Absolute Return 100 Fund (PARTX)

Seeking a positive return of 1% above inflation, as measured by T-bills, over a full market cycle of at least three years. The fund employs strategies that may produce lower volatility over time, is designed to operate independently of market direction, and is suitable for investors considering short- to intermediate-term bond funds.

D. William Kohli
(investing since 1986)

Absolute return strategies remain steady even when markets are shaken
by negative news

Fund highlights

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. The class A share performance shown assumes reinvestment of distributions and does not account for taxes. After-sales-charge returns reflect a maximum load of 5.75% for Putnam Absolute Return 500 and 700 Funds and 1.00% for Putnam Absolute Return 100 and 300 Funds. To obtain the most recent month-end performance, visit putnam.com. Class Y shares, available to investors through an asset-based fee program or for institutional clients, are sold without an initial sales charge and have no CDSC.

Each fund seeks to earn a positive total return that exceeds the rate of inflation by a targeted amount over a reasonable period of time regardless of market conditions. There can be no assurance that a fund will meet its objective. The funds are not intended to outperform stocks and bonds during strong market rallies.

Absolute return funds have fewer limitations on where they can invest as compared to traditional funds. They have the ability to move among security types (i.e., stocks, bonds, cash, and alternatives), capitalization ranges, styles, durations, credit qualities, and geographic regions. This flexibility in terms of asset allocation offers the advantage of improved portfolio diversification as compared to many traditional funds. Absolute return funds also may also have additional risks that traditional funds might not incur such as investing in derivatives, commodities and from the use of leverage.

Yield more closely reflects current performance than total return.

The BofA Merrill Lynch U.S. Treasury Bill Index is an unmanaged index that tracks the performance of U.S. dollar denominated U.S. Treasury Bills publicly issued in the U.S. domestic market. Qualifying securities must have a remaining term of at least one month to final maturity and a minimum amount outstanding of $1 billion. It is not possible to invest directly in an index.

Each fund seeks to earn a positive total return that exceeds the rate of inflation by a targeted amount over a reasonable period of time regardless of market conditions. There can be no assurance that a fund will meet its objective. The fund is not intended to outperform stocks and bonds during strong market rallies. Consult your financial advisor to determine which fund fits into your investment goals and time horizon.

Consider these risks before investing: Allocation of assets among asset classes may hurt performance. Bond prices in the portfolio may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific issuer or industry. The fund's active trading strategy may lose money or not earn a return sufficient to cover associated trading and other costs. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. 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 and the risk that they may increase in value less when interest rates decline and decline in value more when interest rates rise. International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The fund may not achieve its goal, and it is not intended to be a complete investment program. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. The fund's efforts to produce lower-volatility returns may not be successful and may periodically make it more difficult for the fund to achieve its targeted return. Under certain market conditions, the fund may accept greater-than-typical volatility to seek its targeted return. You can lose money by investing in the fund. The fund's prospectus lists additional risks.

Allocations may not total 100% of net assets because the table includes the notional value of derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities.

Credit qualities are shown as a percentage of net assets as of the date indicated above. 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 are included in the net cash 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 net cash category. The fund itself has not been rated by an independent rating agency.

You can lose money by investing in a fund. Any given fund may not achieve its goal, and is not intended as a complete investment program. All funds have risk. The value and/or returns of a portfolio will fluctuate with market conditions. You may have more or less than the original amount invested when you redeem your shares.