| UNITED STATES SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
FORM N-CSR | ||
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES | ||
| Investment Company Act file number: | (811–07513) |
| Exact name of registrant as specified in charter: | Putnam Funds Trust |
| Address of principal executive offices: | 100 Federal Street, Boston, Massachusetts 02110 |
| Name and address of agent for service: | Robert T. Burns, Vice President 100 Federal Street Boston, Massachusetts 02110 |
| Copy to: | Bryan Chegwidden, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036 |
| Registrant's telephone number, including area code: | (617) 292–1000 |
| Date of fiscal year end: | November 30, 2020 |
| Date of reporting period: | December 1, 2019 — May 31, 2020 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Short-Term Municipal
Income Fund
Semiannual report
5 | 31 | 20
IMPORTANT NOTICE: Delivery of paper fund reports
In accordance with regulations adopted by the Securities and Exchange Commission, beginning on January 1, 2021, reports like this one will no longer be sent by mail unless you specifically request it. Instead, they will be on Putnam’s website, and you will be notified by mail whenever a new one is available, and provided with a website link to access the report.
If you wish to stop receiving paper reports sooner, or if you wish to continue to receive paper reports free of charge after January 1, 2021, please see the back cover or insert for instructions. If you invest through a bank or broker, your choice will apply to all funds held in your account. If you invest directly with Putnam, your choice will apply to all Putnam funds in your account.
If you already receive these reports electronically, no action is required.
Message from the Trustees
July 8, 2020
Dear Fellow Shareholder:
Financial markets worldwide continue to be challenged by volatility and economic uncertainty due to the COVID-19 pandemic. In addition, our nation is struggling with confusion, anger, and grief over the excessive force that caused the death of George Floyd and with the overall issue of systemic racial injustice. Your Board of Trustees and Putnam Investments stand united against oppression and racism. We will work to support thoughtful and resourceful actions to elevate both our workplace and society.
Also, we would like to take this opportunity to thank Robert E. Patterson, who retired as a Trustee on June 30, 2020, for his 36 years of service. We will miss Bob’s experienced judgment and insights, and we wish him well. We are also pleased to welcome Mona K. Sutphen to the Board. Ms. Sutphen brings extensive professional and directorship experience to her role as a Trustee.
As always, thank you for investing with Putnam.
Municipal bonds finance important public projects, such as schools, roads, and hospitals. The bonds are backed by the issuing city, town, or other government entity or by revenues collected from usage fees. However, unlike Treasuries and corporate bonds, the interest paid on municipal bonds is generally free from federal income taxes.
Putnam Short-Term Municipal Income Fund offers an additional advantage — the flexibility to invest in municipal bonds issued by any state or local government in the country. The fund invests mainly in bonds that have short-term maturities from three years or less and are investment grade in quality. Because an issuer’s fiscal health can affect the prices of its bonds, this flexibility is a distinct advantage.
Putnam Short-Term Municipal Income Fund offers an active, research-intensive investment approach.
| 2 Short-Term Municipal Income Fund |
Source: Putnam, as of 5/31/20. Past performance is no guarantee of future results. Yields for U.S. Treasuries, investment-grade corporates, and municipal bonds are represented by the average “yield to worst” — a calculation of the lowest possible yield generated without defaulting — of the Bloomberg Barclays U.S. Treasury Index, an unmanaged index of U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury; the Bloomberg Barclays U.S. Credit Index, an unmanaged index of U.S. dollar-denominated, investment-grade, fixed-rate, taxable corporate and government related bonds; and the Bloomberg Barclays Municipal Bond Index, an unmanaged index of long-term fixed-rate, investment-grade tax-exempt bonds, respectively. You cannot invest directly in an index. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Income from municipal bonds may be subject to the alternative minimum tax. Taxable equivalent yield and annual after-tax income are based on a 40.80% federal income tax rate. This rate reflects the Tax Cuts and Jobs Act of 2017 and includes the 3.80% Medicare surtax.
Source: Moody’s Investor Services, U.S. Municipal Bond Defaults and Recoveries, Five-Year Average Cumulative Default Rates, 1970–2018 (August 2019). Most recent data available.
| Short-Term Municipal Income Fund 3 |
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 2.25%; had they, returns would have been lower. See below and pages 9–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
* Source: Lipper, a Refinitiv company.
† Returns for the six-month period are not annualized, but cumulative.
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 5/31/20. See above and pages 9–11 for additional fund performance information. Index descriptions can be found on pages 14–15.
| 4 Short-Term Municipal Income Fund |
Garrett, how was the market for short-term municipal bonds during the reporting period?
Short-term municipal bonds posted gains with the Bloomberg Barclay’s 3-Year Municipal Bond Index [the fund’s benchmark] rising 1.92% for the period. As the period began, the U.S.–China trade dispute was creating some headwinds for the U.S. economy. However, on the whole, the United States was faring better than other developed markets due to strong employment and robust consumer spending. The Federal Reserve was holding its short-term benchmark rate in a target range of 1.50% to 1.75% after reducing it in August, September, and October 2019 to foster growth. In this rate environment, bonds of all maturities rallied, and risk-taking was rewarded. Lower-quality bonds outperformed their higher-quality counterparts, and longer-maturity bonds outperformed shorter-maturity bonds.
In late February 2020, fears about the spread of the COVID-19 pandemic outside of China and its potential impact on global economic growth sparked a steep sell-off in equities and other high-risk assets. Concerns about credit quality and the impact that the lockdown would have
| Short-Term Municipal Income Fund 5 |
Allocations are shown as a percentage of the fund’s net assets as of 5/31/20. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, the timing of matured security transactions, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.
Credit qualities are shown as a percentage of the fund’s net assets as of 5/31/20. A bond rated BBB or higher (SP-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. Ratings may vary over time.
Cash and net other assets, if any, represent the market value weights of cash, derivatives, and short-term securities in the portfolio. The fund itself has not been rated by an independent rating agency.
| 6 Short-Term Municipal Income Fund |
on the municipal sector led to large outflows across the asset class. New issuance essentially halted, and as investors sought cash, negative mutual fund flows drove supply and demand technicals to what we viewed as extremely negative levels. Credit spreads widened and the yield curve steepened to reflect the bearish outlook. As a result, the Municipal/Treasury [M/T] ratio widened significantly during the sell-off. [The M/T ratio measures the yield on AAA-rated municipal bonds relative to the yield on U.S. Treasury bonds of similar maturities.] With the health risks posed by the pandemic rising and economic and financial conditions deteriorating, the Fed lowered rates to near zero in March.
The municipal bond market recovered in April and May thanks to the historic monetary and fiscal policies designed to provide liquidity in the financial system and ease the economic strain of the pandemic on the U.S. economy. In an especially noteworthy move, the Fed announced that it would start buying municipal debt. This program allowed cash-strapped states and cities to get loans to help tide them over until the U.S. economy bounces back. High-quality short- and intermediate-term bonds rallied significantly as conditions across the municipal market began to slowly normalize.
High-yield and lower-investment-grade credit spreads narrowed from the worst levels but were still significantly wider than pre-pandemic levels at period-end. Yields on higher-quality bonds remained near record lows.
How did the fund perform during the period?
For the six months ended May 31, 2020, the fund underperformed its benchmark and the average return of its Lipper peer group, Short Municipal Debt Funds.
What strategies or holdings influenced the fund’s performance during the period?
Prior to the pandemic, we had positioned the fund fairly defensively given the low level of interest rates and tight credit spreads. The fund had an overweight exposure to investment-grade bonds rated A and BBB. Most of that credit exposure was held on the shorter end of the fund’s investment universe as a way to dampen potential volatility. Additionally, given the relatively flat profile of the yield curve at that time, the fund was positioned on the shorter, or lower, side of duration ranges. [A short duration means the fund has a low sensitivity to interest-rate changes.] While the fund initially outperformed its Lipper peers, our decision to overweight some transportation-related holdings detracted from performance during the market sell-off, resulting in returns near the peer group’s median for the period.
In March and April 2020, we took advantage of the market volatility to add duration and credit risk. During this time, we moved to an underweight position on the very short end of the yield curve and an overweight position in bonds with two- to four-year maturities. This positioning reflected our view that the Fed was going to remain on hold for an extended period. This strategy had the intended effect of extending the fund’s duration back to a more neutral position relative to our Lipper peers. Additionally, we invested in municipal bonds with callable structures at the longer end of the short-term universe to help increase the portfolio’s yield.
The fund’s overweight exposure to lower-investment-grade securities was a headwind as spreads ended the period wider than where they began the period. With interest rates hovering near zero, we believe credit opportunities are likely to drive performance returns for the balance of the year.
| Short-Term Municipal Income Fund 7 |
We remain cautious about Puerto Rico due to its uncertain economic recovery and a perceived lack of institutional credibility across the Commonwealth’s government. As such, the fund remained underweight in its exposure to uninsured Puerto Rico municipal debt.
How did you use derivatives during the period?
We utilized total return swaps to hedge sector exposure and to gain exposure to specific sectors.
What is your outlook for the second half of 2020?
With regard to short-term interest rates, the Fed is projecting that it will hold interest rates near zero until 2022. That said, we believe Fed officials stand ready to revisit their nontraditional policy tools should the economy deteriorate further.
We believe the strength of the economic recovery and the pace of normalization will greatly influence the performance of the municipal market in the months ahead. At this point, the greatest risk and opportunity lies in lower-quality securities, in our view.
Much of the issuance within the municipal market is used to finance public infrastructure, which include toll roads, subways, bridges, ports, airports, colleges, and convention centers. Human mobility and congregating are critical for the ability of these enterprises to generate revenue. Their lack of or severely reduced use could have trickle down effects on state and local municipalities.
We believe it will take time for the market to digest the longer term impact of COVID-19. While we don’t see a systemic risk to the municipal market, we are seeing credit fundamentals broadly deteriorating. That said, credit spreads have widened significantly. We believe this market environment plays to our team’s strengths of fundamental credit analysis.
At period-end, we were waiting for more detail regarding Federal aid for municipalities. We believe that direct aid to states and municipalities is warranted and needed given the nature of this crisis.
Thank you, Garrett, for your time and insights today.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.
Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk. Statements in the Q&A concerning the fund’s performance or portfolio composition relative to those of the fund’s Lipper peer group may reference information produced by Lipper Inc. or through a third party.
| 8 Short-Term Municipal Income Fund |
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2020, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R6 and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.
Fund performance Total return for periods ended 5/31/20
| Life of | Annual | Annual | Annual | |||||
| fund | average | 5 years | average | 3 years | average | 1 year | 6 months | |
| Class A (3/18/13) | ||||||||
| Before sales charge | 7.16% | 0.97% | 6.22% | 1.21% | 4.69% | 1.54% | 1.45% | 0.42% |
| After sales charge | 4.75 | 0.65 | 3.83 | 0.75 | 2.34 | 0.77 | –0.84 | –1.84 |
| Class B (3/18/13) | ||||||||
| Before CDSC | 5.65 | 0.77 | 5.15 | 1.01 | 4.16 | 1.37 | 1.24 | 0.32 |
| After CDSC | 5.65 | 0.77 | 5.15 | 1.01 | 4.16 | 1.37 | 0.24 | –0.68 |
| Class C (3/18/13) | ||||||||
| Before CDSC | 2.71 | 0.37 | 2.67 | 0.53 | 2.48 | 0.82 | 0.70 | 0.06 |
| After CDSC | 2.71 | 0.37 | 2.67 | 0.53 | 2.48 | 0.82 | –0.30 | –0.93 |
| Class R6 (5/22/18) | ||||||||
| Net asset value | 9.19 | 1.23 | 7.64 | 1.48 | 5.67 | 1.86 | 1.82 | 0.56 |
| Class Y (3/18/13) | ||||||||
| Net asset value | 9.10 | 1.22 | 7.56 | 1.47 | 5.59 | 1.83 | 1.70 | 0.55 |
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 2.25% sales charge levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 1.00% in the first year, declining over time to 0.50% in the second year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1.00% CDSC for the first year that is eliminated thereafter. Class R6 and Y shares have no initial sales charge or CDSC. Performance for class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
| Short-Term Municipal Income Fund 9 |
Comparative index returns For periods ended 5/31/20
| Life of | Annual | Annual | Annual | |||||
| fund | average | 5 years | average | 3 years | average | 1 year | 6 months | |
| Bloomberg Barclays 3-Year | ||||||||
| Municipal Bond Index | 12.60% | 1.66% | 10.18% | 1.96% | 6.72% | 2.19% | 3.39% | 1.92% |
| Lipper Short Municipal | ||||||||
| Debt Funds category | 7.29 | 0.98 | 6.19 | 1.21 | 4.39 | 1.44 | 1.54 | 0.53 |
| average* |
Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 6-month, 1-year, 3-year, 5-year, and life-of-fund periods ended 5/31/20, there were 141, 139, 116, 104, and 88 funds, respectively, in this Lipper category.
Fund price and distribution information For the six-month period ended 5/31/20
| Distributions | Class A | Class B | Class C | Class R6 | Class Y | |
| Number | 6 | 6 | 6 | 6 | 6 | |
| Income1 | $0.072581 | $0.062091 | $0.036451 | $0.085934 | $0.085166 | |
| Capital gains2 | — | — | — | — | — | |
| Total | $0.072581 | $0.062091 | $0.036451 | $0.085934 | $0.085166 | |
| Before | After | Net | Net | Net | Net | |
| sales | sales | asset | asset | asset | asset | |
| Share value | charge | charge | value | value | value | value |
| 11/30/19 | $10.08 | $10.31 | $10.08 | $10.08 | $10.08 | $10.08 |
| 5/31/20 | 10.05 | 10.28 | 10.05 | 10.05 | 10.05 | 10.05 |
| Before | After | Net | Net | Net | Net | |
| Current rate | sales | sales | asset | asset | asset | asset |
| (end of period) | charge | charge | value | value | value | value |
| Current dividend rate3 | 1.18% | 1.15% | 0.98% | 0.47% | 1.44% | 1.45% |
| Taxable equivalent4 | 1.99 | 1.94 | 1.66 | 0.79 | 2.43 | 2.45 |
| Current 30-day | ||||||
| SEC yield (with | ||||||
| expense limitation)5,6 | N/A | 0.91 | 0.74 | 0.19 | 1.20 | 1.15 |
| Taxable equivalent4 | N/A | 1.54 | 1.25 | 0.32 | 2.03 | 1.94 |
| Current 30-day | ||||||
| SEC yield (without | ||||||
| expense limitation)6 | N/A | –0.01 | –0.24 | –0.75 | 0.23 | 0.31 |
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (2.25% for class A shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
1 For some investors, investment income may be subject to the federal alternative minimum tax.
2 Capital gains, if any, are taxable for federal and, in most cases, state purposes.
3 Most recent distribution, including any return of capital and excluding capital gains, annualized and divided by share price before or after sales charge at period-end.
4 Assumes maximum 40.80% federal and state combined tax rate for 2020. Results for investors subject to lower tax rates would not be as advantageous.
5 For a portion of the period, the fund had expense limitations, without which yields would have been lower.
6 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.
| 10 Short-Term Municipal Income Fund |
Fund performance as of most recent calendar quarter Total return for periods ended 6/30/20
| Life of | Annual | Annual | Annual | |||||
| fund | average | 5 years | average | 3 years | average | 1 year | 6 months | |
| Class A (3/18/13) | ||||||||
| Before sales charge | 7.70% | 1.02% | 6.70% | 1.31% | 5.33% | 1.75% | 1.72% | 0.78% |
| After sales charge | 5.28 | 0.71 | 4.30 | 0.85 | 2.96 | 0.98 | –0.57 | –1.48 |
| Class B (3/18/13) | ||||||||
| Before CDSC | 6.17 | 0.83 | 5.64 | 1.10 | 4.69 | 1.54 | 1.51 | 0.68 |
| After CDSC | 6.17 | 0.83 | 5.64 | 1.10 | 4.69 | 1.54 | 0.51 | –0.32 |
| Class C (3/18/13) | ||||||||
| Before CDSC | 3.15 | 0.43 | 3.11 | 0.61 | 2.99 | 0.99 | 0.96 | 0.41 |
| After CDSC | 3.15 | 0.43 | 3.11 | 0.61 | 2.99 | 0.99 | –0.04 | –0.59 |
| Class R6 (5/22/18) | ||||||||
| Net asset value | 9.76 | 1.29 | 8.14 | 1.58 | 6.21 | 2.03 | 1.99 | 0.92 |
| Class Y (3/18/13) | ||||||||
| Net asset value | 9.67 | 1.28 | 8.05 | 1.56 | 6.12 | 2.00 | 1.98 | 0.91 |
See the discussion following the fund performance table on page 9 for information about the calculation of fund performance.
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund’s expenses were limited; had expenses not been limited, they would have been higher. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
| Class A | Class B | Class C | Class R6 | Class Y | |
| Net expenses for the fiscal year | |||||
| ended 11/30/19*# | 0.60% | 0.80% | 1.35% | 0.33% | 0.35% |
| Total annual operating expenses for the fiscal | |||||
| year ended 11/30/19# | 1.38% | 1.58% | 2.13% | 1.11% | 1.13% |
| Annualized expense ratio for the six-month | |||||
| period ended 5/31/20 | 0.59% | 0.79% | 1.34% | 0.33% | 0.34% |
Fiscal year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.
Expenses are shown as a percentage of average net assets.
# Restated to reflect current fees.
* Reflects Putnam Management’s contractual obligation to limit certain fund expenses through 3/30/21.
| Short-Term Municipal Income Fund 11 |
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 12/1/19 to 5/31/20. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class R6 | Class Y | |
| Expenses paid per $1,000*† | $2.96 | $3.96 | $6.70 | $1.65 | $1.70 |
| Ending value (after expenses) | $1,004.20 | $1,003.20 | $1,000.60 | $1,005.60 | $1,005.50 |
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/20. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended 5/31/20, use the following calculation method. To find the value of your investment on 12/1/19, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class R6 | Class Y | |
| Expenses paid per $1,000*† | $2.98 | $3.99 | $6.76 | $1.67 | $1.72 |
| Ending value (after expenses) | $1,022.05 | $1,021.05 | $1,018.30 | $1,023.35 | $1,023.30 |
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/20. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.
| 12 Short-Term Municipal Income Fund |
Consider these risks before investing
The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Interest the fund receives might be taxable. Unlike bonds, funds that invest in bonds have fees and expenses. Tax-exempt bonds may be issued under the Internal Revenue Code only by limited types of issuers for limited types of projects. As a result, the fund’s investments may be focused in certain market segments and be more vulnerable to fluctuations in the values of the securities it holds than a more broadly invested fund. Capital gains, if any, are taxed at the federal and, in most cases, state levels. For some investors, investment income may be subject to the federal alternative minimum tax. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.
| Short-Term Municipal Income Fund 13 |
Terms and definitions
Important terms
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 2.25% maximum sales charge for class A shares.
Contingent deferred sales charge (CDSC) is generally 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 over time from a 1.00% maximum during the first year to 0.50% during the second year. After the second year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/or capital gains reinvestment. They are not subject to an initial sales charge and may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.
Class Y shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.
Fixed-income terms
Current rate is the annual rate of return earned from dividends or interest of an investment. Current rate is expressed as a percentage of the price of a security, fund share, or principal investment.
Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.
Comparative indexes
Bloomberg Barclays 3-Year Municipal Bond Index is an unmanaged index of publicly issued investment-grade corporate, U.S. Treasury, and government agency securities with remaining maturities of one to three years.
Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
ICE BofA (Intercontinental Exchange Bank of America) U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a
| 14 Short-Term Municipal Income Fund |
fund and an index will differ. You cannot invest directly in an index.
ICE Data Indices, LLC (“ICE BofA”), used with permission. ICE BofA permits use of the ICE BofA indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.
Lipper, a Refinitiv company, is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2019, are available in the Individual Investors section of putnam.com and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.
Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.
Trustee and employee fund ownership
Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of May 31, 2020, Putnam employees had approximately $453,000,000 and the Trustees had approximately $73,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.
| Short-Term Municipal Income Fund 15 |
Liquidity risk management program
Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the first annual report on the program to the Trustees in April 2020. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from December 2018 through March 2020. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2019. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. The report also included a discussion of liquidity monitoring during the period, including during the market liquidity challenges caused by the COVID 19 pandemic, and the impact those challenges had on the liquidity of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.
| 16 Short-Term Municipal Income Fund |
Financial statements
These sections of the report, as well as the accompanying Notes, 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 non-investment 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 liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.
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 highlights table also includes the current reporting period.
| Short-Term Municipal Income Fund 17 |
The fund’s portfolio 5/31/20 (Unaudited)
Key to holding’s abbreviations
| AGM Assured Guaranty Municipal Corporation | GNMA Government National Mortgage Association |
| AMBAC AMBAC Indemnity Corporation | GNMA Coll. Government National Mortgage |
| BAM Build America Mutual | Association Collateralized |
| BAN Bond Anticipation Notes | NATL National Public Finance Guarantee Corporation |
| COP Certificates of Participation | OTC Over-the-counter |
| FHA Insd. Federal Housing Administration Insured | PSFG Permanent School Fund Guaranteed |
| FHLMC Coll. Federal Home Loan Mortgage | VRDN Variable Rate Demand Notes, which are floating- |
| Corporation Collateralized | rate securities with long-term maturities that carry |
| FNMA Coll. Federal National Mortgage | coupons that reset and are payable upon demand |
| Association Collateralized | either daily, weekly or monthly. The rate shown is the |
| FRB Floating Rate Bonds: the rate shown is the current | current interest rate at the close of the reporting |
| interest rate at the close of the reporting period. Rates | period. Rates are set by remarketing agents and may |
| may be subject to a cap or floor. For certain securities, | take into consideration market supply and demand, |
| the rate may represent a fixed rate currently in place | credit quality and the current SIFMA Municipal Swap |
| at the close of the reporting period. | Index rate, which was 0.14% as of the close of the |
| G.O. Bonds General Obligation Bonds | reporting period. |
| MUNICIPAL BONDS AND NOTES (100.5%)* | Rating** | Principal amount | Value |
| Alabama (1.8%) | |||
| AL State Special Care Fac. Fin. Auth. Mandatory Put | |||
| Bonds (11/1/22), (Ascension Health Credit Group), | |||
| Ser. 06C-1, 1.85%, 11/15/46 | AA+ | $500,000 | $512,905 |
| Black Belt Energy Gas Dist., Gas Supply Mandatory | |||
| Put Bonds (7/1/22), Ser. A, 4.00%, 8/1/47 | Aa2 | 150,000 | 158,369 |
| 671,274 | |||
| Arizona (0.4%) | |||
| AZ State Indl. Dev. Auth. Ed. 144A Rev. Bonds, (BASIS | |||
| Schools, Inc.), Ser. A, 4.00%, 7/1/21 | BB | 25,000 | 25,115 |
| Glendale, Indl. Dev. Auth. Sr. Living Fac. Rev. Bonds, | |||
| (Royal Oaks Life Care Cmnty.), 4.00%, 5/15/22 | A/F | 100,000 | 103,169 |
| Phoenix, Indl. Dev. Auth. Ed. Rev. Bonds, (Great | |||
| Hearts Academies), 3.75%, 7/1/24 | BBB– | 10,000 | 10,278 |
| Phoenix, Indl. Dev. Auth. Ed. 144A Rev. Bonds, | |||
| (BASIS Schools, Inc.), 3.00%, 7/1/20 | BB | 25,000 | 24,990 |
| 163,552 | |||
| California (20.6%) | |||
| CA Muni. Fin. Auth. Rev. Bonds, (Channing House), | |||
| Ser. A, 5.00%, 5/15/23 | AA– | 650,000 | 731,497 |
| CA School Fac. Fin. Auth. 144A Rev. Bonds, (Green | |||
| Dot Pub. Schools), Ser. A, 5.00%, 8/1/21 | BBB– | 100,000 | 105,047 |
| CA State G.O. Bonds | |||
| AGM, 5.25%, 8/1/32 | Aa2 | 300,000 | 424,824 |
| 5.00%, 3/1/23 | Aa2 | 150,000 | 169,145 |
| CA State Mandatory Put Bonds(12/1/21), Ser. B, | |||
| 0.991%, 12/1/31 | Aa2 | 1,000,000 | 994,810 |
| CA State Mandatory Put Bonds(12/1/20), Ser. C, | |||
| 0.931%, 12/1/28 | Aa2 | 350,000 | 349,440 |
| 18 Short-Term Municipal Income Fund |
| MUNICIPAL BONDS AND NOTES (100.5%)* cont. | Rating** | Principal amount | Value |
| California cont. | |||
| CA State Charter School Fin. Auth. 144A Rev. Bonds, | |||
| (Summit Pub. Schools), 5.00%, 6/1/22 | Baa3 | $105,000 | $109,952 |
| CA State Infrastructure & Econ. Dev. Bank | |||
| Mandatory Put Bonds (4/1/22), (J. Paul Getty Trust | |||
| (The)), Ser. A-2, 0.589%, 10/1/47 | Aaa | 500,000 | 495,200 |
| Mandatory Put Bonds (8/1/21), (CA Academy | |||
| of Sciences), Ser. D, 0.502%, 8/1/47 | A2 | 200,000 | 196,240 |
| CA State Muni. Fin. Auth Mobile Home Park Rev. | |||
| Bonds, (Caritas Affordable Housing, Inc.), Ser. A, | |||
| 5.00%, 8/15/23 | BBB+ | 510,000 | 562,907 |
| CA State Muni. Fin. Auth. Solid Waste Disp. | |||
| Mandatory Put Bonds (12/1/20), (Waste | |||
| Management, Inc.), Ser. A, 2.00%, 12/1/44 | A– | 125,000 | 125,321 |
| CA State, Pub. Wks. Board Rev. Bonds | |||
| (Dept. of State Hospitals — Coalinga State Hosp.), | |||
| 5.00%, 6/1/23 | Aa3 | 235,000 | 267,136 |
| (Various Capital), Ser. B, 5.00%, 3/1/23 | Aa3 | 425,000 | 478,491 |
| Long Beach Harbor Rev. Bonds, Ser. C, | |||
| 4.00%, 7/15/21 | Aa2 | 500,000 | 519,280 |
| Metro. Wtr. Dist. of Southern CA Rev. Bonds, (Build | |||
| America Bonds-Southern CA Metro. Wtr. Dist.), | |||
| 6.947%, 7/1/40 | AAA | 500,000 | 502,120 |
| Palomar, Cmnty. Colleg Dist. G.O. Bonds, | |||
| 5.00%, 5/1/23 | Aa2 | 500,000 | 566,255 |
| San Bernardino Cnty., FRB, Ser. C, 0.60%, 8/1/23 | AA+ | 500,000 | 495,335 |
| San Diego, Pub. Facs. Fin. Auth. Rev. Bonds, Ser. A, | |||
| 5.00%, 5/15/29 | AA+ | 300,000 | 375,015 |
| San Juan, Unified School Dist. G.O. Bonds, Ser. B, | |||
| 5.00%, 8/1/23 | Aa2 | 100,000 | 110,168 |
| Southern CA Pub. Pwr. Auth. Mandatory Put Bonds | |||
| (5/1/21), (Canyon Pwr.), Ser. A, 2.25%, 7/1/40 | Aa3 | 200,000 | 200,970 |
| 7,779,153 | |||
| Colorado (2.4%) | |||
| CO E-470 Pub. Hwy. Auth. Mandatory Put Bonds | |||
| (9/1/21), Ser. A, 0.536%, 9/1/39 | A2 | 500,000 | 494,630 |
| CO State Hlth. Fac. Auth. Hosp. Rev. Bonds, | |||
| (Evangelical Lutheran Good Samaritan Society), | |||
| 5.00%, 6/1/20 | AAA/P | 100,000 | 100,000 |
| High Plains Co. Metro. Dist. G.O. Bonds, NATL, | |||
| 4.00%, 12/1/21 | Baa2 | 150,000 | 157,475 |
| Southlands, Metro. Dist. No. 1 G.O. Bonds, Ser. A-1, | |||
| 3.00%, 12/1/22 | Ba1 | 60,000 | 59,388 |
| U. of CO Hosp. Auth. Mandatory Put Bonds (3/1/22), | |||
| (UCHA Oblig. Group.), Ser. C-2, 5.00%, 11/15/38 | AA | 100,000 | 105,175 |
| 916,668 | |||
| Connecticut (2.8%) | |||
| CT State Special Tax, 5.00%, 5/1/25 | A+ | 150,000 | 177,092 |
| CT State Hsg. Fin. Auth. Rev. Bonds | |||
| Ser. D2, 3.00%, 5/15/24 | Aaa | 600,000 | 641,790 |
| Ser. G, 2.75%, 5/15/26 | Aaa | 235,000 | 242,177 |
| 1,061,059 |
| Short-Term Municipal Income Fund 19 |
| MUNICIPAL BONDS AND NOTES (100.5%)* cont. | Rating** | Principal amount | Value |
| District of Columbia (1.6%) | |||
| DC G.O. Bonds, Ser. B, AGM, 3.80%, 6/1/20 | AA+ | $150,000 | $150,000 |
| DC Rev. Bonds | |||
| (D.C. Intl. School), 5.00%, 7/1/27 | BBB | 300,000 | 335,901 |
| (KIPP DC), 5.00%, 7/1/23 | BBB+ | 100,000 | 108,446 |
| 594,347 | |||
| Florida (2.6%) | |||
| Escambia Cnty., Hlth. Fac. Auth. Rev. Bonds, (Baptist | |||
| Hlth. Care Corp. Oblig. Grp.), Ser. A, 5.125%, 8/15/20 | Baa2 | 30,000 | 30,286 |
| Jacksonville, Port Auth. Rev. Bonds, 4.50%, 11/1/32 | |||
| (Prerefunded 11/1/22) | A2 | 855,000 | 932,198 |
| 962,484 | |||
| Georgia (4.0%) | |||
| Burke Cnty., Dev. Auth. Poll. Control Mandatory | |||
| Put Bonds (5/3/21), (GA Transmission Corp. Vogtle | |||
| Project), 2.50%, 1/1/52 | AA– | 200,000 | 203,312 |
| Main St. Natural Gas, Inc. Gas Supply Mandatory Put | |||
| Bonds (9/1/23), Ser. B, 0.998%, 4/1/48 | Aa2 | 800,000 | 776,248 |
| Main Street Natural Gas, Inc. Gas Supply Rev. Bonds, | |||
| Ser. A, 5.00%, 5/15/21 | A3 | 500,000 | 513,890 |
| 1,493,450 | |||
| Illinois (9.4%) | |||
| Chicago, G.O. Bonds, Ser. A | |||
| 5.00%, 1/1/22 | BBB+ | 250,000 | 254,745 |
| 5.00%, 1/1/21 | BBB– | 200,000 | 201,440 |
| 5.00%, 1/1/21 (Escrowed to Maturity) | BBB+ | 50,000 | 51,362 |
| Chicago, Board of Ed. G.O. Bonds, Ser. E, | |||
| 5.00%, 12/1/21 | BB– | 100,000 | 101,372 |
| Chicago, O’Hare Intl. Arpt. Rev. Bonds, Ser. F, | |||
| 4.25%, 1/1/21 | A2 | 500,000 | 501,465 |
| Chicago, Waste Wtr. Transmission Rev. Bonds, | |||
| 5.00%, 1/1/23 | A | 200,000 | 211,832 |
| IL State G.O. Bonds | |||
| Ser. A, 5.00%, 10/1/24 | Baa3 | 500,000 | 509,705 |
| Ser. D, 5.00%, 11/1/21 | Baa3 | 450,000 | 456,048 |
| Ser. A, 5.00%, 4/1/21 | Baa3 | 100,000 | 100,795 |
| 5.00%, 1/1/21 | Baa3 | 150,000 | 150,857 |
| 4.00%, 8/1/25 | Baa3 | 225,000 | 218,342 |
| IL State Fin. Auth. Mandatory Put Bonds (9/1/22), | |||
| (Field Museum of Natural History), 0.752%, 11/1/34 | A2 | 495,000 | 488,575 |
| IL State Fin. Auth. Rev. Bonds, (Presbyterian Homes | |||
| Oblig. Group), Ser. A, 5.00%, 11/1/23 | A–/F | 75,000 | 79,984 |
| Northern IL U. Rev. Bonds, Ser. B, BAM | |||
| 5.00%, 4/1/22 | AA | 100,000 | 105,995 |
| 5.00%, 4/1/21 | AA | 100,000 | 102,767 |
| 3,535,284 |
| 20 Short-Term Municipal Income Fund |
| MUNICIPAL BONDS AND NOTES (100.5%)* cont. | Rating** | Principal amount | Value |
| Kentucky (3.3%) | |||
| KY State Econ. Dev. Fin. Auth. Rev. Bonds, | |||
| (Owensboro Hlth.), Ser. A, 5.00%, 6/1/20 | BB+/F | $45,000 | $45,000 |
| KY State Pub. Energy Auth. Gas Supply Rev. Bonds, | |||
| Ser. B, 4.00%, 7/1/20 | A1 | 200,000 | 200,426 |
| Louisville & Jefferson Cnty., Metro. Govt. Poll. | |||
| Control Mandatory Put Bonds (4/1/21), (Louisville | |||
| Gas & Elec. Co.), Ser. A, 1.85%, 10/1/33 | A1 | 1,000,000 | 1,009,162 |
| 1,254,588 | |||
| Louisiana (1.0%) | |||
| LA State Offshore Term. Auth. Deepwater Port | |||
| Mandatory Put Bonds (12/1/23), (Loop, LLC), Ser. A, | |||
| 1.65%, 9/1/33 | A3 | 400,000 | 395,276 |
| 395,276 | |||
| Maryland (0.7%) | |||
| Frederick Cnty., Special Tax Bonds, (Oakdale-Lake | |||
| Linganore), 2.625%, 7/1/24 | BB/P | 200,000 | 191,922 |
| MD Econ. Dev. Corp. Rev. Bonds, (Towson U. Sr. | |||
| Student Hsg.), 4.00%, 7/1/20 | BBB | 85,000 | 85,162 |
| 277,084 | |||
| Massachusetts (0.3%) | |||
| Lowell, Collegiate Charter School Rev. Bonds, | |||
| 4.00%, 6/15/24 | BB–/P | 50,000 | 49,760 |
| MA State Hsg. Fin. Agcy. Rev. Bonds, Ser. SF-169, | |||
| 4.00%, 12/1/44 | Aa1 | 50,000 | 52,390 |
| 102,150 | |||
| Michigan (1.4%) | |||
| MI State Hosp. Fin. Auth. Mandatory Put Bonds | |||
| (4/1/21), (Ascension Hlth.), Ser. F-2, 1.90%, 11/15/47 | AA+ | 355,000 | 358,195 |
| Milan Area Schools G.O. Bonds, 5.00%, 5/1/21 | AA | 175,000 | 182,121 |
| 540,316 | |||
| Minnesota (1.5%) | |||
| MN State Res. Hsg. Fin. Agcy. Rev. Bonds, Ser. A, | |||
| 4.00%, 7/1/38 | Aa1 | 70,000 | 73,533 |
| Rochester, Hlth. Care Fac. VRDN, (Mayo Clinic), | |||
| Ser. B, 0.12%, 11/15/38 | VMIG 1 | 500,000 | 500,000 |
| 573,533 | |||
| Mississippi (0.6%) | |||
| MS State Bus. Fin. Corp. Rev. Bonds, (System Energy | |||
| Resources, Inc.), 2.50%, 4/1/22 | BBB+ | 225,000 | 227,077 |
| 227,077 | |||
| Montana (0.1%) | |||
| MT State Board of Hsg. Rev. Bonds, Ser. A-2, FHA | |||
| Insd., 3.00%, 12/1/43 | Aa1 | 30,000 | 30,944 |
| 30,944 | |||
| Nevada (0.3%) | |||
| Las Vegas, Redev. Agcy. Tax Alloc. Bonds, | |||
| 5.00%, 6/15/22 | BBB+ | 100,000 | 107,316 |
| 107,316 |
| Short-Term Municipal Income Fund 21 |
| MUNICIPAL BONDS AND NOTES (100.5%)* cont. | Rating** | Principal amount | Value |
| New Jersey (3.8%) | |||
| Lyndhurst Twp., G.O. Bonds, 2.00%, 5/6/21 | AA+ | $500,000 | $504,805 |
| NJ State Econ. Dev. Auth. Rev. Bonds, Ser. B, | |||
| 5.00%, 11/1/21 | Baa1 | 100,000 | 102,188 |
| NJ State Tpk. Auth. Mandatory Put Bonds (1/1/21), | |||
| Ser. C-5, 0.719%, 1/1/28 | A+ | 150,000 | 149,381 |
| NJ State Trans. Trust Fund Auth. Rev. Bonds, Ser. AA, | |||
| 5.25%, 6/15/30 | Baa1 | 650,000 | 676,299 |
| 1,432,673 | |||
| New Mexico (0.8%) | |||
| Farmington, Poll. Control Mandatory Put | |||
| Bonds (6/1/22), (Pub. Svcs. Co. of NM), Ser. B, | |||
| 2.125%, 6/1/40 | Baa2 | 100,000 | 99,907 |
| NM State Hosp. Equip. Loan Council First Mtge. Rev. | |||
| Bonds, (La Vida Expansion), Ser. C, 2.25%, 7/1/23 | BBB–/F | 200,000 | 187,350 |
| 287,257 | |||
| New York (14.1%) | |||
| Long Island, Pwr. Auth. Elec. Syst. Mandatory Put | |||
| Bonds (9/1/24), Ser. B, 1.65%, 9/1/49 | A2 | 500,000 | 499,765 |
| Metro. Trans. Auth. Mandatory Put Bonds (11/15/24), | |||
| Ser. A-1, 5.00%, 11/15/48 | A2 | 500,000 | 526,660 |
| Metro. Trans. Auth. Rev. Bonds | |||
| Ser. B-1, BAN, 5.00%, 5/15/22 | A– | 500,000 | 512,130 |
| Ser. B-2B, 5.00%, 5/15/21 | A1 | 500,000 | 506,770 |
| New York, G.O. Bonds, Ser. E, 5.25%, 8/1/22 | Aa1 | 250,000 | 276,653 |
| NY City, Hsg. Dev. Corp. Mandatory Put Bonds | |||
| (7/3/23), Ser. B-2, 2.10%, 11/1/58 | AA+ | 170,000 | 173,669 |
| NY State Dorm. Auth. Personal Income | |||
| Tax Rev. Bonds | |||
| Ser. E, 5.00%, 3/15/23 | Aa1 | 210,000 | 236,055 |
| Ser. A, 5.00%, 2/15/23 (Prerefunded 6/17/20) | Aa1 | 400,000 | 448,212 |
| NY State Hsg. Fin. Agcy. Rev. Bonds | |||
| (Affordable Hsg.), Ser. M, FHLMC Coll., FNMA Coll., | |||
| GNMA Coll., 1.85%, 11/1/20 | Aa2 | 250,000 | 251,155 |
| (Climate Bond Certified), FNMA Coll., | |||
| 1.625%, 5/1/23 | Aa2 | 760,000 | 765,685 |
| NY State Urban Dev. Corp. Sales Tax Rev. Bonds, | |||
| Ser. A-1, 5.00%, 3/15/22 | Aa1 | 295,000 | 319,680 |
| Port Auth. of NY & NJ Rev. Bonds | |||
| Ser. 189, 5.00%, 5/1/23 | Aa3 | 255,000 | 285,238 |
| Ser. 185, 5.00%, 9/1/21 | Aa3 | 500,000 | 525,105 |
| 5,326,777 | |||
| Ohio (1.8%) | |||
| OH State Higher Edl. Fac. Comm. Rev. Bonds, | |||
| (U. of Dayton), Ser. 06, AMBAC, 2.791%, 12/1/21 | A+ | 665,000 | 665,033 |
| 665,033 | |||
| Pennsylvania (3.9%) | |||
| Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds, | |||
| (Allegheny Hlth. Network Oblig. Group), Ser. A, | |||
| 5.00%, 4/1/22 | A | 200,000 | 213,040 |
| Bethlehem, Area School Dist. Auth. Mandatory Put | |||
| Bonds (11/1/21), 0.609%, 1/1/30 | A1 | 150,000 | 147,998 |
| 22 Short-Term Municipal Income Fund |
| MUNICIPAL BONDS AND NOTES (100.5%)* cont. | Rating** | Principal amount | Value |
| Pennsylvania cont. | |||
| Meadville, G.O. Bonds, Ser. B, AGM, 3.00%, 10/1/27 | A2 | $500,000 | $500,600 |
| PA State COP, Ser. A, 5.00%, 7/1/20 | A2 | 100,000 | 100,362 |
| PA State Econ. Dev. Fin. Auth. Solid Waste Disp. | |||
| Mandatory Put Bonds (8/3/20), (Waste Mgt., Inc.), | |||
| Ser. A, 1.70%, 8/1/37 | A– | 200,000 | 200,074 |
| PA State Tpk. Comm. Rev. Bonds, 5.00%, 12/1/21 | A1 | 200,000 | 213,128 |
| State Public School Bldg. Auth. Palease Rev. Bonds, | |||
| (Philadelphia School Dist.), 5.00%, 6/1/23 | A2 | 100,000 | 112,019 |
| 1,487,221 | |||
| Puerto Rico (0.5%) | |||
| Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds, | |||
| Ser. CC, AGM, 5.50%, 7/1/29 | AA | 55,000 | 59,897 |
| Cmnwlth. of PR, Infrastructure Fin. Auth. Special Tax | |||
| Bonds, Ser. C, AMBAC, 5.50%, 7/1/26 | C | 25,000 | 27,334 |
| Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds, Ser. L, | |||
| NATL, 5.50%, 7/1/21 | Baa2 | 108,834 | 109,588 |
| 196,819 | |||
| Rhode Island (0.3%) | |||
| RI Hlth. & Edl. Bldg. Corp. Rev. Bonds, (Lifespan | |||
| Oblig. Group-Hosp. Fin.), 5.00%, 5/15/22 | BBB+ | 100,000 | 105,793 |
| 105,793 | |||
| South Carolina (1.6%) | |||
| SC State Pub. Svcs. Auth. Rev. Bonds, (Santee | |||
| Cooper), Ser. D | |||
| 5.00%, 12/1/22 (Prerefunded 6/1/22) | AAA/P | 50,000 | 54,708 |
| 5.00%, 12/1/22 | A2 | 50,000 | 53,182 |
| SC Trans. Infrastructure Bank Mandatory Put Bonds | |||
| (10/1/22), Ser. 03B, 0.698%, 10/1/31 | Aa3 | 495,000 | 484,432 |
| 592,322 | |||
| Texas (11.8%) | |||
| Central TX Regl. Mobility Auth. Rev. Bonds, Ser. A, | |||
| 5.00%, 1/1/22 | A– | 300,000 | 312,021 |
| Goose Creek, Cons. Indpt. School Dist. Mandatory | |||
| Put Bonds (10/1/20), Ser. B, PSFG, 3.00%, 10/1/49 | Aaa | 115,000 | 115,859 |
| Harris Cnty., Cultural Ed. Fac. Fin. Corp. VRDN, (The | |||
| Methodist Hosp.), Ser. C-1, 0.06%, 12/1/24 | A-1+ | 1,000,000 | 1,000,000 |
| Houston, Indpt. School Dist. Mandatory Put Bonds | |||
| (6/1/23), PSFG, 4.00%, 6/1/29 | Aaa | 1,000,000 | 1,101,320 |
| Leander, Indep. School Dist. G.O. Bonds, Ser. A, | |||
| PSFG, zero %, 8/15/20 | AAA | 500,000 | 499,755 |
| Little Elm, Indpt. School Dist. G.O. Bonds, PSFG, | |||
| 5.00%, 8/15/22 | AAA | 305,000 | 336,836 |
| SA Energy Acquisition Pub. Fac. Corp. Rev. Bonds, | |||
| (Gas Supply), 5.50%, 8/1/25 | A3 | 75,000 | 87,885 |
| TX State Rev. Bonds, 4.00%, 8/27/20 | SP-1+ | 500,000 | 504,595 |
| TX State Affordable Hsg. Corp. Rev. Bonds, Ser. A, | |||
| GNMA, 5.25%, 9/1/28 | Aa1 | 195,000 | 201,105 |
| TX State Muni. Pwr. Agcy. Rev. Bonds, (Syst. Net/ | |||
| Transmission Converting Security), 5.00%, 9/1/47 | A+ | 275,000 | 277,324 |
| 4,436,700 |
| Short-Term Municipal Income Fund 23 |
| MUNICIPAL BONDS AND NOTES (100.5%)* cont. | Rating** | Principal amount | Value |
| Utah (2.7%) | |||
| Murray City, Hosp. VRDN, (IHC Hlth. Svcs., Inc.), | |||
| Ser. A, 0.06%, 5/15/37 | VMIG 1 | $1,000,000 | $1,000,000 |
| 1,000,000 | |||
| Virginia (1.3%) | |||
| VA State College Bldg. Auth. Edl. Fac. Rev. Bonds, | |||
| Ser. B, 5.00%, 9/1/22 | Aa1 | 450,000 | 497,565 |
| 497,565 | |||
| Washington (3.1%) | |||
| Grant Cnty., Pub. Util. Dist. No. 2 Mandatory Put | |||
| Bonds (12/2/20), (Elec. Syst.), 2.00%, 1/1/44 | AA+ | 400,000 | 401,348 |
| King Cnty., Swr. Mandatory Put Bonds (12/1/21), | |||
| 2.60%, 1/1/43 | Aa2 | 300,000 | 304,374 |
| Port of Seattle Rev. Bonds, Ser. C, 5.00%, 5/1/24 | A1 | 315,000 | 356,857 |
| WA State Hlth. Care Fac. Auth. Mandatory Put Bonds | |||
| (7/1/22), (Fred Hutchinson Cancer Research Ctr.), | |||
| Ser. B, 1.214%, 1/1/42 | A+ | 100,000 | 100,025 |
| 1,162,604 | |||
| Total municipal bonds and notes (cost $37,680,924) | $37,876,319 | ||
| SHORT-TERM INVESTMENTS (1.3%)* | Shares | Value | |
| Putnam Short Term Investment Fund 0.71% L | 476,686 | $476,686 | |
| Total short-term investments (cost $476,686) | $476,686 | ||
| TOTAL INVESTMENTS | |||
| Total investments (cost $38,157,610) | $38,353,005 | ||
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from December 1, 2019 through May 31, 2020 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $37,674,484.
** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at the close of the reporting period. Securities rated by Fitch are indicated by “/F.” Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications. If a security is insured, it will usually be rated by the ratings organizations based on the financial strength of the insurer. For further details regarding security ratings, please see the Statement of Additional Information.
L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
| 24 Short-Term Municipal Income Fund |
On Mandatory Put Bonds, the rates shown are the current interest rates at the close of the reporting period and the dates shown represent the next mandatory put dates. Rates are set by remarketing agents and may take into consideration market supply and demand, credit quality and the current SIFMA Municipal Swap Index, 1 Month US LIBOR or 3 Month US LIBOR rates, which were 0.14%, 0.18% and 0.34%, respectively, as of the close of the reporting period.
The dates shown parenthetically on prerefunded bonds represent the next prerefunding dates.
The dates shown on debt obligations are the original maturity dates.
The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
| State debt | 16.8% | |
| Local debt | 14.1 | |
| Transportation | 13.2 | |
| Utilities | 11.6 | |
| Health care | 10.2 |
| OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/20 (Unaudited) | ||||||
| Upfront | ||||||
| premium | Termina- | Payments | Total return | Unrealized | ||
| Swap counterparty/ | received | tion | received (paid) | received by | appreciation/ | |
| Notional amount | Value | (paid) | date | by fund | or paid by fund | (depreciation) |
| Citibank, N.A. | ||||||
| $1,000,000 | $23,694 | $— | 8/12/20 | — | 0.98% minus | $23,694 |
| Municipal Market | ||||||
| Data Index AAA | ||||||
| municipal yields | ||||||
| 5 Year rate — At | ||||||
| maturity | ||||||
| Morgan Stanley & Co. International PLC | ||||||
| 1,000,000 | 23,865 | — | 8/6/20 | — | 0.98% minus | 23,865 |
| Municipal Market | ||||||
| Data Index AAA | ||||||
| municipal yields | ||||||
| 5 Year rate — At | ||||||
| maturity | ||||||
| Upfront premium received | — | Unrealized appreciation | 47,559 | |||
| Upfront premium (paid) | — | Unrealized (depreciation) | — | |||
| Total | $— | Total | $47,559 | |||
| Short-Term Municipal Income Fund 25 |
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | |||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | ||
| Municipal bonds and notes | $— | $37,876,319 | $— | ||
| Short-term investments | 476,686 | — | — | ||
| Totals by level | $476,686 | $37,876,319 | $— | ||
| Valuation inputs | |||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | ||
| Total return swap contracts | $— | $47,559 | $— | ||
| Totals by level | $— | $47,559 | $— | ||
The accompanying notes are an integral part of these financial statements.
| 26 Short-Term Municipal Income Fund |
Statement of assets and liabilities 5/31/20 (Unaudited)
| ASSETS | |
| Investment in securities, at value (Note 1): | |
| Unaffiliated issuers (identified cost $37,680,924) | $37,876,319 |
| Affiliated issuers (identified cost $476,686) (Notes 1 and 5) | 476,686 |
| Interest and other receivables | 273,234 |
| Receivable for shares of the fund sold | 41,712 |
| Receivable for investments sold | 55,827 |
| Receivable from Manager (Note 2) | 33,863 |
| Unrealized appreciation on OTC swap contracts (Note 1) | 47,559 |
| Prepaid assets | 57,403 |
| Total assets | 38,862,603 |
| LIABILITIES | |
| Payable for investments purchased | 1,094,670 |
| Payable for shares of the fund repurchased | 8,561 |
| Payable for custodian fees (Note 2) | 7,733 |
| Payable for investor servicing fees (Note 2) | 3,573 |
| Payable for Trustee compensation and expenses (Note 2) | 1,393 |
| Payable for administrative services (Note 2) | 112 |
| Payable for distribution fees (Note 2) | 8,180 |
| Distributions payable to shareholders | 1,504 |
| Other accrued expenses | 62,393 |
| Total liabilities | 1,188,119 |
| Net assets | $37,674,484 |
| REPRESENTED BY | |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $37,501,491 |
| Total distributable earnings (Note 1) | 172,993 |
| Total — Representing net assets applicable to capital shares outstanding | $37,674,484 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
| Net asset value and redemption price per class A share ($20,056,881 divided by 1,995,236 shares) | $10.05 |
| Offering price per class A share (100/97.75 of $10.05)* | $10.28 |
| Net asset value and offering price per class B share ($131,442 divided by 13,076 shares)** | $10.05 |
| Net asset value and offering price per class C share ($299,354 divided by 29,792 shares)** | $10.05 |
| Net asset value, offering price and redemption price per class R6 share | |
| ($1,858,856 divided by 185,008 shares) | $10.05 |
| Net asset value, offering price and redemption price per class Y share | |
| ($15,327,951 divided by 1,525,023 shares) | $10.05 |
* On single retail sales of less than $100,000. On sales of $100,000 or more 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.
| Short-Term Municipal Income Fund 27 |
Statement of operations Six months ended 5/31/20 (Unaudited)
| INVESTMENT INCOME | |
| Interest (including interest income of $3,138 from investments in affiliated issuers) (Note 5) | $304,891 |
| Total investment income | 304,891 |
| EXPENSES | |
| Compensation of Manager (Note 2) | 44,012 |
| Investor servicing fees (Note 2) | 9,733 |
| Custodian fees (Note 2) | 4,971 |
| Trustee compensation and expenses (Note 2) | 787 |
| Distribution fees (Note 2) | 25,839 |
| Administrative services (Note 2) | 540 |
| Auditing and tax fees | 40,827 |
| Blue sky expense | 42,268 |
| Other | 10,948 |
| Fees waived and reimbursed by Manager (Note 2) | (100,097) |
| Total expenses | 79,828 |
| Expense reduction (Note 2) | (14) |
| Net expenses | 79,814 |
| Net investment income | 225,077 |
| REALIZED AND UNREALIZED GAIN (LOSS) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (Notes 1 and 3) | (32,063) |
| Total net realized loss | (32,063) |
| Change in net unrealized appreciation (depreciation) on: | |
| Securities from unaffiliated issuers | (22,913) |
| Swap contracts | 47,559 |
| Total change in net unrealized appreciation | 24,646 |
| Net loss on investments | (7,417) |
| Net increase in net assets resulting from operations | $217,660 |
The accompanying notes are an integral part of these financial statements.
| 28 Short-Term Municipal Income Fund |
Statement of changes in net assets
| INCREASE IN NET ASSETS | Six months ended 5/31/20* | Year ended 11/30/19 |
| Operations | ||
| Net investment income | $225,077 | $393,721 |
| Net realized gain (loss) on investments | (32,063) | 21,333 |
| Change in net unrealized appreciation of investments | 24,646 | 255,963 |
| Net increase in net assets resulting from operations | 217,660 | 671,017 |
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Taxable net investment income | ||
| Class A | (4,161) | (1,717) |
| Class B | (32) | (22) |
| Class C | (75) | (37) |
| Class M | — | (2) |
| Class R6 | (312) | (166) |
| Class Y | (1,910) | (934) |
| From tax-exempt net investment income | ||
| Class A | (134,192) | (205,098) |
| Class B | (845) | (2,349) |
| Class C | (1,126) | (2,735) |
| Class M | — | (198) |
| Class R6 | (12,488) | (24,078) |
| Class Y | (86,115) | (148,278) |
| Increase from capital share transactions (Note 4) | 12,938,693 | 5,436,238 |
| Total increase in net assets | 12,915,097 | 5,721,641 |
| NET ASSETS | ||
| Beginning of period | 24,759,387 | 19,037,746 |
| End of period | $37,674,484 | $24,759,387 |
* Unaudited.
The accompanying notes are an integral part of these financial statements.
| Short-Term Municipal Income Fund 29 |
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS | LESS DISTRIBUTIONS | RATIOS AND SUPPLEMENTAL DATA | ||||||||||
| Ratio | ||||||||||||
| Net realized | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | Total return | Net assets, | Ratio of expenses | income (loss) | |||||
| beginning | Net investment | gain (loss) | investment | net investment | Total | Net asset value, | at net asset value | end of period | to average | to average | Portfolio | |
| Period ended | of period | income (loss) | on investments | operations | income | distributions | end of period | (%)a | (in thousands) | net assets (%)b,c | net assets (%)c | turnover (%) |
| Class A | ||||||||||||
| May 31, 2020 ** | $10.08 | .07 | (.03) | .04 | (.07) | (.07) | $10.05 | .42* | $20,057 | .30* | .67* | 26* |
| November 30, 2019 | 9.95 | .17 | .13 | .30 | (.17) | (.17) | 10.08 | 2.99 | 14,450 | .60 | 1.67 | 83 |
| November 30, 2018 | 9.97 | .14 | (.02) | .12 | (.14) | (.14) | 9.95 | 1.22 | 9,792 | .61 | 1.43 | 76 |
| November 30, 2017 | 9.92 | .09 | .05 | .14 | (.09) | (.09) | 9.97 | 1.45 | 8,067 | .60d | .93d | 156 |
| November 30, 2016 | 10.01 | .06 | (.09) | (.03) | (.06) | (.06) | 9.92 | (.33) | 10,217 | .60d | .56d | 46 |
| November 30, 2015 | 10.04 | .05 | (.03) | .02 | (.05) | (.05) | 10.01 | .23 | 10,151 | .60d | .52d | 45 |
| Class B | ||||||||||||
| May 31, 2020 ** | $10.08 | .06 | (.03) | .03 | (.06) | (.06) | $10.05 | .32* | $131 | .40* | .57* | 26* |
| November 30, 2019 | 9.95 | .15 | .12 | .27 | (.14) | (.14) | 10.08 | 2.78 | 162 | .80 | 1.48 | 83 |
| November 30, 2018 | 9.97 | .12 | (.02) | .10 | (.12) | (.12) | 9.95 | 1.01 | 168 | .81 | 1.23 | 76 |
| November 30, 2017 | 9.91 | .07 | .06 | .13 | (.07) | (.07) | 9.97 | 1.35 | 63 | .80d | .74d | 156 |
| November 30, 2016 | 10.01 | .04 | (.10) | (.06) | (.04) | (.04) | 9.91 | (.63) | 77 | .80d | .36d | 46 |
| November 30, 2015 | 10.04 | .03 | (.03) | —e | (.03) | (.03) | 10.01 | .02 | 79 | .80d | .33d | 45 |
| Class C | ||||||||||||
| May 31, 2020 ** | $10.08 | .03 | (.02) | .01 | (.04) | (.04) | $10.05 | .06* | $299 | .67* | .30* | 26* |
| November 30, 2019 | 9.94 | .09 | .14 | .23 | (.09) | (.09) | 10.08 | 2.32 | 311 | 1.35 | .93 | 83 |
| November 30, 2018 | 9.97 | .07 | (.03) | .04 | (.07) | (.07) | 9.94 | .36 | 280 | 1.36 | .68 | 76 |
| November 30, 2017 | 9.91 | .02 | .06 | .08 | (.02) | (.02) | 9.97 | .81 | 314 | 1.33d | .22d | 156 |
| November 30, 2016 | 10.01 | —e | (.10) | (.10) | —e | —e | 9.91 | (.99) | 311 | 1.16d | —d,f | 46 |
| November 30, 2015 | 10.04 | —e | (.03) | (.03) | —e | —e | 10.01 | (.28) | 141 | 1.11d | .03d | 45 |
| Class R6 | ||||||||||||
| May 31, 2020 ** | $10.08 | .08 | (.02) | .06 | (.09) | (.09) | $10.05 | .56* | $1,859 | .17* | .80* | 26* |
| November 30, 2019 | 9.94 | .20 | .13 | .33 | (.19) | (.19) | 10.08 | 3.37 | 1,347 | .33 | 1.95 | 83 |
| November 30, 2018 † | 9.93 | .10 | .01 | .11 | (.10) | (.10) | 9.94 | 1.10* | 1,091 | .17* | 1.02* | 76 |
| Class Y | ||||||||||||
| May 31, 2020 ** | $10.08 | .08 | (.02) | .06 | (.09) | (.09) | $10.05 | .55* | $15,328 | .17* | .79* | 26* |
| November 30, 2019 | 9.94 | .19 | .14 | .33 | (.19) | (.19) | 10.08 | 3.34 | 8,489 | .35 | 1.93 | 83 |
| November 30, 2018 | 9.97 | .17 | (.03) | .14 | (.17) | (.17) | 9.94 | 1.37 | 7,694 | .36 | 1.66 | 76 |
| November 30, 2017 | 9.91 | .12 | .06 | .18 | (.12) | (.12) | 9.97 | 1.81 | 7,223 | .35d | 1.18d | 156 |
| November 30, 2016 | 10.01 | .08 | (.10) | (.02) | (.08) | (.08) | 9.91 | (.18) | 10,606 | .35d | .81d | 46 |
| November 30, 2015 | 10.04 | .08 | (.03) | .05 | (.08) | (.08) | 10.01 | .48 | 3,575 | .35d | .75d | 45 |
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 30 Short-Term Municipal Income Fund | Short-Term Municipal Income Fund 31 |
Financial highlights cont.
* Not annualized.
** Unaudited.
† For the period May 22, 2018 (commencement of operations) to November 30, 2018.
a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
b Includes amounts paid through expense offset and brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.
c Reflects an involuntary contractual expense limitations in effect during the period. As a result of such limitations, the expenses of each class reflect a reduction of the following amount (Note 2):
| Percentage of average net assets | ||||||
| 5/31/20 | 11/30/19 | 11/30/18 | 11/30/17 | 11/30/16 | 11/30/15 | |
| Class A | 0.32% | 0.84% | 1.01% | 1.05% | 1.02% | 0.94% |
| Class B | 0.32 | 0.84 | 1.01 | 1.05 | 1.02 | 0.94 |
| Class C | 0.32 | 0.84 | 1.01 | 1.05 | 1.02 | 0.94 |
| Class R6 | 0.32 | 0.84 | 0.54 | N/A | N/A | N/A |
| Class Y | 0.32 | 0.84 | 1.01 | 1.05 | 1.02 | 0.94 |
d Reflects a voluntary waiver of certain fund expenses in effect during the period relating to the enhancement of certain annualized net yields for the fund. As a result of such waivers, the expenses of each class reflect a reduction of the following amounts as a percentage of average net assets.
| 11/30/17 | 11/30/16 | 11/30/15 | |
| Class A | N/A | N/A | N/A |
| Class B | N/A | N/A | N/A |
| Class C | 0.02% | 0.19% | 0.24% |
| Class Y | N/A | N/A | N/A |
e Amount represents less than $0.01 per share.
f Amount represents less than 0.01%.
The accompanying notes are an integral part of these financial statements.
| 32 Short-Term Municipal Income Fund |
Notes to financial statements 5/31/20 (Unaudited)
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from December 1, 2019 through May 31, 2020.
Putnam Short-Term Municipal Income Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek as high a level of current income exempt from federal income tax as Putnam Management believes is consistent with preservation of capital. The fund invests mainly in bonds that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax (AMT)) and that have short-term maturities (i.e., three years or less). The bonds the fund invests in are mainly investment-grade in quality. Under normal circumstances, Putnam Management invests at least 80% of the fund’s net assets in tax-exempt investments, which for purposes of this policy include investments paying interest subject to the federal AMT for individuals. This investment policy cannot be changed without the approval of the fund’s shareholders. Putnam Management may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.
The fund offers class A, class B, class C, class R6 and class Y shares. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A shares are sold with a maximum front-end sales charge of 2.25%. Class A shares generally are not subject to a contingent deferred sales charge and class R6 and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within two years of purchase. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and generally convert to class A shares after approximately ten years. Class R6 shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C and class R6 shares may differ based on the distribution fee of each class, which is identified in Note 2. 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 R6 shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the fund’s Amended and Restated Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Note 1: Significant accounting policies
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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only
| Short-Term Municipal Income Fund 33 |
with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
Tax-exempt bonds and notes are generally valued on the basis of valuations provided by an independent pricing service approved by the Trustees. Such services use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, including amortization and accretion of premiums and discounts on debt securities, is recorded on the accrual basis.
Total return swap contracts The fund entered into OTC and/or centrally cleared total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, to hedge sector exposure and for gaining exposure to specific sectors.
To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC and/or centrally cleared total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market maker. Any change is recorded as an unrealized gain or loss on OTC total return swaps. Daily fluctuations in the value of centrally cleared total return swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC and/or centrally cleared total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC total return swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared total return swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared total return swap contracts due to the clearinghouse guarantee fund and
| 34 Short-Term Municipal Income Fund |
other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.
OTC and/or centrally cleared total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund did not have a net liability position on open derivative contracts subject to the Master Agreements.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.
The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either
| Short-Term Municipal Income Fund 35 |
short-term or long-term capital losses. At November 30, 2019, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:
| Loss carryover | ||
| Short-term | Long-term | Total |
| $7,994 | $27,758 | $35,752 |
Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The aggregate identified cost on a tax basis is $38,156,449, resulting in gross unrealized appreciation and depreciation of $484,606 and $240,491, respectively, or net unrealized appreciation of $244,115.
Distributions to shareholders Income dividends are recorded daily by the fund and are paid monthly. Distributions from capital gains, 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. 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.
Expenses of the Trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:
| 0.440% | of the first $5 billion, | 0.240% | of the next $50 billion, | |
| 0.390% | of the next $5 billion, | 0.220% | of the next $50 billion, | |
| 0.340% | of the next $10 billion, | 0.210% | of the next $100 billion and | |
| 0.290% | of the next $10 billion, | 0.205% | of any excess thereafter. |
For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.140% of the fund’s average net assets.
Putnam Management has contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through March 30, 2022, to the extent that total expenses of the fund (excluding brokerage, interest, taxes, investment-related expenses, payments under distribution plans, extraordinary expenses, payments under the fund’s investor servicing contract and acquired fund fees and expenses, but including payments under the fund’s investment management contract) would exceed an annual rate of 0.28% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $31,412 as a result of this limit.
Putnam Management has also contractually agreed, through March 30, 2022, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $68,685 as a result of this limit.
| 36 Short-Term Municipal Income Fund |
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.25% of the average net assets of the portion of the fund managed by PIL.
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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.
Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.
During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:
| Class A | $5,955 | Class R6 | 376 | |
| Class B | 44 | Class Y | 3,256 | |
| Class C | 102 | Total | $9,733 |
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $14 under the expense offset arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $26, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
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 and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to the following share classes pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (Maximum %) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (Approved %) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:
| Short-Term Municipal Income Fund 37 |
| Maximum % | Approved % | Amount | |
| Class A | 0.35% | 0.25% | $23,892 |
| Class B | 1.00% | 0.45% | 316 |
| Class C | 1.00% | 1.00% | 1,631 |
| Total | $25,839 |
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies from the sale of class A shares, and received no monies in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A redemptions.
Note 3: Purchases and sales of securities
During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:
| Cost of purchases | Proceeds from sales | |
| Investments in securities (Long-term) | $18,676,066 | $7,254,980 |
| U.S. government securities (Long-term) | — | — |
| Total | $18,676,066 | $7,254,980 |
The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.
Note 4: Capital shares
At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:
| SIX MONTHS ENDED 5/31/20 | YEAR ENDED 11/30/19 | |||
| Class A | Shares | Amount | Shares | Amount |
| Shares sold | 1,832,473 | $18,456,215 | 1,019,981 | $10,214,720 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 13,505 | 135,856 | 20,068 | 201,695 |
| 1,845,978 | 18,592,071 | 1,040,049 | 10,416,415 | |
| Shares repurchased | (1,284,325) | (12,925,003) | (590,696) | (5,917,377) |
| Net increase | 561,653 | $5,667,068 | 449,353 | $4,499,038 |
| SIX MONTHS ENDED 5/31/20 | YEAR ENDED 11/30/19 | |||
| Class B | Shares | Amount | Shares | Amount |
| Shares sold | 601 | $6,003 | — | $— |
| Shares issued in connection with | ||||
| reinvestment of distributions | 87 | 870 | 237 | 2,371 |
| 688 | 6,873 | 237 | 2,371 | |
| Shares repurchased | (3,679) | (36,818) | (1,096) | (10,987) |
| Net decrease | (2,991) | $(29,945) | (859) | $(8,616) |
| 38 Short-Term Municipal Income Fund |
| SIX MONTHS ENDED 5/31/20 | YEAR ENDED 11/30/19 | |||
| Class C | Shares | Amount | Shares | Amount |
| Shares sold | 8,791 | $88,454 | 11,687 | $117,321 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 119 | 1,193 | 272 | 2,736 |
| 8,910 | 89,647 | 11,959 | 120,057 | |
| Shares repurchased | (9,999) | (99,903) | (9,286) | (93,496) |
| Net increase (decrease) | (1,089) | $(10,256) | 2,673 | $26,561 |
| YEAR ENDED 11/30/19* | ||||
| Class M | Shares | Amount | ||
| Shares sold | — | $— | ||
| Shares issued in connection with reinvestment of | ||||
| distributions | 19 | 187 | ||
| 19 | 187 | |||
| Shares repurchased | (1,271) | (12,811) | ||
| Net decrease | (1,252) | $(12,624) | ||
| SIX MONTHS ENDED 5/31/20 | YEAR ENDED 11/30/19 | |||
| Class R6 | Shares | Amount | Shares | Amount |
| Shares sold | 75,985 | $760,197 | 58,287 | $584,042 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 1,179 | 11,849 | 2,345 | 23,549 |
| 77,164 | 772,046 | 60,632 | 607,591 | |
| Shares repurchased | (25,818) | (259,824) | (36,713) | (367,963) |
| Net increase | 51,346 | $512,222 | 23,919 | $239,628 |
| SIX MONTHS ENDED 5/31/20 | YEAR ENDED 11/30/19 | |||
| Class Y | Shares | Amount | Shares | Amount |
| Shares sold | 1,087,187 | $10,865,502 | 626,198 | $6,268,882 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 8,536 | 85,781 | 14,786 | 148,589 |
| 1,095,723 | 10,951,283 | 640,984 | 6,417,471 | |
| Shares repurchased | (413,015) | (4,151,679) | (572,314) | (5,725,220) |
| Net increase | 682,708 | $6,799,604 | 68,670 | $692,251 |
* Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.
| Short-Term Municipal Income Fund 39 |
Note 5: Affiliated transactions
Transactions during the reporting period with any company which is under common ownership or control were as follows:
| Shares | |||||
| outstanding | |||||
| and fair | |||||
| Fair value as | Purchase | Sale | Investment | value as | |
| Name of affiliate | of 11/30/19 | cost | proceeds | income | of 5/31/20 |
| Short-term investments | |||||
| Putnam Short Term | |||||
| Investment Fund* | $746,542 | $13,848,078 | $14,117,934 | $3,138 | $476,686 |
| Total Short-term | |||||
| investments | $746,542 | $13,848,078 | $14,117,934 | $3,138 | $476,686 |
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.
Note 6: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default.
On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. LIBOR has historically been a common benchmark interest rate index used to make adjustments to variable-rate loans. It is used throughout global banking and financial industries to determine interest rates for a variety of financial instruments and borrowing arrangements. The transition process might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based investments. While some LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate-setting methodology, not all may have such provisions and there may be significant uncertainty regarding the effectiveness of any such alternative methodologies. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Beginning in January 2020, global financial markets have experienced, and may continue, to experience significant volatility resulting from the spread of a virus known as COVID–19. The outbreak of COVID–19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand, and general market uncertainty. The effects of COVID–19 have adversely affected, and may continue to adversely affect, the global economy, the economies of certain nations, and individual issuers, all of which may negatively impact the fund’s performance.
Note 7: Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:
| OTC total return swap contracts (notional) | $860,000 |
The following is a summary of the fair value of derivative instruments as of the close of the reporting period:
| Fair value of derivative instruments as of the close of the reporting period | ||||
| ASSET DERIVATIVES | LIABILITY DERIVATIVES | |||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Fair value | liabilities location | Fair value |
| Interest rate contracts | Receivables | $47,559 | Payables | $— |
| Total | $47,559 | $— | ||
| 40 Short-Term Municipal Income Fund |
The following is a summary of change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (Note 1) (there were no realized gains or losses on derivative instruments):
| Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) | ||
| on investments | ||
| Derivatives not accounted for as | ||
| hedging instruments under ASC 815 | Swaps | Total |
| Interest rate contracts | $47,559 | $47,559 |
| Total | $47,559 | $47,559 |
Note 8: Offsetting of financial and derivative assets and liabilities
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.
| Citibank, N.A. | Morgan Stanley & Co. International PLC |
Total | |
| Assets: | |||
| OTC Total return swap contracts*# | $23,694 | $23,865 | $47,559 |
| Total Assets | $23,694 | $23,865 | $47,559 |
| Liabilities: | |||
| OTC Total return swap contracts*# | — | — | — |
| Total Liabilities | $— | $— | $— |
| Total Financial and Derivative Net Assets | $23,694 | $23,865 | $47,559 |
| Total collateral received (pledged)†## | $— | $— | |
| Net amount | $23,694 | $23,865 | |
| Controlled collateral received (including TBA | |||
| commitments)** | $— | $— | $— |
| Uncontrolled collateral received | $— | $— | $— |
| Collateral (pledged) (including TBA commitments)** | $— | $— | $— |
* Excludes premiums, if any. Included in unrealized appreciation and depreciation on OTC swap contracts on the Statement of assets and liabilities.
** Included with Investments in securities on the Statement of assets and liabilities.
† Additional collateral may be required from certain brokers based on individual agreements.
# Covered by master netting agreement (Note 1).
## Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.
Note 9: Change in independent accountants
On March 20, 2020, the Audit, Compliance and Distributions Committee of the Trustees of the Putnam Funds approved and recommended the decision to change the Fund’s independent accountant and to not retain KPMG LLP, and on April 3, 2020, upon request of the Putnam Funds, KPMG LLP provided a letter of resignation. During the two previous fiscal years, KPMG LLP audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope, or accounting principle. Further, in connection with its audits for the two previous fiscal years and the subsequent interim period through April 3,
| Short-Term Municipal Income Fund 41 |
2020: (i) there were no disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of KPMG LLP would have caused it to make reference to the subject matter of the disagreements in its report on the Fund’s financial statements for such years, and (ii) there were no “reportable events” of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
On April 17, 2020, the Audit, Compliance and Distributions Committee of the Trustees of the Putnam Funds approved and recommended the decision to appoint PricewaterhouseCoopers LLP as the Fund’s independent accountant.
| 42 Short-Term Municipal Income Fund |
Putnam family of funds
The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial advisor or call Putnam Investor Services at 1-800-225-1581. Please read the prospectus carefully before investing.
| Blend | Income |
| Capital Spectrum Fund | Convertible Securities Fund |
| Emerging Markets Equity Fund | Diversified Income Trust |
| Equity Spectrum Fund | Floating Rate Income Fund |
| Focused Equity Fund | Global Income Trust |
| Global Equity Fund | Government Money Market Fund* |
| International Capital Opportunities Fund | High Yield Fund |
| International Equity Fund | Income Fund |
| Multi-Cap Core Fund | Money Market Fund† |
| Research Fund | Mortgage Opportunities Fund |
| Mortgage Securities Fund | |
| Global Sector | Short Duration Bond Fund |
| Global Health Care Fund | Ultra Short Duration Income Fund |
| Global Technology Fund | |
| Tax-free Income | |
| Growth | AMT-Free Municipal Fund |
| Growth Opportunities Fund | Intermediate-Term Municipal Income Fund |
| Small Cap Growth Fund | Short-Term Municipal Income Fund |
| Sustainable Future Fund | Tax Exempt Income Fund |
| Sustainable Leaders Fund | Tax-Free High Yield Fund |
| Value | State tax-free income funds‡: |
| Equity Income Fund | California, Massachusetts, Minnesota, |
| International Value Fund | New Jersey, New York, Ohio, and Pennsylvania. |
| Small Cap Value Fund |
| Short-Term Municipal Income Fund 43 |
| Absolute Return | Asset Allocation |
| Fixed Income Absolute Return Fund | Dynamic Risk Allocation Fund |
| Multi-Asset Absolute Return Fund | George Putnam Balanced Fund |
| Putnam PanAgora** | Dynamic Asset Allocation Balanced Fund |
| Putnam PanAgora Managed Futures Strategy | Dynamic Asset Allocation Conservative Fund |
| Putnam PanAgora Market Neutral Fund | Dynamic Asset Allocation Growth Fund |
| Putnam PanAgora Risk Parity Fund | |
| RetirementReady® Maturity Fund | |
| RetirementReady® 2060 Fund | |
| RetirementReady® 2055 Fund | |
| RetirementReady® 2050 Fund | |
| RetirementReady® 2045 Fund | |
| RetirementReady® 2040 Fund | |
| RetirementReady® 2035 Fund | |
| RetirementReady® 2030 Fund | |
| RetirementReady® 2025 Fund | |
| RetirementReady® 2020 Fund |
* You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
† You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
‡ Not available in all states.
** Sub-advised by PanAgora Asset Management.
Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.
| 44 Short-Term Municipal Income Fund |
Fund information
Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.
| Investment Manager | Trustees | Michael J. Higgins |
| Putnam Investment | Kenneth R. Leibler, Chair | Vice President, Treasurer, |
| Management, LLC | Liaquat Ahamed | and Clerk |
| 100 Federal Street | Ravi Akhoury | |
| Boston, MA 02110 | Barbara M. Baumann | Jonathan S. Horwitz |
| Katinka Domotorffy | Executive Vice President, | |
| Investment Sub-Advisor | Catharine Bond Hill | Principal Executive Officer, |
| Putnam Investments Limited | Paul L. Joskow | and Compliance Liaison |
| 16 St James’s Street | George Putnam, III | |
| London, England SW1A 1ER | Robert L. Reynolds | Richard T. Kircher |
| Manoj P. Singh | Vice President and BSA | |
| Marketing Services | Mona K. Sutphen | Compliance Officer |
| Putnam Retail Management | ||
| 100 Federal Street | Officers | Susan G. Malloy |
| Boston, MA 02110 | Robert L. Reynolds | Vice President and |
| President | Assistant Treasurer | |
| Custodian | ||
| State Street Bank | Robert T. Burns | Denere P. Poulack |
| and Trust Company | Vice President and | Assistant Vice President, Assistant |
| Chief Legal Officer | Clerk, and Assistant Treasurer | |
| Legal Counsel | ||
| Ropes & Gray LLP | James F. Clark | Janet C. Smith |
| Vice President, Chief Compliance | Vice President, | |
| Officer, and Chief Risk Officer | Principal Financial Officer, | |
| Principal Accounting Officer, | ||
| Nancy E. Florek | and Assistant Treasurer | |
| Vice President, Director of | ||
| Proxy Voting and Corporate | Mark C. Trenchard | |
| Governance, Assistant Clerk, | Vice President | |
| and Assistant Treasurer |
This report is for the information of shareholders of Putnam Short-Term Municipal Income Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| Item 2. Code of Ethics: |
| Not applicable |
| Item 3. Audit Committee Financial Expert: |
| Not applicable |
| Item 4. Principal Accountant Fees and Services: |
| Not applicable |
| Item 5. Audit Committee of Listed Registrants |
| Not applicable |
| Item 6. Schedule of Investments: |
| The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
| Not applicable |
| Item 8. Portfolio Managers of Closed-End Investment Companies |
| Not Applicable |
| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
| Not applicable |
| Item 10. Submission of Matters to a Vote of Security Holders: |
| Not applicable |
| Item 11. Controls and Procedures: |
| (a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 180 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. |
| (b) Changes in internal control over financial reporting: Not applicable |
| Item 12. Disclosures of Securities Lending Activities for Closed-End Investment Companies: |
| Not Applicable |
| Item 13. Exhibits: |
| (a)(1) Not applicable |
| (a)(4) Change in registrant's independent public accountant. |
| (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith. |
| SIGNATURES |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
| Putnam Funds Trust |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Accounting Officer |
| Date: July 29, 2020 |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
| By (Signature and Title): |
| /s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer |
| Date: July 29, 2020 |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Financial Officer |
| Date: July 29, 2020 |