Putnam Fixed Income Absolute Return Fund Semiannual report 4 | 30 | 21 Absolute return funds are designed for a wide range of investors and pursue positive returns with less volatility over time than more traditional funds. FUND SYMBOL CLASS A PTRNX Putnam Fixed Income Absolute Return Fund Semiannual report 4 | 30 | 21 Message from the Trustees 1 Interview with your fund’s portfolio manager 3 Your fund’s performance 8 Your fund’s expenses 10 Consider these risks before investing 12 Terms and definitions 13 Other information for shareholders 15 Financial statements 16 Message from the Trustees June 11, 2021 Dear Fellow Shareholder: With summer at hand, it’s worth asking whether the economy has returned to normal. More than half of the 50 states have lifted pandemic-related restrictions. First-quarter growth in U.S. gross domestic product was 6%, reflecting a return nearly to pre-pandemic levels of economic output. The global economy is a different story. Beyond our shores, many nations lag the United States in vaccination rates and business activity. While there are reasons to feel some relief, it’s important to recognize what may be a new normal. The pandemic is not in the past, and many of the changes precipitated by it could last. During this time, dynamic, well-managed companies have adapted to seize new, more sustainable growth opportunities. Putnam’s active philosophy is well suited to this time. Putnam’s investment teams are analyzing companies, industries, consumers, and even governments. They try to understand the fundamentals of what has stayed the same and what has changed to uncover valuable investment insights or potential risks. Thank you for investing with Putnam. Respectfully yours, Robert L. Reynolds Kenneth R. Leibler President and Chief Executive Officer Chair, Board of Trustees Putnam Investments Performance history as of 4/30/21 Annualized total return (%) comparison The fund — class A shares before sales charge Fund’s benchmark Putnam Fixed Income Absolute Return Fund (PTRNX) ICE BofA U.S. Treasury Bill Index 8.42 4.08 3.74 2.79 3.06 2.07 1.20 1.50 0.58 0.66 0.12 0.05 LIFE OF FUND 10 YEARS 5 YEARS 3 YEARS 1 YEAR 6 MONTHS (since 12/23/08) Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 2.25%; had they, returns would have been lower. See below and pages 8–10 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com. Returns for periods less than one year are cumulative. Recent broad market index and fund performance U.S. stocks (S&P 500 Index) 28.85% Putnam Fixed Income Absolute Return Fund (class A shares before sales charge) 3.74% Fund’s benchmark (ICE BofA U.S. Treasury Bill Index) 0.05% U.S. bonds (Bloomberg Barclays U.S. Aggregate Bond Index) –1.52% This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 4/30/21. See above and pages 8–10 for additional fund performance information. Index descriptions can be found on page 14. All Bloomberg Barclays indices provided by Bloomberg Index Services Limited. 2 Fixed Income Absolute Return Fund Interview with your fund’s portfolio manager Interview with your fund’s portfolio manager Performance history as of 4/30/21 Mike Salm discusses the investing environment and fund performance for the six-month period Annualized total return (%) comparison The fund — class A shares before sales charge Fund’s benchmark ended April 30, 2021, as well as his outlook Putnam Fixed Income Absolute Return Fund (PTRNX) ICE BofA U.S. Treasury Bill Index for the fixed-income markets. 8.42 4.08 3.74 2.79 3.06 2.07 1.20 1.50 0.58 0.66 0.12 0.05 Mike, please describe the investing LIFE OF FUND 10 YEARS 5 YEARS 3 YEARS 1 YEAR 6 MONTHS environment during the period. (since 12/23/08) Global financial markets proved to be surpris- Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. ingly resilient during the six-month reporting Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. period ended April 30, 2021. Encouraging Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the Covid-19 vaccine news bolstered investor bar chart do not reflect a sales charge of 2.25%; had they, returns would have been lower. See below and pages 8–10 Michael V. Salm for additional performance information. For a portion of the periods, the fund had expense limitations, without which Portfolio Manager optimism about the strength of the economic returns would have been lower. To obtain the most recent month-end performance, visit putnam.com. recovery in 2021. President Biden’s $1.9 trillion Returns for periods less than one year are cumulative. Mike is Co-Chief Investment Officer, American Rescue Plan that was enacted Fixed Income. He has a B.A. from Cornell in March 2021 and the gradual easing of University. Mike joined Putnam in 1997 and has been in the investment mobility restrictions provided a further boost Recent broad market index and fund performance industry since 1989. to market sentiment. Rising prices for stocks Albert Chan, CFA, D. William Kohli, and and commodities also helped to lift the overall U.S. stocks market environment. However, concerns about (S&P 500 Index) 28.85% Paul D. Scanlon, CFA, are also Portfolio Managers of the fund. the potential inflationary impact of additional Putnam Fixed Income Absolute Return Fund stimulus on top of a recovering economy led to 3.74% (class A shares before sales charge) an exodus from government bonds. This drove Fund’s benchmark longer-term interest rates higher and placed a (ICE BofA U.S. Treasury Bill Index) 0.05% degree of pressure on the credit market. U.S. bonds The yield on the benchmark 10-year U.S. –1.52% (Bloomberg Barclays U.S. Aggregate Bond Index) Treasury note rose from 0.88% on October 31, 2020, to 1.65% on April 30, 2021. The 30-year This comparison shows your fund’s performance in the context of broad market indexes for the six months Treasury climbed from 1.65% to 2.30% over the ended 4/30/21. See above and pages 8–10 for additional fund performance information. Index descriptions can be found on page 14. same time frame. Outside the United States, interest rates moved higher as well. Within All Bloomberg Barclays indices provided by Bloomberg Index Services Limited. this environment, rising bond yields weighed on investment-grade debt despite marginal Fixed Income Absolute Return Fund 3 Portfolio composition Agency pass-throughs 49.5% Commercial mortgage- backed securities 20.5% Agency collateralized mortgage obligations 18.7% High-yield corporate bonds 11.2% Non-agency residential mortgage-backed securities 9.7% Investment-grade corporate bonds 9.1% Bank loans 7.3% Emerging-market bonds 6.1% Asset-backed securities 3.8% Collateralized loan obligations 3.4% Convertible securities 2.7% Cash and net other assets 13.8% Allocations are shown as a percentage of the fund’s net assets as of 4/30/21. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding. Allocations may not total 100% because the table includes the notional value of certain derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities. Holdings and allocations may vary over time. spread tightening. [Spreads are the yield What were the positive drivers of advantage credit-sensitive bonds offer over performance during the period? comparable-maturity U.S. Treasuries. Bond Corporate credit was the largest contributor prices rise as yield spreads tighten and decline to returns. The sector benefited significantly as spreads widen.] Meanwhile, high-yield from the reopening of the economy, along credit posted a modest gain, aided by better- with better-than-expected earnings during the than-expected corporate earnings and higher period. Mortgage credit also was a significant oil prices. contributor. Commercial mortgage-backed securities [CMBS] led the way, as spreads How did the fund perform? tightened for both CMBS mezzanine cash bonds The fund’s class A share return was 3.74% as well as for the CMBX despite coming under for the six-month period ending April 30, some pressure in the final two months of the 2021, outperforming the 0.05% return of the period. Residential mortgage credit also proved fund’s benchmark, the ICE BofA U.S. Treasury beneficial, as the market was supported by the Bill Index. strong housing market during the period. 4 Fixed Income Absolute Return Fund Prepayment risk strategies were another signifi- What about detractors to the fund’s cant contributor to returns.