund may enter into contracts to purchase securities
for a fixed price at a future date beyond customary settlement
time ("forward commitments") if the Fund holds, and maintains
until the settlement date in a segregated account, cash or
high-grade debt obligations in an amount sufficient to meet the
purchase price, or if the Fund enters into offsetting contracts
for the forward sale of other securities it owns.  In the case of
to-be-announced ("TBA") purchase commitments, the unit price and
the estimated principal amount are established when the Fund
enters into a contract, with the actual principal amount being
within a specified range of the estimate.  Forward commitments
may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of
decline in the value of the Fund's other assets.  Where such
purchases are made through dealers, the Fund relies on the dealer
to consummate the sale.  The dealer's failure to do so may result
in the loss to the Fund of an advantageous yield or price. 
Although the Fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or
for delivery pursuant to options contracts it has entered into,
the Fund may dispose of a commitment prior to settlement if
Putnam Management deems it appropriate to do so.  The Fund may
realize short-term profits or losses upon the sale of forward
commitments.

     The Fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns
under delayed delivery arrangements.  Proceeds of TBA sale
commitments are not received until the contractual settlement
date.  During the time a TBA sale commitment is outstanding,
equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.  Unsettled TBA sale
commitments are valued at current market value of the underlying
securities.  If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss on the commitment without regard to any
unrealized gain or loss on the underlying security.  If the Fund
delivers securities under the commitment, the Fund realizes a
gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.

REPURCHASE AGREEMENTS

     The Fund may enter into repurchase agreements up to the
limit specified in the Prospectus.  A repurchase agreement is a
contract under which the Fund acquires a security for a
relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the
Fund's cost plus interest).  It is the Fund's present intention
to enter into repurchase agreements only with commercial banks
and registered broker-dealers and only with respect to
obligations of the U.S. government or its agencies or
instrumentalities.  Repurchase agreements may also be viewed as
loans made by the Fund which are collateralized by the securities
subject to repurchase.  Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor.  If the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest.  In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the Fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.

     Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the Fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts.  These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.

OPTIONS ON SECURITIES

     WRITING COVERED OPTIONS.  The Fund may write covered call
options and covered put options on optionable securities held in
its portfolio, when in the opinion of Putnam Management such
transactions are consistent with the Fund's investment objectives
and policies.  Call options written by the Fund give the
purchaser the right to buy the underlying securities from the
Fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the Fund at a
stated price.

     The Fund may write only covered options, which means that,
so long as the Fund is obligated as the writer of a call option,
it will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges).  In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised.  In addition,
the Fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written.  The Fund may write
combinations of covered puts and calls on the same underlying
security.

     The Fund will receive a premium from writing a put or call
option, which increases the Fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit.  The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security.  By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security.  By writing a put option, the Fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.

     The Fund may terminate an option that it has written prior
to its expiration by entering into a closing purchase
transaction, in which it purchases an offsetting option.  The
Fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs)
is less or more than the premium received from writing the
option.  Because increases in the market price of a call option
generally reflect increases in the market price of the security
underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.

     If the Fund writes a call option but does not own the
underlying security, and when it writes a put option, the Fund
may be required to deposit cash or securities with its broker as
"margin", or collateral, for its obligation to buy or sell the
underlying security.  As the value of the underlying security
varies, the Fund may have to deposit additional margin with the
broker.  Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.

     PURCHASING PUT OPTIONS.  The Fund may purchase put options 
to protect its portfolio holdings in an underlying security
against a decline in market value.  Such protection is provided
during the life of the put option since the Fund, as holder of
the option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price.  In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the Fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs. 

     PURCHASING CALL OPTIONS.  The Fund may purchase call
options to hedge against an increase in the price of securities
that the Fund wants ultimately to buy.  Such hedge protection is
provided during the life of the call option since the Fund, as
holder of the call option, is able to buy the underlying security
at the exercise price regardless of any increase in the
underlying security's market price.  In order for a call option
to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the
premium and transaction costs.

RISK FACTORS IN OPTIONS TRANSACTIONS

     The successful use of the Fund's options strategies
depends on the ability of Putnam Management to forecast correctly
interest rate and market movements.  For example, if the Fund
were to write a call option based on Putnam Management's
expectation that the price of the underlying security would fall,
but the price were to rise instead, the Fund could be required to
sell the security upon exercise at a price below the current
market price.  Similarly, if the Fund were to write a put option
based on Putnam Management's expectation that the price of the
underlying security would rise, but the price were to fall
instead, the Fund could be required to purchase the security upon
exercise at a price higher than the current market price.

     When the Fund purchases an option, it runs the risk that
it will lose its entire investment in the option in a relatively
short period of time, unless the Fund exercises the option or
enters into a closing sale transaction before the option's
expiration.  If the price of the underlying security does not
rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction
costs, the Fund will lose part or all of its investment in the
option.  This contrasts with an investment by the Fund in the
underlying security, since the Fund will not realize a loss if
the security's price does not change.

     The effective use of options also depends on the Fund's
ability to terminate option positions at times when Putnam
Management deems it desirable to do so.  There is no assurance
that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.

     If a secondary market in options were to become
unavailable, the Fund could no longer engage in closing
transactions.  Lack of investor interest might adversely affect
the liquidity of the market for particular options or series of
options.  A market may discontinue trading of a particular option
or options generally.  In addition, a market could become
temporarily unavailable if unusual events -- such as volume in
excess of trading or clearing capability -- were to interrupt its
normal operations.

     A market may at times find it necessary to impose
restrictions on particular types of options transactions, such as
opening transactions.  For example, if an underlying security
ceases to meet qualifications imposed by the market or the
Options Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring series, and
opening transactions in existing series may be prohibited.  If an
options market were to become unavailable, the Fund as a holder
of an option would be able to realize profits or limit losses
only by exercising the option, and the Fund, as option writer,
would remain obligated under the option until expiration or
exercise.

     Disruptions in the markets for the securities underlying
options purchased or sold by the Fund could result in losses on
the options.  If trading is interrupted in an underlying
security, the trading of options on that security is normally
halted as well.  As a result, the Fund as purchaser or writer of
an option will be unable to close out its positions until options
trading resumes, and it may be faced with considerable losses if
trading in the security reopens at a substantially different
price.  In addition, the Options Clearing Corporation or other
options markets may impose exercise restrictions.  If a
prohibition on exercise is imposed at the time when trading in
the option has also been halted, the Fund as purchaser or writer
of an option will be locked into its position until one of the
two restrictions has been lifted.  If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options.  The Fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.

     Special risks are presented by internationally-traded
options.  Because of time differences between the United States
and various foreign countries, and because different holidays are
observed in different countries, foreign options markets may be
open for trading during hours or on days when U.S. markets are
closed.  As a result, option premiums may not reflect the current
prices of the underlying interest in the United States.

OVER-THE-COUNTER OPTIONS

     The Staff of the Division of Investment Management of the
Securities and Exchange Commission has taken the position that
over-the-counter ("OTC") options purchased by the Fund and assets
held to cover OTC options written by the Fund are illiquid
securities.  Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments,
the Fund intends to enter into OTC options transactions only with 
primary dealers in U.S. Government Securities and, in the case of
OTC options written by the Fund, only pursuant to agreements that
will assure that the Fund will at all times have the right to
repurchase the option written by it from the dealer at a
specified formula price.  The Fund will treat the amount by which
such formula price exceeds the amount, if any, by which the
option may be "in-the-money" as an illiquid investment.  It is
the present policy of the Fund not to enter into any OTC option
transaction if, as a result, more than 15% of the Fund's net
assets would be invested in (i) illiquid investments (determined
under the foregoing formula) relating to OTC options written by
the Fund, (ii) OTC options purchased by the Fund, (iii)
securities which are not readily marketable, and (iv) repurchase
agreements maturing in more than seven days.

FUTURES CONTRACTS AND RELATED OPTIONS

     Subject to applicable law, and unless otherwise specified
in the Prospectus, the Fund may invest without limit in the types
of futures contracts and related options identified in the
Prospectus.  A financial futures contract sale creates an
obligation by the seller to deliver the type of financial
instrument called for in the contract in a specified delivery
month for a stated price.  A financial futures contract purchase
creates an obligation by the purchaser to take delivery of the
type of financial instrument called for in the contract in a
specified delivery month at a stated price.  The specific
instruments delivered or taken, respectively, at settlement date
are not determined until on or near that date.  The determination
is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made.  Futures contracts
are traded in the United States only on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for
such trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant
contract market.

     Although futures contracts by their terms call for actual
delivery or acceptance of commodities or securities, in most
cases the contracts are closed out before the settlement date
without the making or taking of delivery.  Closing out a futures
contract sale is effected by purchasing a futures contract for
the same aggregate amount of the specific type of financial
instrument or commodity with the same delivery date.  If the
price of the initial sale of the futures contract exceeds the
price of the offsetting purchase, the seller is paid the
difference and realizes a gain.  Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the
seller realizes a loss.  Similarly, the closing out of a futures
contract purchase is effected by the purchaser's entering into a
futures contract sale.  If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the
purchase price exceeds the offsetting sale price, he realizes a
loss.  In general 40% of the gain or loss arising from the
closing out of a futures contract traded on an exchange approved
by the CFTC is treated as short-term gain or loss, and 60% is
treated as long-term gain or loss.

     Unlike when the Fund purchases or sells a security, no
price is paid or received by the Fund upon the purchase or sale
of a futures contract.  Upon entering into a contract, the Fund
is required to deposit with its custodian in a segregated account
in the name of the futures broker an amount of cash and/or U.S.
Government Securities.  This amount is known as "initial margin." 
The nature of initial margin in futures transactions is different
from that of margin in security transactions in that futures
contract margin does not involve the borrowing of funds to
finance the transactions.  Rather, initial margin is similar to a
performance bond or good faith deposit which is returned to the
Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.  Futures contracts
also involve brokerage costs.

     Subsequent payments, called "variation margin" or
"maintenance margin", to and from the broker (or the custodian)
are made on a daily basis as the price of the underlying security
or commodity fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as
"marking to the market."  For example, when the Fund has
purchased a futures contract on a security and the price of the
underlying security has risen, that position will have increased
in value and the Fund will receive from the broker a variation
margin payment based on that increase in value.  Conversely, when
the Fund has purchased a security futures contract and the price
of the underlying security has declined, the position would be
less valuable and the Fund would be required to make a variation
margin payment to the broker.

     The Fund may elect to close some or all of its futures
positions at any time prior to their expiration in order to
reduce or eliminate a hedge position then currently held by the
Fund.  The Fund may close its positions by taking opposite
positions which will operate to terminate the Fund's position in
the futures contracts.  Final determinations of variation margin
are then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain. 
Such closing transactions involve additional commission costs.

     OPTIONS ON FUTURES CONTRACTS.  The Fund may purchase and
write call and put options on futures contracts it may buy or
sell and enter into closing transactions with respect to such
options to terminate existing positions. Options on future
contracts give the purchaser the right in return for the premium
paid to assume a position in a futures contract at the specified
option exercise price at any time during the period of the
option.  The Fund may use options on futures contracts in lieu of
writing or buying options directly on the underlying securities
or purchasing and selling the underlying futures contracts.  For
example, to hedge against a possible decrease in the value of its
portfolio securities, the Fund may purchase put options or write
call options on futures  contracts rather than selling futures
contracts.  Similarly, the Fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the Fund expects to
purchase.  Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.

     As with options on securities, the holder or writer of an
option may terminate his position by selling or purchasing an
offsetting option.  There is no guarantee that such closing
transactions can be effected.

     The Fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.

     RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED
OPTIONS.  Successful use of futures contracts by the Fund is
subject to Putnam Management's ability to predict movements in
the direction of interest rates and other factors affecting
securities markets.  For example, if the Fund has hedged against
the possibility of decline in the values of its investments and
the values of its investments increase instead, the Fund will
lose part or all of the benefit of the increase through payments
of daily maintenance margin.  The Fund may have to sell
investments at a time when it may be disadvantageous to do so in
order to meet margin requirements.

     Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs).  However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the Fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments.  The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.

     There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.

     To reduce or eliminate a hedge position held by the Fund,
the Fund may seek to close out a position.  The ability to
establish and close out positions will be subject to the
development and maintenance of a liquid secondary market.  It is
not certain that this market will develop or continue to exist
for a particular futures contract or option.  Reasons for the
absence of a liquid secondary market on an exchange include the
following:  (i) there may be insufficient trading interest in
certain contracts or options; (ii) restrictions may be imposed by
an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of
contracts or options, or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the
secondary market on that exchange for such contracts or options
(or in the class or series of contracts or options) would cease
to exist, although outstanding contracts or options on the
exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be
exercisable in accordance with their terms.

     U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS.  If
the Fund invests in tax-exempt securities issued by a
governmental entity, the Fund may purchase and sell futures
contracts and related options on U.S. Treasury securities when,
in the opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in the tax-exempt securities which are the
subject of the hedge.  U.S. Treasury security futures contracts
require the seller to deliver, or the purchaser to take delivery
of, the type of U.S. Treasury security called for in the contract
at a specified date and price.  Options on U.S. Treasury security
futures contracts give the purchaser the right in return for the
premium paid to assume a position in a U.S. Treasury security
futures contract at the specified option exercise price at any
time during the period of the option.

     Successful use of U.S. Treasury security futures contracts
by the Fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities.  For example, if the Fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect tax-exempt securities held in its
portfolio, and the prices of the Fund's tax-exempt securities
increase instead as a result of a decline in interest rates, the
Fund will lose part or all of the benefit of the increased value
of its securities which it has hedged because it will have
offsetting losses in its futures positions.  In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements at
a time when it may be disadvantageous to do so.

     There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for tax-exempt
securities.  For example, if the Fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the Fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio.  Putnam
Management will seek to reduce this risk by monitoring movements
in markets for U.S. Treasury security futures and options and for
tax-exempt securities closely.  The Fund will only purchase or
sell Treasury security futures or related options when, in the
opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in tax-exempt securities in which the Fund
invests.

     INDEX FUTURES CONTRACTS.  An index futures contract is a
contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made.  Entering
into a contract to buy units of an index is commonly referred to
as buying or purchasing a contract or holding a long position in 
the index.  Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position.  A unit is the current value of the index.  The Fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective.  The Fund may also purchase and sell options on index
futures contracts.

     For example, the Standard & Poor's Composite 500 Stock
Price Index ("S&P 500") is composed of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. 
The S&P 500 assigns relative weightings to the common stocks
included in the Index, and the value fluctuates with changes in
the market values of those common stocks.  In the case of the S&P
500, contracts are to buy or sell 500 units.  Thus, if the value
of the S&P 500 were $150, one contract would be worth $75,000
(500 units x $150).  The stock index futures contract specifies
that no delivery of the actual stocks making up the index will
take place.  Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract.  For example, if
the Fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the Fund will
gain $2,000 (500 units x gain of $4).  If the Fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the Fund will lose $1,000 (500
units x loss of $2).

     There are several risks in connection with the use by the
Fund of index futures as a hedging device.  One risk arises
because of the imperfect correlation between movements in the
prices of the index futures and movements in the prices of
securities which are the subject of the hedge.  Putnam Management
will, however, attempt to reduce this risk by buying or selling,
to the extent possible, futures on indices the movements of which
will, in its judgment, have a significant correlation with
movements in the prices of the securities sought to be hedged.

     Successful use of index futures by the Fund for hedging
purposes is also subject to Putnam Management's ability to
predict movements in the direction of the market.  It is possible
that, where the Fund has sold futures to hedge its portfolio
against a decline in the market, the index on which the futures
are written may advance and the value of securities held in the
Fund's portfolio may decline.  If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities.  It is also possible that, if the
Fund has hedged against the possibility of a decline in the
market adversely affecting securities held in its portfolio and
securities prices increase instead, the Fund will lose part or
all of the benefit of the increased value of those securities it
has hedged because it will have offsetting losses in its futures
positions.  In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements at a time when it is
disadvantageous to do so.

     In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the index futures and the portion of the portfolio
being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain
market distortions.  First, all participants in the futures 
market are subject to margin deposit and maintenance
requirements.  Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal
relationship between the index and futures markets.  Second,
margin requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result the
futures market may attract more speculators than the securities
market does.  Increased participation by speculators in the
futures market may also cause temporary price distortions.  Due
to the possibility of price distortions in the futures market and
also because of the imperfect correlation between movements in
the index and movements in the prices of index futures, even a
correct forecast of general market trends by Putnam Management
may still not result in a successful hedging transaction over a
short time period.

     OPTIONS ON STOCK INDEX FUTURES.  Options on index futures
are similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option.  Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future.  If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date.  Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid. 

OPTIONS ON INDICES

     As an alternative to purchasing call and put options on
index futures, the Fund may purchase and sell call and put
options on the underlying indices themselves.  Such options would
be used in a manner identical to the use of options on index
futures.

INDEX WARRANTS

     The Fund may purchase put warrants and call warrants whose
values vary depending on the change in the value of one or more
specified securities indices ("index warrants").  Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise.  In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index.  The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the 
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index.  If the Fund were not to
exercise an index warrant prior to its expiration, then the Fund
would lose the amount of the purchase price paid by it for the
warrant.

     The Fund will normally use index warrants in a manner
similar to its use of options on securities indices.  The risks
of the Fund's use of index warrants are generally similar to
those relating to its use of index options. Unlike most index
options, however, index warrants are issued in limited amounts
and are not obligations of a regulated clearing agency, but are
backed only by the credit of the bank or other institution which
issues the warrant.  Also, index warrants generally have longer
terms than index options.  Although the Fund will normally invest
only in exchange-listed warrants, index warrants are not likely
to be as liquid as certain index options backed by a recognized
clearing agency.  In addition, the terms of index warrants may
limit the Fund's ability to exercise the warrants at such time,
or in such quantities, as the Fund would otherwise wish to do. 

FOREIGN SECURITIES

     Under its current policy, which may be changed without
shareholder approval, the Fund may invest up to the limit of its
total assets specified in its Prospectus in securities
principally traded in markets outside the United States. 
Eurodollar certificates of deposit are excluded for purposes of
this limitation.  Foreign investments can be affected favorably
or unfavorably by changes in currency exchange rates and in
exchange control regulations.  There may be less publicly
available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.  Securities of 
some foreign companies are less liquid or more volatile than
securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United
States.  Investments in foreign securities can involve other
risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or
nationalization of assets and imposition of withholding taxes on
dividend or interest payments.  To hedge against possible
variations in foreign exchange rates, the Fund may purchase and
sell forward foreign currency contracts.  These represent
agreements to purchase or sell specified currencies at specified
dates and prices.  The Fund will only purchase and sell forward
foreign currency contracts in amounts Putnam Management deems
appropriate to hedge existing or anticipated portfolio positions
and will not use such forward contracts for speculative purposes. 
Foreign securities, like other assets of the Fund, will be held
by the Fund's custodian or by a subcustodian.

FOREIGN CURRENCY TRANSACTIONS

     The Fund may engage in currency exchange transactions to
protect against uncertainty in the level of future currency
exchange rates.  In addition, the Fund may write covered call and
put options on foreign currencies for the purpose of increasing
its current return.

     Generally, the Fund may engage in both "transaction
hedging" and "position hedging".  When it engages in transaction
hedging, the Fund enters into foreign currency transactions with
respect to specific receivables or payables, generally arising in
connection with the purchase or sale of portfolio securities. 
The Fund will engage in transaction hedging when it desires to
"lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or
interest payment in a foreign currency.  By transaction hedging
the Fund will attempt to protect itself against a possible loss
resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or
on which the dividend or interest payment is earned, and the date
on which such payments are made or received.

     The Fund may purchase or sell a foreign currency on a spot
(or cash) basis at the prevailing spot rate in connection with
the settlement of transactions in portfolio securities
denominated in that foreign currency.  The Fund may also enter
into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency
futures contracts.

     For transaction hedging purposes the Fund may also
purchase exchange-listed and over-the-counter call and put
options on foreign currency futures contracts and on foreign
currencies.  A put option on a futures contract gives the Fund
the right to assume a short position in the futures contract
until the expiration of the option.  A put option on a currency
gives the Fund the right to sell the currency at an exercise
price until the expiration of the option.  A call option on a
futures contract gives the Fund the right to assume a long
position in the futures contract until the expiration of the
option.  A call option on a currency gives the Fund the right to
purchase the currency at the exercise price until the expiration
of the option. 

     When it engages in position hedging, the Fund enters into
foreign currency exchange transactions to protect against a
decline in the values of the foreign currencies in which its
portfolio securities are denominated (or an increase in the value
of currency for securities which the Fund expects to purchase,
when the Fund holds cash or short-term investments).  In
connection with position hedging, the Fund may purchase put or
call options on foreign currency and on foreign currency futures
contracts and buy or sell forward contracts and foreign currency
futures contracts.  The Fund may also purchase or sell foreign
currency on a spot basis.  

     The precise matching of the amounts of foreign currency
exchange transactions and the value of the portfolio securities
involved will not generally be possible since the future value of
such securities in foreign currencies will change as a
consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered
into and the dates they mature.

     It is impossible to forecast with precision the market
value of portfolio securities at the expiration or maturity of a
forward or futures contract.  Accordingly, it may be necessary
for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market
value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency.  Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the Fund is obligated to deliver.

     Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the securities which the
Fund owns or intends to purchase or sell.  They simply establish
a rate of exchange which one can achieve at some future point in
time.  Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged
currency, they tend to limit any potential gain which might
result from the increase in value of such currency.

     The Fund may seek to increase its current return or to
offset some of the costs of hedging against fluctuations in
current exchange rates by writing covered call options and
covered put options on foreign currencies.  The Fund receives a
premium from writing a call or put option, which increases the
Fund's current return if the option expires unexercised or is
closed out at a net profit.  The Fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written.

     The Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated.  Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the Fund.  Cross hedging transactions by the Fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge. 

     CURRENCY FORWARD AND FUTURES CONTRACTS.  A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract.  In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee. 
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers.  A forward contract generally has no 
deposit requirement, and no commissions are charged at any stage
for trades.  A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at
the time of the contract.  Foreign currency futures contracts
traded in the United States are designed by and traded on
exchanges regulated by the CFTC, such as the New York Mercantile
Exchange.

     Forward foreign currency exchange contracts differ from
foreign currency futures contracts in certain respects.  For
example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the
parties, rather than a predetermined date in a given month. 
Forward contracts may be in any amounts agreed upon by the
parties rather than predetermined amounts.  Also, forward foreign
exchange contracts are traded directly between currency traders
so that no intermediary is required.  A forward contract
generally requires no margin or other deposit. 

     At the maturity of a forward or futures contract, the Fund
either may accept or make delivery of the currency specified in
the contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract.  Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract.  Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts. 

     Positions in the foreign currency futures contracts may be
closed out only on an exchange or board of trade which provides a
secondary market in such contracts.  Although the Fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time.  In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the Fund would continue to be required to make
daily cash payments of variation margin. 

     FOREIGN CURRENCY OPTIONS.  In general, options on foreign
currencies operate similarly to options on securities and are
subject to many similar risks.  Foreign currency options are
traded primarily in the over-the-counter market, although options
on foreign currencies have recently been listed on several
exchanges.  Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit
("ECU").  The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.

     The Fund will only purchase or write foreign currency
options when Putnam Management believes that a liquid secondary
market exists for such options.  There can be no assurance that a
liquid secondary market will exist for a particular option at any
specific time.  Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.

     The value of any currency, including U.S. dollars and
foreign currencies, may be affected by complex political and
economic factors applicable to the issuing country.  In addition,
the exchange rates of foreign currencies (and therefore the 
values of foreign currency options) may be affected
significantly, fixed, or supported directly or indirectly by U.S.
and foreign government actions.  Government intervention may
increase risks involved in purchasing or selling foreign currency
options, since exchange rates may not be free to fluctuate in
response to other market forces.

     The value of a foreign currency option reflects the value
of an exchange rate, which in turn reflects relative values of
two currencies, the U.S. dollar and the foreign currency in
question.  Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those
that may be involved in the exercise of foreign currency options,
investors may be disadvantaged by having to deal in an odd lot
market for the underlying foreign currencies in connection with
options at prices that are less favorable than for round lots. 
Foreign governmental restrictions or taxes could result in
adverse changes in the cost of acquiring or disposing of foreign
currencies.

     There is no systematic reporting of last sale information
for foreign currencies and there is no regulatory requirement
that quotations available through dealers or other market sources
be firm or revised on a timely basis.  Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable.  The interbank market
in foreign currencies is a global, around-the-clock market.  To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.

     SETTLEMENT PROCEDURES.  Settlement procedures relating to
the Fund's investments in foreign securities and to the Fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments.  For example,
settlement of transactions involving foreign securities or
foreign currency may occur within a foreign country, and the Fund
may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery.  Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.

     FOREIGN CURRENCY CONVERSION.  Although foreign exchange
dealers do not charge a fee for currency conversion, they do
realize a profit based on the difference (the "spread") between
prices at which they are buying and selling various currencies. 
Thus, a dealer may offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.

RESTRICTED SECURITIES

     The SEC Staff currently takes the view that any
designation by the Trustees of the authority to determine that a
restricted security is readily marketable (as described in the
investment restrictions of the Funds) must be pursuant to written
procedures established by the Trustees.  It is the present
intention of the Funds' Trustees that, if the Trustees decide to
delegate such determinations to Putnam Management or another
person, they would do so pursuant to written procedures,
consistent with the Staff's position.  Should the Staff modify
its position in the future, the Trustees would consider what
action would be appropriate in light of the Staff's position at
that time.  

TAXES

     TAXATION OF THE FUND.  The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").  In order
so to qualify and to qualify for the special tax treatment
accorded regulated investment companies and their shareholders,
the Fund must, among other things:

     (a)  Derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities
loans, and gains from the sale of stock, securities and foreign
currencies, or other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect
to its business of investing in such stock, securities, or
currencies;

     (b)  derive less than 30% of its gross income from the
sale or other disposition of certain assets (including stock or
securities and certain options, futures contracts and forward
contracts) held for less than three months; 

     (c) distribute with respect to each taxable year at least
90% of the sum of its taxable net investment income, its net
tax-exempt income, and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year;
and

     (d) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of the
Fund's assets is represented by cash and cash items, U.S.
Government securities, securities of other regulated investment
companies, and other securities limited in respect of any one
issuer to a value not greater than 5% of the value of the Fund's
total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is
invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and
which are engaged in the same, similar, or related trades or
businesses.

     If the Fund qualifies as a regulated investment company
that is accorded special tax treatment, the Fund will not be
subject to federal income tax on income paid to its shareholders
in the form of dividends (including capital gain dividends).

     If the Fund failed to qualify as a regulated investment
company accorded special tax treatment in any taxable year, the
Fund would be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including
any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary
income.  In addition, the Fund could be required to recognize
unrealized gains, pay  substantial taxes and interest and make
substantial distributions before requalifying as a regulated
investment company that is accorded special tax treatment.

     If the Fund fails to distribute in a calendar year
substantially all of its ordinary income for such year and
substantially all of its capital gain net income for the one-year
period ending October 31 (or later if the Fund is permitted so to
elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the
undistributed amounts.  A dividend paid to shareholders by the
Fund in January of a year generally is deemed to have been paid
by the Fund on December 31 of the preceding year, if the dividend
was declared and payable to shareholders of record on a date in
October, November or December of that preceding year.  The Fund
intends generally to make distributions sufficient to avoid
imposition of the 4% excise tax.

     EXEMPT-INTEREST DIVIDENDS.  The Fund will be qualified to
pay exempt-interest dividends to its shareholders only if, at the
close of each quarter of the Fund's taxable year, at least 50% of
the total value of the Fund's assets consists of obligations the
interest on which is exempt from federal income tax. 
Distributions that the Fund properly designates as exempt-
interest dividends are treated by shareholders as interest
excludable from their gross income for federal income tax
purposes but may be taxable for federal alternative minimum tax
purposes.  If the Fund intends to be qualified to pay
exempt-interest dividends, the Fund may be limited in its ability
to engage in such taxable transactions as forward commitments,
repurchase agreements, financial futures, and options contracts
on financial futures, tax-exempt bond indices, and other assets. 
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a Fund
paying exempt-interest dividends is not deductible.  The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the Fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends.  Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.

     In general, exempt-interest dividends, if any,
attributable to interest received on certain private activity
obligations and certain industrial development bonds will not be
tax-exempt to any shareholders who are "substantial users" of the
facilities financed by such obligations or bonds or who are
"related persons" of such substantial users.

     A Fund which is qualified to pay exempt-interest dividends
will inform investors within 60 days of the Fund's fiscal
year-end of the percentage of its income distributions designated
as tax-exempt.  The percentage is applied uniformly to all
distributions made during the year.  The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income
that was tax-exempt during the period covered by the
distribution.

     HEDGING TRANSACTIONS.  If the Fund engages in
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including mark-to-market,
straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's
securities, or convert short-term capital losses into long-term
capital losses.  These rules could therefore affect the amount,
timing and character of distributions to shareholders.  The Fund
will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of
the Fund.

     Under the 30% of gross income test described above (see
"Taxation of the Fund"), the Fund will be restricted in selling
assets held or considered under Code rules to have been held for
less than three months, and in engaging in certain hedging
transactions (including hedging transactions in options and
futures) that in some circumstances could cause certain Fund
assets to be treated as held for less than three months.

     Certain of the Fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income.  If
the Fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as a
dividend to the extent of the Fund's remaining earnings and
profits, and thereafter as a return of capital or as gain from
the sale or exchange of a capital asset, as the case may be.  If
the Fund's book income is less than its taxable income, the Fund
could be required to make distributions exceeding book income to
qualify as a regulated investment company that is accorded
special tax treatment.

     RETURN OF CAPITAL DISTRIBUTIONS.  If the Fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain. 
A return of capital is not taxable, but it reduces your tax basis
in your shares.

     SECURITIES ISSUED OR PURCHASED AT A DISCOUNT.  The Fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the Fund to accrue and distribute income
not yet received.  In order to generate sufficient cash to make
the requisite distributions, the Fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.

     CAPITAL LOSS CARRYOVER.  The amounts and expiration dates
of any capital loss carryovers available to the Fund are shown in
Note 1 (Federal income taxes) to the financial statements
included in Part I of this Statement or incorporated by reference
into this Statement.

     FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED
HEDGING TRANSACTIONS.  The Fund's transactions in foreign
currency-denominated debt securities, certain foreign currency
options, futures contracts, and forward contracts may give rise
to ordinary income or loss to the extent such income or loss
results from fluctuations in the value of the foreign currency
concerned.

     If more than 50% of the Fund's assets at year end consists
of the debt and equity securities of foreign corporations, the
Fund may elect to permit shareholders to claim a credit or
deduction on their income tax returns for their pro rata portion
of qualified taxes paid by the Fund to foreign countries.  In
such a case, shareholders will include in gross income from
foreign sources their pro rata shares of such taxes.  A
shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the Fund may be subject to
certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount
of such taxes.  Shareholders who do not itemize on their federal
income tax returns may claim a credit (but no deduction) for such
foreign taxes.

     Investment by the Fund in certain "passive foreign
investment companies" could subject the Fund to a U.S. federal
income tax or other charge on the proceeds from the sale of its
investment in such a company; however, this tax can be avoided by
making an election to mark such investments to market annually or
to treat the passive foreign investment company as a "qualified
electing fund."

     SALE OR REDEMPTION OF SHARES.  The sale, exchange or
redemption of Fund shares may give rise to a gain or loss.  In
general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the
shares have been held for more than 12 months, and otherwise as
short-term capital gain or loss.  However, if a shareholder sells
shares at a loss within six months of purchase, any loss will be
disallowed for Federal income tax purposes to the extent of any
exempt-interest dividends received on such shares.  In addition,
any loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than
short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the
shares.  All or a portion of any loss realized upon a taxable
disposition of Fund shares will be disallowed if other Fund
shares are purchased within 30 days before or after the
disposition.  In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.

     SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS.  Special tax
rules apply to investments though defined contribution plans and
other tax-qualified plans.  Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.

     BACKUP WITHHOLDING.  The Fund generally is required to
withhold and remit to the U.S. Treasury 31% of the taxable
dividends and other distributions paid to any individual
shareholder who fails to furnish the Fund with a correct taxpayer
identification number, who has underreported dividends or
interest income, or who fails to certify to the Fund that he or
she is not subject to such withholding.  An individual's taxpayer
identification number is his or her social security number.

MANAGEMENT OF THE FUND

TRUSTEES

     *+GEORGE PUTNAM, Chairman and President.  Chairman and
Director of Putnam Investment Management, Inc. and Putnam Mutual
Funds.  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.

     +WILLIAM F. POUNDS, Vice Chairman.  Professor of
Management, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology.  Director of Fisher Price, Inc., IDEXX,
M/A-COM, Inc., EG&G, Inc. and Sun Company, Inc.

     JAMESON A. BAXTER, Trustee. President, Baxter Associates,
Inc. (consultants to management). Director of Banta Corporation,
Avondale Federal Savings Bank and ASHTA Chemicals, Inc.  Chairman
of the Board of Trustees, Mount Holyoke College.

     +HANS H. ESTIN, Trustee.  Vice Chairman, North American
Management Corp. (a registered investment adviser).  Director of
The Boston Company, Inc. and Boston Safe Deposit and Trust
Company.

     ELIZABETH T. KENNAN, Trustee.  President of Mount Holyoke
College.  Director, NYNEX Corporation, Northeast Utilities and
the Kentucky Home Life Insurance Companies and Trustee of the
University of Notre Dame.

     *LAWRENCE J. LASSER, Trustee and Vice President. 
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Investment Management, Inc. 
Director of Marsh & McLennan Companies, Inc.  Vice President of
the Putnam funds.

     John A. Hill, Trustee.  Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser). 
Director, Lantana Corporation, Maverick Tube Corporation, Snyder
Oil Corporation and various First Reserve Funds.

     +ROBERT E. PATTERSON, Trustee.  Executive Vice President,
Cabot Partners Limited Partnership (a registered investment
adviser).

     DONALD S. PERKINS, Trustee.  Director of various
corporations, including American Telephone & Telegraph Company,
AON Corp., Cummins Engine Company, Inc., Illinois Power Company,
Inland Steel Industries, Inc., K mart Corporation, LaSalle Street
Fund, Inc., Springs Industries, Inc., TBG, Inc. and Time Warner
Inc.

     *#GEORGE PUTNAM, III, Trustee.  President, New Generation
Research, Inc. (publisher of bankruptcy information).  Director,
World Environment Center. 

     *A.J.C. SMITH, Trustee.  Chairman, Chief Executive Officer
and Director, Marsh & McLennan Companies, Inc.

     W. NICHOLAS THORNDIKE, Trustee.  Director of various
corporations and charitable organizations, including Providence
Journal Co. and Courier Corporation.  Also, Trustee and President
of Massachusetts General Hospital and Trustee of Bradley Real
Estate Trust and Eastern Utilities Associates.

Officers

     CHARLES E. PORTER, Executive Vice President.  Managing
Director of Putnam Investments, Inc. and Putnam Investment
Management, Inc. Executive Vice President of the Putnam funds.

     PATRICIA C. FLAHERTY, Senior Vice President.  Senior Vice
President of Putnam Investments, Inc. and Putnam Investment
Management, Inc.

     WILLIAM N. SHIEBLER, Vice President.  Director and Senior
Managing Director of Putnam Investments, Inc.  President, Chief
Operating Officer and Director of Putnam Mutual Funds.  Vice
President of the Putnam funds.

     GORDON H. SILVER, Vice President.  Senior Managing
Director of Putnam Investments, Inc. and Putnam Investment
Management, Inc.  Director, Putnam Investments, Inc. and Putnam
Investment Management, Inc.  Vice President of the Putnam funds.

     JOHN R. VERANI, Vice President.  Senior Vice President of
Putnam Investments, Inc. and Putnam Investment Management, Inc. 
Vice President of the Putnam funds.

     PAUL M. O'NEIL, Vice President.  Vice President of Putnam
Investments, Inc. and Putnam Investment Management, Inc.  Vice
President of the Putnam funds.

     JOHN D. HUGHES, Vice President and Treasurer.  Vice
President and Treasurer of the Putnam funds.

     BEVERLY MARCUS, Clerk and Assistant Treasurer.  Clerk and
Assistant Treasurer of the Putnam funds.

     *Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund, Putnam Management or
Putnam Mutual Funds.

     +Members of the Executive Committee of the Trustees.  The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the Fund and may exercise all of the powers of
the Trustees.

     #George Putnam, III is the son of George Putnam.

                             -----------------

     Certain other officers of Putnam Management are officers
of your Fund.  SEE "ADDITIONAL OFFICERS OF THE FUND" IN PART I OF
THIS STATEMENT.  The mailing address of each of the officers and
Trustees is One Post Office Square, Boston, Massachusetts 02109.

     Except as stated below, the principal occupations of the
officers and Trustees for the last five years have been with the
employers as shown above, although in some cases they have held
different positions with such employers.  Also, prior to January,
1992, Ms. Baxter was Vice President and Principal, Regency Group,
Inc. and Consultant, The First Boston Corporation.  Prior to May,
1991, Mr. Pounds was Senior Advisor to the Rockefeller Family and
Associates, Chairman of Rockefeller Trust Company and Director of
Rockefeller Group, Inc.  Prior to November, 1990, Mr. Shiebler
was President and Chief Operating Officer of the Intercapital
Division of Dean Witter Reynolds, Inc., Vice President of the
Dean Witter Funds and Director of Dean Witter Trust Company.

     Each Trustee of the Fund 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 and for special services rendered
in that connection.  All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services.  FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND, SEE "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT.

     The Agreement and Declaration of Trust of the Fund
provides that the Fund 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 Fund, 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 Fund or that such
indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties.  The Fund, at its expense, provides liability
insurance for the benefit of its Trustees and officers.

     Putnam Management, Putnam Mutual Funds and Putnam
Fiduciary Trust Company are subsidiaries of Putnam Investments,
Inc., a holding company which is in turn wholly owned by Marsh &
McLennan Companies, Inc., a publicly owned holding company whose
principal operating subsidiaries are international insurance and
reinsurance brokers, investment managers and management
consultants.

     Trustees and officers of the Fund who are also officers of
Putnam Management or its affiliates or who are stockholders of
Marsh & McLennan Companies, Inc. will benefit from the advisory
fees, sales commissions, distribution fees (if any), custodian
fees and transfer agency fees paid or allowed by the Fund.

PUTNAM MANAGEMENT

     Putnam Management is one of America's oldest and largest
money management firms.  Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the Fund's portfolio.  By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937.  Today, the firm serves as the investment manager for
the funds in the Putnam Family, with over $64 billion in assets
in nearly 3.5 million shareholder accounts at December 31, 1993. 
An affiliate, The Putnam Advisory Company, Inc., manages domestic
and foreign institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies.  Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers.  At
December 31, 1993, Putnam Management and its affiliates managed
nearly $91 billion in assets, including over $17 billion in tax
exempt securities and nearly $31 billion in retirement plan
assets.
<PAGE>
THE MANAGEMENT CONTRACT

     Under a Management Contract between the Fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the Fund and makes
investment decisions on behalf of the Fund.  Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
Fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the Fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the Fund's
portfolio securities.  Putnam Management may place Fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the Fund and other clients.  In so doing, Putnam
Management may cause the Fund to pay greater brokerage
commissions than it might otherwise pay.

     FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "FUND CHARGES AND EXPENSES" IN PART I OF
THIS STATEMENT.  Putnam Management's compensation under the
Management Contract may be reduced in any year if the Fund's
expenses exceed the limits 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
term "expenses" is defined in the statutes or regulations of such
jurisdictions, and generally, excludes brokerage commissions,
taxes, interest, extraordinary expenses and, if the Fund has a
Distribution Plan, payments made under such Plan.  The only such
limitation as of the date of this Statement (applicable to any
Fund registered for sale in California) was 2.5% of the first $30
million of average net assets, 2% of the next $70 million and
1.5% of any excess over $100 million.

     Under the Management Contract, Putnam Management may
reduce its compensation to the extent that the Fund's expenses
exceed such lower expense limitation as Putnam Management may, by
notice to the Fund, declare to be effective.  The expenses
subject to this limitation are exclusive of brokerage
commissions, interest, taxes, deferred organizational and 
extraordinary expenses and, if the Fund has a Distribution Plan,
payments required under such Plan.  THE TERMS OF ANY EXPENSE
LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN EITHER
THE PROSPECTUS OR PART I OF THIS STATEMENT.

     In addition to the fee paid to Putnam Management, the Fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the Fund and their assistants who
provide certain administrative services for the Fund and the
other funds in the Putnam Family, each of which bears an
allocated share of the foregoing costs.  The aggregate amount of
all such payments and reimbursements is determined annually by
the Trustees.  THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S
MOST RECENT FISCAL YEAR IS INCLUDED IN "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT.  Putnam Management pays
all other salaries of officers of the Fund.  The Fund pays all
expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing and
shareholder reporting expenses.  The Fund pays the cost of
typesetting for its Prospectuses and the cost of printing and
mailing any Prospectuses sent to its shareholders.  Putnam Mutual
Funds pays the cost of printing and distributing all other
Prospectuses.

     The Management Contract provides that Putnam Management
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 to the Fund in the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties on the part of Putnam Management.

     The Management Contract may be terminated without penalty
by vote of the Trustees or the shareholders of the Fund, or by
Putnam Management, on 30 days' written notice.  It may be amended
only by a vote of the shareholders of the Fund.  The Management
Contract also terminates without payment of any penalty in the
event of its assignment.  The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
Fund.  In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.

PORTFOLIO TRANSACTIONS

     INVESTMENT DECISIONS.  Investment decisions for the Fund
and for the other investment advisory clients of Putnam
Management and its affiliates are made with a view to achieving
their 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 or sold for certain 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 one or more
clients when one or more other clients are selling the security. 
In some instances, one client may sell a particular security to
another client.  It also sometimes happens that two or more
clients simultaneously purchase or sell the same security, in
which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such
clients in a manner which in Putnam Management's opinion is
equitable to each and in accordance with the amount 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 Fund 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 Fund usually
includes an undisclosed dealer commission or mark-up.  In
underwritten offerings, the price paid by the Fund 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.  SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION CONCERNING COMMISSIONS
PAID BY THE FUND.

     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 Fund'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 that portion of the cost of
these services which 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
Fund), although not all of these services are necessarily useful
and of value in managing the Fund.  The management fee paid by
the Fund 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 Fund and buys and sells
investments for the Fund through a substantial number of brokers
and dealers.  In so doing, Putnam Management uses 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 as described below.  In seeking
the most favorable price and execution, Putnam Management, having
in mind the Fund'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 Fund 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 Fund 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 Fund 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 Fund 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 effort 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 Fund, less any direct expenses approved by the
Trustees, shall be recaptured by the Fund through a reduction of
the fee payable by the Fund under the Management Contract. 
Putnam Management seeks to recapture for the Fund soliciting
dealer fees on the tender of the Fund'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 Fund (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 Fund.

PRINCIPAL UNDERWRITER

     Putnam Mutual Funds is the principal underwriter of shares
of the Fund and the other continuously offered Putnam funds. 
Putnam Mutual Funds is not obligated to sell any specific amount
of shares of the Fund and will purchase shares for resale only
against orders for shares.  SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION ON SALES CHARGES AND
OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS.

INVESTOR SERVICING AGENT AND CUSTODIAN

     Putnam Investor Services, a division of Putnam Fiduciary
Trust Company ("PFTC"), is the Fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the Fund as an expense of
all its shareholders.  The fee paid to Putnam Investor Services
is determined by the Trustees taking into account the number of
shareholder accounts and transactions.  Putnam Investor Services
earned the DALBAR Quality Tested Service Seal in 1990, 1991 and
1992.  Over 10,000 tests of 38 separate shareholders service
components demonstrated that Putnam Investor Services exceeded
the industry standard in all categories.

     PFTC is the custodian of the Fund's assets.  In carrying
out its duties under its custodian contract, PFTC may employ one
or more subcustodians whose responsibilities will include
safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities and collecting
interest and dividends on the Fund's investments.  PFTC and any
subcustodians employed by it have a lien on the securities of the
Fund (to the extent permitted by the Fund's investment
restrictions) to secure charges and any advances made by such
subcustodians at the end of any day for the purpose of paying for
securities purchased by the Fund.  The Fund expects that such
advances will exist only in unusual circumstances.  Neither PFTC
nor any subcustodian determines the investment policies of the
Fund or decides which securities the Fund will buy or sell.  PFTC
pays the fees and other charges of any subcustodians employed by
it.  The Fund may from time to time pay custodial expenses in
full or in part through the placement by Putnam Management of the
Fund's portfolio transactions with the subcustodians or with a
third-party broker having an agreement with the subcustodians. 
The Fund pays PFTC an annual fee based on the Fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.

     SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS
STATEMENT FOR INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR
SERVICING AND CUSTODY RECEIVED BY PFTC.  The fees may be reduced
by credits allowed by PFTC.

DETERMINATION OF NET ASSET VALUE

     The Fund determines net asset value per share of each
class of shares once each day the New York Stock Exchange (the
"Exchange") is open.  Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving and Christmas. The Fund determines net
asset value as of the close of regular trading on the Exchange. 
However, equity options held by the Fund are priced as of the
close of trading at 4:10 p.m., and futures contracts on U.S.
Government securities and index options held by the Fund are
priced as of their close of trading at 4:15 p.m.

     Securities for which market quotations are readily
available are valued at prices which, in the opinion of the
Trustees or Putnam Management, most nearly represent the market
values of such securities.  Currently, such prices are determined
using the last reported sale price or, if no sales are reported
(as in the case of some securities traded over-the-counter), the
last reported bid price, except that certain U.S. Government
securities are stated at the mean between the last reported bid
and asked prices.  Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value.  All other securities and assets are
valued at their fair value following procedures approved by the
Trustees.  Liabilities are deducted from the total, and the
resulting amount is divided by the number of shares of the class
outstanding.

     Reliable market quotations are not considered to be
readily available for long-term corporate bonds and notes,
certain preferred stocks, tax-exempt securities, or certain
foreign securities.  These investments are stated at fair value
on the basis of valuations furnished by pricing services approved
by the Trustees, which determine valuations for normal,
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and
various relationships between securities which are generally
recognized by institutional traders.

     If any securities held by a Fund are restricted as to
resale, Putnam Management determines their fair value following
procedures approved by the Trustees.  The fair value of such
securities is generally determined as the amount which the Fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time.  The valuation
procedures applied in any specific instance are likely to vary
from case to case.  However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Fund in 
connection with such disposition).  In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class (both at the time of purchase and at the time of
valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer. 

     Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange.  The values of these
securities used in determining the net asset value of the Fund's
shares are computed as of such times.  Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. Government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange. 
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the Fund's net asset
value.  If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees.

     Money market funds generally value their portfolio
securities at amortized cost according to Rule 2a-7 under the
Investment Company Act of 1940.

HOW TO BUY SHARES

General

     The Prospectus contains a general description of how
investors may buy shares of the Fund and states whether the Fund
offers more than one class of shares.  This Statement contains
additional information which may be of interest to investors.  

     Class A shares are sold with a sales charge payable at the
time of purchase (except for Class A shares of money market
funds).  As used in this Statement and unless the context
requires otherwise, the term "Class A shares" includes shares of
Funds that offer only one class of shares.  The Prospectus
contains a table of applicable sales charges.  For information
about how to purchase Class A shares of a Putnam fund at net
asset value through an employer's defined contribution plan,
please consult your employer.  Certain purchases of Class A
shares may be exempt from a sales charge or may be subject to a
contingent deferred sales charge.  See "General--Sales without
sales charges or contingent deferred sales charges", "Additional
Information About Class A Shares", and "Contingent Deferred Sales
Charges--Class A shares".

     Class B shares are sold subject to a contingent deferred
sales charge payable upon redemption within a specified period
after purchase.  The Prospectus contains a table of applicable
contingent deferred sales charges.

     Class Y shares, which are available only to employer-
sponsored defined contribution plans initially investing at least
$250 million in a combination of Putnam funds and other
investments managed by Putnam Management or its affiliates, are
not subject to sales charges or contingent deferred sales
charges.
      
     Certain purchase programs described below are not
available to defined contribution plans.  Consult your employer
for information on how to purchase shares through your plan.

     The Fund is currently making a continuous offering of its
shares.  The Fund receives the entire net asset value of shares
sold.  The Fund will accept unconditional orders for shares to be
executed at the public offering price based on the net asset
value per share next determined after the order is placed.  In
the case of Class A shares, the public offering price is the net
asset value plus the applicable sales charge, if any.  No sales
charge is included in the public offering price of other classes
of shares.  In the case of orders for purchase of shares placed
through dealers, the public offering price will be based on the
net asset value determined on the day the order is placed, but
only if the dealer receives the order before the close of regular
trading on the Exchange.  If the dealer receives the order after
the close of the Exchange, the price will be based on the net
asset value next determined.  If funds for the purchase of shares
are sent directly to Putnam Investor Services, they will be
invested at the public offering price based on the net asset
value next determined after receipt.  Payment for shares of the
Fund must be in U.S. dollars; if made by check, the check must be
drawn on a U.S. bank.

     Initial and subsequent purchases must satisfy the minimums
stated in the Prospectus, except that (i) individual investments
under certain employee benefit plans or Tax Qualified Retirement
Plans may be lower, (ii) persons who are already shareholders may
make additional purchases of $50 or more by sending funds
directly to Putnam Investor Services (see "Your Investing
Account" below), and (iii) for investors participating in
systematic investment plans and military allotment plans, the
initial and subsequent purchases must be $25 or more. 
Information about these plans is available from investment
dealers or from Putnam Mutual Funds.

     As a convenience to investors, shares may be purchased
through a systematic investment plan.  Preauthorized monthly bank
drafts for a fixed amount (at least $25) are used to purchase
Fund shares at the applicable public offering price next
determined after Putnam Mutual Funds receives the proceeds from
the draft (normally the 20th of each month, or the next business
day thereafter).  Further information and application forms are
available from investment dealers or from Putnam Mutual Funds.

     Except as described below, distributions to be reinvested
are reinvested without a sales charge in shares of the same class
as of the ex-dividend date using the net asset value determined
on that date, and are credited to a shareholder's account on the
payment date.  Distributions for Putnam Tax Exempt Income Fund,
Putnam Arizona Tax Exempt Income Fund, Putnam California Tax
Exempt Income Fund, Putnam Municipal Income Fund, Putnam Florida
Tax Exempt Income Fund,  Putnam Massachusetts Tax Exempt Income
Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam
Minnesota Tax Exempt Income Fund II, Putnam New Jersey Tax Exempt
Income Fund, Putnam New York Tax Exempt Income Fund, Putnam New
York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income
Fund II, Putnam Pennsylvania Tax Exempt Income Fund and Putnam
Texas Tax Exempt Income Fund are reinvested without a sales
charge as of the next day following the period for which
distributions are paid using the net asset value determined on
that date, and are credited to a shareholder's account on the
payment date.  Distributions for Putnam Tax-Free Income Trust and
Putnam Corporate Asset Trust are reinvested without a sales
charge as of the last day of the period for which distributions
are paid using the net asset value determined on that date, and
are credited to a shareholder's account on the payment date. 
Dividends for Putnam money market funds are credited to a
shareholder's account on the payment date.

     PAYMENT IN SECURITIES.  In addition to cash, the Fund may
accept securities as payment for Fund shares at the applicable
net asset value.  Generally, the Fund will only consider 
accepting securities to increase its holdings in a portfolio
security, or if Putnam Management determines that the offered
securities are a suitable investment for the Fund and in a
sufficient amount for efficient management.

     While no minimum has been established, it is expected that
the Fund would not accept securities with a value of less than
$100,000 per issue as payment for shares.  The Fund may reject in
whole or in part any or all offers to pay for purchases of Fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for Fund shares
at any time without notice.  The Fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the Fund.  The Fund
will only accept securities which are delivered in proper form. 
The Fund will not accept options or restricted securities as
payment for shares.  The acceptance of securities by the Fund in
exchange for Fund shares must comply with applicable regulations
of certain states.  In addition, Putnam Global Governmental
Income Trust may accept only investment grade bonds with prices
regularly stated in publications generally accepted by investors,
such as the London Financial Times and the Association of
International Bond Dealers manual, or securities listed on the
New York or American Stock Exchanges or with NASDAQ, and Putnam
Diversified Income Trust may accept only bonds with prices
regularly stated in publications generally accepted by investors. 
For federal income tax purposes, a purchase of Fund shares with
securities will be treated as a sale or exchange of such
securities on which the investor will realize a taxable gain or
loss.  The processing of a purchase of Fund shares with
securities involves certain delays while the Fund considers the
suitability of such securities and while other requirements are
satisfied.  For information regarding procedures for payment in
securities, contact Putnam Mutual Funds.  Investors should not
send securities to the Fund except when authorized to do so and
in accordance with specific instructions received from Putnam
Mutual Funds.

     SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES
CHARGES.  The Fund may sell shares without a sales charge or
contingent deferred sales charge to:

     (i) current and retired Trustees of the Fund; officers of
     the Fund; directors and current and retired U.S. full-time
     employees of Putnam Management, Putnam Mutual Funds, their
     parent corporations and certain corporate affiliates;
     family members of and employee benefit plans for the
     foregoing; and partnerships, trusts or other entities in
     which any of the foregoing has a substantial interest;

     (ii) employee benefit plans, for the repurchase of shares
     in connection with repayment of plan loans made to plan
     participants (if the sum loaned was obtained by redeeming
     shares of a Putnam fund sold with a sales charge) (not
     offered by tax-exempt funds);

     (iii) clients of administrators of tax-qualified employee
     benefit plans which have entered into agreements with
     Putnam Mutual Funds (not offered by tax-exempt funds);

     (iv) registered representatives and other employees of
     broker-dealers having sales agreements with Putnam Mutual
     Funds; employees of financial institutions having sales
     agreements with Putnam Mutual Funds or otherwise having an
     arrangement with any such broker-dealer or financial
     institution with respect to sales of Fund shares; and
     their spouses and children under age 21  (Putnam Mutual
     Funds is regarded as the dealer of record for all such
     accounts);

     (v) investors meeting certain requirements who sold shares
     of certain Putnam closed-end funds pursuant to a tender
     offer by such closed-end fund; 

     (vi) a trust department of any financial institution
     purchasing shares of the Fund in its capacity as trustee
     of any trust, if the value of the shares of the Fund and
     other Putnam funds purchased or held by all such trusts
     exceeds $1 million in the aggregate; and

     (vii) "wrap accounts" maintained for clients of broker-
     dealers, financial institutions or financial planners who
     have entered into agreements with Putnam Mutual Funds with
     respect to such accounts.

     In addition, the Fund may issue its shares at net asset
value or more in connection with the acquisition of substantially
all of the securities owned by other investment companies or
personal holding companies.

     PAYMENTS TO DEALERS.  Putnam Mutual Funds may, at its
expense, pay concessions in addition to the payments disclosed in
the Prospectus to dealers which satisfy certain criteria
established from time to time by Putnam Mutual Funds relating to
increasing net sales of shares of the Putnam funds over prior
periods, and certain other factors.

ADDITIONAL INFORMATION ABOUT CLASS A SHARES

     The underwriter's commission is the sales charge shown in
the Prospectus less any applicable dealer discount.  The dealer
discount is the same for all dealers, except that Putnam Mutual
Funds retains the entire sales charge on any retail sales made by
it.  Putnam Mutual Funds will give dealers ten days' notice of
any changes in the dealer discount.

     Putnam Mutual Funds offers several plans by which an
investor may obtain reduced sales charges on purchases of Class A
shares.  The variations in sales charges reflect the varying
efforts required to sell shares to separate categories of
purchasers.  These plans may be altered or discontinued at any
time.

     COMBINED PURCHASE PRIVILEGE.  The following persons may
qualify for the sales charge reductions or eliminations shown in
the Prospectus by combining into a single transaction the
purchase of Class A shares with other purchases of any class of
shares:

          (i) an individual, or a "company" as defined in Section
     2(a)(8) of the Investment Company Act of 1940 (which
     includes corporations which are corporate affiliates of
     each other);

          (ii) an individual, his or her spouse and their children
     under twenty-one, purchasing for his, her or their own
     account;

          (iii) a trustee or other fiduciary purchasing for a single
     trust estate or single fiduciary account (including a
     pension, profit-sharing, or other employee benefit trust
     created pursuant to a plan qualified under Section 401 of
     the Internal Revenue Code);

          (iv) tax-exempt organizations qualifying under Section
     501(c)(3) of the Internal Revenue Code (not including
     403(b) plans); and

          (v) employee benefit plans of a single employer or of
     affiliated employers, other than 403(b) plans.

     A combined purchase currently may also include shares of
any class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.

     CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION).  A
purchaser of Class A shares may qualify for a cumulative quantity
discount by combining a current purchase (or combined purchases
as described above) with certain other shares of any class of
Putnam funds already owned.  The applicable sales charge is based
on the total of:

     (i) the investor's current purchase; and

     (ii) the maximum public offering price (at the close of
     business on the previous day) of:

             (a) all shares held by the investor in all of the
             Putnam funds (except money market funds); and

             (b) any shares of money market funds acquired by
             exchange from other Putnam funds; and

     (iii) the maximum public offering price of all shares
     described in paragraph (ii) owned by another shareholder
     eligible to participate with the investor in a "combined
     purchase" (see above).

     To qualify for the combined purchase privilege or to
obtain the cumulative quantity discount on a purchase through an
investment dealer, when each purchase is made the investor or
dealer must provide Putnam Mutual Funds with sufficient
information to verify that the purchase qualifies for the
privilege or discount.  The shareholder must furnish this
information to Putnam Investor Services when making direct cash
investments.

     STATEMENT OF INTENTION.  Investors may also obtain the
reduced sales charges for Class A shares shown in the Prospectus
for investments of a particular amount by means of a written
Statement of Intention, which expresses the investor's intention
to invest that amount (including certain "credits," as described
below) within a period of 13 months in shares of any class of the
Fund or any other continuously offered Putnam fund (excluding
money market funds).  Each purchase of Class A shares under a
Statement of Intention will be made at the public offering price
applicable at the time of such purchase to a single transaction
of the total dollar amount indicated in the Statement.  A
Statement of Intention may include purchases of shares made not
more than 90 days prior to the date that an investor signs a
Statement; however, the 13-month period during which the
Statement is in effect will begin on the date of the earliest
purchase to be included.

     An investor may receive a credit toward the amount
indicated in the Statement equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement which are
eligible for purchase under a Statement (plus any shares of money
market funds acquired by exchange of such eligible shares). 
Investors do not receive credit for shares purchased by the
reinvestment of distributions.  Investors qualifying for the
"combined purchase privilege" (see above) may purchase shares
under a single Statement of Intention.

     The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated.  The
minimum initial investment under a Statement of Intention is 5%
of such amount, and must be invested immediately.  Class A shares
purchased with the first 5% of such amount will be held in escrow
to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not
purchased.   When the full amount indicated has been purchased,
the escrow will be released.  If an investor desires to redeem
escrowed shares before the full amount has been purchased, the
shares will be released from escrow only if the investor pays the
sales charge that, without regard to the Statement of Intention,
would apply to the total investment made to date.  

     To the extent that an investor purchases more than the
dollar amount indicated on the Statement of Intention and
qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased at the end of
the 13-month period, upon recovery from the investor's dealer of
its portion of the sales charge adjustment.  Once received from
the dealer, which may take a period of time or may never occur,
the sales charge adjustment will be used to purchase additional
shares at the then current offering price applicable to the
actual amount of the aggregate purchases.  These additional
shares will not be considered as part of the total investment for
the purpose of determining the applicable sales charge pursuant
to the Statement of Intention.  No sales charge adjustment will
be made unless and until the investor's dealer returns any excess
commissions previously received.

     To the extent that an investor purchases less than the
dollar amount indicated on the Statement of Intention within the
13-month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period.  This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the Prospectus.  If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.  

     Statements of Intention are not available for certain
employee benefit plans.

     Statement of Intention forms may be obtained from Putnam
Mutual Funds or from investment dealers.  Interested investors
should read the Statement of Intention carefully.

     REDUCED SALES CHARGE FOR GROUP PURCHASES.  Members of
qualified groups may purchase Class A shares of the Fund at a
group sales charge rate of 4.5% of the public offering price
(4.71% of the net amount invested).  The dealer discount on such
sales is 3.75% of the offering price.

     To receive the group rate, group members must purchase
Class A shares through a single investment dealer designated by
the group.  The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms.  After the initial purchase, a
member may send funds for the purchase of Class A shares directly
to Putnam Investor Services.  Purchases of Class A shares are
made at the public offering price based on the net asset value
next determined after Putnam Mutual Funds or Putnam Investor
Services receives payment for the shares.  The minimum investment
requirements described above apply to purchases by any group
member.  Only Class A shares are included in calculating the
purchased amount.

     Qualified groups include the employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which at least 10 members
participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some
purpose in addition to the purchase of investment company shares
at a reduced sales charge; (iv) the group's sole organizational
nexus or connection is not that the members are credit card
holders of a company, policy holders of an insurance company,
customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) the group agrees to 
provide its designated investment dealer access to the group's
membership by means of written communication or direct
presentation to the membership at a meeting on not less
frequently than an annual basis; (vi) the group or its investment
dealer will provide annual certification in form satisfactory to
Putnam Investor Services that the group then has at least 25
members and that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.

     Members of a qualified group include: (i) any group which
meets the requirements stated above and which is a constituent
member of a qualified group; (ii) any individual purchasing for
his or her own account who is carried on the records of the group
or on the records of any constituent member of the group as being
a good standing employee, partner, member or person of like
status of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary.  For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations.  The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring Class A shares for the benefit
of any of the foregoing.

     A member of a qualified group may, depending upon the
value of Class A shares of the Fund owned or proposed to be
purchased by the member, be entitled to purchase Class A shares
of the Fund at non-group sales charge rates shown in the
Prospectus which may be lower than the group sales charge rate,
if the member qualifies as a person entitled to reduced non-group
sales charges.  Such a group member will be entitled to purchase
at the lower rate if, at the time of purchase, the member or his
or her investment dealer furnishes sufficient information for
Putnam Mutual Funds or Putnam Investor Services to verify that
the purchase qualifies for the lower rate.

     Interested groups should contact their investment dealer
or Putnam Mutual Funds.  The Fund reserves the right to revise
the terms of or to suspend or discontinue group sales at any
time.

     EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS.  The
term "employee benefit plan" means any plan or arrangement,
whether or not tax-qualified, which provides for the purchase of
Class A shares.  The term "affiliated employer" means employers
who are affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940.  The term
"individual account plan" means any employee benefit plan whereby
(i) Class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate Investing Account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.

     The table of sales charges in the Prospectus applies to
sales to employee benefit plans, except that the Fund may sell
Class A shares at net asset value to employee benefit plans,
including individual account plans, of employers or of affiliated
employers which have at least 750 employees to whom such plan is
made available, in connection with a payroll deduction system of
plan funding (or other system acceptable to Putnam Investor
Services) by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services.  The Fund may
also sell Class A shares at net asset value to employee benefit
plans of employers or of affiliated employers which have at least
750 employees, if such plans are qualified under Section 401 of
the Internal Revenue Code.

     Additional information about employee benefit plans and
individual account plans is available from investment dealers or
from Putnam Mutual Funds.

CONTINGENT DEFERRED SALES CHARGES

     Class A shares. The Fund exempts purchases of $1 million
or more of Class A shares from front-end sales charges.  Putnam
Mutual Funds pays commissions at the rates shown in the table
below to investment dealers of record on any such sales,
including purchases pursuant to any Combined Purchase Privilege,
Right of Accumulation or Statement of Intention.  Shareholders
will be charged a contingent deferred sales charge ("Class A
CDSC") if those shares are redeemed within the period shown
below:

           Commissions
             paid to
           investment
           dealers of
           record and             Period after
Amount of transaction              applicable   purchase during
at offering price                     CDSC    which CDSC applies

- ---------------------------------------------  -----------------
$1,000,000 but less than $2,500,000   1.00%         2 years
 2,500,000 but less than  5,000,000   0.50%         1 year
 5,000,000 and over                   0.25%         1 year

     The Class A CDSC is imposed on the lower of the cost and
the current net asset value of the shares redeemed.

     Shares of the Fund sold without a sales charge through
defined contribution plans are not subject to the Class A CDSC. 
Putnam Mutual Funds may make payments out of its own assets to
certain brokers and financial consultants in connection with
purchases of shares of the Fund at net asset value by such plans,
subject to the right of Putnam Mutual Funds to reclaim such
payments if such shares are redeemed.  The payments will be made
by Putnam Mutual Funds as follows: (1) for purchases of at least
$1,000,000 but less than $2,500,000, at the rate of 1.00%,
subject to reclaim if the shares are redeemed within two years;
(2) for purchases of at least $2,500,000 but less than
$5,000,000, at the rate of 0.50%, subject to reclaim if the
shares are redeemed within one year; and (3) for purchases of
$5,000,000 or more, at a rate of up to 0.25%, subject to reclaim
if the shares are redeemed within one year.  For the purpose of
these payments, Putnam Mutual Funds will treat plans that are
purchasing shares of the Fund in an amount less than $1,000,000
but that are sponsored by employers with more than 750 employees
as if they were plans purchasing shares of the Fund in an amount
of at least $1,000,000 but less than $2,500,000. 

     CLASS B SHARES.  Investors who set up a Systematic
Withdrawal Plan (SWP) for a Class B share account (see "Plans
Available To Shareholders -- Automatic Cash Withdrawal Plan") may
withdraw through the SWP up to 12% of the net asset value of the
account (calculated as set forth below) each year without
incurring any CDSC.  Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be redeemed
first and will count toward the 12% limitation.  If there are
insufficient shares not subject to a CDSC, shares subject to the
lowest CDSC liability will be redeemed next until the 12% limit
is reached.  The 12% figure is calculated on a pro rata basis at
the time of the first payment made pursuant to a SWP and
recalculated thereafter on a pro rata basis at the time of each
SWP payment.  Therefore, shareholders who have chosen a SWP based
on a percentage of the net asset value of their account of up to
12% will be able to receive SWP payments without incurring a
CDSC.  However, shareholders who have chosen a specific dollar
amount (for example, $100 per month from a fund that pays income
distributions monthly) for their periodic SWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account. 
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments). 
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC.  This SWP
privilege may be revised or terminated at any time.  

     ALL SHARES.  No CDSC is imposed on shares of any class
subject to a CDSC ("CDSC Shares") to the extent that the CDSC
Shares redeemed (i) are no longer subject to the holding period
therefor, (ii) resulted from reinvestment of distributions on
CDSC Shares, or (iii) were exchanged for shares of another Putnam
fund, provided that the shares acquired in such exchange or
subsequent exchanges (including shares of a Putnam money market
fund) will continue to remain subject to the CDSC, if applicable,
until the applicable holding period expires.  In determining
whether the CDSC applies to each redemption of CDSC Shares, CDSC
Shares no longer subject to a CDSC and CDSC Shares representing
reinvestment of distributions are redeemed first. 

     The Fund will waive any CDSC on redemptions, in the case
of individual or Uniform Transfers to Minors Act accounts, in
case of death or disability or for the purpose of paying benefits
pursuant to tax-qualified retirement plans.  Such payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under section 401(a) or section
403(b)(7) (a "403(b) plan") of the Internal Revenue Code of 1986,
as amended (the "Code"), due to death, disability, retirement or
separation from service.  The Fund will also waive any CDSC in
the case of the death of one joint tenant.  These waivers may be
changed at any time.  Additional waivers may apply to IRA
accounts opened prior to February 1, 1994.

DISTRIBUTION PLAN

     If the Fund or a class of shares of the Fund has adopted a
Distribution Plan, the Prospectus describes the principal
features of the Plan.  This Statement contains additional
information which may be of interest to investors.

     Continuance of a Plan is subject to annual approval by a
vote of the Trustees, including a majority of the Trustees who
are not interested persons of the Fund and who have no direct or
indirect interest in the Plan or related arrangements (the
"Qualified Trustees"), cast in person at a meeting called for
that purpose.  All material amendments to a Plan must be likewise
approved by the Trustees and the Qualified Trustees.  No Plan may
be amended in order to increase materially the costs which the
Fund may bear for distribution pursuant to such Plan without also
being approved by a majority of the outstanding voting securities
of the Fund or the relevant class of the Fund, as the case may
be.  A Plan terminates automatically in the event of its
assignment and may be terminated without penalty, at any time, by
a vote of a majority of the Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the Fund or the
relevant class of the Fund, as the case may be.

     If Plan payments are made to reimburse Putnam Mutual Funds
for payments to dealers based on the average net asset value of
Fund shares attributable to shareholders for whom the dealers are
designated as the dealer of record, "average net asset value"
attributable to a shareholder account means the product of (i)
the Fund's average daily share balance of the account and (ii)
the Fund's average daily net asset value per share (or the
average daily net asset value per share of the class, if
applicable).  For administrative reasons, Putnam Mutual Funds may
enter into agreements with certain dealers providing for the
calculation of "average net asset value" on the basis of assets
of the accounts of the dealer's customers on an established day
in each quarter.

INVESTOR SERVICES

SHAREHOLDER INFORMATION

     Each time shareholders buy or sell shares, they will
receive a statement confirming the transaction and listing their
current share balance.  (Under certain investment plans, a
statement may only be sent quarterly.)  Shareholders will receive
a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.  To help shareholders take full
advantage of their Putnam investment, they will receive a Welcome
Kit and a periodic publication covering many topics of interest
to investors.  The Fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping.  Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services.  Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.

YOUR INVESTING ACCOUNT

     The following information provides more detail concerning
the operation of a Putnam Investing Account.  For further 
information or assistance, investors should consult Putnam
Investor Services.  Shareholders who purchase shares through a
defined contribution plan should note that not all of the
services or features described below may be available to them,
and they should contact their employer for details.

     A shareholder may reinvest a recent cash distribution
without a front-end sales charge or without the reinvested shares
being subject to a CDSC, as the case may be, by delivering to
Putnam Investor Services the uncashed distribution check,
endorsed to the order of the Fund.  Putnam Investor Services must
receive the properly endorsed check within 30 days after the date
of the check.  Upon written notice to shareholders, the Fund may
permit shareholders who receive cash distributions to reinvest
amounts representing returns of capital without a sales charge or
without being subject to the CDSC.

     The Investing Account also provides a way to accumulate
shares of the Fund.  In most cases, after an initial investment
of $500, a shareholder may send checks to Putnam Investor
Services for $50 or more, made payable to the Fund, to purchase
additional shares at the applicable public offering price next
determined after Putnam Investor Services receives the check. 
For Putnam Corporate Asset Trust, the minimum initial investment
is $25,000 and the minimum subsequent investment is $5,000. 
Checks must be drawn on a U.S. bank and must be payable in U.S.
dollars.

     Putnam Investor Services acts as the shareholder's agent
whenever it receives instructions to carry out a transaction on
the shareholder's account.  Upon receipt of instructions that
shares are to be purchased for a shareholder's account, shares
will be purchased through the investment dealer designated by the
shareholder.  Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.

     Shares credited to an account are transferable upon
written instructions in good order to Putnam Investor Services
and may be sold to the Fund as described under "How to buy
shares, sell shares and exchange shares" in the Prospectus. 
Money market funds and certain other funds will not issue share
certificates.  A shareholder may send any certificates which have
been previously issued to Putnam Investor Services for
safekeeping at no charge to the shareholder.

     Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities. 
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.

     Putnam Investor Services may make special services
available to shareholders with investments exceeding $1,000,000. 
Contact Putnam Investor Services for details.

     The Fund pays Putnam Investor Services' fees for
maintaining Investing Accounts.

REINSTATEMENT PRIVILEGE

CLASS A SHARES

     An investor who has sold shares to the Fund may reinvest 
(within 90 days) the proceeds of such sale in shares of the Fund,
or may be able to reinvest (within 90 days) the proceeds in
shares of the other continuously offered Putnam funds (through
the Exchange Privilege described in the Prospectus and below). 
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization and
will not be subject to any sales charge, including a contingent
deferred sales charge.

CLASS B SHARES

     An investor who has sold Class B shares to the Fund may
reinvest (within 90 days) the proceeds of such sale in Class B
shares of the Fund, or may be able to reinvest (within 90 days)
the proceeds in Class B shares of other Putnam funds (through the
Exchange Privilege described in the Prospectus and below).  Upon
such reinvestment, the investor would receive Class B shares at
the net asset value next determined after Putnam Mutual Funds
receives a Reinstatement Authorization subject to the applicable
contingent deferred sales charge calculated for this purpose
using the date of the original purchase.

ALL SHARES

     Exercise of the Reinstatement Privilege does not alter the
federal income tax treatment of any capital gains realized on a
sale of Fund shares, but to the extent that any shares are sold
at a loss and the proceeds are reinvested in shares of the Fund,
some or all of the loss may be disallowed as a deduction. 
Consult your tax adviser.

     Investors who desire to exercise this Privilege should
contact their investment dealer or Putnam Investor Services. 

EXCHANGE PRIVILEGE

     Except as otherwise set forth in this section, by calling
Putnam Investor Services, investors may exchange shares valued up
to $500,000 between accounts with identical registrations,
provided that no certificates are outstanding for such shares and
no address change has been made within the preceding 15 days. 
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.  

     Putnam Investor Services also makes exchanges promptly
after receiving a properly completed Exchange Authorization Form
and, if issued, share certificates.  If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature.  Because an exchange of shares involves the
redemption of Fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the Fund were to suspend
redemptions or postpone payment for the Fund shares being
exchanged, in accordance with federal securities laws.  Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds.  The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange. 
Shares of certain Putnam funds are not available to residents of
all states.  The Fund reserves the right to change or suspend the
Exchange Privilege at any time.  Shareholders would be notified
of any change or suspension.  Additional information is available
from Putnam Investor Services.

     Shares of the Fund must be held at least 15 days by the
shareholder desiring an exchange.  There is no holding period if
the shareholder acquired the shares to be exchanged through
reinvestment of distributions, transfer from another shareholder,
prior exchange or certain employer-sponsored defined contribution
plans.  In all cases, the shares to be exchanged must be
registered on the records of the Fund in the name of the
shareholder desiring the exchange.

     Shareholders of other Putnam funds may also exchange their
shares at net asset value for shares of the Fund, as set forth in
the current prospectus of each fund.

     For federal income tax purposes, an exchange is a sale on
which the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's cost.  The Exchange
Privilege may be revised or terminated at any time.  Shareholders
would be notified of any such change or suspension.
 
DIVIDENDS PLUS

     Shareholders may invest the Fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the Fund's distribution is payable.  No
sales charge or contingent deferred sales charge will apply to
the purchased shares unless the Fund is a money market fund.  The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund.  Shares of
certain Putnam funds are not available to residents of all
states.

     The minimum account size requirement for the receiving
fund will not apply if the current value of your account in this
Fund is more than $5,000.

     Shareholders of other Putnam funds (except for money
market funds, whose shareholders must pay a sales charge or
become subject to a contingent deferred sales charge) may also
use their distributions to purchase shares of the Fund at net
asset value.

     For federal tax purposes, distributions from the Fund
which are reinvested in another fund are treated as paid by the
Fund to the shareholder and invested by the shareholder in the
receiving fund and thus, to the extent comprised of taxable
income and deemed paid to a taxable shareholder, are taxable.

     The Dividends PLUS program may be revised or terminated at
any time.

PLANS AVAILABLE TO SHAREHOLDERS

     The Plans described below are fully voluntary and may be
terminated at any time without the imposition by the Fund or
Putnam Investor Services of any penalty.  All Plans provide for
automatic reinvestment of all distributions in additional shares
of the Fund at net asset value.  The Fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these Plans
at any time.

     AUTOMATIC CASH WITHDRAWAL PLAN.  An investor who owns or
buys shares of the Fund valued at $10,000 or more at the current
public offering price may open a Withdrawal Plan and have a
designated sum of money ($50 or more) paid monthly, quarterly,
semi-annually or annually to the investor or another person. 
(Payments from the Fund can be combined with payments from other
Putnam funds into a single check through a Designated Payment
Plan.)  Shares are deposited in a Plan account, and all
distributions are reinvested in additional shares of the Fund at
net asset value (except where the Plan is utilized in connection
with a charitable remainder trust).  Shares in a Plan account are
then redeemed at net asset value to make each withdrawal payment. 
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee.  As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor. 
The redemption of shares in connection with a Withdrawal Plan
generally will result in a gain or loss for tax purposes.  Some
or all of the losses realized upon redemption may be disallowed
pursuant to the so-called wash sale rules if shares of the same
fund from which shares were redeemed are purchased (including
through the reinvestment of fund distributions) within a period
beginning 30 days before, and ending 30 days after, such
redemption.  In such a case, the basis of the replacement shares
will be increased to reflect the disallowed loss.  Continued
withdrawals in excess of income will reduce and possibly exhaust
invested principal, especially in the event of a market decline. 
The maintenance of a Withdrawal Plan concurrently with purchases
of additional shares of the Fund would be disadvantageous to the
investor because of the sales charge payable on such purchases. 
For this reason, the minimum investment accepted while a
Withdrawal Plan is in effect is $1,000, and an investor may not
maintain a Plan for the accumulation of shares of the Fund (other
than through reinvestment of distributions) and a Withdrawal Plan
at the same time.  The cost of administering these Plans for the
benefit of those shareholders participating in them is borne by
the Fund as an expense of all shareholders.  The Fund, Putnam
Mutual Funds or Putnam Investor Services may terminate or change
the terms of the Withdrawal Plan at any time.  A Withdrawal Plan
will be terminated if communications mailed to the shareholder
are returned as undeliverable.

     Investors should consider carefully with their own
financial advisers whether the Plan and the specified amounts to
be withdrawn are appropriate in their circumstances.  The Fund
and Putnam Investor Services make no recommendations or
representations in this regard.

     TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. 
(NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT
SECURITIES.)  Investors may purchase shares of the Fund through
the following Tax Qualified Retirement Plans, available to
qualified individuals or organizations:

     Standard and variable profit-sharing (including 401(k))
     and money purchase pension plans; and

     Individual Retirement Account Plans (IRAs).

     Each of these Plans has been qualified as a prototype plan
by the Internal Revenue Service.  Putnam Investor Services will
furnish services under each plan at a specified annual cost. 
Putnam Fiduciary Trust Company serves as trustee under each of
these Plans.

     Forms and further information on these Plans are available
from investment dealers or from Putnam Mutual Funds.  In
addition, specialized professional plan administration services
are available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.

     A 403(b) Retirement Plan is available for employees of
public school systems and organizations which meet the
requirements of Section 501(c)(3) of the Internal Revenue Code. 
Forms and further information on the 403(b) Plan are also
available from investment dealers or from Putnam Mutual Funds. 
Shares of the Fund may also be used in simplified employee
pension (SEP) plans.  For further information on the Putnam
prototype SEP plan, contact an investment dealer or Putnam Mutual
Funds.

     Consultation with a competent financial and tax adviser
regarding these Plans and consideration of the suitability of
Fund shares as an investment under the Employee Retirement Income
Security Act of 1974 or otherwise is recommended.

SIGNATURE GUARANTEES

     Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures.  A copy of such
procedures is available upon request.  If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee.  Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner. 
Contact Putnam Investor Services for details.

SUSPENSION OF REDEMPTIONS

     The Fund may not suspend shareholders' right of
redemption, or postpone payment for more than seven days, unless
the New York Stock Exchange is closed for other than customary
weekends or holidays, or if permitted by the rules of the
Securities and Exchange Commission during periods when trading on
the Exchange is restricted or during any emergency which makes it
impracticable for the Fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by order of the Commission for protection of
investors.

SHAREHOLDER LIABILITY

     Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund.  However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Fund or the Trustees.  The Agreement and Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the Fund.  Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to
meet its obligations.  The likelihood of such circumstances is
remote.

STANDARD PERFORMANCE MEASURES

     Yield and total return data for the Fund may from time to
time be presented in Part I of this Statement and in
advertisements.  In the case of funds with more than one class of
shares, all performance information is calculated separately for
each class.  The data is calculated as follows.

     Total return for one-, five- and ten-year periods (or for
such shorter periods as the Fund has been in operation or shares
of the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the Fund made at the beginning of the
period, at the maximum public offering price for Class A shares
and net asset value for other classes of shares, and then
calculating the annual compounded rate of return which would
produce that amount.  Total return for a period of one year is
equal to the actual return of the Fund during that period.  Total
return calculations assume deduction of the Fund's maximum sales
charge or contingent deferred sales charge, if applicable, and
reinvestment of all Fund distributions at net asset value on
their respective reinvestment dates.

     The Fund's yield is presented for a specified thirty-day
period (the "base period").  Yield is based on the amount
determined by (i) calculating the aggregate amount of dividends
and interest earned by the Fund during the base period less
expenses accrued for that period, and (ii) dividing that amount
by the product of (A) the average daily number of shares of the
Fund outstanding during the base period and entitled to receive
dividends and (B) the per share maximum public offering price for
Class A shares and net asset value for other classes of shares on
the last day of the base period.  The result is annualized on a
compounding basis to determine the yield.  For this calculation,
interest earned on debt obligations held by the Fund is generally
calculated using the yield to maturity (or first expected call
date) of such obligations based on their market values (or, in
the case of receivables-backed securities such as GNMA's, based
on cost).  Dividends on equity securities are accrued daily at
their stated dividend rates.

     If the Fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks). 
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.

     If the Fund is a tax-exempt fund, the tax-equivalent yield
during the base period may be presented for shareholders in one
or more stated tax brackets.  Tax-equivalent yield is calculated
by adjusting the tax-exempt yield by a factor designed to show
the approximate yield that a taxable investment would have to
earn to produce an after-tax yield equal, for that shareholder,
to the tax-exempt yield.  The tax-equivalent yield will differ
for shareholders in other tax brackets.

     At times, Putnam Management may reduce its compensation or
assume expenses of the Fund in order to reduce the Fund's
expenses.  The per share amount of any such fee reduction or
assumption of expenses during the Fund's past ten fiscal years
(or for the life of the Fund, if shorter) is reflected in the
table in the section entitled "Financial history" in the
Prospectus.  Any such fee reduction or assumption of expenses
would increase the Fund's yield and total return during the
period of the fee reduction or assumption of expenses.

     All data are based on past performance and do not predict
future results.

COMPARISON OF PORTFOLIO PERFORMANCE

     Independent statistical agencies measure the Fund's
investment performance and publish comparative information
showing how the Fund, and other investment companies, performed
in specified time periods.  Three agencies whose reports are
commonly used for such comparisons are set forth below.  From
time to time, the Fund may distribute these comparisons to its
shareholders or to potential investors.   THE AGENCIES LISTED
BELOW MEASURE PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN 
ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN THE
PRECEDING SECTION.

     LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
     rankings monthly.  The rankings are based on total return
     performance calculated by Lipper, reflecting generally
     changes in net asset value adjusted for reinvestment of
     capital gains and income dividends.  They do not reflect
     deduction of any sales charges.  Lipper rankings cover a
     variety of performance periods, for example year-to-date,
     1-year, 5-year, and 10-year performance.  Lipper
     classifies mutual funds by investment objective and asset
     category.

     MORNINGSTAR, INC. distributes mutual fund ratings twice a
     month.  The ratings are divided into five groups: 
     highest, above average, neutral, below average and lowest. 
     They represent a fund's historical risk/reward ratio
     relative to other funds with similar objectives.  The
     performance factor is a weighted-average assessment of the
     Fund's 3-year, 5-year, and 10-year total return
     performance (if available) reflecting deduction of
     expenses and sales charges.  Performance is adjusted using
     quantitative techniques to reflect the risk profile of the
     fund.  The ratings are derived from a purely quantitative
     system that does not utilize the subjective criteria
     customarily employed by rating agencies such as Standard &
     Poor's Corporation and Moody's Investor Service, Inc.

     CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
     fund rankings and is distributed monthly.  The rankings
     are based entirely on total return calculated by
     Weisenberger for periods such as year-to-date, 1-year,
     3-year, 5-year and 10-year.  Mutual funds are ranked in
     general categories (e.g., international bond,
     international equity, municipal bond, and maximum capital
     gain).  Weisenberger rankings do not reflect deduction of
     sales charges or fees.

     Independent publications may also evaluate the Fund's
performance.  Certain of those publications are listed below, at
the request of Putnam Mutual Funds, which bears full
responsibility for their use and the descriptions appearing
below.  From time to time the Fund may distribute evaluations by
or excerpts from these publications to its shareholders or to
potential investors.  The following illustrates the types of
information provided by these publications.

     BUSINESS WEEK publishes mutual fund rankings in its
     Investment Figures of the Week column.  The rankings are
     based on 4-week and 52-week total return reflecting
     changes in net asset value and the reinvestment of all
     distributions.  They do not reflect deduction of any sales
     charges.  Funds are not categorized; they compete in a
     large universe of over 2000 funds.  The source for
     rankings is data generated by Morningstar, Inc.

     INVESTOR'S BUSINESS DAILY publishes mutual fund rankings
     on a daily basis.  The rankings are depicted as the top 25
     funds in a given category.  The categories are based
     loosely on the type of fund, e.g., growth funds, balanced
     funds, U.S. government funds, GNMA funds, growth and
     income funds, corporate bond funds, etc.  Performance
     periods for sector equity funds can vary from 4 weeks to
     39 weeks; performance periods for other fund groups vary
     from 1 year to 3 years.  Total return performance reflects
     changes in net asset value and reinvestment of dividends
     and capital gains.  The rankings are based strictly on
     total return.  They do not reflect deduction of any sales
     charges.  Performance grades are conferred from A+ to E. 
     An A+ rating means that the fund has performed within the
     top 5% of a general universe of over 2000 funds; an A
     rating denotes the top 10%; an A- is given to the top 15%,
     etc. 

     BARRON'S periodically publishes mutual fund rankings.  The 
     rankings are based on total return performance provided by
     Lipper Analytical Services.  The Lipper total return data
     reflects changes in net asset value and reinvestment of
     distributions, but does not reflect deduction of any sales
     charges.  The performance periods vary from short-term
     intervals (current quarter or year-to-date, for example)
     to long-term periods (five-year or ten-year performance,
     for example).  Barron's classifies the funds using the
     Lipper mutual fund categories, such as Capital
     Appreciation Funds, Growth Funds, U.S. Government Funds,
     Equity Income Funds, Global Funds, etc.  Occasionally,
     Barron's modifies the Lipper information by ranking the
     funds in asset classes.  "Large funds" may be those with
     assets in excess of $25 million; "small funds" may be
     those with less than $25 million in assets.

     THE WALL STREET JOURNAL publishes its Mutual Fund
     Scorecard on a daily basis.  Each Scorecard is a ranking
     of the top-15 funds in a given Lipper Analytical Services
     category.  Lipper provides the rankings based on its total
     return data reflecting changes in net asset value and
     reinvestment of distributions and not reflecting any sales
     charges.  The Scorecard portrays 4-week, year-to-date,
     one-year and 5-year performance; however, the ranking is
     based on the one-year results.  The rankings for any given
     category appear approximately once per month.

     FORTUNE magazine periodically publishes mutual fund
     rankings that have been compiled for the magazine by
     Morningstar, Inc.  Funds are placed in stock or bond fund
     categories (for example, aggressive growth stock funds,
     growth stock funds, small company stock funds, junk bond
     funds, Treasury bond funds, etc.), with the top-10 stock
     funds and the top-5 bond funds appearing in the rankings. 
     The rankings are based on 3-year annualized total return
     reflecting changes in net asset value and reinvestment of
     distributions and not reflecting sales charges. 
     Performance is adjusted using quantitative techniques to
     reflect the risk profile of the fund.
 
     MONEY magazine periodically publishes mutual fund rankings
     on a database of funds tracked for performance by Lipper
     Analytical Services.  The funds are placed in 23 stock or
     bond fund categories and analyzed for five-year risk
     adjusted return.  Total return reflects changes in net
     asset value and reinvestment of all dividends and capital
     gains distributions and does not reflect deduction of any
     sales charges.  Grades are conferred (from A to E):  the
     top 20% in each category receive an A, the next 20% a B,
     etc.  To be ranked, a fund must be at least one year old,
     accept a minimum investment of $25,000 or less and have
     had assets of at least $25 million as of a given date.

     FINANCIAL WORLD publishes its monthly Independent
     Appraisals of Mutual Funds, a survey of approximately 1000
     mutual funds.  Funds are categorized as to type, e.g.,
     balanced funds, corporate bond funds, global bond funds,
     growth and income funds, U.S. government bond funds, etc. 
     To compete, funds must be over one year old, have over $1
     million in assets, require a maximum of $10,000 initial
     investment, and should be available in at least 10 states
     in the United States.  The funds receive a composite past
     performance rating, which weighs the intermediate- and
     long-term past performance of each fund versus its
     category, as well as taking into account its risk, reward
     to risk, and fees.  An A+ rated fund is one of the best,
     while a D-rated fund is one of the worst.  The source for
     Financial World rating is Schabacker investment management
     in Rockville, MD.

     FORBES magazine periodically publishes mutual fund ratings
     based on performance over at least two bull and bear
     market cycles.  The funds are categorized by type,
     including stock and balanced funds, taxable bond funds,
     municipal bond funds, etc.  Data sources include Lipper
     Analytical Services and CDA Investment Technologies.  The
     ratings are based strictly on performance at net asset
     value over the given cycles.  Funds performing in the top
     5% receive an A+ rating; the top 15% receive an A rating;
     and so on until the bottom 5% receive an F rating.  Each
     fund exhibits two ratings, one for performance in "up"
     markets and another for performance in "down" markets.

     KIPLINGER'S PERSONAL FINANCE MAGAZINE (formerly Changing
     Times), periodically publishes rankings of mutual funds
     based on one-, three- and five-year total return
     performance reflecting changes in net asset value and
     reinvestment of dividends and capital gains and not
     reflecting deduction of any sales charges.  Funds are
     ranked by tenths:  a rank of 1 means that a fund was among
     the highest 10% in total return for the period; a rank of
     10 denotes the bottom 10%.  Funds compete in categories of
     similar funds--aggressive growth funds, growth and income
     funds, sector funds, corporate bond funds, global
     governmental bond funds, mortgage-backed securities funds,
     etc.  Kiplinger's also provides a risk-adjusted grade in
     both rising and falling markets.  Funds are graded against
     others with the same objective.  The average weekly total
     return over two years is calculated.  Performance is
     adjusted using quantitative techniques to reflect the risk
     profile of the fund.

     U.S. NEWS AND WORLD REPORT periodically publishes mutual
     fund rankings based on an overall performance index (OPI)
     devised by Kanon Bloch Carre & Co., a Boston research
     firm.  Over 2000 funds are tracked and divided into 10
     equity, taxable bond and tax-free bond categories.  Funds
     compete within the 10 groups and three broad categories. 
     The OPI is a number from 0-100 that measures the relative
     performance of funds at least three years old over the
     last 1, 3, 5 and 10 years and the last six bear markets.
     Total return reflects changes in net asset value and the
     reinvestment of any dividends and capital gains
     distributions and does not reflect deduction of any sales
     charges.  Results for the longer periods receive the most
     weight.

     THE 100 BEST MUTUAL FUNDS YOU CAN BUY (1992), authored by
     Gordon K. Williamson.  The author's list of funds is
     divided into 12 equity and bond fund categories, and the
     100 funds are determined by applying four criteria. 
     First, equity funds whose current management teams have
     been in place for less than five years are eliminated. 
     (The standard for bond funds is three years.)  Second, the
     author excludes any fund that ranks in the bottom 20
     percent of its category's risk level.  Risk is determined
     by analyzing how many months over the past three years the
     fund has underperformed a bank CD or a U.S. Treasury bill. 
     Third, a fund must have demonstrated strong results for
     current three-year and five-year performance.  Fourth, the
     fund must either possess, in Mr. Williamson's judgment,
     "excellent" risk-adjusted return or "superior" return with
     low levels of risk.  Each of the 100 funds is ranked in
     five categories:  total return, risk/volatility,
     management, current income and expenses.  The rankings
     follow a five-point system:  zero designates "poor"; one
     point means "fair"; two points denote "good"; three points
     qualify as a "very good"; four points rank as "superior";
     and five points mean "excellent."

     In addition, Putnam Mutual Funds may distribute to
shareholders or prospective investors illustrations of the
benefits of reinvesting tax-exempt or tax-deferred distributions
over specified time periods, which may include comparisons to
fully taxable distributions.  These illustrations use
hypothetical rates of tax-advantaged and taxable returns and are
not intended to indicate the past or future performance of any
fund.

DEFINITIONS

"Putnam Management"         --  Putnam Investment Management,
                                Inc., the Fund's investment
                                manager.

"Putnam Mutual Funds"       --  Putnam Mutual Funds Corp., the
                                Fund's principal underwriter.

"Putnam Fiduciary Trust     --  Putnam Fiduciary Trust Company,
 Company"                       the Fund's custodian.

"Putnam Investor Services"  --  Putnam Investor Services, a
                                division of Putnam Fiduciary
                                Trust Company, the Fund's
                                investor servicing agent.
<PAGE>

                        PUTNAM FEDERAL INCOME TRUST

                                 FORM N-1A
                                  PART C

                             OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

         (a)  Index to Financial Statements and Supporting
              Schedules:

              (1)  Financial Statements:

                   Statement of assets and liabilities --October
                   31,    1993(a)    .
                   Statement of operations -- year ended October
                   31,    1993(a)    .
                   Statement of changes in net assets -- years
                   ended October 31,    1993     and October 31, 
                        1992(a)    .
                      Financial highlights (a)(b)    .
                   Notes to financial statements (a).

              (2)  Supporting Schedules:

                   Schedules I - Portfolio of investments owned
                   -- October 31, 1992(a).
                   Schedules II through IX omitted because the
                   required matter is not present.

                   (a)    Incorporated by reference into Parts A
                        and     B.
                   (b) Included in Part A.
- --------------------------
         (b)  Exhibits:

              1a.  Form of Written Instrument Amending Agreement
                   and Declaration of Trust, as amended March 7,
                   1986 - Incorporated by reference to Post-
                   Effective Amendment No. 3 to the Registrant's
                   Registration Statement.
              1b.  Form of Agreement and Declaration of Trust,
                   as amended    May 5, 1994 -- Exhibit 1.    
              2.   By-Laws, as amended June 7, 1991 -  
                   Incorporated by reference to Post-Effective
                   Amendment No. 8 to the Registrant's
                   Registration Statement.
                                 3.   Not applicable.<PAGE>
                 4a.    Class A     Specimen share certificate -
                           - Exhibit 2.
              4b.  Class B Specimen share certificate -- Exhibit
                   3.
              4c.  Portions of Agreement and Declaration of
                   Trust Relating to Shareholders' Rights --
                   Exhibit 4.
              4d.  Portions of By-Laws Relating to Shareholders'
                   Rights -- Exhibit 5.    
              5.   Copy of Management Contract dated December
                   21, 1988 - Incorporated by reference to Post-
                   Effective Amendment No. 4 to the Registrant's
                   Registration Statement.
              6a.     Form     of Distributors' Contract dated
                      May 5, 1994 -- Exhibit 6.    
              6b.  Copy of Specimen Dealer Sales Contract -
                      Exhibit 7    .             
              6c.  Copy of Specimen Financial Institution Sales
                   Contract -   - Exhibit 8.    
              7.   Not applicable.
              8.   Copy of Custodian Agreement dated May 3, 1991
                      , as amended July 13, 1992 - Exhibit
                   9.    
              9.   Copy of Investor Servicing Agreement dated
                   June 3, 1991 with Putnam Fiduciary Trust
                   Company - Incorporated by reference to Post-
                   Effective Amendment No. 8 to the Registrant's
                   Registration Statement.
              10.  Opinion of Ropes & Gray, including consent -
                      -     Exhibit    10    . 
              11.  Not applicable.
              12.  Not applicable.
              13.  Investment Letter from         Putnam
                      Investment     Management        , Inc. to
                   the Registrant    -     -Incorporated by
                   reference to Pre-Effective Amendment No. 1 to
                   the Registrant's Registration Statement.
              14a. Copy of Prototype Individual Retirement
                   Account Plan -   -     Incorporated by
                   reference to Post-Effective Amendment No. 5
                   to the Registrant's Registration Statement.
              14b. Copy of Prototype Basic Plan Document and
                   Related Plan Agreements.  Filed by Form SE on
                   December 24, 1990.    -    - Incorporated by
                   reference to Post-Effective Amendment No. 6
                   to the Registrant's Registration Statement.
              15a.    Form of Class A     Distribution Plan and
                   Agreement dated    May 5, 1994 -- Exhibit 11.
              15b. Form of Class Distribution Plan and Agreement
                   dated May 5, 1994 -- Exhibit 12.    
              15b. Copy of Specimen Dealer Service Agreement -
                      -   Exhibit 13.    
              15c. Copy of Specimen Financial Institution
                   Service Agreement -   - Exhibit 14.    
              16a. Schedules for computation of performance
                   quotations         -   -     Exhibit
                      15    .

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
         REGISTRANT

         None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

         As of    January     31,    1994     there were 
   
    
       33,904  holders of the Registrant's shares of
beneficial interest.


ITEM 27. INDEMNIFICATION

         The information required by this item is incorporated
by reference from the Registrant's Registration Statement of Form
N-1A under the Investment Company Act of 1940 (File No. 811-
4617).
<PAGE>
<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

    Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates. 
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds.  The address of the investment
adviser, its corporate affiliates and the Putnam Funds is One
Post Office Square, Boston, Massachusetts 02109.

NAME                      NON-PUTNAM BUSINESS AND OTHER
    CONNECTIONS

Christopher J. Ainley     Prior to March, 1992, Vice President,
Vice President              J.P. Morgan Investment Management,
                          522 Fifth Avenue, New York, NY 10021

Gail S. Attridge          Prior to November, 1993, International
Vice President              Analyst, Keystone Custodian Funds,
                          200 Berkley Street, Boston, MA 02116

Dolores Snyder Bamford    Prior to June, 1992, Research
Assistant Vice President    Associate, Fidelity Investments, 82
                          Devonshire St., Boston, MA 02109

Charles L. Beach          Prior to May, 1992, Senior Analyst,
Assistant Vice President    Dean Witter Investment Banking,
                          One Financial Center,
                          Boston, MA 02110

Edward P. Bousa           Prior to October, 1992, Vice President
Senior Vice President       and Portfolio Manager, Fidelity
                          Investments, 82 Devonshire St.,
                          Boston, MA 02109

Kathleen M. Brant         Prior to June, 1992, Global Bond
Vice President              Trader, Fidelity Investments,
                          82 Devonshire St., Boston, MA 02109

Leslie J. Burke           Prior to February, 1992, Research
Assistant Vice President    Associate, Fidelity Investments, 82
                          Devonshire St., Boston, MA 02109

Peter Carman              Prior to August, 1993, Chief
Senior Managing Director    Investment Officer, Chairman, U.S.
                          Equity Investment Policy Committee,
                          Member of Board of Directors,
                          Sanford C. Bernstein & Co., Inc.,
                          767 Fifth Avenue, New York, NY 10153

Anna Coppola              Prior to May, 1993, Associate,
Assistant Vice President    Heidrick & Struggles, One Post
                          Office Square, Boston, MA 02109

Kathleen Crews            Prior to February, 1993, Assistant
Assistant Vice President    Vice President, Alliance Capital
                          Management, L.P., 1345 Avenue of
                          the Americas, New York, NY 10105
                          York, NY

Kenneth L. Daly           Prior to September, 1993, Vice
Senior Vice President       President, Fidelity Investments,
                          82 Devonshire St., Boston, MA 02109

Richard B. England        Prior to December, 1992, Investment
Vice President              Officer, Aetna Equity Investors,
                          151 Farmington Avenue, Hartford,
                          CT, 06156

Joseph F. Feeney, Jr.     Prior to June, 1992, Assistant
Assistant Vice President    Vice President, Bank of Boston,
                          100 Federal St., Boston, MA 02110

Jonathan H. Francis       Prior to March, 1993, President,
Assistant Vice President    J.H. Francis & Co., N. Pheasant
                          Lane, Westport, CT 06880

Judy P. Frodigh           Prior to June, 1992, Manager, Human
Vice President              Resources, Massachusetts Financial
                          Services, Inc., 500 Boylston St.,
                          Boston, MA 02110

James F. Giblin           Prior to April, 1993, Managing
Senior Vice President       Director, CIGNA Corp. Investments,
                          Inc., 900 Cottage Grove Rd.
                          Bloomfield, CT 06152

Thomas C. Goggins         Prior to June, 1993, Portfolio
Vice President              Manager, Transamerica Investment
                          Services, 1150 South Olive Street,
                          Los Angeles, CA 90015

Corey A. Griffin          Prior to June, 1992, Vice President,
Assistant Vice President    Coldwell Banker Commercial Real
                          Estate
    Services, 70-80 Lincoln St.,
                          Boston,
    MA 02111

<PAGE>
Daniel J. Grim            Prior to May 1993, Consultant,
Vice President              Connie
                          Lee, 2445 M Street N.W.,
                          Washington, D.C. 20037;
                          Chief Operating Officer, Boardwalk,
                          Inc., Minocqua, WI 54548

Billy P. Han              Prior to December, 1992, Vice
Assistant Vice President    President, Scudder, Stevens & Clark,
                          Inc., 160 Federal Street, Boston, MA
                          02110

Stephon A. Jackson        Prior to December, 1992,  nalyst,
Assistant Vice President    Arco Investment Management Co.,
                          515 South Flower Street,
                          Los Angeles, CA 91030

David J. Jallits          Prior to August, 1992, Vice President,
Vice President              Citibank Corp., 55 Water Street,
                          New York, NY 10043

Jeffrey L. Knight         Prior to March, 1993, Teacher,
Vice President              Greater Newburyport Educational
                          Collaborative, Newburyport, MA 01950

Jeffrey J. Kobylarz       Prior to May, 1993, Credit Analyst,
Vice President              Dean Witter Reynolds, Inc.,
                          Two World Trade Center,
                          New York, NY 10048

Ami T. Kuan               Prior to June, 1992, Equity Analyst,
Assistant Vice President    Fidelity Investments, 82 Devonshire
                          St., Boston, MA 02109

Lawrence J. Lasser        Director, Marsh & McLennan Companies,
President, Director         Inc., 1221 Avenue of the Americas,
and Chief Executive         New York, NY  10020
Officer                   Director, INROADS/Central New England,
                          Inc., 99 Bedford St., Boston,
                          MA 02111

Robert A. Madore          Prior to October, 1992, Senior Vice
Vice President              President and Portfolio Manager,
                          Fiduciary Captial Management, Inc.
                          51 Sherman Hill Rd., Woodbury,
                          CT 06798

Frederick S. Marius       Prior to September, 1992, Associate
    
Assistant Vice President    Attorney at Skadden Arps, One
Associate Counsel           Beacon St., Boston, MA 02109
<PAGE>
Andrew S. Matteis         Prior to March, 1993, Vice President,
Vice President              Fitch Investors Service, One
                          State Street Plaza, New York
                          NY 10004

Michael J. Mufson         Prior to June, 1993, Senior Equity
Vice President              Analyst, Stein Roe & Farnum,
                          One South Wacker Drive, Chicago, Il
                          60606

Warren Naphtal            Prior to January, 1994, Managing
Senior Vice President       Director, Continental Bank, 231
                          So. Lasalle St., Chicago, IL 60697

Jeffrey W. Netols         Prior to February, 1993, Portfolio
Senior Vice President       Analyst, Associated Bank,
                          200 N. Adams, Greenbay, WI 54307

Brian O'Keefe             Prior to December, 1993, Vice
Vice President              President - Foreign Exchange
                          Trader, Bank of Boston, 100 Federal
                          Street, Boston, MA 02109

Pat G. Patel              Prior to April, 1993, Regional
Assistant Vice President    Manager, Zacks Investment Research,
                          155 N. Wacker Drive, Chicago,
                          IL 60606

George Putnam             Chairman and Director, Putnam Mutual
Chairman and Director       Funds Corp.
    Director, The Boston Company, Inc.,
                          One Boston Place, Boston, MA 02108
    Director, Boston Safe Deposit and
                          Trust Company, One Boston Place,
                          Boston, MA 02108
    Director, Freeport-McMoRan, Inc., 200
                          Park Avenue, New York, NY  10166
    Director, General Mills, Inc., 9200
                          Wayzata Boulevard, Minneapolis,
                          MN 55440
    Director, Houghton Mifflin Company,
                          One Beacon Street, Boston, MA 02108
    Director, Marsh & McLennan Companies,
                          Inc., 1221 Avenue of the Americas,
                          New York, NY 10020
    Director, Rockefeller Group, Inc.,
                          1230 Avenue of the Americas,
                          New York, NY 10020
<PAGE>
Christopher A. Ray        Prior to January, 1993, Vice President
Vice President              and Portfolio Manager at Scudder,
                          Stevens & Clark, Inc., 160 Federal
                          Street, Boston, MA 02110

Charles A. Ruys de Perez  Prior to August, 1992, Associate,
Vice President and          Debevoise and Plimpton,
Senior Counsel              875 Third Ave., New York, NY 19022

Mark J. Siegel            Prior to June, 1993, Vice President, 
Vice President              Salomon Brothers International,
                          Ltd., Victoria Plaza, 111 Buckingham
                          Palace Road, London SW1W 0SB,
                          England

Joanne Soja               Prior to June, 1993, Managing
Senior Vice President       Director/Portfolio Manager,
                          Chancellor Capital Management,
                          153 East 53rd Street, New York, NY
                          10002

Harlan R. Sonderling      Prior to March, 1992, Vice President,
Vice President              Mutual of America Life Insurance
                          Company, 666 Fifth Avenue, New
                          York, NY 10103

Douglas T. Terreson       Prior to October, 1992, Investment
Vice President              Analyst, Sunbank Capital Management,
                          200 South Orange Avenue, Orlando,
                          FL, 32802

Bonnie L. Troped          Prior to May, 1993, Assistant Vice
Vice President            President/Director of Corporate
                          Events, The Boston Company, One
                          Boston Place, Boston, MA 02108

F. Mark Turner            Prior to November, 1992, Managing
Managing Director           Director, Scudder, Stevens & Clark,
                          160 Federal St., Boston, MA 02110

Thomas M. Turpin          Prior to March, 1993, Vice President
Senior Vice President       The Boston Company, One Boston
                          Place, Boston, MA 02108

John D. Weber             Prior to June, 1992, Associate,
Assistant Vice President    Citicorp Venture Capital, Ltd.
                          399 Park Avenue, New York, NY 10043

<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER

    (a)  Putnam Mutual Funds Corp. is the principal
underwriter for each of the following investment companies,
including the Registrant:
 
Putnam Adjustable Rate U.S. Government Fund, Putnam American
Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds,
Putnam Balanced Government Fund, Putnam California Tax Exempt
Income Fund, Putnam California Tax Exempt Money Market Fund,
Putnam Capital Appreciation Fund, Putnam Capital Growth and
Income Fund, Putnam Capital Manager Trust, Putnam Convertible
Income-Growth Trust, Putnam Corporate Asset Trust, Putnam Daily
Dividend Trust, Putnam Diversified Income Trust, Putnam Dividend
Growth Fund, Putnam Energy-Resources Trust, Putnam Equity Income
Fund, Putnam Europe Growth Fund, Putnam Federal Income Trust,
Putnam Florida Tax Exempt Income Fund, The George Putnam Fund of
Boston, Putnam Global Governmental Income Trust, Putnam Global
Growth Fund, Putnam Growth Fund, The Putnam Fund for Growth and
Income, Putnam Health Sciences Trust, Putnam High Yield Trust,
Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam
Investors Fund, Putnam Managed Income Trust, Putnam Massachusetts
Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund
II, Putnam Minnesota Tax Exempt Income Fund II, Putnam Municipal
Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New
Opportunities Fund, Putnam New York Tax Exempt Income Fund,
Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax
Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund II,
Putnam OTC Emerging Growth Fund, Putnam Overseas Growth Fund,
Putnam Pennsylvania Tax Exempt Income Fund, Putnam Research
Analyst Fund, Putnam Tax-Free Income Trust, Putnam Tax Exempt
Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Texas
Tax Exempt Income Fund, Putnam U.S. Government Income Trust,
Putnam Utilities Growth and Income Fund, Putnam Vista Fund,
Putnam Voyager Fund

(b) The directors and officers of the Registrant's
principal underwriter are:<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES        Positions and Offices
Name                           with Underwriter                    WITH REGISTRANT
<C>                                   <C>                                     <C>
Paulette C. Amisano        Vice President                               None
Ronald J. Anwar            Vice President                               None
Karen M. Apatow            Assistant Vice President                     None
Steven E. Asher            Senior Vice President                        None
Georgette M. Bacca         Vice President                               None
Ira G. Baron               Senior Vice President                        None
John L. Bartlett           Senior Vice President                        None
Robert A. Benish           Assistant Vice President                     None
John J. Bent               Vice President                               None
James R. Besher            Vice President                               None
Maureen L. Boisvert        Vice President                               None
Keith R. Bouchard          Vice President                               None
Leslee R. Bresnahan        Vice President                               None
James D. Brockelman        Vice President                               None
Kathleen T. Brogan         Vice President                               None
Scott P. Brogan            Vice President                               None
Gail Buckner               Senior Vice President                        None
Martha B. Bunker           Assistant Vice President                     None
Jon D. Burke               Senior Vice President                        None
Robert W. Burke            Senior Managing Director                     None
Richard P. Busher          Vice President                               None
Ellen S. Callahan          Assistant Vice President                     None
William A. Campagna        Vice President                               None
Lauren M. Campbell         Assistant Vice President                     None
Charles A. Carey           Assistant Vice President                     None
Patricia A. Cartwright     Assistant Vice President                     None
Christopher D. Caton       Assistant Vice President                     None
Dana F. Clark              Vice President                               None
James E. Clinton           Assistant Vice President                     None
Kathleen M. Collman        Managing Director                            None
Mark L. Coneeny            Vice President                               None
Donald A. Connelly         Senior Vice President                        None
Anna Coppola               Assistant Vice President                     None
F. Nicholas Corvinus       Senior Vice President                        None
Kenneth L. Daly            Senior Vice President                        None
Nancy M. Days              Assistant Vice President                     None
Daniel Delianedis          Vice President                               None
Janice D. Delory           Assistant Vice President                     None
J. Thomas Depres           Senior Vice President                        None
Scott M. Donaldson         Assistant Vice President                     None
Emily J. Durbin            Assistant Vice President                     None
David B. Edlin             Vice President                                None
James M. English           Vice President                               None
Vincent Esposito           Senior Vice President                        None
Susan H. Feldman           Vice President                               None
Paul F. Fichera            Vice President                               None
C. Nancy Fisher            Senior Vice President                        None
Mitchell B. Fishman        Assistant Vice President                     None
Joseph C. Fiumara          Vice President                               None
Patricia C. Flaherty       Senior Vice President                        None
Judy P. Frodigh            Vice President                               None
Samuel F. Gagliardi        Vice President                               None
Judy S. Gates              Vice President                               None
Richard W. Gauger          Assistant Vice President                     None
Joseph P. Gennaco          Vice President                               None
Steven E. Gibson           Managing Director                            None
Robert Goodman             Managing Director                            None
Robert G. Greenly          Vice President                               None
Daniel W. Greenwood        Vice President                               None
Keith E. Gregg             Vice President                               None
Thomas W. Halloran         Vice President                               None
Marilyn M. Hausammann      Senior Vice President                        None
Howard W. Hawkins, III     Vice President                               None
Jill M. Hayes              Vice President                               None
Paul P. Heffernan          Vice President                               None
Susan M. Heimanson         Vice President                               None
Katherine L. Hickney       Vice President                               None
Bradley J. Hilsabeck       Vice President                               None
Bess J.M. Hochstein        Vice President                               None
Sherrie V. Holder-Watts    Vice President                               None
Maureen A. Holmes          Assistant Vice President                     None
William J. Hurley          Senior Vice President                        None
Gregory E. Hyde            Vice President                               None
Dwight D. Jacobsen         Vice President                               None
Douglas B. Jamieson        Director & Senior Managing Director          None
Kevin M. Joyce             Senior Vice President                        None
James J. Kilbane           Vice President                               None
Deborah H. Kirk            Senior Vice President                        None
Jill A. Koontz             Assistant Vice President                     None
Howard H. Kreutzberg       Senior Vice President                        None
Christopher W. LaPierre    Assistant Vice President                     None
Mary E. Ledwith            Vice President                               None
Edward V. Lewandowski, Sr. Vice President                               None
Edward V. Lewandowski, Jr. Vice President                               None
Ann-Marie Linehan          Vice President                               None
Rufino R. Lomba            Assistant Vice President                     None
Philip J. Lussier          Managing Director                            None
Ann Malatos                Assistant Vice President                     None
Renee L. Maloof            Assistant Vice President                     None
Frederick S. Marius        Assistant Vice President                     None
Karen E. Marotta           Assistant Vice President                     None
Kathleen M. McAnulty       Assistant Vice President                     None
Anne B. McCarthy           Assistant Vice President                     None
Marla J. McDougall         Assistant Vice President                     None
Walter S. McFarland        Vice President                               None
Greg J. McMillan           Assistant Vice President                     None
Robert E. McMurtrie        Vice President                               None
Claye A. Metelmann         Assistant Vice President                     None
J. Chris Meyer             Senior Vice President                        None
Ronald K. Mills            Vice President                               None
Mitchell L. Moret          Vice President                               None
Donald E. Mullen           Vice President                               None
Brendan R. Murray          Vice President                               None
Robert Nadherny            Vice President                               None
Alexander L. Nelson        Managing Director                            None
Mary K. Nickerson          Vice President                               None
John P. Nickodemus         Vice President                               None
Michael C. Noonis          Assistant Vice President                     None
Peter A. Nyhus             Vice President                               None
Kristen P. O'Brien         Vice President                               None
Donald O'Fee               Vice President                               None
Edward J. O'Hara           Assistant Vice President                     None
Lorie C. O'Malley          Senior Vice President                        None
Philip G. Padgett, Jr.     Vice President                               None
Richard N. Pallan          Senior Managing Director                     None
Scott A. Papes             Vice President                               None
Cynthia O. Parr            Vice President                               None
John D. Pataccoli          Vice President                               None
Joseph Phoenix             Vice President                               None
Jeffrey E. Place           Vice President                               None
Keith Plapinger            Vice President                               None
Douglas H. Powell          Vice President                               None
George Putnam              Director                             Chairman & President
Douglas F. Rowe            Vice President                               None
Robert B. Rowe             Vice President                               None
Kevin A. Rowell            Vice President                               None
Thomas C. Rowley           Vice President                               None
Charles Ruys de Perez      Vice President                               None
Laurie A. Ryan             Assistant Vice President                     None
Catherine A. Saunders      Vice President                               None
Robbin L. Saunders         Assistant Vice President                     None
Karl W. Saur               Vice President                               None
Christine A. Scordato      Vice President                               None
Kathleen G. Sharpless      Senior Vice President                        None
John F. Sharry             Senior Vice President                        None
John B. Shamburg           Vice President                               None
Vincent P. Sheehan         Vice President                               None
William N. Shiebler        Director, Chief Executive               Vice President
    Officer and President
Daniel S. Shore            Vice President                               None
Gordon H. Silver           Senior Managing Director                     None
Nicholas T. Stanojev       Vice President                               None
Matthew S. Stein           Assistant Vice President                     None
Moira A. Sullivan          Vice President                               None
Janet C. Sweeney           Vice President                               None
Edward M. Syring, Jr.      Vice President                               None
James S. Tambone           Senior Vice President                        None
B. Iris Tanner             Assistant Vice President                     None
Louis Tasiopoulos          Senior Vice President                        None
David S. Taylor            Vice President                               None
John R. Telling            Vice President                               None
Richard B. Tibbetts        Senior Vice President                        None
Patrice M. Tirado          Vice President                               None
Janet E. Tosi-Barry        Assistant Vice President                     None
Bonnie L. Troped           Vice President                               None
Larry R. Unger             Vice President                               None
Douglas J. Vander Linde    Vice President                               None
John F. Wallin             Senior Vice President                        None
Edward F. Whalen           Vice President                               None
Robert J. Wheeler          Senior Vice President                        None
John B. White              Vice President                               None
Kirk E. Williamson         Vice President                               None
Leigh T. Williamson        Vice President                               None
Benjamin Woloshin          Vice President                               None
William H. Woolverton      Senior Vice President and Clerk              None
Timothy R. Young           Vice President                               None
Ronald J. Zucker           Senior Vice President                        None

</TABLE>
<PAGE>
The principal business address of each person listed above is One
Post Office Square, Boston, MA 02109, except for:

Mr. Anwar 25-49 86th Street, Jackson Heights, NY 11369
Mr. Bartlett, 1946 Westholme Avenue, Los Angeles, CA 90025
Mr. Besher, 8141 S. 77th East Ave., Tulsa, OK 74133
Mr. Bouchard, 18 Brice Rd., Annapolis, MD 21401
Mr. Brogan, 1601-Q Bridge Mill Road, Marietta, GA 30067
Ms. Buckner, 235 Walton Street, Englewood, NJ 07631
Mr. Burke, 2333 Stormcroft Court, Westlake Village, CA 91361
Mr. Busher, 12005 Ridge Knoll Drive, Fairfax, VA 22033
Mr. Connelly, 4634 Mirada Way, Sarasota, FL 34238
Mr. Corvinus, 208 Water St., Newburyport, MA 01950
Mr. Edlin, 7 River Road, 305 Palmer Point, Cos Cob, CT 06807
Mr. English, 1184 Pintail Circle, Boulder, CO 80303
Mr. Goodman, 14 Clover Place, Cos Cob, CT 06807
Mr. Halloran, 19449 Misty Lake Drive, Strongsville, OH 44136
Mr. Hyde, 3305 Sulky, Marietta, GA 30067
Mr. Jacobsen, 3 Sylvan Court, Pompton Plains, NJ 07444
Ms. Kirk, 124 Rivermist Dr., Buffalo, NY 14202
Mr. Lewandowski, 805 Darrell Road, Hillsborough, CA 94010
Mr. Lewandowski, Jr., 2120 The Strand, Manhattan Beach, CA 90266
Mr. McFarland, P.O. Box 4189, Chesterfield, MO 63006
Mr. McMurtrie, 14529 Glastonbury, Detroit, MI 48223
Mr. Moret, 4519 Lawn Avenue, Western Springs, IL 60558
Mr. Murray, 528 Plum Street, Syracuse, NY 13024
Mr. Nadherny, 9714 Marmount Drive, Seattle, WA 98117
Mr. Nickodemus, 1232 B Louden St., Cincinnati, OH 45202
Mr. Nyhus, 7203 Oak Pointe Curve, Bloomington, MN 55438
Mr. O'Fee, 1012 Vista Del Mar Drive, Delray Beach, FL 33483
Mr. Padgett, Jr., 7709 Charleston Drive, Bethesda, MD 20817
Mr. Papes, 1127 Olive Lake Drive, St. Louis, MO 63132
Mr. Pataccoli, 125 41st Street, Manhattan Beach, Ca 90266
Mr. Phoenix, 1426 Asbury Avenue, Hubbard Woods, IL 60093
Mr. Place, 4211 Loch Highland Parkway, Roswell, GA 30075
Mr. Powell, 2823 34th Avenue West, Seattle, WA 98199
Mr. D. Rowe 2309 Woodmont Circle, Heath, TX 75087
Mr. R. Rowe, 109 Shore Drive, Longwood, FL  32779
Mr. Rowell, 3535 East Coast Highway, Corona Del Mar, CA 92625
Mr. Rowley, 10061 S. Wood, Chicago, IL 60643
Ms. Saunders, 6400 Christie Avenue, Emeryville, CA 94608
Mr. Shamburg, 10603 N. 100th Street, Scottsdale, AZ 85260
Mr. Sheehan, Parkway Center, 1150 Galapago, Denver, CO 80204
Mr. Shore, 1100 Charlotte, Austin, TX 78203
Mr. B. Sullivan, 777 Pinoake Road, Mt. Lebanon, PA 15243
Ms. M. Sullivan, 493 Zinfandel Lane, St. Helena, CA 94574
Ms. Sweeney, 8 Surf Street, Marblehead, MA 01945
Mr. Syring, 7540 Mandarian Dr., Boca Raton, FL 33433
Mr. Telling, 329 Belt Avenue, St. Louis, MO 63112
Mr. Unger, 212 E. Broadway, Suite 903, New York, NY 10002
Mr. Vessels, 7 Riverview Drive, Norwalk, CT 06850
Mr. Williamson, 32 Kramer Place, Mandeville, LA 70448
Mr. White, 23 Wellington St., Arlington, MA 02174
Mr. Woloshin, 730 North Bundy Drive, Los Angeles, CA 90049
<PAGE>
ITEM 30.  LOCATION OF ACCOUNTS AND RECORDS

         Persons maintaining physical possession of accounts,
books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are Registrant's Clerk, Beverly Marcus;
Registrant's investment adviser,         Putnam    Investment    
Management         , Inc.; Registrant's principal underwriter,
Putnam Mutual Funds Corp.; Registrant's custodian, Putnam
Fiduciary Trust Company ("PFTC"); and Registrant's transfer and
dividend disbursing agent, Putnam Investor Services, a division
of PFTC.  The address of the Clerk, investment adviser, principal
underwriter,     custodian and     transfer and dividend
disbursing agent is One Post Office Square, Boston, Massachusetts
02109.

ITEM 31.  MANAGEMENT SERVICES

         None.

ITEM 32.  UNDERTAKINGS

            The Registrant undertakes to furnish to each person
to whom a prospectus of the Registrant is delivered a copy of the
Registrant's latest annual report to shareholders, upon request
and without charge.    

                       ----------------------------

                    CONSENT OF INDEPENDENT ACCOUNTANTS

         We consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
part of this Post-Effective Amendment to the Registration
Statement    of Putnam Federal Income Trust     on Form N-1A
(File No. 33-3903) of our report dated December    9, 1993    ,
on our audit of the financial statements and     financial
highlights     of Putnam Federal Income Trust   ,     which
report is included in the    Fund's     Annual Report    for
Putnam Federal Income Trust     for the year ended October 31,
   1993    . 
   
    We    also     consent to the references to our firm under
the     caption     "Independent Accountants    and Financial
Statements    " in the Statement of Additional
Information   .     
   
    COOPERS & LYBRAND 
Boston, Massachusetts
   February 24, 1994    

                        --------------------------
<PAGE>
                                  NOTICE

       A copy of the Agreement and Declaration of Trust of Putnam
Federal Income Trust is on file with the Secretary of State of
The Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Registrant by an
officer of the Registrant as an officer and not individually and
the obligations of or arising out of this instrument are not
binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of
the Registrant.

                              POWER OF ATTORNEY

       I, the undersigned Trustee of Putnam Federal Income Trust,
hereby severally constitute and appoint George Putnam, Charles E.
Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins
and John W. Gerstmayr, and each of them singly, my true and
lawful attorneys, with full power to them and each of them, to
sign for me, and in my name and in the capacity indicated below,
the Registration Statement on Form N-1A of Putnam Federal Income
Trust and any and all amendments (including post-effective
amendments) to said Registration Statement and to file the same
with all exhibits thereto, and other documents in connection
thereunder, with the Securities and Exchange Commission, granting
unto my said attorneys, and each of them acting alone, full power
and authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to
all intents and purposes as he or she might or could do in
person, and hereby ratify and confirm all that said attorneys or
any of them may lawfully do or cause to be done by virtue
thereof.

WITNESS my hand and seal on the date set forth below.

                           Signature              Title     Date

/s/ Jameson A. Baxter                                   
                           
JAMESON A. BAXTER          Trustee         January 17, 1994    <PAGE>
                                SIGNATURES

        Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all of the requirements for effectiveness
of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston,
and The Commonwealth of Massachusetts, on the      24 the day    
of     February, 1994    .

                                PUTNAM FEDERAL INCOME TRUST

                                By:
                                Gordon H. Silver, Vice President

       Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statement of Putnam
Federal Income Trust has been signed below by the following
persons in the capacities and on the dates indicated:


          SIGNATURE                              TITLE 
    
    George Putnam                          President
                                           and
                                                Chairman of the
                                                Board;  Principal
                                           Executive Officer;
                                           Trustee                           

    William F. Pounds                      Vice Chairman and
                                           
                                           
                                           
                                           
                                           
                                           
                                           
    
                                           
                                           Trustee
    John D. Hughes                         Vice President,
                                           Treasurer and
                                           Principal Financial
                                           
                                           Officer

    Paul G. Bucuvalas                      Assistant Treasurer
                                           and Principal Accounting
                                           
    Officer
       Jameson A. Baxter                   Trustee    
    Hans H. Estin                          Trustee
    John A. Hill                           Trustee
    Elizabeth T. Kennan                    Trustee
    Lawrence J. Lasser                     Trustee
    Robert E. Patterson                    Trustee<PAGE>
    Donald S. Perkins                      Trustee
    George Putnam, III                     Trustee
    A.J.C. Smith                           Trustee
    W. Nicholas Thorndike                  Trustee 


                                           By:   Gordon H. Silver,
                                           
                                           as
                                           Attorney-in-Fact
                                              February 24, 1994    
    
<PAGE>



                                 EXHIBIT INDEX 


1.    Form of Declaration of Trust, as amended May 5, 1994 - Exhibit 1. 
4a.   Class A Specimen share certificate - Exhibit  2.
4b.   Class B Specimen share certificate - Exhibit 3.
4c.   Portions of Agreement and Declaration of Trust relating to
      Shareholders' Rights - Exhibit 4.
4d.   Portions of Bylaws relating to Shareholders'
      Rights - Exhibit 5.
6a.   Form of Distributor's Contract dated May 4, 1994 - Exhibit 6. 
6b.   Copy of Specimen Dealer Sales Contract -Exhibit 7.
6c.   Copy of Specimen Financial Institution Sales Contract -  Exhibit 8. 
8.    Copy of Custodian Agreement with Putnam Fiduciary Trust Company dated
      May 3, 1991, as amended July 13, 1992 - Exhibit 9. 
10.   Opinion of Ropes & Gray, including consent - Exhibit 10. 
15a.  Form of Class A Distribution Plan and
      Agreement -Exhibit 12.
15b.  Form of Class B Distribution Plan and     Agreement - Exhibit
                                           
                                           12.
15c.  Copy of Specimen Dealer Service Agreement -Exhibit  13. 
15d.  Copy of Specimen Financial Institution Service Agreement - Exhibit 14.  
      
16.   Schedules for computation of performance quotations.  Exhibit 15. 

<PAGE>
Exhibit 1.

                                  FORM OF
                        PUTNAM FEDERAL INCOME TRUST

                      AMENDED AND RESTATED AGREEMENT 
                         AND DECLARATION OF TRUST


      This  AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
made at Boston, Massachusetts, this 5th day of May, 1994, hereby amends
and restates in its entirety the Agreement and Declaration of Trust of
this Trust, dated March 7, 1986, as heretofore amended, by the Trustees
hereunder, and by the holders of shares of beneficial interest to be
issued hereunder as hereinafter provided.

      WITNESSETH that

      WHEREAS, this Trust has been formed to carry on the business of
an investment company; and

      WHEREAS, the Trustees have agreed to manage all property coming
into their hands as trustees of a Massachusetts voluntary association
with transferable shares in accordance with the provisions hereinafter
set forth.

      NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities and other assets, which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and
dispose of the same upon the following terms and conditions for the pro
rata benefit of the holders from time to time of Shares in this Trust as
hereinafter set forth.

                                 ARTICLE I
                           NAME AND DEFINITIONS

NAME

      Section 1.  This Trust shall be  known as "Putnam Federal Income
Trust", and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.

DEFINITIONS

      Section 2.  Whenever used herein, unless otherwise required by
the context or specifically provided:

  (a) The "Trust" refers to the Massachusetts business trust
  established by this Agreement and Declaration of Trust, as
  amended from time to time;
  (b) "Trustees" refers to the Trustees of the Trust named herein
  or elected in accordance with Article IV;

  (c) "Shares" means the equal proportionate transferable
  units of interest into which the beneficial interest in the Trust
  shall be divided from time to time or, if more than one series or
  class of Shares is authorized by the Trustees, the equal
  proportionate transferable units into which each series or class
  of Shares shall be divided from time to time;

  (d) "Shareholder" means a record owner of Shares;

  (e) The "1940 Act" refers to the Investment Company Act of
  1940 and the Rules and Regulations thereunder, all as amended
  from time to time;

  (f) The terms "Affiliated Person", "Assignment",
  "Commission", "Interested Person", "Principal Underwriter" and
  "Majority Shareholder Vote" (the 67% or 50% requirement of the
  third sentence of Section 2(a)(42) of the 1940 Act, whichever may
  be applicable) shall have the meanings given them in the 1940
  Act;

  (g) "Declaration of Trust" shall mean this Amended and
  Restated Agreement and Declaration of Trust as amended or
  restated from time to time; 

  (h) "Bylaws" shall mean the Bylaws of the Trust as amended
  from time to time;

  (i)  The term "series" or "series of Shares" refers to the
      one or more separate investment portfolios of the Trust into
      which the assets and liabilities of the Trust may be divided
      and the Shares of the Trust representing the beneficial
      interest of Shareholders in such respective portfolios; and

  (j)  The term "class" or "class of Shares" refers to the
  division of Shares into two or more classes as provided in   
  Article III, Section 1 hereof.
                                     
                                ARTICLE II
                             PURPOSE OF TRUST

      The purpose of the Trust is to provide investors a managed
investment primarily in securities, debt instruments and other
instruments and rights of a financial character.
<PAGE>

                                ARTICLE III
                                  SHARES

DIVISION OF BENEFICIAL INTEREST

      Section 1.  The Shares of the Trust shall be issued in one or
more series as the Trustees may, without shareholder approval,
authorize.  Each series shall be preferred over all other series in
respect of the assets allocated to that series.  The beneficial interest
in each series shall at all times be divided into Shares, without par
value, each of which shall, except as provided in the following
sentence, represent an equal proportionate interest in the series with
each other Share of the same series, none having priority or preference
over another. The Trustees may, without shareholder approval, divide the
Shares of any series into two or more classes, Shares of each such class
having such preferences and special or relative rights and privileges
(including conversion rights, if any) as the Trustees may determine and
as shall be set forth in the Bylaws.  The number of Shares authorized
shall be unlimited.  The Trustees may from time to time divide or
combine the Shares of any series or class into a greater or lesser
number without thereby changing the proportionate beneficial interest in
the series or class.

OWNERSHIP OF SHARES

      Section 2.  The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent.  No certificates
certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time.  The Trustees may
make such rules as they consider appropriate for the issuance of Share
Certificates, the transfer of Shares and similar matters.  The record
books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the
Shareholders of each series and class and as to the number of Shares of
each series and class held from time to time by each Shareholder.

INVESTMENT IN THE TRUST

      Section 3.  The Trustees shall accept investments in the Trust
from such persons and on such terms and for such consideration, which
may consist of cash or tangible or intangible property or a combination
thereof, as they from time to time authorize.

      All consideration received by the Trust for the issue or sale of
Shares of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the series of Shares with respect to which the
same were received by the Trust for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of account
of the Trust and are herein referred to as "assets of" such series.

NO PREEMPTIVE RIGHTS

      Section 4.  Shareholders shall have no preemptive or other right
to subscribe to any additional Shares or other securities issued by the
Trust.

STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY

      Section 5.  Shares shall be deemed to be personal property giving
only the rights provided in this Declaration of Trust or the Bylaws. 
Every Shareholder by virtue of having become a Shareholder shall be held
to have expressly assented and agreed to the terms of this Declaration
of Trust and the Bylaws and to have become a party hereto.  The death of
a Shareholder during the continuance of the Trust shall not operate to
terminate the same nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of said
decedent under this Trust.  Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the
Shareholders partners.  Neither the Trust nor the Trustees, nor any
officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.

                                ARTICLE IV
                               THE TRUSTEES

ELECTION

      Section 1.  A Trustee may be elected either by the Trustees or by
the Shareholders.  There shall be not less than three Trustees.  The
number of Trustees shall be fixed by the Trustees.  Each Trustee elected
by the Trustees or the Shareholders shall serve until he or she retires,
resigns, is removed or dies or until the next meeting of Shareholders
called for the purpose of
electing Trustees and until the election and qualification of his or her
successor.  At any meeting called for the purpose, a Trustee may be
removed by vote of two-thirds of the outstanding shares.  The initial
Trustees, each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or her
successor is elected and qualified, or until he or she sooner dies,
resigns or is removed shall be Richard M. Cutler and such other persons
as the Trustee or Trustees then in office shall, prior to any sale of
Shares pursuant to public offering, appoint.

EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE

      Section 2.  The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created
pursuant to the terms of this Declaration of Trust.

POWERS

      Section 3.  Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and
they shall have all powers necessary or convenient to carry out that
responsibility.  Without limiting the foregoing, the Trustees may adopt
Bylaws not inconsistent with this Declaration of Trust providing for the
conduct of the business of the Trust and may amend and repeal them to
the extent that such Bylaws do not reserve that right to the
Shareholders; they may fill vacancies in or add to their number, and may
elect and remove such officers and appoint and terminate such agents as
they consider appropriate; they may appoint from their own number, and
terminate, any one or more committees consisting of two or more
Trustees, including an executive committee which may, when the Trustees
are not in session, exercise some or all of the power and authority of
the Trustees as the Trustees may determine; they may employ one or more
custodians of the assets of the Trust and may authorize such custodians
to employ subcustodians and to deposit all or any part of such assets in
a system or systems for the central handling of securities, retain a
transfer agent or a Shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate
such authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the
Trust or to any such custodian or underwriter.

      Without limiting the foregoing, the Trustees shall have power and
authority:

(a)   To invest and reinvest cash, and to hold cash uninvested;

(b)   To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;

(c)   To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;

(d)   To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;

(e)   To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
the name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or otherwise;

(f)   Subject to the provisions of Article III, Section 3, to allocate
assets, liabilities, income and expenses of the Trust to a particular
series of Shares or to apportion the same among two or more series,
provided that any liabilities or expenses incurred by or arising in
connection with a particular series of Shares shall be payable solely
out of the assets of that series; and to the extent necessary or
appropriate to give effect to the preferences and special or relative
rights and privileges of any classes of Shares, to allocate assets,
liabilities, income and expenses of a series to a particular class of
Shares of that series or to apportion the same among two or more classes
of Shares of that series;

(g)   To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of
which is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer,
and to pay calls or subscriptions with respect to any security held in
the Trust;

(h)   To join with other security holders in acting through a committee
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and
to pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;

(i)   To compromise, arbitrate or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including but not
limited to claims for taxes;

(j)   To enter into joint ventures, general or limited partnerships and
any other combinations or associations;

(k)   To borrow funds;

(l)   To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any of or all
such obligations;

(m)   To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers
or managers, principal underwriters, or independent contractors of the
Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or
omitted any such person as Shareholder, Trustee, officer, employee,
agent, investment adviser or manager, principal underwriter, or
independent contractor, including any action taken or omitted that may
be determined to constitute negligence, whether or not the Trust would
have the power to indemnify such person against such liability; and

(n)   To pay pensions for faithful service, as deemed appropriate by
the Trustees, and to adopt, establish and carry out pension, profit-
sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the Trust.

      The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by trustees. 
Except as otherwise provided herein or from time to time in the Bylaws,
any action to be taken by the Trustees may be taken by a majority of the
Trustees present at a meeting of Trustees (a quorum being present),
within or without Massachusetts, including any meeting held by means of
a conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other at
the same time and participation by such means shall constitute presence
in person at a meeting, or by written consents of a majority of the
Trustees then in office.

PAYMENT OF EXPENSES BY TRUST

      Section 4.  The Trustees are authorized to pay or to cause to be
paid out of the assets of the Trust all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with the Trust, or in
connection with the management thereof, including, but not limited to,
the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser or
manager, principal underwriter, auditor, counsel, custodian, transfer
agent, Shareholder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur, provided, however, that all expenses,
fees, charges, taxes and liabilities incurred or arising in connection
with a particular series of Shares shall be payable solely out of the
assets of that series.

OWNERSHIP OF ASSETS OF THE TRUST

      Section 5.  Title to all of the assets of each series of Shares
and of the Trust shall at all times be considered as vested in the
Trustees.

ADVISORY, MANAGEMENT AND DISTRIBUTION

      Section 6.  Subject to a favorable Majority Shareholder Vote, the
Trustees may, at any time and from time to time, contract for exclusive
or nonexclusive advisory and/or management services with any
corporation, trust, association or other organization (the "Manager"),
every such contract to comply with such requirements and restrictions as
may be set forth in the Bylaws; and any such contract may contain such
other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what investments
shall be purchased, held, sold or exchanged and what portion, if any, of
the assets of the Trust shall be held uninvested and to make changes in
the Trust's investments.  The Trustees may also, at any time and from
time to time, contract with the Manager or any other corporation, trust,
association or other organization, appointing it exclusive or
nonexclusive distributor or principal underwriter for the Shares, every
such contract to comply with such requirements and restrictions as may
be set forth in the Bylaws; and any such contract may contain such other
terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.

      The fact that:

  (i)  any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee, 
manager, adviser, principal underwriter or distributor or agent of or
for any corporation, trust, association, or other organization, or of or
for any parent or affiliate of any organization, with which an advisory
or management contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other agency contract
may have been or may hereafter be made, or that any such organization,
or any parent or affiliate thereof, is a Shareholder or has an interest
in the Trust, or that

  (ii)  any corporation, trust, association or other organization
with which an advisory or management contract or principal underwriter's
or distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or management contract, or transfer, Shareholder servicing or
other agency contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests,

shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or
executing the same or create any liability or accountability to the
Trust or its Shareholders.


                                 ARTICLE V
                 SHAREHOLDERS' VOTING POWERS AND MEETINGS

VOTING POWERS

      Section 1.  Subject to the voting powers of one or more classes
of shares as set forth in this Declaration of Trust or in the Bylaws,
the Shareholders shall have power to vote only (i) for the election of
Trustees as provided in Article IV, Section 1, (ii) for the removal of
Trustees as provided in Article IV, Section 1, (iii) with respect to any
Manager as provided in Article IV, Section 6, (iv) with respect to any
termination of this Trust to the extent and as provided in Article IX,
Section 4, (v) with respect to any amendment of this Declaration of
Trust to the extent and as provided in Article IX, Section 7, (vi) to
the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders, and (vii) with
respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust, the Bylaws or any registration of
the Trust with the Securities and Exchange Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable.  Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote.  Notwithstanding any
other provision of this Declaration of Trust, on any matter submitted to
a vote of Shareholders, all Shares of the Trust then entitled to vote
shall be voted in the aggregate as a single class without regard to
series or classes of shares, except (1) when required by the 1940 Act or
when the Trustees shall have determined that the matter affects one or
more series or classes of Shares materially differently, Shares shall be
voted by individual series or class; and (2) when the Trustees have
determined that the matter affects only the interests of one or more
series or classes, then only Shareholders of such series or classes
shall be entitled to vote thereon.  There shall be no cumulative voting
in the election of Trustees.  Shares may be voted in person or by proxy. 
A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to
the contrary from any one of them.  A proxy purporting to be executed by
or on behalf of a Shareholder shall be deemed valid unless challenged at
or prior to its exercise and the burden of proving invalidity shall rest
on the challenger.  Until Shares of any series or class are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be taken by
Shareholders as to such series or class.
VOTING POWER AND MEETINGS

      Section 2.  Meetings of Shareholders of any or all series or
classes may be called by the Trustees from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
Shareholders of such series or classes as herein provided or upon any
other matter deemed by the Trustees to be necessary or desirable. 
Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time, place and
purpose of the meeting, to each Shareholder entitled to vote at such
meeting at the Shareholder's address as it appears on the records of the
Trust.  If the Trustees shall fail to call or give notice of any meeting
of Shareholders for a period of 30 days after written application by
Shareholders holding at least 10% of the then outstanding Shares of all
series and classes entitled to vote at such meeting requesting that a
meeting be called for a purpose requiring action by the Shareholders as
provided herein or in the Bylaws, then Shareholders holding at least 10%
of the then outstanding Shares of all series and classes entitled to
vote at such meeting may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for herein in
case of call thereof by the Trustees.  Notice of a meeting need not be
given to any Shareholder if a written waiver of notice, executed by him
or her before or after the meeting, is filed with the records of the
meeting, or to any Shareholder who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to
him or her.
<PAGE>
QUORUM AND REQUIRED VOTE

      Section 3.  Thirty percent of Shares entitled to vote on a
particular matter shall be a quorum for the transaction of business on
that matter at a Shareholders' meeting, except that where any provision
of law or of this Declaration of Trust permits or requires that holders
of any series or class shall vote as an individual series or class, then
thirty percent of the aggregate number of Shares of that series or class
entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that series or class.  Any lesser number
shall be sufficient for adjournments.  Any adjourned session or sessions
may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice.  Except when
a larger vote is required by any provision of this Declaration of Trust
or the Bylaws, or by the 1940 Act, a majority of the Shares voted shall
decide any questions and a plurality shall elect a Trustee, provided
that where any provision of law or of this Declaration of Trust permits
or requires that the holders of any series or class shall vote as an
individual series or class, then a majority of the Shares of that series
or class voted on the matter (or a plurality with respect to the
election of a Trustee) shall decide that matter insofar as that series
or class is concerned.

ACTION BY WRITTEN CONSENT

      Section 4.  Any action taken by Shareholders may be taken without
a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by any express
provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records
of the meetings of Shareholders.  Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.

ADDITIONAL PROVISIONS

      Section 5.  The Bylaws may include further provisions not
inconsistent with this Declaration of Trust, regarding of Shareholders'
voting powers, the conduct of meetings and related matters.


                                ARTICLE VI
                DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES

DISTRIBUTIONS

      Section 1.  The Trustees may each year, or more frequently if
they so determine, distribute to the Shareholders of each series out of
the assets of such series such amounts as the Trustees may determine. 
Any such distribution to the Shareholders of a particular series shall
be made to said Shareholders pro rata in proportion to the number of
Shares of such series held by each of them, except to the extent
otherwise required or permitted by the preferences and special or
relative rights and privileges of any classes of Shares of that series,
and any distribution to the Shareholders of a particular class of Shares
shall be made to such Shareholders pro rata in proportion to the number
of Shares of such class held by each of them. Such distributions shall
be made in cash or Shares or a combination thereof as determined by the
Trustees.  Any such distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with the Bylaws.

REDEMPTIONS AND REPURCHASES

      Section 2.  The Trust shall purchase such Shares as are offered
by any Shareholder for redemption, upon the presentation of any
certificate for the Shares to be purchased, a proper instrument of
transfer and a request directed to the Trust or a person designated by
the Trust that the Trust purchase such Shares, or in accordance with
such other procedures for redemption as the Trustees may from time to
time authorize; and the Trust will pay therefor the net asset value
thereof, as next determined in accordance with the Bylaws.  Payment for
said Shares shall be made by the Trust to the Shareholder within seven
days after the date on which the request is made.  The obligation set
forth in this Section 2 is subject to the provision that in the event
that any time the New York Stock Exchange is closed for other than
customary weekends or holidays, or, if permitted by rules of the
Securities and Exchange Commission, during periods when trading on the
Exchange is restricted or during any emergency which makes it
impractical for the Trust to dispose of its investments or to determine
fairly the value of its net assets, or during any other period permitted
by order of the Securities and Exchange Commission for the protection of
investors, such obligation may be suspended or postponed by the
Trustees.  The Trust may also purchase or repurchase Shares at a price
not exceeding the net asset value of such Shares in effect when the
purchase or repurchase or any contract to purchase or repurchase is
made.

REDEMPTIONS AT THE OPTION OF THE TRUST

      Section 3.  The Trust shall have the right at its option and at
any time to redeem Shares of any Shareholder at the net asset value
thereof as determined in accordance with the Bylaws: (i) if at such time
such Shareholder owns fewer Shares than, or Shares having an aggregate
net asset value of less than, an amount determined from time to time by
the Trustees; or (ii) to the extent that such Shareholder owns Shares of
a particular series or class of Shares equal to or in excess of a
percentage of the outstanding Shares of that series or class determined
from time to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage equal to
or in excess of such percentage of the aggregate number of outstanding
Shares of the Trust or the aggregate net asset value of the Trust
determined from time to time by the Trustees.


                                ARTICLE VII
           COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES

COMPENSATION

      Section 1.  The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their
compensation.  Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment
banking or other services and payment for the same by the Trust.

LIMITATION OF LIABILITY

      Section 2.  The Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
manager or principal underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee, but nothing
herein contained shall protect any Trustee against any liability to
which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.

      Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or done by
or on behalf of the Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed or
done only in or with respect to their or his or her capacity as Trustees
or Trustee, and such Trustees or Trustee shall not be personally liable
thereon.

                               ARTICLE VIII
                              INDEMNIFICATION

TRUSTEES, OFFICERS, ETC.

      Section 1.  The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the
Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all liabilities
and expenses, including but not limited to amounts paid in satisfaction
of judgments, in compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which
such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding (a) not to have acted in good faith in
the reasonable belief that such Covered Person's action was in the best
interests of the Trust or (b) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of such Covered Person's office.  Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties),
shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so
paid to the Trust if it is ultimately determined that indemnification of
such expenses is not authorized under this Article, provided, however,
that either (a) such Covered Person shall have provided appropriate
security for such undertaking, (b) the Trust shall be insured against
losses arising from any such advance payments or (c) either a majority
of the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed
to a full trial type inquiry) that there is reason to believe that such
Covered Person will be found entitled to indemnification under this
Article.

COMPROMISE PAYMENT

      Section 2.  As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the
proceeding was brought, that such Covered Person either (a) did not act
in good faith in the reasonable belief that his or her action was in the
best interests of the Trust or (b) is liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his or her office, indemnification shall be provided if (a) approved
as in the best interests of the Trust, after notice that it involves
such indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that such Covered Person acted in
good faith in the reasonable belief that his or her action was in the
best interests of the Trust and is not liable to the Trust or its
Shareholders by reasons of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his or her office, or (b) there has been obtained an opinion in
writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to the effect
that such Covered Person appears to have acted in good faith in the
reasonable belief that his or her action was in the best interests of
the Trust and that such indemnification would not protect such Person
against any liability to the Trust to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her
office.  Any approval pursuant to this Section shall not prevent the
recovery from any Covered Person of any amount paid to such Covered
Person in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interests of the Trust
or to have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.

INDEMNIFICATION NOT EXCLUSIVE

      Section 3.  The right of indemnification hereby provided shall
not be exclusive of or affect any other rights to which such Covered
Person may be entitled.  As used in this Article VIII, the term "Covered
Person" shall include such person's heirs, executors and administrators
and a "disinterested Trustee" is a Trustee who is not an "interested
person" of the Trust as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, (or who has been exempted from being an
"interested person" by any rule, regulation or order of the Securities
and Exchange Commission) and against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending.  Nothing contained
in this Article shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees or officers, and other
persons may be entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
<PAGE>
SHAREHOLDERS

      Section 4.  In case any Shareholder or former Shareholder shall
be held to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or other
legal representatives or in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled to be held
harmless from and indemnified against all loss and expense arising from
such liability, but only out of the assets of the particular series of
Shares of which he or she is or was a Shareholder.

                                ARTICLE IX
                               MISCELLANEOUS

TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE

      Section 1.  All persons extending credit to, contracting with or
having any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares for payment under such credit, contract or
claim, and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future,
shall be personally liable therefor.  Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee.

      Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer or officers
shall give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite that the
same was executed or made by or on behalf of the Trust or by them as
Trustee or Trustees or as officer or officers and not individually and
that the obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the assets
and property of the Trust, and may contain such further recital as he or
she or they may deem appropriate, but the omission thereof shall not
operate to bind any Trustee or Trustees or officer or officers or
Shareholder or Shareholders individually.

TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY

      Section 2.  The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.  A
Trustee shall be liable for his or her own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee, and for nothing else, and shall
not be liable for errors of judgment or mistakes of fact or law.  The
Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and shall be under
no liability for any act or omission in accordance with such advice or
for failing to follow such advice.  The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.

LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES

      Section 3.  No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made or to
be made by the Trustees or to see to the application of any payments
made or property transferred to the Trust or upon its order.

DURATION AND TERMINATION OF TRUST

      Section 4.  Unless terminated as provided herein, the Trust shall
continue without limitation of time.  The Trust may be terminated at any
time by vote of Shareholders holding at least 66-2/3% of the Shares
entitled to vote or by the Trustees by written notice to the
Shareholders.  Any series of Shares may be terminated at any time by
vote of Shareholders holding at least 66-2/3% of the Shares of such
series entitled to vote or by the Trustees by written notice to the
Shareholders of such series.

      Upon termination of the Trust or of any one or more series of
Shares, after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated of the
Trust or of the particular series as may be determined by the Trustees,
the Trust shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets to distributable form
in cash or shares or other securities, or any combination thereof, and
distribute the proceeds to the Shareholders of the series involved,
ratably according to the number of Shares of such series held by the
several Shareholders of such series on the date of termination, except
to the extent otherwise required or permitted by the preferences and
special or relative rights and privileges of any classes of any series
of Shares of the Trust, provided that any distribution to the
Shareholders of a particular class of any 
series of Shares shall be made to such Shareholders pro rata in
proportion to the number of Shares of such class held by each of them.
<PAGE>
FILING OF COPIES, REFERENCES, HEADINGS

      Section 5.  The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may
be inspected by any Shareholder.  A copy of this instrument and of each
amendment hereto shall be filed by the Trust with the Secretary of State
of The Commonwealth of Massachusetts and with the Boston City Clerk, as
well as any other governmental office where such filing may from time to
time be required.  Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
amendments have been made and as to any matters in connection with the
Trust hereunder, and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of
this instrument or of any such amendments.  In this instrument and in
any such amendment, references to this instrument, and all expressions
like "herein", "hereof" and "hereunder" shall be deemed to refer to this
instrument as amended or affected by any such amendments.  Headings are
placed herein for convenience of reference only and shall not be taken
as a part hereof or control or affect the meaning, construction or
effect of this instrument.  This instrument may be executed in any
number of counterparts each of which shall be deemed an original.

APPLICABLE LAW

      Section 6.  This Declaration of Trust is made in The Commonwealth
of Massachusetts, and it is created under and is to be governed by and
construed and administered according to the laws of said Commonwealth. 
The Trust shall be of the type commonly called a Massachusetts business
trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.

AMENDMENTS

      Section 7.  This Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the then Trustees
when authorized to do so by vote of Shareholders holding a majority of
the Shares entitled to vote, except that an amendment which shall affect
the holders of one or more series or classes of Shares but not the
holders of all outstanding series and classes shall be authorized by
vote of the Shareholders holding a majority of the Shares entitled to
vote of each series and class affected and no vote of Shareholders of a
series or class not affected shall be required.  Amendments having the
purpose of changing the name of the Trust or of supplying any omission,
curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.<PAGE>
      IN WITNESS WHEREOF, the undersigned, being a majority of the
Trustees of the Trust, have hereunto set their hands and seals in the
City of Boston, Massachusetts for themselves and their assigns, as of
the day and year first above written.

           
           

- -------------------------                  --------------------------
George Putnam                              
      Lawrence J. Lasser


- --------------------------                 
           -------------------------
William F. Pounds                          
           
           Robert E. Patterson


- --------------------------                 --------------------------
Jameson A. Baxter                          Donald S. Perkins


- --------------------------                 
           -------------------------
Hans H. Estin                              
                                           
           George Putnam, III


- --------------------------                 
           -------------------------
John A. Hill                               
                                           
           A.J.C Smith


- --------------------------                 -------------------------
Elizabeth T. Kennan                        
           
           W. Nicholas Thorndike

                                           
           
<PAGE>
                     THE COMMONWEALTH OF MASSACHUSETTS

           
           
           Boston,  May 5, 1994

Suffolk, ss.

      Then personally appeared each of the above named Trustees of
Putnam Federal Income Trust and acknowledged the foregoing instrument to
be his or her free act and deed, before me,

           
                                           
           
           
           
           
           ----------------------------
           
                                           
           Notary Public
                                         My commission expires:
            

The address of the Trust is One Post Office Square, Boston,
Massachusetts 02109
<PAGE>
Exhibit 2.

                  PUTNAM FEDERAL INCOME TRUST 
                        Class A Shares

                             Trust Certificate

Account No.              Certificate No.               Shares

                                             CUSIP  746749 10 0
     THIS CERTIFIES THAT                     

is the owner of                       Class A shares of
beneficial interest in Putnam Federal Income Trust, fully paid and
nonassessable, the said shares being issued, received andheld under and
subject to the terms and provisions of the Agreement and Declaration of
Trust dated as of March 7, 1986, establishing Putnam Federal Income
Trust,  all amendments thereto, copies of which are on file with the
Secretary of State of The Commonwealth of Massachusetts.  The said owner
by accepting this certificate agrees to and is bound by all of the said
terms and provisions.  The shares represented hereby are transferable in
writing by the owner thereof in person or by attorney upon surrender of
this certificate to the Trustees properly endorsed for transfer.  This
certificate is executed on behalf of the Trustees as Trustees and not
individually and the obligations hereof are not binding upon any of the
Trustees or shareholders individually but are binding only upon the
assets and property of the Trust.  This certificate is not valid unless
countersigned by the Investor Servicing Agent.

     In Witness Whereof the Trustees of Putnam Federal Income Trust have
caused the following facsimile signatures to be affixed to this
certificate.

Dated:                             COUNTERSIGNED:

           
                                           
           PUTNAM INVESTOR SERVICES
           
                                           
           a division of of Putnam         
                                           
                                           Fiduciary Trust Company 
                                           
           
           INVESTOR SERVICING AGENT

                                   BY


          FOR THE TRUSTEES         AUTHORIZED SIGNATURE

<PAGE>
Exhibit 3.

                        PUTNAM FEDERAL INCOME TRUST
                              Class B Shares

                         Trust Certificate

Account No.              Certificate No.               Shares

                                             CUSIP 746 749 20 9 
      
      THIS CERTIFIES THAT        

is the owner of                            
           
           Class B shares of
beneficial interest in Putnam Federal Income Trust, fully paid and
nonassessable, the said shares being issued, received and held under and
subject to the terms and provisions of the Agreement and Declaration of
Trust dated as of March 7, 1986, establishing Putnam Federal Income
Trust, and all amendments thereto, copies of which are on file with the
Secretary of State of The Commonwealth of Massachusetts.  The said owner
by accepting this certificate agrees to and is bound by all of the said
terms and provisions.  The shares represented hereby are transferable in
writing by the owner thereof in person or by attorney upon surrender of
this certificate to the Trustees
properly endorsed for transfer.  This certificate is executed on
behalf of the Trustees as Trustees and not individually and the
obligations hereof are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Trust.  This certificate is not valid unless
countersigned by the Investor Servicing Agent.

     In Witness Whereof the Trustees of Putnam Federal Income Trust have
caused the following facsimile signatures to be affixed to this
certificate.

Dated:                             COUNTERSIGNED:

                                   PUTNAM INVESTOR SERVICES 
                                   a division of Putnam Fiduciary
                                   Trust Company
                                   INVESTOR SERVICING AGENT

                                   BY


          FOR THE TRUSTEES         AUTHORIZED SIGNATURE<PAGE>
Exhibit 4.


                               (PORTIONS OF
                   AGREEMENT AND DECLARATION OF TRUST OF
                        PUTNAM FEDERAL INCOME TRUST
                     RELATING TO SHAREHOLDERS' RIGHTS)



(c) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time
or, if more than one series of Shares is authorized by the Trustees, the
equal proportionate transferable units into which each series of Shares
shall be divided from time to time;

(d) "Shareholder" means a record owner of Shares;


                                ARTICLE III
                                  Shares

DIVISION OF BENEFICIAL INTEREST

      Section 1.  The Shares of the Trust shall be issued in one or
more series as the Trustees may, without shareholder approval,
authorize.  Each series shall be preferred over all other series in
respect of the assets allocated to that series.  The beneficial interest
in each series shall at all times be divided into Shares, without par
value, each of which shall represent an equal proportionate interest in
the series with each other Share of the same series, none having
priority or preference over another.  The number of Shares authorized
shall be unlimited.  The Trustees may from time to time divide or
combine the Shares of any series into a greater or lesser number without
thereby changing the proportionate beneficial interests in the series.

OWNERSHIP OF SHARES

      Section 2.  The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent.  No certificates
certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time.  The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, the transfer of Shares and similar matters.  The record
books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the
Shareholders of each series and as to the number of Shares of each
series held from time to time by each Shareholder.
<PAGE>
INVESTMENT IN THE TRUST

      Section 3.  The Trustees shall accept investments in the Trust
from such persons and on such terms and for such consideration, which
may consist of cash or tangible or intangible property or a combination
thereof, as they or the Bylaws from time to time authorize.

      All consideration received by the Trust for the issue or sale of
Shares of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the series of Shares with respect to which the
same were received by the Trust for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of account
of the Trust and are herein referred to as "assets of" such series.

NO PREEMPTIVE RIGHTS

      Section 4.  Shareholders shall have no preemptive or other right
to subscribe to any additional Shares or other securities issued by the
Trust.

STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY

      Section 5.  Shares shall be deemed to be personal property giving
only the rights provided in this instrument.  Every Shareholder by
virtue of having become a Shareholder shall be held to have expressly
assented and agreed to the terms hereof and to have become a party
hereto.  The death of a Shareholder during the continuance of the Trust
shall not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust.  Ownership of Shares shall not
entitle the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute
the Shareholders partners.  Neither the Trust nor the Trustees, nor any
officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.
<PAGE>
                                ARTICLE IV
                               THE TRUSTEES
ELECTION

      Section 1.  A Trustee may be elected either by the Trustees or by
the Shareholders.  There shall be not less than three Trustees.  The
number of Trustees shall be fixed by the Trustees.  Each Trustee elected
by the Trustees or the Shareholders shall serve until he or she retires,
resigns, is removed or dies or until the next meeting of Shareholders
called for the purpose of electing Trustees and until the election and
qualification of his or her successor.  At any meeting called for the
purpose, a Trustee may be removed by vote of two-thirds of the
outstanding shares.  The initial Trustees, each of whom shall serve
until the first meeting of Shareholders at which Trustees are elected
and until his successor is elected and qualified, or until he sooner
dies, resigns or is removed shall be George Putnam, Richard M. Cutler
and Alla O'Brien and such other persons as the Trustee or Trustees then
in office shall, prior to any sale of Shares pursuant to public
offering, appoint.


                                 ARTICLE V
                 SHAREHOLDERS' VOTING POWERS AND MEETINGS

VOTING POWERS

      Section 1.  The Shareholders shall have power to vote only (i)
for the election of Trustees as provided in Article IV, Section 1, (ii)
for the removal of Trustees as provided in Article IV, Section 1, (iii)
with respect to any Manager as provided in Article IV, Section 6, (iv)
with respect to any termination of this Trust to the extent and as
provided in Article IX, Section 4, (v) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Article IX,
Section 7, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vii) with respect to such additional matters relating
to the Trust as may be required by this Declaration of Trust, the Bylaws
or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable.  Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote.  Notwithstanding any
other provision of this Declaration of Trust, on any matter submitted to
a vote of Shareholders, all Shares of the Trust then entitled to vote
shall be voted by individual series, except (1) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual
series; and (2) when the Trustees have determined that the matter
affects only the interests of one or more series, then only Shareholders
of such series shall be entitled to vote thereon.  There shall be no
cumulative voting in the election of Trustees.  Shares may be voted in
person or by proxy.  A proxy with respect to Shares held in the name of
two or more persons shall be valid if executed by any one of them unless
at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them.  A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger.  Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or Bylaws to be taken by
Shareholders.

VOTING POWER AND MEETINGS

      Section 2.  Meetings of Shareholders of any or all series may be
called by the Trustees from time to time for the purpose of taking
action upon any matter requiring the vote or authority of the
Shareholders of such series as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable.  Written notice of
any meeting of Shareholders shall be given or caused to be given by the
Trustees by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to
each Shareholder entitled to vote at such meeting at the Shareholder's
address as it appears on the records of the Trust.  If the Trustees
shall fail to call or give notice of any meeting of Shareholders for a
period of 30 days after written application by Shareholders holding at
least 10% of the then outstanding Shares of each series entitled to vote
at such meeting or of all series if all series are entitled to vote at
such meeting requesting a meeting to be called for a purpose requiring
action by the Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 10% of the then outstanding Shares of each
series entitled to vote at such meeting or of all series if all series
are entitled to vote at such meeting may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner provided
for herein in case of call thereof by the Trustees.  Notice of a meeting
need not be given to any Shareholder if a written waiver of notice,
executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Shareholder who attends the meeting
without protesting prior thereto or at its commencement the lack of
notice to him or her.
<PAGE>
QUORUM AND REQUIRED VOTE

      Section 3.  Thirty percent of Shares entitled to vote shall be a
quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of this Declaration of Trust
permits or requires that holders of any series shall vote as a series,
then thirty percent of the aggregate number of Shares of that series
entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that series.  Any lesser number shall be
sufficient for adjournments.  Any adjourned session or sessions may be
held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice.  Except when a larger
vote is required by any provision of this Declaration of Trust or the
Bylaws, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of
law or of this Declaration of Trust permits or requires that the holders
of any series shall vote as a series, then a majority of the Shares of
that series voted on the matter (or a plurality with respect to the
election of a Trustee) shall decide that matter insofar as that series
is concerned.

ACTION BY WRITTEN CONSENT

      Section 4.  Any action taken by Shareholders may be taken without
a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by any express
provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records
of the meetings of Shareholders.  Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.

ADDITIONAL PROVISIONS

      SECTION 5.  The Bylaws may include further provisions of
Shareholders' votes and meetings and related matters.

                                ARTICLE VI
                DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES

DISTRIBUTIONS

      Section 1.  The Trustees may each year, or more frequently if
they so determine, distribute to the Shareholders of each series out of
the assets of such series such amounts as the Trustees may determine. 
Any such distribution to the Shareholders of a particular series shall
be made to said Shareholders pro rata in proportion to the number of
Shares of such series held by each of them.  Such distributions shall be
made in cash or Shares or a combination thereof as determined by the
Trustees.  Any such distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with the Bylaws.

REDEMPTIONS AND REPURCHASES

      Section 2.  The Trust shall purchase such Shares as are offered
by any Shareholder for redemption, upon the presentation of any
certificate for the Shares to be purchased, a proper instrument of
transfer and a request directed to the Trust or a person designated by
the Trust that the Trust purchase such Shares, or in accordance with
such other procedures for redemption as the Trustees may from time to
time authorize; and the Trust will pay therefor the net asset value
thereof, as next determined in accordance with the Bylaws.  Payment for
said Shares shall be made by the Trust to the Shareholder within seven
days after the date on which the request is made.  The obligation set
forth in this Section 2 is subject to the provision that in the event
that any time the New York Stock Exchange is closed for other than
customary weekends or holidays, or, if permitted by rules of the
Commission, during periods when trading on the Exchange is restricted or
during any emergency which makes it impractical for the Trust to dispose
of its investments or to determine fairly the value of its net assets,
or during any other period permitted by order of the Commission for the
protection of investors, such obligation may be suspended or postponed
by the Trustees.  The Trust may also purchase or repurchase Shares at a
price not exceeding the net asset value of such Shares in effect when
the purchase or repurchase or any contract to purchase or repurchase is
made.

REDEMPTIONS AT THE OPTION OF THE TRUST

      Section 3.  The Trust shall have the right at its option and at
any time to redeem Shares of any Shareholder at the net asset value
thereof as determined in accordance with the Bylaws:  (i) if at such
time such Shareholder owns fewer Shares than, or Shares having an
aggregate net asset value of less than, an amount determined from time
to time by the Trustees; or (ii) to the extent that such Shareholder
owns Shares of a particular series of Shares equal to or in excess of a
percentage of the outstanding Shares of that series determined from time
to time by the Trustees; or (iii) to the extent that such Shareholder
owns Shares of the Trust representing a percentage equal to or in excess
of such percentage of the aggregate number of outstanding Shares of the
Trust or the aggregate net asset value of the Trust determined from time
to time by the Trustees.
<PAGE>
                                ARTICLE VII
           COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES



SHAREHOLDERS

      Section 4.  In case any Shareholder or former Shareholder shall
be held to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or other
legal representatives or in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled to be held
harmless from and indemnified against all loss and expense arising from
such liability, but only out of the assets of the particular series of
Shares of which he or she is or was a Shareholder.

                                ARTICLE IX
                               MISCELLANEOUS

TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE

      Section 1.  All persons extending credit to, contracting with or
having any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares for payment under such credit, contract or
claim, and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future,
shall be personally liable therefor.  Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee.

      Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer or officers
shall give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite that the
same was executed or made by or on behalf of the Trust or by them as
Trustee or Trustees or as officer or officers and not individually and
that the obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the assets
and property of the Trust, and may contain such further recital as he or
she or they may deem appropriate, but the omission thereof shall not
operate to bind any Trustee or Trustees or officer or officers or
Shareholder or Shareholders individually.


Exhibit 5.

                          (PORTIONS OF BYLAWS OF
                        PUTNAM FEDERAL INCOME TRUST
                     RELATING TO SHAREHOLDERS' RIGHTS)


                                 ARTICLE 9
                 ISSUANCE OF SHARES AND SHARE CERTIFICATES

      9.1  SALE OF SHARES.  Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities from time
to time, full and fractional shares of its shares of beneficial
interest, such shares to be issued and sold at a price of not less than
the par value per share, if any, and not less than the net asset value
per share as from time to time determined in accordance with the
Declaration of Trust and these Bylaws and, in the case of fractional
shares, at a proportionate reduction in such price.  In the case of
shares sold for securities, such securities shall be valued in
accordance with the provisions for determining the value of the assets
of the Trust as stated in the Declaration of Trust and these Bylaws. 
The officers of the Trust are severally authorized to take all such
actions as may be necessary or desirable to carry out this Section 9.1.

      9.2  SHARE CERTIFICATES.  In lieu of issuing certificates for
shares, the Trustees or the transfer agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the record
holders of such shares, who shall in either case be deemed, for all
purposes hereunder, to be the holders of certificates for such shares as
if they had accepted such certificates and shall be held to have
expressly assented and agreed to the terms hereof.

      The Trustees may at any time authorize the issuance of share
certificates.  In that event, each shareholder shall be entitled to a
certificate stating the number of shares of each class owned by him, in
such form as shall be prescribed from time to time by the Trustees. 
Such certificate shall be signed by the President or a Vice President
and by the Treasurer or an Assistant Treasurer.  Such signatures may be
facsimile if the certificate is signed by a transfer agent or by a
registrar.  In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be such
officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its
issue.

      9.3  LOSS OF CERTIFICATES.  The transfer agent of the Trust, with
the approval of any two officers of the Trust, is authorized to issue
and countersign replacement certificates for the shares of the Trust
which have been lost, stolen or destroyed upon (i) receipt of an
affidavit or affidavits of loss or non-receipt and of an indemnity
agreement executed by the registered holder or his legal representative
and supported by an open penalty surety bond, said agreement and said
bond in all cases to be in form and content satisfactory to and approved
by the President or the Treasurer, or (ii) receipt of such other
documents as may be approved by the Trustees.

      9.4  ISSUANCE OF NEW CERTIFICATE TO PLEDGEE.  A pledgee of shares
transferred as collateral security shall be entitled to a new
certificate if the instrument of transfer substantially describes the
debt or duty that is intended to be secured thereby.  Such new
certificate shall express on its face that it is held as collateral
security, and the name of the pledgor shall be stated thereon, who alone
shall be liable as a shareholder and entitled to vote thereon.

      9.5  DISCONTINUANCE OF ISSUANCE OF CERTIFICATES.  The Trustees
may at any time discontinue the issuance of share certificates and may,
by written notice to each shareholder, require the surrender of share
certificates to the Trust for cancellation.  Such surrender and
cancellation shall not affect the ownership of shares in the Trust.

                                ARTICLE 10 

      10.4  REPORTS TO SHAREHOLDERS.  The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations, containing
all information required by applicable laws or regulations.

                                ARTICLE 11
                               SHAREHOLDERS

      11.1  MEETINGS.  A meeting of the shareholders shall be called by
the Clerk whenever ordered by the Trustees, the Chairman of the Trustees
or requested in writing by the holder or holders of at least one-tenth
of the outstanding shares entitled to vote at such meeting.  If the
Clerk, when so ordered or requested, refuses or neglects for more than
two days to call such meeting, the Trustees, Chairman of the Trustees or
the shareholders so requesting may, in the name of the Clerk, call the
meeting by giving notice thereof in the manner required when notice is
given by the Clerk.

      11.2  ACCESS TO SHAREHOLDER LIST.  Shareholders of record may
apply to the Trustees for assistance in communicating with other
shareholders for the purpose of calling a meeting in order to vote upon
the question of removal of a Trustee.  When ten or more shareholders of
record who have been such for at least six months preceding the date of
application and who hold in the aggregate shares having a net asset
value of at least $25,000 so apply, the Trustees shall within five
business days either:

           (i) afford to such applicants access to a list of
      names and addresses of all shareholders as recorded on the
      books of the Trust; or

           (ii)  inform such applicants of the approximate
      number of shareholders of record and the approximate cost
      of mailing material to them, and, within a reasonable time
      thereafter, mail, at the applicants' expense, materials
      submitted by the applicants, to all such shareholders of
      record.  The Trustees shall not be obligated to mail
      materials which they believe to be misleading or in
      violation of applicable law.

      11.3  RECORD DATES.  For the purpose of determining the
shareholders of any class or series of shares of the Trust who are
entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a time, which shall
be not more than 90 days before the date of any meeting of shareholders
or more than 60 days before the date of payment of any dividend or of
any other distribution, as the record date for determining the
shareholders of such class or series having the right to notice of and
to vote at such meeting and any adjournment thereof or the right to
receive such dividend or distribution, and in such case only
shareholders of record on such record date shall have such right
notwithstanding any transfer of shares on the books of the Trust after
the record date; or without fixing such record date the Trustees may for
any such purposes close the register or transfer books for all or part
of such period.

      11.4 PROXIES.  The placing of a shareholder's name on a proxy
pursuant to telephone or electronically transmitted instructions
obtained pursuant to procedures reasonably designed to verify that such
instructions have been authorized by such shareholder shall constitute
execution of such proxy by or on behalf of such shareholder.

<PAGE>
Exhibit 6.                            

                        PUTNAM FEDERAL INCOME TRUST
                                 FORM OF 
                           DISTRIBUTOR'S CONTRACT
                         FOR CLASS A AND B SHARES 


 Distributor's Contract dated May 4, 1994, by and between PUTNAM
FEDERAL INCOME TRUST, a Massachusetts business trust (the "Fund") and
PUTNAM MUTUAL FUNDS CORP., a Massachusetts corporation ("Putnam").

 WHEREAS, the Fund and Putnam are desirous of providing for the
distribution by Putnam of Class A shares and Class B shares of the Fund;

 NOW, THEREFORE, in consideration of the mutual agreement contained in
the Terms and Conditions of Distributor's Contract attached to and
forming a part of this Contract (the "Terms and Conditions"), the Fund
hereby appoints Putnam as a distributor of Class A shares and Class B
shares of the Fund, and Putnam hereby accepts such appointment, all as
set forth in the Terms and Conditions.

 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 FEDERAL INCOME TRUST and PUTNAM MUTUAL
FUNDS CORP., have each caused this Distributor's Contract to be signed
in duplicate in its behalf, all as of the day and year first above
written.

                     PUTNAM FEDERAL INCOME TRUST                  
   

                          
                     By:  ------------------------
                          


                     PUTNAM MUTUAL FUNDS CORP.

                          
                     By:  -------------------------



                           TERMS AND CONDITIONS
                                    OF
                          DISTRIBUTOR'S CONTRACT

1.    RESERVATION OF RIGHT NOT TO SELL.  The Fund reserves the right to
refuse at any time or times to sell any of its shares of beneficial
interest ("shares") hereunder for any reason deemed adequate by it.

2.    FEE WITH RESPECT TO CLASS A SHARES.  Except as otherwise provided
in Section 4 below, Putnam shall not be entitled to receive any
compensation from the Fund for its services in connection with the
distribution of Class A shares, except to the extent that the Fund may
from time to time agree to reimburse Putnam for specific expenses
pursuant to a Distribution Plan and Agreement from time to time in
effect between the Fund and Putnam with respect to the Class A shares of
the Fund and except that Putnam may receive a contingent deferred sales
charge upon the redemption of Class A shares, determined in the manner
set forth in the then current Prospectus or Statement of Additional
Information of the Fund.

3.    FEE WITH RESPECT TO CLASS B SHARES.  For the services provided
and expenses incurred by Putnam as a distributor of Class B shares of
the Fund, which shall include the payment by Putnam to investment
dealers of commissions on the sale of Class B shares of the Fund and
dealer services fees and other payments as set forth in the then current
Prospectus or Statement of Additional Information of the Fund, Putnam
shall receive from the Fund:

 (a)  a distribution fee payable in such amounts and upon such terms
and conditions as is provided under a Distribution Plan and Agreement
from time to time in effect between the Fund and Putnam with respect to
Class B shares of the Fund, as the case may be; and

     (b)  a contingent deferred sales charge upon the redemption of
Class B shares, determined in the manner set forth in the then current
Prospectus or Statement of Additional Information of the Fund.

4.    SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will have
the right, as principal, to sell Class A shares of the Fund to
investment dealers against orders therefor at the public offering price
less a discount determined by Putnam, which discount shall not exceed
the amount of the sales charge referred to below.  Putnam will have the
right, as principal, to sell Class B shares  of the Fund to investment
dealers against orders therefor at net asset value.

 Putnam will also have the right, as principal, to purchase shares from
the Fund at their net asset value and to sell such shares to the public
against orders therefor at the public offering price (in the case of
Class A shares) or at net asset value (in the case of Class B shares). 
Upon receipt of an order to purchase Fund shares from a bank or dealer
with whom Putnam has a Sales Contract, Putnam will promptly purchase
shares from the Fund to fill such order.  Upon receipt of registration
instructions in proper form and payment for such shares, Putnam will
transmit such instructions to the Fund or its agent for registration of
the shares purchased.

 Putnam will also have the right, as agent for the Fund, to sell Class
A shares at the public offering price or Class B at net asset value to
such persons and upon such conditions as the Trustees of the Fund may
from time to time determine.

 Putnam will also have the right, as principal, to sell Class A shares
at their net asset value or Class B at their net asset value and not
subject to a contingent deferred sales charge to such persons as may be
approved by the Trustees of the Fund, all such sales to comply with the
provisions of the Investment Company Act of 1940 and the Rules and
Regulations of the Securities and Exchange Commission promulgated
thereunder.

 The public offering price of Class A shares shall be the net asset
value of Class A shares then in effect, plus any applicable sales charge
determined in the manner set forth in the then current Prospectus and
Statement of Additional Information of the Fund or as permitted by the
Investment Company Act of 1940 and Rules and Regulations of the
Securities and Exchange Commission promulgated thereunder.  In no event
shall the public offering price exceed 1000/915ths of such net asset
value, and in no event shall any applicable sales charge exceed 8 1/2%
of the public offering price.  The net asset value of Class A shares and
Class B shares shall be determined in the manner provided in the
Agreement and Declaration of Trust of the Fund as then amended and when
determined shall be applicable to transactions as provided for in the
then current Prospectus and Statement of Additional Information.

 On every sale the Fund shall receive the applicable net asset value of
the shares.  Putnam shall have the right to retain the sales charge on
Class A shares less any applicable dealer discount.  Putnam will
reimburse the Fund for any increased issue tax paid on account of the
sales charge.
<PAGE>
5.    SALES OF SHARES BY THE FUND.  The Fund reserves the right to
issue shares at any time directly to its shareholders as a stock
dividend or stock split and to sell shares to its shareholders or to
other persons approved by Putnam at not less than net asset value.

6.    REPURCHASE OF SHARES.  Putnam will act as agent for the Fund in
connection with the repurchase of shares by the Fund upon the terms and
conditions set forth in the then current Prospectus of the Fund.

7.    BASIS OF PURCHASES AND SALES OF SHARES.  Putnam will use its best
efforts to place shares sold by it on an investment basis.  Putnam does
not agree to sell any specific number of shares.  Shares will be sold by
Putnam only against orders therefor.  Putnam will not purchase shares
from anyone other than the Fund except in accordance with Section 4, and
will not take "long" or "short" positions in shares contrary to the
Agreement and Declaration of Trust or By-Laws of the Fund.

8.    RULES OF NASD, ETC.  Putnam will conform to the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. and the
sale of securities laws of any jurisdiction in which it sells, directly
or indirectly, any shares. Putnam also agrees to furnish to the Fund
sufficient copies of any agreements or plans it intends to use in
connection with any sales of shares in adequate time for the Fund to
file and clear them with the proper authorities before they are put in
use, and not to use them until so filed and cleared.

9.    PUTNAM INDEPENDENT CONTRACTOR.  Putnam shall be an independent
contractor and neither Putnam nor any of its officers or employees as
such, is or shall be an employee of the Fund.  Putnam is responsible for
its own conduct and the employment, control and conduct of its agents
and employees and for injury to such agents or employees or to others
through its agents or employees.  Putnam assumes full responsibility for
its agents and employees under applicable statutes and agrees to pay all
employer taxes thereunder.

 Putnam will maintain at its own expense insurance against public
liability in such an amount as the Trustees of the Fund may from time to
time reasonably request.

10.   EXPENSES.  Putnam will pay all expenses of qualifying shares of
the Fund for sale under the so-called "Blue Sky" laws of any state
(except expenses of any action by the Fund relating to its Agreement and
Declaration of Trust or other matters in which the Fund has a direct
concern), and expenses of preparing, printing and distributing
advertising and sales literature (apart from expenses of registering
shares under the Securities Act of 1933, as amended, and registering the
Fund under the Investment Company Act of 1940, as amended, and the
preparation and printing of Prospectuses and Statements of Additional
Information and reports as required by said Acts and the direct expenses
of the issue of shares, except that Putnam will pay the cost of the
preparation and printing of Prospectuses and Statements of Additional
Information and shareholders' reports used by it and by others in the
sale of Fund shares to the extent such cost is not paid by others). 

11.   INDEMNIFICATION OF FUND.  Putnam agrees to indemnify and hold
harmless the Fund and each person who has been, is, or may hereafter be
a Trustee or Director of the Fund against expenses reasonably incurred
by any of them in connection with any claim or in connection with any
action, suit or proceeding to which any of them may be a party, which
arises out of or is alleged to arise out of any misrepresentation or
omission to state a material fact, or out of any alleged
misrepresentation or omission to state a material fact, on the part of
Putnam or any agent or employee of Putnam or any other person for whose
acts Putnam is responsible or is alleged to be responsible, unless such
misrepresentation or omission was made in reliance upon written
information furnished by the Fund.  Putnam also agrees likewise to
indemnify and hold harmless the Fund and each such person in connection
with any claim or in connection with any action, suit or proceeding
which arises out of or is alleged to arise out of Putnam's failure to
exercise reasonable care and diligence with respect to its services
rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for shares.  The term "expenses" includes
amounts paid in satisfaction of judgments or in settlements which are
made with Putnam's consent. The foregoing rights of indemnification
shall be in addition to any other rights to which the Fund or a Trustee
or Director may be entitled as a matter of law.

12.   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.  This Contract may be amended
only if such amendment be approved either by action of the Trustees of
the Fund or at a meeting of the shareholders by the affirmative vote of
a majority of the outstanding shares of the Fund, and by a majority of
the Trustees of the Fund who are not interested persons of the Fund or
of Putnam by vote cast in person at a meeting called for the purpose of
voting on such approval.

13.   EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.  This Contract
shall take effect upon the date first above written and shall remain in
full force and effect continuously (unless terminated automatically as
set forth in Section 12)  until terminated:

 (a)  Either by the Fund or Putnam by not more than sixty (60) days'
 nor less than ten (10) days' written notice delivered or mailed by
 registered mail, postage prepaid, to the other party; or

 (b)  If the continuance of this Contract after January 31, 1995 is not
 specifically approved at least annually by the Trustees of the Fund or
 the shareholders of the Fund by the affirmative vote of a majority of
 the outstanding shares of the Fund, and by a majority of the Trustees
 of the Fund who are not interested persons of the Fund or of Putnam,
 by vote cast in person at a meeting called for the purpose of voting
 on such approval.

 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 Fund.  The requirement under
(b) above that continuance of this Contract be "specifically approved at
least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations thereunder.

 Termination of this contract pursuant to this Section 11 shall be
without the payment of any penalty.

14.   CERTAIN DEFINITIONS.  For the purposes of this Contract, the
"affirmative vote of a majority of the outstanding shares of the Fund"
means the affirmative vote, at a duly called and held meeting of
shareholders of the Fund, (a) of the holders of 67% or more of the
shares of the Fund 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 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 entitled to vote at such meeting,
whichever is less.

 For the purposes of this Contract, the terms "interested person" and
"assignment" shall have the meanings defined in the Investment Company
Act of 1940, subject however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act.





<PAGE>
Exhibit 7.


                           DEALER SALES CONTRACT   

Between:  PUTNAM MUTUAL FUNDS CORP.and
General Distributor of
The Putnam Family of Mutual Funds     
P.O. Box 2701
Boston, MA  02208

As general distributor of The Putnam Family of Mutual Funds (the
"Funds"), we agree to sell you shares of beneficial interest issued by
the Funds (the "Shares"), subject to any limitations imposed by any of
the Funds and to confirmation by us in each instance of such sales.  By
your acceptance hereof, you agree to all of the following terms and
conditions:

                        1.  OFFERING PRICE AND FEES

The public offering price at which you may offer the Shares is the net
asset value thereof, as computed from time to time, plus any applicable
sales charge described in the then-current Prospectus of the applicable
Fund.  As compensation for each sale of Shares made by you, you will be
allowed the dealer discount, if any, on such Shares described in the
then-current Prospectus of the Fund whose Shares are sold.  We reserve
the right to revise the dealer discount referred to herein upon ten
days' written notice to you.  We will furnish you upon request with the
public offering prices for the Shares, and you agree to quote such
prices in connection with any Shares offered by you for sale.  Your
attention is specifically called to the fact that each sale is always
made subject to confirmation by us at the public offering price next
computed after receipt of the order.  There is no sales charge or dealer
discount to dealers on the reinvestment of dividends and distributions.

In addition to the dealer discount, if any, allowed pursuant to the
foregoing provisions of this Section 1, we may, at our expense, provide
additional promotional incentives or payments to dealers.  If non-cash
concessions are provided, each dealer earning such a concession may
elect to receive an amount in cash equivalent to the cost of providing
such concessions.  Notice of the availability of concessions will be
given to you by us.  All dealer discounts, promotional incentives,
payments and concessions will be made by us in accordance with National
Association of Securities Dealers, Inc. ("NASD") guidelines and rules.
<PAGE>
                          2.  MANNER OF OFFERING,
                       SELLING AND PURCHASING SHARES

We have delivered to you a copy of each Fund's current Prospectus and
will provide you with such number of copies of each Fund's Prospectus,
Statement of Additional Information and shareholder reports and of
supplementary sales materials prepared by us, as you may reasonably
request.  You will offer and sell the Shares only in accordance with the
terms and conditions of the current Prospectus and Statement of
Additional Information of the applicable Fund.  Neither you nor any
other person is authorized to give any information or to make any
representations other than those contained in such Prospectuses,
Statements of Additional Information and shareholder reports or in such
supplementary sales materials.  You agree that you will not use any
other offering materials for the Funds without our written consent.

You hereby agree (i) to exercise your best efforts to find purchasers
for the Shares of the Funds, (ii) to furnish to each person to whom any
sale is made a copy of the then-current Prospectus of the applicable
fund, (iii) to transmit to us promptly upon receipt any and all orders
received by you, and (iv) to pay to us the offering price, less any
dealer discount to which you are entitled, within five (5) business days
of our confirmation of your order, or such shorter time as may be
required by law.  If such payment is not received within said time
period, we reserve the right, without prior notice, to cancel the sale,
or at our option to return the Shares to the issuer for redemption or
repurchase.  In the latter case, we shall have the right to hold you
responsible for any loss resulting to us.  Should payment be made by
check on your local bank, liquidation of Shares may be delayed pending
clearance of your check.  You agree to issue confirmations promptly for
all accepted purchase orders for accounts held in street name.  You
shall make all sales subject to our confirmation.  All orders are
subject to acceptance or rejection by us in our sole discretion, and by
the Funds in their sole discretion.  The procedure stated herein
relating to the pricing and handling of orders shall be subject to
instructions which we may forward to you from time to time.
                          3.  COMPLIANCE WITH LAW

You hereby represent that you are registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended, and are licensed and
qualified as a broker-dealer or otherwise authorized to offer and sell
the Shares under the laws of each jurisdiction in which the Shares will
be offered and sold by you.  You further confirm that you are a member
in good standing of the NASD and agree to maintain such membership in
good standing or, in the alternative, you are a foreign dealer not
eligible for membership in the NASD.

You agree that in selling Shares you will comply with all applicable
laws, rules and regulations, including the applicable provisions of the
Securities Act of 1933, as amended, the applicable rules and regulations
of the NASD, and the applicable rules and regulations of any
jurisdiction in which you sell, directly or indirectly, any Shares.  You
agree not to offer for sale or sell the Shares in any jurisdiction in
which the Shares are not qualified for sale or in which you are not
qualified as a broker-dealer.

                       4.  RELATIONSHIP WITH DEALERS

In offering and selling Shares under this Contract, you shall be acting
as principal and nothing herein shall be construed to constitute you or
any of your agents, employees or representatives as our agent or
employee, or as an agent or employee of the Funds.  As general
distributor of the Funds, we shall have full authority to take such
action as we may deem advisable in respect of all matters pertaining to
the distribution of the Shares.  We shall not be under any obligation to
you, except for obligations expressly assumed by us in this Contract.

                              5.  TERMINATION

Either party hereto may terminate this Contract, without cause, upon ten
days' written notice to the other party.  We may terminate this Contract
for cause upon the violation by you of any of the provisions hereof,
such termination to become effective on the date such notice of
termination is mailed to you.  This Contract shall terminate
automatically if either Party ceases to be a member of the NASD.

                             6.  ASSIGNABILITY

This Contract is not assignable or transferable, except that we may
assign or transfer this Contract to any successor which becomes general
distributor of the Funds.

                             7.  GOVERNING LAW

This Contract and the rights and obligations of the parties hereunder
shall be governed by and construed under the laws of The Commonwealth of
Massachusetts.
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.

                     Very truly yours,


                     PUTNAM MUTUAL FUNDS CORP.

                     By:  /s/William N. Shiebler
                     ------------------------------
                          William N. Shiebler, President 
                          and Chief Executive Officer

We accept and agree to the foregoing Contract as of the date set forth
below.

                     Dealer

 
                          ----------------------------

                     By:  ----------------------------
                          Authorized Signature, Title

                          ----------------------------

                          ----------------------------
                     Address

                Dated     ----------------------------

Please return the signed Putnam copy to Putnam Mutual Funds Corp., P.O.
Box 2701, Boston, MA 02208



<PAGE>
Exhibit 8.


                   FINANCIAL INSTITUTION SALES CONTRACT

Between: Putnam Investors Fundand

PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
P. O. Box 2701
Boston, MA 02208

As general distributor of The Putnam Family of Mutual Funds (the
"Funds"), we agree that you will make available to your customers, under
an agency relationship with your customers, shares of beneficial
interest issued by the Funds (the "Shares"), subject to any limitations
imposed by any of the Funds and to confirmation by us of each
transaction.  By your acceptance hereof, you agree to all of the
following terms and conditions:

                        1. OFFERING PRICES AND FEES

The public offering price at which you may make the Shares available to
your customers is the net asset value thereof, as computed from time to
time, plus any applicable sales charge described in the then-current
Prospectus of the applicable Fund.  In the case of purchases by you, as
agent for your customers, of Shares sold with a sales charge, you shall
receive an agency commission consisting of a portion of the public
offering price, determined on the same basis as the "dealer discount"
described in the then-current Prospectus of the Fund, and such other
compensation to dealers as may be described therein, which shall be
payable to you at the same time and on the same basis as the same is
paid to such dealers, consistent with applicable law, rules and
regulations.  In determining the amount of any agency commission payable
to you hereunder, we reserve the right to exclude any purchases for any
accounts which we reasonably determine are not made in accordance with
the terms of the applicable Fund Prospectus and the provisions of this
Contract.  We reserve the right to revise the agency commission referred
to herein upon ten days' written notice to you.  We will furnish you
upon request with the public offering prices for the Shares, and you
agree to quote such prices in connection with any Shares made available
by you as agent for your customers.  Your attention is specifically
called to the fact that each purchase of Shares by your customers is
always made subject to confirmation by us at the public offering price
next computed after receipt of the order.  There is no sales charge or
agency commission to you on the reinvestment of dividends and
distributions.
<PAGE>
             2. MANNER OF MAKING SHARES AVAILABLE FOR PURCHASE

We will, upon request, deliver to you a copy of each Fund's then-current
Prospectus and will provide you with such number of copies of each
Fund's then-current Prospectus, Statement of Additional Information and
shareholder reports and of supplementary sales materials prepared by us,
as you may reasonably request.  It shall be your obligation to ensure
that all such information and materials are distributed to your
customers who own Shares, in accordance with securities and/or banking
law and regulations and any other applicable regulations.  Neither you
nor any other person is authorized to give any information or to make
any representations other than those contained in such Prospectuses,
Statements of Additional Information and shareholder reports or in such
supplementary sales materials.  You shall not furnish or cause to be
furnished to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional
materials and sales literature, advertisements, press releases,
announcements, statements, posters, signs or other similar material),
except such information and materials as may be furnished to you by us
or the Fund, and such other information and materials as may be approved
in writing by us.

You hereby agree:

 (i) to not purchase any Shares as agent for any customer, unless you
 deliver or cause to be delivered to such customer, at or prior to the
 time of such purchase, a copy of the then-current Prospectus of the
 applicable Fund unless such customer has acknowledged receipt of the
 Prospectus of such Fund.  You hereby represent that you understand
 your obligation to deliver a prospectus to customers who purchase
 Shares pursuant to federal securities laws and you have taken all
 necessary steps to comply with such prospectus delivery requirements;

 (ii) to transmit to us promptly upon receipt any and all orders
 received by you, it being understood that no conditional orders will
 be accepted;

 (iii) to obtain from each customer for whom you act as agent for the
 purchase of Shares any taxpayer identification number certification
 and backup withholding information required under the Internal Revenue
 Code of 1986, as amended from time to time (the "Code"), and the
 regulations promulgated thereunder, or other sections of the Code
 which may become applicable, and to provide us or our designee with
 timely written notice of any failure to obtain such taxpayer
 identification number certification or information in order to enable
 the implementation of any required backup withholding in accordance
 with the Code and the regulations thereunder; and

 (iv) to pay to us the offering price, less any agency commission to
 which you are entitled, within five (5) business days of our
 confirmation of your customer's order, or such shorter time as may be
 required by law.  You may, subject to our approval, remit the total
 public offering price to us, and we will return to you your agency
 commission.  If such payment is not received within said time period,
 we reserve the right, without prior notice, to cancel the sale, or at
 our option to return the Shares to the issuer for redemption or
 repurchase.  In the latter case, we shall have the right to hold you
 responsible for any loss resulting to us.  Should payment be made by
 local bank check, liquidation of Shares may be delayed pending
 clearance of your check.

Unless otherwise mutually agreed in writing or except as provided below,
each transaction placed by you shall be promptly confirmed by us in
writing to you, and shall be confirmed to the customer promptly upon
receipt by us of instructions from you as to such customer.  In the case
of a purchase order by customer's application, each transaction shall be
promptly confirmed in writing directly to the customer and a copy of
each confirmation shall be sent simultaneously to you.  We reserve the
right, at our discretion and without notice, to suspend the sale of
Shares or withdraw entirely the sale of Shares of any or all of the
Funds.  All orders are subject to acceptance or rejection by us in our
sole discretion, and by the Funds in their sole discretion.  The
procedure stated herein relating to the pricing and handling of orders
shall be subject to instructions which we may forward to you from time
to time.

                          3. COMPLIANCE WITH LAW

You hereby represent that you are either (1) a "bank" as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and at the time of each transaction in shares of the
Funds, are not required to register as a broker-dealer under the
Exchange Act or regulations thereunder; or (2) registered as a broker-
dealer under the Exchange Act, a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and affiliated with a
bank.

(a)   If you are a bank, not required to register as a broker-dealer
under the Exchange Act:  You further represent and warrant to us that
with respect to any sales in the United States, you will use your best
efforts to ensure that any purchase of Shares by your customers
constitutes a suitable investment for such customers.  You shall not
effect any transaction in, or induce any purchase or sale of, any Shares
by means of any manipulative, deceptive or other fraudulent device or
contrivance, and shall otherwise deal equitably and fairly with your
customers with respect to transactions in Shares of a Fund.

(b)   If you are a NASD member broker-dealer affiliated with a bank and
registered under the Exchange Act:  You further represent and warrant to
us that with respect to any sales in the United States, you agree to
abide by all of the applicable laws, rules and regulations including
applicable provisions of the Securities Act of 1933, as amended, and the
applicable rules and regulations of the NASD, including, without
limitation, its Rules of Fair Practice, and the applicable rules and
regulations of any jurisdiction in which you make Shares available for
sale to your customers.  You agree not to make available for sale to
your customers the Shares in any jurisdiction in which the Shares are
not qualified for sale or in which you are not qualified as a broker-
dealer.  We shall have no obligation or responsibility as to your right
to make Shares of any Funds available to your customers in any
jurisdiction.  You agree to notify us immediately in the event of (i)
your expulsion or suspension from the NASD or your becoming subject to
any enforcement action by the Securities and Exchange Commission, NASD,
or any other self-regulatory organization, or (ii) your violation of any
applicable federal or state law, rule or regulation including, but not
limited to, those of the SEC, NASD or other self-regulatory
organization, arising out of or in connection with this Agreement, or
which may otherwise affect in any material way your ability to act in
accordance with the terms of this Contract.

You shall not make Shares of any Fund available to your customers,
including your fiduciary customers, except in compliance with all
federal and state laws and rules and regulations of regulatory agencies
or authorities applicable to you, or any of your affiliates engaging in
such activity, which may affect your business practices.  You confirm
that you are not in violation of any banking law or regulations as to
which you are subject.

                       4. RELATIONSHIP WITH CUSTOMER

With respect to any and all transactions in the Shares of any Fund
pursuant to this Contract, it is understood and agreed in each case
that:  (a) you shall be acting solely as agent for the account of your
customer; (b) each transaction shall be initiated solely upon the order
of your customer; (c) we shall execute transactions only upon receiving
instructions from you acting as agent for your customer or upon
receiving instructions directly from your customer; (d) as between you
and your customer, your customer will have full beneficial ownership of
all Shares; (e) each transaction shall be for the account of your
customer and not for your account; and (f) unless otherwise agreed in
writing we will serve as a clearing broker for you on a fully disclosed
basis, and you shall serve as the introducing agent for your customers'
accounts.  Subject to the foregoing, however, and except for Shares sold
subject to a contingent deferred sales charge, you may maintain record
ownership of such customers' Shares in an account registered in your
name or the name of your nominee, for the benefit of such customers. 
With respect to Shares sold subject to a contingent deferred sales
charge, you agree not to hold shares of such Funds in an account
registered in your name or in the name of your nominee for the benefit
of certain of your customers.  You understand that such Shares must be
held in a separate account for each shareholder of such Funds.  Each
transaction shall be without recourse to you provided that you act in
accordance with the terms of this Agreement.  You represent and warrant
to us that you will have full right, power and authority to effect
transactions (including, without limitation, any purchases and
redemptions) in Shares on behalf of all customer accounts provided by
you.

                5. RELATIONSHIP WITH FINANCIAL INSTITUTION

Neither this Contract nor the performance of the services of the
respective parties hereunder shall be considered to constitute an
exclusive arrangement, or to create a partnership, association or joint
venture between you and us.  In making available Shares of the Funds
under this Contract, nothing herein shall be construed to constitute you
or any of your agents, employees or representatives as our agent or
employee, or as an agent or employee of the Funds, and you shall not
make any representations to the contrary.  As general distributor of the
Funds, we shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution of
the Shares.  We shall not be under any obligation to you, except for
obligations expressly assumed by us in this Contract.

                              6.  TERMINATION

Either party hereto may terminate this Contract, without cause, upon ten
days' written notice to the other party.  We may terminate this Contract
for cause upon the violation by you of any of the provisions hereof,
such termination to become effective on the date such notice of
termination is mailed to you.  If you are registered as a broker-dealer
and affiliated with a bank, this Contract shall terminate automatically
if either Party ceases to be a member of the NASD.

                             7.  ASSIGNABILITY

This Contract is not assignable or transferable, except that we may
assign or transfer this Contract to any successor which becomes general
distributor of the Funds.
<PAGE>
                             8.  MISCELLANEOUS

(a)   All communications mailed to us should be sent to the above
address.  Any notice to you shall be duly given if mailed or delivered
to you at the address specified by you below.

(b)   This Contract constitutes the entire agreement and understanding
between the parties and supercedes any and all prior agreements between
the parties.

(c)   This Contract and the rights and obligations of the parties
hereunder shall be governed by and construed under the laws of The
Commonwealth of Massachusetts.

                          Very truly yours,

                          PUTNAM MUTUAL FUNDS CORP.

                          By:  ------------------------------     
                          William N. Shiebler, President          
                     and Chief Executive Officer

 We accept and agree to the foregoing Contract as of the date set forth
below.

 Financial Institution:   ---------------------------

                     By:  ----------------------------
                          Authorized Signature, Title

                          ----------------------------

                          ----------------------------
                          Address

                 Dated:   ----------------------------

Please return the signed Putnam copy of this sales Contract to Putnam
Mutual Funds Corp., P. O. Box 2701, Boston, MA  02208.


<PAGE>
Exhibit 9.

                            CUSTODIAN AGREEMENT


 AGREEMENT made as of the 3rd day of May, 1991, as amended July 13,
1992, between each of the Putnam Funds listed in Schedule A, each of
such Funds acting on its own behalf separately from all the other Funds
and not jointly or jointly and severally with any of the other Funds
(each of the Funds being hereinafter referred to as the "Fund"), and
Putnam Fiduciary Trust Company (the "Custodian").

 WHEREAS, the Custodian represents to the Fund that it is eligible to
serve as a custodian for a management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
and

 WHEREAS, the Fund wishes to appoint the Custodian as the Fund's
custodian.

 NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:

1.    APPOINTMENT OF CUSTODIAN.  The Fund hereby employs and appoints
the Custodian as custodian of its assets for the term and subject to the
provisions of this Agreement.  At the direction of the Custodian, the
Fund agrees to deliver to the Sub-Custodians appointed pursuant to
Section 2 below (the "Sub-Custodians") securities, funds and other
property owned by it. The Custodian shall have no responsibility or
liability for or on account of securities, funds or other property not
so delivered to the Sub-Custodians.  Upon request, the Fund shall
deliver to the Custodian or to such Sub-Custodians as the Custodian may
direct such proxies, powers of attorney or other instruments as may be
reasonably necessary or desirable in connection with the performance by
the Custodian or any Sub-Custodian of their respective obligations under
this Agreement or any applicable Sub-Custodian Agreement.

2.    APPOINTMENT OF SUB-CUSTODIANS.  The Custodian may at any time and
from time to time appoint, at its own cost and expense, as a Sub-
Custodian for the Fund any bank or trust company which meets the
requirements of the 1940 Act and the rules and regulations thereunder to
act as a custodian, provided that the Fund shall have approved in
writing any such bank or trust company and the Custodian gives prompt
written notice to the Fund of any such appointment.  The agreement
between the Custodian and any Sub-Custodian shall be substantially in
the form of the Sub-Custodian agreement attached hereto as Exhibit 1
(the "Sub-Custodian Agreement") unless otherwise approved by the Fund,
provided, however, that the agreement between the Custodian and any Sub-
Custodian appointed primarily for the purpose of holding foreign
securities of the Fund shall be substantially in the form of the Sub-
Custodian Agreement attached hereto as Exhibit 1(A) (the "Foreign Sub-
Custodian Agreement"; the "Sub-Custodian Agreement" and the "Foreign
Sub-Custodian Agreement" are herein referred to collectively and each
individually as the "Sub-Custodian Agreement").  All Sub-Custodians
shall be subject to the instructions of the Custodian and not the Fund. 
The Custodian may, at any time in its discretion, remove any bank or
trust company which has been appointed as a Sub-Custodian but shall in
such case promptly notify the Fund in writing of any such action. 
Securities, funds and other property of the Fund delivered pursuant to
this Agreement shall be held exclusively by Sub-Custodians appointed
pursuant to the provisions of this 

Section 2.

 The Sub-Custodians which the Fund has approved to date are set forth
in Schedule B hereto.  Schedule B shall be amended from time to time as
Sub-Custodians are changed, added or deleted. The Fund shall be
responsible for informing the Custodian sufficiently in advance of a
proposed investment which is to be held at a location not listed on
Schedule B, in order that there shall be sufficient time for the
Custodian to put the appropriate arrangements in place with such Sub-
Custodian pursuant to such Sub-Custodian Agreement.

 With respect to the securities, funds or other property held by a Sub-
Custodian, the Custodian shall be liable to the Fund if and only to the
extent that such Sub-Custodian is liable to the Custodian.  The
Custodian shall nevertheless be liable to the Fund for its own
negligence in transmitting any instructions received by it from the Fund
and for its own negligence in connection with the delivery of any
securities, funds or other property of the Fund to any such Sub-
Custodian.

 In the event that any Sub-Custodian appointed pursuant to the
provisions of this Section 2 fails to perform any of its obligations
under the terms and conditions of the applicable Sub-Custodian
Agreement, the Custodian shall use its best efforts to cause such Sub-
Custodian to perform such obligations.  In the event that the Custodian
is unable to cause such Sub-Custodian to perform fully its obligations
thereunder, the Custodian shall forthwith terminate such Sub-Custodian
and, if necessary or desirable, appoint another Sub-Custodian in
accordance with the provisions of this Section 2.  The Custodian may
with the approval of the Fund commence any legal or equitable action
which it believes is necessary or appropriate in connection with the
failure by a Sub-Custodian to perform its obligations under the
applicable Sub-Custodian Agreement.  Provided the Custodian shall not
have been negligent with respect to any such matter, such action shall
be at the expense of the Fund.  The Custodian shall keep the Fund fully
informed regarding such action and the Fund may at any time upon notice
to the Custodian elect to take responsibility for prosecuting such
action.  In such event the Fund shall have the right to enforce and
shall be subrogated to the Custodian's rights against any such Sub-
Custodian for loss or damage caused the Fund by such Sub-Custodian.

 At the written request of the Fund, the Custodian will terminate any
Sub-Custodian appointed pursuant to the provisions of this Section 2 in
accordance with the termination provisions of the applicable Sub-
Custodian Agreement.  The Custodian will not amend any Sub-Custodian
Agreement in any material manner except upon the prior written approval
of the Fund and shall in any case give prompt written notice to the Fund
of any amendment to the Sub-Custodian Agreement.

3.    DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
 HELD BY SUB-CUSTODIANS.  

 3.1  HOLDING SECURITIES - The Custodian shall cause one or more Sub-
Custodians to hold and, by book-entry or otherwise, identify as
belonging to the Fund all non-cash property delivered to such Sub-
Custodian.

 3.2  DELIVERY OF SECURITIES - The Custodian shall cause Sub-Custodians
holding securities of the Fund to release and deliver securities owned
by the Fund held by the Sub-Custodian or in a Securities System account
of the Sub-Custodian only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and
only in the following cases:

      3.2.1     Upon sale of such securities for the account of the
                Fund and receipt of payment therefor; PROVIDED,
                HOWEVER, that a Sub-Custodian may release and deliver
                securities prior to the receipt of payment therefor if
                (i) in the Sub-Custodian's judgment, (A) release and
                delivery prior to payment is required by the terms of
                the instrument evidencing the security or (B) release
                and delivery prior to payment is the prevailing method
                of settling securities transactions between
                institutional investors in the applicable market and
                (ii) release and delivery prior to payment is in
                accordance with generally accepted trade practice and
                with any applicable governmental regulations and the
                rules of Securities Systems or other securities
                depositories and clearing agencies in the applicable
                market.  The Custodian agrees, upon request, to advise
                the Fund of all pending transactions in which release
                and delivery will be made prior to the receipt of
                payment therefor;
           
      3.2.2     Upon the receipt of payment in connection with any
                repurchase agreement related to such securities entered
                into by the Fund;

      3.2.3     In the case of a sale effected through a Securities
                System, in accordance with the provisions of Section
                3.12 hereof;

      3.2.4     To the depository agent in connection with tender or
                other similar offers for portfolio securities of the
                Fund; provided that, in any such case, the cash or
                other consideration is thereafter to be delivered to
                the Sub-Custodian;

      3.2.5     To the issuer thereof or its agent, when such
                securities are called, redeemed, retired or otherwise
                become payable; provided that, in any such case, the
                cash or other consideration is to be delivered to the
                Sub-Custodian;

      3.2.6     To the issuer thereof, or its agent for transfer into
                the name of the Fund or into the name of any nominee or
                nominees of the Sub-Custodian or into the name or
                nominee name of any agent appointed pursuant to Section
                3.11 or any other name permitted pursuant to Section
                3.3; or for exchange for a different number of bonds,
                certificates or other evidence representing the same
                aggregate face amount or number of units; provided
                that, in any such case, the new securities are to be
                delivered to the Sub-Custodian; 

      3.2.7     Upon the sale of such securities for the account of the
                Fund, to the broker or its clearing agent, against a
                receipt, for examination in accordance with "street
                delivery" custom; provided that in any such case, the
                                Sub-Custodian shall have no 
<PAGE>
                responsibility or liability for any loss arising from
                the delivery of such securities prior to receiving
                payment for such securities except as may arise from
                the Sub-Custodian's own negligence or willful
                misconduct;

      3.2.8     For exchange or conversion pursuant to any plan of
                merger, consolidation, recapitalization, reorganization
                or readjustment of the securities of the issuer of such
                securities, or pursuant to provisions for conversion
                contained in such securities, or pursuant to any
                deposit agreement; provided that, in any such case, the
                new securities and cash, if any, are to be delivered to
                the Sub-Custodian;

      3.2.9     In the case of warrants, rights or similar securities,
                the surrender thereof in the exercise of such warrants,
                rights or similar securities or the surrender of
                interim receipts or temporary securities for definitive
                securities; provided that, in any such case, the new
                securities and cash, if any, are to be delivered to the
                Sub-Custodian;

      3.2.10    For delivery in connection with any loans of securities
                made by the Fund, but only against receipt of adequate
                collateral as agreed upon from time to time by the
                Custodian and the Fund, which may be in the form of
                cash or obligations issued by the United States
                government, its agencies or instrumentalities; except
                that in connection with any loan of securities held in
                a Securities System for which collateral is to credited
                to the Sub-Custodian's account in another Securities
                System, the Sub-Custodian will not be held liable or
                responsible for delivery of the securities prior to the
                receipt of such collateral.

      3.2.11    For delivery as security in connection with any
                borrowings by the Fund requiring a pledge of assets by
                the Fund, but only against receipt of amounts borrowed;

      3.2.12    Upon receipt of instructions from the transfer agent
                ("Transfer Agent") for the Fund, for delivery to such
                Transfer Agent or to the shareholders of the Fund in
                connection with distributions in kind, as may be
                described from time to time in the Fund's Declaration
                of Trust and currently effective registration
                statement, if any, in satisfaction of requests by Fund
                shareholders for repurchase or redemption; 

      3.2.13    For delivery to another Sub-Custodian of the Fund; and

      3.2.14    For any other proper corporate purpose, but only upon
                receipt of, in addition to Proper Instructions, a
                certified copy of a resolution of the Trustees or of
                the Executive Committee of the Fund signed by an
                officer of the Fund and certified by its Clerk or an
                Assistant Clerk, specifying the securities to be
                delivered, setting forth the purpose for which such
                delivery is to be made, declaring such purposes to be
                proper corporate purposes, and naming the person or
                persons to whom delivery of such securities shall be
                made.

      3.3  REGISTRATION OF SECURITIES.  Securities of the Fund held by
 the Sub-Custodians hereunder (other than bearer securities) shall be
 registered in the name of the Fund or in the name of any nominee of
 the Fund or of any nominee of the Sub-Custodians or any 17f-5 Sub-
 Custodian or Foreign Depository (as each of those terms is defined in
 the Foreign Sub-Custodian Agreement, which nominee shall be assigned
 exclusively to the Fund, unless the Fund has authorized in writing the
 appointment of a nominee to be used in common with other registered
 investment companies having the same investment adviser as the Fund,
 or in the name or nominee name of any agent appointed pursuant to
 Section 3.12.  Notwithstanding the foregoing, a Sub-Custodian, agent,
 17f-5 Sub-Custodian or Foreign Depository may hold securities of the
 Fund in a nominee name which is used for its other clients provided
 that such name is not used by the Sub-Custodian, agent, 17f-5 Sub-
 Custodian or Foreign Depository for its own securities and that
 securities of the Fund are, by book-entry or otherwise, at all times
 identified as belonging to the Fund and distinguished from other
 securities held for other clients using the same nominee name.  In
 addition, and notwithstanding the foregoing, a Sub-Custodian or agent
 thereof or 17f-5 Sub-Custodian or Foreign Depository may hold
 securities of the Fund in its own name if such registration is the
 prevailing method in the applicable market by which custodians
 register securities of institutional clients and provided that
 securities of the Fund are, by book-entry or otherwise, at all times
 identified as belonging to the Fund and distinguished from other
 securities held for other clients or for the Sub-Custodian or agent
 thereof or 17f-5 Sub-Custodian or Foreign Depository.  All securities
 accepted by a Sub-Custodian under the terms of a Sub-Custodian
 Agreement shall be in good delivery form.

      3.4  BANK ACCOUNTS.  The Custodian shall cause one or more Sub-
Custodians to open and maintain a separate bank account or accounts in
the name of the Fund or the Custodian, subject only to draft or order by
the Sub-Custodian acting pursuant to the terms of a Sub-Custodian
Contract or by the Custodian acting pursuant to this Agreement, and
shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company Act of
1940.  Funds held by the Sub-Custodian for the Fund may be deposited by
it to its credit as sub-custodian or to the Custodian's credit as
custodian in the Banking Department of the Sub-Custodian or in such
other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall be
approved by vote of a majority of the Trustees of the Fund.  Such funds
shall be deposited by the Sub-Custodian or the Custodian in its capacity
as sub-custodian or custodian, respectively, and shall be withdrawable
by the Sub-Custodian or the Custodian only in that capacity.  The Sub-
Custodian shall be liable for actual losses incurred by the Fund
attributable to any failure on the part of the Sub-Custodian to report
accurate cash availability information with respect to the Fund's or the
Custodian's bank accounts maintained by the Sub-Custodian or any of its
agents.

 3.5  PAYMENTS FOR SHARES.  The Custodian shall cause one or more Sub-
Custodians to deposit into the Fund's account amounts received from the
Transfer Agent of the Fund for shares of the Fund issued by the Fund and
sold by its distributor.  The Custodian will provide timely notification
to the Fund of any receipt by the Sub-Custodian from the Transfer Agent
of payments for shares of the Fund.

 3.6  AVAILABILITY OF FEDERAL FUNDS.  Upon mutual agreement between the
Fund and the Custodian, the Custodian shall cause one or more Sub-
Custodians, upon the receipt of Proper Instructions, to make federal
funds available to the Fund as of specified times agreed upon from time
to time by the Fund and the Custodian with respect to amounts received
by the Sub-Custodians for the purchase of shares of the Fund.

 3.7  COLLECTION OF INCOME.  The Custodian shall cause one or more Sub-
Custodians to collect on a timely basis all income and other payments
with respect to registered securities held hereunder, including
securities held in a Securities System, to which the Fund shall be
entitled either by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer,
such securities are held by the Sub-Custodian or agent thereof and shall
credit such income, as collected, to the Fund's account.  Without
limiting the generality of the foregoing, the Custodian shall cause the
Sub-Custodian to detach and present for payment all coupons and other
income items requiring presentation as and when they become due and
shall collect interest when due on securities held under the applicable
Sub-Custodian Agreement.  Arranging for the collection of income due the
Fund on securities loaned pursuant to the provisions of Section 3.2.10
shall be the responsibility of the Fund.  The Custodian will have no
duty or responsibility in connection therewith, other than to provide
the Fund with such information or data as may be necessary to assist the
Fund in arranging for the timely delivery to the Sub-Custodian of the
income to which the Fund is properly entitled.

 3.8  PAYMENT OF FUND MONIES.  Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall cause one or more Sub-Custodians to pay out
monies of the Fund in the following cases only:

      3.8.1     Upon the purchase of securities for the account of the
                Fund but only (a) against the delivery of such
                securities to the Sub-Custodian (or any bank, banking
                firm or trust company doing business in the United
                States or abroad which is qualified under the
                Investment Company Act of 1940, as amended, to act as a
                custodian and has been designated by the Sub-Custodian
                as its agent for this purpose) or any 17f-5 Sub-
                Custodian or any Foreign Depository registered in the
                name of the Fund or in the name of a nominee of the
                Sub-Custodian referred to in Section 3.3 hereof or in
                proper form for transfer; PROVIDED, HOWEVER, that the
                Sub-Custodian may cause monies of the Fund to be paid
                out prior to delivery of such securities if (i) in the
                Sub-Custodian's judgment, (A) payment prior to delivery
                is required by the terms of the instrument evidencing
                the security or (B) payment prior to delivery is the
                prevailing method of settling securities transactions
                between institutional investors in the applicable
                market and (ii) payment prior to delivery is in
                accordance with generally accepted trade practice and
                with any applicable governmental regulations and the
                rules of Securities Systems or other securities
                depositories and clearing agencies in the applicable
                market; the Custodian agrees, upon request, to advise
                the Fund of all pending transactions in which payment
                will be made prior to the receipt of securities in
                accordance with the provision to the foregoing
                sentence; (b) in the case of a purchase effected
                through a Securities System, in accordance with the
                conditions set forth in Section 3.13 hereof; or (c)(i)
                in the case of a repurchase agreement entered into
                between the Fund and the Sub-Custodian, another bank,
                or a broker-dealer against delivery of the securities
                either in certificate form or through an entry
                crediting the Sub-Custodian's account at the Federal
                Reserve Bank with such securities or (ii) in the case
                of a repurchase agreement entered into between the Fund
                and the Sub-Custodian, against delivery of a receipt
                evidencing purchase by the Fund of Securities owned by
                the Sub-Custodian along with written evidence of the
                agreement by the Sub-Custodian to repurchase such
                securities from the Fund; or (d) for transfer to a time
                deposit account of the Fund in any bank, whether
                domestic or foreign, which transfer may be effected
                prior to receipt of a confirmation of the deposit from
                the applicable bank or a financial intermediary;

      3.8.2     In connection with conversion, exchange or surrender of
                securities owned by the Fund as set forth in Section
                3.2 hereof;

      3.8.3     For the redemption or repurchase of Shares issued by
                the Fund as set forth in Section 3.10 hereof;

      3.8.4     For the payment of any expense or liability incurred by
                the Fund, including but not limited to the following
                payments for the account of the Fund: interest, taxes,
                management, accounting, transfer agent and legal fees,
                including the Custodian's fee; and operating expenses
                of the Fund whether or not such expenses are to be in
                whole or part capitalized or treated as deferred
                expenses;

      3.8.5     For the payment of any dividends or other distributions
                declared to shareholders of the Fund; 

      3.8.6     For transfer to another Sub-Custodian of the Fund;

      3.8.7     For any other proper purpose, but only upon receipt of,
                in addition to Proper Instructions, a certified copy of
                a resolution of the Trustees or of the Executive
                Committee of the Fund signed by an officer of the Fund
                and certified by its Clerk or an Assistant Clerk,
                specifying the amount of such payment, setting forth
                the purpose for which such payment is to be made,
                declaring such purpose to be a proper purpose, and
                naming the person or persons to whom such payments is
                to be made.

 3.9  LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED.  Except as otherwise provided in this Agreement, in any and
every case where payment for purchase of securities for the account of
the Fund is made by a Sub-Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Fund to so pay in advance, the Custodian shall cause the Sub-
Custodian to be absolutely liable to the Fund in the event any loss
results to the Fund from the payment by the Sub-Custodian in advance of
delivery of such securities.

 3.10  PAYMENTS FOR REPURCHASE OR REDEMPTIONS OF SHARES OF THE FUND. 
From such funds as may be available, the Custodian shall, upon receipt
Proper Instructions, cause one or more Sub-Custodians to make funds
available for payment to a shareholder who has delivered to the Transfer
Agent a request for redemption or repurchase of shares of the Fund.  In
connection with the redemption or repurchase of shares of the Fund, the
Custodian is authorized, upon receipt of Proper Instructions, to cause
one or more Sub-Custodian, to wire funds to or through a commercial bank
designated by the redeeming shareholder.  In connection with the
redemption or repurchase of Shares of the Fund, the Custodian, upon
receipt of Proper Instructions, shall cause one or more Sub-Custodians
to honor checks drawn on the Sub-Custodian by a shareholder when
presented to the Sub-Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time among the Fund,
the Custodian and the Sub-Custodian.
<PAGE>
 3.11 APPOINTMENT OF AGENTS.  The Custodian may permit any Sub-
Custodian at any time or times in its discretion to appoint (and may at
any time remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the provisions of this
Section 3 as the Sub-Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian or any Sub-Custodian of its responsibilities or liabilities
hereunder and provided that any such agent shall have been approved by
vote of the Trustees of the Fund.  The Custodian may also permit any
Sub-Custodian to which foreign securities of the Fund have been
delivered to direct such securities to be held by 17f-5 Sub-Custodians
and to use the facilities of Foreign Depositories, as those terms are
defined in the Foreign Sub-Custodian Agreement, in accordance with the
terms of the Foreign Sub-Custodian Agreement.

 The agents which the Fund and the Custodian have approved to date are
set forth in Schedule B hereto.  Schedule B shall be amended from time
to time as agents are changed, added or deleted.  The Fund shall be
responsible for informing the Custodian, and the Custodian shall be
responsible for informing the appropriate Sub-Custodian, sufficiently in
advance of a proposed investment which is to be held at a location not
listed on Schedule B, in order that there shall be sufficient time for
the Sub-Custodian to complete the appropriate contractual and technical
arrangements with such agent.  Any Sub-Custodian Agreement shall provide
that the engagement by the Sub-Custodian of one or more agents shall not
relieve the Sub-Custodian of its responsibilities or liabilities
thereunder.

 3.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS.  The Custodian may
permit any Sub-Custodian to deposit and/or maintain securities owned by
the Fund in a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain federal
agencies, collectively referred to herein as "Securities System" in
accordance with applicable rules and regulations (including Rule 17f-4
of the 1940 Act) and subject to the following provisions:

      3.12.1    The Sub-Custodian may, either directly or through one
                or more agents, keep securities of the Fund in a
                Securities System provided that such securities are
                represented in an account ("Account") of the Sub-
                                Custodian in
<PAGE>
                the Securities System which shall not             
                     include any assets of the Sub-Custodian other than
                assets held as a fiduciary, custodian or     otherwise for
                customers;

      3.12.2    The records of the Sub-Custodian with respect to
                securities of the Fund which are maintained in a
                Securities System shall identify by book-entry those
                securities belonging to the Fund;

      3.12.3    The Sub-Custodian shall pay for securities purchased
                for the account of the Fund upon (i) receipt of advice
                from the Securities System that such securities have
                been transferred to the Account, and (ii) the making of
                an entry on the records of the Sub-Custodian to reflect
                such payment and transfer for the account of the Fund. 
                The Sub-Custodian shall transfer securities sold for
                the account of the Fund upon (i) receipt of advice from
                the Securities System that payment for such securities
                has been transferred to the Account, and (ii) the
                making of an entry on the records of the Sub-Custodian
                to reflect such transfer and payment for the account of
                the Fund.  Copies of all advices from the Securities
                System of transfers of securities for the account of
                the Fund shall identify the Fund, be maintained for the
                Fund by the Sub-Custodian or such an agent and be
                provided to the Fund at its request.  The Sub-Custodian
                shall furnish the Fund confirmation of each transfer to
                or from the account of the Fund in the form of a
                written advice or notice and shall furnish to the Fund
                copies of daily transaction sheets reflecting each
                day's transactions in the Securities System for the
                account of the Fund on the next business day;


      3.12.4    The Sub-Custodian shall provide the Fund with any
                report obtained by the Sub-Custodian on the Securities
                System's accounting system, internal accounting
                controls and procedures for safeguarding securities
                deposited in the Securities System;
<PAGE>
      3.12.5    The Sub-Custodian shall utilize only such Securities
                Systems as are approved by the Board of Trustees of the
                Fund, and included on a list maintained by the
                Custodian;

      3.12.6    Anything to the contrary in this Agreement
                notwithstanding, the Sub-Custodian shall be liable to
                the Fund for any loss or damage to the Fund resulting
                from use of the Securities System by reason of any
                negligence, misfeasance or misconduct of the Sub-
                Custodian or any of its agents or of any of its or
                their employees or from failure of the Sub-Custodian or
                any such agent to enforce effectively such rights as it
                may have against the Securities System; at the election
                of the Fund, it shall be entitled to be subrogated to
                the rights of the Sub-Custodian with respect to any
                claim against the Securities System or any other person
                which the Sub-Custodian may have as a consequence of
                any such loss or damage if and to the extent that the
                Fund has not been made whole for any such loss or
                damage.

 3.12A     DEPOSITARY RECEIPTS.  Only upon receipt of Proper
Instructions, the Sub-Custodian shall instruct a 17f-5 Sub-Custodian or
an agent of the Sub-Custodian appointed pursuant to the applicable
Foreign Sub-Custodian Agreement (an "Agent") to surrender securities to
the depositary used by an issuer of American Depositary Receipts or
International Depositary Receipts (hereinafter collectively referred to
as "ADRs") for such securities against a written receipt therefor
adequately describing such securities and written evidence satisfactory
to the 17f-5 Sub-Custodian or Agent that the depositary has acknowledged
receipt of instructions to issue with respect to such securities ADRs in
the name of the Sub-Custodian, or a nominee of the Sub-Custodian, for
delivery to the Sub-Custodian.

 Only upon receipt of Proper Instructions, the Sub-Custodian shall
surrender ADRs to the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Sub-Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver
the securities underlying such ADRs to a 17f-5 Sub-Custodian or an
Agent.

 3.12B     FOREIGN EXCHANGE TRANSACTIONS AND FUTURES CONTRACTS.  Only
upon receipt of Proper Instructions, the Sub-Custodian shall enter into
foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for the account of
the Fund or shall enter into futures contracts or options on futures
contracts.  Such transactions may be undertaken by the Sub-Custodian
with such banking institutions, including the Sub-Custodian and 17f-5
Sub-Custodian(s) appointed pursuant to the applicable Foreign Sub-
Custodian Agreement, as principals, as approved and authorized by the
Fund.  Foreign exchange contracts, futures contracts and options, other
than those executed with the Sub-Custodian, shall for all purposes of
this Agreement be deemed to be portfolio securities of the Fund.

 3.12C     OPTION TRANSACTIONS.  Only upon receipt of Proper
Instructions, the Sub-Custodian shall enter into option transactions in
accordance with the provisions of any agreement among the Fund, the
Custodian and/or the Sub-Custodian and a broker-dealer.

 3.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES.  The Custodian shall
cause one or more Sub-Custodians as may be appropriate to execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by the Sub-
Custodian and in connection with transfers of securities.

 3.14 PROXIES.  The Custodian shall, with respect to the securities
held by the Sub-Custodians, cause to be promptly executed by the
registered holder of such securities, if the securities are registered
other than in the name of the Fund or a nominee of the fund, all
proxies, without indication of the manner in which such proxies are to
be voted, and shall promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.

 3.15 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The
Custodian shall cause the Sub-Custodians to transmit promptly to the
Custodian, and the Custodian shall transmit promptly to the Fund, all
written information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in connection
therewith) received by the Sub-Custodian from issuers of the securities
being held for the account of the Fund.  With respect to tender or
exchange offers, the Custodian shall cause the Sub-Custodian to transmit
promptly to the Fund, all written information received by the Sub-
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer.  If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall
notify the Custodian of the action the Fund desires such Sub-Custodian
to take, provided, however, neither the Custodian nor the Sub-Custodian
shall be liable to the Fund for the failure to take any such action
unless such instructions are received by the Custodian at least four
business days prior to the date on which the Sub-Custodian is to take
such action or, in the case of foreign securities, such longer period as
shall have been agreed upon in writing by the Custodian and the Sub-
Custodian.

 3.16 PROPER INSTRUCTIONS.  Proper Instructions as used throughout this
Agreement means a writing signed or initialed by one or more person or
persons who are authorized by the Trustees of the Fund and the
Custodian.  Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the
purpose for which such action is requested.  Oral instructions will be
considered Proper Instructions if the Custodian or Sub-Custodian, as the
case may be, reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved.  All oral instructions shall be confirmed in writing.  Proper
Instructions also include communications effected directly between
electro-mechanical or electronic devices provided that the Trustees have
approved such procedures.  Notwithstanding the foregoing, no Trustee,
officer, employee or agent of the Fund shall be permitted access to any
securities or similar investments of the Fund deposited with any Sub-
Custodian or any agent of any Sub-Custodian for any reason except in
accordance with the provisions of Rule 17f-2 under the 1940 Act.

 3.17 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.  The Custodian may
in its discretion, and may permit one or more Sub-Custodians in their
discretion, without express authority from the Fund to:

      3.17.1    make payments to itself or others for minor expenses of
                handling securities or other similar items relating to
                its duties under this Agreement, or in the case of a
                Sub-Custodian, under the applicable Sub-Custodian
                Agreement, provided that all such payments shall be
                accounted for to the Fund;

      3.17.2    surrender securities in temporary form for securities
                in definitive form;

      3.17.3    endorse for collection, in the name of the Fund,
                checks, drafts and other negotiable instruments; and

      3.17.4    in general, attend to all non-discretionary details in
                connection with the sale, exchange, substitution,
                purchase, transfer and other dealings with the
                securities and property of the Fund except as otherwise
                directed by the Trustees of the Fund.

 3.18 EVIDENCE OF AUTHORITY.  The Custodian shall be protected in
acting upon any instructions, notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund.

 3.19 INVESTMENT LIMITATIONS.  In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, the Custodian may assume, unless and
until notified in writing to the contrary, that Proper Instructions
received by it are not in conflict with or in any way contrary to any
provisions of the Fund's Declaration of Trust or By-Laws (or comparable
documents) or votes or proceedings of the shareholders or Trustees of
the Fund.  The Custodian shall in no event be liable to the Fund and
shall be indemnified by the Fund for any violation of any investment
limitations to which the Fund is subject or other limitations with
respect to the Fund's powers to expend funds, encumber securities,
borrow or take similar actions affecting its portfolio.

4.    PERFORMANCE STANDARDS.  The Custodian shall use its best efforts
to perform its duties hereunder in accordance with the standards set
forth in Schedule C hereto.  Schedule C may be amended from time to time
as agreed to by the Custodian and the Trustees of the Fund.

5.    RECORDS.  The Custodian shall create and maintain all records
relating to the Custodian's activities and obligations under this
Agreement and cause all Sub-Custodians to create and maintain all
records relating to the Sub-Custodian's activities and obligations under
the appropriate Sub-Custodian Agreement in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to
Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and 31a-2
thereunder, applicable federal and state tax laws, and any other law or
administrative rules or procedures which may be applicable to the Fund. 
All such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian or during the
regular business hours of the Sub-Custodian, as the case may be, be open
for inspection by duly authorized officers, employees or agents of the
Custodian and Fund and employees and agents of the Securities and
Exchange Commission.  At the Fund's request, the Custodian shall supply
the Fund and cause one or more Sub-Custodians to supply the Custodian
with a tabulation of securities owned by the Fund and held under this
Agreement.  When requested to do so by the Fund and for such
compensation as shall be agreed upon, the Custodian shall include and
cause one or more Sub-Custodians to include certificate numbers in such
tabulations.
<PAGE>
6.    OPINION AND REPORTS OF FUND'S INDEPENDENT ACCOUNTANTS.  The
Custodian shall take all reasonable actions, as the Fund may from time
to time request, to furnish such information with respect to its
activities hereunder as the Fund's independent public accountants may
request in connection with the accountant's verification of the Fund's
securities and similar investments as required by Rule 17f-2 under the
1940 Act, the preparation of the Fund's registration statement and
amendments thereto, the Fund's reports to the Securities and Exchange
Commission, and with respect to any other requirements of such
Commission.

 The Custodian shall also direct any Sub-Custodian to take all
reasonable actions, as the Fund may from time to time request, to
furnish such information with respect to its activities under the
applicable Sub-Custodian Agreement as the Fund's independent public
accountant may request in connection with the accountant's verification
of the Fund's securities and similar investments as required by Rule
17f-2 under the 1940 Act, the preparation of the Fund's registration
statement and amendments thereto, the Fund's reports to the Securities
and Exchange Commission, and with respect to any other requirements of
such Commission.

7.    REPORTS OF CUSTODIAN'S AND SUB-CUSTODIANS' INDEPENDENT
ACCOUNTANTS.  The Custodian shall provide the Fund, at such times as the
Fund may reasonably require, with reports by its independent public
accountant on its accounting system, internal accounting controls and
procedures for safeguarding securities, including securities deposited
and/or maintained in Securities Systems, relating to services provided
by the Custodian under this Agreement.  The Custodian shall also cause
one or more of the Sub-Custodians to provide the Fund, at such time as
the Fund may reasonably require, with reports by independent public
accountants on their accounting systems, internal accounting controls
and procedures for safeguarding securities, including securities
deposited and/or maintained in Securities Systems, relating to services
provided by those Sub-Custodians under their respective Sub-Custody
Agreements.  Such reports, which shall be of sufficient scope and in
sufficient detail as may reasonably be required by the Fund, shall
provide reasonable assurance that any material inadequacies would be
disclosed by such examinations, and, if there is no such inadequacies,
shall so state.

8.    COMPENSATION.  The Custodian shall be entitled to reasonable
compensation for its services and expenses as custodian, as agreed upon
from time to time between the Fund and the Custodian.  Such expenses
shall not include, however, the fees paid by the Custodian to any Sub-
Custodian.
<PAGE>
9.    RESPONSIBILITY OF CUSTODIAN.  The Custodian shall exercise
reasonable care and diligence in carrying out the provisions of this
Agreement and shall not be liable to the Fund for any action taken or
omitted by it in good faith without negligence.  So long as and to the
extent that it is in the exercise of reasonable care, neither the
Custodian nor any Sub-Custodian shall be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement and shall
be held harmless in acting upon any notice, request, consent,
certificate or other instrument reasonably believed by it to be genuine
and, if in writing, reasonably believed by it to be signed by the proper
party or parties.  It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.  Notwithstanding the foregoing, the
responsibility of the Custodian or a Sub-Custodian with respect to
redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.  It is also
understood that the Custodian shall not be liable for any loss resulting
from a Sovereign Risk.  A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition
or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism, insurrection
or revolution; or any other similar act or event beyond the Custodian's
control.

 If the Fund requires the Custodian which in turn may require a Sub-
Custodian to take any action with respect to securities, which action
involves the payment of money or which action may, in the opinion of the
Custodian or the Sub-Custodian result in the Custodian or its nominee or
a Sub-Custodian or its nominee being liable for the payment of money or
incurring liability of some other form, the Fund, as a prerequisite to
requiring the Custodian or the Custodian requiring any Sub-Custodian to
take such action, shall provide indemnity to the Custodian in an amount
and form satisfactory to it.

 The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from and against all taxes, charges, expenses, assessments,
claims and liabilities (including counsel fees) incurred or assessed
against it or its nominee or any Sub-Custodian or its nominee in
connection with the performance of this Agreement, or any Sub-Custodian
Agreement except, as to the Custodian, such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, and as to a Sub-Custodian, such as may arise from such Sub-
Custodian's or its nominee's own negligent action, negligent failure to
act or willful misconduct.  The negligent action, negligent failure to
act or willful misconduct of the Custodian shall not diminish the Fund's
obligation to indemnify the Custodian in the amount, but only in the
amount, of any indemnity required to be paid to a Sub-Custodian under
its Sub-Custodian Agreement.  The Custodian may assign this indemnity
from the Fund directly to, and for the benefit of, any Sub-Custodian. 
The Custodian is authorized, and may authorize any Sub-Custodian, to
charge any account of the Fund for such items and such fees.  To secure
any such authorized charges and any advances of cash or securities made
by the Custodian or any Sub-Custodian to or for the benefit of the Fund
for any purpose which results in the Fund incurring an overdraft at the
end of any business day or for extraordinary or emergency purposes
during any business day, the Fund (except a Fund specified in Schedule D
to this Agreement) hereby grants to the Custodian a security interest in
and pledges to the Custodian securities up to a maximum of 10% of the
value of the Fund's net assets for the purpose of securing payment of
any such advances and hereby authorizes the Custodian on behalf of the
Fund to grant to any Sub-Custodian a security interest in and pledge of
securities held for the Fund (including those which may be held in a
Securities System) up to a maximum of 10% of the value of the net assets
held by such Sub-Custodian.  The specific securities subject to such
security interest may be designated in writing from time to time by the
Fund or its investment adviser.  In the absence of any designation of
securities subject to such security interest, the Custodian or the Sub-
Custodian, as the case may be, may designate securities held by it. 
Should the Fund fail to repay promptly any authorized charges or
advances of cash or securities, the Custodian or the Sub-Custodian shall
be entitled to use such available cash and to dispose of pledged
securities and property as is necessary to repay any such authorized
charges or advances and to exercise its rights as a secured party under
the U.C.C.  The Fund agrees that a Sub-Custodian shall have the right to
proceed directly against the Fund and not solely as subrogee to the
Custodian with respect to any indemnity hereunder assigned to a Sub-
Custodian, and in that regard, the Fund agrees that it shall not assert
against any Sub-Custodian proceeding against it any defense or right of
set-off the Fund may have against the Custodian arising out of the
negligent action, negligent failure to act or willful misconduct of the
Custodian, and hereby waives all rights it may have to object to the
right of a Sub-Custodian to maintain an action against it.

10.   SUCCESSOR CUSTODIAN.  If a successor custodian shall be appointed
by the Trustees of the Fund, the Custodian shall, upon termination,
cause to be delivered to such successor custodian, duly endorsed and in
the form for transfer, all securities, funds and other properties then
held by the Sub-Custodians and all instruments held by the Sub-
Custodians relative thereto and cause the transfer to an account of the
successor custodian all of the Fund's securities held in any Securities
System.

 If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Trustees of the Fund, cause to be delivered at the office of the
Custodian and transfer such securities, funds and other properties in
accordance with such vote.

 In the event that no written order designating a successor custodian
or certified copy of a vote of the Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank
or trust company, which meets the requirements of the 1940 Act and the
rules and regulations thereunder, such securities, funds and other
properties.  Thereafter, such bank or trust company shall be the
successor of the Custodian under this Agreement.

 In the event that such securities, funds and other properties remain
in the possession of the Custodian or any Sub-Custodian after the date
of termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Trustees to appoint a
successor custodian, the Custodian shall be entitled to fair
compensation for its services during such period as the Sub-Custodians
retain possession of such securities, funds and other properties and the
provisions of this Agreement relating to the duties and obligations of
the Custodian shall remain in full force and effect.

11.  EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.  This Agreement shall
become effective as of its execution, shall continue in full force and
effect until terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing;
provided either party may at any time immediately terminate this
Agreement in the event of the appointment of a conservator or receiver
for the other party or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.  No provision of this Agreement may be amended or
terminated except by a statement in writing signed by the party against
which enforcement of the amendment or termination is sought.

 Upon termination of the Agreement, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian and through the Custodian any
Sub-Custodian for its costs, expenses and disbursements.

12.   INTERPRETATION.  This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the
subject matter hereof.  In connection with the operation of this
Agreement, the Custodian and the Fund may from time to time agree in
writing on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement.  No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to
be an amendment of this Agreement.  

13.   GOVERNING LAW.  This instrument is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and construed
according to the internal laws of said Commonwealth, without regard to
principles of conflicts of law.

14.   NOTICES.  Notices and other writings delivered or mailed postage
prepaid to the Fund addressed to the Fund attention: John Hughes, or to
such other person or address as the Fund may have designated to the
Custodian in writing, or to the Custodian at One Post Office Square,
Boston, Massachusetts  02109 attention:  George Crane, or to such other
address as the Custodian may have designated to the Fund in writing,
shall be deemed to have been properly delivered or given hereunder to
the respective addressee.

15.   BINDING OBLIGATION.  This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither party hereto may assign
this Agreement or any of its rights or obligations hereunder without the
prior written consent of the other party.

16.   DECLARATION OF TRUST.  A copy of the Declaration of Trust of each
of the Funds 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 each of the Funds as Trustees and
not individually and that the obligations of this instrument are not
binding on any of the Trustees or officers or shareholders individually,
but are binding only on the assets and property of each Fund with
respect to its obligations hereunder.
<PAGE>
 IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf as of the day and year first above
written.

                     THE PUTNAM FUNDS LISTED
                     IN SCHEDULE A
                          
                          /s/ John D. Hughes
                     By   ----------------------------
                          Vice President and Treasurer

                     PUTNAM FIDUCIARY TRUST COMPANY

                          /s/ Robert F. Lucey
                     By   ----------------------------
                          President

 Putnam Investments, Inc. ("Putnam"), the sole owner of the Custodian,
agrees that Putnam shall be the primary obligor with respect to
compensation due the Sub-Custodians pursuant to the Sub-Custodian
Agreements in connection with the Sub-Custodians' performance of their
responsibilities thereunder and agrees to take all actions necessary and
appropriate to assure that the Sub-Custodians shall be compensated in
the amounts and on the schedules agreed to by the Custodian and the Sub-
Custodians pursuant to those Agreements.

                     PUTNAM INVESTMENTS, INC.

                          /s/ Douglas B. Jamieson
                     By   ------------------------------
                   
<PAGE>
                                SCHEDULE A

Putnam Adjustable Rate U.S. Government Fund
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asia Pacific Growth Fund
Putnam Balanced Government Fund
Putnam California Investment Grade Municipal Trust
Putnam California Tax Exempt Income Fund
Putnam California Tax Exempt Money Market Fund
Putnam Capital Appreciation Fund
Putnam Capital Growth and Income Fund
Putnam Capital Manager Trust
Putnam Convertible Income-Growth Trust
Putnam Corporate Asset Trust
Putnam Daily Dividend Trust
Putnam Diversified Income Trust
Putnam Dividend Growth Fund
Putnam Dividend Income Fund
Putnam Energy-Resources Trust
Putnam Equity Income Fund
Putnam Europe Growth Fund
Putnam Federal Income Trust
Putnam Florida Tax Exempt Income Fund
The George Putnam Fund of Boston
Putnam Global Governmental Income Trust
Putnam Global Growth Fund
Putnam Growth Fund
The Putnam Fund for Growth and Income
Putnam Health Sciences Trust
Putnam High Income Convertible and Bond Fund
Putnam High Yield Trust
Putnam High Yield Advantage Fund
Putnam High Yield Municipal Trust
Putnam Income Fund
Putnam Investment Grade Intermediate Municipal Trust
Putnam Investment Grade Municipal Trust
Putnam Investment Grade Municipal Trust II
Putnam Investment Grade Municipal Trust III
Putnam Investors Fund
Putnam Life Stages Asset Allocation Trust
Putnam Managed High Yield Trust
Putnam Managed Income Trust
Putnam Managed Municipal Income Trust
Putnam Massachusetts Tax Exempt Income Fund II
Putnam Master Income Trust
Putnam Michigan Tax Exempt Income Fund II
Putnam Minnesota Tax Exempt Income Fund II
Putnam Municipal Income Fund
Putnam Municipal Opportunities Trust
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Investment Grade Municipal Trust
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Money Market Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund II
Putnam OTC Emerging Growth Fund
Putnam Overseas Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Research Analysts Fund
Putnam Tax Exempt Income Fund
Putnam Tax Exempt Money Market Fund
Putnam Tax-Free Income Trust:
Tax-Free Insured Fund
Tax-Free High Yield Fund
Putnam Texas Tax Exempt Income Fund
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Vista Fund
Putnam Voyager Fund

Dated: November 5, 1993<PAGE>

                                SCHEDULE B

 State Street Bank and Trust Company
 Boston Safe Deposit and Trust Company
 The Northern Trust Company
 Bankers Trust Company
<PAGE>
                                SCHEDULE C
                           PERFORMANCE STANDARDS

INCOME COLLECTION

O     Income will be paid to the Funds or its agents as follows if no
      mitigating circumstances exist:

 Federal Reserve Book Entry Securities   Payable Date

 Depository Trust Company Securities     Payable Date + 1

 Participant Trust Company Securities    Payable Date + 1

 Physical Mortgaged-Backed Securities    Payable Date + 5

 Physical Municipal Securities 
 Registered Outside the Eastern 
 Seaboard Area                           Payable Date + 5

 Other Physical Securities               Payable Date + 3

O     In the event that income is not received within timeframes indicated
      above because of improper or untimely actions by the custodian, the
      Funds will receive an earnings credit for the value of these funds
      beginning with the dates indicated on the above schedule.  The credit
      will be reflected on the custody invoice.

O     In the event that Income is not received within the indicated
      timeframes because of claims against third parties, where the
      custodian is not at fault, the Funds will be paid upon actual receipt
      of income but no later than 60 calendar days after payable date.

O     If any particular situations occur that render the standards as
      inappropriate, the circumstances will be reviewed on a case-by-case
      basis to determine due diligence by the custodian with respect to its
      responsibility.

TRADE SETTLEMENTS

O     All trade fails will be reported to the Funds or its agents within one
      business day of the fail.

O     All purchase fails will accrue an earnings credit to the Funds to be
      applied against the custody invoice.

O     The Funds will receive compensation for sell fails that occur because
      of custodian error.  This will be accomplished by crediting the Fund
      with sale proceeds on contractual settlement date.SCHEDULE C
REPORTING

O     The Funds or its agents will receive Reports monthly as indicated
      below:

O     Principal and Interest 
 Reconcilement Report               2nd Business Day

O     Trade Fail Report                  5th Business Day

O     Cash Transactions Report           10th Business Day (1)

O     Open Trades Report                 10th Business Day

O     Position Reconciliation Report     10th Business Day

O     Past Due Income Report             15th Business Day

O     Dividend Reinvestment Report       20th Business Day

(1)   With the exception of the Government Funds which will be the 15th
      Business Day.

CAPITAL CHANGES

O     The Funds will be notified of pending corporate actions within 5
      business days of receipt by the custodian or its agent, but no later
      than 5 business days prior to expiration date.

O     In the event that the custodian receives information less than 5 days
      prior to expiration date, the Funds will be immediately informed.

O     Preliminary Bond Call Notices will be received prior to call date.

O     Final Bond Call Notices will be received by the 5th business day after
      call date.

O     If the Bond Call Notice is received after the 5th business day
      following the call date, the custodian will reimburse the Funds for
      accrued interest lost.
O     If the Bond Call Notice is received after 30 days following the call
      date, the custodian will reimburse the Funds for accrued interest lost
      plus the face amount of the called bond at the current price or the
      call price, whichever is greater.
o     If any particular situations occur that render the standards as
      inappropriate, the circumstances will be reviewed on a case-by-case
      basis to determine due diligence by the custodian with respect to its
      responsibility.


                                                                  EXHIBIT 1

                      MASTER SUB-CUSTODIAN AGREEMENT


 AGREEMENT made this      day of        , 199  , between Putnam
Fiduciary Trust Company, a Massachusetts-chartered trust company (the
"Custodian"), and                , a             (the "Sub-Custodian").

 WHEREAS, the Sub-Custodian represents to the Custodian that it is
eligible to serve as a custodian for a management investment company
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), and

 WHEREAS, the Custodian has entered into a Custodian Agreement between
it and each of the Putnam Funds listed in Schedule A, each of such Funds
acting on its own behalf separately from all the other Funds and not
jointly or jointly and severally with any of the other Funds (each of
the Funds being hereinafter referred to as the "Fund"), and

 WHEREAS, the Custodian and the Fund desire to utilize sub-custodians
for the purpose of holding cash and securities of the Fund, and

 WHEREAS, the Custodian wishes to appoint the Sub-Custodian as the
Fund's Sub-Custodian,

 NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:

 1.   APPOINTMENT OF CUSTODIAN.  The Custodian hereby employs and
appoints the Sub-Custodian as a Sub-Custodian for the Fund for the term
and subject to the provisions of this Agreement.  Upon request, the
Custodian shall deliver to the Sub-Custodian such proxies, powers of
attorney or other instruments as may be reasonably necessary or
desirable in connection with the performance by the Sub-Custodian of its
obligations under this Agreement on behalf of the Fund.

 2.   DUTIES OF THE SUB-CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY IT.  The Custodian may from time to time deposit securities or
cash owned by the Fund with the Sub-Custodian.  The Sub-Custodian shall
have no responsibility or liability for or on account of securities,
funds or other property of the Fund not so delivered to it.  The Sub-
Custodian shall hold and dispose of the securities hereafter held by or
deposited with the Sub-Custodian as follows:<PAGE>
 2.1  HOLDING SECURITIES.  The Sub-Custodian shall hold and physically
segregate for the account of the Fund all non-cash property, including
all securities owned by the Funds, other than securities which are
maintained pursuant to Section 2.13 in a Securities System.  All such
securities are to be held or disposed of for, and subject at all times
to the instructions of, the Custodian pursuant to the terms of this
Agreement.  The Sub-Custodian shall maintain adequate records
identifying the securities as being held by it as Sub-Custodian of the
Fund.

 2.2  DELIVERY OF SECURITIES.  The Sub-Custodian shall release and
deliver securities of the Fund held by it hereunder (or in a Securities
System account of the Sub-Custodian) only upon receipt of Proper
Instructions (as defined in Section 2.17), which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:

      1)   Upon sale of such securities for the account of the Fund and
receipt of payment therefor;

      2)   Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by the
Fund;

      3)   In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.13 hereof;

      4)   To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;

      5)   To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be delivered to the
Sub-Custodian;

      6)   To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees of the Sub-
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.12; or for exchange for a different number of
bonds, certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such case, the new
securities are to be delivered to the Sub-Custodian;

      7)   Upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided that,
in any such case, the Sub-Custodian shall have no responsibility or
liability for any loss arising from the 
<PAGE>
delivery of such securities prior to receiving payment for such
securities except as may arise from the Sub-Custodian's own negligence
or willful misconduct;

      8)   For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Sub-Custodian;

      9)   In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Sub-Custodian;

      10)  For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Sub-Custodian, which may
be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities;

      11)  For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;

      12)  Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent"), for delivery to such Transfer Agent or to
the shareholders of the Fund in connection with distributions in kind,
as may be described from time to time in the Fund's Declaration of Trust
and currently effective registration statement, if any, in satisfaction
of requests by shareholders for repurchase or redemption; 

      13)  For delivery to another Sub-Custodian of the Fund; and

      14)  For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Trustees or of the Executive Committee of the Fund signed by an officer
of the Fund and certified by its Clerk or an Assistant Clerk, specifying
the securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to be proper corporate
purposes, and naming the person or persons to whom delivery of such
securities is to be made.
<PAGE>
 2.3  REGISTRATION OF SECURITIES.  Securities of the Fund held by the
Sub-Custodian hereunder (other than bearer securities) shall be
registered in the name of the Fund or in the name of any nominee of the
Fund or of any nominee of the Sub-Custodian, which nominee shall be
assigned exclusively to the Fund, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Fund, or in the name or nominee name of any agent appointed pursuant
to Section 2.12.  Notwithstanding the foregoing, a Sub-Custodian or
agent thereof may hold securities of the Fund in a nominee name which is
used for its other clients provided such name is not used by the Sub-
Custodian or agent for its own securities and that securities of the
Fund are physically segregated at all times from other securities held
for other clients using the same nominee name.  All securities accepted
by the Sub-Custodian under the terms of this Agreement shall be in
"street name" or other good delivery form.

 2.4  BANK ACCOUNTS.  The Sub-Custodian shall open and maintain a
separate bank account or accounts in the name of the Fund, subject only
to draft or order by the Sub-Custodian acting pursuant to the terms of
this Agreement, and shall hold in such account or accounts, subject to
the provisions hereof, all cash received for the account of the Funds,
other than cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the 1940 Act.  Funds held by
the Sub-Custodian for the Fund shall be deposited by it to its credit as
Sub-Custodian of the Fund in the Banking Department of the Sub-Custodian
or other banks.  Such funds shall be deposited by the Sub-Custodian in
its capacity as Sub-Custodian and shall be withdrawable by the Sub-
Custodian only in that capacity.  The Sub-Custodian shall be liable for
losses incurred by the Fund attributable to any failure on the part of
the Sub-Custodian to report accurate cash availability information with
respect to the Fund's bank accounts maintained by the Sub-Custodian or
any of its agents, provided that such liability shall be determined
solely on a cost-of-funds basis.

 2.5  PAYMENTS FOR SHARES.  The Sub-Custodian shall receive from any
distributor of the Fund's shares or from the Transfer Agent of the Fund
and deposit into the Fund's account such payments as are received for
shares of the Fund issued or sold from time to time by the Fund.  The
Sub-Custodian will provide timely notification to the Custodian, and the
Transfer Agent of any receipt by it of payments for shares of the Fund.

 2.6  INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS.  Upon mutual
agreement between the Custodian and the Sub-Custodian, the Sub-Custodian
shall, upon the receipt of Proper Instructions,

      1)   invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds received
after a time agreed upon between the Sub-Custodian and the Custodian;
and

      2)   make federal funds available to the Fund as of specified
times agreed upon from time to time by the Custodian and the Sub-
Custodian in the amount of checks, when cleared within the Federal
Reserve System, received in payment for shares of the Fund which are
deposited into the Fund's account or accounts.

 2.7  COLLECTION OF INCOME.  The Sub-Custodian shall collect on a
timely basis all income and other payments with respect to registered
securities held hereunder to which the Fund shall be entitled either by
law or pursuant to custom in the securities business, and shall collect
on a timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities are
held hereunder and shall credit such income, as collected, to the Fund's
account.  Without limiting the generality of the foregoing, the Sub-
Custodian shall detach and present for payment all coupons and other
income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder.  Arranging
for the collection of income due the Fund on securities loaned pursuant
to the provisions of Section 2.2(10) shall be the responsibility of the
Custodian.  The Sub-Custodian will have no duty or responsibility in
connection therewith, other than to provide the Custodian with such
information or data as may be necessary to assist the Custodian in
arranging for the timely delivery to the Sub-Custodian of the income to
which the Fund is properly entitled.

 2.8  PAYMENT OF FUND MONIES.  Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the
parties, the Sub-Custodian shall cause monies of a Fund to be paid out
in the following cases only:

      1)   Upon the purchase of securities for the account of the Fund
but only (a) against the delivery of such securities to the Sub-
Custodian (or any bank, banking firm or trust company doing business in
the United States or abroad which is qualified under the 1940 Act, as
amended, to act as a custodian and has been designated by the Sub-
Custodian as its agent for this purpose) registered in the name of the
Fund or in the name of a nominee referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected through
a Securities System, in accordance with the conditions set forth in
Section 2.13 hereof; or (c) in the case of repurchase agreements entered
into between the Fund and the Sub-Custodian, or another bank, (i)
against delivery of the securities either in certificate form or through
an entry crediting the Sub-Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the Sub-Custodian
along with written evidence of the agreement by the Sub-Custodian to
repurchase such securities from the Fund;

      2)   In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;

      3)   For the redemption or repurchase of shares issued by the
Fund as set forth in Section 2.10 hereof;
 
      4)   For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for the
account of the Fund:  interest, taxes, management, accounting, custodian
and Sub-Custodian, transfer agent and legal fees, including the
Custodian's fee; and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;

      5)   For the payment of any dividends declared pursuant to the
governing documents of the Fund; 

      6)   For transfer to another Sub-Custodian of the Fund; and

      7)   For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Trustees or of the Executive Committee of the Fund signed by an officer
of the Fund and certified by its Clerk or an Assistant Clerk, specifying
the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be made.

 2.9  LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED.  In any and every case where payment for purchase of
securities for the account of a Fund is made by the Sub-Custodian in
advance of receipt of the securities purchased in the absence of
specific written instructions from the Custodian to so pay in advance,
the Sub-Custodian shall be absolutely liable to the Fund and the
Custodian in the event any loss results to the Fund or the Custodian
from the failure of the Sub-Custodian to make such payment against
delivery of such securities, except that in the case of repurchase
agreements entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Sub-Custodian may transfer funds to the
account of such bank prior to the receipt of written evidence that the
securities subject to such a repurchase agreement have been transferred
by book-entry into a segregated non-proprietary account of the Sub-
Custodian maintained with any Federal Reserve Bank or of the safe-
keeping receipt, provided that such securities have in fact been so
transferred by book-entry.
<PAGE>
 2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. 
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and By-Laws and any applicable
votes of the Trustees of the Fund pursuant thereto, the Sub-Custodian
shall, upon receipt of instructions from the Custodian, make funds
available for payment to shareholders of the Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of their
shares.  In connection with the redemption or repurchase of shares of
the Fund, the Sub-Custodian, upon receipt of Proper Instructions, is
authorized to wire funds to or through a commercial bank designated by
the redeeming shareholders.  In connection with the redemption or
repurchase of shares of the Fund, the Sub-Custodian, upon receipt of
Proper Instructions, shall honor checks drawn on the Sub-Custodian by a
shareholder, when presented to the Sub-Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
among the Fund, the Custodian and the Sub-Custodian.

 2.11 VARIANCES.  The Sub-Custodian may accept securities or cash
delivered in settlement of trades notwithstanding variances between the
amount of securities or cash so delivered and the amount specified in
the instructions furnished to it by the Custodian, provided that the
variance in any particular transaction does not exceed (i) $25 in the
case of transactions of $1,000,000 or less, and (ii) $50 in the case of
transactions exceeding $1,000,000.  The Sub-Custodian shall maintain a
record of any such variances and notify the Custodian of such variances
in periodic transaction reports submitted to the Custodian.  The Sub-
Custodian will not advise any party with whom the Fund effects
securities transactions of the existence of these variance provisions
without the consent of the Fund and the Custodian.

 2.12 APPOINTMENT OF AGENTS.  Without limiting its own responsibility
for its obligations assumed hereunder, the Sub-Custodian may at any time
and from time to time engage, at its own cost and expense, as an agent
to act for the Fund on the Sub-Custodian's behalf with respect to any
such obligations any bank or trust company which meets the requirements
of the 1940 Act, and the rules and regulations thereunder, to perform
services delegated to the Sub-Custodian hereunder, provided that the
Fund shall have approved in writing any such bank or trust company and
the Sub-Custodian shall give prompt written notice to the Custodian and
the Fund of any such engagement.  All agents of the Sub-Custodian shall
be subject to the instructions of the Sub-Custodian and not the
Custodian.  The Sub-Custodian may, at any time in its discretion, and
shall at the Custodian's direction, remove any bank or trust company
which has been appointed as an agent, and shall in either case promptly
notify the Custodian and the Fund in writing of the completion of any
such action.  
<PAGE>
 The agents which the Fund has approved to date are set forth in
Schedule B hereto.  Schedule B shall be amended from time to time as
approved agents are changed, added or deleted.  The Custodian shall be
responsible for informing the Sub-Custodian sufficiently in advance of a
proposed investment which is to be held at a location not listed on
Schedule B, in order that there shall be sufficient time for the Fund to
give the approval required by the preceding paragraph and for the Sub-
Custodian to complete the appropriate contractual and technical
arrangements with such agent.  The engagement by the Sub-Custodian of
one or more agents to carry out such of the provisions of this Section 2
shall not relieve the Sub-Custodian of its responsibilities or
liabilities hereunder.

 2.13 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS.  The Sub-Custodian
may deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury (collectively referred to herein as
"Securities System") in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations (including
Rule 17f-4 of the 1940 Act), and subject to the following provisions:

      1)   The Sub-Custodian may keep securities of the Fund in a
Securities System provided that such securities are represented in an
account ("Account") of the Sub-Custodian in the Securities System which
shall not include any assets other than assets held as a fiduciary,
custodian or otherwise for customers;

      2)   The records of the Sub-Custodian with respect to securities
of the Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;

      3)   The Sub-Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Sub-Custodian to
reflect such payment and transfer for the account of the Fund.  The Sub-
Custodian shall transfer securities sold for the account of the Fund
upon (a) receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (b) the making
of an entry on the records of the Sub-Custodian to reflect such transfer
and payment for the account of the Fund.  Copies of all advices from the
Securities System of transfers of securities for the account of the Fund
shall identify the Fund, be maintained for the Fund by the Sub-Custodian
and be provided to the Fund or the Custodian at the Custodian's request. 
The Sub-Custodian shall furnish the Custodian confirmation of each
transfer to or from the account of the Fund in the form of a written
advice or notice and shall furnish to the Custodian copies of daily
transaction sheets reflecting each day's transactions in the Securities
System for the account of the Fund on the next business day;

      4)   The Sub-Custodian shall provide the Custodian with any
report obtained by the Sub-Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;

      5)   The Sub-Custodian shall have received the initial or annual
certificate, as the case may be, required by Section 2.10 hereof;

      6)   Anything to the contrary in this Agreement notwithstanding,
the Sub-Custodian shall be liable to the Fund and the Custodian for any
loss or damage to the Fund or the Custodian resulting from use of the
Securities System by reason of any negligence, misfeasance or misconduct
of the Sub-Custodian or any of its agents or of any of its or their
employees or from failure of the Sub-Custodian or any such agent to
enforce effectively such rights as it may have against the Securities
System; at the election of the Custodian, it shall be entitled to be
subrogated to the rights of the Sub-Custodian with respect to any claim
against the Securities System or any other person which the Sub-
Custodian may have as a consequence of any such loss or damage if and to
the extent that the Fund and the Custodian have not been made whole for
any such loss or damage.

 2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES.  The Sub-Custodian shall
execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other
payments with respect to securities held by it hereunder and in
connection with transfers of securities.

 2.15 PROXIES.  The Sub-Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of a Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the
Custodian such proxies, all proxy soliciting materials and all notices
relating to such securities.

 2.16 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES.  The Sub-
Custodian shall transmit promptly to the Custodian all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Sub-Custodian from issuers of the securities
being held for the account of the Fund.  With respect to tender or
exchange offers, the Sub-Custodian shall transmit promptly to the
Custodian all written information received by the Sub-Custodian from
issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer.  If the
Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transactions, the Custodian shall notify the
Sub-Custodian of the action the Fund desires the Sub-Custodian to take;
provided, however, that the Sub-Custodian shall not be liable to the
Fund or the Custodian for the failure to take any such action unless
such instructions are received by the Sub-Custodian at least two
business days prior to the date on which the Sub-Custodian is to take
such action.

 2.17 PROPER INSTRUCTIONS.  Proper Instructions as used throughout this
Agreement means a writing signed or initialed by one or more persons who
are authorized by the Trustees of the Fund and by vote of the Board of
Directors of the Custodian.  Each such writing shall set forth the
specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. 
Oral instructions will be considered Proper Instructions if the Sub-
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved.  The Custodian shall cause all oral instructions to be
confirmed in writing.  Upon receipt of a certificate of the Clerk or an
Assistant Clerk as to the authorization by the Trustees of the Funds
accompanied by a detailed description of procedures approved by the
Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices, provided that
the Trustees, the Custodian and the Sub-Custodian are satisfied that
such procedures afford adequate safeguards for the Fund's assets. 
Notwithstanding the foregoing, no Trustee, officer, employee or agent of
the Fund shall be permitted access to any securities or similar
investments of the Fund deposited with the Sub-Custodian or any agent
for any reason except in accordance with the provisions of Rule 17f-2
under the 1940 Act.

 2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.  The Sub-Custodian
may in its discretion, without express authority from the Custodian:

      1)   make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under
this Agreement, provided that all such payments shall be accounted for
to the Fund and the Custodian;

      2)   surrender securities in temporary form for securities in
definitive form;

      3)   endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
<PAGE>
      4)   in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund held by the
Sub-Custodian hereunder except as otherwise directed by the Custodian or
the Trustees of the Fund.

 2.19 EVIDENCE OF AUTHORITY.  The Sub-Custodian shall be protected in
acting upon any instruction, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine and to
have been properly executed by or on behalf of the Fund or the Custodian
as custodian of the Fund.  The Sub-Custodian may receive and accept a
certified copy of a vote of the Trustees of the Fund or the Board of
Directors of the Custodian, as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
determination or of any action by the Trustees pursuant to the
Declaration of Trust and By-Laws and the Board of Directors of the
Custodian, as the case may be as described in such vote, and such vote
may be considered as in full force and effect until receipt by the Sub-
Custodian of written notice to the contrary.

 3.   PERFORMANCE STANDARDS; PROTECTION OF THE FUND.  The Sub-Custodian
shall use its best efforts to perform its duties hereunder in accordance
with the standards set forth in Schedule C hereto.  Schedule C may be
amended from time to time as agreed to by the Custodian and the Trustees
of the Fund.  

 4.   RECORDS.  The Sub-Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the
Trustees of the Fund to keep the books of account of the Funds or, if
directed in writing to do so by the Custodian, shall itself keep such
books of account.  The Sub-Custodian shall create and maintain all
records relating to its activities and obligations under this Agreement
in such manner as will meet the obligations of the Custodian under its
Custodian Agreement with the Fund under the 1940 Act, with particular
attention to Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and
31a-2 thereunder, applicable federal and state tax laws, and any other
law or administrative rules or procedures which may be applicable to the
Fund or the Custodian.  All such records shall be the property of the
Fund and shall at all times during the regular business hours of the
Sub-Custodian be open for inspection by duly authorized officers,
employees or agents of the Custodian and the Fund and employees and
agents of the Securities and Exchange Commission.  The Sub-Custodian
shall, at the Custodian's request, supply the Custodian with a
tabulation of securities owned by the Fund and held under this Agreement
and shall, when requested to do so by the Custodian and for such
compensation as shall be agreed upon between the Custodian and Sub-
Custodian, include certificate numbers in such tabulations.
<PAGE>
 5.   OPINION AND REPORTS OF THE FUND'S INDEPENDENT ACCOUNTANTS.  The
Sub-Custodian shall take all reasonable actions, as the Custodian may
from time to time request, to obtain from year to year favorable
opinions from the Fund's independent public accountants with respect to
its activities hereunder in connection with the preparation of the
Fund's registration statements and amendments thereto, the Fund's
reports to the Securities and Exchange Commission and with respect to
any other requirements of such Commission.

 6.   REPORTS OF SUB-CUSTODIAN'S INDEPENDENT ACCOUNTANTS.  The Sub-
Custodian shall provide the Custodian, at such times as the Custodian
may reasonably require, with reports by independent public accountants
on the accounting system, internal accounting control and procedures for
safeguarding securities, including securities deposited and/or
maintained in a Securities System, relating to the services provided by
the Sub-Custodian under this Agreement; such reports, which shall be of
sufficient scope and in sufficient detail as may reasonably be required
by the Custodian, shall provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, shall so state.

 7.   COMPENSATION.  The Sub-Custodian shall be entitled to reasonable
compensation for its services and expenses as Sub-Custodian, as agreed
upon from time to time between the Custodian and the Sub-Custodian.

 8.   RESPONSIBILITY OF SUB-CUSTODIAN.  The Sub-Custodian shall
exercise reasonable care and diligence in carrying out the provisions of
this Agreement and shall not be liable to the Fund or the Custodian for
any action taken or omitted by it in good faith without negligence.  So
long as and to the extent that it is in the exercise of reasonable care,
the Sub-Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it
or delivered by it pursuant to this Agreement and shall be held harmless
in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by
the proper party or parties.  It shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice.  Notwithstanding the foregoing, the
responsibility of the Sub-Custodian with respect to redemptions effected
by check shall be in accordance with a separate agreement entered into
between the Custodian and the Sub-Custodian.

 The Sub-Custodian shall protect the Fund and the Custodian from direct
losses to the Fund resulting from any act or failure to act of the Sub-
Custodian in violation of its duties hereunder or of law and shall
maintain customary errors and omissions and fidelity insurance policies
in an amount not less than $25 million to cover losses to the Fund
resulting from any such act or failure to act.

 If the Custodian requires the Sub-Custodian to take any action with
respect to securities, which action involves the payment of money or
which action may, in the opinion of the Sub-Custodian, result in the
Sub-Custodian's being liable for the payment of money or incurring
liability of some other form, the Custodian, as a prerequisite to
requiring the Sub-Custodian to take such action, shall provide indemnity
to the Sub-Custodian in an amount and form satisfactory to it.

 The Custodian agrees to indemnify and hold harmless the Sub-Custodian
from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or
its nominee in connection with the performance of this Agreement, except
such as may arise from its own negligent action, negligent failure to
act or willful misconduct.  To secure any such authorized charges and
any advances of cash or securities made by the Sub-Custodian to or for
the benefit of the Fund for any purpose which results in the Fund's
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Custodian on behalf of the Fund, unless prohibited from doing so by one
or more of the Fund's fundamental investment restrictions, hereby
represents that it has obtained from the Fund authorization to apply
available cash in any account maintained by the Sub-Custodian on behalf
of the Fund and a security interest in and pledge to it of securities
held for the Fund by the Sub-Custodian, in an amount not to exceed the
amount not prohibited by such restrictions, for the purposes of securing
payment of any such advances, and that the Fund has agreed, from time to
time, to designate in writing, or to cause its investment adviser to
designate in writing, the specific securities subject to such security
interest and pledge.  The Custodian hereby assigns the benefits of such
security interest and pledge to the Sub-Custodian, and agrees that,
should the Fund or the Custodian fail to repay promptly any advances of
cash or securities, the Sub-Custodian shall be entitled to use such
available cash and to dispose of such pledged securities as is necessary
to repay any such advances.

 9.   SUCCESSOR SUB-CUSTODIAN.  If a successor Sub-Custodian shall be
appointed by the Custodian, the Sub-Custodian shall, upon termination,
cause to be delivered to such successor Sub-Custodian, duly endorsed and
in the form for transfer, all securities then held by it, shall cause
the transfer to an account of the successor Sub-Custodian all of the
Fund's securities held in a Securities System and shall cause to be
delivered to such successor Sub-Custodian all funds and other property
held by it or any of its agents.

 If no such successor Sub-Custodian shall be appointed, the Sub-
Custodian shall, in like manner, upon receipt of a certified copy of a
vote of the Trustees of the Fund, cause to be delivered at the office of
the Sub-Custodian and transfer such securities, funds and other
properties in accordance with such vote.

 In the event that no written order designating a successor Sub-
Custodian or certified copy of a vote of the Trustees shall have been
delivered to the Sub-Custodian on or before the date when such
termination shall become effective, then the Sub-Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Sub-
Custodian and its agents and all instruments held by the Sub-Custodian
and its agents relative thereto and all other property held by it and
its agents under this Agreement and to cause to be transferred to an
account of such successor Sub-Custodian all of the Fund's securities
held in any Securities System.  Thereafter, such bank or trust company
shall be the successor of the Sub-Custodian under this Agreement.  

 In the event that securities, funds and other properties remain in the
possession of the Sub-Custodian after the date of termination hereof
owing to failure of the Custodian to obtain the certified copy of vote
referred to or of the Trustees to appoint a successor Sub-Custodian, the
Sub-Custodian shall be entitled to fair compensation for its services
during such period as the Sub-Custodian retains possession of such
securities, funds and other properties and the provisions of this
Agreement relating to the duties and obligations of the Sub-Custodian
shall remain in full force and effect.

 Upon termination, the Sub-Custodian shall, upon receipt of a certified
copy of a vote of the Trustees of the Fund, cause to be delivered to any
other Sub-Custodian designated in such vote such assets, securities and
other property of the Fund as are designated in such vote, or pursuant
to Proper Instructions, cause such assets, securities and other property
of the Fund as are designated by the Custodian to be delivered to one or
more of the sub-custodians designated on Schedule D hereto, as from time
to time amended.

 10.  EFFECTIVE PERIOD; TERMINATION AND AMENDMENT.  This Agreement
shall become effective as of its execution, shall continue in full force
and effect until terminated as hereinafter provided, may be amended at
any time by mutual agreement of the parties hereto and may be terminated
by either party by an instrument in writing delivered or mailed, postage
prepaid, to the other party, such termination to take effect not sooner
than thirty (30) days after the date of mailing; provided, however, that
the Sub-Custodian shall not act under Section 2.13 hereof in the absence
of receipt of an initial certificate of the Clerk or an Assistant Clerk
that the Trustees of the Fund have approved the initial use of a
particular Securities System and the receipt of an annual certificate of
the Clerk or an Assistant Clerk that the Trustees have reviewed the use
by the Fund of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940; and provided, further,
however, that the Custodian shall not amend or terminate this Agreement
in contravention of any applicable federal or state regulations or any
provision of the Declarations of Trust or By-Laws of the Fund; and
provided, further, that the Custodian may at any time, by action of its
Board of Directors, or the Trustees of the Fund, as the case may be,
immediately terminate this Agreement in the event of the appointment of
a conservator or receiver for the Sub-Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction.

 Upon termination of this Agreement, the Custodian shall pay to the
Sub-Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Sub-Custodian for its
reimbursable costs, expenses and disbursements.

 11.  AMENDMENT AND INTERPRETATION.  This Agreement constitutes the
entire understanding and agreement of the parties hereto with respect to
the subject matter hereof.  No provision of this Agreement may be
amended or terminated except by a statement in writing signed by the
party against which enforcement of the amendment or termination is
sought.

 In connection with the operation of this Agreement, the Sub-Custodian
and the Custodian may from time to time agree in writing on such
provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general
tenor of this Agreement.  No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment
of this Agreement.

 12.  GOVERNING LAW.  This Agreement is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and construed
according to the laws of said Commonwealth.

 13.  NOTICES.  Notices and other writings delivered or mailed postage
prepaid to the Custodian addressed to the Custodian attention:           
, or to such other person or address as the Custodian may have
designated to the Sub-Custodian in writing, or to the Sub-Custodian at   
       , or to such other address as the Sub-Custodian may have
designated to the Custodian in writing, shall be deemed to have been
properly delivered or given hereunder to the respective addressee.

 14.  BINDING OBLIGATION.  This Agreement shall be binding on and shall
inure to the benefit of the Custodian and the Sub-Custodian and their
respective successors and assigns, provided that neither party hereto
may assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other party.

 15.  PRIOR AGREEMENTS.  This Agreement supersedes and terminates, as
of the date hereof, all prior contracts between the Fund or the
Custodian and the Sub-Custodian relating to the custody of the Fund's
assets.

 16.  DECLARATION OF TRUST.  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 the obligations of or
arising out of this instrument are not binding upon any of the Trustees
or beneficiaries individually but binding only upon the assets and
property of the Funds.

 IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the    day of        , 199  .

                     PUTNAM FIDUCIARY TRUST COMPANY


                     By   ---------------------------
                     (SUB-CUSTODIAN)


                     By   ---------------------------

<PAGE>
                                                               EXHIBIT 1(A)

                  MASTER FOREIGN SUB-CUSTODIAN AGREEMENT


 AGREEMENT made this       day of            , 199  , between Putnam
Fiduciary Trust Company, a Massachusetts-chartered trust company (the
"Custodian"), and                                ,  (the
"Sub-Custodian").

 WHEREAS, the Sub-Custodian represents to the Custodian that it is
eligible to serve as a custodian for a management investment company
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), and

 WHEREAS, the Custodian has entered into a Custodian Agreement between
it and each of the Putnam Funds listed in Schedule A to this Agreement,
each of such Funds acting on its own behalf separately from all the
other Funds and not jointly or jointly and severally with any of the
other Funds (each of the Funds being hereinafter referred to as the
"Fund"), and

 WHEREAS, the Custodian and the Fund desire to utilize sub-custodians
for the purpose of holding cash and securities of the Fund, and

 WHEREAS, the Custodian wishes to appoint the Sub-Custodian as the
Fund's Sub-Custodian,

 NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:

   APPOINTMENT OF SUB-CUSTODIAN.  The Custodian hereby employs and
appoints the Sub-Custodian as a sub-custodian for safekeeping of
securities and other assets of the Fund for the term and subject to the
provisions of this Agreement.  Upon request, the Custodian shall deliver
to the Sub-Custodian such proxies, powers of attorney or other
instruments as may be reasonably necessary or desirable in connection
with the performance by the Sub-Custodian of its obligations under this
Agreement on behalf of the Fund.

   DUTIES OF THE SUB-CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY IT.  The Custodian may from time to time deposit or direct the
deposit of securities or cash owned by the Fund with the Sub-Custodian. 
The Sub-Custodian shall have no responsibility or liability for or on
account of securities, funds or other property of the Fund not so
delivered to it.  Except for securities and funds held by 17f-5 Sub-
Custodians (as defined in Section 2.11(b)) the Sub-Custodian shall hold
and dispose of the securities or cash hereafter held by or deposited
with the Sub-Custodian as follows:
   HOLDING SECURITIES.  The Sub-Custodian shall hold and, by book-entry
or otherwise, identify as belonging to the Fund all non-cash property
which has been delivered to the Sub-Custodian.  All such securities are
to be held or disposed of for, and subject at all times to the
instructions of, the Custodian pursuant to the terms of this Agreement. 
The Sub-Custodian shall maintain adequate records identifying the
securities as being held by it as sub-custodian of the Fund.

   DELIVERY OF SECURITIES.  The Sub-Custodian shall release and deliver
securities of the Fund held by it hereunder (or in a Securities System
account of the Sub-Custodian) only upon receipt of Proper Instructions
(as defined in Section 2.19), which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:

             Upon sale of such securities for the account of the Fund
and receipt of payment therefor, provided, however, that the Sub-
Custodian may release and deliver securities prior to the receipt of
payment therefor if (i) in the Sub-Custodian's judgment, (A) release and
delivery prior to payment is required by the terms of the instrument
evidencing the security or (B) release and delivery prior to payment is
the prevailing method of settling securities transactions between
institutional investors in the applicable market and (ii) release and
delivery prior to payment is in accordance with generally accepted trade
practice and with any applicable governmental regulations and the rules
of Securities Systems or other securities depositories and clearing
agencies in the applicable market.  The Sub-Custodian agrees, upon
request, to advise the Custodian of all pending transactions in which
release and delivery will be made prior to the receipt of payment
therefor;

              Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by
the Fund;

    In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.12 hereof;

    To the depository agent in connection with tender
or other similar offers for such securities; provided that, in any such
case, the cash or other consideration is thereafter to be delivered to
the Sub-Custodian;

   To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is thereafter to be delivered
to the Sub-Custodian;

   To the issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee or nominees of the
Sub-Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or any other name permitted pursuant to Section
2.3; or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are
thereafter to be delivered to the Sub-Custodian;

   Upon the sale of such securities for the account of the Fund, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that, in any such
case, the Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Sub-Custodian's
own negligence or willful misconduct;

   For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and cash,
if any, thereafter are to be delivered to the Sub-Custodian;

   In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the now
securities and cash, if any, are thereafter to be delivered to the
Sub-Custodian;

   For delivery in connection with any loans of securities made by the
Fund, but only against receipt of collateral the adequacy and timing of
receipt of which shall be as agreed upon from time to time in writing by
the Custodian and the Sub-Custodian, which may be in the form of cash or
obligations issued by the United States government, its agencies or
instrumentalities;

   For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against receipt
of amounts borrowed;

   Upon receipt of instructions from the transfer agent for the Fund
(the "Transfer Agent"), for delivery to such Transfer Agent or to the
shareholders of the Fund in connection with distributions in kind, in
satisfaction of requests by shareholders for repurchase or redemption;

   For delivery to the Custodian or another sub-custodian of the Fund;
and
   For any other proper purpose, but only upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of the Trustees
or of the Executive Committee of the Fund signed by an officer of the
Fund and certified by its Clerk or an Assistant Clerk, specifying the
securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to be proper corporate
purposes, and naming the person or persons to whom delivery of such
securities is to be made.

  REGISTRATION OF SECURITIES.  Securities of the Fund held by the
Sub-Custodian hereunder (other than bearer securities) shall be
registered in the name of the Fund or in the name of any nominee of the
Fund or of any nominee of the Sub-Custodian or any 17f-5 Sub-Custodian
or Foreign Depository (as each of those terms is defined in
Section 2.11(b)), which nominee shall be assigned exclusively to the
Fund, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies
having the same investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section 2.11(a). 
Notwithstanding the foregoing, the Sub-Custodian or agent thereof or any
17f-5 Sub-Custodian or Foreign Depository may hold securities of the
Fund in a nominee name which is used for its other clients provided that
such name is not used by the Sub-Custodian, agent, 17f-5 Sub-Custodian
or Foreign Depository for its own securities and that securities of the
Fund are, by book-entry or otherwise, at all times identified as
belonging to the Fund and distinguished from other securities held for
other clients using the same nominee name.  In addition, and
notwithstanding the foregoing, the Sub-Custodian or agent thereof or
17f-5 Sub-Custodian or Foreign Depository may hold securities of the
Fund in its own name if such registration is the prevailing method in
the applicable market by which custodians register securities of
institutional clients and provided that securities of the Fund are, by
book-entry or otherwise, at all times identified as belonging to the
Fund and distinguished from other securities held for other clients or
for the Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or Foreign
Depository.  All securities accepted by the Sub-Custodian under the
terms of this Agreement shall be in good delivery form.

  BANK ACCOUNTS.  The Sub-Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund or of the Custodian for
the benefit of the Fund, subject only to draft or order by the Sub-
Custodian acting pursuant to the terms of this Agreement or by the
Custodian acting pursuant to the Custodian Agreement, and shall hold in
such account or accounts, subject to the provisions hereof, to the Sub-
Custodian's credit as sub-custodian of the Fund or the Custodian's
credit as custodian for the Fund, cash received for the account of the
Fund other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the 1940 Act or
cash held as deposits with 17f-5 Sub-Custodians in accordance with the
following paragraph.  The responsibilities of the Sub-Custodian for
cash, including foreign currency, of the Fund accepted on the Sub-
Custodian's books as a deposit shall be that of a U.S. bank for a
similar deposit.
<PAGE>
 The Sub-Custodian may open a bank account on the books of a 17f-5 Sub-
Custodian in the name of the Fund or of the Sub-Custodian as a sub-
custodian for the Fund, and may deposit cash, including foreign
currency, of the Fund in such account, and such funds shall be
withdrawable only pursuant to draft or order of the Sub-Custodian.  The
records for such account will be maintained by the Sub-Custodian but
such account shall not constitute a deposit liability of the Sub-
Custodian.  The responsibilities of the Sub-Custodian for deposits
maintained in such account shall be the same as and no greater than the
Sub-Custodian's responsibility in respect of other portfolio securities
of the Fund.

 The Sub-Custodian shall be liable for actual losses incurred by the
Fund attributable to any failure on the part of the Sub-Custodian to
report accurate cash availability information with respect to the bank
accounts referred to in this Section 2.4.

  PAYMENTS FOR SHARES.  The Sub-Custodian shall maintain custody of
amounts received from the Transfer Agent of the Fund for shares of the
Fund issued by the Fund and sold by its distributor and deposit such
amounts into the Fund's account.  The Sub-Custodian will provide timely
notification to the Custodian and the Transfer Agent of any receipt by
it of payments for shares of the Fund.

  AVAILABILITY OF FEDERAL FUNDS.  Upon mutual agreement between the
Custodian and the Sub-Custodian, the Sub-Custodian shall, upon the
receipt of Proper Instructions, make federal funds available to the
Custodian for the account of the Fund as of specified times agreed upon
from time to time by the Custodian and the Sub-Custodian with respect to
amounts received by the Sub-Custodian for the purchase of shares of the
Fund.

  COLLECTION OF INCOME.  The Sub-Custodian shall collect on a timely
basis all income and other payments with respect to registered
securities held hereunder, including securities held in a Securities
System, to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer securities if, on
the date of payment by the issuer, such securities are held hereunder
and shall credit such income, as collected, to the Fund's account. 
Without limiting the generality of the foregoing, the Sub-Custodian
shall detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder.  Arranging for the
collection of income due the Fund on securities loaned pursuant to the
provisions of Section 2.2(10) shall be the responsibility of the
Custodian.  The Sub-Custodian will have no duty or responsibility in
connection therewith, other than to provide the Custodian with such
information or data as may be necessary to assist the Custodian in
arranging for the timely delivery to the Sub-Custodian of the income to
which the Fund is properly entitled.

  PAYMENT OF FUND MONIES.  Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Sub-Custodian shall cause monies
of the Fund to be paid out in the following cases only:

  Upon the purchase of securities for the account of the Fund but only
(a) against the delivery of such securities to the Sub-Custodian (or any
bank, banking firm or trust company doing business in the United States
or abroad which is qualified under the 1940 Act, as amended, to act as a
custodian and has been designated by the Sub-Custodian as its agent for
this purpose) or any 17f-5 Sub-Custodian or any Foreign Depository (as
each of those terms is defined in Section 2.11(b)) registered in the
name of the Fund or in the name of a nominee referred to in Section 2.3
hereof or in proper form for transfer, provided, however, that the Sub-
Custodian may cause monies of the Fund to be paid out prior to delivery
of such securities if (i) in the Sub-Custodian's judgment, (A) payment
prior to delivery is required by the terms of the instrument evidencing
the security or (B) payment prior to delivery is the prevailing method
of settling securities transactions between institutional investors in
the applicable market and (ii) payment prior to delivery is in
accordance with generally accepted trade practice and with any
applicable governmental regulations and the rules of Securities Systems
or other securities depositories and clearing agencies in the applicable
market.  The Sub-Custodian agrees, upon request, to advise the Custodian
of all pending transactions in which payment will be made prior to the
receipt of securities in accordance with the proviso to the foregoing
sentence; (b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section 2.12
hereof; or (c) (i) in the case of a repurchase agreement entered into
between the Fund and the Sub-Custodian, another bank or a broker-dealer,
against delivery of the securities either in certificate form or through
an entry crediting the Sub-Custodian's or its agent's non-proprietary
account at any Federal Reserve Bank with such securities or (ii) in the
case of a repurchase agreement entered into between the Fund and the
Sub-Custodian, against delivery of a receipt evidencing purchase by the
Fund of securities owned by the Sub-Custodian along with written
evidence of the agreement by the Sub-Custodian to repurchase such
securities from the Fund; or (d) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign, which transfer may
be effected prior to receipt of a confirmation of the deposit from the
applicable bank or a financial intermediary;

  In connection with conversion, exchange or surrender or tender or
exercise of securities owned by the Fund as set forth in Section 2.2
hereof;
 
  For the redemption or repurchase of shares issued by the Fund as set
forth in Section 2.10 hereof;

  For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, custodian and
sub-custodian, transfer agent and legal fees, including the Custodian's
fee; and operating expenses of the Fund whether or not such expenses are
to be in whole or part    capitalized or treated as deferred expenses;

  For the payment of any dividends or other
distributions declared to shareholders of the Fund;

  For transfer to the Custodian or another sub-custodian of the Fund;
and

  For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Trustees or
of the Executive Committee of the Fund signed by an officer of the Fund
and certified by its Clerk or Assistant Clerk, specifying the amount of
such payment, setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.

  LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. 
Except as otherwise provided in this Agreement, in any and every case
where payment for purchase of securities for the account of the Fund is
made by the Sub-Custodian in advance of receipt of the securities
purchased in the absence of Proper Instructions from the Custodian to so
pay in advance, the Sub-Custodian shall be absolutely liable to the Fund
and the Custodian in the event any loss results to the Fund or the
Custodian from the payment by the Sub-Custodian in advance of delivery
of such securities.

 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND.  From
such funds as may be available, the Sub-custodian shall, upon receipt of
Proper Instructions, make funds available for payment to a shareholder
of the Fund who has delivered to the Transfer Agent a request for
redemption or repurchase of shares of the Fund.  In connection with the
redemption or repurchase of shares of the Fund, the Sub-Custodian, upon
receipt of Proper Instructions, is authorized to wire funds to or
through a commercial bank designated by the redeeming shareholder.  In
connection with the redemption or repurchase of shares of the Fund, the
Sub-Custodian, upon receipt of Proper Instructions, shall honor checks
drawn on the Sub-Custodian by a shareholder, when presented to the
Sub-Custodian in accordance with such procedures and controls as are
mutually agreed upon from time to time among the Fund, the Custodian and
the Sub-Custodian.
<PAGE>
  APPOINTMENT OF AGENTS AND SUB-CUSTODIANS PURSUANT TO 
RULE 17F-5.

      (a)  Agents.  Without limiting its own responsibility for its
obligations assumed hereunder, the Sub-Custodian may at any time and
from time to time engage, at its own cost and expense, as an agent to
act for the Fund on the Sub-Custodian's behalf with respect to any such
obligations any bank or trust company which meets the requirements of
the 1940 Act, and the rules and regulations thereunder, to perform
services delegated to the Sub-Custodian hereunder, provided that the
Fund and the Custodian shall have approved in writing any such bank or
trust company.  All agents of the Sub-Custodian shall be subject to the
instructions of the Sub-Custodian and not the Custodian.  The Sub-
Custodian may, at any time in its discretion, and shall at the
Custodian's direction, remove any bank or trust company which has been
appointed as an agent, and shall in either case promptly notify the
Custodian and the Fund in writing of the completion of any such action.

 The agents which the Fund has approved to date are set forth in
Schedule B hereto.  Schedule B shall be amended from time to time as
approved agents are changed, added or deleted.  The Custodian shall be
responsible for informing the Sub-Custodian sufficiently in advance of a
proposed investment which is to be held at a location not listed on
Schedule B, in order that there shall be sufficient time for the Fund to
give the approval required by the preceding paragraph and for the Sub-
Custodian to complete the appropriate contractual and technical
arrangements with such agent.  The engagement by the Sub-Custodian of
one or more agents shall not relieve the Sub-Custodian of its
responsibilities or liabilities hereunder.

      (b)  17f-5 Sub-Custodians.  Securities, funds and other property
of the Fund may be held by sub-custodians appointed pursuant to the
provisions of this Section 2.11 (each, a "17f-5 Sub-Custodian").  The
Sub-Custodian may, at any time and from time to time, appoint any bank
or trust company (that meets the requirements of a custodian or a
foreign custodian under the Investment Company Act of 1940 and the rules
and regulations thereunder, including without limitation Rule 17f-5
thereunder, or that has received an order of the Securities and Exchange
Commission ("SEC") exempting it from any of such requirements that it
does not meet) to act as a 17f-5 Sub-Custodian for the Fund, provided
that the Fund shall have approved in writing (1) any such bank or trust
company and the sub-custodian agreement to be entered into between such
bank or trust company and the Sub-Custodian, and (2) the 17f-5 Sub-
Custodian's offices or branches at which the 17f-5 Sub-Custodian is
authorized to hold securities, cash and other property of the Fund. 
Upon such approval by the Fund, the Sub-Custodian is authorized on
behalf of the Fund to notify each 17f-5 Sub-Custodian of its appointment
as such.  The Sub-Custodian may, at any time in its discretion, remove
any bank or trust company that has been appointed as a 17f-5 Sub-
Custodian.

 Those 17f-5 Sub-Custodians and their offices or branches which the
Fund has approved to date are set forth on Schedule C hereto.  Such
Schedule C shall be amended from time to time as 17f-5 Sub-Custodians,
branches or offices are changed, added or deleted.  The Custodian shall
be responsible for informing the Sub-Custodian sufficiently in advance
of a proposed investment which is to be held at a location not listed on
Schedule C, in order that there shall be sufficient time for the Fund to
give the approval required by the preceding paragraph and for the Sub-
Custodian to put the appropriate arrangements in place with such 17f-5
Sub-Custodian pursuant to such sub-custodian agreement.

 With respect to the securities and funds held by a 17f-5 Sub-
Custodian, either directly or indirectly, including demand and interest
bearing deposits, currencies or other deposits and foreign exchange
contracts, the Sub-Custodian shall be liable to the Custodian and the
Fund if and only to the extent that such 17f-5 Sub-Custodian is liable
to the Sub-Custodian and the Sub-Custodian recovers under the applicable
sub-custodian agreement, provided, however, that the foregoing
limitation shall not apply if such 17f-5 Sub-Custodian's liability to
the Sub-Custodian is limited because the applicable sub-custodian
agreement does not contain provisions substantially similar to the
provisions of Section 2 (but not including Section 2.12) of this
Agreement.  The Sub-Custodian shall also be liable to the Custodian and
the Fund for its own negligence in transmitting any instructions
received by it from the Fund or the Custodian and for its own negligence
in connection with the delivery of any securities or funds held by it to
any such 17f-5 Sub-Custodian.

 The Custodian or the Fund may authorize the Sub-Custodian or one or
more of the 17f-5 Sub-Custodians to use the facilities of one or more
foreign securities depositories or clearing agencies (each, a "Foreign
Depository") that is permitted to be used by registered investment
companies by a Rule or Rules of the SEC or that has received an order of
the SEC exempting it from any of such requirements that it does not
meet.  The records of the Sub-Custodian or a 17f-5 Sub-Custodian
employing a Foreign Depository or clearing agency shall identify those
securities belonging to the Fund which are maintained in such a Foreign
Depository.  The engagement by the Sub-Custodian of one or more Foreign
Depositories shall not relieve the Sub-Custodian of its responsibilities
or liabilities hereunder.  The Foreign Depositories which the Fund has
approved to date are set forth in Schedule C hereto.  Schedule C shall
be amended from time to time as approved Foreign Depositories are
changed, added or deleted.  The Custodian shall be responsible for
informing the Sub-Custodian sufficiently in advance of a proposed
investment which is to be held at a location not listed on Schedule C,
in order that there shall be sufficient time for the Fund to give the
approval required by the preceding paragraph and for the Sub-Custodian
to complete the appropriate contractual and technical arrangements with
such Foreign Depository.

 In the event that any 17f-5 Sub-Custodian appointed pursuant to the
provisions of this Section 2.11 fails to perform any of its obligations
under the terms and conditions of the applicable sub-custodian
agreement, the Sub-Custodian shall use its best efforts to cause such
17f-5 Sub-Custodian to perform such obligations.  In the event that the
Sub-Custodian is unable to cause such 17f-5 Sub-Custodian to perform
fully its obligations thereunder, the Sub-Custodian shall forthwith upon
the Custodian's request terminate such 17f-5 Sub-Custodian as a sub-
custodian for the Fund and, if necessary or desirable, appoint another
17f-5 Sub-Custodian in accordance with the provisions of this
Section 2.11.  At the election of the Custodian, it shall have the right
to enforce and shall be subrogated to the Sub-Custodian's rights against
any such 17f-5 Sub-Custodian for loss or damage caused the Fund by such
17f-5 Sub-Custodian.

 At the written request of the Fund, the Sub-Custodian will terminate
as a sub-custodian for the Fund any 17f-5 Sub-Custodian appointed
pursuant to the provisions of this Section 2.11 in accordance with the
termination provisions under the applicable sub-custodian agreement. 
The Sub-Custodian will not amend any sub-custodian agreement or agree to
change or permit any changes thereunder except upon the prior written
approval of the Fund.

 In the event the Sub-Custodian makes any payment to a 17f-5 Sub-
Custodian under the indemnification provisions of any sub-custodian
agreement, no more than thirty days after written notice to the
Custodian of the Sub-Custodian's having made such payment, the Custodian
will reimburse the Sub-Custodian the amount of such payment except in
respect of any negligence or misconduct of the Sub-Custodian.

  DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS.  The Sub-Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury or by a federal agency (collectively
referred to herein as "Securities System") in accordance with applicable
rules and regulations (including Rule 17f-4 of the 1940 Act), and
subject to the following provisions:

  The Sub-Custodian may, either directly or through one or more agents,
keep securities of the Fund in a Securities System provided that such
securities are represented in an account ("Account") of the
Sub-Custodian or such an agent in the Securities System which shall not
include any assets other than assets held as a fiduciary, custodian or
otherwise for customers;
<PAGE>
  The records of the Sub-Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;

  The Sub-Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Sub-Custodian to reflect such
payment and transfer for the account of the Fund.  The Sub-Custodian
shall transfer securities sold for the account of the Fund upon (i)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of
an entry on the records of the Sub-Custodian to reflect such transfer
and payment for the account of the Fund.  Copies of all advices from the
Securities System of transfers of securities for the account of the Fund
shall identify the Fund, be maintained for the Fund by the Sub-Custodian
or such an agent and be provided to the Fund or the Custodian at the
Custodian's request.  The Sub-Custodian shall furnish the Custodian
confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Custodian
copies of daily transaction statements reflecting each day's
transactions in the Securities System for the account of the Fund on the
next business day;

  The Sub-Custodian shall provide the Custodian with any report obtained
by the Sub-Custodian on the Securities System's accounting system,
internal accounting controls and procedures for safeguarding securities
deposited in the Securities System;

  The Sub-Custodian shall utilize only such Securities Systems as are
set forth in a list provided by the Custodian of Securities Systems
approved for use by the Board of Trustees of the Fund, which list will
be amended from time to time by the Custodian as may be necessary to
reflect any subsequent action taken by the Trustees of the Fund;
 Anything to the contrary in this Agreement twithstanding, the
Sub-Custodian shall be liable to the Fund and the Custodian for any loss
or damage to the Fund or the Custodian resulting from use of the
Securities System by reason of any negligence, misfeasance or misconduct
of the Sub-Custodian or any of its agents or of any of its or their
employees or from failure of the Sub-Custodian or any such agent or
employee to enforce effectively such rights as it may have against the
Securities System.  At the election of the Custodian, it shall be
entitled to be subrogated to the rights of the Sub-Custodian with
respect to any claim against the Securities System or any other person
which the Sub-Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund and the Custodian have not
been made whole for any such loss or damage.
<PAGE>
  DEPOSITARY RECEIPTS.  Only upon receipt of Proper Instructions, the
Sub-Custodian shall instruct a 17f-5 Sub-Custodian appointed pursuant to
Section 2.11(b) hereof or an agent of the Sub-Custodian appointed
pursuant to Section 2.11(a) hereof (an "Agent") to surrender securities
to the depositary used by an issuer of American Depositary Receipts or
International Depositary Receipts (hereinafter collectively referred to
as "ADRs") for such securities against a written receipt therefor
adequately describing such securities and written evidence satisfactory
to the 17f-5 Sub-Custodian or Agent that the depositary has acknowledged
receipt of instructions to issue with respect to such securities ADRs in
the name of the Sub-Custodian, or a nominee of the Sub-Custodian, for
delivery to the Sub-Custodian in Boston, Massachusetts, or at such other
place as the Sub-Custodian may from time to time designate.

 Only upon receipt of Proper Instructions, the Sub-Custodian shall
surrender ADRs to the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Sub-Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver
the securities underlying such ADRs to a 17f-5 Sub-Custodian or an
Agent.

  FOREIGN EXCHANGE TRANSACTIONS AND FUTURES CONTRACTS.  Only upon
receipt of Proper Instructions, the Sub-Custodian shall enter into
foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for the account of
the Fund or shall enter into futures contracts or options on futures
contracts.  Such transactions may be undertaken by the Sub-Custodian
with such banking institutions, including the Sub-Custodian and 17f-5
Sub-Custodian(s) appointed pursuant to Section 2.11(b), as principals,
as approved and authorized by the Fund.  In connection with such
transaction, the Sub-Custodian is authorized to make free outgoing
payments of cash in the form of U.S. Dollars or foreign currency without
receiving confirmation of a foreign exchange contract, futures contract
or option thereon or confirmation that the countervalue currency
completing the foreign exchange contract or futures contract has been
delivered or received or that the option has been delivered or received. 
Foreign exchange contracts, futures contracts and options, other than
those executed with the Sub-Custodian as principal, shall for all
purposes of this Agreement be deemed to be portfolio securities of the
Fund.

  OPTION TRANSACTIONS.  Only upon receipt of Proper Instructions, the
Sub-Custodian shall enter into option transactions in accordance with
the provisions of any agreement among the Fund, the Custodian, and/or
the Sub-Custodian and a broker-dealer.

  OWNERSHIP CERTIFICATES FOR TAX PURPOSES.  The Sub-Custodian shall
execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other
payments with respect to securities held by it hereunder and in
connection with transfers of securities.

 PROXIES.  The Sub-Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered other than in the name
of the Fund, all proxies that are received by the Sub-Custodian, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Custodian such proxies, all proxy
soliciting materials and all notices relating to such securities.

  COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES.  The
Sub-Custodian shall transmit promptly to the Custodian all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Sub-Custodian from issuers of the securities
being held for the account of the Fund.  With respect to tender or
exchange offers, the Sub-Custodian shall transmit promptly to the
Custodian all written information received by the Sub-Custodian from
issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer.  If the
Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transactions, the Custodian shall notify the
Sub-Custodian of the action the Fund desires the Sub-Custodian to take;
provided, however, that the Sub-Custodian shall not be liable to the
Fund or the Custodian for the failure to take any such action unless
Proper Instructions are received by the Sub-Custodian at least two
business days prior to the date on which the Sub-Custodian is to take
such action, or in the case of foreign securities, such longer periods
as shall have been agreed upon in writing by the Custodian and the Sub-
Custodian, which may be in the form of written operating procedures or
standards.

  PROPER INSTRUCTIONS.  Proper Instructions as used throughout this
Agreement means a writing signed or initialed by one or more persons who
are authorized by the Trustees of the Fund and by the Custodian.  Each
such writing shall set forth the specific transaction or type of
transaction involved.  Oral instructions will be considered Proper
Instructions if the Sub-Custodian reasonably believes them to have been
given by a person authorized to give such instructions with respect to
the transaction involved.  The Custodian shall cause all oral
instructions to be confirmed in writing.  Proper Instructions shall also
include communications effected directly between the Custodian and
Sub-Custodian by electro-mechanical or electronic devices, provided that
the Custodian and the Sub-Custodian have approved such procedures. 
Notwithstanding the foregoing, no Trustee, officer, employee or agent of
the Fund
shall be permitted access to any securities or similar investments of
the Fund deposited with the Sub-Custodian or any agent for any reason
except in accordance with the provisions of Rule 17f-2 under the 1940
Act.

  ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY.  The Sub-Custodian may in
its discretion, without express authority from the Custodian:

  make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the
Custodian;
surrender securities in temporary form for securities in definitive
form;

 (3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and

   in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund held by the
Sub-Custodian hereunder except as otherwise directed by the Custodian.

   EVIDENCE OF AUTHORITY.  The Sub-Custodian shall be protected in
acting upon any instruction, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine and to
have been properly executed by or on behalf of the Fund or the Custodian
as custodian of the Fund.

   PERFORMANCE STANDARDS.  The Sub-Custodian shall use its best efforts
to perform its duties hereunder in accordance with such standards as are
agreed upon from time to time by the Custodian and the Sub-Custodian.

  RECORDS.  The Sub-Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Trustees of the
Fund to keep the books of account of the Fund or, if directed in writing
to do so by the Custodian, shall itself keep such books of account.  The
Sub-Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will
meet the obligations of the Fund under the 1940 Act, with particular
attention to Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and
31a-2 thereunder; the Sub-Custodian shall also create and maintain such
records as are required by applicable federal and state tax laws, and
any other law or administrative rules or procedures which may be
applicable to the Fund or the Custodian, such laws, rules or procedures
to be specified by the Custodian from time to time.  All such records
shall be the property of the Fund and shall at all times during the
regular business hours of the Sub-Custodian be open for inspection by
duly authorized officers, employees or agents of the Custodian and the
Fund and employees and agents of the Securities and Exchange Commission. 
The Sub-Custodian shall, at the Custodian's request, supply the
Custodian with a tabulation of securities owned by the Fund and held
under this Agreement and shall, when requested to do so by the Custodian
and for such compensation as shall be agreed upon between the Custodian
and Sub-Custodian, include certificate numbers in such tabulations.

  Opinion and Reports of the Fund's Independent Accountant. The
Sub-Custodian shall take all reasonable actions, as the Custodian may
from time to time request, to furnish such information with respect to
its activities hereunder as the Fund's independent public accountant may
request in connection with the accountant's verification of the Fund's
securities and similar investments as required by Rule 17f-2 under the
1940 Act, the preparation of the Fund's registration statement and
amendments thereto, the Fund's reports to the Securities and Exchange
Commission and with respect to any other requirements of such
Commission.

   Reports of Sub-Custodian's Independent Accountant.  The
Sub-Custodian shall provide the Custodian, at such times as the
Custodian may reasonably require, with reports by an independent public
accountant on the accounting system, internal accounting controls and
procedures for safeguarding securities, including securities deposited
and/or maintained in a Securities System, relating to the services
provided by the Sub-Custodian under this Agreement; such reports, which
shall be of sufficient scope and in sufficient detail as may reasonably
be required by the Custodian, shall provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and if
there are no such inadequacies, shall so state.

   Compensation.  The Sub-Custodian shall be entitled to reasonable
compensation for its services and expenses as sub-custodian, as agreed
upon from time to time between the Custodian and the Sub-Custodian.

   Responsibility of Sub-Custodian.  The Sub-Custodian shall exercise
reasonable care and diligence in carrying out the provisions of this
Agreement and shall not be liable to the Fund or the Custodian for any
action taken or omitted by it in good faith without negligence or
willful misconduct.  So long as and to the extent that it is in the
exercise of reasonable care, the Sub-Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Agreement and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be
genuine and, if in writing, reasonably believed to be signed by the
proper party or parties.  It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.  Notwithstanding the foregoing, the
responsibility of the Sub-Custodian with respect to redemptions effected
by check shall be in accordance with a separate agreement entered into
between the Custodian and the Sub-Custodian.  It is also understood that
the Sub-Custodian shall not be liable for any loss resulting from a
Sovereign Risk.  A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition
or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism, insurrection
or revolution; or any other similar act or event beyond the Sub-
Custodian's control.

 The Sub-Custodian shall protect the Fund and the Custodian from losses
to the Fund resulting from any act or failure to act of the
Sub-Custodian in violation of its duties hereunder or of any law
applicable to the Sub-Custodian's duties hereunder.

 If the Custodian requires the Sub-Custodian to take any action with
respect to securities, which action involves the payment of money or
which action may, in the opinion of the Sub-Custodian, result in the
Sub-Custodian's being liable for the payment of money or incurring
liability of some other form, the Custodian, as a prerequisite to
requiring the Sub-Custodian to take such action, shall provide indemnity
to the Sub-Custodian in an amount and form satisfactory to the
Sub-Custodian.

 The Custodian agrees to indemnify and hold harmless the Sub-Custodian
from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (collectively, "Authorized
Charges") incurred or assessed against it or its nominee in connection
with the performance of this Agreement, except such as may arise from
its own negligent action, negligent failure to act or willful
misconduct.  The Sub-Custodian is authorized to charge any account of
the Fund for such items and such fees.  To secure any such Authorized
Charges and any advances of cash or securities made by the Sub-Custodian
to or for the benefit of the Fund for any purpose which results in the
Fund's incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Custodian on behalf of the Fund hereby represents that it has obtained
from the Fund authorization to apply available cash in any account
maintained by the Sub-Custodian on behalf of the Fund and a security
interest in and pledge to the Sub-Custodian of securities of the Fund
held by the Sub-Custodian (including those which may be held in a
Securities System) up to a maximum of 10% of the value of the net assets
held by the Sub-Custodian for the purposes of securing payment of any
Authorized Charges and any advances of cash or securities, and that the
Fund has agreed, from time to time, to designate in writing, or to cause
its investment adviser to, or permit the Custodian to, designate in
writing, the securities subject to such security interest and pledge
with such specificity and detail as the Sub-Custodian may reasonably
request (and in the absence of such designation to permit the Sub-
Custodian so to designate securities).  The Custodian hereby grants on
behalf of the Fund a security interest and pledge to the Sub-Custodian,
as aforesaid, in securities and available cash, as security for any
Authorized Charges and any advances of cash or securities and agrees
that, should the Fund or the Custodian fail to repay promptly any
Authorized Charges and any advances of cash or securities, the
Sub-Custodian shall be entitled to use such available cash and to
dispose of such pledged securities as is necessary to repay any such
Authorized Charges or any advances of cash or securities and to exercise
the rights of a secured party under the Uniform Commercial Code.

 The Custodian agrees not to amend the third paragraph of Section 9 of
the Custodian Agreement unless it provides the Sub-Custodian with at
least thirty (30) days' prior written notice of the substance of any
proposed amendments, provided that the foregoing shall not be construed
to in any way to provide that the Sub-Custodian's consent shall be
required to make such an amendment effective or that the Sub-Custodian's
failure to give such consent shall in any way affect its obligations
under this Agreement.

   SUCCESSOR SUB-CUSTODIAN.  If a successor sub-custodian shall be
appointed by the Custodian, the Sub-Custodian shall, upon termination
and upon receipt of Proper Instructions, cause to be delivered to such
successor sub-custodian, duly endorsed and in the form for transfer, all
securities, funds and other property of the Fund then held by it and all
instruments held by the Sub-Custodian related thereto and cause the
transfer to an account of the successor sub-custodian all of the Fund's
securities held in any Securities Systems.

 If no such successor sub-custodian shall be appointed, the
Sub-Custodian shall, in like manner, upon receipt of a certified copy of
a vote of the Trustees of the Fund, cause to be transferred such
securities, funds and other property in accordance with such vote.

 In the event that no written order designating a successor
sub-custodian or certified copy of a vote of the Trustees shall have
been delivered to the Sub-Custodian on or before the date when such
termination shall become effective, then the SubCustodian shall have the
right to deliver to a bank or trust company, which meets the
requirements of the 1940 Act and the rules and regulations thereunder,
all securities, funds and other properties of the Fund.  Thereafter,
such bank or trust company shall be the successor of the Sub-Custodian
under this Agreement.

 In the event that securities, funds and other property remain in the
possession of the Sub-Custodian after the date of termination hereof
owing to failure of the Custodian to obtain a certified copy of the
Trustees appointing a successor subcustodian, the Sub-Custodian shall be
entitled to fair compensation for its services during such period as the
SubCustodian retains possession of such securities, funds and other
property and the provisions of this Agreement relating to the duties and
obligations of the Sub-Custodian shall remain in full force and affect.

   EFFECTIVE PERIOD; TERMINATION AND AMENDMENT.  This Agreement shall
become effective as of its execution, shall continue in full force and
effect until terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage
prepaid, to the other party, such termination to take effect not sooner
than thirty (30) days after the date of mailing; provided, that either
party may at any time immediately terminate this Agreement in the event
of the appointment of a conservator or receiver for the other party or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.  No provision of
this Agreement may be amended or terminated except by a statement in
writing signed by the party against which enforcement of the amendment
or termination is sought.

 Upon termination of this Agreement, the Custodian shall pay to the
Sub-Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Sub-Custodian for its
reimbursable costs, expenses and disbursements.  The provisions of
Section 7, including, until any Authorized Charges and any advances of
cash or securities referred to therein are repaid, all liens and
security interests created pursuant thereto, and all rights to
indemnification, shall survive any termination of this Agreement.

   INTERPRETATION.  This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject matter
hereof.  In connection with the operation of this Agreement, the
Sub-Custodian and the Custodian may from time to time agree in writing
on such provisions interpretive of or in addition to the provisions of
this Agreement as may in their joint opinion be consistent with the
general tenor of this Agreement.  No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to
be an amendment of this Agreement.

   GOVERNING LAW.  This Agreement is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and construed
according to the internal laws of said Commonwealth, without regard to
principles of conflicts of law.

   NOTICES.  Notices and other writings delivered or mailed postage
prepaid to the Custodian addressed to the Custodian attention:  George
H.  Crane, Senior Vice President, The Putnam Companies, 99 High Street,
Boston, MA 02109 or to such other person or address as the Custodian may
have designated to the SubCustodian in writing, or to the Sub-Custodian
attention:                                                               
                or to such other address as the SubCustodian may have
designated to the Custodian in writing, shall be deemed to have been
properly delivered or given hereunder to the respective addressee.

   BINDING OBLIGATION.  This Agreement shall be binding on and shall
inure to the benefit of the Custodian and the SubCustodian and their
respective successors and assigns, provided that neither party hereto
may assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other party.

   PRIOR AGREEMENTS.  This Agreement supersedes and terminates, as of
the date hereof, all prior contracts between the Fund or the Custodian
and the Sub-Custodian relating to the custody of the Fund's assets.

   DECLARATION OF TRUST.  A copy of the Declaration of Trust of the
Fund is on file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or
beneficiaries individually but binding only upon the assets and property
of the Fund.

 IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the        day of             
    , 199  .

                     PUTNAM FIDUCIARY TRUST COMPANY


                     By--------------------------------                 
             
                       Name:
                       Title:

                     (Sub-Custodian)


                         By---------------------------------             
                  
                       Name:
                       Title:
<PAGE>
     The Sub-Custodian and Putnam Investments, Inc. ("Putnam"), the sole
owner of the Custodian, agree that Putnam shall be the primary obligor
with respect to compensation due the Sub-Custodian pursuant to Section 6
of this Agreement in connection with the Sub-Custodian's performance of
its responsibilities hereunder.  The Custodian and Putnam agree to take
all actions necessary and appropriate to assure that the Sub-Custodian
shall be compensated in the amounts and on the schedule agreed to by the
Custodian and the Sub-Custodian pursuant to Section 6.

                     PUTNAM INVESTMENTS, INC.


                     By:-------------------------------                 
               
                        Name:
                        Title:

                     PUTNAM FIDUCIARY TRUST COMPANY

                     
                     By:--------------------------------                
                                      
                        Name:
                        Title:

                     (Sub-Custodian)


                     By:----------------------------------              
                   
                        Name:
                        Title:

<PAGE>
Exhibit 10.
                               ROPES & GRAY 
                         One International Place 
                     Boston, Massachusetts 02110-2624 
                              (617) 951-7000 

 
                               February 24, 1994 
 
Putnam Federal Income Trust (the "Fund") 
One Post Office Square 
Boston, Massachusetts 02109 
 
Gentlemen: 
 
 You have informed us that you propose to offer and sell from time to
time 9,592,801 of your shares of beneficial interest (the "Shares"), for
cash or securities at the net asset value per share, determined in
accordance with your Bylaws, which Shares are in addition to your shares
of beneficial interest which you have previously offered and sold or
which you are currently offering. 
 
 We have examined copies of (i) your Agreement and Declaration of Trust
as on file at the office of the Secretary of State of The Commonwealth
of Massachusetts, which provides for an unlimited number of authorized
shares of beneficial interest, and (ii) your Bylaws, which provide for
the issue and sale by the Fund of such Shares. 
 
 We assume that appropriate action will be taken to register or qualify
the sale of the Shares under any applicable state and federal laws
regulating offerings and sales of securities. 
 
 Based upon the foregoing, we are of the opinion that: 
 
 1.   The Fund is a legally organized and validly existing voluntary
association with transferable shares of beneficial interest under the
laws of The Commonwealth of Massachusetts and is authorized to issue an
unlimited number of shares of beneficial interest. 
 
 2.   Upon the issue of any of the Shares referred to in the first
paragraph hereof for cash or securities at net asset value, and the
receipt of the appropriate consideration therefor as provided in your
Bylaws, such Shares so issued will be validly issued, fully paid and
nonassessable by the Fund. 
 
<PAGE>
 
 
ROPES & GRAY 
 
Putnam Federal Income Trust         -2-       February 24, 1994         
 
 The Fund is an entity of the type commonly known as a "Massachusetts
business trust".  Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the obligations of
the Fund.  However, the Agreement and Declaration of Trust disclaims
shareholder liability for acts or obligations of the Fund and requires
that  notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or its Trustees.  The
Agreement and Declaration of Trust provides for indemnification out of
the property of the Fund for all loss and expense of any shareholder of
the Fund held personally liable for the obligations of the Fund solely
by reason of his being or having been a shareholder.  Thus, the risk of
a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be
unable to meet its obligations. 
 
 We understand that this opinion is to be used in connection with the
registration of the Shares for offering and sale pursuant to the
Securities Act of 1933, as amended, and the provisions of Rule 24e-2
under the Investment Company Act of 1940, as amended.  We consent to the
filing of this opinion with and as a part of Post-Effective Amendment
No. 10 to you registration Statement No. 33-3903. 
 
                               Very truly yours, 
 

 
                               Ropes & Gray 

 
 

<PAGE>
Exhibit 11.

                        PUTNAM FEDERAL INCOME TRUST               
                                  FORM OF
                  CLASS A DISTRIBUTION PLAN AND AGREEMENT
                                                                           
     This Plan and Agreement (the "Plan") constitutes the Class A
Distribution Plan of Putnam Federal Income Trust, a Massachusetts
business trust (the "Trust"), adopted pursuant to the provisions of Rule
12b-1 under the Investment Company Act of 1940 (the "Act") and the
related agreement between the Trust and Putnam Mutual Funds Corp.
("PMF"), the principal underwriter of the Trust's Class A shares. 
During the effective term of this Plan, the Trust may make payments to
PMF upon the terms and conditions hereinafter set forth:

 SECTION 1.  The Trust may make payments to PMF, in the form of fees or
reimbursements, to compensate PMF  for services provided and expenses
incurred by it for purposes of promoting the sale of Class A shares of
the Fund, reducing redemptions of Class A shares, or maintaining or
improving services provided to shareholders by PMF and investment
dealers.  The amount of such payments and the purposes for which they
are made shall be determined by the Qualified Trustees (as defined
below).  Payments under this Plan shall not exceed in any fiscal year
the annual rate of 0.35% of the average net asset value of the Trust, as
determined at the close of each business day during the year.  A
majority of the Qualified Trustees (as defined below) may, at any time
and from time to time, reduce the amount of such payments, or may
suspend the operation of the Plan for such period or periods of time as
they may determine.

 SECTION 2.  This Plan shall not take effect until:

      (a)  it has been approved by a vote of a majority of the
 outstanding voting securities of the Trust; and

      (b)  it has been approved, together with any related agreements,
 by votes of the majority (or whatever greater percentage may, from
 time to time, be required by Section 12(b) of the Act or the rules and
 regulations thereunder) of both (i) the Trustees of the Trust, and
 (ii) the Qualified Trustees of the Trust, cast in person at a meeting
 called for the purpose of voting on this Plan or such agreement.

 SECTION 3.  This Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for
approval of this Plan in Section 2(b).

 SECTION 4.  PMF shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were
made.

 SECTION 5.  This Plan may be terminated at any time by vote of a
majority of the Qualified Trustees, or by vote of a majority of the
Trust's outstanding voting securities.

 SECTION 6.  All agreements with any person relating to implementation
of this Plan shall be in writing, and any agreement related to this Plan
shall provide:

      (a)  that such agreement may be terminated at any time, without
 payment of any penalty, by vote of a majority of the Qualified
 Trustees or by vote of a majority of the Trust's outstanding voting
 securities, on not more than 60 days' written notice to any other
 party to the agreement; and

      (b)  that such agreement shall terminate automatically in the
 event of its assignment.

 SECTION 7.  This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof
without the approval of a majority of the outstanding voting securities
of the Trust, and all material amendments to this Plan shall be approved
in the manner provided for approval of this Plan in Section 2(b).

 SECTION 8.  As used in this Plan, (a) the term "Qualified Trustees"
shall mean those Trustees of the Trust who are not interested persons of
the Trust, and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it, and (b) the
terms "assignment", "interested person" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings
specified in the Act and the rules and regulations thereunder, subject
to such exemptions as may be granted by the Securities and Exchange
Commission.

 SECTION 9.  A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as Trustees and not
individually, and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and
property of the Trust.
<PAGE>
 Executed as of May 5, 1994 

PUTNAM MUTUAL FUNDS CORP.           PUTNAM FEDERAL INCOME         
                          TRUST                                   

By:   -------------------------     By:--------------------------
 William N. Shiebler                Charles E. Porter
 President                          Executive Vice President

<PAGE>
                                     
Exhibit 12


                                      
                        PUTNAM FEDERAL INCOME TRUST
                                  FORM OF
                                  CLASS B 
                     DISTRIBUTION PLAN AND AGREEMENT 
 
 
 This Plan and Agreement (the "Plan") constitutes the Distribution Plan
for the Class B shares of Putnam Federal Income Trust, a Massachusetts
business trust (the "Trust"), adopted pursuant to the provisions of Rule
12b-1 under the Investment Company Act of 1940 (the "Act") and the
related agreement between the Trust and Putnam Mutual Funds Corp.
("Putnam Mutual Funds").  During the effective term of this Plan, the
Trust may incur expenses primarily intended to result in the sale of its
Class B shares upon the terms and conditions hereinafter set forth:  

 SECTION 1.  The Trust shall pay to Putnam Mutual Funds a monthly fee
at the annual rate of 1.00% of the average net asset value of the Class
B shares of the Trust, as determined at the close of each business day
during the month, to compensate Putnam Mutual Funds for services
provided and expenses incurred by it in connection with the offering of
the Trust's Class B shares, which may include, without limitation, the
payment by Putnam Mutual Funds to investment dealers of commissions on
the sale of Class B shares, as set forth in the then current Prospectus
or Statement of Additional Information of the Trust and the payment of a
service fee of up to 0.25% of such net asset value for the purposes of
maintaining or improving services provided to shareholders by Putnam
Mutual Funds and investment dealers.  Such fees shall be payable for
each month within 15 days after the close of such month.  A majority of
the Qualified Trustees, as defined below, may, from time to time, reduce
the amount of such payments, or may suspend the operation of the Plan
for such period or periods of time as they may determine. 
 
 SECTION 2.  This Plan shall not take effect until: 
 

      (a)  it has been approved by a vote of a majority of the
           outstanding Class B shares of the Trust; 
 
      (b)  it has been approved, together with any related agreements,
           by votes of the majority (or whatever greater percentage
           may, from time to time, be required by Section 12 (b) of the
           Act or the rules and regulations thereunder) of both (i) the
           Trustees of the Trust, and (ii) the Qualified Trustees of
           the Trust, cast in person at a meeting called for the
           purpose of voting on this Plan or such agreement; and  

      (c)  the Trust has received the proceeds of the initial public
           offering of its Class B shares. 

 SECTION 3.  This Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for
approval of this Plan in Section 2 (b). 
 
 SECTION 4.  Putnam Mutual Funds shall provide to the Trustees of the
Trust, and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made. 
 
 SECTION 5.  This Plan may be terminated at any time by vote of a
majority of the Qualified Trustees or by vote of the majority of the
outstanding Class B shares of the Trust. 
 
 SECTION 6.  All agreements with any person relating to implementation
of this Plan shall be in writing, and any agreement related to this Plan
shall provide: 
 
      (a)  that such agreement may be terminated at any time, without
           payment of any penalty, by vote of a majority of the
           Qualified Trustees or by vote of a majority of the
           outstanding Class B shares of the Trust, on not more than 60
           days' written notice to any other party to the agreement;
           and 
 
      (b)  that such agreement shall terminate automatically in the
           event of its assignment. 
 
 SECTION 7.  This Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof
without the approval of a majority of the outstanding Class B shares of
the Trust and all material amendments to this Plan shall be approved in
the manner provided for approval of this Plan in Section 2(b). 
 
 SECTION 8.  As used in this Plan, (a) the term "Qualified Trustees"
shall mean those Trustees of the Trust who are not interested persons of
the Trust, and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it, and (b) the term
"majority of the outstanding Class B shares of the Trust" means the
affirmative vote, at a duly called and held meeting of Class B
shareholders of the Trust, (i) of the holders of 67% or more of the
Class B shares of the Trust present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding Class B shares of the Trust entitled to vote at such meeting
are present in person or by proxy, or (ii) of the holders of more than
50% of the outstanding Class B shares of the Trust entitled to vote at
such meeting, whichever is less, and (c) the terms "assignment" and
"interested person" shall have the respective meanings specified in the
Act and the rules and regulations thereunder, subject to such exemptions
as may be granted by the Securities and Exchange Commission. 
 
 SECTION 9.  A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as Trustees and not
individually, and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and
property of the Trust.

 Executed as of May 5, 1994.               

 

PUTNAM MUTUAL FUNDS CORP.      PUTNAM FEDERAL INCOME TRUST 
      
By:   --------------------------    By:  -----------------------
- -     William N. Shiebler                Charles E. Porter
 President                          Executive Vice President 
                             





<PAGE>
Exhibit 13


                         DEALER SERVICE AGREEMENT

Between:                            and

PUTNAM MUTUAL FUNDS CORP. 
General Distributor of              
The Putnam Family of Mutual Funds   
P.O. Box 2701
Boston, MA  02208


We are pleased to inform you that, pursuant to the terms of this Dealer
Service Agreement, we are authorized to pay you service fees in
connection with the accounts of your customers that hold shares of
certain Putnam funds listed in SCHEDULE 1 that have adopted distribution
plans pursuant to Rule 12b-1 (the "12b-1 Funds").  Payment of the
service fees is subject to your initial and continuing satisfaction of
the following terms and conditions which may be revised by us from time
to time:

                      1.  QUALIFICATION REQUIREMENTS

(a)   You have entered into a Sales Contract with us with respect to
the Putnam Family of Mutual Funds (the "Putnam Funds").

(b)   You are the dealer of record for accounts in Putnam Funds having
an aggregate average net asset value of at least the minimum amount set
forth in SCHEDULE 2 (DEALER FIRM REQUIREMENTS) during the period for
which a service fee is to be paid.  Putnam Fund accounts are accounts in
any open-end Putnam Fund, but excluding any accounts for your firm's own
retirement plans.

(c)   One or more of your current employees must be the designated
registered representative(s) on accounts in Putnam Funds having an
aggregate average net asset value of at least the minimum amount set
forth in SCHEDULE 2 (REGISTERED REPRESENTATIVE REQUIREMENTS) during the
period for which a service fee is to be paid.

(d)   You will provide the following information and agree that we will
be entitled to rely on the accuracy of such information in updating our
records for determining the levels of service fees payable to you under
the terms of this Agreement.  You understand that such payments will be
based solely on Putnam's records.

      (i)  For each Putnam Fund account registered in the name of one
      of your customers, you will advise us, preferably by electronic
      means, before the end of the second month in each calendar
      quarter, of the Putnam Fund account number and the registered
      representative's identification, social security and branch
      number.

      (ii) For each Putnam Fund account registered in your name (street
      name accounts), you will use your best efforts to advise us,
      preferably by electronic means, before the end of the second
      month in each calendar quarter, of the Putnam Fund account
      number, net asset value of the account, date of valuation, and,
      for each registered representative assigned to assets in the
      account:  the representative's identification number, social
      security number, branch number, and the net asset value of
      assigned assets in the account.

                             2.  Service Fees

(a)   If you meet the qualification requirements set forth above in
Paragraph 1, you will be paid a service fee on assets in the 12b-1 Funds
for which you are the dealer of record and which are serviced by a
registered representative of your firm meeting the Registered
Representative Requirements, if any, at the annual rates specified in
SCHEDULE 3 (excluding any accounts for your firm's own retirement
plans).

(b)   You understand and agree that:

      (i)  all service fee payments are subject to the limitations
      contained in each 12b-1 Fund's Distribution Plan, which may be
      varied or discontinued at any time;

      (ii)  your failure to provide the services described in Paragraph
      4 below as may be amended by us from time to time, or otherwise
      comply with the terms of this Agreement, will render you
      ineligible to receive service fees; and

      (iii)  failure of an assigned registered representative to
      provide services required by this Agreement will render that
      representative's accounts ineligible as accounts on which service
      fees are paid.

       3.  PAYMENTS AND COMMUNICATIONS TO REGISTERED REPRESENTATIVES

(a)   You will pass through to your registered representatives a
significant share of the service fees paid to you pursuant to this
Agreement.

(b)   You will assist us in distributing to your registered
representatives periodic statements which we will have prepared showing
the aggregate average net asset value of shares in Putnam Funds with
which they are credited on our records.
<PAGE>
                           4.  Required Services

(a)   You will assign one of your registered representatives to each
Putnam Fund account on your records and reassign the Putnam Fund account
should that representative leave your firm.

(b)   You and your registered representatives will assist us and our
affiliates in providing the following services to shareholders of the
Putnam Funds:

      (i)  Maintain regular contact with shareholders in          assig
                                                                  ned
                                                                  accou
                                                                  nts
                                                                  and
                                                                  assis
                                                                  t in
                                                                  answe
                                                                  ring
                                                                  inqui
                                                                  ries
                                                                  conce
                                                                  rning
                                                                  the
                                                                  Putna
                                                                  m
                                                                  Funds
                                                                  .

      (ii) Assist in distributing sales and service          literature
                                                             provided
                                                             by us,
                                                             particular
                                                             ly to the
                                                             beneficial
                                                             owners of
                                                             accounts
                                                             registered
                                                             in your
                                                             name
                                                             (street
                                                             name
                                                             accounts).

      (iii) Assist us and our affiliates in the establishment          and
                                                                       maint
                                                                       enanc
                                                                       e of
                                                                       share
                                                                       holde
                                                                       r
                                                                       accou
                                                                       nts
                                                                       and
                                                                       recor
                                                                       ds.

      (iv) Assist shareholders in effecting administrative        chang
                                                                  es,
                                                                  such
                                                                  as
                                                                  chang
                                                                  ing
                                                                  divid
                                                                  end
                                                                  optio
                                                                  ns,
                                                                  accou
                                                                  nt
                                                                  desig
                                                                  natio
                                                                  ns,
                                                                  addre
                                                                  ss,
                                                                  autom
                                                                  atic
                                                                  inves
                                                                  tment
                                                                  progr
                                                                  ams
                                                                  or
                                                                  syste
                                                                  matic
                                                                  inves
                                                                  tment
                                                                  plans
                                                                  .

      (v)  Assist in processing purchase and redemption           trans
                                                                  actio
                                                                  ns.

      (vi) Provide any other information or services as the       custo
                                                                  mer
                                                                  or we
                                                                  may
                                                                  reaso
                                                                  nably
                                                                  reque
                                                                  st.

(c)   You will support our marketing efforts by granting reasonable
requests for visits to your offices by our wholesalers and by including
all Putnam Funds on your "approved" list.

(d)   Your compliance with the service requirements set forth in this
Agreement will be evaluated by us from time to time by surveying
shareholder satisfaction with service, by monitoring redemption levels
of shareholder accounts assigned to you and by such other methods as we
deem appropriate.

(e)   The provisions of this Paragraph 4 may be amended by us from time
to time upon notice to you.
<PAGE>
                               5.  Amendment

This Agreement, including any Schedule hereto, shall be deemed amended
as provided in any written notice delivered by us to you.
                   6.  Effective Period and Termination

The provisions of this Agreement shall remain in effect for not more
than one year from the date of its execution or adoption and thereafter
for successive annual periods only so long as such continuance is
specifically approved at least annually by the Trustees of each of the
12b-1 Funds in conformity with Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act").  This Agreement shall automatically
terminate in the event of its assignment (as defined by the 1940 Act). 
In addition, this Agreement may be terminated at any time, without the
payment of any penalty, by either party upon written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or, as
provided in Rule 12b-1 under the 1940 Act, by the Trustees of any 12b-1
Fund or by the vote of the holders of the outstanding voting securities
of any 12b-1 Fund.

                            7.  Written Reports

Putnam Mutual Funds Corp. shall provide the Trustees of each of the 12b-
1 Funds, and such Trustees shall review at least quarterly, a written
report of the amounts paid to you under this Agreement and the purposes
for which such expenditures were made.

                             8.  MISCELLANEOUS

(a)   All communications mailed to us should be sent to the above
address.  Any notice to you shall be duly given if mailed or delivered
to you at the address specified by you below.

(b)   The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.

                          Very truly yours,

                          PUTNAM MUTUAL FUNDS CORP.

                          By:  ------------------------------     
                          William N. Shiebler, President
                               and Chief Executive Officer
<PAGE>
We accept and agree to the foregoing Agreement as of the date set forth
below.

                          Dealer:   -------------------------


                          By:  ----------------------------
                               Authorized Signature, Title

                               ------------------------------

                               ------------------------------
                               Address


                          Dated:    -------------------------

Please return the signed Putnam copy of this Agreement to Putnam Mutual
Funds Corp., P.O. Box 2701, Boston, MA  02208.
<PAGE>
Schedule 1:  THE 12B-1 FUNDS

CATEGORY A

Putnam Convertible Income-Growth Trust (Class A)
Putnam Energy-Resources Trust
Putnam Global Growth Fund (Class A)
Putnam Health Sciences Trust (Class A)
Putnam Investors Fund (Class A)
Putnam Managed Income Trust
Putnam Strategic Income Trust 
Putnam Vista Fund (Class A)
Putnam Voyager Fund (Class A)
The George Putnam Fund of Boston (Class A)
The Putnam Fund for Growth and Income (Class A)

CATEGORY B

Putnam High Yield Trust (Class A)
Putnam Tax-Free High Yield Fund 
Putnam Tax-Free Insured Fund 
Putnam U.S. Government Income Trust (Class A)

CATEGORY C

Putnam Income Fund (Class A)

CATEGORY D

Putnam Michigan Tax Exempt Income Fund II (Class A)
Putnam Minnesota Tax Exempt Income Fund II (Class A)
Putnam Ohio Tax Exempt Income Fund II (Class A)

CATEGORY E

Putnam Municipal Income Fund (Class A)

CATEGORY F

Putnam Massachusetts Tax Exempt Income Fund II (Class A)

CATEGORY G

Putnam New York Tax Exempt Opportunities Fund 

CATEGORY H

Putnam California Tax Exempt Income Fund (Class A)
Putnam New Jersey Tax Exempt Income Fund (Class A)
Putnam New York Tax Exempt Income Fund (Class A)
Putnam Tax Exempt Income Fund (Class A)
CATEGORY I

Putnam Arizona Tax Exempt Income Fund

CATEGORY J

Putnam Florida Tax Exempt Income Fund (Class A)
Putnam Pennsylvania Tax Exempt Income Fund (Class A)

CATEGORY K

Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund 

CATEGORY L

Putnam Arizona Tax Exempt Income Fund (Class B)
Putnam California Tax Exempt Income Fund (Class B)
Putnam Florida Tax Exempt Income Fund (Class B)
Putnam Massachusetts Tax Exempt Income Fund II (Class B)
Putnam Michigan Tax Exempt Income Fund II (Class B)
Putnam Minnesota Tax Exempt Income Fund II (Class B)
Putnam New Jersey Tax Exempt Income Fund (Class B)
Putnam New York Tax Exempt Income Fund (Class B)
Putnam Ohio Tax Exempt Income Fund II (Class B)
Putnam Pennsylvania Tax Exempt Income Fund (Class B)
Putnam Tax Exempt Income Fund (Class B)
Putnam Texas Tax Exempt Income Fund

CATEGORY M

Putnam Adjustable Rate U.S. Government Fund (Class A and B)
Putnam American Government Income Fund
Putnam Asia Pacific Growth Fund (Class A and B)
Putnam Balanced Government Fund (Class A and B)
Putnam Convertible Income-Growth Trust (Class B)
Putnam Diversified Income Trust (Class A and B)
Putnam Dividend Growth Fund (Class A and B)
Putnam Equity Income Fund (Class A and B)
Putnam Europe Growth Fund 
Putnam Federal Income Trust
The George Putnam Fund of Boston (Class B)
Putnam Global Governmental Income Trust 
Putnam Global Growth Fund (Class B)
The Putnam Fund for Growth and Income (Class B)
Putnam Health Sciences Trust (Class B)
Putnam High Yield Advantage Fund
Putnam High Yield  Trust (Class B)
Putnam Income Fund (Class B)
Putnam Investors Fund (Class B)
Putnam Municipal Income Fund (Class B)
Putnam New Opportunities Fund (Class A and B)
Putnam OTC Emerging Growth Fund (Class A and B)
Putnam U.S. Government Income Trust (Class B)
Putnam Utilities Growth and Income Fund (Class A and B)
Putnam Vista Fund (Class B)
Putnam Voyager Fund (Class B)
Schedule 2:  Minimum Assets

 DEALER FIRM REQUIREMENTS.  The minimum aggregate average net asset
value of all accounts in Putnam Funds specified by Paragraph 1(b) is
$250,000.  We will review this requirement prior to the start of each
year and inform you of any changes.

 REGISTERED REPRESENTATIVE REQUIREMENTS.  With respect to Paragraph
1(c), there is no minimum asset qualification requirement in the Putnam
Funds applicable to each of your representatives.  We will review this
requirement prior to the start of each year and inform you of any
changes.

SCHEDULE 3:  ANNUAL SERVICE FEE RATES

Category A:     0.20% on shares acquired through December 31, 1989
                (including capital appreciation on such shares) and 0.25% on
                shares acquired after December 31, 1989 (including shares
                purchased after December 31, 1989 with reinvested
                distributions on any shares).

Category B:     0.20% on shares acquired through March 31, 1990 (including
                capital appreciation on such shares) and 0.25% on shares
                acquired after March 31, 1990 (including shares purchased
                after March 31, 1990 with reinvested distributions on any
                shares).

Category C:     0.20% on shares acquired through March 31, 1991 (including
                capital appreciation on such shares) and 0.25% on shares
                acquired after March 31, 1991 (including shares purchased
                after March 31, 1991 with reinvested distributions on any
                shares).

Category D:     0.15% on shares outstanding as of March 9, 1992 and 0.20% on
                shares acquired after March 9, 1992.

Category E:     0.20% on shares outstanding as of May 7, 1992 and 0.25% on
                shares acquired after May 7, 1992.

Category F:     0.15% on shares outstanding as of May 11, 1992 and 0.20% on
                shares acquired after May 11, 1992.

Category G:     0.15% on shares outstanding as of July 13, 1992 and 0.20% on
                shares acquired after July 13, 1992.

Category H:     0.15% on shares outstanding as of December 31, 1992 and
                0.20% on shares acquired after December 31, 1992.

Category I:     0.15% on shares outstanding as of March 5, 1993 and 0.20% on
                shares acquired after March 5, 1993.

Category J:     0.15% on shares outstanding as of July 8, 1993 and 0.20% on
                shares acquired after July 8, 1993.

Category K:     0.10% on all shares.

Category L:     0.20% on all shares.

Category M:     0.25% on all shares.

<PAGE>
Exhibit 14

                           FINANCIAL INSTITUTION
                             SERVICE AGREEMENT

Between:                                           and

PUTNAM MUTUAL FUNDS CORP.      
General Distributor of         
The Putnam Family of Mutual Funds        
P.O. Box 2701
Boston, MA  02208

We are pleased to inform you that, pursuant to the terms of this
FINANCIAL INSTITUTION SERVICE AGREEMENT, we are authorized to pay you
service fees in connection with the accounts of your customers that hold
shares of certain Putnam funds listed in SCHEDULE 1 that have adopted
distribution plans pursuant to Rule 12b-1 (the "12b-1 Funds").  Payment
of the service fees is subject to your initial and continuing
satisfaction of the following terms and conditions which may be revised
by us from time to time:

                       1. QUALIFICATION REQUIREMENTS

(a) You have entered into a Financial Institution Sales Contract with us
with respect to the Putnam Family of Mutual Funds (the "Putnam Funds"),
whose shares you have agreed to make available to your customers on an
agency basis.

(b) You are the financial institution of record for accounts in Putnam
Funds having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (FINANCIAL INSTITUTION
REQUIREMENTS) during the period for which a service fee is to be paid. 
Putnam Fund accounts are accounts in any open-end Putnam Fund but
excluding any accounts for your organization's own retirement plans.

(c) One or more of your current employees must be the designated
registered representative(s) in the case of a bank affiliated dealer, or
agent representative(s) in the case of a bank (both referred to as
"representatives"), on accounts in Putnam Funds having an aggregate
average net asset value of at least the minimum amount set forth in
SCHEDULE 2 (REPRESENTATIVE REQUIREMENTS) during the period for which a
service fee is to be paid.

(d) You will provide the following information and agree that we will be
entitled to rely on the accuracy of such information in updating our
records for determining the levels of service fees payable to you under
the terms of this Agreement.  You understand that such payments will be
based solely on Putnam's records:

 (i) For each Putnam Fund account registered in the name of one of your
 customers, you will advise us, preferably by electronic means, before
 the end of the second month in each calendar quarter, of the Putnam
 Fund account number and the representative's identification number,
 social security number and branch number.

 (ii) For each Putnam Fund account registered in your name (nominee
 name accounts), you will use your best efforts to advise us,
 preferably by electronic means, before the end of the second month in
 each calendar quarter, of the Putnam Fund account number, net asset
 value of the account, date of valuation, and, for each representative
 assigned to assets in the account: the representative's identification
 number, social security number, branch number, and net asset value of
 assigned assets in the account.

                              2. SERVICE FEES

(a) If you meet the qualification requirements set forth above in
Paragraph 1, you will be paid, at the end of each calendar quarter, a
service fee on assets of your customers in the 12b-1 Funds for which you
are the financial institution of record and which are serviced by a
representative of your organization meeting the Representative
Requirements, if any, at the annual rates specified in SCHEDULE 3
(excluding any accounts for your organization's own retirement plans),
provided that you have evaluated such service fees and have concluded
that it is consistent with applicable laws, rules, regulations and
regulatory interpretations for you to receive such service fees.

(b) You understand and agree that:

 (i) all service fee payments are subject to the limitations contained
 in each 12b-1 Fund's Distribution Plan, which may be varied or
 discontinued at any time;

 (ii) your failure to provide the services described in Paragraph 4
 below as may be amended by us from time to time, or otherwise comply
 with the terms of this Agreement, will render you ineligible to
 receive service fees; and

 (iii) failure of an assigned representative to provide services
 required by this Agreement will render that representative's accounts
 ineligible as accounts on which service fees are paid.

             3. PAYMENTS AND COMMUNICATIONS TO REPRESENTATIVES

(a) Where consistent with applicable laws, rules, regulations and
regulatory interpretations, you will pass through to your
representatives a significant share of the service fees paid to you
pursuant to this Agreement, or you will otherwise use the payments of
service fees to advance the objective of providing and improving service
to shareholders of the Putnam Funds in a manner specifically approved by
Putnam Financial Services (for example, via training courses for
representatives or shareholder seminars).

(b) You will assist us in distributing to your representatives periodic
statements which we will have prepared showing the aggregate average net
asset value of shares in Putnam Funds with which they are credited on
our records.

                           4. REQUIRED SERVICES

(a) You will assign one of your representatives to each Putnam Fund
account on your records and reassign the Putnam Fund account should that
representative leave your organization.

(b) You and your representatives will assist us and our affiliates in
providing the following services to shareholders of the Putnam Funds:

 (i) Maintain regular contact with shareholders in assigned accounts
 and assist in answering inquiries concerning the Putnam Funds.

 (ii) Assist in distributing sales and service literature provided by
 us, particularly to the beneficial owners of accounts registered in
 your name (nominee name accounts).

 (iii) Assist us and our affiliates in the establishment and
 maintenance of shareholder accounts and records.

 (iv) Assist shareholders in effecting administrative changes, such as
 changing dividend options, account designations, address, automatic
 investment programs or systematic investment plans.

 (v) Assist in processing purchase and redemption transactions.

 (vi) Provide any other information or services as the customer or we
 may reasonably request.

(c) You will grant reasonable requests for visits to your offices by our
wholesalers and include all Putnam Funds on your menu or list of
investments made available by you to your customers.

(d) Your compliance with the service requirements set forth in this
Agreement will be evaluated by us from time to time by surveying
shareholder satisfaction with service, by monitoring redemption levels
of shareholder accounts assigned to you and by such other methods as we
deem appropriate.

(e) The provisions of this Paragraph 4 may be amended by us from time to
time upon notice to you.

                               5. AMENDMENT

This Agreement, including any Schedule hereto, shall be deemed amended
as provided in any written notice delivered by us to you.

                    6. EFFECTIVE PERIOD AND TERMINATION

The provisions of this Agreement shall remain in effect for one year
from the date of its execution or adoption and thereafter for successive
annual periods only so long as such continuance is specifically approved
at least annually by the Trustees of each of the 12b-1 Funds in
conformity with Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act").  This Agreement shall automatically terminate in the event
of its assignment (as defined by the 1940 Act).  In addition, this
Agreement may be terminated at any time, without the payment of any
penalty, by either party upon written notice to the other party, or, as
provided in Rule 12b-1 under the 1940 Act, by the Trustees of any 12b-1
Fund or by the vote of the holders of the outstanding voting securities
of any 12b-1 Fund.

                            7. WRITTEN REPORTS

Putnam Mutual Funds Corp. shall provide the Trustees of each of the 12b-
1 Funds, and such Trustees shall review at least quarterly, a written
report of the amounts paid to you under this Agreement and the purposes
for which such expenditures were made.

                          8. COMPLIANCE WITH LAWS

With respect to the receipt of service fees under the terms of this
Agreement, you will comply with all applicable federal and state laws
and rules, and all applicable regulations and interpretations of
regulatory agencies or authorities, which may affect your business
practices, including any requirement of written authorization or consent
by your customers to your receipt of service fees, and any requirement
to provide disclosure to your customers of such service fees.  

                             9. MISCELLANEOUS
(a) All communications mailed to us should be sent to the above address. 
Any notice to you shall be duly given if mailed or delivered to you at
the address specified by you below.

(b) The provisions of this Agreement shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
 
                          Very truly yours, 
 
                          PUTNAM MUTUAL FUNDS CORP.

 
                          By:  -------------------------- 
                               William N. Shiebler, 
                               President and 
                               Chief Executive Officer 
 
We accept and agree to the foregoing Agreement as of the date set forth
below. 

 
      Financial Institution:   -------------------------- 
 
 
                          By:  -------------------------- 
                               Authorized Signature, Title 
 
                               -------------------------- 
 
                               -------------------------- 
                               Address 
 
                     Dated:    -------------------------- 
 
Please return the signed Putnam copy of this Agreement to Putnam Mutual
Funds Corp., P.O. Box 2701, Boston, MA  02208. <PAGE>
SCHEDULE 1:  THE 12B-1 FUNDS

CATEGORY A

Putnam Convertible Income-Growth Trust (Class A)
Putnam Energy-Resources Trust
Putnam Global Growth Fund (Class A)
Putnam Health Sciences Trust (Class A)
Putnam Investors Fund (Class A)
Putnam Managed Income Trust
Putnam Strategic Income Trust 
Putnam Vista Fund (Class A)
Putnam Voyager Fund (Class A)
The George Putnam Fund of Boston (Class A)
The Putnam Fund for Growth and Income (Class A)

CATEGORY B

Putnam High Yield Trust (Class A)
Putnam Tax-Free High Yield Fund 
Putnam Tax-Free Insured Fund 
Putnam U.S. Government Income Trust (Class A)

CATEGORY C

Putnam Income Fund (Class A)

CATEGORY D

Putnam Michigan Tax Exempt Income Fund II (Class A)
Putnam Minnesota Tax Exempt Income Fund II (Class A)
Putnam Ohio Tax Exempt Income Fund II (Class A)

CATEGORY E

Putnam Municipal Income Fund (Class A)

CATEGORY F

Putnam Massachusetts Tax Exempt Income Fund II (Class A)

CATEGORY G

Putnam New York Tax Exempt Opportunities Fund 

CATEGORY H

Putnam California Tax Exempt Income Fund (Class A)
Putnam New Jersey Tax Exempt Income Fund (Class A)
Putnam New York Tax Exempt Income Fund (Class A)
Putnam Tax Exempt Income Fund (Class A)<PAGE>
CATEGORY I

Putnam Arizona Tax Exempt Income Fund

CATEGORY J

Putnam Florida Tax Exempt Income Fund (Class A)
Putnam Pennsylvania Tax Exempt Income Fund (Class A)

CATEGORY K

Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund 

CATEGORY L

Putnam Arizona Tax Exempt Income Fund (Class B)
Putnam California Tax Exempt Income Fund (Class B)
Putnam Florida Tax Exempt Income Fund (Class B)
Putnam Massachusetts Tax Exempt Income Fund II (Class B)
Putnam Michigan Tax Exempt Income Fund II (Class B)
Putnam Minnesota Tax Exempt Income Fund II (Class B)
Putnam New Jersey Tax Exempt Income Fund (Class B)
Putnam New York Tax Exempt Income Fund (Class B)
Putnam Ohio Tax Exempt Income Fund II (Class B)
Putnam Pennsylvania Tax Exempt Income Fund (Class B)
Putnam Tax Exempt Income Fund (Class B)
Putnam Texas Tax Exempt Income Fund

CATEGORY M

Putnam Adjustable Rate U.S. Government Fund (Class A and B)
Putnam American Government Income Fund
Putnam Asia Pacific Growth Fund (Class A and B)
Putnam Balanced Government Fund (Class A and B)
Putnam Convertible Income-Growth Trust (Class B)
Putnam Diversified Income Trust (Class A and B)
Putnam Dividend Growth Fund (Class A and B)
Putnam Equity Income Fund (Class A and B)
Putnam Europe Growth Fund 
Putnam Federal Income Trust
The George Putnam Fund of Boston (Class B)
Putnam Global Governmental Income Trust 
Putnam Global Growth Fund (Class B)
The Putnam Fund for Growth and Income (Class B)
Putnam Health Sciences Trust (Class B)
Putnam High Yield Advantage Fund
Putnam High Yield  Trust (Class B)
Putnam Income Fund (Class B)
Putnam Investors Fund (Class B)
Putnam Municipal Income Fund (Class B)
Putnam New Opportunities Fund (Class A and B)
Putnam OTC Emerging Growth Fund (Class A and B)
Putnam U.S. Government Income Trust (Class B)
Putnam Utilities Growth and Income Fund (Class A and B)
Putnam Vista Fund (Class B)
Putnam Voyager Fund (Class B)


SCHEDULE 2:  MINIMUM ASSETS

 FINANCIAL INSTITUTION REQUIREMENTS.  The minimum aggregate average net
asset value of all accounts in Putnam Funds specified by Paragraph 1(b)
is $250,000.  We will review this requirement prior to the start of each
year and inform you of any changes.

 REPRESENTATIVE REQUIREMENTS.  With respect to Paragraph 1(c), there is
no minimum asset qualification requirement in the Putnam Funds
applicable to each of your representatives.  We will review this
requirement prior to the start of each year and inform you of any
changes.  We reserve the right to set a minimum at any time.

SCHEDULE 3:  ANNUAL SERVICE FEE RATES

Category A:     0.20% on shares acquired through December 31, 1989
                (including capital appreciation on such shares) and 0.25% on
                shares acquired after December 31, 1989 (including shares
                purchased after December 31, 1989 with reinvested
                distributions on any shares).

Category B:     0.20% on shares acquired through March 31, 1990 (including
                capital appreciation on such shares) and 0.25% on shares
                acquired after March 31, 1990 (including shares purchased
                after March 31, 1990 with reinvested distributions on any
                shares).

Category C:     0.20% on shares acquired through March 31, 1991 (including
                capital appreciation on such shares) and 0.25% on shares
                acquired after March 31, 1991 (including shares purchased
                after March 31, 1991 with reinvested distributions on any
                shares).

Category D:     0.15% on shares outstanding as of March 9, 1992 and 0.20% on
                shares acquired after March 9, 1992.

Category E:     0.20% on shares outstanding as of May 7, 1992 and 0.25% on
                shares acquired after May 7, 1992.

Category F:     0.15% on shares outstanding as of May 11, 1992 and 0.20% on
                shares acquired after May 11, 1992.

Category G:     0.15% on shares outstanding as of July 13, 1992 and 0.20% on
                shares acquired after July 13, 1992.

Category H:     0.15% on shares outstanding as of December 31, 1992 and
                0.20% on shares acquired after December 31, 1992.

Category I:     0.15% on shares outstanding as of March 5, 1993 and 0.20% on
                shares acquired after March 5, 1993.

Category J:     0.15% on shares outstanding as of July 8, 1993 and 0.20% on
                shares acquired after July 8, 1993.

Category K:     0.10% on all shares.

Category L:     0.20% on all shares.

Category M:     0.25% on all shares.


<PAGE>
Exhibit 15

                        SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS

Fund name: Putnam Federal Income Trust
Fiscal periods ending: October 31, 1993
Inception date (if less than 10 years of performance): March 1, 1985

TOTAL RETURN

Average Annual Total Return Formula:     ERV = P(1+T)       n

P=Initial Investment                      $1,000.00  $1,000.00  $1,000.00
ERV        =  Ending Redeemable Value     $1,030.48  $1,484.71  
$1,677.41  
n          =  Number of Time Periods      1 Year     5 Years    10 Years*
T          =  Average Annual Total Return +3.05%     +8.23%     +7.23%

                                *Life of fund, if less than 10 years

YIELD

Formula:

                        Interest + Dividends -
Expenses   
           2(-------------------------------------------------- +1)6 -1
                         POP x Average shares


Interest and Dividends             
           $3,241,761
Expenses                           
                              $  540,949
Reimbursement                      
           $(227,223)
Average shares                     
           57,899,968
NAV                                
                                   
           $10.47
Sales Charge                       
           4.75%
POP                                
           $10.99
Yield at POP                       
           4.71%


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