PUTNAM
U.S.
GOVERNMENT
INCOME TRUST
[GRAPHIC OMITTED:
art work]
SEMIANNUAL REPORT
March 31, 1995
[LOGO: BOSTON - LONDON - TOKYO]
<PAGE>
PERFORMANCE HIGHLIGHTS
o "The appeal of GNMAs is their yield advantage over long-term Treasuries --
typically about 1% -- combined with their 100% full faith and credit backing
by the U.S. government -- the same level of credit protection available from
Treasuries."
-- Michael Martino, fund manager
o Performance should always be considered in light of a fund's investment
strategy. Putnam U.S. Government Income Trust is designed for investors
seeking current income consistent with capital preservation. The fund invests
in securities backed by the full faith and credit of the U.S. government and
in repurchase agreements and forward commitments with respect to these
securities.
--------------------------------------------------------------------------
SEMIANNUAL RESULTS AT A GLANCE
--------------------------------------------------------------------------
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
--------------------------------------------------------------------------
(change in value during period
plus reinvested distributions)
6 months ended 3/31/95 4.89% -0.11% 4.60% -0.40%
CLASS A CLASS B CLASS M
SHARE VALUE: NAV POP NAV NAV POP
--------------------------------------------------------------------------
9/30/94 $12.37 $12.99 $12.33 -- --
2/6/95 -- -- -- $12.29 $12.70
3/31/95 12.50 13.12 12.47 12.50 12.92
DISTRIBUTIONS: NO. INCOME CAPITAL GAINS TOTAL
--------------------------------------------------------------------------
Class A 6 $0.456 -- $0.456
Class B 6 0.410 -- 0.410
Class M 2 0.150 -- 0.150
CLASS A CLASS B
CURRENT RETURN: NAV POP NAV
--------------------------------------------------------------------------
End of period
Current dividend rate<F1> 7.30% 6.95% 6.64%
Current 30-day SEC yield<F2> 7.23 6.88 6.47
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Performance data represent past results and will differ for each share
class. For performance over longer periods, see pages 8 and 9. POP assumes
4.75% maximum sales charge for class A shares and 3.25% for class M
shares. CDSC assumes 5% maximum contingent deferred sales charge.
Performance for class M shares is not shown because of the brevity of the
reporting period. <F1>Income portion of most recent distribution, annualized
and divided by NAV or POP at end of period. <F2>Based only on investment
income, calculated using SEC guidelines.
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
Photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
Confidence levels in the U.S. bond market have increased substantially since
Putnam U.S. Government Income Trust began its fiscal year this past October.
Your fund's performance as of March 31, 1995, the fiscal year's halfway point,
reflects this change for the better.
Last year's rising interest rates may have rattled the financial markets, but
they seem to have succeeded in heading off inflation. The latter, after all,
was the Federal Reserve Board's intent as it nudged short-term rates higher
throughout 1994 and into early 1995.
Though yields on benchmark 30-year Treasury bonds declined somewhat from a
recent high, real yields, after allowing for moderate inflation, remain well
ahead of their historic average. Mortgage-backed securities performed slightly
better than Treasuries. The dollar's decline generally enhanced the fund's
results as foreign investors purchased U.S. securities in anticipation of the
dollar's resurgence.
In the following report, Fund Manager Michael Martino looks back on the first
half of fiscal 1995 and offers some projections for the rest of the year.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
May 17, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
MICHAEL MARTINO
Fixed-income markets rallied impressively during the first half of Putnam
U.S. Government Income Trust's 1995 fiscal year, contributing to the fund's
solid performance during this period. Although the Federal Reserve Board
continued to raise short-term interest rates -- which generally has an
adverse effect on bond prices -- investors eventually perceived the Fed's
actions as an effort to moderate the economy's strong growth.
Investors now appear confident that the Fed will curtail inflationary
pressures. As a result, yields on long-term government securities, which are
influenced by investors' expectations of inflation, have dropped somewhat
since peaking last November, while 30-year Treasury bonds' real yields,
defined as the current yield minus the inflation rate, have risen well above
their historical average.
For the six months ended March 31, 1995, your fund's class A shares generated
a total return of 4.89% at net asset value (NAV), and class B shares returned
4.60% at NAV. This represents a considerable improvement over fiscal 1994,
when bond markets suffered at the hands of rising interest rates and
inflationary pressures.
o GROWING INVESTOR CONFIDENCE BUOYS MARKET
In the first half of the fund's 1995 fiscal year, the U.S. economy continued
to expand and the dollar plummeted against major foreign currencies. To
investors, such events often evoke fears of inflation. However, the Fed's
record of interest-rate increases since early 1994 has demonstrated its
determination to reduce the economy's growth rate to a noninflationary level.
This policy, combined with incipient slowdowns in retail sales, automobiles,
manufacturing, and housing, appears to be easing investors' fears.
In our opinion, the economy is not likely to sustain the rapid growth that
characterized it in 1994. We expect that the Fed, consistent with its recent
vigilance against inflation, may raise short-term interest rates at least
once more before the end of 1995, possibly to support the weak dollar. We
also anticipate that investors' confidence in the Fed's strategy will
continue, easing their concerns about inflation and driving down long-term
interest rates (including long-term Treasury yields). Of course, there can be
no guarantee that these events will occur.
o GNMA SECURITIES: CURRENT VALUE AND FUTURE POTENTIAL
In 1994, we reaped significant benefits from the undervalued Government
National Mortgage Association (GNMA) market by increasing the fund's GNMA
allocation from just over 80% of net assets to more than 90%. Over the past
six months, GNMAs have outperformed other U.S. government securities, making
them more expensive relative to U.S. Treasuries. However, in our opinion, the
current one-percentage-point yield advantage that GNMAs offer over long-term
Treasuries justifies the portfolio's current weighting. As of March 31,
1995, 83.6% of the portfolio was invested in GNMAs -- a percentage we
consider to be neutral for the fund.
[GRAPHIC OMITTED: line chart "GNMAs OUTPERFORM LONG-TERM TREASURIES"
with sub-head of "12-month cumulative total returns for period 4/1/94-3/31/95".
A solid white line represents GNMAs<F1>: and
a solid black line represents Long-term Treasuries<F2>.
Plot points range from -4% to +7% in 1% increments and
dates range from 4/30/94 through 3/31/94 in month-end increments.
The caption reads:
Graph shows cumulative performance measured by each index for the
12-month period ended 3/31/95. Each month-ending date reflects
cumulative performance from 4/1/94 -- the beginning of the period.
<F1>Lehman Brothers GNMA Index. <F2>Lehman Brothers Long-Term Treasury
Index. Indexes are unmanaged, assume reinvestment of distributions,
and do not reflect fund performance. Past performance is not
indicative of future results.]
<PAGE>
When long-term interest rates shift, GNMA yields tend to follow -- but
typically with a lag. Because bond prices move in the opposite direction of
yields, a moderate decline in long-term rates may create a window of
opportunity, with GNMAs offering exceptional value relative to Treasuries. If
this scenario develops, we may again increase the fund's GNMA weighting to
90% to 95% of the portfolio.
o BARBELLING TREASURIES AS THE YIELD CURVE FLATTENS
When short-term interest rates rise more quickly than long-term rates,
intermediate-term securities experience the greatest price declines. This was
the case for much of 1994. To draw the maximum benefit for your fund in this
environment, we concentrated Treasury holdings toward both ends of the
maturity spectrum while generally avoiding intermediate-term securities, a
strategy known as "barbelling."
While there can be no guarantees, our expectations for bond yields through
1995 -- stable to slightly higher short-term yields and long-term yields that
may drop below their current levels -- suggest that, for a portion of the
portfolio's Treasury holdings, a barbell strategy may continue to offer the
best potential for preserving capital. Market pressures from a flattening
yield curve could impose selling pressure on intermediate-term Treasuries,
driving their prices down and enhancing the relative values of short- and
long-term bonds.
o LONGER DURATION TO ENHANCE VALUE
Because most of 1994 was characterized by rising long-term interest rates, we
kept the portfolio's duration relatively short. This defensive strategy can
be effective in protecting the portfolio's value when rates are rising.
Duration is a measure of the price sensitivity of a portfolio of bonds to
changes in interest rates. Like maturity, with which it is often confused,
duration is measured in years.
If, as we anticipate, long-term interest rates decline somewhat over the
coming months as investors' fears of inflation dissipate, we may assume a
less defensive stance. The portfolio's average duration, which was 4.46 years
on March 31, could be extended
<PAGE>
[GRAPHIC OMITTED: bar chart "BARBELLING TREASURY SECURITIES*" showing
0-5 years of 9.9%; 5-15 years of 0%; and 15-30 years of 4.5%.
Footnote reads
* Based on percentage of total net assets.
Caption reads:
By clustering securities at each end of the yield spectrum in a
"barbell" configuration, the portfolio delivers results similar to
those of intermediate-term securities, without the volatility that
often characterizes intermediates.]
to between 5.0 and 5.5 years. Because bond prices increase as interest rates
fall, a longer duration may enable the fund to derive greater benefit from
declining long-term interest rates. However, with such a strategy, an
increase in long-term rates could adversely affect the portfolio.
o A FUND FOR THE LONG TERM
Our objective for the fund is to deliver solid performance over the long
term. Investors in this fund should have an investment horizon of at least
three years in order to allow the fund to benefit from economic activity
through an entire interest-rate cycle. As each cycle progresses, we will
continue to monitor interest-rate trends and price relationships among
government bond sectors in order to add value to the portfolio.
The views expressed in this report are exclusively those of Putnam
Management, and are not meant as investment advice. Although the described
holdings were viewed favorably as of 3/31/95, there is no guarantee the fund
will continue to hold these securities in the future. While U.S. government
backing of individual securities does not insure your principal, which will
fluctuate, it does guarantee that the fund's government-backed holdings will
make timely payments of interest and principal. Mortgage-backed securities
are subject to prepayment risk, which is the risk that the investor's
principal will be returned in full at some point earlier or later than the
security's stated maturity date. Such prepayment may cause an investor's
actual rate of return to differ from the expected rate of return.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: on a
cumulative long-term basis and on average how the fund might have grown each
year over varying periods. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 3/31/95
Lehman Bros. Consumer
Class A Class B Mortgage-backed Price
NAV POP NAV CDSC Securities Index Index
- ----------------------------------------------------------------------------
6 months 4.89% -0.11% 4.60% -0.40% 5.69% 1.34%
- ----------------------------------------------------------------------------
1 year 4.79 -0.18 4.10 -0.77 6.01 2.85
- ----------------------------------------------------------------------------
5 years 40.84 34.20 -- -- 51.42 17.64
Annual average 7.09 6.06 -- -- 8.65 3.30
- ----------------------------------------------------------------------------
10 years 124.65 113.95 -- -- 174.30 42.29
Annual average 8.43 7.90 -- -- 10.62 3.59
- ----------------------------------------------------------------------------
Life of class B -- -- 12.23 9.49 18.20 8.53
Annual average -- -- 4.02 3.14 5.90 2.83
- ----------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan in 1990. The fund began
investment operations on 2/8/84, offering shares now known as class A. Effective
4/27/92, the fund began offering class B shares and on 2/1/95, class M shares.
Performance data represent past results and will differ for each share class.
Performance for class M shares is not shown because of the brevity of the
reporting period. Investment returns and principal value will fluctuate so an
investor's shares, when sold, may be worth more or less than their original
cost.
<PAGE>
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
CLASS M SHARES have a lower initial sales charge and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures shown here
assume the maximum 4.75% sales charge for class A shares and 3.25% for class M
shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the
redemption of class B shares and assumes redemption at the end of the period.
Your fund's CDSC declines from a 5% maximum during the first year to 1% during
the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged list of GNMA,
FNMA, and FHLMC bonds.
LEHMAN BROTHERS LONG-TERM TREASURY INDEX is composed of all bonds covered by the
Lehman Brothers Treasury Bond Index with maturities of 10 years or greater.
LEHMAN BROTHERS GNMA INDEX is composed of all fixed-rate, securitized mortgage
pools backed by GNMA, with principal amounts outstanding in excess of $50
million. Subset of the Lehman Brothers Mortgage-Backed Securities Index.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.
All indexes assume reinvestment of distributions and do not take into account
brokerage commissions or other costs. The fund's portfolio contains securities
that differ from those in the indexes.
<PAGE>
A PUTNAM PERSPECTIVE ON RISK AND REWARD
You've probably been told how important it is to understand the relationship
between an investment's potential rewards and its accompanying risks. Given
the cautionary nature of such instructions, it may take most investors a
while to realize that risk has a positive side.
Every risk signals a potential reward. Selecting only those investments that
offer the greatest degree of security generally leads to only modest rewards.
Furthermore, even insured or guaranteed investments may be subject to changes
in their rates of return or, in some cases, in their principal values.
Experienced investors know that no investment is truly risk free and are
therefore willing to take on some measure of risk in order to increase their
potential gains.
THE GREATER THE RISK, THE GREATER THE POTENTIAL REWARD. Accepting an
appropriate level of investment risk can give you a better chance of
outpacing inflation over time and seeking to maximize your investment's
return. How much risk? Your financial advisor's feedback and your time
horizon can make all the difference in determining how much risk is
compatible with your investment goals and your peace of mind.
o FITTING YOUR FUND SELECTION TO YOUR RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards? It's helpful to understand the types of risks that can
apply to different types of investments, and to look at your own portfolio
with this perspective.
For short-term goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And all
income-oriented investors should consider interest-rate, credit, and
prepayment risks carefully. Within each of Putnam's four investment
categories, you can select funds with differing levels of risk and reward
potential to customize your portfolio.
o A RUNDOWN OF RISK TYPES
MARKET RISK Most important for stock funds, but relevant to all funds, this
is a measure of how sensitive a fund's holdings are to changes in general
market conditions. Remember, though, that securities that lose value quickly
in market declines may also show the strongest gains in more favorable
environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this type
of risk is a particular concern for fixed-income investors. However,
interest-rate increases can also have a substantial negative effect on the
stock market.
INFLATION RISK If your investments cannot keep pace with inflation, your
money will begin to lose its purchasing power. Stock investments are
generally considered among the best ways of addressing inflation risk over
the long term.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the security's
issuer will not be able to meet its payment, while prepayment risk involves
the premature payoff of a loan, with a resulting loss of interest income.
Professional management and in-depth research are invaluable in managing both
these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash at
their perceived market values. Liquidity risk can affect the price of
securities held in the fund's portfolio and, thus, the fund's share prices.
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's prospectus.
<PAGE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund<F1>
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Trust
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH AND INCOME FUNDS
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
STATE TAX-FREE INCOME FUNDS<F2>
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
LIFESTAGES(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
<PAGE>
MOST CONSERVATIVE INVESTMENTS<F3>
PUTNAM MONEY MARKET FUNDS:
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDS AND SAVINGS ACCOUNTS<F4>
<F1> Temporarily closed to new investment.
<F2> Not available in all states.
<F3> Relative to above.
<F4> Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest
or send money.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (96.0%)*
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
Government National Mortgage Association
$ 293,313 16s, with various due dates to December 15, 2011 $ 341,160
554,654 15s, with various due dates to October 15, 2012 642,359
421,747 14s, with various due dates to January 20, 2015 471,946
70,947,801 13 1/2s, with various due dates to November 15, 2014 80,299,752
55,347,194 13s, with various due dates to December 15, 2014 62,428,224
60,935,968 12 1/2s, with various due dates to January 20, 2014 68,828,741
30,155,610 12s, with various due dates to February 15, 2015 33,751,983
1,772,502 11 1/2s, TBA, March 20, 2016 +++ 1,923,165
3,995,896 11 1/2s, with various due dates to October 15, 2015 4,435,445
5,422,206 11s, with various due dates to May 20, 2015 5,828,871
122,958 11s, Midgets, with various dates to July 15, 2000 131,104
328,129 10 7/8s, February 15, 2010 358,276
48,664,520 10 1/2s, with various due dates to June 15, 2021 52,861,835
8,383,254 10 1/2s, Midgets, with various due dates to July 15, 2015 8,839,093
72,697,475 10s, with various dates to February 15, 2015 78,449,578
100,000,000 9 1/2s, TBA, April 14, 2025 +++ 104,875,000
285,326,810 9 1/2s, with various due dates to April 15, 2023 300,912,983
42,138,731 9 1/2s, Midgets, with various due dates to
November 15, 2015 44,219,331
558,122,358 9s, with various due dates to September 15, 2022 579,207,591
6,006,336 9s, Project Loans, with various due dates to June 15, 2021 6,167,756
63,051,883 9s, Midgets, with various due dates to June 15, 2009 65,613,366
4,995,337 8.58s, Project Loans with various due dates to July 15, 2024 5,110,854
5,823,086 8 1/2s, Project Loans, March 15, 2027 5,903,153
351,632,414 8 1/2s , with various due dates to July 15, 2023 360,433,047
26,519,824 8 1/2s, Midgets, with various due dates to August 15, 2006 27,232,544
75,199,739 8s, Midgets, with various due dates October 15, 2009 75,904,737
746,393,256 8s, with various due dates to September 15, 2023 744,493,523
690,083,146 7 1/2s, with various due dates to February 15, 2017 666,071,380
535,033,566 7s, with various due dates to March 15, 2024 500,423,582
Government National Mortgage Association
Graduated Payment Mortgages
94,034 15s, with various due dates to September 15, 2012 106,552
79,035 13 3/4s, with various due dates to November 20, 2014 87,333
325,863 13 1/2s, with various due dates to November 15, 2012 360,893
256,521 13 1/4s, with various due dates to November 15, 2014 281,445
142,189 13s, with various due dates to December 15, 2010 156,230
2,165,461 12 3/4s, with various due dates to November 15, 2013 2,390,646
370,748 12 1/2s, with various due dates to January 20, 2014 410,231
1,726,388 12 1/4s, with various due dates to July 15, 2015 1,906,913
<PAGE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
$ 3,395,619 11 1/4s, with various due dates to January 16, 2015 $ 3,701,225
892,287 10 3/4s, with various due dates to March 15, 2016 960,324
1,687,550 10 1/4s, with various due dates to December 15, 2020 1,805,679
2,644,523 10s, with various due dates to May 15, 2010 2,829,640
2,805,256 9 1/4s, with various due dates to December 15, 2020 2,892,920
198,600,000 U.S. Treasury Bonds 7 5/8s, February 15, 2025 202,882,313
300,000,000 U.S. Treasury Notes 9 3/8s, April 15, 1996 308,343,750
--------------
TOTAL U. S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $4,456,950,773) $4,415,276,473
<CAPTION>
SHORT-TERM INVESTMENTS (5.6%)*
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
$100,000,000 U.S. Treasury Notes 9 1/2s, November 15, 1995 $ 101,906,250
25,000,000 U.S. Treasury Notes 8 7/8s, February 15, 1996 25,492,188
129,197,000 Interest in $510,221,000 joint repurchase agreement
dated March 31, 1995 with Goldman Sachs Inc., due
with respect to various U.S. Treasury obligations--
maturity value of $129,264,613 for an effective
yield of 6.28% 129,197,000
--------------
TOTAL SHORT TERM INVESTMENTS (cost $256,708,717) $ 256,595,438
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $ 4,713,659,490)*** $4,671,871,911
- -------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $4,601,079,662 which corresponds to a
net asset value per class A share, class B share, class Y share and class M share of
$12.50, $12.47, $12.52, and $12.50 respectively.
+++ TBAs are mortgage backed securities traded under delayed delivery commitments settling
after March 31, 1995. Although the unit price for the trades has been established, the
principal value has not been finalized. However, the amount of the commitments will
not fluctuate more than 2.0% from the principal amount. The cost of TBA purchases at
March 31, 1995 is $105,000,000.
<CAPTION>
TBA SALE COMMITMENTS Outstanding at March 31, 1995
(proceeds receivable $68,059,875)
- ----------------------------------------------------------------------------
PRINCIPAL DELIVERY COUPON MARKET
AGENCY AMOUNT MONTH RATE VALUE
- ----------------------------------------------------------------------------
<C> <C> <C> <C> <C>
GNMA $59,800,000 Apr. 12.5% $67,574,000
- ----------------------------------------------------------------------------
*** The aggregate identified cost on a tax cost basis is $4,719,558,962, resulting in
gross unrealized appreciation and depreciation of $59,731,257 and $107,418,308,
respectively, or net unrealized depreciation of $47,687,051.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (Unaudited)
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $4,713,659,490) (Note 1) $4,671,871,911
- -------------------------------------------------------------------------------
Cash 89,361
- -------------------------------------------------------------------------------
Interest receivables 45,713,471
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,288,816
- -------------------------------------------------------------------------------
Receivable for securities sold 69,306,812
- -------------------------------------------------------------------------------
TOTAL ASSETS 4,791,270,371
- -------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased 105,556,165
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 7,918,616
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,726,623
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 3,899
- -------------------------------------------------------------------------------
Distributions payable to shareholders 2,940
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 745,866
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 14,867
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 3,209,111
- -------------------------------------------------------------------------------
Other accrued expenses 438,622
- -------------------------------------------------------------------------------
TBA sale commitment at value (proceeds receivable $68,059,875) 67,574,000
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 190,190,709
- -------------------------------------------------------------------------------
NET ASSETS $4,601,079,662
- -------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Note 4) $5,087,967,815
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (445,169,002)
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (417,447)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments and TBA
sale commitments (41,301,704)
- -------------------------------------------------------------------------------
TOTAL--REPRESENTING NET ASSETS APPLICABLE TO CAPITAL
SHARES OUTSTANDING $4,601,079,662
- -------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($2,965,545,016 divided by 237,173,828 shares) $12.50
- -------------------------------------------------------------------------------
Offering price per share (100/95.25 of $12.50)* $13.12
- -------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($1,615,966,653 divided by 129,629,238 shares)+ $12.47
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price of
class Y shares ($19,409,994 divided by 1,550,791 shares) $12.52
- -------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($157,999 divided by 12,638 shares) $12.50
- -------------------------------------------------------------------------------
Offering price per share (100/96.75 of $12.50)* $12.92
- -------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Six months ended March 31, 1995 (Unaudited)
INTEREST INCOME $192,934,152
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,712,221
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,041,710
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 57,158
- -------------------------------------------------------------------------------
Reports to shareholders 74,569
- -------------------------------------------------------------------------------
Auditing 64,971
- -------------------------------------------------------------------------------
Legal 18,038
- -------------------------------------------------------------------------------
Postage 258,723
- -------------------------------------------------------------------------------
Registration 2,680
- -------------------------------------------------------------------------------
Administrative services (Note 2) 30,265
- -------------------------------------------------------------------------------
Distribution fees--Class A--(Note 2) 3,772,202
- -------------------------------------------------------------------------------
Distribution fees--Class B--(Note 2) 8,196,573
- -------------------------------------------------------------------------------
Distribution fees--Class M--(Note 2) 61
- -------------------------------------------------------------------------------
Other expenses 95,221
- -------------------------------------------------------------------------------
TOTAL EXPENSES 24,324,392
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 168,609,760
- -------------------------------------------------------------------------------
Net realized loss on investments (Note 3) (174,491,297)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and TBA sale
commitments during the period 220,292,942
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS TRANSACTIONS 45,801,645
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $214,411,405
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30
1995* 1994
- -------------------------------------------------------------------------------
DECREASE IN NET ASSETS
- -------------------------------------------------------------------------------
OPERATIONS:
- -------------------------------------------------------------------------------
Net investment income $ 168,609,760 $ 420,237,452
- -------------------------------------------------------------------------------
Net realized loss on investments (174,491,297) (356,267,400)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and TBA sale commitments 220,292,942 (222,925,105)
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 214,411,405 (158,955,053)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
- -------------------------------------------------------------------------------
Net investment income:
- -------------------------------------------------------------------------------
Class A (113,012,826) (225,599,421)
- -------------------------------------------------------------------------------
Class B (55,279,251) (105,397,633)
- -------------------------------------------------------------------------------
Class Y (734,860) (192,090)
- -------------------------------------------------------------------------------
Class M (270) --
- -------------------------------------------------------------------------------
Paid-in capital
- -------------------------------------------------------------------------------
Class A -- (64,372,323)
- -------------------------------------------------------------------------------
Class B -- (30,074,059)
- -------------------------------------------------------------------------------
Class Y -- (54,811)
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (429,956,543) (1,459,402,210)
- -------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (384,572,345) (2,044,047,600)
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of period $4,985,652,007 $7,029,699,607
- -------------------------------------------------------------------------------
END OF PERIOD (including distributions in
excess of net investment income of $417,447
and $0, respectively) $4,601,079,662 $4,985,652,007
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
FEBRUARY 6, 1995 APRIL 11, 1994 APRIL 27, 1992
(COMMENCEMENT OF SIX MONTHS (COMMENCEMENT SIX MONTHS (COMMENCEMENT OF
OPERATIONS) TO ENDED OF OPERATIONS) ENDED OPERATIONS) TO
MARCH 31 MARCH 31 TO SEPTEMBER 30 MARCH 31 YEAR ENDED SEPTEMBER 30 SEPTEMBER 30
- -------------------------------------------------------------------------------------------------------------------------------
1995<F1> 1995<F1> 1994 1995<F1> 1994 1993 1992<F2>
- -------------------------------------------------------------------------------------------------------------------------------
CLASS M CLASS Y CLASS B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $12.29 $12.38 $12.68 $12.33 $13.60 $13.93 $13.64
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .40 .39 .41 .64 1.00 .48
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments .16 .13 (.30) .14 (1.05) (.35) .28
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .36 .53 .09 .55 (.41) .65 .76
- -------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (.15) (.39) (.30) (.41) (.67) (.98) (.47)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Paid-in capital <F3> -- -- (.09) -- (.19) -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.15) (.39) (.39) (.41) (.86) (.98) (.47)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.50 $12.52 $12.38 $12.47 $12.33 $13.60 $13.93
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE (%) <F4> 2.95<F5> 5.10<F5> .11<F5> 4.60<F5> (3.16) 4.85 5.67<F5>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $158 $19,410 $19,337 $1,615,967 $1,752,887 $2,232,219 $660,515
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) .10<F5> .26<F5> .29<F5> .76<F5> 1.60 1.61 .77<F5>
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .67<F5> 3.85<F5> 3.63<F5> 3.35<F5> 6.55 7.11 3.10<F5>
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 92.69<F5> 92.69<F5> 209.00 92.69<F5> 209.00 295.88 293.36<F5>
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Unaudited.
<F2> Per share investment income, expenses and net investment income have been determined on the basis of
the weighted average number of shares outstanding during the period.
<F3> Distributions of capital for the year ended 9/30/94 have been calculated in accordance with Statement
of Position 93-2 "Determination, Disclosure and Financial Statement Presentation of Income, Capital
Gains, and Return of Capital Distributions by Investment Companies."
<F4> Total Investment Return assumes dividend reinvestment and does not reflect the effect of sales charges.
<F5> Not annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(continued)
SIX MONTHS
ENDED
MARCH 31 YEAR ENDED SEPTEMBER 30
- ----------------------------------------------------------------------------------------------------------------------
1995<F1> 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $12.37 $13.63 $13.96 $13.89 $13.51 $13.73
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income .46 .69 1.10 1.19 1.34 1.33
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments .13 (1.00) (.36) .12 .35 .21
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .59 (.31) .74 1.31 1.69 1.12
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (.46) (.74) (1.07) (1.21) (1.31) (1.33)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- -- -- (.03) -- --
- ----------------------------------------------------------------------------------------------------------------------
Paid-in capital <F3> -- (.21) -- -- -- (.01)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.46) (.95) (1.07) (1.24) (1.31) (1.34)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.50 $12.37 $13.63 $13.96 $13.89 $13.51
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE (%) <F4> 4.89<F5> (2.35) 5.55 9.92 13.10 8.54
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $2,965,545 $3,213,428 $4,797,481 $4,465,162 $2,540,541 $1,590,990
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) .39<F5> .85 .88 1.01 .91 .75
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.73<F5> 7.31 7.92 8.44 9.67 9.66
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 92.69<F5> 209.00 295.88 293.36 118.96 63.46
- ----------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(continued)
TEN MONTHS
ENDED
YEAR ENDED SEPTEMBER 30 [continued] SEPTEMBER 30
- ----------------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1985
- ----------------------------------------------------------------------------------------------------------
CLASS A
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.84 $13.60 $14.60 $14.58 $14.15
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------
Net investment income 1.36 1.38 1.39 1.55 1.46
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.10) .23 (.95) .07 .36
- ----------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.26 1.61 .44 1.62 1.82
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
- ----------------------------------------------------------------------------------------------------------
Net investment income (1.37) (1.37) (1.44) (1.59) (1.39)
- ----------------------------------------------------------------------------------------------------------
Net realized gain on investments -- -- -- (.01) --
- ----------------------------------------------------------------------------------------------------------
Paid-in capital <F3> -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.37) (1.37) (1.44) (1.60) (1.39)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.73 $13.84 $13.60 $14.60 $14.58
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE (%) <F4> 9.65 12.27 2.91 11.71 13.46<F5>
- ----------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $1,386,960 $1,369,547 $1,196,133 $966,551 $408,374
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) .65 .61 .58 .56 .60<F5>
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 9.90 9.81 9.55 10.30 9.85<F5>
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 167.60 54.51 43.03 116.32 136.44<F5>
- ----------------------------------------------------------------------------------------------------------
<FN>
<F1> Unaudited.
<F2> Per share investment income, expenses and net investment income have been determined on the basis of
the weighted average number of shares outstanding during the period.
<F3> Distributions of capital for the year ended 9/30/94 have been calculated in accordance with Statement
of Position 93-2 "Determination, Disclosure and Financial Statement Presentation of Income, Capital
Gains, and Return of Capital Distributions by Investment Companies."
<F4> Total Investment Return assumes dividend reinvestment and does not reflect the effect of sales charges.
<F5> Not annualized.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (Unaudited)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The fund's investment
objective is to seek as high a level of current income as is consistent with
preservation of capital by investing exclusively in securities backed by the
full faith and credit of the United States and in repurchase agreements and
forward commitments with respect to those securities.
The fund offers class A, class B, class M and class Y shares. The fund commenced
its public offering of class M shares on February 6, 1995. Class A shares are
sold with a maximum front-end sales charge of 4.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class A
shares, and are subject to a contingent deferred sales charge if those shares
are redeemed within six years of purchase. Class M shares are sold with a
maximum front end sales charge of 3.25% and pay a distribution fee that is lower
than class A shares. Class Y shares, which do not pay a front-end or contingent
deferred sales charge, are generally subject to the same expenses as class A and
class B shares, but do not bear a distribution fee. Class Y shares are sold only
to defined contribution plans with an initial investment of $250 million in a
combination of Putnam funds and other investments managed by Putnam. Expenses of
the fund are borne pro-rata by the holders of all classes of shares, except that
each class bears expenses unique to that class (including the distribution fees
applicable to such class), and votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required by law to
determined by the Trustees. Shares of each class would receive their pro-rata
share of the net assets of the fund, if the fund were liquidated. In addition,
the Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A SECURITY VALUATION Investments for which market quotations are readily
available are stated at market value, which is 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 obligations are stated at the mean between the bid and
asked prices. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market, and other
investments are stated at fair value following procedures approved by the
Trustees.
B TBA PURCHASE COMMITMENTS The fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed price at a future date
beyond customary settlement time 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. TBA
purchase 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. Unsettled TBA purchase commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security valuation" above.
Although the fund will generally enter into TBA purchase 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 Manage ment deems it appropriate to do so.
TBA SALE 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.
<PAGE>
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Security valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or loss. 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 secu rities 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.
C JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the fund may transfer uninvested cash balances into a
joint trading account, along with the cash of other registered investment
companies managed by Putnam Investment Management Inc. (Putnam Management) the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. and
certain other accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
D REPURCHASE AGREEMENTS The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. The fund's Manager is responsible
for determining that the value of these underlying securities is at all times at
least equal to the resale price, including accrued interest.
E SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security trans actions are
accounted for on the trade date (date the order to buy or sell is executed).
Interest income is recorded on the accrual basis.
F FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid imposition
of any excise tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized apprecia tion of securities held and excise tax on income and
capital gains.
At September 30, 1994, the fund had capital loss carryovers of approximately
$10,982,308 in capital loss carryovers available to offset future realized
capital gains, if any. To the extent that capital loss carryovers are used to
offset realized gains, it is unlikely that gains so offset will be distributed
to shareholders, since any such distribution might be taxable as ordinary
income.
LOSS CARRYOVER EXPIRATION
- ------------------------------------
$ 1,685,556 September 30, 1999
9,296,752 September 30, 2002
- ------------------------------------
$10,982,308
- ------------------------------------
G DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-divi dend date. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles.
<PAGE>
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average net assets of the fund for the
quarter. Such fee is based on the following annual rates: 0.57% of the first
$500 million of average net assets, 0.475% of the next $500 million, 0.4275% of
the next $500 million, and 0.38% of any amount over $1.5 billion.
The fund also reimburses the Manager for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative
services to the fund. The aggregate amount of all such reimbursements is
determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $5,435 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested persons
of the Manager and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by the Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, Inc., a division of
PFTC. Investor servicing and custodian fees reported in the State ment of
operations for the six months ended March 31, 1995 have been reduced by credits
allowed by PFTC.
The fund has adopted distribution plans (the "Plans") with respect to its class
A shares, class B shares and class M shares pursuant to Rule 12B-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam
Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments Inc., for
services provided and expenses incurred by it in distributing shares of the
fund. The Trustees have approved payment by the fund at an annual rate of .25%,
1.00% and .50% of the average net assets attrib utable to class A, class B and
class M shares, respectively.
For the six months ended March 31, 1995, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $137,179 and $337, from the sale of
class A and class M shares, respectively, and $4,038,023 in con tingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of up
to 1% is assessed on certain redemptions of class A shares purchased as part of
an investment of $1 million or more. For the six months ended March 31, 1995,
Putnam Mutual Funds Corp., acting as underwriter received $16,441 on class A
redemptions.
<PAGE>
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended March 31, 1995, purchases and sales of U.S.
government obligations other than short-term investments aggregated
$4,310,927,828 and $4,752,773,421, respectively. There were no purchases or
sales of investment securities other than U.S. government obligations during the
period. In determining the net gain or loss on securities sold, the cost of
securities has been determined on the identified cost basis.
NOTE 4
CAPITAL SHARES
At March 31, 1995, there was an unlimited number of shares of beneficial
interest authorized, divided into four classes, class A, class B, class Y and
class M capital stock. Transactions in capital shares were as follows:
SIX MONTHS ENDED MARCH 31 YEAR ENDED SEPTEMBER 30
1995 1994
- ------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 11,553,567 $ 142,023,955 27,988,595 $ 366,620,412
- ------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,563,861 67,774,745 13,265,583 172,473,338
- ------------------------------------------------------------------------------
17,117,428 209,798,700 41,254,178 539,093,750
- ------------------------------------------------------------------------------
Shares repurchased (39,771,703) (487,019,284) (133,310,840) (1,740,121,034)
- ------------------------------------------------------------------------------
NET DECREASE (22,654,275) $(277,220,584) (92,056,662) $(1,201,027,284)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31 YEAR ENDED SEPTEMBER 30
1995 1994
- ------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 7,370,210 $ 90,295,987 36,373,071 $ 480,643,840
- ------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,891,459 35,139,530 6,740,193 87,303,265
- ------------------------------------------------------------------------------
10,261,669 125,435,517 43,113,264 567,947,105
- ------------------------------------------------------------------------------
Shares repurchased (22,781,950) (278,189,608) (65,135,400) (845,878,972)
- ------------------------------------------------------------------------------
NET DECREASE (12,520,281) $(152,754,091) (22,022,136) $ (277,931,867)
- ------------------------------------------------------------------------------
FOR THE PERIOD
APRIL 11, 1994
(COMMENCEMENT OF
OPERATIONS) TO
SIX MONTHS ENDED MARCH 31 SEPTEMBER 30
1995 1994
- ------------------------------------------------------------------------------
CLASS Y SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 139,134 $ 1,709,278 1,645,385 $20,599,551
- ------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 60,287 734,866 19,884 247,695
- ------------------------------------------------------------------------------
199,421 2,444,144 1,665,269 20,847,246
- ------------------------------------------------------------------------------
Shares repurchased (210,664) (2,581,400) (103,235) (1,290,305)
- ------------------------------------------------------------------------------
NET INCREASE
(DECREASE) (11,243) $ (137,256) 1,562,034 $19,556,941
- ------------------------------------------------------------------------------
<PAGE>
FOR THE PERIOD
FEBRUARY 6, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31
1994
- ------------------------------------------------------------------------------
CLASS M SHARES AMOUNT
- ------------------------------------------------------------------------------
Shares sold 12,643 $155,444
- ------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 13 164
- ------------------------------------------------------------------------------
12,656 155,608
- ------------------------------------------------------------------------------
Shares repurchased (18) (220)
- ------------------------------------------------------------------------------
Net increase 12,638 $155,388
- ------------------------------------------------------------------------------
<PAGE>
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
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
Michael F. Bouscaren
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
<PAGE>
This report is for the information of shareholders of Putnam New York Tax Exempt
Opportunities Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information, or to
request a prospectus, call toll free: 1-800-225-1581.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
<PAGE>
[LOGO: PUTNAM INVESTMENTS]
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
------------
032/885/527-17785
