OF SPECIAL INTEREST

Merger with Putnam Tax-Free High Yield Fund proposed

The fund's Trustees have approved the merger of your fund into Putnam
Tax-Free High Yield Fund, an open-end fund that, like your fund, invests
mainly in bonds that pay interest exempt from federal income tax.
Putnam Tax-Free High Yield Fund invests in a nationally diversified
portfolio of lower-rated, higher-yielding municipal bonds and
investment-grade municipal bonds.  The proposed merger is expected to
result in lower expenses for shareholders of your fund due to the larger
asset base of the combined fund.

A prospectus/proxy statement containing more information about the
proposed merger is expected to be sent to shareholders of your fund in
the coming months.  Completion of the merger is subject to a number of
conditions, including approval by shareholders of your fund at a
shareholder meeting.

This report is not an offer to sell, nor a solicitation of an offer to
buy, shares of any fund, nor is it a solicitation of a proxy. To receive
a free copy of the prospectus/proxy statement relating to the proposed
merger (which contains important information about fees, expenses and
risk considera-tions) after a registration statement has been filed with
the SEC and becomes effective, please call 1-800-255-1581. The
prospectus/proxy statement will also be available without charge on the
SEC's website (www.sec.gov). Read the prospectus/proxy statement
carefully before making any investment decisions.