PUTNAM FEDERAL INCOME TRUST (the "fund")
Prospectus Supplement dated June 18, 1997 to
Class A Prospectus dated February 28, 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 page 2 of the prospectus is replaced with the
following:
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes expenses attributable to class A
shares based on the fund's most recent fiscal year. The example
shows the cumulative expenses attributable to a hypothetical
$1,000 investment in class A shares over specified periods.
Annual fund operating expenses
(as a percentage of average
net assets)
Management fees 0.65%
12b-1 fees 0.25%
Other expenses 0.29%
Total fund operating expenses 1.19%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund occurs. 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 and total fund
operating expenses were 0.62% and 1.16%, respectively.
Example
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
<PAGE>
1 3 5 10
year years years years
$12$38 $65 $144
The example does not represent past or future expense levels, and
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 varies. The example does not reflect any
charges or expenses related to your employer's plan.
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