| UNITED STATES SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
FORM N-CSR | ||
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES | ||
| Investment Company Act file number: | (811-03897) |
| Exact name of registrant as specified in charter: | Putnam Mortgage Securities Fund |
| Address of principal executive offices: | 100 Federal Street, Boston, Massachusetts 02110 |
| Name and address of agent for service: | Stephen Tate, Vice President 100 Federal Street Boston, Massachusetts 02110 |
| Copy to: | Bryan Chegwidden, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036 |
| James E. Thomas, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | September 30, 2024 |
| Date of reporting period: | October 1, 2023 – March 31, 2024 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Mortgage Securities
Fund
Semiannual report
3 | 31 | 24
Message from the Trustees
May 6, 2024
Dear Fellow Shareholder:
We are pleased to report that on January 1, 2024, Franklin Resources, Inc., a leading global asset management firm operating as Franklin Templeton, acquired Putnam Investments. With complementary capabilities and an established infrastructure serving over 150 countries, Franklin Templeton enhances Putnam’s investment, risk management, operations, and technology platforms. Together, our firms are committed to delivering strong fund performance and more choices for our investors.
We are also excited to welcome Jane E. Trust as an interested trustee to your Board of Trustees. Ms. Trust contributes over 30 years of investment management experience to The Putnam Funds, and has served as Senior Vice President, Fund Board Management, at Franklin Templeton since 2020.
As we enter this new chapter, you can rest assured that your fund continues to be actively managed by the same experienced professionals. Your investment team is exploring new and attractive opportunities for your fund while monitoring changing market conditions.
Thank you for investing with Putnam.
Credit qualities are shown as a percentage of the fund’s net assets as of 3/31/24. A bond rated BBB or higher (A-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. Ratings and portfolio credit quality will vary over time. Due to rounding, percentages may not equal 100%.
Cash and net other assets, if any, represent the market value weights of cash, derivatives, and short-term securities in the portfolio. The fund itself has not been rated by an independent rating agency.
Of special interest
Effective December 2023, the fund increased its monthly dividend distribution rate for class A shares to $0.064 from $0.050 per share. The change was made because the fund is required to fully distribute undistributed income accrued in the fiscal year ended September 30, 2023. Similar increases were made to the other share classes.
| 2 Mortgage Securities Fund |
Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
| Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Total annual operating expenses for the | ||||||
| fiscal year ended 9/30/23 | 0.97% | 1.72% | 1.72% | 1.22% | 0.56% | 0.72% |
| Annualized expense ratio for the | ||||||
| six-month period ended 3/31/24 | 0.96% | 1.71% | 1.71% | 1.21% | 0.55% | 0.71% |
Fiscal year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.
Expenses are shown as a percentage of average net assets.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 10/1/23 to 3/31/24. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Expenses paid per $1,000*† | $5.00 | $8.89 | $8.89 | $6.30 | $2.87 | $3.70 |
| Ending value (after expenses) | $1,084.40 | $1,080.50 | $1,080.10 | $1,082.90 | $1,086.90 | $1,086.10 |
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 3/31/24. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period (183); and then dividing that result by the number of days in the year (366).
| Mortgage Securities Fund 3 |
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended 3/31/24, use the following calculation method. To find the value of your investment on 10/1/23, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Expenses paid per $1,000*† | $4.85 | $8.62 | $8.62 | $6.11 | $2.78 | $3.59 |
| Ending value (after expenses) | $1,020.20 | $1,016.45 | $1,016.45 | $1,018.95 | $1,022.25 | $1,021.45 |
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 3/31/24. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period (183); and then dividing that result by the number of days in the year (366).
| 4 Mortgage Securities Fund |
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (SEC) regulations, your fund’s manager sends a single notice of internet availability, or a single printed copy, of annual and semiannual shareholder reports, prospectuses, and proxy statements to shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call 1-800-225-1581 or, for exchange-traded funds only, 1-833-228-5577. We will begin sending individual copies within 30 days.
Proxy voting
The Putnam Funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2023, are available in the Individual Investors section of putnam.com and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain The Putnam Funds’ proxy voting guidelines and procedures at no charge by calling Shareholder Services at 1-800-225-1581 or, for exchange-traded funds only, 1-833-228-5577.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.
| Mortgage Securities Fund 5 |
Important notice regarding Putnam’s privacy policy
In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.
It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.
Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.
| 6 Mortgage Securities Fund |
Financial statements
These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.
The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.
Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal period.
Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover (not required for money market funds) in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.
| Mortgage Securities Fund 7 |
| The fund’s portfolio 3/31/24 (Unaudited) | ||
| U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (127.3%)* | Principal amount | Value |
| U.S. Government Guaranteed Mortgage Obligations (27.6%) | ||
| Government National Mortgage Association Adjustable Rate Mortgages (US Treasury Yield Curve Rate + 1.50%), 3.625%, 7/20/26 | $1,483 | $1,455 |
| Government National Mortgage Association Pass-Through Certificates | ||
| 6.00%, TBA, 4/1/54 | 3,000,000 | 3,026,862 |
| 6.00%, 1/15/29 | 1 | 1 |
| 5.50%, TBA, 4/1/54 | 12,000,000 | 11,992,936 |
| 5.50%, 8/15/35 | 91 | 92 |
| 5.00%, TBA, 4/1/54 | 5,000,000 | 4,914,804 |
| 4.50%, TBA, 4/1/54 | 12,000,000 | 11,529,704 |
| 4.00%, TBA, 4/1/54 | 17,000,000 | 15,909,661 |
| 3.50%, TBA, 4/1/54 | 14,000,000 | 12,738,370 |
| 3.00%, TBA, 4/1/54 | 19,000,000 | 16,758,352 |
| 2.50%, TBA, 4/1/54 | 24,000,000 | 20,440,097 |
| 2.00%, TBA, 4/1/54 | 23,000,000 | 18,844,365 |
| 116,156,699 | ||
| U.S. Government Agency Mortgage Obligations (99.7%) | ||
| Uniform Mortgage-Backed Securities | ||
| 6.50%, TBA, 4/1/54 | 2,000,000 | 2,042,969 |
| 6.00%, TBA, 4/1/54 | 65,400,000 | 66,020,790 |
| 5.50%, TBA, 4/1/54 | 52,000,000 | 51,750,156 |
| 5.00%, TBA, 4/1/54 | 27,000,000 | 26,352,421 |
| 4.50%, TBA, 4/1/54 | 18,000,000 | 17,140,079 |
| 4.00%, TBA, 4/1/54 | 20,000,000 | 18,520,312 |
| 3.50%, TBA, 4/1/54 | 33,000,000 | 29,525,978 |
| 3.50%, TBA, 4/1/39 | 2,000,000 | 1,899,609 |
| 3.00%, TBA, 4/1/54 | 33,000,000 | 28,398,048 |
| 3.00%, TBA, 4/1/39 | 4,000,000 | 3,718,125 |
| 2.50%, TBA, 4/1/54 | 71,000,000 | 58,688,714 |
| 2.50%, TBA, 4/1/39 | 9,000,000 | 8,178,398 |
| 2.00%, TBA, 4/1/54 | 103,000,000 | 81,488,090 |
| 2.00%, TBA, 4/1/39 | 18,000,000 | 15,943,747 |
| 1.50%, TBA, 4/1/39 | 11,000,000 | 9,521,450 |
| 419,188,886 | ||
| Total U.S. government and agency mortgage obligations (cost $534,394,782) | $535,345,585 | |
| U.S. TREASURY OBLIGATIONS (0.1%)* | Principal amount | Value |
| U.S. Treasury Notes 0.250%, 09/30/25 i | $271,000 | $253,247 |
| Total U.S. treasury obligations (cost $253,247) | $253,247 | |
| MORTGAGE-BACKED SECURITIES (81.4%)* | Principal amount | Value | |
| Agency collateralized mortgage obligations (30.6%) | |||
| Federal Home Loan Mortgage Corporation | |||
| Strips FRB Ser. 406, Class F30, (US 30 Day Average SOFR + 1.15%), 6.47%, 10/25/53 | $845,331 | $850,935 | |
| Structured Pass-Through Certificates FRB Ser. 57, Class 2A1, 4.858%, 7/25/43 W | 9,976 | 9,267 | |
8 Mortgage Securities Fund | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Agency collateralized mortgage obligations cont. | |||
| Federal Home Loan Mortgage Corporation | |||
| REMICs Ser. 4018, Class DI, IO, 4.50%, 7/15/41 | $412,861 | $21,388 | |
| REMICs Ser. 5121, Class KI, IO, 4.00%, 6/25/51 | 7,080,831 | 1,617,538 | |
| REMICs Ser. 4953, Class AI, IO, 4.00%, 2/25/50 | 4,472,875 | 917,521 | |
| REMICs Ser. 23-5349, Class IB, IO, 4.00%, 12/15/46 | 4,867,381 | 1,006,866 | |
| REMICs Ser. 4019, Class JI, IO, 4.00%, 5/15/41 | 1,037,293 | 64,772 | |
| REMICs IFB Ser. 3408, Class EK, ((-4.024 x US 30 Day Average SOFR) + 25.33%), 3.931%, 4/15/37 | 126,201 | 139,508 | |
| Structured Pass-Through Certificates FRB Ser. 59, Class 2A1, 3.875%, 10/25/43 W | 5,197 | 4,175 | |
| REMICs IFB Ser. 3065, Class DC, ((-3 x US 30 Day Average SOFR) + 19.52%), 3.561%, 3/15/35 | 1,085,025 | 1,101,812 | |
| REMICs Ser. 5050, Class IM, IO, 3.50%, 10/25/50 | 10,322,816 | 1,965,586 | |
| REMICs Ser. 4136, Class IQ, IO, 3.50%, 11/15/42 | 3,032,983 | 409,658 | |
| Strips Ser. 304, Class C37, IO, 3.50%, 12/15/27 | 183,241 | 5,184 | |
| REMICs Ser. 5071, Class IV, IO, 3.00%, 12/25/50 | 18,281,824 | 3,278,238 | |
| REMICs IFB Ser. 5003, Class DS, IO, ((-1 x US 30 Day Average SOFR) + 5.99%), 0.665%, 8/25/50 | 7,068,671 | 798,553 | |
| REMICs IFB Ser. 4326, Class GS, IO, ((-1 x US 30 Day Average SOFR) + 5.94%), 0.617%, 4/15/44 | 8,506,046 | 726,184 | |
| REMICs IFB Ser. 4915, Class SD, IO, ((-1 x US 30 Day Average SOFR) + 5.94%), 0.615%, 9/25/49 | 8,743,379 | 807,130 | |
| REMICs IFB Ser. 4933, Class SA, IO, ((-1 x US 30 Day Average SOFR) + 5.89%), 0.565%, 12/25/49 | 6,217,692 | 718,645 | |
| REMICs Ser. 3369, Class BO, PO, zero %, 9/15/37 | 1,534 | 1,222 | |
| REMICs Ser. 3391, PO, zero %, 4/15/37 | 23,770 | 19,838 | |
| REMICs FRB Ser. 3117, Class AF, zero %, 2/15/36 | 11,878 | 9,946 | |
| Federal National Mortgage Association | |||
| REMICs Trust FRB Ser. 04-W7, Class A2, 7.472%, 3/25/34 W | 2,309 | 2,311 | |
| REMICs FRB Ser. 03-W11, Class A1, 6.72%, 6/25/33 W | 227 | 228 | |
| REMICs Ser. 15-58, Class KI, IO, 6.00%, 3/25/37 | 4,120,549 | 675,931 | |
| REMICs Ser. 15-86, Class MI, IO, 5.50%, 11/25/45 | 3,617,625 | 595,063 | |
| REMICs Ser. 18-51, Class BI, IO, 5.50%, 7/25/38 | 3,403,527 | 265,288 | |
| REMICs Ser. 17-19, Class IH, IO, 5.00%, 3/25/47 | 3,940,016 | 580,364 | |
| REMICs FRB Ser. 03-W14, Class 2A, 4.57%, 1/25/43 W | 6,385 | 6,086 | |
| REMICs Ser. 20-31, IO, 4.50%, 5/25/50 | 10,109,611 | 1,998,560 | |
| Trust FRB Ser. 03-W3, Class 1A4, 4.31%, 8/25/42 W | 14,707 | 13,695 | |
| Trust FRB Ser. 04-W2, Class 4A, 4.24%, 2/25/44 W | 3,118 | 3,006 | |
| REMICs Ser. 12-104, Class HI, IO, 4.00%, 9/25/27 | 926,338 | 31,344 | |
| REMICs Ser. 21-25, Class IJ, IO, 3.50%, 5/25/51 | 21,174,072 | 4,097,607 | |
| REMICs Ser. 20-20, Class IK, IO, 3.50%, 3/25/50 | 7,235,786 | 1,068,371 | |
| REMICs Ser. 20-62, Class MI, IO, 3.50%, 5/25/49 | 28,484,451 | 5,235,344 | |
| REMICs Ser. 23-49, Class IB, IO, 3.50%, 3/25/47 | 7,210,708 | 1,142,443 | |
| REMICs IFB Ser. 08-24, Class SP, ((-3.667 x US 30 Day Average SOFR) + 22.86%), 3.355%, 2/25/38 | 277,095 | 274,661 | |
| REMICs Ser. 20-96, IO, 3.00%, 1/25/51 | 7,968,819 | 1,325,135 | |
| REMICs Ser. 23-49, Class IA, IO, 3.00%, 8/25/46 | 9,450,913 | 1,135,404 | |
| REMICs Ser. 21-3, Class IB, IO, 2.50%, 2/25/51 | 6,111,236 | 1,000,104 | |
| REMICs IFB Ser. 11-123, Class KS, IO, ((-1 x US 30 Day Average SOFR) + 6.49%), 1.165%, 10/25/41 | 236,708 | 16,857 | |
Mortgage Securities Fund 9 | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Agency collateralized mortgage obligations cont. | |||
| Federal National Mortgage Association | |||
| REMICs IFB Ser. 18-20, Class SB, IO, ((-1 x US 30 Day Average SOFR) + 6.14%), 0.815%, 3/25/48 | $4,469,660 | $341,035 | |
| REMICs IFB Ser. 20-41, Class SE, IO, ((-1 x US 30 Day Average SOFR) + 5.99%), 0.665%, 6/25/50 | 5,063,522 | 598,412 | |
| REMICs IFB Ser. 16-50, Class SM, IO, ((-1 x US 30 Day Average SOFR) + 5.99%), 0.665%, 8/25/46 | 7,645,513 | 450,935 | |
| REMICs IFB Ser. 19-51, Class SA, IO, ((-1 x US 30 Day Average SOFR) + 5.94%), 0.615%, 9/25/49 | 7,280,789 | 710,134 | |
| REMICs IFB Ser. 16-8, Class SA, IO, ((-1 x US 30 Day Average SOFR) + 5.94%), 0.615%, 3/25/46 | 7,742,892 | 726,039 | |
| REMICs IFB Ser. 19-71, Class CS, IO, ((-1 x US 30 Day Average SOFR) + 5.89%), 0.565%, 11/25/49 | 2,491,720 | 242,930 | |
| REMICs IFB Ser. 19-83, Class QS, IO, ((-1 x US 30 Day Average SOFR) + 5.84%), 0.515%, 1/25/50 | 14,596,564 | 1,705,204 | |
| REMICs Ser. 01-79, Class BI, IO, 0.237%, 3/25/45 W | 608,603 | 1,272 | |
| REMICs Ser. 03-34, PO, zero %, 4/25/43 | 34,246 | 29,192 | |
| REMICs Ser. 08-53, Class DO, PO, zero %, 7/25/38 | 79,480 | 64,223 | |
| REMICs Ser. 07-14, Class KO, PO, zero %, 3/25/37 | 2,677 | 2,154 | |
| REMICs Ser. 06-84, Class OT, PO, zero %, 9/25/36 | 769 | 610 | |
| Government National Mortgage Association | |||
| FRB Ser. 23-152, Class FB, IO, 6.469%, 4/20/51 W | 1,057,188 | 1,073,377 | |
| Ser. 16-75, Class LI, IO, 6.00%, 1/20/40 | 2,642,383 | 438,005 | |
| Ser. 22-125, Class CI, IO, 5.00%, 6/20/52 | 9,927,103 | 1,887,807 | |
| Ser. 20-167, Class IT, IO, 5.00%, 9/20/47 | 5,026,087 | 1,031,761 | |
| Ser. 15-89, Class LI, IO, 5.00%, 12/20/44 | 3,485,123 | 715,670 | |
| Ser. 14-76, IO, 5.00%, 5/20/44 | 1,970,382 | 387,547 | |
| Ser. 13-51, Class QI, IO, 5.00%, 2/20/43 | 2,425,835 | 315,147 | |
| Ser. 13-6, Class OI, IO, 5.00%, 1/20/43 | 5,662,092 | 1,068,493 | |
| Ser. 21-89, Class IL, IO, 4.50%, 5/20/51 | 7,342,388 | 1,647,362 | |
| Ser. 18-1, IO, 4.50%, 1/20/48 | 3,946,779 | 830,197 | |
| Ser. 13-34, Class HI, IO, 4.50%, 3/20/43 | 3,331,824 | 599,630 | |
| Ser. 13-39, Class IJ, IO, 4.50%, 3/20/43 | 4,353,816 | 804,134 | |
| Ser. 09-121, Class CI, IO, 4.50%, 12/16/39 | 3,143,421 | 571,395 | |
| Ser. 15-53, Class MI, IO, 4.00%, 4/16/45 | 3,074,595 | 556,968 | |
| Ser. 14-2, Class IL, IO, 4.00%, 1/16/44 | 589,194 | 96,650 | |
| Ser. 14-100, Class NI, IO, 4.00%, 6/20/43 | 1,788,045 | 97,579 | |
| Ser. 13-165, Class IL, IO, 4.00%, 3/20/43 | 1,009,479 | 153,871 | |
| Ser. 12-56, Class IB, IO, 4.00%, 4/20/42 | 2,777,473 | 468,839 | |
| Ser. 12-38, Class MI, IO, 4.00%, 3/20/42 | 5,317,030 | 938,775 | |
| Ser. 14-182, Class BI, IO, 4.00%, 1/20/39 | 4,237,388 | 343,808 | |
| Ser. 21-197, Class BI, IO, 3.50%, 11/20/51 | 11,432,440 | 1,455,290 | |
| Ser. 21-177, Class IG, IO, 3.50%, 10/20/51 | 15,041,955 | 2,266,516 | |
| Ser. 20-175, Class JI, IO, 3.50%, 11/20/50 | 10,868,980 | 1,839,082 | |
| Ser. 15-168, Class IG, IO, 3.50%, 3/20/43 | 1,749,696 | 222,005 | |
| Ser. 12-136, IO, 3.50%, 11/20/42 | 5,154,741 | 719,284 | |
| Ser. 14-102, Class IG, IO, 3.50%, 3/16/41 | 551,489 | 20,177 | |
| Ser. 15-52, Class KI, IO, 3.50%, 11/20/40 | 1,041,179 | 55,582 | |
| Ser. 21-176, Class GI, IO, 3.00%, 10/20/51 | 7,626,166 | 1,148,653 | |
10 Mortgage Securities Fund | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Agency collateralized mortgage obligations cont. | |||
| Government National Mortgage Association | |||
| Ser. 21-188, Class IU, IO, 3.00%, 10/20/51 | $5,123,342 | $981,298 | |
| Ser. 21-188, Class IW, IO, 3.00%, 10/20/51 | 8,106,910 | 1,225,747 | |
| Ser. 21-116, Class EI, IO, 3.00%, 7/20/51 | 9,056,080 | 1,092,094 | |
| Ser. 21-76, Class NI, IO, 3.00%, 8/20/50 | 10,826,329 | 1,694,320 | |
| Ser. 14-174, Class AI, IO, 3.00%, 11/16/29 | 1,255,426 | 53,883 | |
| IFB Ser. 23-140, Class JS, IO, ((-2.488 x US 30 Day Average SOFR) + 16.05%), 2.814%, 9/20/53 | 1,254,786 | 1,152,159 | |
| Ser. 16-H13, Class IK, IO, 2.676%, 6/20/66 W | 9,843,233 | 805,392 | |
| Ser. 21-7, Class MI, IO, 2.50%, 1/20/51 | 12,054,863 | 1,591,056 | |
| Ser. 21-8, Class IP, IO, 2.50%, 1/20/51 | 27,092,758 | 3,797,278 | |
| Ser. 20-162, Class UI, IO, 2.50%, 10/20/50 | 7,874,218 | 1,063,554 | |
| Ser. 20-138, Class IB, IO, 2.50%, 9/20/50 | 16,909,490 | 2,212,221 | |
| Ser. 16-H04, Class HI, IO, 2.337%, 7/20/65 W | 4,270,993 | 114,463 | |
| Ser. 16-H07, Class PI, IO, 2.274%, 3/20/66 W | 17,211,933 | 1,081,447 | |
| Ser. 16-H24, IO, 2.159%, 9/20/66 W | 12,464,224 | 913,978 | |
| IFB Ser. 23-66, Class PS, ((-2.5 x US 30 Day Average SOFR) + 15.38%), 2.077%, 5/20/53 | 2,758,582 | 2,697,927 | |
| Ser. 15-H23, Class TI, IO, 1.935%, 9/20/65 W | 11,207,686 | 420,288 | |
| Ser. 15-H23, Class DI, IO, 1.897%, 9/20/65 W | 3,220,673 | 140,099 | |
| Ser. 17-H23, Class BI, IO, 1.884%, 11/20/67 W | 7,489,834 | 314,573 | |
| Ser. 17-H08, Class GI, IO, 1.741%, 2/20/67 W | 8,806,155 | 736,497 | |
| IFB Ser. 23-20, Class SP, IO, ((-1 x US 30 Day Average SOFR) + 7.00%), 1.681%, 2/20/53 | 21,143,030 | 1,059,539 | |
| Ser. 14-H25, Class BI, IO, 1.666%, 12/20/64 W | 9,759,799 | 238,188 | |
| IFB Ser. 24-4, Class ES, IO, ((-1 x US 30 Day Average SOFR) + 6.95%), 1.631%, 1/20/54 | 19,310,039 | 1,231,977 | |
| IFB Ser. 23-7, Class AS, IO, ((-1 x US 30 Day Average SOFR) + 6.90%), 1.581%, 1/20/53 | 45,514,190 | 2,151,397 | |
| Ser. 17-H04, Class BI, IO, 1.419%, 2/20/67 W | 9,045,117 | 379,754 | |
| IFB Ser. 13-182, Class SP, IO, ((-1 x CME Term SOFR 1 Month) + 6.59%), 1.257%, 12/20/43 | 2,647,144 | 268,447 | |
| Ser. 17-H06, Class MI, IO, 1.245%, 2/20/67 W | 13,506,404 | 523,805 | |
| Ser. 18-H02, Class IM, IO, 1.23%, 2/20/68 W | 8,426,735 | 504,814 | |
| IFB Ser. 23-136, Class GS, IO, ((-1 x US 30 Day Average SOFR) + 6.50%), 1.181%, 9/20/53 | 44,778,579 | 1,572,919 | |
| IFB Ser. 11-156, Class SK, IO, ((-1 x CME Term SOFR 1 Month) + 6.49%), 1.157%, 4/20/38 | 3,815,125 | 406,132 | |
| Ser. 16-H18, Class QI, IO, 1.105%, 6/20/66 W | 9,840,217 | 515,588 | |
| IFB Ser. 24-11, Class S, IO, ((-1 x US 30 Day Average SOFR) + 6.40%), 1.081%, 1/20/54 | 17,399,412 | 1,018,459 | |
| Ser. 17-H14, Class LI, IO, 1.073%, 6/20/67 W | 5,574,424 | 256,127 | |
| Ser. 17-H03, Class KI, IO, 1.033%, 1/20/67 W | 13,607,422 | 1,114,448 | |
| Ser. 18-H04, Class JI, IO, 1.02%, 3/20/68 W | 11,207,313 | 457,258 | |
| IFB Ser. 23-13, Class SL, IO, ((-1 x US 30 Day Average SOFR) + 6.25%), 0.931%, 1/20/53 | 20,196,330 | 1,127,569 | |
| Ser. 18-H01, Class XI, IO, 0.929%, 1/20/68 W | 11,459,500 | 757,294 | |
| IFB Ser. 21-98, Class SK, IO, ((-1 x CME Term SOFR 1 Month) + 6.19%), 0.857%, 6/20/51 | 9,148,083 | 1,078,467 | |
Mortgage Securities Fund 11 | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Agency collateralized mortgage obligations cont. | |||
| Government National Mortgage Association | |||
| IFB Ser. 21-77, Class SM, IO, ((-1 x CME Term SOFR 1 Month) + 6.19%), 0.857%, 5/20/51 | $12,946,245 | $1,503,758 | |
| IFB Ser. 20-133, Class CS, IO, ((-1 x CME Term SOFR 1 Month) + 6.19%), 0.857%, 9/20/50 | 9,072,543 | 1,045,366 | |
| IFB Ser. 20-112, Class MS, IO, ((-1 x CME Term SOFR 1 Month) + 6.19%), 0.857%, 8/20/50 | 4,966,468 | 594,072 | |
| FRB Ser. 16-H19, Class AI, IO, 0.843%, 9/20/66 W | 17,688,859 | 736,352 | |
| IFB Ser. 23-56, Class AS, IO, ((-1 x US 30 Day Average SOFR) + 6.16%), 0.841%, 4/20/53 | 37,715,905 | 1,978,588 | |
| IFB Ser. 13-87, Class SA, IO, ((-1 x CME Term SOFR 1 Month) + 6.09%), 0.757%, 6/20/43 | 6,508,047 | 566,948 | |
| Ser. 16-H23, Class NI, IO, 0.735%, 10/20/66 W | 18,635,226 | 773,362 | |
| IFB Ser. 19-158, Class AS, IO, ((-1 x CME Term SOFR 1 Month) + 6.04%), 0.709%, 9/16/43 | 5,186,602 | 459,550 | |
| IFB Ser. 19-56, Class SK, IO, ((-1 x CME Term SOFR 1 Month) + 6.04%), 0.707%, 5/20/49 | 4,344,981 | 414,634 | |
| IFB Ser. 10-20, Class SC, IO, ((-1 x CME Term SOFR 1 Month) + 6.04%), 0.707%, 2/20/40 | 412,182 | 37,096 | |
| Ser. 16-H27, Class GI, IO, 0.701%, 12/20/66 W | 14,810,084 | 773,768 | |
| Ser. 16-H24, Class JI, IO, 0.696%, 11/20/66 W | 5,556,213 | 273,505 | |
| IFB Ser. 23-181, Class DS, IO, ((-1 x US 30 Day Average SOFR) + 6.00%), 0.681%, 11/20/53 | 44,947,343 | 1,983,315 | |
| IFB Ser. 23-103, Class SK, IO, ((-1 x US 30 Day Average SOFR) + 6.00%), 0.681%, 7/20/53 | 18,397,153 | 938,630 | |
| IFB Ser. 16-80, Class SD, IO, ((-1 x CME Term SOFR 1 Month) + 5.99%), 0.657%, 6/20/46 | 6,238,254 | 603,515 | |
| Ser. 17-H25, Class CI, IO, 0.617%, 12/20/67 W | 13,051,291 | 792,988 | |
| IFB Ser. 23-19, Class S, ((-1 x CME Term SOFR 1 Month) + 5.94%), 0.607%, 11/20/49 | 25,815,603 | 2,468,181 | |
| IFB Ser. 19-125, Class SG, IO, ((-1 x CME Term SOFR 1 Month) + 5.94%), 0.607%, 10/20/49 | 7,795,386 | 889,659 | |
| IFB Ser. 19-110, Class SQ, IO, ((-1 x CME Term SOFR 1 Month) + 5.94%), 0.607%, 9/20/49 | 5,584,251 | 546,558 | |
| Ser. 17-H08, Class NI, IO, 0.597%, 3/20/67 W | 8,331,246 | 286,595 | |
| IFB Ser. 19-121, Class SD, IO, ((-1 x CME Term SOFR 1 Month) + 5.89%), 0.557%, 10/20/49 | 7,674,295 | 878,768 | |
| IFB Ser. 20-47, Class SA, IO, ((-1 x CME Term SOFR 1 Month) + 5.89%), 0.557%, 5/20/44 | 10,416,947 | 874,086 | |
| Ser. 15-H20, Class CI, IO, 0.513%, 8/20/65 W | 15,920,512 | 870,852 | |
| FRB Ser. 15-H16, Class XI, IO, 0.49%, 7/20/65 W | 6,872,215 | 353,919 | |
| Ser. 16-H03, Class AI, IO, 0.432%, 1/20/66 W | 9,100,573 | 313,515 | |
| Ser. 15-H14, Class AI, IO, 0.431%, 6/20/65 W | 33,566,854 | 1,337,744 | |
| Ser. 15-H22, Class AI, IO, 0.407%, 9/20/65 W | 17,053,661 | 813,460 | |
| Ser. 17-H20, Class AI, IO, 0.382%, 10/20/67 W | 18,130,502 | 828,908 | |
| IFB Ser. 23-40, Class SP, IO, ((-1 x US 30 Day Average SOFR) + 5.65%), 0.331%, 3/20/53 | 34,483,707 | 900,314 | |
| IFB Ser. 23-43, Class S, IO, ((-1 x US 30 Day Average SOFR) + 5.60%), 0.281%, 3/20/53 | 39,849,069 | 936,031 | |
| IFB Ser. 22-209, Class SG, IO, ((-1 x US 30 Day Average SOFR) + 5.60%), 0.281%, 12/20/52 | 31,518,765 | 1,591,171 | |
12 Mortgage Securities Fund | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Agency collateralized mortgage obligations cont. | |||
| Government National Mortgage Association | |||
| Ser. 17-H25, IO, 0.263%, 11/20/67 W | $8,533,562 | $305,083 | |
| Ser. 15-H04, Class AI, IO, 0.219%, 12/20/64 W | 11,282,402 | 328,001 | |
| IFB Ser. 14-119, Class SA, IO, ((-1 x CME Term SOFR 1 Month) + 5.49%), 0.157%, 8/20/44 | 2,982,821 | 231,465 | |
| Ser. 14-H21, Class AI, IO, 0.133%, 10/20/64 W | 12,346,631 | 397,586 | |
| Ser. 15-H13, Class AI, IO, 0.116%, 6/20/65 W | 10,523,211 | 463,186 | |
| Ser. 15-H10, Class HI, IO, 0.084%, 4/20/65 W | 13,364,266 | 562,636 | |
| Ser. 18-H19, Class JI, IO, 0.067%, 10/20/68 W | 11,966,065 | 413,540 | |
| Ser. 16-H10, Class AI, IO, 0.032%, 4/20/66 W | 19,126,270 | 388,034 | |
| Ser. 16-H06, Class DI, IO, 0.023%, 7/20/65 W | 10,162,447 | 260,159 | |
| Ser. 17-H10, Class MI, IO, 0.021%, 4/20/67 W | 9,807,586 | 296,189 | |
| Ser. 17-H09, IO, 0.014%, 4/20/67 W | 8,702,385 | 255,633 | |
| 128,584,688 | |||
| Commercial mortgage-backed securities (27.9%) | |||
| AREIT CRE Trust 144A FRB Ser. 20-CRE4, Class D, 8.631%, 4/15/37 | 821,000 | 769,359 | |
| BANK 144A Ser. 18-BN11, Class D, 3.00%, 3/15/61 | 839,000 | 505,553 | |
| Barclays Commercial Mortgage Trust 144A | |||
| Ser. 19-C4, Class E, 3.25%, 8/15/52 | 2,034,000 | 1,224,248 | |
| FRB Ser. 19-C5, Class F, 2.606%, 11/15/52 W | 1,001,000 | 533,065 | |
| Bayview Opportunity Master Fund VII Trust 144A Ser. 23-1A, Class A, 6.93%, 10/28/60 | 397,751 | 427,676 | |
| Benchmark Mortgage Trust FRB Ser. 18-B1, Class C, 4.177%, 1/15/51 W | 1,099,000 | 806,131 | |
| Benchmark Mortgage Trust 144A | |||
| FRB Ser. 18-B3, Class D, 3.021%, 4/10/51 W | 1,744,000 | 1,072,481 | |
| Ser. 19-B11, Class D, 3.00%, 5/15/52 | 2,608,000 | 1,680,280 | |
| Ser. 18-B1, Class E, 3.00%, 1/15/51 W | 1,840,000 | 1,045,175 | |
| BWAY Mortgage Trust 144A FRB Ser. 22-26BW, Class F, 4.866%, 2/10/44 W | 2,305,000 | 1,434,406 | |
| CD Commercial Mortgage Trust | |||
| FRB Ser. 17-CD3, Class C, 4.538%, 2/10/50 W | 1,638,000 | 810,056 | |
| Ser. 17-CD3, Class B, 3.984%, 2/10/50 W | 826,000 | 565,686 | |
| CD Commercial Mortgage Trust 144A | |||
| Ser. 17-CD3, Class D, 3.25%, 2/10/50 | 2,287,000 | 880,472 | |
| Ser. 19-CD8, Class D, 3.00%, 8/15/57 | 1,450,000 | 760,989 | |
| Citigroup Commercial Mortgage Trust | |||
| FRB Ser. 15-GC27, Class C, 4.419%, 2/10/48 W | 1,731,000 | 1,649,642 | |
| FRB Ser. 15-P1, Class C, 4.369%, 9/15/48 W | 973,000 | 908,535 | |
| Citigroup Commercial Mortgage Trust 144A | |||
| FRB Ser. 12-GC8, Class C, 4.941%, 9/10/45 W | 1,387,488 | 1,252,319 | |
| FRB Ser. 15-GC27, Class D, 4.419%, 2/10/48 W | 1,018,000 | 915,773 | |
| Ser. 15-P1, Class D, 3.225%, 9/15/48 | 567,000 | 491,730 | |
| Ser. 15-GC27, Class E, 3.00%, 2/10/48 | 1,664,000 | 1,256,661 | |
| COMM Mortgage Trust | |||
| FRB Ser. 13-CR13, Class C, 4.919%, 11/10/46 W | 420,537 | 390,992 | |
| FRB Ser. 14-CR16, Class C, 4.899%, 4/10/47 W | 1,741,904 | 1,619,828 | |
| FRB Ser. 14-UBS3, Class C, 4.73%, 6/10/47 W | 409,000 | 312,314 | |
| FRB Ser. 14-UBS4, Class C, 4.621%, 8/10/47 W | 397,060 | 299,656 | |
Mortgage Securities Fund 13 | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Commercial mortgage-backed securities cont. | |||
| COMM Mortgage Trust | |||
| Ser. 13-CR12, Class AM, 4.30%, 10/10/46 | $1,987,529 | $1,769,785 | |
| Ser. 15-DC1, Class B, 4.035%, 2/10/48 W | 1,285,000 | 1,198,908 | |
| FRB Ser. 15-CR26, Class D, 3.464%, 10/10/48 W | 1,351,375 | 1,054,959 | |
| COMM Mortgage Trust 144A | |||
| FRB Ser. 13-LC13, Class D, 5.349%, 8/10/46 W | 2,546,000 | 1,922,230 | |
| FRB Ser. 13-CR13, Class D, 4.919%, 11/10/46 W | 1,906,000 | 1,237,200 | |
| FRB Ser. 14-CR17, Class D, 4.784%, 5/10/47 W | 1,959,000 | 1,682,681 | |
| FRB Ser. 14-UBS4, Class D, 4.684%, 8/10/47 W | 757,000 | 432,566 | |
| FRB Ser. 14-CR19, Class D, 4.621%, 8/10/47 W | 1,317,000 | 1,222,941 | |
| FRB Ser. 13-CR7, Class D, 4.243%, 3/10/46 W | 800,653 | 747,407 | |
| FRB Ser. 15-LC19, Class E, 4.211%, 2/10/48 W | 1,436,000 | 1,080,684 | |
| Ser. 12-CR4, Class B, 3.703%, 10/15/45 | 2,219,000 | 1,347,226 | |
| Ser. 13-LC6, Class E, 3.50%, 1/10/46 | 701,000 | 638,389 | |
| Ser. 17-COR2, Class D, 3.00%, 9/10/50 | 1,765,000 | 1,306,100 | |
| Ser. 15-LC19, Class D, 2.867%, 2/10/48 | 1,240,000 | 1,092,842 | |
| FRB Ser. 18-COR3, Class D, 2.809%, 5/10/51 W | 936,000 | 537,713 | |
| CSAIL Commercial Mortgage Trust | |||
| FRB Ser. 15-C3, Class C, 4.35%, 8/15/48 W | 922,000 | 780,599 | |
| FRB Ser. 15-C2, Class C, 4.174%, 6/15/57 W | 1,876,000 | 1,648,140 | |
| FRB Ser. 15-C2, Class D, 4.174%, 6/15/57 W | 2,410,000 | 1,748,686 | |
| Ser. 15-C1, Class B, 4.044%, 4/15/50 W | 635,000 | 599,162 | |
| CSAIL Commercial Mortgage Trust 144A Ser. 19-C17, Class D, 2.50%, 9/15/52 | 1,828,000 | 1,149,542 | |
| DBUBS Mortgage Trust 144A FRB Ser. 11-LC3A, Class D, 5.321%, 8/10/44 W | 2,208,999 | 2,074,033 | |
| Federal Home Loan Mortgage Corporation 144A Multifamily Structured Credit Risk FRB Ser. 21-MN3, Class M2, 9.32%, 11/25/51 | 2,289,000 | 2,245,395 | |
| Government National Mortgage Association FRB Ser. 24-32, IO, 0.706%, 6/16/63 | 17,541,862 | 855,166 | |
| GS Mortgage Securities Corp., II 144A FRB Ser. 13-GC10, Class D, 4.537%, 2/10/46 W | 1,880,000 | 1,720,709 | |
| GS Mortgage Securities Trust 144A | |||
| FRB Ser. 10-C1, Class D, 6.36%, 8/10/43 W | 742,000 | 633,045 | |
| FRB Ser. 14-GC24, Class D, 4.521%, 9/10/47 W | 2,326,000 | 1,267,241 | |
| Ser. 17-GS5, Class D, 3.509%, 3/10/50 W | 1,021,000 | 488,686 | |
| JPMBB Commercial Mortgage Securities Trust FRB Ser. 14-C22, Class C, 4.561%, 9/15/47 W | 1,124,000 | 972,179 | |
| JPMBB Commercial Mortgage Securities Trust 144A | |||
| FRB Ser. 14-C19, Class C19, 4.657%, 4/15/47 W | 732,000 | 724,321 | |
| FRB Ser. C14, Class D, 4.111%, 8/15/46 W | 2,305,000 | 1,541,754 | |
| FRB Ser. 13-C12, Class E, 3.959%, 7/15/45 W | 1,235,000 | 877,288 | |
| JPMCC Commercial Mortgage Securities Trust 144A FRB Ser. 17-JP7, Class D, 4.383%, 9/15/50 W | 1,453,000 | 1,043,861 | |
| JPMDB Commercial Mortgage Securities Trust | |||
| FRB Ser. 18-C8, Class C, 4.761%, 6/15/51 W | 835,000 | 676,068 | |
| Ser. 18-C8, Class B, 4.522%, 6/15/51 | 636,000 | 561,480 | |
| Ser. 17-C5, Class C, 4.512%, 3/15/50 W | 995,000 | 735,122 | |
| JPMDB Commercial Mortgage Securities Trust 144A FRB Ser. 16-C2, Class D, 3.326%, 6/15/49 W | 2,330,000 | 1,317,451 | |
14 Mortgage Securities Fund | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Commercial mortgage-backed securities cont. | |||
| JPMorgan Chase Commercial Mortgage Securities Trust | |||
| Ser. 06-LDP9, Class AMS, 5.337%, 5/15/47 | $1,503,527 | $1,452,802 | |
| FRB Ser. 13-LC11, Class D, 4.116%, 4/15/46 W | 933,000 | 384,880 | |
| FRB Ser. 13-C10, Class C, 4.074%, 12/15/47 W | 1,046,335 | 959,548 | |
| Ser. 13-LC11, Class B, 3.499%, 4/15/46 | 725,000 | 616,111 | |
| JPMorgan Chase Commercial Mortgage Securities Trust 144A | |||
| FRB Ser. 11-C3, Class D, 5.526%, 2/15/46 W | 1,123,000 | 867,232 | |
| FRB Ser. 11-C3, Class E, 5.526%, 2/15/46 W | 1,629,000 | 667,719 | |
| FRB Ser. 13-C16, Class D, 4.884%, 12/15/46 W | 966,364 | 794,923 | |
| Morgan Stanley Bank of America Merrill Lynch Trust | |||
| FRB Ser. 15-C25, Class C, 4.518%, 10/15/48 W | 1,824,000 | 1,600,598 | |
| FRB Ser. 14-C16, Class B, 4.354%, 6/15/47 W | 1,695,000 | 1,588,215 | |
| FRB Ser. 15-C22, Class C, 4.193%, 4/15/48 W | 1,616,000 | 1,475,170 | |
| FRB Ser. 17-C34, Class C, 4.172%, 11/15/52 W | 751,000 | 622,723 | |
| FRB Ser. 13-C9, Class C, 3.727%, 5/15/46 W | 946,000 | 828,170 | |
| Morgan Stanley Bank of America Merrill Lynch Trust 144A | |||
| FRB Ser. 13-C12, Class D, 6.049%, 10/15/46 W | 479,000 | 400,552 | |
| FRB Ser. 13-C12, Class E, 6.049%, 10/15/46 W | 2,040,618 | 1,632,323 | |
| FRB Ser. 14-C17, Class D, 4.653%, 8/15/47 W | 726,000 | 663,546 | |
| FRB Ser. 12-C6, Class G, 4.50%, 11/15/45 W | 1,288,000 | 469,605 | |
| FRB Ser. 15-C24, Class E, 4.323%, 5/15/48 W | 1,780,000 | 1,346,748 | |
| FRB Ser. 12-C6, Class E, 4.252%, 11/15/45 W | 1,677,000 | 804,745 | |
| FRB Ser. 15-C23, Class D, 4.138%, 7/15/50 W | 924,000 | 804,763 | |
| FRB Ser. 13-C10, Class F, 3.942%, 7/15/46 W | 2,316,000 | 143,926 | |
| FRB Ser. 13-C9, Class D, 3.815%, 5/15/46 W | 1,122,000 | 945,315 | |
| Ser. 14-C19, Class D, 3.25%, 12/15/47 | 954,000 | 786,992 | |
| Morgan Stanley Capital I Trust 144A | |||
| FRB Ser. 12-C4, Class E, 5.164%, 3/15/45 W | 1,938,000 | 1,431,213 | |
| FRB Ser. 11-C3, Class E, 4.944%, 7/15/49 W | 2,576,226 | 2,500,614 | |
| Multifamily Connecticut Avenue Securities Trust 144A FRB Ser. 19-01, Class M10, 8.685%, 10/25/49 | 5,732,226 | 5,640,915 | |
| PFP, Ltd. 144A | |||
| FRB Ser. 23-10, Class AS, (CME Term SOFR 1 Month + 3.02%), 8.351%, 9/16/38 (Bermuda) | 507,000 | 510,192 | |
| FRB Ser. 22-9, Class AS, (CME Term SOFR 1 Month + 2.78%), 8.109%, 8/19/35 (Bermuda) | 687,000 | 690,069 | |
| FRB Ser. 21-8, Class A, 6.439%, 8/9/37 (Cayman Islands) | 422,140 | 418,793 | |
| Ready Capital Mortgage Financing, LLC 144A FRB Ser. 22-FL9, Class A, 7.796%, 6/25/37 | 978,866 | 980,220 | |
| Shelter Growth CRE Issuer, Ltd. 144A FRB Ser. 23-FL5, Class A, 8.08%, 5/19/38 (Bermuda) | 732,000 | 732,914 | |
| UBS Commercial Mortgage Trust | |||
| FRB Ser. 18-C11, Class C, 4.882%, 6/15/51 W | 1,439,000 | 1,176,180 | |
| FRB Ser. 17-C3, Class C, 4.386%, 8/15/50 W | 2,426,000 | 2,011,620 | |
| UBS Commercial Mortgage Trust 144A | |||
| FRB Ser. 12-C1, Class E, 5.00%, 5/10/45 W | 1,132,786 | 1,012,033 | |
| FRB Ser. 18-C11, Class D, 3.00%, 6/15/51 W | 2,564,000 | 1,377,549 | |
| VMC Finance, LLC 144A FRB Ser. 21-FL4, Class A, 6.541%, 6/16/36 | 366,771 | 365,271 | |
Mortgage Securities Fund 15 | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Commercial mortgage-backed securities cont. | |||
| Wells Fargo Commercial Mortgage Trust | |||
| FRB Ser. 16-NXS5, Class D, 4.977%, 1/15/59 W | $1,174,000 | $864,237 | |
| FRB Ser. 18-C46, Class C, 4.965%, 8/15/51 W | 823,000 | 703,742 | |
| FRB Ser. 15-C31, Class C, 4.594%, 11/15/48 W | 1,373,000 | 1,273,258 | |
| FRB Ser. 15-SG1, Class B, 4.452%, 9/15/48 W | 1,072,000 | 993,912 | |
| FRB Ser. 15-C29, Class D, 4.218%, 6/15/48 W | 1,407,000 | 1,217,750 | |
| FRB Ser. 20-C57, Class C, 4.023%, 8/15/53 W | 418,000 | 364,370 | |
| Ser. 15-C31, Class D, 3.852%, 11/15/48 | 1,554,000 | 1,243,200 | |
| Ser. 16-BNK1, Class C, 3.071%, 8/15/49 W | 790,000 | 465,805 | |
| Wells Fargo Commercial Mortgage Trust 144A | |||
| FRB Ser. 15-C31, Class E, 4.594%, 11/15/48 W | 1,550,000 | 1,007,499 | |
| FRB Ser. 15-C30, Class D, 4.494%, 9/15/58 W | 522,500 | 440,116 | |
| Ser. 17-RB1, Class D, 3.401%, 3/15/50 | 991,000 | 513,072 | |
| Ser. 16-C33, Class D, 3.123%, 3/15/59 | 1,822,000 | 1,393,493 | |
| WF-RBS Commercial Mortgage Trust Ser. 14-C21, Class C, 4.234%, 8/15/47 W | 1,815,000 | 1,695,230 | |
| WF-RBS Commercial Mortgage Trust 144A | |||
| Ser. 11-C4, Class E, 4.979%, 6/15/44 W | 1,659,568 | 1,256,682 | |
| FRB Ser. 12-C9, Class D, 4.562%, 11/15/45 W | 192,793 | 187,964 | |
| FRB Ser. 12-C9, Class E, 4.562%, 11/15/45 W | 1,003,000 | 929,005 | |
| FRB Ser. 13-C11, Class D, 4.06%, 3/15/45 W | 2,016,000 | 1,629,345 | |
| 117,427,455 | |||
| Residential mortgage-backed securities (non-agency) (22.9%) | |||
| A&D Mortgage Trust 144A | |||
| Ser. 23-NQM5, Class A1, 7.049%, 11/25/68 | 1,983,912 | 2,007,471 | |
| Ser. 24-NQM1, Class A1, 6.195%, 2/25/69 | 2,068,788 | 2,061,551 | |
| Ser. 23-NQM2, Class A1, 6.132%, 5/25/68 | 2,006,939 | 1,995,330 | |
| American Home Mortgage Investment Trust FRB Ser. 07-1, Class GA1C, (CME Term SOFR 1 Month + 0.30%), 5.634%, 5/25/47 | 5,047,957 | 2,880,938 | |
| Arroyo Mortgage Trust 144A Ser. 19-3, Class M1, 4.204%, 10/25/48 W | 750,000 | 653,740 | |
| Bayview Financial Mortgage Pass-Through Trust Ser. 06-C, Class 1A3, 6.528%, 11/28/36 | 2,765,139 | 2,617,245 | |
| Bear Stearns Alt-A Trust | |||
| FRB Ser. 05-10, Class 11A1, (CME Term SOFR 1 Month + 0.61%), 5.944%, 1/25/36 | 191,320 | 172,861 | |
| FRB Ser. 05-8, Class 21A1, 5.292%, 10/25/35 W | 329,122 | 273,330 | |
| Carrington Mortgage Loan Trust FRB Ser. 06-NC2, Class A4, (CME Term SOFR 1 Month + 0.59%), 5.924%, 6/25/36 | 2,765,835 | 2,619,165 | |
| COLT Mortgage Loan Trust 144A Ser. 23-3, Class A1, 7.18%, 9/25/68 | 2,964,562 | 3,007,726 | |
| Countrywide Alternative Loan Trust FRB Ser. 06-OA19, Class A1, (CME Term SOFR 1 Month + 0.29%), 5.623%, 2/20/47 | 1,796,798 | 1,367,322 | |
| Countrywide Asset-Backed Certificates FRB Ser. 07-10, Class 1A1, (CME Term SOFR 1 Month + 0.29%), 5.624%, 6/25/47 | 3,536,560 | 3,313,788 | |
| CSMC Trust 144A FRB Ser. 20-RPL2, Class A12, 3.54%, 2/25/60 W | 1,791,138 | 1,809,469 | |
| Deutsche Alt-B Securities Mortgage Loan Trust Ser. 06-AB4, Class A4B, 6.50%, 10/25/36 | 2,024,800 | 1,677,984 | |
16 Mortgage Securities Fund | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Residential mortgage-backed securities (non-agency) cont. | |||
| Federal Home Loan Mortgage Corporation | |||
| Structured Agency Credit Risk Debt FRN Ser. 15-DNA3, Class B, (US 30 Day Average SOFR + 9.46%), 14.785%, 4/25/28 | $328,580 | $359,737 | |
| Structured Agency Credit Risk Debt FRN Ser. 15-HQA1, Class B, (US 30 Day Average SOFR + 8.91%), 14.235%, 3/25/28 | 2,709,403 | 2,839,750 | |
| Structured Agency Credit Risk Debt FRN Ser. 16-DNA3, Class M3, (US 30 Day Average SOFR + 5.11%), 10.435%, 12/25/28 | 2,132,532 | 2,265,506 | |
| Federal Home Loan Mortgage Corporation 144A | |||
| Structured Agency Credit Risk Trust FRB Ser. 19-HQA2, Class B2, (US 30 Day Average SOFR + 11.36%), 16.685%, 4/25/49 | 637,000 | 779,564 | |
| Structured Agency Credit Risk Trust FRB Ser. 18-HQA2, Class B2, (US 30 Day Average SOFR + 11.11%), 16.435%, 10/25/48 | 2,108,000 | 2,688,524 | |
| Structured Agency Credit Risk Trust FRB Ser. 19-DNA1, Class B2, (US 30 Day Average SOFR + 10.86%), 16.185%, 1/25/49 | 4,520,000 | 5,705,279 | |
| Structured Agency Credit Risk Trust FRB Ser. 19-DNA2, Class B2, (US 30 Day Average SOFR + 10.61%), 15.935%, 3/25/49 | 282,000 | 340,384 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 20-DNA4, Class B2, (US 30 Day Average SOFR + 10.11%), 15.435%, 8/25/50 | 2,647,000 | 3,560,215 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA3, Class B2, (US 30 Day Average SOFR + 10.11%), 15.435%, 7/25/50 | 916,000 | 1,204,483 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 22-DNA3, Class B2, (US 30 Day Average SOFR + 9.75%), 15.07%, 4/25/42 | 350,000 | 396,195 | |
| Structured Agency Credit Risk Trust FRB Ser. 19-FTR1, Class B2, (US 30 Day Average SOFR + 8.46%), 13.785%, 1/25/48 | 2,681,000 | 3,165,256 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA2, Class B2, (US 30 Day Average SOFR + 7.71%), 13.035%, 3/25/50 | 1,000,000 | 1,168,996 | |
| Structured Agency Credit Risk Trust FRB Ser. 19-DNA4, Class B2, (US 30 Day Average SOFR + 6.36%), 11.685%, 10/25/49 | 1,070,000 | 1,181,843 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA4, Class B1, (US 30 Day Average SOFR + 5.36%), 10.685%, 9/25/50 | 708,612 | 782,001 | |
| Structured Agency Credit Risk Trust FRB Ser. 19-FTR3, Class FTR3, (US 30 Day Average SOFR + 4.91%), 10.236%, 9/25/47 | 371,000 | 389,086 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 20-DNA5, Class B1, (US 30 Day Average SOFR + 4.80%), 10.12%, 10/25/50 | 3,100,000 | 3,497,188 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 21-DNA1, Class B2, (US 30 Day Average SOFR + 4.75%), 10.07%, 1/25/51 | 1,330,000 | 1,403,202 | |
| Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA2, Class B1, (US 30 Day Average SOFR + 4.21%), 9.535%, 3/25/50 | 3,276,000 | 3,689,163 | |
| Seasoned Credit Risk Transfer Trust Ser. 19-1, Class M, 4.75%, 7/25/58 W | 1,400,000 | 1,299,534 | |
| Seasoned Credit Risk Transfer Trust FRB Ser. 18-3, Class 3, 4.75%, 8/25/57 W | 876,000 | 800,815 | |
| Seasoned Credit Risk Transfer Trust Ser. 19-4, Class M, 4.50%, 2/25/59 W | 2,085,000 | 1,839,322 | |
| Federal National Mortgage Association | |||
| Connecticut Avenue Securities FRB Ser. 16-C03, Class 2B, (US 30 Day Average SOFR + 12.86%), 18.185%, 10/25/28 | 467,365 | 549,280 | |
| Connecticut Avenue Securities FRB Ser. 16-C03, Class 1B, (US 30 Day Average SOFR + 11.86%), 17.185%, 10/25/28 | 2,814,018 | 3,266,631 | |
Mortgage Securities Fund 17 | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Residential mortgage-backed securities (non-agency) cont. | |||
| Federal National Mortgage Association | |||
| Connecticut Avenue Securities FRB Ser. 16-C04, Class 1B, (US 30 Day Average SOFR + 10.36%), 15.685%, 1/25/29 | $780,456 | $889,934 | |
| Connecticut Avenue Securities FRB Ser. 16-C06, Class 1B, (US 30 Day Average SOFR + 9.36%), 14.685%, 4/25/29 | 504,921 | 577,046 | |
| Federal National Mortgage Association 144A | |||
| Connecticut Avenue Securities Trust FRB Ser. 20-SBT1, Class 1B1, (US 30 Day Average SOFR + 6.86%), 12.185%, 2/25/40 | 3,455,000 | 3,719,793 | |
| Connecticut Avenue Securities Trust FRB Ser. 19-R01, Class 2B1, (US 30 Day Average SOFR + 4.46%), 9.785%, 7/25/31 | 3,187,000 | 3,428,017 | |
| Connecticut Avenue Securities Trust FRB Ser. 19-R03, Class 1B1, (US 30 Day Average SOFR + 4.21%), 9.535%, 9/25/31 | 881,301 | 934,556 | |
| Connecticut Avenue Securities Trust FRB Ser. 20-SBT1, Class 1M2, (US 30 Day Average SOFR + 3.76%), 9.085%, 2/25/40 | 1,887,000 | 1,983,560 | |
| Connecticut Avenue Securities Trust FRB Ser. 20-R01, Class 1B1, (US 30 Day Average SOFR + 3.36%), 8.685%, 1/25/40 | 347,000 | 359,161 | |
| Connecticut Avenue Securities Trust FRB Ser. 20-R02, Class 2B1, (US 30 Day Average SOFR + 3.11%), 8.435%, 1/25/40 | 311,000 | 319,540 | |
| Connecticut Avenue Securities Trust FRB Ser. 22-R02, Class 2M2, (US 30 Day Average SOFR + 3.00%), 8.32%, 1/25/42 | 3,048,000 | 3,133,725 | |
| Connecticut Avenue Securities Trust FRB Ser. 19-R01, Class 2M2, (US 30 Day Average SOFR + 2.56%), 7.885%, 7/25/31 | 3,255 | 3,270 | |
| Connecticut Avenue Securities FRB Ser. 21-R02, Class 2M2, (US 30 Day Average SOFR + 2.00%), 7.32%, 11/25/41 | 400,000 | 402,272 | |
| HarborView Mortgage Loan Trust FRB Ser. 05-2, Class 1A, (CME Term SOFR 1 Month + 0.63%), 5.961%, 5/19/35 | 951,145 | 296,904 | |
| Home Re, Ltd. 144A FRB Ser. 21-2, Class B1, (US 30 Day Average SOFR + 4.15%), 9.47%, 1/25/34 (Bermuda) | 1,000,000 | 993,331 | |
| JPMorgan Alternative Loan Trust FRB Ser. 06-A6, Class 1A1, (CME Term SOFR 1 Month + 0.43%), 5.764%, 11/25/36 | 1,138,146 | 940,055 | |
| LHOME Mortgage Trust 144A | |||
| Ser. 23-RTL2, Class A1, 8.00%, 6/25/28 | 641,000 | 638,546 | |
| Ser. 23-RTL4, Class A1, 7.628%, 11/25/28 | 781,000 | 780,288 | |
| MFA Trust 144A Ser. 23-NQM3, Class A1, 6.617%, 7/25/68 | 493,835 | 496,410 | |
| Morgan Stanley ABS Capital I, Inc. Trust FRB Ser. 04-HE9, Class M2, (CME Term SOFR 1 Month + 1.04%), 6.374%, 11/25/34 | 100,114 | 94,532 | |
| Oaktown Re III, Ltd. 144A | |||
| FRB Ser. 19-1A, Class B1B, (US 30 Day Average SOFR + 4.46%), 9.785%, 7/25/29 (Bermuda) | 695,000 | 695,401 | |
| FRB Ser. 19-1A, Class B1A, (US 30 Day Average SOFR + 3.61%), 8.935%, 7/25/29 (Bermuda) | 574,000 | 574,333 | |
| Saluda Grade Alternative Mortgage Trust 144A | |||
| Ser. 24-RTL5, Class A1, stepped-coupon 7.762% (9.262%, 9/1/26), 4/25/30 †† | 1,409,000 | 1,408,884 | |
| Ser. 24-RTL4, Class A1, stepped-coupon 7.50% (8.50%, 7/1/26), 2/25/30 †† | 1,074,000 | 1,069,499 | |
| Structured Asset Mortgage Investments II Trust FRB Ser. 06-AR7, Class A1BG, (CME Term SOFR 1 Month + 0.23%), 5.564%, 8/25/36 | 212,335 | 183,707 | |
| Toorak Mortgage Corp., Ltd. 144A Ser. 21-1, Class A2, 5.105%, 6/25/24 | 1,100,000 | 1,068,958 | |
18 Mortgage Securities Fund | |
| MORTGAGE-BACKED SECURITIES (81.4%)* cont. | Principal amount | Value | |
| Residential mortgage-backed securities (non-agency) cont. | |||
| Towd Point Mortgage Trust 144A Ser. 19-2, Class A2, 3.75%, 12/25/58 W | $862,000 | $762,865 | |
| WaMu Mortgage Pass-Through Certificates Trust FRB Ser. 05-AR8, Class 2AC2, (CME Term SOFR 1 Month + 1.03%), 6.364%, 7/25/45 | 524,117 | 464,552 | |
| Wells Fargo Home Equity Asset-Backed Securities Trust FRB Ser. 07-2, Class A3, (CME Term SOFR 1 Month + 0.57%), 5.904%, 4/25/37 | 544,935 | 526,205 | |
| 96,375,218 | |||
| Total mortgage-backed securities (cost $365,533,701) | $342,387,361 | ||
| ASSET-BACKED SECURITIES (1.7%)* | Principal amount | Value | |
| Mello Warehouse Securitization Trust 144A | |||
| FRB Ser. 21-3, Class F, (CME Term SOFR 1 Month + 5.26%), 10.594%, 10/22/24 | $425,000 | $423,698 | |
| FRB Ser. 21-3, Class E, (CME Term SOFR 1 Month + 3.36%), 8.694%, 10/22/24 | 2,146,000 | 2,137,978 | |
| FRB Ser. 21-3, Class D, (CME Term SOFR 1 Month + 2.11%), 7.444%, 10/22/24 | 1,700,000 | 1,695,113 | |
| FRB Ser. 21-3, Class A, (CME Term SOFR 1 Month + 0.96%), 6.294%, 10/22/24 | 510,000 | 508,772 | |
| NewRez Warehouse Securitization Trust 144A FRB Ser. 21-1, Class D, (CME Term SOFR 1 Month + 1.51%), 6.844%, 5/25/24 | 1,061,667 | 1,061,387 | |
| Station Place Securitization Trust 144A FRB Ser. 23-2, Class A1, (CME Term SOFR 1 Month + 0.95%), 6.279%, 6/29/24 | 1,375,000 | 1,374,695 | |
| Total asset-backed securities (cost $7,116,102) | $7,201,643 | ||
| SHORT-TERM INVESTMENTS (13.6%)* | Principal amount/ shares | Value | |
| Putnam Short Term Investment Fund Class P 5.50% L | Shares | 40,296,434 | $40,296,434 |
| State Street Institutional U.S. Government Money Market Fund, Premier Class 5.26% P | Shares | 12,236,000 | 12,236,000 |
| U.S. Treasury Bills 5.361%, 4/25/24 ∆ Φ | $2,400,000 | 2,391,589 | |
| U.S. Treasury Bills 5.380%, 5/23/24 # ∆ Φ | 2,500,000 | 2,481,045 | |
| Total short-term investments (cost $57,405,272) | $57,405,068 | ||
| TOTAL INVESTMENTS | ||
| Total investments (cost $964,703,104) | $942,592,904 | |
| Key to holding’s abbreviations | |||
| bp | Basis Points | ||
| CME | Chicago Mercantile Exchange | ||
| FRB | Floating Rate Bonds: The rate shown is the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the close of the reporting period. | ||
| FRN | Floating Rate Notes: The rate shown is the current interest rate or yield at the close of the reporting period. Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the close of the reporting period. | ||
Mortgage Securities Fund 19 | |
| IFB | Inverse Floating Rate Bonds, which are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The rate shown is the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. | ||
| IO | Interest Only | ||
| OTC | Over-the-counter | ||
| PO | Principal Only | ||
| REMICs | Real Estate Mortgage Investment Conduits | ||
| SOFR | Secured Overnight Financing Rate | ||
| TBA | To Be Announced Commitments | ||
| Notes to the fund’s portfolio | |||
| Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from October 1, 2023 through March 31, 2024 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Franklin Resources, Inc., and references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures. | |||
| * | Percentages indicated are based on net assets of $420,592,662. | ||
| †† | The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate. | ||
| # | This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period. Collateral at period end totaled $844,022 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8). | ||
| ∆ | This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period. Collateral at period end totaled $1,850,459 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8). | ||
| Φ | This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain TBA commitments at the close of the reporting period. Collateral at period end totaled $695,871 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8). | ||
| i | This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts (Note 1). | ||
| L | Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. | ||
| P | This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts and TBA commitments. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. | ||
| W | The rate shown represents the weighted average coupon associated with the underlying mortgage pools. Rates may be subject to a cap or floor. | ||
| Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity. | |||
| 144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. | |||
| See Note 1 to the financial statements regarding TBA commitments. | |||
| The dates shown on debt obligations are the original maturity dates. | |||
20 Mortgage Securities Fund | |
| FUTURES CONTRACTS OUTSTANDING at 3/31/24 (Unaudited) | ||||||
| Number of contracts | Notional amount | Value | Expiration date | Unrealized appreciation/ (depreciation) | ||
| U.S. Treasury Note 2 yr (Short) | 485 | $99,174,922 | $99,174,922 | Jun-24 | $73,463 | |
| Unrealized appreciation | 73,463 | |||||
| Unrealized (depreciation) | — | |||||
| Total | $73,463 | |||||
| FORWARD PREMIUM SWAP OPTION CONTRACTS OUTSTANDING at 3/31/24 (Unaudited) | ||||||
| Counterparty Fixed right or obligation % to receive or (pay)/Floating rate index/ Maturity date | Expiration date/strike | Notional/ contract amount | Premium receivable/ (payable) | Unrealized appreciation/ (depreciation) | ||
| Bank of America N.A. | ||||||
| 1.8838/US SOFR/Apr-34 (Purchased) | Apr-24/1.8838 | $57,860,800 | $(423,202) | $(421,227) | ||
| (4.225)/US SOFR/Nov-36 (Purchased) | Nov-26/4.225 | 41,942,300 | (2,147,446) | (646,331) | ||
| 3.725/US SOFR/Nov-36 (Purchased) | Nov-26/3.725 | 41,942,300 | (2,050,978) | 195,451 | ||
| 0.9876/US SOFR/Mar-50 (Purchased) | Mar-30/0.9876 | 12,942,000 | (281,122) | (121,525) | ||
| (0.9876)/US SOFR/Mar-50 (Purchased) | Mar-30/0.9876 | 12,942,000 | (4,179,735) | 554,435 | ||
| 2.735/US SOFR/Feb-59 (Purchased) | Feb-29/2.735 | 9,751,600 | (755,749) | (8,581) | ||
| 1.405/US SOFR/Dec-58 (Purchased) | Dec-28/1.405 | 2,526,100 | (387,441) | (284,085) | ||
| (1.405)/US SOFR/Dec-58 (Purchased) | Dec-28/1.405 | 2,526,100 | (387,441) | 481,475 | ||
| Barclays Bank PLC | ||||||
| 1.945/US SOFR/Jun-51 (Purchased) | Jun-31/1.945 | 12,539,500 | (675,879) | (199,880) | ||
| (1.945)/US SOFR/Jun-51 (Purchased) | Jun-31/1.945 | 12,539,500 | (2,658,374) | 456,438 | ||
| 3.10/US SOFR/Dec-42 (Purchased) | Dec-32/3.10 | 1,161,400 | (398,522) | 7,201 | ||
| Citibank, N.A. | ||||||
| (3.855)/US SOFR/Jul-29 (Purchased) | Jul-24/3.855 | 89,170,800 | (876,103) | 89,171 | ||
| 3.355/US SOFR/Jul-29 (Purchased) | Jul-24/3.355 | 89,170,800 | (900,625) | (608,145) | ||
| (1.34)/US SOFR/Jan-61 (Purchased) | Jan-41/1.34 | 14,080,100 | (3,291,364) | 411,702 | ||
| 1.34/US SOFR/Jan-61 (Purchased) | Jan-41/1.34 | 14,080,100 | (1,175,688) | (229,365) | ||
| Deutsche Bank AG | ||||||
| 3.19/US SOFR/Mar-38 (Written) | Mar-28/3.19 | 5,530,300 | 385,185 | (66,751) | ||
| (3.19)/US SOFR/Mar-38 (Written) | Mar-28/3.19 | 5,530,300 | 385,185 | 138,036 | ||
| Goldman Sachs International | ||||||
| 2.35/US SOFR/Mar-59 (Purchased) | Mar-29/2.35 | 13,681,500 | (797,631) | (54,452) | ||
| JPMorgan Chase Bank N.A. | ||||||
| (3.0925)/US SOFR/Mar-43 (Written) | Mar-33/3.0925 | 13,402,000 | 1,125,768 | 312,937 | ||
| 3.0925/US SOFR/Mar-43 (Written) | Mar-33/3.0925 | 13,402,000 | 1,125,768 | (226,762) | ||
| (3.475)/US SOFR/Dec-38 (Written) | Dec-28/3.475 | 9,356,900 | 627,848 | 98,902 | ||
| 3.475/US SOFR/Dec-38 (Written) | Dec-28/3.475 | 9,356,900 | 627,848 | (68,680) | ||
| Toronto-Dominion Bank | ||||||
| 2.118/US SOFR/Mar-41 (Purchased) | Mar-31/2.118 | 2,820,300 | (93,916) | (24,875) | ||
| (2.118)/US SOFR/Mar-41 (Purchased) | Mar-31/2.118 | 2,820,300 | (373,938) | 57,760 | ||
| Unrealized appreciation | 2,803,508 | |||||
| Unrealized (depreciation) | (2,960,659) | |||||
| Total | $(157,151) | |||||
Mortgage Securities Fund 21 | |
| OTC INTEREST RATE SWAP CONTRACTS OUTSTANDING at 3/31/24 (Unaudited) | |||||||
| Swap counterparty/ Notional amount | Value | Upfront premium received (paid) | Termination date | Payments made by fund | Payments received by fund | Unrealized appreciation/ (depreciation) | |
| Morgan Stanley & Co. International PLC | |||||||
| $50,000,000 | $1,406,000 | $1,162,857 | 9/21/27 | 3.30% — Annually | US SOFR — Annually | $3,130,011 | |
| 370,000,000 | 3,492,800 | 2,201,886 | 9/21/24 | 3.40% — Annually | US SOFR — Annually | 9,648,864 | |
| Upfront premium received | 3,364,743 | Unrealized appreciation | 12,778,875 | ||||
| Upfront premium (paid) | — | Unrealized (depreciation) | — | ||||
| Total | $3,364,743 | Total | $12,778,875 | ||||
| CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 3/31/24 (Unaudited) | |||||||
| Notional amount | Value | Upfront premium received (paid) | Termination date | Payments made by fund | Payments received by fund | Unrealized appreciation/ (depreciation) | |
| $19,166,900 | $314,529 E | $(652) | 12/13/57 | US SOFR — Annually | 3.524% — Annually | $313,877 | |
| 3,635,100 | 23,883 E | (71) | 12/6/42 | US SOFR — Annually | 3.887% — Annually | 23,812 | |
| 3,805,500 | 28,389 E | (57) | 3/18/36 | 3.757% — Annually | US SOFR — Annually | (28,446) | |
| 4,043,400 | 62,228 E | (137) | 2/20/59 | 3.485% — Annually | US SOFR — Annually | (62,365) | |
| 61,590,900 | 181,693 | (231) | 3/18/26 | US SOFR — Annually | 4.413% — Annually | (176,221) | |
| 195,551,000 | 860,424 E | 1,661,335 | 6/20/29 | 4.00% — Annually | US SOFR — Annually | 804,323 | |
| 195,969,000 | 578,109 E | (155,419) | 6/20/26 | 4.20% — Annually | US SOFR — Annually | 422,690 | |
| 22,951,000 | 6,885 E | 54,279 | 6/20/34 | 3.80% — Annually | US SOFR — Annually | 47,393 | |
| 10,021,000 | 11,524 E | (84,298) | 6/20/54 | US SOFR — Annually | 3.60% — Annually | (72,773) | |
| 47,135,000 | 94,741 E | (22,780) | 6/20/26 | 4.25% — Annually | US SOFR — Annually | 71,961 | |
| 4,509,000 | 19,749 E | 33,047 | 6/20/34 | 3.85% — Annually | US SOFR — Annually | 13,298 | |
| 16,185,000 | 162,497 E | (44,483) | 6/20/54 | 3.65% — Annually | US SOFR — Annually | (206,981) | |
| 13,720,500 | 101,806 | (181) | 3/27/34 | US SOFR — Annually | 3.932% — Annually | 98,997 | |
| Total | $1,440,352 | $1,249,565 | |||||
| E Extended effective date. | |||||||
22 Mortgage Securities Fund | |
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 3/31/24 (Unaudited) | ||||||||
| Swap counterparty/ Referenced debt* | Rating*** | Upfront premium received (paid)** | Notional amount | Value | Termi- nation date | Payments received by fund | Unrealized appreciation/ (depreciation) | |
| Citigroup Global Markets, Inc. | ||||||||
| CMBX NA BB.13 Index | BB−/P | $1,664,481 | $3,893,000 | $1,328,292 | 12/16/72 | 500 bp — Monthly | $339,974 | |
| CMBX NA BB.6 Index | B/P | 254,204 | 762,901 | 178,443 | 5/11/63 | 500 bp — Monthly | 76,503 | |
| CMBX NA BB.9 Index | B/P | 1,493,765 | 3,551,000 | 1,343,698 | 9/17/58 | 500 bp — Monthly | 153,519 | |
| CMBX NA BBB−.11 Index | BBB−/P | 33,810 | 161,000 | 20,737 | 11/18/54 | 300 bp — Monthly | 13,167 | |
| CMBX NA BBB−.13 Index | BBB−/P | 34,358 | 120,000 | 67,636 | 12/16/72 | 300 bp — Monthly | (33,095) | |
| CMBX NA BBB−.15 Index | BBB−/P | 12,883 | 56,000 | 7,946 | 11/18/64 | 300 bp — Monthly | 4,969 | |
| CMBX NA BBB−.16 Index | BBB−/P | 209,811 | 923,000 | 133,189 | 4/17/65 | 300 bp — Monthly | 77,161 | |
| Credit Suisse International | ||||||||
| CMBX NA BB.7 Index | B-/P | 36,784 | 207,607 | 60,954 | 1/17/47 | 500 bp — Monthly | (23,968) | |
| Goldman Sachs International | ||||||||
| CMBX NA BB.14 Index | BB−/P | 92,164 | 592,000 | 183,283 | 12/16/72 | 500 bp — Monthly | (90,544) | |
| CMBX NA BB.6 Index | B/P | 6,423 | 19,307 | 4,516 | 5/11/63 | 500 bp — Monthly | 1,926 | |
| CMBX NA BB.7 Index | B-/P | 234,836 | 620,558 | 182,196 | 1/17/47 | 500 bp — Monthly | 53,244 | |
| CMBX NA BBB−.11 Index | BBB−/P | 186 | 1,000 | 129 | 11/18/54 | 300 bp — Monthly | 58 | |
| CMBX NA BBB−.16 Index | BBB−/P | 28,955 | 141,000 | 20,346 | 4/17/65 | 300 bp — Monthly | 8,691 | |
| JPMorgan Securities LLC | ||||||||
| CMBX NA BB.10 Index | B-/P | 28,886 | 360,000 | 142,524 | 5/11/63 | 500 bp — Monthly | (113,288) | |
| CMBX NA BB.7 Index | B-/P | 16,440 | 36,237 | 10,639 | 1/17/47 | 500 bp — Monthly | 5,836 | |
| CMBX NA BB.7 Index | B-/P | 158,648 | 244,599 | 71,814 | 1/17/47 | 500 bp — Monthly | 87,072 | |
| CMBX NA BBB−.8 Index | B+/P | 103,543 | 664,000 | 70,782 | 10/17/57 | 300 bp — Monthly | 33,147 | |
| Merrill Lynch International | ||||||||
| CMBX NA A.13 Index | A-/P | 132,031 | 1,013,000 | 71,417 | 12/16/72 | 200 bp — Monthly | 61,009 | |
| CMBX NA A.13 Index | A-/P | 134,846 | 1,013,000 | 71,417 | 12/16/72 | 200 bp — Monthly | 63,823 | |
| CMBX NA BB.6 Index | B/P | 186,736 | 871,439 | 203,830 | 5/11/63 | 500 bp — Monthly | (16,246) | |
| CMBX NA BB.7 Index | B-/P | 20,331 | 126,829 | 37,237 | 1/17/47 | 500 bp — Monthly | (16,783) | |
Mortgage Securities Fund 23 | |
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 3/31/24 (Unaudited) cont. | ||||||||
| Swap counterparty/ Referenced debt* | Rating*** | Upfront premium received (paid)** | Notional amount | Value | Termi- nation date | Payments received by fund | Unrealized appreciation/ (depreciation) | |
| Morgan Stanley & Co. International PLC | ||||||||
| CMBX NA BB.13 Index | BB−/P | $370,733 | $822,000 | $280,466 | 12/16/72 | 500 bp — Monthly | $91,066 | |
| CMBX NA BB.7 Index | B-/P | 132,135 | 329,907 | 96,861 | 1/17/47 | 500 bp — Monthly | 35,595 | |
| CMBX NA BBB−.13 Index | BBB−/P | 228,069 | 717,000 | 154,442 | 12/16/72 | 300 bp — Monthly | 74,045 | |
| CMBX NA BBB−.16 Index | BBB−/P | 15,685 | 69,000 | 9,957 | 4/17/65 | 300 bp — Monthly | 5,768 | |
| CMBX NA BBB−.7 Index | BB+/P | 18,198 | 65,931 | 11,070 | 1/17/47 | 300 bp — Monthly | 7,167 | |
| CMBX NA BBB−.9 Index | BB/P | 47,282 | 487,000 | 71,540 | 9/17/58 | 300 bp — Monthly | (23,974) | |
| Upfront premium received | 5,696,223 | Unrealized appreciation | 1,193,740 | |||||
| Upfront premium (paid) | — | Unrealized (depreciation) | (317,898) | |||||
| Total | $5,696,223 | Total | $875,842 | |||||
| * Payments related to the referenced debt are made upon a credit default event. | ||||||||
| ** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution. | ||||||||
| *** Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody’s, Standard & Poor’s or Fitch ratings are believed to be the most recent ratings available at March 31, 2024. Securities rated by Fitch are indicated by “/F.” Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications. | ||||||||
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 3/31/24 (Unaudited) | ||||||||
| Swap counterparty/ Referenced debt* | Upfront premium received (paid)** | Notional amount | Value | Termi- nation date | Payments (paid) by fund | Unrealized appreciation/ (depreciation) | ||
| Citigroup Global Markets, Inc. | ||||||||
| CMBX NA BB.7 Index | $(615,904) | $1,565,738 | $459,701 | 1/17/47 | (500 bp) — Monthly | $(157,726) | ||
| CMBX NA BB.8 Index | (28,145) | 62,513 | 22,073 | 10/17/57 | (500 bp) — Monthly | (6,132) | ||
| CMBX NA BBB−.10 Index | (707,526) | 2,354,000 | 444,435 | 11/17/59 | (300 bp) — Monthly | (264,464) | ||
| CMBX NA BBB−.12 Index | (1,312,535) | 4,625,000 | 913,438 | 8/17/61 | (300 bp) — Monthly | (404,533) | ||
| CMBX NA BBB−.8 Index | (754,155) | 3,904,000 | 416,166 | 10/17/57 | (300 bp) — Monthly | (340,266) | ||
| CMBX NA BBB−.9 Index | (251,259) | 1,062,000 | 156,008 | 9/17/58 | (300 bp) — Monthly | (95,871) | ||
24 Mortgage Securities Fund | |
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 3/31/24 (Unaudited) cont. | ||||||||
| Swap counterparty/ Referenced debt* | Upfront premium received (paid)** | Notional amount | Value | Termi- nation date | Payments (paid) by fund | Unrealized appreciation/ (depreciation) | ||
| Credit Suisse International | ||||||||
| CMBX NA BB.10 Index | $(46,565) | $349,000 | $138,169 | 11/17/59 | (500 bp) — Monthly | $91,265 | ||
| CMBX NA BB.10 Index | (41,383) | 348,000 | 137,773 | 11/17/59 | (500 bp) — Monthly | 96,052 | ||
| CMBX NA BB.10 Index | (22,747) | 183,000 | 72,450 | 11/17/59 | (500 bp) — Monthly | 49,525 | ||
| Goldman Sachs International | ||||||||
| CMBX NA BB.8 Index | (53,080) | 125,026 | 44,147 | 10/17/57 | (500 bp) — Monthly | (9,055) | ||
| CMBX NA BB.9 Index | (1,409,598) | 3,523,000 | 1,333,103 | 9/17/58 | (500 bp) — Monthly | (79,920) | ||
| CMBX NA BBB−.12 Index | (316,200) | 1,199,000 | 236,803 | 8/17/61 | (300 bp) — Monthly | (80,097) | ||
| JPMorgan Securities LLC | ||||||||
| CMBX NA BB.11 Index | (111,197) | 112,713 | 26,364 | 5/11/63 | (500 bp) — Monthly | (84,943) | ||
| Merrill Lynch International | ||||||||
| CMBX NA BB.10 Index | (1,764) | 31,000 | 12,273 | 11/17/59 | (500 bp) — Monthly | 10,479 | ||
| Morgan Stanley & Co. International PLC | ||||||||
| CMBX NA BB.8 Index | (950,911) | 2,082,157 | 735,209 | 10/17/57 | (500 bp) — Monthly | (217,726) | ||
| CMBX NA BB.9 Index | (11,859) | 28,000 | 10,595 | 9/17/58 | (500 bp) — Monthly | (1,291) | ||
| CMBX NA BBB−.10 Index | (579,466) | 1,792,000 | 338,330 | 11/17/59 | (300 bp) — Monthly | (242,181) | ||
| CMBX NA BBB−.11 Index | (39,515) | 162,000 | 20,866 | 11/18/54 | (300 bp) — Monthly | (18,744) | ||
| CMBX NA BBB−.12 Index | (268,151) | 843,000 | 166,493 | 8/17/61 | (300 bp) — Monthly | (102,150) | ||
| CMBX NA BBB−.8 Index | (262,257) | 1,274,000 | 135,808 | 10/17/57 | (300 bp) — Monthly | (127,192) | ||
| Upfront premium received | — | Unrealized appreciation | 247,321 | |||||
| Upfront premium (paid) | (7,784,217) | Unrealized (depreciation) | (2,232,291) | |||||
| Total | $(7,784,217) | Total | $(1,984,970) | |||||
| * Payments related to the referenced debt are made upon a credit default event. | ||||||||
| ** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution. | ||||||||
Mortgage Securities Fund 25 | |
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | |||
| Investments in securities: | Level 1 | Level 2 | Level 3 |
| Asset-backed securities | $— | $7,201,643 | $— |
| Mortgage-backed securities | — | 342,387,361 | — |
| U.S. government and agency mortgage obligations | — | 535,345,585 | — |
| U.S. treasury obligations | — | 253,247 | — |
| Short-term investments | 12,236,000 | 45,169,068 | — |
| Totals by level | $12,236,000 | $930,356,904 | $— |
| Valuation inputs | |||
| Other financial instruments: | Level 1 | Level 2 | Level 3 |
| Futures contracts | $73,463 | $— | $— |
| Forward premium swap option contracts | — | (157,151) | — |
| Interest rate swap contracts | — | 9,223,345 | — |
| Credit default contracts | — | 978,866 | — |
| Totals by level | $73,463 | $10,045,060 | $— |
The accompanying notes are an integral part of these financial statements.
26 Mortgage Securities Fund | |
Statement of assets and liabilities 3/31/24 (Unaudited)
| ASSETS | |
| Investment in securities, at value (Notes 1 and 8): | |
| Unaffiliated issuers (identified cost $924,406,670) | $902,296,470 |
| Affiliated issuers (identified cost $40,296,434) (Note 5) | 40,296,434 |
| Cash | 1,424,081 |
| Interest and other receivables | 3,877,648 |
| Receivable for shares of the fund sold | 323,048 |
| Receivable for investments sold | 1,181,857 |
| Receivable for variation margin on futures contracts (Note 1) | 98,509 |
| Receivable for variation margin on centrally cleared swap contracts (Note 1) | 622,596 |
| Unrealized appreciation on forward premium swap option contracts (Note 1) | 2,803,508 |
| Unrealized appreciation on OTC swap contracts (Note 1) | 14,219,936 |
| Premium paid on OTC swap contracts (Note 1) | 7,784,217 |
| Receivable from broker (Note 1) | 43,161 |
| Deposits with broker (Note 1) | 10,127,926 |
| Prepaid assets | 59,878 |
| Total assets | 985,159,269 |
| LIABILITIES | |
| Payable for investments purchased | 761,341 |
| Payable for purchases of TBA securities (Note 1) | 535,081,977 |
| Payable for shares of the fund repurchased | 359,940 |
| Payable for compensation of Manager (Note 2) | 136,449 |
| Payable for custodian fees (Note 2) | 26,725 |
| Payable for investor servicing fees (Note 2) | 139,720 |
| Payable for Trustee compensation and expenses (Note 2) | 495,014 |
| Payable for administrative services (Note 2) | 1,297 |
| Payable for distribution fees (Note 2) | 246,611 |
| Payable for variation margin on centrally cleared swap contracts (Note 1) | 140,205 |
| Unrealized depreciation on forward premium swap option contracts (Note 1) | 2,960,659 |
| Unrealized depreciation on OTC swap contracts (Note 1) | 2,550,189 |
| Premium received on OTC swap contracts (Note 1) | 9,060,966 |
| Collateral on certain derivative contracts and TBA commitments, at value (Notes 1 and 8) | 12,489,247 |
| Other accrued expenses | 116,267 |
| Total liabilities | 564,566,607 |
| Net assets | $420,592,662 |
| REPRESENTED BY | |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $809,458,239 |
| Total distributable earnings (Note 1) | (388,865,577) |
| Total — Representing net assets applicable to capital shares outstanding | $420,592,662 |
(Continued on next page)
| Mortgage Securities Fund 27 |
Statement of assets and liabilities cont.
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
| Net asset value and redemption price per class A share | |
| ($384,675,798 divided by 45,041,402 shares) | $8.54 |
| Offering price per class A share (100/96.00 of $8.54)* | $8.90 |
| Net asset value and offering price per class B share ($159,567 divided by 18,771 shares)** | $8.50 |
| Net asset value and offering price per class C share ($1,939,339 divided by 229,992 shares)** | $8.43 |
| Net asset value, offering price and redemption price per class R share | |
| ($4,219,464 divided by 501,912 shares) | $8.41 |
| Net asset value, offering price and redemption price per class R6 share | |
| ($3,778,539 divided by 449,693 shares) | $8.40 |
| Net asset value, offering price and redemption price per class Y share | |
| ($25,819,955 divided by 3,073,345 shares) | $8.40 |
*On single retail sales of less than $100,000. On sales of $100,000 or more 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.
| 28 Mortgage Securities Fund |
Statement of operations Six months ended 3/31/24 (Unaudited)
| INVESTMENT INCOME | |
| Interest (including interest income of $865,494 from investments in affiliated issuers) (Note 5) | $15,608,398 |
| Total investment income | 15,608,398 |
| EXPENSES | |
| Compensation of Manager (Note 2) | 802,955 |
| Investor servicing fees (Note 2) | 438,410 |
| Custodian fees (Note 2) | 29,337 |
| Trustee compensation and expenses (Note 2) | 11,698 |
| Distribution fees (Note 2) | 498,447 |
| Administrative services (Note 2) | 8,030 |
| Other | 177,870 |
| Total expenses | 1,966,747 |
| Expense reduction (Note 2) | (19,281) |
| Net expenses | 1,947,466 |
| Net investment income | 13,660,932 |
| REALIZED AND UNREALIZED GAIN (LOSS) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (Notes 1 and 3) | (5,792,424) |
| Futures contracts (Note 1) | 386,590 |
| Swap contracts (Note 1) | (2,768,217) |
| Written options (Note 1) | (31,767) |
| Total net realized loss | (8,205,818) |
| Change in net unrealized appreciation (depreciation) on: | |
| Securities from unaffiliated issuers and TBA sale commitments | 26,522,514 |
| Futures contracts | (395,556) |
| Swap contracts | (1,261,261) |
| Written options | 3,393,843 |
| Total change in net unrealized appreciation | 28,259,540 |
| Net gain on investments | 20,053,722 |
| Net increase in net assets resulting from operations | $33,714,654 |
The accompanying notes are an integral part of these financial statements.
| Mortgage Securities Fund 29 |
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Six months ended 3/31/24* | Year ended 9/30/23 |
| Operations | ||
| Net investment income | $13,660,932 | $29,665,115 |
| Net realized loss on investments | (8,205,818) | (55,524,487) |
| Change in net unrealized appreciation of investments | 28,259,540 | 21,500,387 |
| Net increase (decrease) in net assets resulting | ||
| from operations | 33,714,654 | (4,358,985) |
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
| Class A | (21,777,563) | (55,401,156) |
| Class B | (9,874) | (56,944) |
| Class C | (116,126) | (381,762) |
| Class R | (239,954) | (594,142) |
| Class R6 | (313,714) | (750,887) |
| Class Y | (1,404,831) | (3,393,543) |
| Decrease from capital share transactions (Note 4) | (261,632) | (7,970,161) |
| Total increase (decrease) in net assets | 9,590,960 | (72,907,580) |
| NET ASSETS | ||
| Beginning of period | 411,001,702 | 483,909,282 |
| End of period | $420,592,662 | $411,001,702 |
*Unaudited.
The accompanying notes are an integral part of these financial statements.
| 30 Mortgage Securities Fund |
| This page left blank intentionally. |
| Mortgage Securities Fund 31 |
Financial highlights
(For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS | LESS DISTRIBUTIONS | RATIOS AND SUPPLEMENTAL DATA | |||||||||||
| Ratio of net | |||||||||||||
| Net asset | Net realized | Ratio | investment | ||||||||||
| value, | and unrealized | Total from | From net | Net asset | Total return | Net assets, | of expenses | income (loss) | Portfolio | ||||
| beginning | Net investment | gain (loss) | investment | investment | From return | Total | value, end | at net asset | end of period | to average | to average | turnover | |
| Period ended | of period | income (loss)a | on investments | operations | income | of capital | distributions | of period | value (%)b | (in thousands) | net assets (%)c | net assets (%) | (%)d |
| Class A | |||||||||||||
| March 31, 2024** | $8.34 | .28 | .41 | .69 | (.49) | — | (.49) | $8.54 | 8.44* | $384,676 | .48* | 3.28* | 683* |
| September 30, 2023 | 9.65 | .59 | (.67) | (.08) | (1.23) | — | (1.23) | 8.34 | (1.41) | 375,957 | .97e | 6.52e | 1,500 |
| September 30, 2022 | 11.87 | .55 | (2.28) | (1.73) | (.49) | — | (.49) | 9.65 | (14.96) | 442,394 | .92e,f | 5.02e | 863 |
| September 30, 2021 | 12.02 | .53 | (.19) | .34 | (.14) | (.35) | (.49) | 11.87 | 2.80 | 606,657 | .78e | 4.29e | 974 |
| September 30, 2020 | 12.96 | .48 | (.87) | (.39) | (.55) | — | (.55) | 12.02 | (3.05) | 680,883 | .75e | 3.88e | 916 |
| September 30, 2019 | 12.37 | .44 | .74 | 1.18 | (.59) | — | (.59) | 12.96 | 9.80 | 780,517 | .75e | 3.55e | 1,089 |
| Class B | |||||||||||||
| March 31, 2024** | $8.30 | .24 | .41 | .65 | (.45) | — | (.45) | $8.50 | 8.05* | $160 | .85* | 2.90 * | 683* |
| September 30, 2023 | 9.60 | .52 | (.67) | (.15) | (1.15) | — | (1.15) | 8.30 | (2.12) | 233 | 1.72e | 5.72e | 1,500 |
| September 30, 2022 | 11.81 | .47 | (2.27) | (1.80) | (.41) | — | (.41) | 9.60 | (15.61) | 618 | 1.67e,f | 4.25e | 863 |
| September 30, 2021 | 11.97 | .43 | (.19) | .24 | (.11) | (.29) | (.40) | 11.81 | 1.92 | 1,165 | 1.53e | 3.50e | 974 |
| September 30, 2020 | 12.89 | .39 | (.86) | (.47) | (.45) | — | (.45) | 11.97 | (3.69) | 2,190 | 1.50e | 3.14e | 916 |
| September 30, 2019 | 12.31 | .35 | .72 | 1.07 | (.49) | — | (.49) | 12.89 | 8.91 | 5,214 | 1.49e | 2.85e | 1,089 |
| Class C | |||||||||||||
| March 31, 2024** | $8.24 | .24 | .41 | .65 | (.46) | — | (.46) | $8.43 | 8.01* | $1,939 | .85* | 2.90 * | 683* |
| September 30, 2023 | 9.54 | .52 | (.66) | (.14) | (1.16) | — | (1.16) | 8.24 | (2.07) | 2,268 | 1.72e | 5.76e | 1,500 |
| September 30, 2022 | 11.74 | .46 | (2.25) | (1.79) | (.41) | — | (.41) | 9.54 | (15.60) | 3,467 | 1.67e,f | 4.25e | 863 |
| September 30, 2021 | 11.90 | .42 | (.18) | .24 | (.11) | (.29) | (.40) | 11.74 | 1.94 | 5,938 | 1.53e | 3.44e | 974 |
| September 30, 2020 | 12.84 | .39 | (.88) | (.49) | (.45) | — | (.45) | 11.90 | (3.82) | 14,611 | 1.50e | 3.13e | 916 |
| September 30, 2019 | 12.25 | .35 | .73 | 1.08 | (.49) | — | (.49) | 12.84 | 9.04 | 23,972 | 1.50e | 2.83e | 1,089 |
| Class R | |||||||||||||
| March 31, 2024** | $8.22 | .26 | .41 | .67 | (.48) | — | (.48) | $8.41 | 8.29 * | $4,219 | .60* | 3.16* | 683* |
| September 30, 2023 | 9.52 | .56 | (.66) | (.10) | (1.20) | — | (1.20) | 8.22 | (1.58) | 4,518 | 1.22e | 6.27e | 1,500 |
| September 30, 2022 | 11.71 | .52 | (2.24) | (1.72) | (.47) | — | (.47) | 9.52 | (15.11) | 4,593 | 1.17e,f | 4.77e | 863 |
| September 30, 2021 | 11.88 | .49 | (.20) | .29 | (.13) | (.33) | (.46) | 11.71 | 2.41 | 6,479 | 1.03e | 4.02e | 974 |
| September 30, 2020 | 12.81 | .45 | (.86) | (.41) | (.52) | — | (.52) | 11.88 | (3.26) | 7,813 | 1.00e | 3.63e | 916 |
| September 30, 2019 | 12.23 | .41 | .72 | 1.13 | (.55) | — | (.55) | 12.81 | 9.55 | 11,126 | 1.00e | 3.32e | 1,089 |
| Class R6 | |||||||||||||
| March 31, 2024** | $8.21 | .29 | .41 | .70 | (.51) | — | (.51) | $8.40 | 8.69* | $3,779 | .27* | 3.49* | 683* |
| September 30, 2023 | 9.52 | .62 | (.67) | (.05) | (1.26) | — | (1.26) | 8.21 | (1.04) | 5,451 | .56e | 6.94e | 1,500 |
| September 30, 2022 | 11.71 | .59 | (2.25) | (1.66) | (.53) | — | (.53) | 9.52 | (14.58) | 5,123 | .53e,f | 5.40e | 863 |
| September 30, 2021 | 11.88 | .57 | (.20) | .37 | (.15) | (.39) | (.54) | 11.71 | 3.07 | 6,069 | .41e | 4.67e | 974 |
| September 30, 2020 | 12.82 | .52 | (.86) | (.34) | (.60) | — | (.60) | 11.88 | (2.71) | 5,928 | .37e | 4.26e | 916 |
| September 30, 2019 | 12.24 | .49 | .72 | 1.21 | (.63) | — | (.63) | 12.82 | 10.25 | 7,454 | .37e | 3.96e | 1,089 |
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 32 Mortgage Securities Fund | Mortgage Securities Fund 33 |
Financial highlights cont.
| INVESTMENT OPERATIONS | LESS DISTRIBUTIONS | RATIOS AND SUPPLEMENTAL DATA | |||||||||||
| Ratio of net | |||||||||||||
| Net asset | Net realized | Ratio | investment | ||||||||||
| value, | and unrealized | Total from | From net | Net asset | Total return | Net assets, | of expenses | income (loss) | Portfolio | ||||
| beginning | Net investment | gain (loss) | investment | investment | From return | Total | value, end | at net asset | end of period | to average | to average | turnover | |
| Period ended | of period | income (loss)a | on investments | operations | income | of capital | distributions | of period | value (%)b | (in thousands) | net assets (%)c | net assets (%) | (%)d |
| Class Y | |||||||||||||
| March 31, 2024** | $8.21 | .28 | .41 | .69 | (.50) | — | (.50) | $8.40 | 8.61* | $25,820 | .35* | 3.41* | 683* |
| September 30, 2023 | 9.52 | .60 | (.66) | (.06) | (1.25) | — | (1.25) | 8.21 | (1.17) | 22,575 | .72e | 6.77e | 1,500 |
| September 30, 2022 | 11.71 | .58 | (2.25) | (1.67) | (.52) | — | (.52) | 9.52 | (14.71) | 27,715 | .67e,f | 5.23e | 863 |
| September 30, 2021 | 11.88 | .55 | (.19) | .36 | (.15) | (.38) | (.53) | 11.71 | 2.93 | 77,518 | .53e | 4.59e | 974 |
| September 30, 2020 | 12.81 | .51 | (.86) | (.35) | (.58) | — | (.58) | 11.88 | (2.75) | 61,132 | .50e | 4.14e | 916 |
| September 30, 2019 | 12.23 | .48 | .72 | 1.20 | (.62) | — | (.62) | 12.81 | 10.12 | 89,152 | .50e | 3.89e | 1,089 |
* Not annualized.
** Unaudited.
a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
c Includes amounts paid through expense offset and/or brokerage service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.
d Portfolio turnover includes TBA purchase and sale commitments.
e Reflects an involuntary contractual expense limitation and/or waivers of certain fund expenses in connection with investments in Putnam Government Money Market Fund in effect during the period. As a result of such limitations and/or waivers, the expenses of each class reflect a reduction of the following amounts (Note 2):
| Percentage of average net assets | |||
| September 30, 2023 | <0.01% | ||
| September 30, 2022 | <0.01 | ||
| September 30, 2021 | 0.11 | ||
| September 30, 2020 | 0.14 | ||
| September 30, 2019 | 0.15 |
f Includes one-time proxy cost of 0.01%.
The accompanying notes are an integral part of these financial statements.
| 34 Mortgage Securities Fund | Mortgage Securities Fund 35 |
Notes to financial statements 3/31/24 (Unaudited)
Unless otherwise noted, the “reporting period” represents the period from October 1, 2023 through March 31, 2024. The following table defines commonly used references within the Notes to financial statements:
| References to | Represent |
| Franklin Templeton | Franklin Resources, Inc. |
| JPMorgan | JPMorgan Chase Bank, N.A. |
| OTC | Over-the-counter |
| PIL | Putnam Investments Limited, an affiliate of Putnam Management |
| Putnam Management | Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned |
| subsidiary of Franklin Templeton | |
| SEC | Securities and Exchange Commission |
| State Street | State Street Bank and Trust Company |
Putnam Mortgage Securities Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The goal of the fund is to seek as high a level of current income as Putnam Management believes is consistent with preservation of capital. The fund invests mainly in mortgages, mortgage-related fixed income securities and related derivatives that are either investment-grade or below-investment-grade in quality (sometimes referred to as “junk bonds”). Under normal circumstances, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in mortgages, mortgage-related fixed income securities and related derivatives (i.e., derivatives used to acquire exposure to, or whose underlying securities are, mortgages or mortgage-related securities). The fund generally uses the net unrealized gain or loss, or market value, of mortgage-related derivatives for purposes of this policy, but may use the notional value of a derivative if that is determined to be a more appropriate measure of the fund’s investment exposure. This policy may be changed only after 60 days’ notice to shareholders.
The fund expects to invest in mortgage-backed investments that are obligations of U.S. government agencies and instrumentalities and accordingly are backed by the full faith and credit of the United States (e.g., Ginnie Mae mortgage-backed bonds) as well as in mortgage-backed investments that are backed by only the credit of a federal agency or government-sponsored entity (e.g., Fannie Mae and Freddie Mac mortgage-backed bonds), and that have short- to long-term maturities.
The fund also expects to invest in lower-rated, higher-yielding mortgage-backed securities, including non-agency residential mortgage-backed securities (which may be backed by non-qualified or “sub-prime” mortgages), commercial mortgage-backed securities, and collateralized mortgage obligations (including interest only, principal only, and other prepayment derivatives). Non-agency (i.e., privately issued) securities typically are lower-rated and higher yielding than securities issued or backed by agencies such as Ginnie Mae, Fannie Mae or Freddie Mac. The fund currently has significant investment exposure to commercial mortgage-backed securities. While the fund’s emphasis will be on mortgage-backed securities, it may also invest to a lesser extent in other types of asset-backed securities.
Putnam Management may consider, among other factors, credit, interest rate, prepayment and liquidity risks, as well as general market conditions, when deciding whether to buy or sell investments. The fund typically uses to a significant extent derivatives, including credit default swaps, interest rate swaps, total return swaps, to-be-announced (TBA) commitments, futures, options and swaptions, including on mortgage-backed securities and indices, for both hedging and non-hedging purposes, including to obtain or adjust exposure to mortgage-backed investments.
| 36 Mortgage Securities Fund |
The fund offers the following share classes. The expenses for each class of shares may differ based on the distribution and investor servicing fees of each class, which are identified in Note 2.
| Share class | Sales charge | Contingent deferred sales charge | Conversion feature |
| 1.00% on certain redemptions of shares | |||
| Class A | Up to 4.00% | bought with no initial sales charge | None |
| Converts to class A shares | |||
| Class B* | None | 5.00% phased out over six years | after 8 years |
| Converts to class A shares | |||
| Class C | None | 1.00% eliminated after one year | after 8 years |
| Class R† | None | None | None |
| Class R6† | None | None | None |
| Class Y† | None | None | None |
* Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment.
† Not available to all investors.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the fund’s Agreement and Declaration of Trust, any claims asserted by a shareholder against or on behalf of the fund, including claims against Trustees and Officers, must be brought in courts located within the Commonwealth of Massachusetts.
Note 1: Significant accounting policies
The fund follows the accounting and reporting guidance in Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services – Investment Companies (ASC 946) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP), including, but not limited to, ASC 946. 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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). 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. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
| Mortgage Securities Fund 37 |
Investments, including mortgage backed securities and short-term investments with remaining maturities of 60 days or less, are valued on the basis of valuations provided by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such service providers use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. Certain securities may be valued on the basis of a price provided by a single source. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, net of any applicable withholding taxes, if any, is recorded on the accrual basis. Amortization and accretion of premiums and discounts on debt securities, if any, is recorded on the accrual basis.
Securities purchased or sold on a delayed delivery basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.
Stripped securities The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The fair value of these securities is highly sensitive to changes in interest rates.
Options contracts The fund uses options contracts to hedge duration and convexity, to isolate prepayment risk and to manage downside risks.
The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.
Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap option contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor
| 38 Mortgage Securities Fund |
contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract. Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Futures contracts The fund uses futures contracts for hedging treasury term structure risk and for yield curve positioning.
The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”
Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Interest rate swap contracts The fund entered into OTC and/or centrally cleared interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, for hedging term structure risk and for yield curve positioning.
An OTC and centrally cleared interest rate swap can be purchased or sold with an upfront premium. For OTC interest rate swap contracts, an upfront payment received by the fund is recorded as a liability on the fund’s books. An upfront payment made by the fund is recorded as an asset on the fund’s books. OTC and centrally cleared interest rate swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change is recorded as an unrealized gain or loss on OTC interest rate swaps. Daily fluctuations in the value of centrally cleared interest rate swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments, including upfront premiums, received or made are recorded as realized gains or losses at the reset date or the closing of the contract. Certain OTC and centrally cleared interest rate swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract.
The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults, in the case of OTC interest rate contracts, or the central clearing agency or a clearing member defaults, in the case of centrally cleared interest rate swap contracts, on its respective obligation to perform under the contract. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC interest rate swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared interest rate swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared interest rate swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.
OTC and centrally cleared interest rate swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
At the close of the reporting period, the fund has deposited cash valued at $10,127,926 in a segregated account to cover margin requirements on open centrally cleared interest rate swap contracts.
Credit default contracts The fund entered into OTC and/or centrally cleared credit default contracts for hedging credit risk, for hedging market risk and for gaining exposure to specific sectors.
In OTC and centrally cleared credit default contracts, the protection buyer typically makes a periodic stream of payments to a counterparty, the protection seller, in exchange for the right to receive a contingent payment upon the occurrence of a credit event on the reference obligation or all other equally ranked obligations of the reference entity. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. For OTC credit default contracts, an upfront payment received by the fund is recorded as
| Mortgage Securities Fund 39 |
a liability on the fund’s books. An upfront payment made by the fund is recorded as an asset on the fund’s books. Centrally cleared credit default contracts provide the same rights to the protection buyer and seller except the payments between parties, including upfront premiums, are settled through a central clearing agent through variation margin payments. Upfront and periodic payments received or paid by the fund for OTC and centrally cleared credit default contracts are recorded as realized gains or losses at the reset date or close of the contract. The OTC and centrally cleared credit default contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change in value of OTC credit default contracts is recorded as an unrealized gain or loss. Daily fluctuations in the value of centrally cleared credit default contracts are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Upon the occurrence of a credit event, the difference between the par value and fair value of the reference obligation, net of any proportional amount of the upfront payment, is recorded as a realized gain or loss.
In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index or the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased the underlying reference obligations. In certain circumstances, the fund may enter into offsetting OTC and centrally cleared credit default contracts which would mitigate its risk of loss. Risks of loss may exceed amounts recognized on the Statement of assets and liabilities. The fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the contract. This risk may be mitigated for OTC credit default contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared credit default contracts through the daily exchange of variation margin. Counterparty risk is further mitigated with respect to centrally cleared credit default swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Where the fund is a seller of protection, the maximum potential amount of future payments the fund may be required to make is equal to the notional amount.
OTC and centrally cleared credit default contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
TBA commitments The fund may enter into TBA (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price and par amount have been established, the actual securities have not been specified. However, it is anticipated that the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date.
The fund may also enter into TBA sale commitments to hedge its portfolio positions, to sell mortgage-backed securities it owns under delayed delivery arrangements or to take a short position in mortgage-backed securities. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, either equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date are held as “cover” for the transaction, or other liquid assets in an amount equal to the notional value of the TBA sale commitment are segregated. If the TBA sale commitment is closed through the acquisition of an offsetting TBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.
TBA commitments, which are accounted for as purchase and sale transactions, may be considered securities themselves, and involve a risk of loss due to changes in the value of the security prior to the settlement date as well as the risk that the counterparty to the transaction will not perform its obligations. Counterparty risk is mitigated by having a master agreement between the fund and the counterparty.
Unsettled TBA commitments are valued at their fair value according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in fair value is recorded by the fund as an unrealized gain or loss. Based on market circumstances, Putnam Management will determine whether to take delivery of the underlying securities or to dispose of the TBA commitments prior to settlement.
TBA purchase commitments outstanding at period end, if any, are listed within the fund’s portfolio and TBA sale commitments outstanding at period end, if any, are listed after the fund’s portfolio.
| 40 Mortgage Securities Fund |
Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements that govern OTC derivative and foreign exchange contracts and Master Securities Forward Transaction Agreements that govern transactions involving mortgage-backed and other asset-backed securities that may result in delayed delivery (Master Agreements) with certain counterparties entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral pledged to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
With respect to ISDA Master Agreements, termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term or short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund had a net liability position of $1,896,001 on open derivative contracts subject to the Master Agreements. Collateral pledged by the fund at period end for these agreements totaled $1,850,459 and may include amounts related to unsettled agreements.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Lines of credit The fund participates, along with other Putnam funds, in a $320 million syndicated unsecured committed line of credit, provided by State Street ($160 million) and JPMorgan ($160 million), and a $235.5 million unsecured uncommitted line of credit, provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate for the committed line of credit and 1.30% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds and a $75,000 fee has been paid by the participating funds to State Street as agent of the syndicated committed line of credit. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.
The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either
| Mortgage Securities Fund 41 |
short-term or long-term capital losses. At September 30, 2023, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:
| Loss carryover | ||
| Short-term | Long-term | Total |
| $199,516,859 | $116,286,643 | $315,803,502 |
Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The aggregate identified cost on a tax basis is $1,033,064,417, resulting in gross unrealized appreciation and depreciation of $37,967,253 and $118,320,243, respectively, or net unrealized depreciation of $80,352,990.
Distributions to shareholders Distributions to shareholders from net investment income, if any, are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. 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.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:
| 0.550% | of the first $5 billion, | 0.350% | of the next $50 billion, | |
| 0.500% | of the next $5 billion, | 0.330% | of the next $50 billion, | |
| 0.450% | of the next $10 billion, | 0.320% | of the next $100 billion and | |
| 0.400% | of the next $10 billion, | 0.315% | of any excess thereafter. |
For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.193% of the fund’s average net assets.
Putnam Management has contractually agreed, through January 30, 2025, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.
PIL is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.20% of the average net assets of the portion of the fund managed by PIL.
On January 1, 2024, a subsidiary of Franklin Templeton acquired Putnam U.S. Holdings I, LLC (“Putnam Holdings”), the parent company of Putnam Management and PIL, in a stock and cash transaction (the “Transaction”). As a result of the Transaction, Putnam Management and PIL became indirect, wholly-owned subsidiaries of Franklin Templeton. The Transaction also resulted in the automatic termination of the investment management contract between the fund and Putnam Management and the sub-management contract for the fund between Putnam Management and PIL that were in place for the fund before the Transaction (together, the “Previous Advisory Contracts”). However, for the period from January 1, 2024 until January 4, 2024, Putnam Management and PIL continued to provide uninterrupted services with respect to the fund pursuant to interim investment management and sub-management contracts (together, the “Interim Advisory Contracts”) that
| 42 Mortgage Securities Fund |
were approved by the Board of Trustees. The terms of the Interim Advisory Contracts were identical to those of the Previous Advisory Contracts, except for the term of the contracts and those provisions required by regulation. On January 4, 2024, new investment management and sub-management contracts were approved by fund shareholders at a shareholder meeting held in connection with the Transaction (together, the “New Advisory Contracts”). The New Advisory Contracts took effect on January 4, 2024 and replaced the Interim Advisory Contracts. The terms of the New Advisory Contracts are substantially similar to those of the Previous Advisory Contracts, and the fee rates payable under the New Advisory Contracts are the same as the fee rates under the Previous Advisory Contracts.
The fund reimburses Putnam Management an allocated amount 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.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.
Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.
During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:
| Class A | $405,002 | Class R | 4,532 | |
| Class B | 201 | Class R6 | 1,282 | |
| Class C | 2,269 | Class Y | 25,124 | |
| Total | $438,410 |
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $19,281 under the expense offset arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $358, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable from July 1, 1995 through December 31, 2023. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to the following share classes pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Franklin Templeton, for services provided and expenses incurred in distributing shares of the fund. The Plans provide payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (Maximum %) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the
| Mortgage Securities Fund 43 |
following annual rate (Approved %) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:
| Maximum % | Approved % | Amount | |
| Class A | 0.35% | 0.25% | $476,184 |
| Class B | 1.00% | 1.00% | 944 |
| Class C | 1.00% | 1.00% | 10,665 |
| Class R | 1.00% | 0.50% | 10,654 |
| Total | $498,447 |
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $68,401 from the sale of class A shares and received no monies and $54 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $22 on class A redemptions.
Note 3: Purchases and sales of securities
During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:
| Cost of purchases | Proceeds from sales | |
| Investments in securities, including TBA commitments (Long-term) | $6,091,261,060 | $6,146,776,016 |
| U.S. government securities (Long-term) | — | — |
| Total | $6,091,261,060 | $6,146,776,016 |
The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.
Note 4: Capital shares
At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:
| SIX MONTHS ENDED 3/31/24 | YEAR ENDED 9/30/23 | |||
| Class A | Shares | Amount | Shares | Amount |
| Shares sold | 2,042,013 | $17,266,612 | 1,010,092 | $9,117,721 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,326,009 | 19,617,137 | 5,482,617 | 49,885,573 |
| 4,368,022 | 36,883,749 | 6,492,709 | 59,003,294 | |
| Shares repurchased | (4,405,104) | (37,232,237) | (7,280,389) | (66,039,522) |
| Net decrease | (37,082) | $(348,488) | (787,680) | $(7,036,228) |
| 44 Mortgage Securities Fund |
| SIX MONTHS ENDED 3/31/24 | YEAR ENDED 9/30/23 | |||
| Class B | Shares | Amount | Shares | Amount |
| Shares sold | — | $— | 276 | $2,541 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 1,157 | 9,712 | 5,838 | 53,216 |
| 1,157 | 9,712 | 6,114 | 55,757 | |
| Shares repurchased | (10,460) | (88,159) | (42,401) | (385,130) |
| Net decrease | (9,303) | $(78,447) | (36,287) | $(329,373) |
| SIX MONTHS ENDED 3/31/24 | YEAR ENDED 9/30/23 | |||
| Class C | Shares | Amount | Shares | Amount |
| Shares sold | 15,021 | $122,952 | 22,498 | $201,042 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 12,683 | 105,695 | 39,817 | 359,272 |
| 27,704 | 228,647 | 62,315 | 560,314 | |
| Shares repurchased | (73,013) | (608,859) | (150,401) | (1,349,068) |
| Net decrease | (45,309) | $(380,212) | (88,086) | $(788,754) |
| SIX MONTHS ENDED 3/31/24 | YEAR ENDED 9/30/23 | |||
| Class R | Shares | Amount | Shares | Amount |
| Shares sold | 31,753 | $266,123 | 69,253 | $614,601 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 28,901 | 239,954 | 66,310 | 594,142 |
| 60,654 | 506,077 | 135,563 | 1,208,743 | |
| Shares repurchased | (108,638) | (897,396) | (68,236) | (614,344) |
| Net increase (decrease) | (47,984) | $(391,319) | 67,327 | $594,399 |
| SIX MONTHS ENDED 3/31/24 | YEAR ENDED 9/30/23 | |||
| Class R6 | Shares | Amount | Shares | Amount |
| Shares sold | 66,425 | $560,620 | 108,741 | $983,244 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 37,306 | 309,582 | 82,714 | 739,992 |
| 103,731 | 870,202 | 191,455 | 1,723,236 | |
| Shares repurchased | (317,675) | (2,661,999) | (66,182) | (571,301) |
| Net increase (decrease) | (213,944) | $(1,791,797) | 125,273 | $1,151,935 |
| SIX MONTHS ENDED 3/31/24 | YEAR ENDED 9/30/23 | |||
| Class Y | Shares | Amount | Shares | Amount |
| Shares sold | 534,873 | $4,475,815 | 604,275 | $5,339,585 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 124,929 | 1,037,162 | 273,531 | 2,451,883 |
| 659,802 | 5,512,977 | 877,806 | 7,791,468 | |
| Shares repurchased | (335,069) | (2,784,346) | (1,041,049) | (9,353,608) |
| Net increase (decrease) | 324,733 | $2,728,631 | (163,243) | $(1,562,140) |
At the close of the reporting period, Putnam Investment Holdings, LLC owned 1 class Y share of the fund (less than 0.01% of class Y shares outstanding), valued at $8.40.
| Mortgage Securities Fund 45 |
Note 5: Affiliated transactions
Transactions during the reporting period with any company which is under common ownership or control were as follows:
| Shares | |||||
| outstanding | |||||
| and fair | |||||
| Fair value as | Purchase | Sale | Investment | value as | |
| Name of affiliate | of 9/30/23 | cost | proceeds | Income | of 3/31/24 |
| Short-term investments | |||||
| Putnam Short Term | |||||
| Investment Fund | |||||
| Class P* | $34,720,456 | $139,229,802 | $133,653,824 | $865,494 | $40,296,434 |
| Total Short-term | |||||
| investments | $34,720,456 | $139,229,802 | $133,653,824 | $865,494 | $40,296,434 |
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.
Note 6: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. The fund may invest in higher-yielding, lower-rated bonds that may have a higher rate of default. The fund may invest a significant portion of its assets in securitized debt instruments, including mortgage-backed and asset-backed investments. The yields and values of these investments are sensitive to changes in interest rates, the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market for these investments may be volatile and limited, which may make them difficult to buy or sell.
Note 7: Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:
| Purchased swap option contracts (contract amount) | $438,000,000 |
| Written swap option contracts (contract amount) | $331,600,000 |
| Futures contracts (number of contracts) | 500 |
| OTC interest rate swap contracts (notional) | $420,000,000 |
| Centrally cleared interest rate swap contracts (notional) | $584,300,000 |
| OTC credit default contracts (notional) | $47,400,000 |
| 46 Mortgage Securities Fund |
The following is a summary of the fair value of derivative instruments as of the close of the reporting period:
| Fair value of derivative instruments as of the close of the reporting period | ||||
| ASSET DERIVATIVES | LIABILITY DERIVATIVES | |||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Fair value | liabilities location | Fair value |
| Credit contracts | Receivables | $5,799,247 | Payables | $4,820,381 |
| Receivables, Net | ||||
| assets — Unrealized | Payables, Net assets — | |||
| Interest rate contracts | appreciation | 13,413,068* | Unrealized depreciation | 4,273,411* |
| Total | $19,212,315 | $9,093,792 | ||
* Includes cumulative appreciation/depreciation of futures contracts and/or centrally cleared swaps as reported in the fund’s portfolio. Only current day’s variation margin is reported within the Statement of assets and liabilities.
The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):
| Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments | ||||
| Derivatives not | ||||
| accounted for as | ||||
| hedging instruments | ||||
| under ASC 815 | Options | Futures | Swaps | Total |
| Credit contracts | $— | $— | $1,469,181 | $1,469,181 |
| Interest rate contracts | 3,441,438 | 386,590 | (4,237,398) | $(409,370) |
| Total | $3,441,438 | $386,590 | $(2,768,217) | $1,059,811 |
| Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) | ||||
| on investments | ||||
| Derivatives not | ||||
| accounted for as | ||||
| hedging instruments | ||||
| under ASC 815 | Options | Futures | Swaps | Total |
| Credit contracts | $— | $— | $(2,144,480) | $(2,144,480) |
| Interest rate contracts | (2,862,573) | (395,556) | 883,219 | $(2,374,910) |
| Total | $(2,862,573) | $(395,556) | $(1,261,261) | $(4,519,390) |
| Mortgage Securities Fund 47 |
Note 8: Offsetting of financial and derivative assets and liabilities
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.
| Bank of America N.A. | Barclays Bank PLC | Barclays Capital, Inc. (clearing broker) | BofA Securities, Inc. | Citibank, N.A. | Citigroup Global Markets, Inc. | Credit Suisse International | Deutsche BankAG | Goldman Sachs International | JPMorgan Chase Bank N.A. | JPMorgan Securities LLC | Merrill Lynch International | Mizuho Capital Markets LLC | Morgan Stanley & Co. International PLC | Toronto- Dominion Bank | Wells Fargo Bank, N.A. | Total | |
| Assets: | |||||||||||||||||
| OTC Interest rate swap contracts*# | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $9,414,132 | $— | $— | 9,414,132 |
| Centrally cleared interest rate | |||||||||||||||||
| swap contracts§ | — | — | 622,596 | — | — | — | — | — | — | — | — | — | — | — | — | — | 622,596 |
| OTC Credit default contracts — | |||||||||||||||||
| protection sold*# | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| OTC Credit default contracts — | |||||||||||||||||
| protection purchased*# | — | — | — | — | — | 2,400,532 | 347,537 | — | 1,609,806 | — | 26,254 | 12,243 | — | 1,402,875 | — | — | 5,799,247 |
| Futures contracts§ | — | — | — | — | — | — | — | — | — | — | 98,509 | — | — | — | — | — | 98,509 |
| Forward premium swap | |||||||||||||||||
| option contracts# | 1,231,361 | 463,639 | — | — | 500,873 | — | — | 138,036 | — | 411,839 | — | — | — | — | 57,760 | — | 2,803,508 |
| Total Assets | $1,231,361 | $463,639 | $622,596 | $— | $500,873 | $2,400,532 | $347,537 | $138,036 | $1,609,806 | $411,839 | $124,763 | $12,243 | $— | $10,817,007 | $57,760 | $— | $18,737,992 |
| Liabilities: | |||||||||||||||||
| OTC Interest rate swap contracts*# | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Centrally cleared interest rate | |||||||||||||||||
| swap contracts§ | — | — | 140,205 | — | — | — | — | — | — | — | — | — | — | — | — | — | 140,205 |
| OTC Credit default contracts — | |||||||||||||||||
| protection sold*# | — | — | — | — | — | 3,071,114 | 60,752 | — | 389,189 | — | 294,750 | 382,141 | — | 622,435 | — | — | 4,820,381 |
| OTC Credit default contracts — | |||||||||||||||||
| protection purchased*# | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Futures contracts§ | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Forward premium swap | |||||||||||||||||
| option contracts# | 1,481,749 | 199,880 | — | — | 837,510 | — | — | 66,751 | 54,452 | 295,442 | — | — | — | — | 24,875 | — | 2,960,659 |
| Total Liabilities | $1,481,749 | $199,880 | $140,205 | $— | $837,510 | $3,071,114 | $60,752 | $66,751 | $443,641 | $295,442 | $294,750 | $382,141 | $— | $622,435 | $24,875 | $— | $7,921,245 |
| Total Financial and Derivative | |||||||||||||||||
| Net Assets | $(250,388) | $263,759 | $482,391 | $— | $(336,637) | $(670,582) | $286,785 | $71,285 | $1,166,165 | $116,397 | $(169,987) | $(369,898) | $— | $10,194,572 | $32,885 | $— | $10,816,747 |
| Total collateral received (pledged)†## | $(111,082) | $263,759 | $— | $— | $(303,491) | $(667,371) | $286,785 | $40,000 | $1,080,000 | $— | $(169,987) | $(369,898) | $— | $10,048,000 | $20,000 | $— | |
| Net amount | $(139,306) | $— | $482,391 | $— | $(33,146) | $(3,211) | $— | $31,285 | $86,165 | $116,397 | $— | $— | $— | $146,572 | $12,885 | $— | |
| Controlled collateral received | |||||||||||||||||
| (including TBA commitments)** | $— | $340,000 | $— | $— | $— | $408,000 | $300,000 | $40,000 | $1,080,000 | $— | $— | $— | $253,247 | $10,048,000 | $20,000 | $— | $12,489,247 |
| Uncontrolled collateral received | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| Collateral (pledged) (including | |||||||||||||||||
| TBA commitments)** | $(111,082) | $— | $— | $(105,131) | $(303,491) | $(667,371) | $— | $— | $— | $— | $(797,567) | $(450,147) | $— | $— | $— | $(111,541) | $(2,546,330) |
* Excludes premiums, if any. Included in unrealized appreciation and depreciation on OTC swap contracts on the Statement of assets and liabilities.
** Included with Investments in securities on the Statement of assets and liabilities.
† Additional collateral may be required from certain brokers based on individual agreements.
| 48 Mortgage Securities Fund | Mortgage Securities Fund 49 |
# Covered by master netting agreement (Note 1).
##Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.
§ Includes current day’s variation margin only as reported on the Statement of assets and liabilities, which is not collateralized. Cumulative appreciation/(depreciation) for futures contracts and centrally cleared swap contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts and centrally cleared swap contracts, which is not included in the table above, amounted to $844,022 and $10,127,926, respectively.
| 50 Mortgage Securities Fund |
Shareholder meeting results (Unaudited)
January 4, 2024 special meeting
At the meeting, a new Management Contract for your fund with Putnam Investment Management, LLC was approved, as follows:
| Votes for | Votes against | Abstentions/Votes withheld |
| 21,529,280 | 1,006,942 | 2,637,332 |
At the meeting, a new Sub-Management Contract for your fund between Putnam Investment Management, LLC and Putnam Investments Limited was approved, as follows:
| Votes for | Votes against | Abstentions/Votes withheld |
| 21,372,667 | 1,090,682 | 2,710,204 |
All tabulations are rounded to the nearest whole number.
| Mortgage Securities Fund 51 |
Fund information
| Investment Manager | Trustees | Jonathan S. Horwitz |
| Putnam Investment | Kenneth R. Leibler, Chair | Executive Vice President, |
| Management, LLC | Barbara M. Baumann, Vice Chair | Principal Executive Officer, |
| 100 Federal Street | Liaquat Ahamed | and Compliance Liaison |
| Boston, MA 02110 | Katinka Domotorffy | |
| Catharine Bond Hill | Kelley Hunt | |
| Investment Sub-Advisor | Jennifer Williams Murphy | AML Compliance Officer |
| Putnam Investments Limited | Marie Pillai | |
| 16 St James’s Street | George Putnam III | Martin Lemaire |
| London, England SW1A 1ER | Robert L. Reynolds | Vice President and |
| Manoj P. Singh | Derivatives Risk Manager | |
| Marketing Services | Mona K. Sutphen | |
| Putnam Retail Management | Jane E. Trust | Alan G. McCormack |
| Limited Partnership | Vice President and | |
| 100 Federal Street | Officers | Derivatives Risk Manager |
| Boston, MA 02110 | Robert L. Reynolds | |
| President, The Putnam Funds | Denere P. Poulack | |
| Custodian | Assistant Vice President, | |
| State Street Bank | Kevin R. Blatchford | Assistant Clerk, and |
| and Trust Company | Vice President and | Assistant Treasurer |
| Assistant Treasurer | ||
| Legal Counsel | Janet C. Smith | |
| Ropes & Gray LLP | James F. Clark | Vice President, |
| Vice President and | Principal Financial Officer, | |
| Chief Compliance Officer | Principal Accounting Officer, | |
| and Assistant Treasurer | ||
| Michael J. Higgins | ||
| Vice President, Treasurer, | Stephen J. Tate | |
| and Clerk | Vice President and | |
| Chief Legal Officer |
This report is for the information of shareholders of Putnam Mortgage Securities Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of the fund’s Quarterly Performance Summary, and the fund’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com or franklintempleton.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| This page left blank intentionally. |
| Item 2. Code of Ethics: |
| Not applicable |
| Item 3. Audit Committee Financial Expert: |
| Not applicable |
| Item 4. Principal Accountant Fees and Services: |
| Not applicable |
| Item 5. Audit Committee of Listed Registrants |
| Not applicable |
| Item 6. Schedule of Investments: |
| The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
| Not applicable |
| Item 8. Portfolio Managers of Closed-End Investment Companies |
| Not Applicable |
| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
| Not applicable |
| Item 10. Submission of Matters to a Vote of Security Holders: |
| Not applicable |
| Item 11. Controls and Procedures: |
| (a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. |
| (b) Changes in internal control over financial reporting: Not applicable |
| Item 12. Disclosures of Securities Lending Activities for Closed-End Investment Companies: |
| Not Applicable |
| Item 13. Recovery of Erroneously Awarded Compensation. |
| Not Applicable |
| Item 14. Exhibits: |
| (a)(1) Not applicable |
| (a)(2) Not applicable |
| SIGNATURES |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
| Putnam Mortgage Securities Fund |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Accounting Officer |
| Date: May 28, 2024 |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
| By (Signature and Title): |
| /s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer |
| Date: May 28, 2024 |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Financial Officer |
| Date: May 28, 2024 |