Putnam Short Duration Income Fund - Putnam Investments

“
We have been positioning the fund for
higher future rates.
”
Joanne Driscoll
In terms of risk management, we seek to
limit the fund’s sensitivity to interest-rate
movements by generally keeping the portfolio’s
duration at or less than one year. We
seek to control the fund’s credit risk by only
investing in investment-grade securities and
limiting its exposure to individual issuers.
Lastly, we utilize high-quality commercial
paper and other money-market-eligible
securities for liquidity purposes and as a
temporary repository for cash that will be
invested in short-term bonds.
Turning to you, Mike, how was the fund
positioned during the period?
We continued to target opportunities in
securities with maturities up to three years
or those with marginally lower credit quality.
We sought to mitigate these risks by counterbalancing
them. Specifically, the Baa-rated
securities that we owned — which provided
the fund with higher yields, given their greater
Credit quality overview
P-1
2.1%
P-2
10.0%
P-3
3.4%
Aaa
2.4%
Aa
15.0%
A
31.2%
Baa
33.8%
Ba
2.3%
Not rated
Cash and net
other assets
1.1%
–1.3%
Credit qualities are shown as a percentage of the fund’s net assets as of 7/31/14. A bond rated Baa
or higher (Prime-3/VMIG3 or higher, for short-term debt) is considered investment grade. The chart
reflects Moody’s ratings; percentages may include bonds or derivatives not rated by Moody’s but
rated by Standard & Poor’s (S&P) or, if unrated by S&P, by Fitch ratings, and then included in the
closest equivalent Moody’s rating. Ratings may vary over time.
Cash and net other assets, if any, represent the market value weights of cash, derivatives, and other
unclassified assets in the portfolio. The fund itself has not been rated by an independent rating
agency. The cash and net other assets category may show a negative market value percentage as
a result of the timing of trade date versus settlement date transactions.
Short Duration Income Fund 7