N-CSRS 1 a_intertermmuniinc.htm PUTNAM FUNDS TRUST a_intertermmuniinc.htm


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: Stephen Tate, 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, 2021
Date of reporting period: December 1, 2020 — May 31, 2021



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:




Message from the Trustees

July 8, 2021

Dear Fellow Shareholder:

This summer, the economy is in a much different condition than a year ago, or even six months ago. Most states have lifted the Covid-19 pandemic-related restrictions, and U.S. gross domestic product has returned nearly to pre-2020 levels. However, the global economy is a different story. Beyond our shores, many nations lag the United States in vaccination rates and business activity.

While there are reasons to feel some relief, it’s important to recognize what may be a new normal. Many changes hastened by the pandemic could be lasting. Dynamic, well-managed companies have adapted to seize new, more sustainable growth opportunities.

An active investment philosophy is well suited to this time. Putnam’s research teams are analyzing the fundamentals of what has stayed the same and what has changed to uncover valuable investment insights and potential risks.

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 U.S. Treasuries and corporate bonds, the interest paid on municipal bonds is generally free from federal income taxes.

Putnam Intermediate-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 investment-grade bonds and normally maintains an average dollar-weighted maturity of between three and ten years. Because an issuer’s fiscal health can affect the prices of its bonds, this flexibility is a distinct advantage.


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The bottom line: Income you keep after paying taxes matters more than pre-tax yield

You keep more income from municipal bonds because it is exempt from most state and federal income taxes.


Sources: Putnam, Bloomberg Index Services Limited, as of 5/31/21. 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. Corporate Bond Index, an unmanaged index of U.S. dollar-denominated, investment-grade, fixed-rate, taxable corporate 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. Annual after-tax income is 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. The income data is based on a hypothetical $100,000 investment.

Defaults in the municipal bond market have been a relative rarity


Source: Moody’s Investors Service, Annual U.S. Municipal Bond Defaults and Recoveries, Five-Year Average Cumulative Default Rates, 1970–2019 (July 2020). Most recent data available.

Intermediate-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 4.00%; 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.

Returns for periods of less than one year are not annualized.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

Lipper peer group average provided by Lipper, a Refinitiv company.


This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 5/31/21. See above and pages 9–11 for additional fund performance information. Index descriptions can be found on pages 15–16.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

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Garrett, how was the market for intermediate-term municipal bonds during the reporting period?

Intermediate-term municipal bonds performed relatively well, ending the period in positive territory despite a sharp rise in interest rates. [Bond prices move inversely to interest rates.] The yield on the benchmark 10-year U.S. Treasury note rose from 0.97% on November 30, 2020, to 1.56% on May 31, 2021. Interest rates moved higher in response to the reopening of the U.S. economy and investors pricing in higher inflation expectations. The rise was most pronounced in February 2021. Investors were worried that additional stimulus measures would accelerate the economic recovery and inflation. This resulted in higher bond yields further out on the yield curve while short-term interest rates remained near zero, anchored by the Federal Reserve’s monetary policy. Underscoring inflation fears, oil prices spiked to their highest in more than a year on March 15, 2021.

Municipals regained their footing in March 2021, with President Biden’s signing of the $1.9 trillion American Rescue Plan. This Covid-19-relief bill included another round of stimulus checks and $350 billion in aid to state and local

Intermediate-Term Municipal Income Fund 5 

 



Allocations are shown as a percentage of the fund’s net assets as of 5/31/21. 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 5/31/21. 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.

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governments. Later in the month, with inflation concerns still on the minds of investors, the Fed downplayed the possibility that it would reduce its support for the economy any time soon. Fed officials also revised their economic outlook for stronger growth for 2021 and affirmed that they still expected to keep interest rates near zero until 2023. Inflation fears eased, and the bellwether 10-year U.S. Treasury bond rate fell and remained in a narrow trading range for the balance of the period.

The higher rates weighed on all interest-rate sensitive, fixed income securities. For the six months ended May 31, 2021, the Bloomberg Barclays 7-Year Municipal Bond Index [the fund’s benchmark] rose 0.60%, outperforming the broader U.S. fixed income markets, which delivered a negative result, and U.S. Treasuries. We believe this outcome was due to the robust technical backdrop, which saw record demand exceeding average supply.

Intermediate-term municipal bonds underperformed their long-term and short-term cohorts. From a credit perspective, higher-yielding, lower-rated municipal bonds outperformed investment-grade municipal bonds. Within revenue-based bonds, the top-performing sectors for the period were hospitals and transportation. Electric utility and water- and sewer-backed bonds were the biggest underperformers.

How did the fund perform during the period?

For the six months ended May 31, 2021, the fund outperformed its benchmark and the average return of its Lipper peer group, Intermediate Municipal Debt Funds.

What strategies or holdings influenced the fund’s performance?

The fund began the period with a duration positioning, or interest-rate sensitivity, that was generally neutral relative to the fund’s Lipper peer group. As part of this strategy, the fund had an overweight exposure to the longer intermediate portion of the yield curve focused on bonds with maturities of 15 years.


With regard to credit risk, the fund had an overweight position in lower-investment-grade securities rated A and BBB and some portions of the lower-rated, high-yield municipal bond market relative to its Lipper peer group. This positioning reflected our view that with economic growth improving, credit spreads were likely to narrow. [Credit spreads reflect the difference in yield between higher- and lower-rated municipal bonds.] Narrowing credit spreads tend to reflect improving creditworthiness, which, in turn, can lead to higher prices.

These strategies were intact through the end of 2020 when the municipal bond market typically sees large reinvestment flows at the start of a new year. These flows were met with very muted supply, which helped to support municipal bond prices. With valuations high and absolute rates nearing historical lows in late January 2021, we reduced our interest-rate exposure to a modestly short position. We achieved this by selling higher-rated holdings and securities with maturities of 10 to 20 years while maintaining the portfolio’s overweight to lower-investment-grade securities rated A and BBB and lower-rated, high-yield municipal bonds. This resulted in a more neutral yield-curve positioning and a short duration posture relative to the fund’s Lipper peer group for the balance of the period. From a sector- or industry-positioning perspective, the fund held overweight exposures to utilities, continuing-care retirement communities, and private higher education relative to the fund’s Lipper peer group.

Intermediate-Term Municipal Income Fund 7 

 


The fund’s exposure to state and local governments was limited to those with, in our view, diverse tax bases and the ability to enact broad revenue enhancements or expense cuts. As part of our strategy for state debt, we held an overweight exposure to Illinois relative to the Lipper peer group. We believe Illinois’s financial profile continues to stabilize and that its flexibility and credit fundamentals were not completely reflected by market spreads.

We remain cautious about Puerto Rico due to what we believe are its seemingly fragile economy, weak demographic trends, poor-quality infrastructure, volatile political environment, and history of fiscal mismanagement. As such, the fund remained underweight in its exposure to uninsured Puerto Rico municipal debt relative to its Lipper peer group. We continue to monitor the Commonwealth’s ongoing restructuring efforts for potential opportunities.

What is your outlook for the municipal bond market as we head into the second half of 2021?

If an infrastructure bill is passed, it would likely be a positive for many municipal borrowers, particularly state and local governments, transit agencies, airports, and other entities that typically finance transportation infrastructure. Water/sewer and electric utilities are also likely to benefit from a broad infrastructure bill. In our view, federal grants for these projects would reduce the need for municipal borrowers to issue debt to cover these essential services. This could increase fiscal flexibility for these borrowers while avoiding higher debt burdens.

As the U.S. economy gains momentum and sectors reopen more fully, the Fed may begin to pivot from its extremely supportive stance toward a less dovish stance. However, we expect the transition to tighter monetary policy will be very gradual. This process may push U.S. Treasury rates higher, which ultimately would dampen price returns from rate-sensitive, fixed income securities, including municipal bonds, in our view.

We continue to believe the greatest opportunities reside in the lower parts of the investment-grade universe as well as the high-yield sectors at this point in the economic recovery. Defaults, despite pandemic-related challenges, remained low and within long-term ranges during the period. In 2020, the default rate represented less than 0.25% of the overall municipal bond market, according to Municipal Market Analytics. Defaults within the investment-grade-rated universe were a rare occurrence.

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.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2021, 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 5/31/21

  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  24.40%  2.70%  16.08%  3.03%  13.95%  4.45%  5.20%  1.85% 
After sales charge  19.43  2.19  11.44  2.19  9.40  3.04  1.00  –2.23 
Class B (3/18/13)                 
Before CDSC  18.65  2.11  12.70  2.42  11.96  3.84  4.59  1.54 
After CDSC  18.65  2.11  10.70  2.05  8.96  2.90  –0.41  –3.43 
Class C (3/18/13)                 
Before CDSC  17.27  1.96  11.88  2.27  11.48  3.69  4.44  1.46 
After CDSC  17.27  1.96  11.88  2.27  11.48  3.69  3.44  0.47 
Class R6 (5/22/18)                 
Net asset value  27.17  2.97  17.73  3.32  15.01  4.77  5.53  2.01 
Class Y (3/18/13)                 
Net asset value  26.88  2.94  17.46  3.27  14.73  4.69  5.37  1.88 

 

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 4.00% sales charge, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% 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.

Class B and C share performance reflects conversion to class A shares after eight years.

Intermediate-Term Municipal Income Fund 9 

 


Fund price and distribution information For the six-month period ended 5/31/21

Distributions  Class A  Class B  Class C  Class R6  Class Y 
Number  6 6  6  6  6 
Income1  $0.078334  $0.046357  $0.037754  $0.095329  $0.091867 
Capital gains2               
Long-term gains  0.032900  0.032900  0.032900  0.032900  0.032900 
Short-term gains  0.135500  0.135500  0.135500  0.135500  0.135500 
Total  $0.246734  $0.214757  $0.206154  $0.263729  $0.260267 
  Before    After  Net  Net  Net  Net 
  sales    sales  asset  asset  asset  asset 
Share value  charge    charge  value  value  value  value 
11/30/20  $10.80    $11.25  $10.81  $10.81  $10.80  $10.80 
5/31/21  10.75    11.20  10.76  10.76  10.75  10.74 
  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  1.26%    1.21%  0.66%  0.51%  1.57%  1.51% 
Taxable equivalent4  2.13    2.04  1.11  0.86  2.65  2.55 
Current 30-day               
SEC yield (with               
expense limitation)5,6  N/A    0.30  –0.27  –0.43  0.63  0.56 
Taxable equivalent4  N/A    0.51  N/A  N/A  1.06  0.95 
Current 30-day               
SEC yield (without               
expense limitation)6  N/A    –0.56  –1.17  –1.33  –0.27  –0.34 

 

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 (4.00% 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 tax rate for 2021. Results for investors subject to lower tax rates would not be as advantageous.

5 For a portion of the periods, the fund had expense limitations, without which returns 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.

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Comparative index returns For periods ended 5/31/21

  Life of  Annual    Annual    Annual     
  fund  average  5 years  average  3 years  average  1 year  6 months 
Bloomberg Barclays 7-Year                 
Municipal Bond Index  28.61%  3.12%  16.34%  3.07%  14.75%  4.69%  3.49%  0.60% 
Lipper Intermediate                 
Municipal Debt Funds  24.94  2.74  14.75  2.79  13.45  4.29  5.43  1.74 
category average*                 

 

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

Lipper peer group average provided by Lipper, a Refinitiv company.

* Over the 6-month, 1-year, 3-year, 5-year, and life-of-fund periods ended 5/31/21, there were 221, 214, 185, 161, and 140 funds, respectively, in this Lipper category.

Fund performance as of most recent calendar quarter Total return for periods ended 6/30/21

  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  24.64%  2.70%  14.86%  2.81%  14.12%  4.50%  4.29%  1.33% 
After sales charge  19.66  2.19  10.26  1.97  9.55  3.09  0.12  –2.73 
Class B (3/18/13)                 
Before CDSC  18.88  2.11  11.50  2.20  12.12  3.89  3.68  1.03 
After CDSC  18.88  2.11  9.50  1.83  9.12  2.95  –1.32  –3.97 
Class C (3/18/13)                 
Before CDSC  17.50  1.97  10.69  2.05  11.64  3.74  3.53  0.95 
After CDSC  17.50  1.97  10.69  2.05  11.64  3.74  2.53  –0.05 
Class R6 (5/22/18)                 
Net asset value  27.45  2.97  16.49  3.10  15.17  4.82  4.62  1.49 
Class Y (3/18/13)                 
Net asset value  27.27  2.95  16.32  3.07  15.00  4.77  4.55  1.45 

 

See the discussion following the fund performance table on page 9 for information about the calculation of fund performance.

Intermediate-Term Municipal Income Fund 11 

 


Your fund’s expenses

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 11/30/20*  0.89%  1.49%  1.64%  0.58%  0.64% 
Total annual operating expenses for the fiscal           
year ended 11/30/20  1.99%  2.59%  2.74%  1.68%  1.74% 
Annualized expense ratio for the six-month           
period ended 5/31/21  0.89%  1.49%  1.64%  0.57%  0.64% 

 

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.

* Reflects Putnam Management’s contractual obligation to limit certain fund expenses through 3/30/22.

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 12/1/20 to 5/31/21. 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*†  $4.48  $7.49  $8.24  $2.87  $3.22 
Ending value (after expenses)  $1,018.50  $1,015.40  $1,014.60  $1,020.10  $1,018.80 

 

* 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 5/31/21. 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.

12 Intermediate-Term Municipal Income Fund 

 


Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 5/31/21, use the following calculation method. To find the value of your investment on 12/1/20, 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*†  $4.48  $7.49  $8.25  $2.87  $3.23 
Ending value (after expenses)  $1,020.49  $1,017.50  $1,016.75  $1,022.09  $1,021.74 

 

* 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 5/31/21. 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.

Intermediate-Term Municipal Income Fund 13 

 


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 generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. 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. Interest the fund receives may be taxable. 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.

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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 4.00% 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 5% maximum during the first year to 1% during the sixth year. After the sixth 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 7-Year Municipal Bond Index is an unmanaged index of investment-grade securities with remaining maturities of seven to eight 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 fund and an index will differ. You cannot invest directly in an index.

Intermediate-Term Municipal Income Fund 15 

 


BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or limited, as to the results to be obtained therefrom, and to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

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.

16 Intermediate-Term Municipal Income Fund 

 


Other information for shareholders

Important notice regarding delivery of shareholder documents

In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single notice of internet availability, or a single printed 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, 2020, 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, 2021, Putnam employees had approximately $579,000,000 and the Trustees had approximately $81,000,000 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.

Liquidity risk management program

Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the most recent annual report on the program to the Trustees in April 2021. 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 January 2020 through December 2020. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2020. 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.

Intermediate-Term Municipal Income Fund 17 

 


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.

18 Intermediate-Term Municipal Income Fund 

 


The fund’s portfolio 5/31/21 (Unaudited)      
 

Key to holding’s abbreviations

AGM Assured Guaranty Municipal Corporation 
AMBAC AMBAC Indemnity Corporation 
BAM Build America Mutual 
FRB Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the close of the reporting period. 
FRN Floating Rate Notes: the rate shown is the current interest rate or yield at the close of the reporting period. Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the close of the reporting period. 
G.O. Bonds General Obligation Bonds 
G.O. Notes General Obligation Notes 
NATL National Public Finance Guarantee Corporation 
PSFG Permanent School Fund Guaranteed 

 

 
 MUNICIPAL BONDS AND NOTES (90.8%)*  Rating**    Principal 
amount 		 Value 
Alabama (1.6%) 
Black Belt Energy Gas Dist. Mandatory Put Bonds (12/1/23), Ser. A, 4.00%, 12/1/48  A2     $100,000  $108,306 
Jefferson, Cnty. Rev. Bonds, (Warrents), 5.00%, 9/15/29  AA     100,000  122,231 
        230,537 
Alaska (0.9%) 
AK State Indl. Dev. & Export Auth. Rev. Bonds, (Tanana Chiefs Conference), Ser. A, 5.00%, 10/1/30  A+/F     100,000  127,215 
        127,215 
Arizona (0.2%) 
AZ State Indl. Dev. Auth. Ed. 144A Rev. Bonds, (BASIS Schools, Inc.), Ser. A, 4.00%, 7/1/21  BB     25,000  25,055 
        25,055 
California (15.1%) 
CA Hlth. Fac. Fin. Auth. Rev. Bonds, (Adventist Hlth. Syst./West), Ser. A, 4.00%, 3/1/33  A     105,000  111,020 
CA State Muni. Fin. Auth. Rev. Bonds             
(Orange Cnty. Civic Ctr.), 5.00%, 6/1/42  AA     160,000  193,618 
(HumanGood Oblig. Group), Ser. A, 4.00%, 10/1/35  A−/F     175,000  196,395 
CA State Poll. Control Fin. Auth. Solid Waste Disp. Mandatory Put Bonds (6/3/24), (Waste Mgt., Inc.), Ser. C, 3.25%, 12/1/27  A−     150,000  163,124 
CA State U. Rev. Bonds, Ser. B, 3.422%, 11/1/25  Aa2     100,000  110,900 
CA State, Pub. Wks. Board Rev. Bonds, (Various Capital), Ser. B, 4.00%, 3/1/36  Aa3     200,000  243,341 
CA Statewide Cmnty. Dev. Auth. Rev. Bonds, (Viamonte Senior Living 1, Inc.), Ser. B, 3.00%, 7/1/25  AA−     200,000  200,347 
San Bernardino Cnty., FRB, Ser. C, 0.34%, 8/1/23  AA+     200,000  198,781 
San Bernardino, City Unified School Dist. G.O. Bonds, (Election 2012), Ser. D, AGM, 3.00%, 8/1/35  AA     350,000  377,756 
San Jose Arpt. Rev. Bonds, (Norman Y Mineta San Jose Intl. Arpt.), Ser. A, 5.00%, 3/1/33  A2     300,000  393,849 
        2,189,131 

 

Intermediate-Term Municipal Income Fund 19 

 

 

 MUNICIPAL BONDS AND NOTES (90.8%)* cont.  Rating**    Principal 
amount 		 Value 
Colorado (2.3%) 
E-470 CO Pub. Hwy. Auth. FRN Mandatory Put Bonds (9/1/21), (Sr. Libor Index), Ser. B, 1.11%, 9/1/39  A2     $100,000  $100,002 
High Plains Co. Metro. Dist. G.O. Bonds, NATL, 5.00%, 12/1/29  A2     100,000  123,859 
Southlands, Metro. Dist. No. 1 G.O. Bonds, Ser. A-1, 3.50%, 12/1/27  Ba1     100,000  108,288 
        332,149 
Connecticut (0.9%) 
CT State Special Tax, 5.00%, 5/1/34  AA−     100,000  131,046 
        131,046 
District of Columbia (1.3%) 
DC Rev. Bonds, (D.C. Intl. School), 5.00%, 7/1/26  BBB     165,000  191,092 
        191,092 
Florida (4.0%) 
FL State Dev. Fin. Corp. Ed. Fac. Rev. Bonds, (Nova Southeastern U., Inc.), 5.00%, 4/1/29  A−     100,000  127,037 
Jacksonville, Port Auth. Rev. Bonds, 4.50%, 11/1/32 (Prerefunded 11/1/22)  A2     300,000  316,490 
Miami-Dade Cnty., Aviation Rev. Bonds, 5.00%, 10/1/29  A2     115,000  130,905 
        574,432 
Georgia (1.5%) 
Burke Cnty., Dev. Auth. Poll. Control Mandatory Put Bonds (2/3/25), (Oglethorpe Pwr. Corp.), 1.50%, 1/1/40  Baa1     100,000  102,459 
Cobb Cnty., Dev. Auth. Student Hsg. Rev. Bonds, (Kennesaw State U. Real Estate), 5.00%, 7/15/30  Baa2     100,000  113,287 
        215,746 
Illinois (10.5%) 
Chicago, G.O. Bonds, Ser. A, 4.00%, 1/1/24  BBB+     75,000  81,012 
Chicago, Board of Ed. G.O. Bonds             
Ser. E, 5.00%, 12/1/21  BB     50,000  51,152 
(School Reform), Ser. A, NATL, zero %, 12/1/21  Baa2     100,000  99,657 
Chicago, O’Hare Intl. Arpt. Rev. Bonds, Ser. C, 5.00%, 1/1/23  A     100,000  107,426 
Chicago, Waste Wtr. Transmission Rev. Bonds, Ser. C, 5.00%, 1/1/26  A     50,000  57,962 
Chicago, Wtr. Wks Rev. Bonds, 5.00%, 11/1/30  A     100,000  120,935 
IL State G.O. Bonds             
5.00%, 2/1/26  Baa3     100,000  118,884 
Ser. D, 5.00%, 11/1/25  Baa3     125,000  147,876 
5.00%, 7/1/23  Baa3     50,000  54,722 
Ser. D, 5.00%, 11/1/21  Baa3     150,000  152,933 
4.00%, 1/1/31  Baa3     100,000  110,059 
IL State Fin. Auth. Rev. Bonds             
(Presbyterian Homes Oblig. Group), Ser. A, 5.00%, 11/1/31  A−/F     100,000  117,863 
(Riverside Hlth. Syst.), 5.00%, 11/15/22  A+     45,000  48,110 
IL State Sales Tax Rev. Bonds, Ser. C, 4.00%, 6/15/30  BBB     100,000  111,021 

 

20 Intermediate-Term Municipal Income Fund 

 

 

 MUNICIPAL BONDS AND NOTES (90.8%)* cont.  Rating**    Principal 
amount 		 Value 
Illinois cont. 
Northern IL U. Rev. Bonds, Ser. B, BAM, 5.00%, 4/1/25  AA     $100,000  $116,023 
Railsplitter, Tobacco Settlement Auth. Rev. Bonds, 5.25%, 6/1/21  A     20,000  20,000 
        1,515,635 
Indiana (1.6%) 
IN State. Fin. Auth. Rev. Bonds, (Rose-Hulman Inst. of Tech., Inc.), 5.00%, 6/1/28 ##  A2     100,000  124,894 
Whiting, Env. Fac. Mandatory Put Bonds (11/1/22), (BP Products North America, Inc.), 5.00%, 11/1/45  A2     100,000  106,788 
        231,682 
Kentucky (3.2%) 
KY Bond Dev. Corp. Edl. Fac. Rev. Bonds, (Transylvania U.), Ser. A, 5.00%, 3/1/28  A−     195,000  240,177 
KY State Pub. Energy Auth. Gas Supply Mandatory Put Bonds (1/1/25), Ser. B, 4.00%, 1/1/49  A1     200,000  222,646 
        462,823 
Louisiana (1.6%) 
St. Tammany Parish Hosp. Svcs. Dist. No. 1 Rev. Bonds, Ser. A, 5.00%, 7/1/48  A+/F     200,000  238,232 
        238,232 
Maryland (0.9%) 
MD State Hlth. & Higher Ed. Fac. Auth. Rev. Bonds, (Stevenson U.), 5.00%, 6/1/29  BBB−     100,000  125,774 
        125,774 
Michigan (1.8%) 
MI State Fin. Auth. Rev. Bonds, (Local Govt. Loan Program-Pub. Ltg. Auth.), Ser. B, 5.00%, 7/1/29  BB+     240,000  262,921 
        262,921 
Minnesota (0.3%) 
Deephaven, Charter School Lease Rev. Bonds, (Eagle Ridge Academy), Ser. A, 4.40%, 7/1/25  BB+     35,000  37,021 
        37,021 
Mississippi (0.3%) 
MS State Bus. Fin. Corp. Rev. Bonds, (System Energy Resources, Inc.), 2.50%, 4/1/22  BBB+     40,000  40,216 
        40,216 
Nevada (1.7%) 
Clark Cnty., School Dist. G.O. Bonds, Ser. A, AGM, 4.00%, 6/15/36  AA     200,000  240,713 
Las Vegas, Special Assmt. Bonds, (Dist. No. 607 Local Impt.), 5.00%, 6/1/24  BBB−/P     10,000  11,007 
        251,720 
New Jersey (3.2%) 
Newark, G.O. Notes, 3.50%, 7/27/21  BBB/P     250,000  251,242 
NJ State Econ. Dev. Auth. Rev. Bonds, Ser. B, 5.00%, 11/1/26  Baa1     100,000  122,027 
NJ State Hlth. Care Fac. Fin. Auth. Rev. Bonds, 5.00%, 9/15/23  Baa1     75,000  83,103 
        456,372 

 

Intermediate-Term Municipal Income Fund 21 

 

 

 MUNICIPAL BONDS AND NOTES (90.8%)* cont.  Rating**    Principal 
amount 		 Value 
New Mexico (2.1%) 
Farmington, Poll. Control             
Mandatory Put Bonds (10/1/21), (Public Service Co. of NM), 1.875%, 4/1/33  Baa2     $100,000  $100,499 
Mandatory Put Bonds (6/1/22), (Public Service Co. of NM), 1.20%, 6/1/40  Baa2     200,000  201,428 
        301,927 
New York (8.4%) 
Albany, Cap. Resource Corp. Rev. Bonds, (Empire Commons Student Hsg., Inc.), 5.00%, 5/1/28  A     100,000  119,877 
Long Island, Pwr. Auth. Elec. Syst. Mandatory Put Bonds (9/1/25), Ser. B, 0.85%, 9/1/50  A2     325,000  325,502 
Metro. Trans. Auth. Rev. Bonds, Ser. C-1, 4.00%, 11/15/34  A3     100,000  114,512 
Port Auth. of NY & NJ Rev. Bonds             
Ser. 193RD, 5.00%, 10/15/35  Aa3     200,000  234,687 
Ser. 221, 4.00%, 7/15/38  Aa3     250,000  297,251 
TSASC, Inc. Rev. Bonds, Ser. A, 5.00%, 6/1/26  A     100,000  121,910 
        1,213,739 
North Carolina (0.9%) 
NC State Tpk. Auth. Rev. Bonds, (Monroe Expressway Syst.), 5.00%, 7/1/33  Aa1     100,000  136,016 
        136,016 
Ohio (3.0%) 
Carlisle, Local School Dist. G.O. Bonds,  
(School Impt.), 4.00%, 12/1/31 		 AA     100,000  111,266 
Hamilton Cnty., Sales Tax Rev. Bonds, Ser. B, AMBAC, zero %, 12/1/26  A1     165,000  152,713 
Lorain Cnty., Port Auth. Econ. Dev. Facs. Rev. Bonds, (Kendal at Oberlin), 5.00%, 11/15/23  A     50,000  55,292 
OH State Hosp. Rev. Bonds, (U. Hosp. Hlth. Syst.), Ser. A, 5.00%, 1/15/31  A2     100,000  118,036 
        437,307 
Pennsylvania (5.7%) 
Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds, (Allegheny Hlth. Network Oblig. Group), Ser. A, 5.00%, 4/1/32  A     200,000  248,902 
Cumberland Cnty., Muni. Auth. Rev. Bonds,  
(Diakon Lutheran Social Ministries), 5.00%, 1/1/32 		 BBB+/F     100,000  114,863 
East Hempfield Twp., Indl. Dev. Auth. Rev. Bonds, (Millersville U. Student Hsg. & Svcs., Inc.), 5.00%, 7/1/30  Ba1     40,000  42,056 
Geisinger, Auth. Hlth. Syst. Mandatory Put Bonds (2/15/27), (Geisinger Hlth. Syst.), 5.00%, 4/1/43  AA−     150,000  183,594 
Pittsburgh, Wtr. & Swr. Auth. Rev. Bonds, Ser. B, AGM, 4.00%, 9/1/34  AA     150,000  181,459 
West Shore Area Auth. Rev. Bonds, (Messiah Village Lifeways Oblig. Group), Ser. A, 5.00%, 7/1/25  BBB−/F     50,000  54,807 
        825,681 

 

22 Intermediate-Term Municipal Income Fund 

 

 

 MUNICIPAL BONDS AND NOTES (90.8%)* cont.  Rating**    Principal 
amount 		 Value 
Puerto Rico (2.1%) 
Cmnwlth. of PR, G.O. Bonds, Ser. A, NATL, 5.50%, 7/1/29  Baa2     $30,000  $32,803 
Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds, Ser. VV, NATL, 5.25%, 7/1/26  Baa2     140,000  150,455 
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds, Ser. N, AMBAC, 5.50%, 7/1/29  C     25,000  27,513 
Cmnwlth. of PR, Infrastructure Fin. Auth. Special Tax Bonds, Ser. A, AMBAC, zero %, 7/1/29  C     130,000  93,989 
        304,760 
South Carolina (0.8%) 
SC State Pub. Svcs. Auth. Rev. Bonds,  
(Santee Cooper), Ser. B, 5.00%, 12/1/38 		 A2     100,000  110,728 
        110,728 
Texas (11.4%) 
Arlington, Higher Ed. Fin. Corp. Rev. Bonds,  
(Uplift Ed.), Ser. A, PSFG 		            
4.00%, 12/1/31  AAA     200,000  225,995 
4.00%, 12/1/31  AAA     165,000  191,547 
Central TX Regl. Mobility Auth. Rev. Bonds, 5.00%, 1/1/37  A−     200,000  243,482 
Clifton, Higher Ed. Fin. Corp. Rev. Bonds, (IDEA Pub. Schools), PSFG, 4.00%, 8/15/30  AAA     250,000  294,123 
Dallas-Fort Worth, Intl. Arpt. Rev. Bonds, Ser. B, 4.50%, 11/1/45  A     200,000  210,263 
Georgetown, G.O. Bonds, 4.00%, 8/15/33  AA+     285,000  334,924 
Temple, Tax Increment Tax Alloc. Bonds, (Reinvestment Zone No. 1), Ser. A, BAM, 5.00%, 8/1/24 ##  AA     135,000  153,496 
        1,653,830 
Utah (1.1%) 
UT Infrastructure Agcy. Rev. Bonds, Ser. A, 4.00%, 10/15/28  BBB−/F     140,000  166,318 
        166,318 
Washington (2.4%) 
Port of Seattle Rev. Bonds, 5.00%, 4/1/38  A1     200,000  247,535 
WA State Hlth. Care Fac. Auth. Mandatory Put Bonds (7/1/22), (Fred Hutchinson Cancer Research Ctr.), Ser. B, 1.16%, 1/1/42  A+     100,000  100,329 
        347,864 
Total municipal bonds and notes (cost $12,540,757)  $13,136,969 
 
SHORT-TERM INVESTMENTS (10.0%)*   Shares  Value 
Putnam Short Term Investment Fund Class P 0.08% L  Shares  1,446,285  $1,446,285 
Total short-term investments (cost $1,446,285)  $1,446,285 
 
 TOTAL INVESTMENTS 
Total investments (cost $13,987,042)  $14,583,254 
 

 

Intermediate-Term Municipal Income Fund 23 

 

 

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, 2020 through May 31, 2021 (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 $14,466,411. 
**  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. 
##  Forward commitment, in part or in entirety (Note 1). 
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. 
  At the close of the reporting period, the fund maintained liquid assets totaling $153,496 to cover the settlement of certain securities. 
  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. 
  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 0.05%, 0.09% and 0.13%, 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): 
   Transportation  14.6% 
   Local debt  14.5 
   Education  12.8 
   Health care  11.9 
   Utilities  10.8 
 

 

24 Intermediate-Term Municipal Income Fund 

 

 

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  $—  $13,136,969  $— 
Short-term investments  —  1,446,285  — 
Totals by level  $—  $14,583,254  $— 


The accompanying notes are an integral part of these financial statements.

 

Intermediate-Term Municipal Income Fund 25 

 

 

Statement of assets and liabilities 5/31/21 (Unaudited)

ASSETS   
Investment in securities, at value (Note 1):   
Unaffiliated issuers (identified cost $12,540,757)  $13,136,969 
Affiliated issuers (identified cost $1,446,285) (Notes 1 and 5)  1,446,285 
Interest and other receivables  141,060 
Receivable for shares of the fund sold  32 
Receivable for investments sold  65,308 
Receivable from Manager (Note 2)  26,381 
Prepaid assets  54,881 
Total assets  14,870,916 
 
LIABILITIES   
Payable for purchases of delayed delivery securities (Note 1)  278,479 
Payable for shares of the fund repurchased  111,896 
Payable for custodian fees (Note 2)  3,738 
Payable for investor servicing fees (Note 2)  2,662 
Payable for Trustee compensation and expenses (Note 2)  1,236 
Payable for administrative services (Note 2)  40 
Payable for distribution fees (Note 2)  5,432 
Distributions payable to shareholders  1,022 
Total liabilities  404,505 
 
Net assets  $14,466,411 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $13,778,862 
Total distributable earnings (Note 1)  687,549 
Total — Representing net assets applicable to capital shares outstanding  $14,466,411 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($11,560,400 divided by 1,075,534 shares)  $10.75 
Offering price per class A share (100/96.00 of $10.75)*  $11.20 
Net asset value and offering price per class B share ($47,840 divided by 4,447 shares)**  $10.76 
Net asset value and offering price per class C share ($636,139 divided by 59,141 shares)**  $10.76 
Net asset value, offering price and redemption price per class R6 share   
($891,884 divided by 83,002 shares)  $10.75 
Net asset value, offering price and redemption price per class Y share   
($1,330,148 divided by 123,828 shares)  $10.74 

 

*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.

26 Intermediate-Term Municipal Income Fund 

 


Statement of operations Six months ended 5/31/21 (Unaudited)

INVESTMENT INCOME   
Interest (including interest income of $532 from investments in affiliated issuers) (Note 5)  $157,397 
Total investment income  157,397 
 
EXPENSES   
Compensation of Manager (Note 2)  29,237 
Investor servicing fees (Note 2)  7,799 
Custodian fees (Note 2)  3,525 
Trustee compensation and expenses (Note 2)  309 
Distribution fees (Note 2)  17,293 
Administrative services (Note 2)  222 
Auditing and tax fees  19,339 
Blue sky expense  36,230 
Other  6,467 
Fees waived and reimbursed by Manager (Note 2)  (59,258) 
Total expenses  61,163 
Expense reduction (Note 2)  (15) 
Net expenses  61,148 
 
Net investment income  96,249 
 
REALIZED AND UNREALIZED GAIN (LOSS)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (Notes 1 and 3)  90,936 
Total net realized gain  90,936 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers  54,056 
Total change in net unrealized appreciation  54,056 
 
Net gain on investments  144,992 
 
Net increase in net assets resulting from operations  $241,241 

 

The accompanying notes are an integral part of these financial statements.

Intermediate-Term Municipal Income Fund 27 

 


Statement of changes in net assets

INCREASE IN NET ASSETS  Six months ended 5/31/21*  Year ended 11/30/20 
Operations     
Net investment income  $96,249  $210,590 
Net realized gain on investments  90,936  207,289 
Change in net unrealized appreciation of investments  54,056  186,556 
Net increase in net assets resulting from operations  241,241  604,435 
Distributions to shareholders (Note 1):     
From ordinary income     
Taxable net investment income     
Class A  —  (5,534) 
Class B  —  (33) 
Class C  —  (217) 
Class R6  —  (301) 
Class Y  —  (712) 
From tax-exempt net investment income     
Class A  (80,232)  (168,699) 
Class B  (239)  (529) 
Class C  (1,938)  (3,172) 
Class R6  (4,723)  (8,809) 
Class Y  (11,535)  (26,622) 
Net realized short-term gain on investments     
Class A  —  (91,870) 
Class B  —  (545) 
Class C  —  (3,597) 
Class R6  —  (4,996) 
Class Y  —  (11,824) 
From net realized long-term gain on investments     
Class A  (170,248)  (10,700) 
Class B  (931)  (63) 
Class C  (6,553)  (419) 
Class R6  (6,510)  (582) 
Class Y  (21,182)  (1,377) 
Increase from capital share transactions (Note 4)  776,333  1,564,033 
Total increase in net assets  713,483  1,827,867 
 
NET ASSETS     
Beginning of period  13,752,928  11,925,061 
End of period  $14,466,411  $13,752,928 

 

*Unaudited.

The accompanying notes are an integral part of these financial statements.

28 Intermediate-Term Municipal Income Fund 

 


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Intermediate-Term Municipal Income Fund 29 

 


Financial highlights (For a common share outstanding throughout the period)

  INVESTMENT OPERATIONS LESS DISTRIBUTIONS RATIOS AND SUPPLEMENTAL DATA
                      Ratio  Ratio of net   
  Net asset    Net realized                of expenses  investment   
  value,    and unrealized  Total from    From    Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss)  investment  From net  net realized gain  Total  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)  on investments­  operations­  investment income­  on investments­  distributions  of period­  value (%)a  (in thousands)  (%)b,c  net assets (%)c  (%) 
Class A                           
May 31, 2021**   $10.80­  .08­  .12­  .20­  (.08)  (.17)  (.25)  $10.75­  1.85*  $11,560­  .44*  .69*  21* 
November 30, 2020­  10.64­  .17­  .27­  .44­  (.17)  (.11)  (.28)  10.80­  4.26­  11,488­  .88­  1.57­  45­ 
November 30, 2019  10.11­  .20­  .52­  .72­  (.19)  —­  (.19)  10.64­  7.16­  9,684­  .89­  1.91­  63­ 
November 30, 2018  10.26­  .19­  (.14)  .05­  (.19)  (.01)  (.20)  10.11­  .49­  7,797­  .86­  1.81­  69­ 
November 30, 2017  9.94­  .17­  .32­  .49­  (.17)  —­  (.17)  10.26­  4.94­  11,308­  .85­  1.65­  91­ 
Class B                           
May 31, 2021**   $10.81­  .04­  .13­  .17­  (.05)  (.17)  (.22)  $10.76­  1.54*  $48­  .74*  .40*  21* 
November 30, 2020­  10.64­  .10­  .28­  .38­  (.10)  (.11)  (.21)  10.81­  3.65­  60­  1.48­  .99­  45­ 
November 30, 2019  10.11­  .13­  .53­  .66­  (.13)  —­  (.13)  10.64­  6.53­  58­  1.49­  1.32­  63­ 
November 30, 2018  10.26­  .13­  (.14)  (.01)  (.13)  (.01)  (.14)  10.11­  (.11)  57­  1.46­  1.22­  69­ 
November 30, 2017  9.95­  .11­  .31­  .42­  (.11)  —­  (.11)  10.26­  4.21­  61­  1.45­  1.07­  91­ 
Class C                           
May 31, 2021**   $10.81­  .04­  .12­  .16­  (.04)  (.17)  (.21)  $10.76­  1.46*  $636­  .82*  .31*  21* 
November 30, 2020­  10.64­  .08­  .29­  .37­  (.09)  (.11)  (.20)  10.81­  3.51­  428­  1.63­  .83­  45­ 
November 30, 2019  10.11­  .12­  .52­  .64­  (.11)  —­  (.11)  10.64­  6.37­  384­  1.64­  1.18­  63­ 
November 30, 2018  10.26­  .11­  (.14)  (.03)  (.11)  (.01)  (.12)  10.11­  (.26)  383­  1.61­  1.07­  69­ 
November 30, 2017  9.94­  .09­  .32­  .41­  (.09)  —­  (.09)  10.26­  4.17­  441­  1.60­  .92­  91­ 
Class R6                           
May 31, 2021**   $10.80­  .09­  .13­  .22­  (.10)  (.17)  (.27)  $10.75­  2.01*  $892­  .28*  .84*  21* 
November 30, 2020­  10.63­  .20­  .29­  .49­  (.21)  (.11)  (.32)  10.80­  4.68­  419­  .57­  1.91­  45­ 
November 30, 2019  10.11­  .23­  .51­  .74­  (.22)  —­  (.22)  10.63­  7.39­  536­  .57­  2.23­  63­ 
November 30, 2018 †­  10.13­  .12­  (.02)  .10­  (.12)  —­  (.12)  10.11­  .95*  473­  .29 *  1.26*  69­ 
Class Y                           
May 31, 2021**   $10.80­  .09­  .11­  .20­  (.09)  (.17)  (.26)  $10.74­  1.88*  $1,330­  .32*  .82*  21* 
November 30, 2020­  10.63­  .19­  .29­  .48­  (.20)  (.11)  (.31)  10.80­  4.62­  1,358­  .63­  1.79­  45­ 
November 30, 2019  10.11­  .22­  .52­  .74­  (.22)  —­  (.22)  10.63­  7.33­  1,262­  .64­  2.16­  63­ 
November 30, 2018  10.26­  .21­  (.14)  .07­  (.21)  (.01)  (.22)  10.11­  .75­  1,884­  .61­  2.06­  69­ 
November 30, 2017  9.94­  .19­  .32­  .51­  (.19)  —­  (.19)  10.26­  5.21­  1,336­  .60­  1.92­  91­ 

 

* Not annualized.

† 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/or brokerage service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

c Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):

        Percentage of average net assets 
  5/31/21  11/30/20  11/30/19  11/30/18  11/30/17  11/30/16 
Class A  0.43%  1.10%  1.47%  1.01%  1.07%  0.62% 
Class B  0.43  1.10  1.47  1.01  1.07  0.62 
Class C  0.43  1.10  1.47  1.01  1.07  0.62 
Class R6  0.43  1.10  1.47  0.53  N/A  N/A 
Class Y  0.43  1.10  1.47  1.01  1.07  0.62 

 

The accompanying notes are an integral part of these financial statements.

30 Intermediate-Term Municipal Income Fund  Intermediate-Term Municipal Income Fund 31 

 


Notes to financial statements 5/31/21 (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, 2020 through May 31, 2021.

Putnam Intermediate-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)). The fund normally maintains an average dollar-weighted maturity between three and ten years. 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 4.00%. 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 six 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 eight years. Prior to March 1, 2021, class C shares generally converted to class A shares after approximately ten years. The expenses for class A, class B and class C shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B and class C shares, but do not bear a distribution fee, and in the case of class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R6 and 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

32 Intermediate-Term Municipal Income Fund 

 


unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. 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, net of any applicable withholding taxes, if any, and including amortization and accretion of premiums and discounts on debt securities, is recorded on the accrual basis.

Securities purchased or sold on a forward commitment basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.

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 Bank Funding Rate for the committed line of credit and 1.30% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate 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

Intermediate-Term Municipal Income Fund 33 

 


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.

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 $13,986,517, resulting in gross unrealized appreciation and depreciation of $604,860 and $8,123, respectively, or net unrealized appreciation of $596,737.

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:

0.590%  of the first $5 billion,  0.390%  of the next $50 billion, 
0.540%  of the next $5 billion,  0.370%  of the next $50 billion, 
0.490%  of the next $10 billion,  0.360%  of the next $100 billion and 
0.440%  of the next $10 billion,  0.355%  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 0.210% of the fund’s average net assets.

Putnam Management has contractually agreed, through March 30, 2023, 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 $52,186 as a result of this limit.

Putnam Management has also contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through March 30, 2023, to the extent that total expenses of the fund (excluding brokerage, interest, taxes, investment-related expenses, payments under distribution plans, extraordinary expenses,

34 Intermediate-Term Municipal Income Fund 

 


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 0.52% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $7,072 as a result of this limit.

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 0.40% 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  $6,522  Class R6  138 
Class B  31  Class Y  772 
Class C  336  Total  $7,799 

 

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 $15 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $9, 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

Intermediate-Term Municipal Income Fund 35 

 


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:

  Maximum %  Approved %  Amount 
Class A  0.35%  0.25%  $14,151 
Class B  1.00%  0.85%  230 
Class C  1.00%  1.00%  2,912 
Total      $17,293 

 

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $633 from the sale of class A shares and received $0 and $4 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)  $2,702,763  $2,791,720 
U.S. government securities (Long-term)  —  — 
Total  $2,702,763  $2,791,720 

 

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 5/31/21  YEAR ENDED 11/30/20 
Class A  Shares  Amount  Shares  Amount 
Shares sold  159,266  $1,711,420  511,593  $5,391,810 
Shares issued in connection with         
reinvestment of distributions  23,640  250,480  26,128  276,591 
  182,906  1,961,900  537,721  5,668,401 
Shares repurchased  (170,880)  (1,833,161)  (384,682)  (4,084,688) 
Net increase  12,026  $128,739  153,039  $1,583,713 

 

36 Intermediate-Term Municipal Income Fund 

 


  SIX MONTHS ENDED 5/31/21  YEAR ENDED 11/30/20 
Class B  Shares  Amount  Shares  Amount 
Shares sold  —  $—  136  $1,461 
Shares issued in connection with         
reinvestment of distributions  98  1,041  85  895 
  98  1,041  221  2,356 
Shares repurchased  (1,190)  (12,677)  (161)  (1,700) 
Net increase (decrease)  (1,092)  $(11,636)  60  $656 
 
  SIX MONTHS ENDED 5/31/21  YEAR ENDED 11/30/20 
Class C  Shares  Amount  Shares  Amount 
Shares sold  36,903  $393,703  11,898  $123,953 
Shares issued in connection with         
reinvestment of distributions  793  8,491  699  7,382 
  37,696  402,194  12,597  131,335 
Shares repurchased  (18,142)  (195,039)  (9,129)  (98,641) 
Net increase  19,554  $207,155  3,468  $32,694 
 
  SIX MONTHS ENDED 5/31/21  YEAR ENDED 11/30/20 
Class R6  Shares  Amount  Shares  Amount 
Shares sold  46,696  $499,523  7,956  $84,763 
Shares issued in connection with         
reinvestment of distributions  1,050  11,233  1,388  14,679 
  47,746  510,756  9,344  99,442 
Shares repurchased  (3,550)  (37,843)  (20,980)  (221,368) 
Net increase (decrease)  44,196  $472,913  (11,636)  $(121,926) 
 
  SIX MONTHS ENDED 5/31/21  YEAR ENDED 11/30/20 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  1,413  $15,110  133,119  $1,413,491 
Shares issued in connection with         
reinvestment of distributions  3,054  32,651  3,818  40,463 
  4,467  47,761  136,937  1,453,954 
Shares repurchased  (6,421)  (68,599)  (129,869)  (1,385,058) 
Net increase (decrease)  (1,954)  $(20,838)  7,068  $68,896 

 

At the close of the reporting period, Putnam Investments, LLC owned the following shares of the fund:

  Shares owned  Percentage of ownership  Value 
Class A  1,103  0.10%  $11,857 
Class R6  1,077  1.30%  $11,578 

 

Intermediate-Term Municipal Income Fund 37 

 


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 11/30/20  cost  proceeds  income  of 5/31/21 
Short-term investments           
Putnam Short Term           
Investment Fund*  $697,325  $4,228,194  $3,479,234  $532  $1,446,285 
Total Short-term           
investments  $697,325  $4,228,194  $3,479,234  $532  $1,446,285 

 

* 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. On March 5, 2021, the FCA and LIBOR’s administrator, ICE Benchmark Administration, announced that most LIBOR settings will no longer be published after the end of 2021 and a majority of U.S. dollar LIBOR settings will no longer be published after June 30, 2023. 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 date on which the applicable rate ceases to be published.

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: New accounting pronouncements

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020–04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in ASU 2020–04 provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of LIBOR and other interbank-offered based reference rates as of the end of 2021. The discontinuation of LIBOR was subsequently extended to June 30, 2023. ASU 2020–04 is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying this provision.

38 Intermediate-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 
Emerging Markets Equity Fund  Convertible Securities Fund 
Focused Equity Fund  Diversified Income Trust 
Focused International Equity Fund  Floating Rate Income Fund 
International Capital Opportunities Fund  Global Income Trust 
International Equity Fund  Government Money Market Fund* 
Multi-Cap Core Fund  High Yield Fund 
Research Fund  Income Fund 
  Money Market Fund† 
Global Sector  Mortgage Opportunities Fund 
Global Health Care Fund  Mortgage Securities Fund 
Global Technology Fund  Short Duration Bond Fund 
  Ultra Short Duration Income Fund 
Growth   
Growth Opportunities Fund  Tax-free Income 
Small Cap Growth Fund  Intermediate-Term Municipal Income Fund 
Sustainable Future Fund  Short-Term Municipal Income Fund 
Sustainable Leaders Fund  Strategic Intermediate Municipal Fund 
  Tax Exempt Income Fund 
Value  Tax-Free High Yield Fund 
International Value Fund   
Large Cap Value Fund  State tax-free income funds‡: 
Small Cap Value Fund  California, Massachusetts, Minnesota, 
  New Jersey, New York, Ohio, and Pennsylvania. 

 

Intermediate-Term Municipal Income Fund 39 

 


Absolute Return  Asset Allocation (cont.) 
Fixed Income Absolute Return Fund  Putnam Retirement Advantage Maturity Fund 
Multi-Asset Absolute Return Fund  Putnam Retirement Advantage 2065 Fund 
  Putnam Retirement Advantage 2060 Fund 
Putnam PanAgora§  Putnam Retirement Advantage 2055 Fund 
Putnam PanAgora Risk Parity Fund  Putnam Retirement Advantage 2050 Fund 
  Putnam Retirement Advantage 2045 Fund 
Asset Allocation  Putnam Retirement Advantage 2040 Fund 
Dynamic Risk Allocation Fund  Putnam Retirement Advantage 2035 Fund 
George Putnam Balanced Fund  Putnam Retirement Advantage 2030 Fund 
Dynamic Asset Allocation Balanced Fund  Putnam Retirement Advantage 2025 Fund 
Dynamic Asset Allocation Conservative Fund 
Dynamic Asset Allocation Growth Fund  RetirementReady® Maturity Fund 
  RetirementReady® 2065 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 

 

* 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.

40 Intermediate-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  Jonathan S. Horwitz 
Putnam Investment  Kenneth R. Leibler, Chair  Executive Vice President, 
Management, LLC  Liaquat Ahamed  Principal Executive Officer, 
100 Federal Street  Ravi Akhoury  and Compliance Liaison 
Boston, MA 02110  Barbara M. Baumann   
  Katinka Domotorffy  Richard T. Kircher 
Investment Sub-Advisor  Catharine Bond Hill  Vice President and BSA 
Putnam Investments Limited  Paul L. Joskow  Compliance Officer 
16 St James’s Street  George Putnam, III   
London, England SW1A 1ER  Robert L. Reynolds  Susan G. Malloy 
  Manoj P. Singh  Vice President and 
Marketing Services  Mona K. Sutphen  Assistant Treasurer 
Putnam Retail Management     
100 Federal Street  Officers  Denere P. Poulack 
Boston, MA 02110  Robert L. Reynolds  Assistant Vice President, Assistant 
  President  Clerk, and Assistant Treasurer 
Custodian     
State Street Bank  James F. Clark  Janet C. Smith 
and Trust Company  Vice President, Chief Compliance  Vice President, 
  Officer, and Chief Risk Officer  Principal Financial Officer, 
Legal Counsel    Principal Accounting Officer, 
Ropes & Gray LLP  Nancy E. Florek  and Assistant Treasurer 
  Vice President, Director of   
  Proxy Voting and Corporate  Stephen J. Tate 
  Governance, Assistant Clerk,  Vice President and 
  and Assistant Treasurer  Chief Legal Officer 
     
  Michael J. Higgins  Mark C. Trenchard 
  Vice President, Treasurer,  Vice President 
  and Clerk   

 

This report is for the information of shareholders of Putnam Intermediate-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)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(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 28, 2021
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 28, 2021
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: July 28, 2021