PUTNAM AMERICAN GOVERNMENT INCOME FUND (the "fund")
Prospectus Supplement dated June 18, 1997 to
Prospectus dated January 30, 1997
On June 6, 1997, the Trustees approved a proposal to increase the
fees payable to Putnam Investment Management, Inc. ("Putnam
Management") under the fund's Management Contract. The proposed
increase is subject to shareholder approval and will be submitted
to shareholders at a meeting to be scheduled. If approved at
that meeting, management fees would thereafter be paid at the
annual rate of 0.65% of the first $500 million of average net
assets, 0.55% of the next $500 million, 0.50% of the next $500
million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5
billion, and 0.38% of any amount thereafter.
As a result of the proposed change, the section "Expenses
summary" on pages 4 and 5 of the prospectus is replaced with the
following:
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in the fund and expenses based on the most recent
fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B Class M
shares shares shares
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 4.75% NONE* 3.25%*
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
<PAGE>
Annual fund operating expenses
(as a percentage of average
net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
---------- ----- -------- ---------
Class A 0.54% 0.25% 0.19% 0.98%
Class B 0.54% 1.00% 0.19% 1.73%
Class M 0.54% 0.50% 0.19% 1.23%
The table is provided to help you understand the expenses of
investing and your share of fund operating expenses. The
expenses shown in the table do not reflect the application of
credits that reduce fund expenses. The annual management fees
shown in the table have been restated to reflect the proposed
increase in the management fees payable to Putnam Management.
Actual management fees for all classes were 0.51% and total fund
operating expenses for class A, B and M shares were 0.95%, 1.70%
and 1.20%, respectively.
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3 5 10
year years years years
Class A $57 $77 $99 $162
Class B $68 $84 $114 $184 ***
Class B (no redemption) $18 $54 $94 $184 ***
Class M $45 $70 $98 $177
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
* The higher 12b-1 fees borne by class B and class M shares
may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front-end sales
charge on class A shares.
** 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. See "How to buy shares -
Class A shares."
<PAGE>
*** Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase. See "Alternative sales arrangements."
34799 6/97
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