Putnam
Intermediate
U.S. Government
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
5-31-00
[SCALE LOGO OMITTED]
From the Trustees
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years in which
Putnam has experienced tremendous growth and transformed itself from a
respected U.S. investment management firm to a financial institution
with a global presence.
As the organization makes its way into the new century, we are certain
that the changes that lie ahead will be even more breathtaking in their
scope. What will not change is the Trustees' dedication to serving the
best interests of our shareholders.
We embark upon this new era of Putnam's rich heritage with confidence
and we look forward to the opportunity of continuing to help you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
July 19, 2000
REPORT FROM THE FUND MANAGER
Kevin M. Cronin
and the Mortgage Team
During the first half of its fiscal year, Putnam Intermediate U.S.
Government Income Fund outperformed its peer group average, benefiting
from its maturity structure and the performance of its U.S. agency
holdings during the last two months of the period. The segments of the
bond market in which your fund invests were affected most by two
factors: the interest-rate increases implemented by the Federal Reserve
Board and the U.S. Treasury's use of the budget surplus to buy back
30-year Treasury bonds.
Total return for 6 months ended 5/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
----------------------------------------------------------------------
1.13% -2.13% 1.03% -1.94% 0.93% -0.06% 1.26% -0.80%
----------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 5.
* YIELD CURVE INVERSION MARKS PERIOD
Six interest-rate increases were implemented between June 1999 and the
end of May 2000 in the Fed's attempt to slow the U.S. economy and
prevent inflationary pressures from building. Evidence emerging late in
the period suggests that these rate increases may be having the desired
effect. For some time now, interest rates for most fixed-income
securities have been on the rise, taking their lead from the Fed's
actions. The most sizable rate increases, however, took place among
short-term securities, as investors perceived that the Fed was handling
the potential inflation problem and that over the long term inflation
would remain under control.
During the first half of your fund's fiscal year, the Fed's tightening
monetary policy took the form of two increases of a quarter of a
percentage point each in February and March and an increase of half a
percentage point in May. The latter came on the heels of an economic
report that showed a marked increase in the employment cost index, a
broad measure of the cost to business for wages and benefits. By the end
of May, the federal funds rate had risen to 6.50%.
[GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION]
PORTFOLIO COMPOSITION*
5/31/00 11/30/99
Fixed rate
mortgage-backed
securities 66.0% 63.9%
Adjustable-rate
mortgage-backed
securities 0.3% 0.3%
U.S. Treasury
securities 21.0% 41.1%
Cash and
short-term
investments 11.3% 5.4%
Footnote reads:
*Based on net assets as of 11/30/99 and 5/31/00. Holdings will vary over time.
While short-term rates were on the rise, the yield on the long-term
30-year Treasury bond declined. The perception that the Fed was keeping
inflation under control was one reason behind this yield curve
inversion. However, the primary cause for the significant decline in
long-term interest rates was the federal government's buyback of 30-year
Treasury bonds, the result of a decision to use the budget surplus to
pay down the federal debt. The increase in demand caused by these
purchases pushed long-term bond prices up, bringing yields down.
* BARBELL STRATEGY HELPS PERFORMANCE
Intermediate-maturity bonds also benefited from this trend. If this debt
buyback had not occurred, we believe the yield curve would still be
somewhat inverted but not as dramatically. Historically an inverted
yield curve has been viewed as a predictor of a slowing economy. In such
a scenario, investors buy longer-term bonds, pushing their yields down,
under the assumption that the economy will slow and push yields lower
still. An inverted yield curve has also been viewed as a precursor to a
stock market decline.
[GRAPHIC OMITTED: Vertical bar chart DURATION OVERVIEW]
DURATION OVERVIEW*
0-1 year 1-5 years 5+ years
17.4% 78.7% 3.9%
Footnote reads:
*As a percentage of market value as of 5/31/00. Duration will vary over time.
Over the course of the semiannual period, your fund's yield curve
positioning helped its relative performance. We implemented what is
known as a barbell strategy, heavily weighting short-term cash positions
on one end of the yield spectrum and longer-term debt on the other. The
cash positions offered ever-increasing yields as short-term rates kept
ratcheting upward; the longer-term positions benefited from the price
appreciation that accompanied their decline in yields. This combination
of investments provided a duration that was essentially neutral.
Duration is a measure of the fund's sensitivity to changes in interest
rates.
* NON-TREASURY DEBT LAGS
During most of the period, performance of non-Treasury fixed-income
investments such as agency debt and mortgage-backed securities lagged
behind Treasury-issued securities. This activity provided your fund with
precisely the kind of buying opportunity we look for in the markets.
Discussions in Congress about the implicit government backing that
agencies such as Fannie Mae and Freddie Mac enjoy caused their debt to
underperform. Timely purchases we made in April provided a boost to the
fund's performance, as these agencies rebounded during the last two
months of the period.
"We believe the Fed is near the end of its tightening cycle and we look
for improved returns in the bond market for the balance of this year."
-- Kevin M. Cronin, portfolio manager
While mortgage-backed securities suffered from dramatic moves in
interest rates, we added to the fund's positions in this sector because
of the attractive yields they offered and because we expect interest
rates to become more stable over the coming months. As a result,
mortgage-backed securities now represent almost 67% of your fund's
investments along with a 21% Treasury and agency debt position and 11%
in short-term cash positions. Most of the fund's mortgage holdings are
in Ginnie Maes, which are backed by the full faith and credit of the
U.S. government, with the rest in Freddie Mac and Fannie Mae securities,
generally in the 5- to 10-year maturity spectrum.
* OUTLOOK: SLOWER ECONOMY, END OF FED RATE INCREASES
Recent data, including a slowdown in the housing market, a
weaker-than-expected purchasing managers' report, and a surprising
uptick in unemployment, suggest that we may be witnessing the start of
the economic slowdown the Fed has been trying to orchestrate.
Nevertheless, we expect a modest rise in short-term rates over the near
term as the Fed looks for more convincing and sustained evidence that
that growth has been curbed.
Looking out over the long term, we believe the Fed will be successful in
slowing the economy and deflecting the inflationary threat spawned by an
economy that grows too fast. Our view is that the Fed is close to
finishing this latest program of interest-rate increases and that rates
could start trending lower by the end of the year, assuming that the
economy shows signs of slowing and inflation remains well behaved.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 5/31/00, 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 principal, which will
fluctuate, it does guarantee that the fund's government-backed holdings
will make timely payments of interest and principal. This fund invests
in mortgage-backed securities, which are subject to prepayment risk.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Intermediate U.S. Government Income Fund is designed for investors
seeking as high a level of current income as is consistent with
preservation of capital.
TOTAL RETURN FOR PERIODS ENDED 5/31/00
Class A Class B Class C Class M
(inception dates) (2/16/93) (2/16/93) (7/26/99) (4/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
6 months 1.13% -2.13% 1.03% -1.94% 0.93% -0.06% 1.26% -0.80%
------------------------------------------------------------------------------
1 year 2.63 -0.64 2.01 -0.91 1.60 0.63 2.48 0.42
------------------------------------------------------------------------------
5 years 31.52 27.26 27.88 27.88 26.44 26.44 31.01 28.32
Annual average 5.63 4.94 5.04 5.04 4.80 4.80 5.55 5.11
------------------------------------------------------------------------------
Life of fund 42.89 38.19 37.04 37.04 34.92 34.92 41.76 38.99
Annual average 5.02 4.54 4.42 4.42 4.19 4.19 4.90 4.62
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/00
Lehman Bros. Intermediate Consumer
Govt. Bond Index price index
------------------------------------------------------------------------------
6 months 1.55% 1.72%
------------------------------------------------------------------------------
1 year 3.00 3.07
------------------------------------------------------------------------------
5 years 31.46 12.55
Annual average 5.62 2.39
------------------------------------------------------------------------------
Life of fund 46.45 19.71
Annual average 5.40 2.51
------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 3.25% and
2.00%, respectively. Class B share returns for the 1-year, 5-year, and
life-of-fund periods reflect the applicable contingent deferred sales
charge (CDSC), which is 3% in the first year, declines to 1% in the
fourth year, and is eliminated thereafter. Returns shown for class M
shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
initial sales charge currently applicable to class M shares and the
higher operating expenses applicable to such shares. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares and adjusted to reflect the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost. Performance data for periods prior to
4/10/95 do not reflect the fund's performance under the current
investment policies.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 5/31/00
Class A Class B Class C Class M
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distributions (number) 6 6 6 6
----------------------------------------------------------------------------------------
Income $0.123042 $0.108578 $0.103873 $0.119442
----------------------------------------------------------------------------------------
Total $0.123042 $0.108578 $0.103873 $0.119442
----------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
----------------------------------------------------------------------------------------
11/30/99 $4.81 $4.97 $4.81 $4.81 $4.82 $4.92
----------------------------------------------------------------------------------------
5/31/00 4.74 4.90 4.75 4.75 4.76 4.86
----------------------------------------------------------------------------------------
Current return (end of period)
-----------------------------------------------------------------------------------------
Current dividend rate1 4.80% 4.64% 4.22% 4.06% 4.63% 4.54%
-----------------------------------------------------------------------------------------
Current 30-day SEC yield2 6.07 5.87 5.46 5.32 5.91 5.79
-----------------------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by NAV or POP at end
of period.
2 Based only on investment income, calculated using SEC guidelines.
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 6/30/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (2/16/93) (2/16/93) (7/26/99) (4/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
6 months 3.26% -0.10% 3.16% 0.16% 2.85% 1.85% 3.39% 1.27%
------------------------------------------------------------------------------
1 year 4.17 0.84 3.76 0.78 3.07 2.08 4.22 2.11
------------------------------------------------------------------------------
5 years 31.39 27.17 27.76 27.76 26.02 26.02 30.87 28.22
Annual average 5.61 4.92 5.02 5.02 4.73 4.73 5.53 5.10
------------------------------------------------------------------------------
Life of fund 44.99 40.22 38.99 38.99 36.53 36.53 43.82 41.01
Annual average 5.17 4.69 4.57 4.57 4.32 4.32 5.05 4.77
------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See first
page of performance section for performance calculation method.
TERMS AND DEFINITIONS
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 in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
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 3.25% maximum sales charge for class A
shares and 2.00% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 3% maximum
during the first year to 1% during the fourth year. After the sixth
year, the CDSC no longer applies. The CDSC for class C shares is 1% for
one year after purchase.
COMPARATIVE BENCHMARKS
Lehman Brothers Intermediate Government Bond Index is composed of all
bonds covered by the Lehman Brothers Government Bond Index with
maturities between one and 9.9 years. The index does not take into
account brokerage commissions or other costs, may include bonds
different from those in the fund, and may pose different risks than the
fund. It is not possible to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
May 31, 2000 (Unaudited)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (87.3%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
U.S. Government Agency Mortgage Obligations (66.3%)
-------------------------------------------------------------------------------------------------------------------
$10,000,000 Federal Home Loan Bank 6.66s, April 6, 2001 $ 9,970,300
Federal Home Loan Mortgage Corp.
2,578,613 7 1/2s, with due dates from August 1, 2007 to
December 1, 2017 2,527,609
21,685,000 6 7/8s, January 15, 2005 21,220,724
62,702,673 6s, with due dates from March 1, 2006 to
June 1, 2029 58,229,353
5,720,000 5 3/4s, June 15, 2001 5,643,123
167,921 Federal National Mortgage Association Adjustable
Rate Mortgages 6.092s, with due dates from
November 1, 2024 to July 1, 2026 163,093
Federal National Mortgage Association
Pass-Through Certificates
11,780 11 1/4s, October 1, 2010 12,811
2,839,492 8s, with due dates from May 1, 2013 to
November 1, 2029 2,818,072
7,638,669 7s, October 1, 2011 7,392,780
40,642,202 6s, with due dates from March 1, 2014 to
December 1, 2014 37,784,243
1,318,685 Government National Mortgage Association
Adjustable Rate Mortgages 7s, July 20, 2026 1,319,714
Government National Mortgage Association
Pass-Through Certificates
68,076,803 9 1/2s, with due dates from December 15, 2009 to
April 15, 2030 71,469,520
2,793,929 9s, December 15, 2021 2,902,166
1,890,998 8 1/2s, October 15, 2008 1,929,704
29,393,497 8s, with due dates from May 15, 2024 to
December 15, 2027 29,439,386
43,854,059 7 1/2s, with due dates from December 15, 2023 to
October 15, 2028 43,045,382
4,013,512 7s, with due dates from December 15, 2026 to
December 15, 2028 3,850,710
----------------
299,718,690
U.S. Treasury Obligations (21.0%)
-------------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes
10,000,000 8s, May 15, 2001 10,109,400
22,125,000 6s, August 15, 2004 21,640,905
50,000,000 6s, July 31, 2002 49,265,500
15,000,000 4 1/4s, November 15, 2003 13,914,900
----------------
94,930,705
----------------
Total U.S. Government and Agency Obligations
(cost $405,069,431) $ 394,649,395
SHORT-TERM INVESTMENT (11.3%) (a) (cost $51,125,052)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$51,134,000 Federal Home Loan Bank effective yield of 6.3%,
June 1, 2000 $ 51,125,052
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $456,194,483) (b) $ 445,774,447
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $451,921,440.
(b) The aggregate identified cost on a tax basis is $456,403,600,
resulting in gross unrealized depreciation of $10,629,153.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $456,194,483) (Note 1) $445,774,447
-------------------------------------------------------------------------------------------
Cash 9,603
-------------------------------------------------------------------------------------------
Interest receivable 3,986,343
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,209,733
-------------------------------------------------------------------------------------------
Total assets 453,980,126
Liabilities
-------------------------------------------------------------------------------------------
Distributions payable to shareholders 63,808
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,034,959
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 683,238
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 55,902
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 19,418
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,090
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 174,239
-------------------------------------------------------------------------------------------
Other accrued expenses 26,032
-------------------------------------------------------------------------------------------
Total liabilities 2,058,686
-------------------------------------------------------------------------------------------
Net assets $451,921,440
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $492,313,264
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,079,068
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (31,050,856)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (10,420,036)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $451,921,440
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($222,724,012 divided by 46,953,820 shares) $4.74
-------------------------------------------------------------------------------------------
Offering price per class A share (100/96.75 of $4.74)* $4.90
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($106,521,841 divided by 22,419,522 shares)** $4.75
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($2,709,102 divided by 570,890 shares)** $4.75
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($9,817,294 divided by 2,064,191 shares) $4.76
-------------------------------------------------------------------------------------------
Offering price per class M share (100/98.00 of $4.76)* $4.86
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($110,149,191 divided by 23,252,982 shares) $4.74
-------------------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended May 31, 2000 (Unaudited)
<S> <C>
Interest income $ 15,526,489
-------------------------------------------------------------------------------------------
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,406,753
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 338,074
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 10,290
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,330
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 283,653
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 502,921
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 11,020
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 20,976
-------------------------------------------------------------------------------------------
Reports to shareholders 9,339
-------------------------------------------------------------------------------------------
Registration fees 363
-------------------------------------------------------------------------------------------
Auditing 12,212
-------------------------------------------------------------------------------------------
Legal 3,569
-------------------------------------------------------------------------------------------
Postage 15,034
-------------------------------------------------------------------------------------------
Other 25,062
-------------------------------------------------------------------------------------------
Total expenses 2,642,596
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (43,953)
-------------------------------------------------------------------------------------------
Net expenses 2,598,643
-------------------------------------------------------------------------------------------
Net investment income 12,927,846
-------------------------------------------------------------------------------------------
Net realized loss on investments (Note 1) (5,913,337)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,876,894)
-------------------------------------------------------------------------------------------
Net loss on investments (7,790,231)
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 5,137,615
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended Year ended
May 31 November 30
2000* 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 12,927,846 $ 26,234,156
--------------------------------------------------------------------------------------------------
Net realized loss on investments (5,913,337) (8,379,755)
--------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,876,894) (13,037,946)
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,137,615 4,816,455
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (5,865,581) (12,515,612)
--------------------------------------------------------------------------------------------------
Class B (2,689,864) (6,633,533)
--------------------------------------------------------------------------------------------------
Class C (45,901) (21,315)
--------------------------------------------------------------------------------------------------
Class M (263,426) (562,015)
--------------------------------------------------------------------------------------------------
Class Y (3,012,818) (6,366,078)
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (50,940,393) 20,974,985
--------------------------------------------------------------------------------------------------
Total decrease in net assets (57,680,368) (307,113)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of period 509,601,808 509,908,921
--------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,079,068 and $28,812, respectively) $451,921,440 $509,601,808
--------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
-------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share May 31
operating performance (Unaudited) Year ended November 30
-------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $4.81 $5.01 $4.90 $4.90 $4.92 $4.60
-------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------
Net investment income .13 .25 .25(c) .28 .29 .27
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.08) (.20) .14 -- (.02) .35
-------------------------------------------------------------------------------------------------------------
Total from
investment operations .05 .05 .39 .28 .27 .62
-------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.25) (.25) (.28) (.26) (.29)
-------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (.01)
-------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.03) -- (.03) --(d)
-------------------------------------------------------------------------------------------------------------
Total distributions (.12) (.25) (.28) (.28) (.29) (.30)
-------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $4.74 $4.81 $5.01 $4.90 $4.90 $4.92
-------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.13* 1.09 8.19 5.98 5.71 13.85
-------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $222,724 $243,927 $242,140 $135,283 $143,575 $57,049
-------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* .99 1.06 1.15 1.22 1.20
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.81* 5.20 5.00 5.77 5.54 5.78
-------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 182.37* 318.67 223.06 188.39 367.19 383.88
-------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid
through expense offset arrangements.
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the periods.
(d) Distributions in excess of net investment income were less than
$0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
-------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share May 31
operating performance (Unaudited) Year ended November 30
-------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $4.81 $5.01 $4.91 $4.90 $4.92 $4.60
-------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------
Net investment income .12 .22 .22(c) .26 .26 .24
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) (.20) .13 -- (.02) .35
-------------------------------------------------------------------------------------------------------------
Total from
investment operations .05 .02 .35 .26 .24 .59
-------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------
From net
investment income (.11) (.22) (.22) (.25) (.24) (.26)
-------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (.01)
-------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.03) -- (.02) --(d)
-------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.22) (.25) (.25) (.26) (.27)
-------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $4.75 $4.81 $5.01 $4.91 $4.90 $4.92
-------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.03* .48 7.32 5.56 5.08 13.17
-------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $106,522 $137,130 $137,569 $68,137 $56,889 $23,201
-------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .81* 1.59 1.66 1.75 1.80 1.81
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.51* 4.60 4.39 5.16 4.94 5.17
-------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 182.37* 318.67 223.06 188.39 367.19 383.88
-------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid
through expense offset arrangements.
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the periods.
(d) Distributions in excess of net investment income were less than
$0.01 per share.
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
---------------------------------------------------------------------------
Six months
ended For the period
Per-share May 31 July 26, 1999+
operating performance (Unaudited) to Nov. 30
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
Net asset value,
beginning of period $4.81 $4.81
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment income .11 .07
---------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) --
---------------------------------------------------------------------------
Total from
investment operations .04 .07
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From net
investment income (.10) (.07)
---------------------------------------------------------------------------
Return of capital -- --
---------------------------------------------------------------------------
In excess of net
investment income -- --
---------------------------------------------------------------------------
Total distributions (.10) (.07)
---------------------------------------------------------------------------
Net asset value,
end of period $4.75 $4.81
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(a) .93* 1.53*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,709 $2,746
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .89* .61*
---------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.40* 1.58*
---------------------------------------------------------------------------
Portfolio turnover (%) 182.37* 318.67
---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid
through expense offset arrangements.
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the periods.
(d) Distributions in excess of net investment income were less than
$0.01 per share.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share May 31 Apr. 3, 1995+
operating performance (Unaudited) Year ended November 30 to Nov. 30
-------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $4.82 $5.02 $4.91 $4.90 $4.93 $4.68
-------------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------------
Net investment income .13 .24 .24(c) .28 .27 .12(c)
-------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) (.20) .14 .01 (.02) .32
-------------------------------------------------------------------------------------------------------------------
Total from
investment operations .06 .04 .38 .29 .25 .44
-------------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.24) (.24) (.28) (.26) (.18)
-------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (.01)
-------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.03) -- (.02) --(d)
-------------------------------------------------------------------------------------------------------------------
Total distributions (.12) (.24) (.27) (.28) (.28) (.19)
-------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $4.76 $4.82 $5.02 $4.91 $4.90 $4.93
-------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.26* .93 8.01 6.03 5.33 9.63*
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $9,817 $10,918 $10,181 $7,158 $4,404 $1,058
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .59* 1.14 1.21 1.30 1.35 .87*
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.73* 5.09 4.88 5.55 5.28 3.37*
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 182.37* 318.67 223.06 188.39 367.19 383.88
-------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid
through expense offset arrangements.
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the periods.
(d) Distributions in excess of net investment income were less than
$0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS Y
-------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share May 31 Year ended Oct. 1, 1997+
operating performance (Unaudited) November 30 to Nov. 30
-------------------------------------------------------------------------------------------
2000 1999 1998 1997
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $4.80 $5.01 $4.90 $4.90
-------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------
Net investment income .14 .26 .26(c) .05
-------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) (.21) .14 --
-------------------------------------------------------------------------------------------
Total from
investment operations .07 .05 .40 .05
-------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------
From net
investment income (.13) (.26) (.26) (.05)
-------------------------------------------------------------------------------------------
Return of capital -- -- -- --
-------------------------------------------------------------------------------------------
In excess of net
investment income -- -- (.03) --
-------------------------------------------------------------------------------------------
Total distributions (.13) (.26) (.29) (.05)
-------------------------------------------------------------------------------------------
Net asset value,
end of period $4.74 $4.80 $5.01 $4.90
-------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.47* 1.14 8.46 1.03*
-------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $110,149 $114,881 $120,019 $119,889
-------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .39* .74 .81 .15*
-------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.93* 5.45 5.30 .96*
-------------------------------------------------------------------------------------------
Portfolio turnover (%) 182.37* 318.67 223.06 188.39
-------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid
through expense offset arrangements.
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the periods.
(d) Distributions in excess of net investment income were less than
$0.01 per share.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Intermediate U.S. Government Income Fund (the "fund") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The fund seeks high
current income consistent with preservation of capital, through
investments primarily in U.S. government securities.
The fund offers class A, class B, class C, class M and class Y shares.
Class A shares are sold with a maximum front-end sales charge of 3.25%.
Class B shares, which convert to class A shares after approximately
eight years, 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
four years of purchase. Class C shares have a higher ongoing
distribution fee than class B shares and class C shares and have a
one-year 1.00% contingent deferred sales charge and do not convert to
class A shares. Class M shares are sold with a maximum front end sales
charge of 2.00% and pay an ongoing distribution fee that is higher than
class A shares but lower than class B and class C shares. Class Y
shares, which are sold at net asset value, are generally subject to the
same expenses as class A, class B, class C and class M shares, but do
not bear a distribution fee. Class Y shares are sold to defined
contribution plans that invest at least $150 million in a combination of
Putnam funds and other accounts managed by affiliates of Putnam
Investment Management, Inc. ("Putnam Management"), the fund's manager, a
wholly-owned subsidiary of Putnam Investments, Inc.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that 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 preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Short-term investments
having remaining maturities of 60 days or less are stated at amortized
cost, which approximates market value. Other investments, including
restricted securities, are stated at fair value following procedures
approved by the Trustees.
B) 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 and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) 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.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management 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.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis. Interest income is recorded on the accrual
basis.
E) 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.
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. If the fund delivers securities under the
commitment, the fund realizes a gain or a loss from the sale of the
securities based upon the unit price established at the date the
commitment was entered into.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable 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, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At November 30, 1999, the fund had a capital loss carryover of
approximately $24,928,000 available to offset future capital gains, if
any. This amount includes approximately $15,145,000 of capital loss
carryovers acquired in connection with the fund's acquisition of the net
assets of Putnam Adjustable Rate U.S. Government Fund in 1996. The
amount of the capital loss carryover that can be used to offset realized
capital gains by the fund in any one year may be limited by the Internal
Revenue Code and Regulations. To the extent that capital loss carryovers
are used to offset realized capital gains, it is unlikely that gains so
offset would be distributed to shareholders since any such distribution
might be taxable as ordinary income. The amount of the carryover and the
expiration dates are:
Loss Carryover Expiration
-------------- ------------------
$1,134,000 November 30, 2001
15,119,000 November 30, 2002
514,000 November 30, 2004
8,161,000 November 30, 2007
G) Distributions to shareholders The fund declares a distribution each
day based upon the projected net investment income, for a specified
period, calculated as if earned prorata throughout the period on a daily
basis. Such distributions are recorded daily and paid monthly. Capital
gain distributions, if any, are recorded on the ex-dividend date and
paid at least annually. 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.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
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. Such fee is based on the following annual rates: 0.60% of the
first $1 billion of average net assets, 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% thereafter.
The fund reimburses Putnam Management an allocated amount 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.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended May 31, 2000, fund expenses were reduced by
$43,953 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $906
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C 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 Retail Management, Inc., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Retail Management, Inc., at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund to an annual rate of 0.25%, 0.85%,
1.00% and 0.40% of the average net assets attributable to class A, class
B, class C and class M shares, respectively.
For the six months ended May 31, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $39,838 and $3,936
from the sale of class A and class M shares, respectively and $181,474
in contingent 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. For the six months ended May 31, 2000, Putnam Retail
Management, Inc., acting as underwriter received $24,076 on class A
redemptions.
Note 3
Purchases and sales of securities
During the six months ended May 31, 2000, cost of purchases and proceeds
from sales of U.S. government and agency obligations other than
short-term investments aggregated $725,485,735 and $858,781,285,
respectively.
Note 4
Capital shares
At May 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended May 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 26,259,845 $124,830,686
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,044,423 4,962,623
---------------------------------------------------------------------------
27,304,268 129,793,309
Shares
repurchased (31,090,920) (147,853,686)
---------------------------------------------------------------------------
Net decrease (3,786,652) $(18,060,377)
---------------------------------------------------------------------------
Year ended November 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 82,440,208 $403,857,633
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,084,355 10,155,465
---------------------------------------------------------------------------
84,524,563 414,013,098
Shares
repurchased (82,127,863) (402,232,404)
---------------------------------------------------------------------------
Net increase 2,396,700 $ 11,780,694
---------------------------------------------------------------------------
Six months ended May 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 10,197,138 $ 49,610,633
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 464,487 1,182,026
---------------------------------------------------------------------------
10,661,625 50,792,659
Shares
repurchased (16,723,458) (79,552,839)
---------------------------------------------------------------------------
Net decrease (6,061,833) $(28,760,180)
---------------------------------------------------------------------------
Year ended November 30, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 34,412,013 $168,833,974
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,125,118 5,493,492
---------------------------------------------------------------------------
35,537,131 174,327,466
Shares
repurchased (34,498,252) (168,856,064)
---------------------------------------------------------------------------
Net increase 1,038,879 $ 5,471,402
---------------------------------------------------------------------------
Six months ended May 31, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 1,546,732 $7,382,926
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,654 18,996
---------------------------------------------------------------------------
1,555,386 7,401,922
Shares
repurchased (1,555,490) (7,389,884)
---------------------------------------------------------------------------
Net (decrease)
increase (104) $ 12,038
---------------------------------------------------------------------------
From July 26, 1999
(commencement of operations) to
November 30, 1999
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 716,604 $3,448,177
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,237 20,403
---------------------------------------------------------------------------
720,841 3,468,580
Shares
repurchased (149,847) (721,308)
---------------------------------------------------------------------------
Net increase 570,994 $2,747,272
---------------------------------------------------------------------------
Six months ended May 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 1,463,339 $7,095,926
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 47,735 118,506
---------------------------------------------------------------------------
1,511,074 7,214,432
Shares
repurchased (1,712,626) (8,136,743)
---------------------------------------------------------------------------
Net decrease (201,552) $ (922,311)
---------------------------------------------------------------------------
Year ended November 30, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 2,537,235 $12,479,085
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 97,163 474,422
---------------------------------------------------------------------------
2,634,398 12,953,507
Shares
repurchased (2,397,373) (11,765,635)
---------------------------------------------------------------------------
Net increase 237,025 $ 1,187,872
---------------------------------------------------------------------------
Six months ended May 31, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 2,349,814 $10,661,418
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 530,664 3,012,818
---------------------------------------------------------------------------
2,880,478 13,674,236
Shares
repurchased (3,559,875) (16,883,799)
---------------------------------------------------------------------------
Net decrease (679,397) $(3,209,563)
---------------------------------------------------------------------------
Year ended November 30, 1999
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 5,345,030 $26,051,044
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,292,538 6,366,078
---------------------------------------------------------------------------
6,637,568 32,417,122
Shares
repurchased (6,670,709) (32,629,377)
---------------------------------------------------------------------------
Net decrease (33,141) $ (212,255)
---------------------------------------------------------------------------
FUND INFORMATION
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Edward H. D'Alelio
Vice President
Kevin M. Cronin
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam
Intermediate U.S. Government Income 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.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
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
the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA036-62273 398/428/674 7/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
---------------------------------------------------------------------------
Putnam Intermediate U.S. Government Income Fund
Supplement to Semiannual Report dated 5/31/00
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
class B, class C, and class M shares, which are discussed more extensively
in the semiannual report.
SEMIANNUAL RESULTS AT A GLANCE
---------------------------------------------------------------------------
Total return
for periods ended 5/31/00: NAV
6 months 1.47%
1 year 2.90
Five years 32.42
Annual average 5.78
Life of fund (since class A inception, 2/16/93) 43.86
Annual average 5.12
Share value: NAV
11/30/99 $4.80
5/31/00 $4.74
---------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
11/30/99 - 5/31/00 6 $0.129044 -- $0.129044
---------------------------------------------------------------------------
Please note that past performance does not indicate future results. Returns
shown for class Y shares for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect the
initial sales charge currently applicable to class A shares. These returns
have not been adjusted to reflect differences in operating expenses which,
for class Y shares, are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. Investment return and principal value will fluctuate so your
shares, when redeemed, may be worth more or less than their original cost.
See full report for information on comparative benchmarks. If you have
questions, please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
