-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GV5M2yMkbvOaw9afDUlBD71DKI+R+rHi2UqHyd2wHh6QseUucwXmMu3bDOuf8Hxt me7Jk1g7USa+VX2tPHnFdA== 0000928816-96-000213.txt : 19960805 0000928816-96-000213.hdr.sgml : 19960805 ACCESSION NUMBER: 0000928816-96-000213 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960802 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INTERMEDIATE US GOVT INCOME FUND CENTRAL INDEX KEY: 0000869797 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046661044 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06257 FILM NUMBER: 96602818 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002551581 MAIL ADDRESS: STREET 1: NULL FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM BALANCED GOVERNMENT FUND DATE OF NAME CHANGE: 19930121 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM BALANCED MORTGAGE FUND DATE OF NAME CHANGE: 19921223 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM FOCUS GROWTH FUND DATE OF NAME CHANGE: 19920703 N-30D 1 PUTNAM U.S. GOV'T INCOME FUND Putnam Intermediate U.S. Government Income Fund SEMIANNUAL REPORT May 31, 1996 [LOGO: BOSTON * LONDON * TOKYO] Fund highlights * According to Lipper Analytical Services, Putnam Intermediate U.S. Government Income Fund's class A share total return ranked 10 out of 91 short intermediate U.S. government funds for the 12 months ended June 30, 1996, placing the fund in the top 11% in this category.* CONTENTS 4 Report from Putnam Management 8 Fund performance summary 12 Portfolio holdings 13 Financial statements *Lipper Analytical Services, an independent research organization, ranks funds according to total return performance. Their rankings vary over time and do not reflect the effects of sales charges. For periods ended 6/30/96: the fund's class A shares ranked 9 out of 56 short intermediate U.S. government funds for 3-year performance; class B shares ranked 20 out of 91 and 26 out of 56 funds for 1- and 3-year performance, respectively; class M shares ranked 8 out of 91 funds for 1-year performance. Class M shares were not ranked over longer periods. From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] (copyright) Karsh, Ottawa Dear Shareholder: The ability to maintain an even keel when the water becomes rough is the mark of an experienced sailor. Maintaining portfolio stability in a volatile bond market suggests similar seasoning. We are pleased to report that Putnam Intermediate U.S. Government Income Fund, with Michael Martino at the helm, was among the handful of bond funds to weather this spring's bond market turbulence with equanimity. During the semiannual period that ended on May 31, 1996, Mike devoted a lot of attention to adjusting the portfolio's duration and shifting the asset mix in response to unfolding events. At the same time, he kept his eye on the horizon as he positioned the fund to take advantage of what he believes will be opportunities arising over the months ahead. In the report that follows, Mike provides details of his strategy thus far in fiscal 1996 and discusses prospects for the fiscal year's second half. Respectfully yours, /S/George Putnam George Putnam Chairman of the Trustees July 17, 1996 Report from the Fund Manager Michael Martino During 1995, bond funds largely demonstrated that they could perform well amid a rallying market. So far in 1996, however, far fewer have met the more difficult task of remaining stable as bond markets have faltered. One of the few to maintain its composure is Putnam Intermediate U.S. Government Income Fund. Over the six-month period ended May 31, 1996, careful management of your fund's exposure to interest-rate changes and prudent allocation among market sectors enabled it to stand its ground as the market retreated. As a result, total return numbers for class A shares at net asset value outperformed the Lehman Brothers Intermediate Government Bond Index, the fund's benchmark. Complete performance information appears on pages 8 and 9. * DURATION MANAGEMENT PROVES KEY TO STABILITY The most significant contribution to your fund's performance over the past six months came from our management of the portfolio's duration. Duration is a measure of the price sensitivity of a portfolio of bonds to changes in interest rates. Like maturity, with which it is often confused, duration is measured in years. Because bond prices rise as interest rates fall, a longer duration gives the fund the potential to derive greater benefit when long-term rates are in decline. Through the first few months of the fiscal period, we kept the portfolio's duration relatively long, seeking to enhance the fund's value as long-term interest rates continued to decline. Of course, a longer duration can have a negative impact on the fund; when rates rise bond prices fall and a longer duration can magnify the fund's decline. In February of this year, as economic growth picked up steam and 1995's bond-market rally showed signs of slowing, we began to shorten your portfolio's duration. Our goal was to reduce declines in the portfolio's value as bond prices declined. By shifting much of the fund's Treasury holdings into bonds with maturities of two and three years, we were able to prevent a substantial decline in the value of the portfolio. * FUND BENEFITS AS MORTGAGE-BACKED SECURITIES STRENGTHEN At the outset of the fund's fiscal year last December, mortgage-backed securities had lagged Treasuries for several months. This underperformance was due primarily to accelerating prepayments, the result of increased refinancing among mortgage holders as long-term interest rates declined. However, this trend gradually changed direction early in calendar 1996. As interest rates began to climb in January, refinancing no longer offered a significant advantage to mortgage holders and prepayment activity began to slow. Your fund began the fiscal year with slightly more than 20% of the portfolio allocated to mortgage-backed securities. These holdings consisted primarily of fixed-rate mortgage securities (FRMs), with a small allocation to adjustable-rate mortgage securities (ARMs). The portfolio's FRM holdings included bonds issued by the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), and the Government National Mortgage Association (Ginnie Mae). FRMs typically offer higher yields than Treasuries -- in the area of a full percentage point more -- and were instrumental in helping the fund maintain its value as the bond market struggled during the period. As the bond-market rally waned, we increased your fund's combined FRM and ARM holdings to roughly 30% of the portfolio to take advantage of their improved performance relative to Treasuries. [GRAPHIC OMITTED: vertical bar chart PORTFOLIO COMPOSITION*] 11/30/95 5/31/96 - ------------------------------------------------------ FRMs 16.5% 9.1% ARMs 4.6% 1.8% U.S. Treasuries 64.9% 77.0% Short-term investments 13.7% 10.0% Footnote reads: *Based on percentage of total net assets. Holdings will vary over time. By the end of April, the rally among mortgage-backed securities had improved demand for these bonds considerably, driving their prices higher. Higher prices, in turn, reduced demand for these securities somewhat, enabling Treasuries to regain some of the ground they had lost earlier in the year. In May, as mortgage-backed securities prices rose, we took advantage of the resulting profit opportunities by selling a portion of the portfolio's FRM and ARM holdings and again emphasizing Treasury securities. * OUTLOOK: BONDS MAY REMAIN STABLE DESPITE STURDY ECONOMIC GROWTH At the beginning of 1996, the consensus among market observers called for slowing economic growth and continued strength in domestic bond markets. However, over the past several months, economic indicators have provided convincing evidence that the U.S. economy is again growing at an above-average pace. The combination of lower-than-expected unemployment, increases in commodity and oil prices, and a breakdown in federal budget talks in recent months conspired to boost economic growth and interrupt the recent bond-market rally. The widely held outlook for the coming few months is one of strong economic growth. But this scenario doesn't necessarily guarantee a rough ride for bond holders. Because economists and investors alike foresee continued growth, the bond market has, to some extent, already taken this expected growth into account. This means that a portion of the yield increases (and corresponding price declines) we've experienced recently reflects assumptions about the future. While there can be no guarantees, this may suggest only modest bond-market declines if economic growth is in line with expectations. On the other hand, if growth proves to be slower than expected, the market may compensate for its earlier pessimism, and bond values may again start to improve. We believe that economic growth will begin to settle down later this year, although there can be no assurances. To prepare your fund for such a development, we recently lengthened the portfolio's duration to enable the fund to benefit if the bond market improves. Of course, this approach entails some risk; substantial increases in interest rates could adversely affect the fund. In light of the currently high prices among mortgage-backed securities, demand for these securities may continue to subside, and prices may return to attractive levels. If these events occur, we may increase the portfolio's allocation to FRMs. Overall, we will continue to emphasize intermediate-term bonds in an effort to minimize interest-rate risk while keeping the fund prepared to benefit from market rallies. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 5/31/96, there is no guarantee the fund will continue to hold these securities in the future. While U.S. government backing of individual securities does not insure your principal, which will fluctuate, it does guarantee that the fund's government-backed holdings will make timely payments of interest and principal. [GRAPHIC OMITTED: vertical bar chart MATURITY OVERVIEW OF TREASURY SECURITIES*] 0-3 years 10.5% 3-5 years 41.1% 5-10 years 25.4% 10-30 years 0.0% Footnote reads: * Based on percentage of total net assets as of 5/31/96. Holdings will vary over time. Perforamnce summary Performance should always be considered in light of a fund's investment strategy. Putnam Intermediate U.S. Government Income Fund is designed for investors seeking as high a level of current income as is consistent with preservation of capital. This section provides, at a glance, information about your fund's performance. Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. TOTAL RETURN FOR PERIODS ENDED 5/31/96 Class A Class B Class M (inception date) (2/16/93) (2/16/93) (4/1/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------ 6 months 0.14% -3.21% -0.16% -3.08% -0.15% -2.13% - ------------------------------------------------------------------------ 1 year 6.28 2.84 5.65 2.65 6.12 3.94 - ------------------------------------------------------------------------ Life of class 15.47 11.68 13.22 12.26 9.47 7.17 Annual average 4.47 3.41 3.85 3.58 8.11 6.16 - ------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/96 Lehman Bros. Intermediate Govt. Bond Consumer Index Price Index - ------------------------------------------------------------------------ 6 months -0.04% 1.95% - ------------------------------------------------------------------------ 1 year 4.53 2.89 - ------------------------------------------------------------------------ Life of class A & B 16.45 9.82 Annual average 4.79 2.89 - ------------------------------------------------------------------------ Life of class M 8.73 3.44 Annual average 7.42 2.95 - ------------------------------------------------------------------------ Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions. Performance data represent past results and will differ for each share class. Investment returns and net asset value will fluctuate so an investor's shares, when sold, may be worth more or less than their original cost. POP assumes 3.25% maximum sales charge for class A shares and 2.00% for class M shares. CDSC for class B shares assumes 3.00% maximum contingent deferred sales charge. Performance data for periods before 4/10/95 do not reflect current investment policies. TOTAL RETURN FOR PERIODS ENDED 6/30/96 (most recent calendar quarter) Class A Class B Class M NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------ 6 months -0.28% -3.59% -0.58% -3.48% -0.36% -2.32% - ------------------------------------------------------------------------ 1 year 5.58 2.19 4.96 1.98 5.63 3.49 - ------------------------------------------------------------------------ Life of class 16.50 12.68 14.18 13.22 10.66 8.34 Annual average 4.64 3.60 4.01 3.75 8.44 6.62 - ------------------------------------------------------------------------ Performance data represent past results, do not reflect future performance, and will differ for each share class. Investment returns and net asset value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. PRICE AND DISTRIBUTION INFORMATION 6 months ended 5/31/96 Class A Class B Class M - ------------------------------------------------------------------------ Distributions (number) 6 6 6 - ------------------------------------------------------------------------ Income $0.147839 $0.133119 $0.144060 - ------------------------------------------------------------------------ Total $0.147839 $0.133119 $0.144060 - ------------------------------------------------------------------------ Share value: NAV POP NAV NAV POP - ------------------------------------------------------------------------ 11/30/95 $4.92 $5.09 $4.92 $4.93 $5.03 - ------------------------------------------------------------------------ 5/31/96 4.78 4.94 4.78 4.78 4.88 - ------------------------------------------------------------------------ Current return (end of period) NAV POP NAV NAV POP - ------------------------------------------------------------------------ Current dividend rate1 5.79% 5.60% 5.19% 5.64% 5.52% - ------------------------------------------------------------------------ Current 30-day SEC yield2 4.93 4.77 4.32 4.78 4.68 - ------------------------------------------------------------------------ 1Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2Based on investment income, calculated using SEC guidelines. TERMS AND DEFINITIONS Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the maximum 3.25% sales charge for class A shares and 2.00% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B shares and assumes redemption at the end of the period. Your fund's CDSC declines from a 3% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. COMPARATIVE BENCHMARKS Lehman Brothers Intermediate Government Bond Index is composed of all bonds covered by the Lehman Brothers Government Bond Index with maturities between one and 9.9 years. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund. Since the fund's holdings consist largely or short- and intermediate-term Treasury and agency securities, it is Putnam Management's opinion that this index is a more appropriate benchmark than the Lehman Brothers Mortgage-Backed Securities Index. It is not possible to invest directly in an index. Consumer Price Index (CPI ) is a commonly used measure of inflation; it does not represent an investment return. PUTNAM GROWTH FUNDS Asia Pacific Growth Fund Capital Appreciation Fund Diversified Equity Trust Europe Growth Fund Global Growth Fund Health Sciences Trust International New Opportunities Fund Investors Fund Natural Resources Fund New Opportunities Fund OTC Emerging Growth Fund Overseas Growth Fund Vista Fund Voyager Fund Voyager Fund II PUTNAM GROWTH AND INCOME FUNDS Balanced Retirement Fund Convertible Income-Growth Trust Equity Income Fund The George Putnam Fund of Boston The Putnam Fund for Growth and Income Growth and Income Fund II Utilities Growth and Income Fund PUTNAM INCOME FUNDS American Government Income Fund Diversified Income Trust Diversified Income Trust II Federal Income Trust Global Governmental Income Trust High Yield Advantage Fund High Yield Trust Income Fund Intermediate U.S. Government Income Fund Preferred Income Fund U.S. Government Income Trust PUTNAM TAX-FREE INCOME FUNDS Municipal Income Fund Tax Exempt Income Fund Tax-Free High Yield Fund Tax-Free Insured Fund State tax-free income funds* Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio and Pennsylvania LIFESTAGESM FUNDS Putnam Asset Allocation Funds--three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments to help maximize your return and reduce your risk. The three portfolios: Putnam Asset Allocation: Balanced Portfolio Putnam Asset Allocation: Conservative Portfolio Putnam Asset Allocation: Growth Portfolio MOST CONSERVATIVE INVESTMENTS+ Putnam money market funds: California Tax Exempt Money Market Fund Money Market Fund New York Tax Exempt Money Market Fund Tax Exempt Money Market Fund CDs and savings accounts++ * Not available in all states. + Relative to above. ++ Not offered by Putnam Investments. Certificates of deposit offer a fixed rate of return and may be insured up to certain limits by federal/state agencies. Savings accounts may also be insured up to certain limits. Please call your financial advisor or Putnam at 1-800- 225-1581 to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Please read it carefully before you invest or send money.
Portfolio of investments owned May 31,1996 (Unaudited) U.S. GOVERNMENT AND AGENCY OBLIGATIONS (87.9%)* PRINCIPAL AMOUNT VALUE U.S. Government Agency Mortgage Pass-Through Certificates (10.9%) - --------------------------------------------------------------------------------------------------------------- Federal Home Loan Corp. Adjustable Rate Mortgages (ARMs) $1,726,437 7.85s, November 18, 2018 $1,777,160 Federal National Mortgage Association 1,013,935 8s, May 1, 2013 1,019,005 1,559,203 7.276s, June 1, 2018 1,595,019 1,858,505 6 1/2s, Balloon, with various due dates from April 1, 1999 to January 1, 2001 1,813,774 4,529,812 Government National Mortgage Association 8s, with various due dates from March 15, 2023 to September 15, 2023 4,577,923 ------------ 10,782,881 U.S. Treasury Obligations (77.0%) - --------------------------------------------------------------------------------------------------------------- U.S. Treasury Notes 5,000,000 8 1/2s, February 15, 2000 5,314,050 10,000,000 8 1/8s, February 15, 1998 10,303,100 10,000,000 8s, May 15, 2001 10,562,500 25,000,000 6 7/8s, May 15, 2006 25,039,000 25,000,000 6 1/4s, April 30, 2001 24,578,000 ------------ 75,796,650 ------------ Total U.S. Government and Agency Obligations (cost $88,629,745) $86,579,531 SHORT-TERM INVESTMENTS (10.0%) * (cost $9,889,453) PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------- $9,888,000 Interest in $530,273,000 joint repurchase agreement dated May 31, 1996 with Morgan Stanley & Co., Inc. due June 3, 1996 with respect to various U.S. Treasury obligations-maturity value of $9,892,359 for an effective yield of 5.29%. $9,889,453 - --------------------------------------------------------------------------------------------------------------- Total Investments (cost $98,519,198)*** $96,468,984 - --------------------------------------------------------------------------------------------------------------- * Percentages are based on net assets of $98,490,676. *** The aggregate identified cost on a tax cost basis is $98,519,198, resulting in gross unrealized appreciation and depreciation of $19,248 and $2,069,462, respectively, or net unrealized appreciation of $2,050,214. The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities May 31, 1996 (Unaudited) Assets - ----------------------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $98,519,198) (Note 1) $96,468,984 - ----------------------------------------------------------------------------------------------------------------- Cash 985 - ----------------------------------------------------------------------------------------------------------------- Interest receivable 684,812 - ----------------------------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 1,911,153 - ----------------------------------------------------------------------------------------------------------------- Unamortized organization expenses (Note 1) 17,137 - ----------------------------------------------------------------------------------------------------------------- Total assets 99,083,071 Liabilities - ----------------------------------------------------------------------------------------------------------------- Distributions payable to shareholders 108,463 - ----------------------------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 210,735 - ----------------------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 138,947 - ----------------------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 27,398 - ----------------------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 209 - ----------------------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 855 - ----------------------------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 47,798 - ----------------------------------------------------------------------------------------------------------------- Payable for organizational expenses (Note 1) 34,973 - ----------------------------------------------------------------------------------------------------------------- Other accrued expenses 23,017 - ----------------------------------------------------------------------------------------------------------------- Total liabilities 592,395 - ----------------------------------------------------------------------------------------------------------------- Net assets $98,490,676 Represented by - ----------------------------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $103,295,325 - ----------------------------------------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (523,524) - ----------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments (Note 1) (2,230,911) - ----------------------------------------------------------------------------------------------------------------- Net unrealized depreciation of investments (2,050,214) - ----------------------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $98,490,676 Computation of net asset value and offering price - ----------------------------------------------------------------------------------------------------------------- Net asset value and redemption price of class A shares ($68,717,357 divided by 14,384,409 shares) $4.78 - ----------------------------------------------------------------------------------------------------------------- Offering price per class A share (100/96.75 of $4.78) * $4.94 - ----------------------------------------------------------------------------------------------------------------- Net asset value and offering price of class B shares ($27,235,886 divided by 5,702,460 shares) ** $4.78 - ----------------------------------------------------------------------------------------------------------------- Net asset value and redemption price of class M shares ($2,537,433 divided by 530,648 shares) $4.78 - ----------------------------------------------------------------------------------------------------------------- Offering price per class M share (100/98.00 of $4.78) * $4.88 - ----------------------------------------------------------------------------------------------------------------- * On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements
Statement of operations Six months ended May 31, 1996 (Unaudited) Interest income: $2,960,831 - ------------------------------------------------------------------------------- Expenses: - ------------------------------------------------------------------------------- Compensation of Manager (Note 2) $266,496 - ------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 66,234 - ------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 3,870 - ------------------------------------------------------------------------------- Administrative services (Note 2) 2,521 - ------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 76,655 - ------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 107,816 - ------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 4,084 - ------------------------------------------------------------------------------- Amortization of organization expenses (Note 1) 4,945 - ------------------------------------------------------------------------------- Reports to shareholders 9,093 - ------------------------------------------------------------------------------- Auditing 16,500 - ------------------------------------------------------------------------------- Legal 2,928 - ------------------------------------------------------------------------------- Postage 3,493 - ------------------------------------------------------------------------------- Registration fees 6,561 - ------------------------------------------------------------------------------- Other expenses 179 - ------------------------------------------------------------------------------- Total expenses 571,375 - ------------------------------------------------------------------------------- Expense reduction (Note 2) (23,156) - ------------------------------------------------------------------------------- Net expenses 548,219 - ------------------------------------------------------------------------------- Net investment income 2,412,612 - ------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 923,920 - ------------------------------------------------------------------------------- Net unrealized depreciation on investments (3,490,867) - ------------------------------------------------------------------------------- Net loss on investments (2,566,947) - ------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $ (154,335) - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements
Statement of changes in net assets Six months ended Year ended May 31 November 30 1996* 1995 - -------------------------------------------------------------------------------------------------------- Increase in net assets - -------------------------------------------------------------------------------------------------------- Operations: - -------------------------------------------------------------------------------------------------------- Net investment income $2,412,612 $4,191,045 - -------------------------------------------------------------------------------------------------------- Net realized gain on investments 923,920 259,045 - -------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments (3,490,867) 5,137,752 - -------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (154,335) 9,587,842 - -------------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------------- From net investment income - -------------------------------------------------------------------------------------------------------- Class A (1,842,001) (3,210,923) - -------------------------------------------------------------------------------------------------------- Class B (687,545) (1,221,731) - -------------------------------------------------------------------------------------------------------- Class M (58,775) (17,436) In excess of net investment income - -------------------------------------------------------------------------------------------------------- Class A -- (34,353) - -------------------------------------------------------------------------------------------------------- Class B -- (13,071) - -------------------------------------------------------------------------------------------------------- Class M -- (187) - -------------------------------------------------------------------------------------------------------- From return of capital - -------------------------------------------------------------------------------------------------------- Class A -- (82,490) - -------------------------------------------------------------------------------------------------------- Class B -- (31,387) - -------------------------------------------------------------------------------------------------------- Class M -- (448) - -------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 19,925,226 1,078,564 - -------------------------------------------------------------------------------------------------------- Total increase in net assets 17,182,570 6,054,380 - -------------------------------------------------------------------------------------------------------- Net assets - -------------------------------------------------------------------------------------------------------- Beginning of period 81,308,106 75,253,726 - -------------------------------------------------------------------------------------------------------- End of period (including distributions in excess of net investment income of $523,524 and $347,815 respectively) $98,490,676 $81,308,106 - -------------------------------------------------------------------------------------------------------- *Unaudited The accompanying notes are an integral part of these financial statements
Financial Highlights (For a share outstanding throughout the period) For the period April 1, 1995 Six months (commencement Six months ended of operations) ended May 31 to November 30 May 31 - ---------------------------------------------------------------------------------------------------------------------- 1996 * 1995 1996 * - ---------------------------------------------------------------------------------------------------------------------- Class M - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $4.93 $4.68 $4.92 - ---------------------------------------------------------------------------------------------------------------------- Investment operations - ---------------------------------------------------------------------------------------------------------------------- Net investment income .14 .12 (a) .13 - ---------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.15) .32 (.14) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations (.01) .44 (.01) - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: - ---------------------------------------------------------------------------------------------------------------------- Net investment income (.14) (.18) (.13) - ---------------------------------------------------------------------------------------------------------------------- Return of capital -- (.01) -- - ---------------------------------------------------------------------------------------------------------------------- Total distributions (.14) (.19) (.13) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.78 $4.93 $4.78 - ---------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%)(c) (.15)(d) 9.63 (d) (.16)(d) - ---------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $2,537 $1,058 $27,236 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(e) .61 (d) .87 (d) .86 (d) - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 2.68 (d) 3.37 (d) 2.51 (d) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 211.40 (d) 383.88 211.40 (d) - ----------------------------------------------------------------------------------------------------------------------
Financial Highlights (continued) (For a share outstanding throughout the period) For the period February 16, 1993 (commencement Year ended of operations) November 30 to November 30 - ---------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $4.60 $4.91 $5.00 - ---------------------------------------------------------------------------------------------------------------------- Investment operations - ---------------------------------------------------------------------------------------------------------------------- Net investment income .24 .24 (b) .18 (a)(b) - ---------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .35 (.32) (.08) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .59 (.08)(b) .10 (b) - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: - ---------------------------------------------------------------------------------------------------------------------- Net investment income (.26) (.21) (.19) - ---------------------------------------------------------------------------------------------------------------------- Return of capital (.01) (.02) -- - ---------------------------------------------------------------------------------------------------------------------- Total distributions (.27) (.23) (.19) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.92 $4.60 $4.91 - ---------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%)(c) 13.17 (1.71) 1.95 (d) - ---------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $23,201 $21,243 $4,317 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(e) 1.81 1.69 (b) .67 (b)(d) - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 5.17 4.98 (b) 3.53 (b)(d) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 383.88 351.62 309.80 - ----------------------------------------------------------------------------------------------------------------------
Financial Highlights (continued) (For a share outstanding throughout the period) Six months ended May 31 Year ended November 30 - ---------------------------------------------------------------------------------------------------------------------- 1996 * 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $4.92 $4.60 $4.91 - ---------------------------------------------------------------------------------------------------------------------- Investment operations - ---------------------------------------------------------------------------------------------------------------------- Net investment income .14 .27 .27 (b) - ---------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.13) .35 (.32) - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .01 .62 (.05)(b) - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: - ---------------------------------------------------------------------------------------------------------------------- Net investment income (.15) (.29) (.24) - ---------------------------------------------------------------------------------------------------------------------- Return of capital -- (.01) (.02) - ---------------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.30) (.26) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $4.78 $4.92 $4.60 - ---------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%)(c) .14 (d) 13.85 (1.12) - ---------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $68,717 $57,049 $53,831 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(e) .56 (d) 1.20 1.09 - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 2.81 (d) 5.78 5.59 - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 211.40 (d) 383.88 351.62 - ----------------------------------------------------------------------------------------------------------------------
Financial Highlights (continued) (For a share outstanding throughout the period) For the period February 16, 1993 (commencement of operations) to November 30 - --------------------------------------------------------------------------------- 1993 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Net asset value, beginning of period $5.00 - --------------------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------------------- Net investment income .21 (a)(b) - --------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.09) - --------------------------------------------------------------------------------- Total from investment operations .12 (b) - --------------------------------------------------------------------------------- Distributions to shareholders from: - --------------------------------------------------------------------------------- Net investment income (.21) - --------------------------------------------------------------------------------- Return of capital -- - --------------------------------------------------------------------------------- Total distributions (.21) - --------------------------------------------------------------------------------- Net asset value, end of period $4.91 - --------------------------------------------------------------------------------- Total investment return at net asset value (%)(c) 2.44 (d) - --------------------------------------------------------------------------------- Net assets, end of period (in thousands) $19,088 - --------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(e) 1.05 (b)(d) - --------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 3.13 (b)(d) - --------------------------------------------------------------------------------- Portfolio turnover (%) 309.08 - --------------------------------------------------------------------------------- * Unaudited (a) Per share net investment income for the periods ended November 30, 1993, for class A and class B, and November 30, 1995, for class M, have been determined on the basis of the weighted average number of shares outstanding during the periods. (b) Reflects an expense limitation in effect during the period. (See Note 2). As a result of such limitation, expenses for the fund reflect a reduction of approximately $0.01 per share for the period ended November 30, 1993. Expenses for the period ended November 30, 1994 relfect a reduction of less than $0.01 per share for class A and class B, respectively. (c) Total investment return assumes dividend reinvestment and does not relflect the effect of sales charge. (d) Not annualized (e) The ratio of expenses to average net assets for the periods ended November 30, 1995 and thereafter, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (See Note 2).
Notes to financial statements May 31, 1996 (Unaudited) Note 1 Significant accounting policies The fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks high current income consistent with preservation of capital, through investments primarily in U.S. government securities. The fund offers class A, class B and class M shares. Class A shares are sold with a maximum front-end sales charge of 3.25%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge, but pay a higher ongoing distribution fee than class A shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within four years of purchase. Class M shares are sold with a maximum front-end sales charge of 2.00% and pay an ongoing distribution fee that is lower than class B shares and higher than class A shares. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sale price, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price, except that certain U.S. government obligations are stated at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair market value following procedures approved by the Trustees. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies managed by Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. E) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held and for excise tax on income and capital gains. At November 30, 1995, the fund had a capital loss carryover of approximately $3,155,000 available to offset future net capital gain, if any, which will expire on November 30, 2002. F) Distributions to shareholders Income dividends are recorded daily by the fund and are distributed monthly. Capital gain distributions if any, are recorded on the ex-dividend date and paid annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. G) Unamortized organization expenses Expenses incurred by the fund in connection with its organization, its registration with the Securities and Exchange Commission and with various states and the initial public offering of its shares were $49,893. These expenses are being amortized on a straight-line basis over a five-year period. The fund will reimburse Putnam Management for the payment of these expenses. Note 2 Management fee, administrative services and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.60% of the first $1 billion of average net assets, 0.50% of the next $500 million, 0.45% of any amount over $1.5 billion subject, under current law, to reduction in any year by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of Putnam Management on the fund's portfolio transactions. The fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Trustees of the fund receive an annual Trustees fee of $530 and an additional fee for each Trustee's meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. The fund adopted a Trustee Fee Deferral Plan (the "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 Plan. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended May 31, 1996, fund expenses were reduced by $23,156 under expense offset arrangements with PFTC. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an annual rate up to .35%, .85% and 1.00% of the average net assets attributable to class A, class B and class M shares, respectively. The Trustees have approved payment by the fund at an annual rate of .25%, .85% and .40% of the average net assets attributable to class A, class B and class M shares, respectively. For the six months ended May 31, 1996, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $32,536 and $2,798 from the sale of class A and class M shares, respectively and $21,436 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the six months ended May 31, 1996, Putnam Mutual Funds Corp., acting as underwriter received $634 on class A redemptions. Note 3 Purchase and sales of securities During the six months ended May 31, 1996, purchases and sales of U.S. government and agency obligations other than short-term investments aggregated $191,781,165 and $172,626,607, respectively. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Capital shares At May 31, 1996, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended May 31, 1996 - ---------------------------------------------------- Class A Shares Amount - ---------------------------------------------------- Shares sold 7,546,942 $ 36,694,607 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 272,614 1,330,895 - ---------------------------------------------------- 7,819,556 38,025,502 Shares repurchased (5,028,981) (24,479,287) - ---------------------------------------------------- Net increase 2,790,575 $ 13,546,215 - ---------------------------------------------------- Year ended November 30, 1995 - ---------------------------------------------------- Class A Shares Amount - ---------------------------------------------------- Shares sold 3,635,834 $ 17,320,323 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 426,252 2,016,383 - ---------------------------------------------------- 4,062,086 19,336,706 Shares repurchased (4,164,440) (19,624,855) - ---------------------------------------------------- Net decrease (102,354) $ (288,149) - ---------------------------------------------------- Six months ended May 31, 1996 - ---------------------------------------------------- Class B Shares Amount - ---------------------------------------------------- Shares sold 2,078,440 $10,136,776 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 127,398 622,050 - ---------------------------------------------------- 2,205,838 10,758,826 Shares repurchased (1,219,297) (5,937,837) - ---------------------------------------------------- Net increase 986,541 $4,820,989 - ---------------------------------------------------- Year ended November 30, 1995 - ---------------------------------------------------- Class B Shares Amount - ---------------------------------------------------- Shares sold 2,532,117 $12,093,732 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 198,942 941,425 - ---------------------------------------------------- 2,731,059 13,035,157 Shares repurchased (2,671,253) (12,701,553) - ---------------------------------------------------- Net increase 59,806 $333,604 - ---------------------------------------------------- Six months ended May 31, 1996 - ---------------------------------------------------- Class M Shares Amount - ---------------------------------------------------- Shares sold 598,546 $ 2,931,408 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 10,944 53,341 - ---------------------------------------------------- 609,490 2,984,749 Shares repurchased (293,656) (1,426,727) - ---------------------------------------------------- Net increase 315,834 $ 1,558,022 - ---------------------------------------------------- April 1, 1995 (commencement of operations) to November 1995 - ---------------------------------------------------- Class M Shares Amount - ---------------------------------------------------- Shares sold 273,507 $1,318,280 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 2,194 10,635 - ---------------------------------------------------- 275,701 1,328,915 Shares repurchased (60,887) (295,806) - ---------------------------------------------------- Net increase 214,814 $1,033,109 - ---------------------------------------------------- Our commitment to quality service * CHOOSE AWARD-WINNING SERVICE Putnam Investor Services has won the DALBAR Quality Tested Service Seal for the past six years. In 1995, over 146,000 tests of 56 shareholder service components demonstrated that Putnam outperformed the industry standard in every category. * HELP YOUR INVESTMENT GROW Set up a systematic program for investing with as little as $25 a month from a Putnam money market fund or from your checking or savings account.* * SWITCH FUNDS EASILY You can move money from one account to another with the same class of shares without a service charge. (This privilege is subject to change or termination.) * ACCESS YOUR MONEY QUICKLY You can get checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. For details about any of these or other services, contact your financial advisor or call the toll-free number shown below and speak with a helpful Putnam representative. To make an additional investment in this or any other Putnam fund, contact your financial advisor or call our toll-free number: 1-800-225- 1581. * Regular investing of course, does not guarantee a profit or protect against a loss in a declining market. Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Ronald J. Jackson Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III Eli Shapiro A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Gary N. Coburn Vice President Alan Bankart Vice President Michael Martino Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul M. O'Neil Vice President Beverly Marcus Clerk and Assistant Treasurer This report is for the information of shareholders of Putnam Intermediate U.S. Government Income Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary. For more information, or to request a prospectus, call toll free: 1-800-225-1581. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution, are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency, and involve risk, including the possible loss of principal amount invested. PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - ------------- Bulk Rate U.S. Postage PAID Putnam Investments - ------------- 25863-398/428/674 7/96 -----END PRIVACY-ENHANCED MESSAGE-----