N-Q 1 a_usgovincometrust.htm PUTNAM U.S. GOVERNMENT INCOME TRUST a_usgovincometrust.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY



Investment Company Act file number: (811-03897)
Exact name of registrant as specified in charter: Putnam U.S. Government Income Trust
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109
Name and address of agent for service: Robert T. Burns, Vice President
One Post Office Square
Boston, Massachusetts 02109
Copy to:         John W. Gerstmayr, Esq.
Ropes & Gray LLP
800 Boylston Street
Boston, Massachusetts 02199-3600
Registrant’s telephone number, including area code: (617) 292-1000
Date of fiscal year end: September 30, 2014
Date of reporting period: December 31, 2013



Item 1. Schedule of Investments:













Putnam U.S. Government Income Trust

The fund's portfolio
12/31/13 (Unaudited)
U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (113.1%)(a)
Principal amount Value
U.S. Government Guaranteed Mortgage Obligations (82.8%)
Government National Mortgage Association Adjustable Rate Mortgages 1 5/8s, July 20, 2026 $23,198 $23,811
Government National Mortgage Association Graduated Payment Mortgages
     13 1/4s, December 20, 2014 2,513 2,620
     12 3/4s, June 20, 2014 119 121
     12 1/4s, March 15, 2014 256 258
     11 1/4s, with due dates from September 15, 2015 to December 15, 2015 9,181 9,936
     9 1/4s, with due dates from April 15, 2016 to May 15, 2016 8,567 9,243
Government National Mortgage Association Pass-Through Certificates
     8 1/2s, December 15, 2019 5,873 6,598
     7 1/2s, October 20, 2030 87,735 104,132
     5 1/2s, August 15, 2035 672 743
     5s, TBA, January 1, 2044 52,000,000 56,363,070
     4 1/2s, with due dates from March 20, 2041 to July 15, 2041 85,667,246 91,691,056
     4 1/2s, TBA, January 1, 2044 116,000,000 123,975,000
     4s, October 15, 2040 45,258,052 47,098,430
     4s, TBA, January 1, 2044 409,000,000 425,615,629
     3 1/2s, with due dates from October 20, 2042 to June 15, 2043 199,861,571 201,637,962
     3 1/2s, TBA, January 1, 2044 8,000,000 8,074,375
954,612,984
U.S. Government Agency Mortgage Obligations (30.3%)
Federal Home Loan Mortgage Corporation Pass-Through Certificates
     4s, with due dates from August 1, 2042 to June 1, 2043 2,435,449 2,478,449
Federal National Mortgage Association Pass-Through Certificates
     6s, January 1, 2038 504,415 558,640
     6s, TBA, January 1, 2044 11,000,000 12,213,427
     5 1/2s, TBA, January 1, 2044 45,000,000 49,510,548
     4s, October 1, 2042 7,145,097 7,286,882
     4s, TBA, January 1, 2044 54,000,000 55,645,315
     3 1/2s, TBA, January 1, 2044 41,000,000 40,762,971
     3s, TBA, January 1, 2044 103,000,000 97,882,188
     2 1/2s, March 1, 2043 90,672,945 82,207,774
348,546,194
Total U.S. government and agency mortgage obligations (cost $1,324,309,055) $1,303,159,178

MORTGAGE-BACKED SECURITIES (27.7%)(a)
Principal amount Value
Agency collateralized mortgage obligations (27.7%)
Federal Home Loan Mortgage Corp.
     IFB Ser. 3182, Class SP, 27.934s, 2032 $37,923 $58,042
     IFB Ser. 3408, Class EK, 25.123s, 2037 459,326 662,826
     IFB Ser. 2976, Class LC, 23.809s, 2035 2,872,750 4,179,089
     IFB Ser. 2979, Class AS, 23.662s, 2034 211,814 271,122
     IFB Ser. 3072, Class SM, 23.186s, 2035 1,247,693 1,770,721
     IFB Ser. 3072, Class SB, 23.039s, 2035 745,098 1,049,969
     IFB Ser. 3249, Class PS, 21.725s, 2036 491,855 665,026
     IFB Ser. 3065, Class DC, 19.36s, 2035 3,718,546 5,229,465
     IFB Ser. 2990, Class LB, 16.52s, 2034 3,071,399 4,015,239
     IFB Ser. 4048, Class GS, IO, 6.483s, 2040 5,235,016 1,022,084
     IFB Ser. 4105, Class HS, IO, 6.433s, 2042 9,895,951 2,417,581
     IFB Ser. 3860, Class SP, IO, 6.433s, 2040 5,788,316 923,584
     IFB Ser. 4136, Class ES, IO, 6.083s, 2042 9,640,614 1,787,177
     IFB Ser. 4112, Class SC, IO, 5.983s, 2042 26,668,757 4,867,048
     IFB Ser. 4105, Class LS, IO, 5.983s, 2041 3,793,831 729,857
     IFB Ser. 4240, Class SA, IO, 5.833s, 2043 7,620,677 1,713,128
     IFB Ser. 311, Class S1, IO, 5.783s, 2043 16,953,508 3,602,671
     IFB Ser. 4012, Class SM, IO, 5.783s, 2042 7,055,001 1,349,269
     IFB Ser. 315, Class S1, IO, 5.753s, 2043 7,331,931 1,640,300
     Ser. 4122, Class TI, IO, 4 1/2s, 2042 10,840,681 2,356,764
     Ser. 4024, Class PI, IO, 4 1/2s, 2041 11,339,186 2,352,836
     Ser. 4018, Class DI, IO, 4 1/2s, 2041 6,131,146 1,150,939
     Ser. 3747, Class HI, IO, 4 1/2s, 2037 667,341 76,412
     Ser. 4116, Class MI, IO, 4s, 2042 22,684,518 4,868,097
     Ser. 4019, Class JI, IO, 4s, 2041 12,293,192 2,352,917
     FRB Ser. T-57, Class 2A1, 3.303s, 2043 32,023 31,382
     Ser. 4141, Class PI, IO, 3s, 2042 12,336,912 1,752,335
     Ser. 4158, Class TI, IO, 3s, 2042 20,297,349 2,782,158
     Ser. 4165, Class TI, IO, 3s, 2042 24,375,383 3,439,367
     Ser. 4171, Class NI, IO, 3s, 2042 14,198,980 1,975,078
     Ser. 4183, Class MI, IO, 3s, 2042 10,351,573 1,450,255
     FRB Ser. T-59, Class 2A1, 2.895s, 2043 17,385 16,820
     Ser. T-56, Class A, IO, 0.524s, 2043 716,585 12,288
     Ser. T-8, Class A9, IO, 0.469s, 2028 2,637,904 28,028
     Ser. T-59, Class 1AX, IO, 0.274s, 2043 6,111,330 75,675
     Ser. T-48, Class A2, IO, 0.212s, 2033 9,039,909 88,987
     Ser. T-56, Class 1, IO, zero %, 2043 794,252 62
     Ser. T-56, Class 2, IO, zero %, 2043 754,217 2,357
     Ser. T-56, Class 3, IO, zero %, 2043 623,348 49
     Ser. 3369, Class BO, PO, zero %, 2037 17,205 15,097
     Ser. 3391, PO, zero %, 2037 55,664 45,673
     Ser. 3300, PO, zero %, 2037 188,917 168,199
     Ser. 3314, PO, zero %, 2036 68,421 62,781
     Ser. 3206, Class EO, PO, zero %, 2036 13,114 11,435
     Ser. 3175, Class MO, PO, zero %, 2036 146,134 124,674
     Ser. 3210, PO, zero %, 2036 14,513 12,952
     FRB Ser. T-54, Class 2A, IO, zero %, 2043 3,621,039 283
     FRB Ser. 3117, Class AF, zero %, 2036 18,253 17,090
     FRB Ser. 3326, Class WF, zero %, 2035 41,785 35,727
     FRB Ser. 3036, Class AS, zero %, 2035 6,126 6,065
Federal National Mortgage Association
     IFB Ser. 06-62, Class PS, 38.912s, 2036 920,845 1,714,536
     IFB Ser. 05-74, Class NK, 26.677s, 2035 2,259,255 3,618,469
     IFB Ser. 06-8, Class HP, 23.963s, 2036 924,399 1,404,680
     IFB Ser. 07-53, Class SP, 23.596s, 2037 1,087,576 1,584,992
     IFB Ser. 08-24, Class SP, 22.68s, 2038 4,733,922 6,935,096
     IFB Ser. 05-122, Class SE, 22.524s, 2035 925,836 1,329,156
     IFB Ser. 05-75, Class GS, 19.756s, 2035 542,859 718,495
     IFB Ser. 05-106, Class JC, 19.614s, 2035 1,402,182 2,025,579
     IFB Ser. 05-83, Class QP, 16.966s, 2034 436,789 563,525
     IFB Ser. 11-4, Class CS, 12.571s, 2040 2,954,307 3,441,932
     IFB Ser. 12-96, Class PS, IO, 6.535s, 2041 10,290,087 2,092,386
     IFB Ser. 11-27, Class AS, IO, 6.315s, 2041 5,771,490 1,075,863
     IFB Ser. 12-132, Class SB, IO, 6.035s, 2042 19,738,145 3,262,913
     Ser. 06-10, Class GC, 6s, 2034 6,039,565 6,220,752
     IFB Ser. 13-59, Class SC, IO, 5.985s, 2043 10,340,284 2,329,795
     IFB Ser. 13-101, Class AS, IO, 5.785s, 2043 11,208,571 2,475,973
     IFB Ser. 13-103, Class SK, IO, 5.755s, 2043 4,247,637 950,187
     IFB Ser. 13-102, Class SH, IO, 5.735s, 2043 11,603,717 2,453,026
     IFB Ser. 13-136, Class SA, IO, 5.68s, 2044 12,025,000 2,449,733
     Ser. 418, Class C24, IO, 4s, 2043 8,680,065 2,092,031
     Ser. 409, Class C16, IO, 4s, 2040 12,440,628 2,633,027
     Ser. 418, Class C15, IO, 3 1/2s, 2043 17,790,434 4,129,327
     Ser. 12-124, Class JI, IO, 3 1/2s, 2042 4,867,053 791,480
     FRB Ser. 03-W14, Class 2A, 3.395s, 2043 28,973 28,698
     FRB Ser. 04-W7, Class A2, 3 3/8s, 2034 14,332 14,959
     FRB Ser. 03-W3, Class 1A4, 3.348s, 2042 53,781 51,676
     FRB Ser. 03-W11, Class A1, 3.293s, 2033 1,606 1,643
     Ser. 13-55, Class IK, IO, 3s, 2043 9,890,082 1,440,392
     Ser. 12-145, Class TI, IO, 3s, 2042 12,105,532 1,433,295
     Ser. 13-35, Class IP, IO, 3s, 2042 7,768,280 933,711
     Ser. 13-55, Class PI, IO, 3s, 2042 17,426,894 2,287,280
     Ser. 13-53, Class JI, IO, 3s, 2041 12,247,526 1,745,272
     Ser. 13-23, Class PI, IO, 3s, 2041 14,020,855 1,555,053
     Ser. 13-30, Class IP, IO, 3s, 2041 17,219,039 1,901,671
     Ser. 13-23, Class LI, IO, 3s, 2041 12,292,176 1,346,116
     FRB Ser. 04-W2, Class 4A, 2.86s, 2044 25,994 25,927
     Ser. 98-W2, Class X, IO, 1.091s, 2028 16,834,161 978,486
     Ser. 98-W5, Class X, IO, 1.023s, 2028 4,873,730 240,640
     FRB Ser. 07-95, Class A3, 0.415s, 2036 13,676,000 12,992,200
     Ser. 01-50, Class B1, IO, 0.409s, 2041 1,056,228 14,193
     Ser. 01-79, Class BI, IO, 0.313s, 2045 2,624,231 25,627
     Ser. 03-34, Class P1, PO, zero %, 2043 129,027 112,254
     Ser. 03-W1, Class 2A, IO, zero %, 2042 7,634,029 596
     Ser. 08-53, Class DO, PO, zero %, 2038 331,163 259,321
     Ser. 07-64, Class LO, PO, zero %, 2037 102,930 89,022
     Ser. 07-44, Class CO, PO, zero %, 2037 242,087 202,515
     Ser. 07-14, Class KO, PO, zero %, 2037 25,852 21,948
     Ser. 06-125, Class OX, PO, zero %, 2037 6,879 6,103
     Ser. 06-84, Class OT, PO, zero %, 2036 8,043 7,013
     Ser. 06-46, Class OC, PO, zero %, 2036 13,973 12,019
     Ser. 08-36, Class OV, PO, zero %, 2036 79,536 65,986
     Ser. 1988-12, Class B, zero %, 2018 7,087 6,733
Government National Mortgage Association
     IFB Ser. 11-56, Class SA, 23.772s, 2041 6,839,783 10,292,301
     IFB Ser. 10-158, Class SD, 14 1/2s, 2040 2,266,000 2,585,801
     IFB Ser. 11-70, Class WS, 9.366s, 2040 3,909,000 3,607,499
     IFB Ser. 11-72, Class SE, 7.187s, 2041 16,383,286 15,072,197
     IFB Ser. 11-81, Class SB, IO, 6.538s, 2036 12,262,183 2,138,157
     IFB Ser. 11-61, Class CS, IO, 6.513s, 2035 4,582,900 675,978
     Ser. 10-9, Class XD, IO, 6.433s, 2040 32,529,318 5,841,290
     IFB Ser. 10-85, Class SE, IO, 6.383s, 2040 7,110,701 1,286,468
     IFB Ser. 13-27, Class SW, IO, 6.333s, 2040 6,528,047 1,164,342
     IFB Ser. 11-56, Class MI, IO, 6.283s, 2041 8,645,451 1,958,454
     IFB Ser. 12-149, Class LS, IO, 6.083s, 2042 4,716,384 782,259
     IFB Ser. 10-20, Class SE, IO, 6.083s, 2040 28,164,737 4,838,702
     IFB Ser. 10-26, Class QS, IO, 6.083s, 2040 25,320,127 4,684,224
     IFB Ser. 13-87, Class AS, IO, 6.033s, 2043 5,261,016 894,378
     IFB Ser. 13-122, Class DS, IO, 5.983s, 2043 7,714,558 1,246,898
     IFB Ser. 13-165, Class LS, IO, 5.983s, 2043 6,765,019 1,232,586
     IFB Ser. 13-99, Class SL, IO, 5.983s, 2043 5,042,078 879,439
     IFB Ser. 10-20, Class SC, IO, 5.983s, 2040 22,055,387 3,829,036
     Ser. 13-149, Class MS, IO, 5.933s, 2039 10,867,393 1,731,936
     IFB Ser. 13-129, Class SA, IO, 5.933s, 2043 19,265,187 3,107,475
     IFB Ser. 13-134, Class DS, IO, 5.933s, 2043 8,964,722 1,466,539
     IFB Ser. 11-146, Class AS, IO, 5.933s, 2041 7,601,810 1,496,606
     IFB Ser. 10-115, Class TS, IO, 5.933s, 2038 10,782,349 1,578,320
     IFB Ser. 12-34, Class SA, IO, 5.883s, 2042 9,472,318 1,942,488
     IFB Ser. 11-128, Class TS, IO, 5.883s, 2041 6,326,524 1,293,774
     IFB Ser. 10-89, Class SD, IO, 5.763s, 2040 6,163,349 1,040,077
     IFB Ser. 11-70, Class SN, IO, 5.733s, 2041 3,260,000 792,604
     IFB Ser. 10-31, Class SA, IO, 5.583s, 2040 6,753,019 1,112,217
     IFB Ser. 10-42, Class SK, IO, 5.503s, 2040 7,186,608 1,069,367
     Ser. 13-3, Class IT, IO, 5s, 2043 7,565,979 1,711,051
     Ser. 13-6, Class OI, IO, 5s, 2043 62,057,299 13,097,814
     Ser. 13-16, Class IB, IO, 5s, 2040 11,787,079 1,446,260
     Ser. 10-35, Class UI, IO, 5s, 2040 9,612,233 2,164,830
     Ser. 10-9, Class UI, IO, 5s, 2040 37,309,860 8,283,561
     Ser. 09-121, Class UI, IO, 5s, 2039 15,939,184 3,472,351
     Ser. 10-58, Class VI, IO, 5s, 2038 831,653 43,662
     Ser. 13-39, Class IJ, IO, 4 1/2s, 2043 86,543,190 19,180,619
     Ser. 13-24, Class IC, IO, 4 1/2s, 2043 5,235,492 1,126,207
     Ser. 13-24, Class IK, IO, 4 1/2s, 2043 9,132,413 1,963,103
     Ser. 12-129, Class IO, IO, 4 1/2s, 2042 7,968,426 1,822,618
     Ser. 11-18, Class PI, IO, 4 1/2s, 2040 9,460,773 1,762,542
     Ser. 10-35, Class QI, IO, 4 1/2s, 2040 24,960,387 5,363,504
     Ser. 10-9, Class QI, IO, 4 1/2s, 2040 18,622,223 4,094,079
     Ser. 11-81, Class PI, IO, 4 1/2s, 2037 14,585,697 1,803,230
     Ser. 10-116, Class IB, IO, 4 1/2s, 2036 410,509 32,840
     Ser. 10-19, Class IH, IO, 4 1/2s, 2034 601,420 33,078
     Ser. 13-165, Class IL, IO, 4s, 2043 6,243,722 1,115,129
     Ser. 12-56, Class IB, IO, 4s, 2042 18,927,316 4,358,904
     Ser. 12-47, Class CI, IO, 4s, 2042 8,904,006 2,049,753
     Ser. 10-116, Class QI, IO, 4s, 2034 6,357,528 501,006
     Ser. 13-79, Class PI, IO, 3 1/2s, 2043 16,589,574 2,830,513
     Ser. 13-37, Class JI, IO, 3 1/2s, 2043 10,276,890 1,675,544
     Ser. 13-27, Class PI, IO, 3 1/2s, 2042 9,328,804 1,641,870
     Ser. 13-18, Class GI, IO, 3 1/2s, 2041 13,313,822 2,144,857
     Ser. 12-71, Class JI, IO, 3 1/2s, 2041 7,898,115 1,118,189
     Ser. 12-48, Class KI, IO, 3 1/2s, 2039 8,663,361 1,556,979
     Ser. 12-48, Class AI, IO, 3 1/2s, 2036 20,519,699 4,046,690
     Ser. 10-151, Class KO, PO, zero %, 2037 2,090,325 1,765,802
     Ser. 06-36, Class OD, PO, zero %, 2036 20,669 17,912
     Ser. 06-64, PO, zero %, 2034 50,845 49,907
GSMPS Mortgage Loan Trust 144A
     Ser. 99-2, IO, 0.815s, 2027 1,295,897 9,719
     Ser. 98-3, IO, 0.114s, 2027 777,212 11,415
     Ser. 98-2, IO, zero %, 2027 667,076 4,795
     Ser. 98-4, IO, zero %, 2026 1,025,235 25,230
319,327,257
Total mortgage-backed securities (cost $293,243,497) $319,327,257

PURCHASED SWAP OPTIONS OUTSTANDING (—%)(a)
Counterparty
Fixed right % to receive or (pay)/ Expiration Contract
Floating rate index/Maturity date date/strike amount Value
Credit Suisse International
     2.79625/3 month USD-LIBOR-BBA/May-24 May-14/2.79625 $58,210,400 $204,319
Total purchased swap options outstanding (cost $660,688) $204,319

SHORT-TERM INVESTMENTS (35.0%)(a)
Principal amount/shares Value
Federal Home Loan Bank unsec. discount notes with an effective yield of 0.09%, April 2, 2014 $35,000,000 $34,994,750
Federal Home Loan Mortgage Corp. unsec. discount notes with an effective yield of 0.10%, April 14, 2014 25,000,000 24,995,750
Federal Home Loan Mortgage Corp. unsec. discount notes with an effective yield of 0.09%, February 3, 2014 11,510,000 11,509,050
Federal National Mortgage Association unsec. discount notes with an effective yield of 0.08%, March 19, 2014 31,831,000 31,828,326
Federal National Mortgage Association unsec. discount notes with an effective yield of 0.07%, February 3, 2014 10,200,000 10,199,346
U.S. Treasury Bills with an effective yield of 0.11%, August 21, 2014(SEG)(SEGCCS)(SEGSF) 35,000,000 34,984,285
U.S. Treasury Bills with an effective yield of 0.02%, January 2, 2014 62,500,000 62,499,958
Putnam Money Market Liquidity Fund 0.04%(AFF) 192,451,492 192,451,492
SSgA Prime Money Market Fund 0.05%(P) 120,000 120,000
Total short-term investments (cost $403,565,235) $403,582,957

TOTAL INVESTMENTS
Total investments (cost $2,021,778,475)(b) $2,026,273,711













FUTURES CONTRACTS OUTSTANDING at 12/31/13 (Unaudited)


Number of             Expiration Unrealized
contracts Value             date depreciation
U.S. Treasury Bond 30 yr (Long) 44 $5,645,750             Mar-14 $(94,271)
U.S. Treasury Note 10 yr (Long) 499 61,400,391             Mar-14 (1,069,729)
Total $(1,164,000)












WRITTEN SWAP OPTIONS OUTSTANDING at 12/31/13 (premiums $640,315) (Unaudited)


Counterparty       
Fixed Obligation % to receive or (pay)/ Expiration       Contract
Floating rate index/Maturity date date/strike       amount Value
Credit Suisse International
    (1.5775)/3 month USD-LIBOR-BBA/May-19 May-14/1.5775        $116,420,900 $157,168
Total $157,168













FORWARD PREMIUM SWAP OPTION CONTRACTS OUTSTANDING at 12/31/13 (Unaudited)
Counterparty        Unrealized
Fixed right or obligation % to receive or (pay)/ Expiration       Contract appreciation/
Floating rate index/Maturity date date/strike       amount (depreciation)

JPMorgan Chase Bank N.A.
     2.777/3 month USD-LIBOR-BBA/May-24 (Purchased) May-14/2.777 $58,210,400 $(468,012)
     (1.60)/3 month USD-LIBOR-BBA/May-19 (Written) May-14/1.60 116,420,900 481,983
Total $13,971












TBA SALE COMMITMENTS OUTSTANDING at 12/31/13 (proceeds receivable $158,506,563) (Unaudited)


Principal       Settlement
Agency amount       date Value
Federal National Mortgage Association, 3 1/2s, January 1, 2044 $23,000,000       1/13/14 $22,867,032
Government National Mortgage Association, 4s, January 1, 2044 129,000,000       1/21/14 134,240,625
Total $157,107,657















CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 12/31/13 (Unaudited)
Upfront     Payments Payments Unrealized
premium     Termination made by received by appreciation/
Notional amount received (paid)     date fund per annum fund per annum (depreciation)
$62,091,100 (E) $(695)     11/21/23 3 month USD-LIBOR-BBA 4.22125% $(927,716)
88,169,400 (E) (489)     11/21/18 2.1525% 3 month USD-LIBOR-BBA 1,060,189
2,979,000 (188)     9/25/23 3 month USD-LIBOR-BBA 2.92% (7,032)
88,169,400 (E) (710)     11/20/18 2.14% 3 month USD-LIBOR-BBA 1,080,247
62,091,100 (E) (695)     11/20/23 3 month USD-LIBOR-BBA 4.255% (839,546)
193,832,200 (E) 1,922,543      3/19/19 3 month USD-LIBOR-BBA 2.00% 1,311,972
267,784,200 (E) 1,263,764      3/19/16 3 month USD-LIBOR-BBA 0.75% 393,465
19,417,500 (E) 287,690      3/19/44 3 month USD-LIBOR-BBA 3.75% (490,564)
234,836,300 (E) 3,436,084      3/19/24 3 month USD-LIBOR-BBA 3.25% 1,881,469
Total $6,907,304     $3,462,484
(E)   Extended effective date.











OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 12/31/13 (Unaudited)
Upfront     Payments Total return Unrealized
Swap counterparty/ premium     Termination received (paid) by received by appreciation/
Notional amount received (paid)     date fund per annum or paid by fund (depreciation)
Bank of America N.A.
$7,497,686 $—      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools $27,370
1,527,208 —      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 5,575
Barclays Bank PLC
1,773,262 —      1/12/40 4.50% (1 month USD-LIBOR) Synthetic MBX Index 4.50% 30 year Fannie Mae pools (3,724)
2,662,654 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 8,054
11,120,828 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (26,548)
9,049,715 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 17,296
8,044,664 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 15,373
1,626,515 —      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 5,938
14,993,444 —      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 54,734
29,060,652 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (69,374)
20,966,056 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 40,066
201,090 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic TRS Index 5.00% 30 year Fannie Mae pools 2,129
4,743,538 —      1/12/40 4.00% (1 month USD-LIBOR) Synthetic MBX Index 4.00% 30 year Fannie Mae pools (14,905)
1,385,083 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 2,647
71,057,744 —      1/12/40 4.00% (1 month USD-LIBOR) Synthetic MBX Index 4.00% 30 year Fannie Mae pools (223,284)
15,951,725 —      1/12/41 4.50% (1 month USD-LIBOR) Synthetic TRS Index 4.50% 30 year Fannie Mae pools 134,733
2,314,788 —      1/12/39 6.00% (1 month USD-LIBOR) Synthetic TRS Index 6.00% 30 year Fannie Mae pools 18,502
19,977,272 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 38,176
24,881,145 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (59,397)
26,479,903 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 50,602
7,863,493 —      1/12/40 4.00% (1 month USD-LIBOR) Synthetic MBX Index 4.00% 30 year Fannie Mae pools (24,709)
240,530 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 1,572
126,155 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (975)
126,155 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (975)
1,008,403 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 1,927
302,997 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (2,342)
245,922 —      1/12/40 4.50% (1 month USD-LIBOR) Synthetic TRS Index 4.50% 30 year Fannie Mae pools 2,923
50,686 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (392)
3,421,246 —      1/12/34 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (17,887)
10,501,638 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (25,070)
970,978 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 1,856
60,949,243 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Ginnie Mae II pools 116,498
5,147,995 —      1/12/40 4.50% (1 month USD-LIBOR) Synthetic MBX Index 4.50% 30 year Fannie Mae pools (10,812)
17,576,428 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 33,588
260,748 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 498
845,382 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 1,616
612,962 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 1,171
10,809,507 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic TRS Index 6.50% 30 year Fannie Mae pools (70,655)
7,230,102 —      1/12/39 5.50% (1 month USD-LIBOR) Synthetic TRS Index 5.50% 30 year Fannie Mae pools 55,885
17,765,409 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (42,410)
8,364,922 —      1/12/39 (6.00%) 1 month USD-LIBOR Synthetic MBX Index 6.00% 30 year Fannie Mae pools (49,145)
4,135,740 —      1/12/43 3.50% (1 month USD-LIBOR) Synthetic MBX Index 3.50% 30 year Fannie Mae pools (8,260)
2,695,351 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (15,549)
1,347,675 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (7,774)
1,347,675 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (7,774)
2,704,658 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (15,602)
7,024,553 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (40,522)
2,704,658 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (15,602)
2,215,937 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Ginnie Mae II pools 4,235
5,639,162 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (13,462)
1,682,275 —      1/12/41 4.50% (1 month USD-LIBOR) Synthetic TRS Index 4.50% 30 year Fannie Mae pools 14,209
4,101,593 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 26,810
5,400,009 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic MBX Index 5.50% 30 year Fannie Mae pools (31,151)
15,308,012 —      1/12/41 (5.00%) 1 month USD-LIBOR Synthetic TRS Index 5.00% 30 year Fannie Mae pools (164,444)
3,987,617 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (9,519)
5,572,157 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (13,302)
Citibank, N.A.
122,791 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (949)
1,424,527 —      1/12/41 (4.00%) 1 month USD-LIBOR Synthetic TRS Index 4.00% 30 year Fannie Mae pools (5,200)
7,249,415 —      1/12/41 (4.50%) 1 month USD-LIBOR Synthetic TRS Index 4.50% 30 year Fannie Mae pools (61,231)
Credit Suisse International
980,937 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Fannie Mae pools 1,875
5,161,701 —      1/12/36 5.00% (1 month USD-LIBOR) Synthetic TRS Index 5.00% 30 year Fannie Mae pools 29,647
3,421,246 —      1/12/34 5.50% (1 month USD-LIBOR) Synthetic TRS Index 5.50% 30 year Fannie Mae pools 17,887
126,155 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (975)
2,987,718 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 9,037
2,987,718 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic MBX Index 4.00% 30 year Fannie Mae pools (8,458)
466,633 —      1/12/41 5.00% (1 month USD-LIBOR) Synthetic MBX Index 5.00% 30 year Ginnie Mae II pools 892
3,001,870 —      1/12/41 (4.00%) 1 month USD-LIBOR Synthetic TRS Index 4.00% 30 year Fannie Mae pools (10,958)
16,015,439 —      1/12/41 (4.00%) 1 month USD-LIBOR Synthetic TRS Index 4.00% 30 year Fannie Mae pools (58,464)
2,244,657 —      1/12/41 (4.50%) 1 month USD-LIBOR Synthetic TRS Index 4.50% 30 year Fannie Mae pools (18,959)
5,530,386 —      1/12/41 (4.50%) 1 month USD-LIBOR Synthetic TRS Index 4.50% 30 year Fannie Mae pools (46,711)
7,477,192 —      1/12/41 (5.00%) 1 month USD-LIBOR Synthetic TRS Index 5.00% 30 year Fannie Mae pools (80,323)
10,248,878 —      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 37,414
Deutsche Bank AG
142,393 —      1/12/40 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 587
245,922 —      1/12/40 (4.50%)1 month USD-LIBOR Synthetic TRS Index 4.50% 30 year Fannie Mae pools (2,923)
140,203 —      1/12/40 5.00% (1 month USD-LIBOR) Synthetic TRS Index 5.00% 30 year Fannie Mae pools 1,484
538,195 —      1/12/41 4.50% (1 month USD-LIBOR) Synthetic MBX Index 4.50% 30 year Ginnie Mae II pools 131
5,161,701 —      1/12/36 (5.00%) 1 month USD-LIBOR Synthetic TRS Index 5.00% 30 year Fannie Mae pools (29,647)
Goldman Sachs International
6,573,124 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 42,964
5,070,727 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 33,144
15,729,148 —      1/12/39 6.00% (1 month USD-LIBOR) Synthetic TRS Index 6.00% 30 year Fannie Mae pools 125,722
5,690,919 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 37,198
6,607,636 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 19,986
6,607,636 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 19,986
8,660,985 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (20,676)
3,253,671 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (7,767)
1,934,078 —      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 7,060
6,031,202 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (46,618)
91,649 —      1/12/39 (5.50%) 1 month USD-LIBOR Synthetic TRS Index 5.50% 30 year Fannie Mae pools (708)
2,393,849 —      1/12/40 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 9,864
5,978,771 —      1/12/39 6.00% (1 month USD-LIBOR) Synthetic TRS Index 6.00% 30 year Fannie Mae pools 47,788
4,897,425 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 32,011
9,585,064 —      1/12/41 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 34,990
6,618,313 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 43,260
11,865,236 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (28,325)
439,878 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (1,050)
1,173,045 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (2,800)
1,043,931 —      1/12/38 (6.50%) 1 month USD-LIBOR Synthetic MBX Index 6.50% 30 year Fannie Mae pools (2,492)
1,457,986 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 9,530
635,875 —      1/12/41 (4.00%) 1 month USD-LIBOR Synthetic MBX Index 4.00% 30 year Ginnie Mae II pools 211
6,696,783 —      1/12/38 6.50% (1 month USD-LIBOR) Synthetic TRS Index 6.50% 30 year Fannie Mae pools 43,773
7,595,376 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 22,973
4,866,395 —      1/12/42 4.00% (1 month USD-LIBOR) Synthetic TRS Index 4.00% 30 year Fannie Mae pools 14,719
12,991,470 —      1/12/41 (4.50%) 1 month USD-LIBOR Synthetic TRS Index 4.50% 30 year Fannie Mae pools (109,730)
11,506,618 —      1/12/39 6.00% (1 month USD-LIBOR) Synthetic TRS Index 6.00% 30 year Fannie Mae pools 91,972
JPMorgan Chase Bank N.A.
10,381,928 —      1/12/41 4.50% (1 month USD-LIBOR) Synthetic TRS Index 4.50% 30 year Fannie Mae pools 87,689
Total$—    $(22,752)










Key to holding's abbreviations
FRB Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period
IFB Inverse Floating Rate Bonds, which are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The rate shown is the current interest rate at the close of the reporting period.
IO Interest Only
PO Principal Only
TBA To Be Announced Commitments
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 October 1, 2013 through December 31, 2013 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, 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.
(a) Percentages indicated are based on net assets of $1,152,620,139.
(b) The aggregate identified cost on a tax basis is $2,026,495,574, resulting in gross unrealized appreciation and depreciation of $26,572,399 and $26,794,262, respectively, or net unrealized depreciation of $221,863.
(AFF) Affiliated company. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. Transactions during the period with Putnam Money Market Liquidity Fund, which is under common ownership and control, were as follows:
Name of affiliate Fair value at the beginning of the reporting period Purchase cost Sale proceeds Investment income Fair value at the end of the reporting period
Putnam Money Market Liquidity Fund * $140,001,624 $59,055,882 $6,606,014 $28,768 $192,451,492
* Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
(SEG) This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period.
(SEGSF) This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period.
(SEGCCS) This security, in part or in entirety, was pledged and segregated with the custodian for collateral on the initial margin on certain centrally cleared derivative contracts at the close of the reporting period.
(P) Security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivatives contracts. 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 $790,045,650 to cover certain derivatives contracts and delayed delivery securities.
Debt obligations are considered secured unless otherwise indicated.
The dates shown on debt obligations are the original maturity dates.
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
Security valuation: Investments, including mortgage backed securities, are valued on the basis of valuations provided by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such service providers 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. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value and are classified as Level 2 securities.
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. 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 and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
Such valuations and procedures are reviewed periodically by the Trustees. Certain securities may be valued on the basis of a price provided by a single source. 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.
Stripped securities: The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The fair value of these securities is highly sensitive to changes in interest rates.
Options contracts: The fund used options contracts to hedge duration and convexity, to isolate prepayment risk.
The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Exchange traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers. Forward premium swap options contracts include premiums that do not settle until the expiration date of the contract. The delayed settlement of the premiums are factored into the daily valuation of the option contracts.
For the fund's average contract amount on options contracts, see the appropriate table at the end of these footnotes.
Futures contracts: The fund used futures contracts to hedge interest rate risk and to gain exposure to interest rates.
The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin”.
For the fund's average number of futures contracts, see the appropriate table at the end of these footnotes.
Interest rate swap contracts: The fund entered into OTC and/or centrally cleared interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to hedge interest rate risk and to gain exposure on interest rates.
An OTC and centrally cleared interest rate swap can be purchased or sold with an upfront premium. For OTC interest rate swap contracts, an upfront payment received by the fund is recorded as a liability on the fund's books. An upfront payment made by the fund is recorded as an asset on the fund's books. OTC and centrally cleared interest rate swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change is recorded as an unrealized gain or loss on OTC interest rate swaps. Daily fluctuations in the value of centrally cleared interest rate swaps are recorded as unrealized gain or loss. Payments, including upfront premiums, received or made are recorded as realized gains or losses at the closing of the contract. Certain OTC and centrally cleared interest rate swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract.
The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults, in the case of OTC interest rate contracts, or the central clearing agency or a clearing member defaults, in the case of centrally cleared interest rate swap contracts, on its respective obligation to perform under the contract. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC interest rate swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared interest rate swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared interest rate swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default.
For the fund's average notional amount on interest rate swap contracts, see the appropriate table at the end of these footnotes.
Total return swap contracts: The fund entered into OTC total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount, to hedge sector exposure, to manage exposure to specific sectors or industries, to gain exposure to specific sectors or industries and to generate additional income for the portfolio.
To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between the fund and the counterparty.
For the fund's average notional amount on OTC total return swap contracts, see the appropriate table at the end of these footnotes.
Master agreements: The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio. Collateral posted to the fund which cannot be sold or repledged totaled $473,662 at the close of the reporting period.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund's future derivative activity.
At the close of the reporting period, the fund had a net liability position of $513,220 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund for these agreements totaled $913,452.
TBA purchase commitments: The fund may enter into TBA (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, it is anticipated that the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date.
TBA purchase commitments may be considered securities themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Unsettled TBA purchase commitments are valued at their fair value according to the procedures described under "Security valuation" above. The contract is marked to market daily and the change in fair value is recorded by the fund as an unrealized gain or loss.
Based on market circumstances, Putnam Management will determine whether to take delivery of the underlying securities or to dispose of the TBA commitments prior to settlement.
TBA sale commitments: The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction.
Unsettled TBA sale commitments are valued at their fair value according to the procedures described under "Security valuation" above. The contract is marked to market daily and the change in fair value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting TBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. Based on market circumstances, Putnam Management will determine whether to deliver the underlying securities or to dispose of the TBA commitments prior to settlement. TBA sale commitments outstanding at period end, if any, are listed after the fund's portfolio.












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
Mortgage-backed securities $— $319,327,257 $—
Purchased swap options outstanding — 204,319 —
U.S. government and agency mortgage obligations — 1,303,159,178 —
Short-term investments 192,571,492 211,011,465 —
Totals by level $192,571,492 $1,833,702,219 $—



Valuation inputs
Other financial instruments: Level 1 Level 2 Level 3
Futures contracts $(1,164,000) $— $—
Written swap options outstanding — (157,168) —
Forward premium swap option contracts — 13,971 —
TBA sale commitments — (157,107,657) —
Interest rate swap contracts — (3,444,820) —
Total return swap contracts — (22,752) —
Totals by level $(1,164,000) $(160,718,426) $—


Fair Value of Derivative Instruments as of the close of the reporting period
Asset derivatives Liability derivatives
Derivatives not accounted for as hedging instruments under ASC 815 Fair value Fair value
Interest rate contracts $4,335,714 $8,906,164
Total $4,335,714 $8,906,164


The volume of activity for the reporting period for any derivative type that was held at the close of the period is listed below and was as follows based on an average of the holdings of that derivative at the end of each fiscal quarter in the reporting period:
Purchased swap option contracts (contract amount) $165,400,000
Written swap option contracts (contract amount) $229,800,000
Futures contracts (number of contracts) 1,000
Centrally cleared interest rate swap contracts (notional) $1,036,200,000
OTC total return swap contracts (notional) $877,600,000

For additional information regarding the fund please see the fund's most recent annual or semiannual shareholder report filed on the Securities and Exchange Commission's Web site, www.sec.gov, or visit Putnam's Individual Investor Web site at www.putnaminvestments.com



Item 2. 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 90 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 3. Exhibits:
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.

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 U.S. Government Income Trust
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
Date: February 27, 2014

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: February 27, 2014

By (Signature and Title):
/s/ Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer
Date: February 27, 2014