Why Putnam Diversified Income Trust?

• With a limited duration, the fund seeks to be less reliant on declining interest rates to drive returns.
• The managers actively position the portfolio to take advantage of undervalued securities from a broad range of sectors, including mortgage-backed securities, emerging-market debt, and high-yield bonds.
• The portfolio offers all-in-one bond-market diversification while seeking high current income.

The fund targets a range of investment opportunities throughout the bond markets
(portfolio composition as of 3/31/12)

A negative percentage reflects the effect of fund strategies that are designed to enhance performance if certain securities decline in value.

Current yield is the annual rate of return earned from dividends or interest of an investment. Current yield is expressed as a percentage of the price of a security, fund share, or principal investment. The SEC yield is a standardized annual yield based on the most recent 30-day period. It is calculated in accordance with current Securities and Exchange Commission regulations and is subject to change.

Total returns of class A shares as of 3/31/12

Class A shares inception 10/3/1988	Before sales charge	After sales charge	Barclays Capital U.S. Aggregate Bond Index
1 year	-1.46%	-5.37%	7.71%
3 years	20.43	18.77	6.83
5 years	3.52	2.67	6.25
10 years	6.13	5.69	5.80
Life of fund	6.69	6.51	7.23

Total expense ratio: 0.98%

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. Performance of class A shares after sales charge assumes reinvestment of distributions and does not account for taxes. After-sales-charge returns reflect a maximum 4.00% load. For a portion of the periods, this fund’s expenses were limited, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund's prospectus. To obtain the most recent month-end performance, visit putnam.com.

* Credit qualities are shown as a percentage of net assets as of 3/31/12. A bond rated Baa or higher (Prime-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. Short-term cash bonds rated A-1+ are included in the AAA-rating category. Ratings and portfolio credit quality will vary over time. Credit quality includes the fixed-income portion of the portfolio. Derivative instruments, including currency forwards, are only included to the extent of any unrealized gain or loss on such instruments and are shown in the not-rated category. Cash is also shown in the not-rated category. The fund itself has not been rated by an independent rating agency.

† Average effective duration provides a measure of a fund’s interest-rate sensitivity. The longer a fund’s duration, the more sensitive the fund is to shifts in interest rates. As of 3/31/12, the Barclays Capital U.S. Aggregate Bond Index had a duration of 5.03 years.

Indexes are unmanaged and used as a broad measure of market performance. It is not possible to invest directly in an index. Past performance is not indicative of future results.

Effective maturity is a calculation of the average time that securities in a fixed-income fund will come due. Effective maturity takes into account mortgage payments in mortgage-backed securities, adjustable coupons on bonds, and puts. Call provisions are not included. Effective duration is calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. It measures the responsiveness of a bond's price, taking into account that expected cash flows will change as interest rates change due to the embedded option.

Standard deviation measures how widely a set of values varies from the mean. It is a historical measure of the variability of return earned by an investment portfolio over a 3-year period.

Consider these risks before investing: International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Additional risks may be associated with emerging-market securities, including illiquidity and volatility. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses.

Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial representative, call Putnam at 1-888-4-PUTNAM (1-888-478-8626), or click on the prospectus section to view or download a prospectus. Please read the prospectus carefully before investing.

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