N-CSRS 1 a_aaequityport.htm PUTNAM FUNDS TRUST a_aaequityport.htm
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: (811-07513)   
 
Exact name of registrant as specified in charter:  Putnam Funds Trust 
 
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109 
 
Name and address of agent for service:  Beth S. Mazor, Vice President 
  One Post Office Square 
  Boston, Massachusetts 02109 
 
Copy to:  John W. Gerstmayr, Esq. 
  Ropes & Gray LLP 
  One International Place 
  Boston, Massachusetts 02110 
 
Registrant’s telephone number, including area code:   (617) 292-1000 
 
Date of fiscal year end: May 31, 2010     
 
Date of reporting period: June 1, 2009 — November 30, 2009 

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:





A BALANCED APPROACH

Since 1937, when George Putnam created a diverse mix of stocks and bonds in a single, professionally managed portfolio, Putnam has championed the balanced approach.

A WORLD OF INVESTING

Today, we offer investors a world of equity, fixed-income, multi-asset, and absolute-return portfolios to suit a range of financial goals.

A COMMITMENT TO EXCELLENCE

Our portfolio managers seek superior results over time, backed by original, fundamental research on a global scale. We believe in the value of experienced financial advice, in providing exemplary service, and in putting clients first in all we do.



Putnam
Asset Allocation:
Equity Portfolio

Semiannual report
11 | 30 | 09

Message from the Trustees  2 
Performance snapshot  4 
Interview with your fund’s portfolio manager  5 
Your fund’s performance  9 
Your fund’s expenses  10 
Terms and definitions  12 
Trustee approval of management contract  13 
Other information for shareholders  23 
Financial statements  24 
Shareholder meeting results  64 


Message from the Trustees

Dear Fellow Shareholder:

As we enter 2010, investors have many reasons to feel a sense of renewal. The stock market’s meteoric rise in the past several months has helped repair some of the damage that investors’ portfolios incurred during the downturn.

Looking forward to the new year, we believe optimism is still warranted. Tangible evidence of recovery has emerged across the real economy and in corporate profits. As economic activity and investor confidence continue to improve, financial markets should remain on their recent path of stabilization. Many of the deep issues that plagued markets in 2008 remain present, however, and future prospects for the economy and markets are far from certain. Time-tested investment principles such as diversification, asset allocation, and a long-term perspective apply now more than ever.

We are pleased to report that many Putnam mutual funds have delivered very strong and competitive results over the past several months. This performance reflects the intense efforts of an investment team infused with a determination to excel and strengthened by the arrival of several senior portfolio managers, research analysts, and traders.

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We would like to thank all shareholders who took the time to vote by proxy on a number of issues, including shareholder-friendly management fee changes, at this past fall’s Putnam Funds’ shareholder meetings. We also would like to take this opportunity to welcome new shareholders to the fund and to thank all our investors for your continued confidence in Putnam.



Performance
snapshot

Total return (%) comparison as of 11/30/09


Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See pages 5 and 9–10 for additional performance information. For a portion of the periods, this fund may have limited expenses, without which returns would have been lower. A 1% short-term trading fee may apply. To obtain the most recent month-end performance, visit putnam.com. The short-term results of a relatively new fund are not necessarily indicative of its long-term prospects.

* Returns for the six-month period are not annualized, but cumulative.

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Interview with your
fund’s portfolio manager

Jeffrey Knight

Jeff, how did Putnam Asset Allocation: Equity Portfolio perform during the semiannual period?

The portfolio’s class A shares advanced 18.23% at net asset value (11.46% at public offering price), which is a robust absolute return for a six-month period, but it actually lagged the 20.17% return of the fund’s benchmark, the Russell 3000 Index. The fund did not keep pace largely because small-cap stocks, in which the fund has a significant strategic allocation, did not keep pace with the broader market. Our stock selection also lagged in a number of categories. The best results came from our stock selections among small-cap growth stocks.

How would you characterize equity markets in the first half of the fund’s fiscal year?

Stock prices rose dramatically in the period, as the market anticipated the end of the recession. This was essentially confirmed when the U.S. Commerce Department reported the U.S. gross domestic product grew at a rate of 2.8% in the third quarter of 2009. This was the first quarter of growth since the middle of 2008.

We also saw an interesting anomaly in that mid-cap stocks led the market and small caps lagged. In a typical recovery small caps tend to lead, as their performance generally depends more on the overall level of economic growth. The leadership of mid caps in this recovery, it appears, was a reflection

Broad market index and fund performance


This chart shows the performance of broad market indexes for the 6 months ended 11/30/09. See the previous page and pages 9–10 for fund performance information. Index descriptions can be found on page 12.

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of the unusually severe bear market in 2008, which turned many large-cap companies into mid caps. In short, this was a different crop of mid caps than we usually see. We don’t anticipate that this leadership will last.

Can you give us an update on thematic equity strategy, one of the special features of this fund?

We allocate a portion of the portfolio to pursue stocks that reflect secular themes in the economy, which gives the portfolio a source of diversification from our other stock selections, which are determined by fundamental analysis. The thematic strategy still reflects our fundamental criteria — we look for companies with high levels of free cash flow that we believe are undervalued but poised for an improvement in earnings.

Themes that I described in the last update, such as cloud computing, alternative energy, and water, remain in place, and they have performed well. We also implemented a gold strategy early in 2009 when it appeared that the dollar was vulnerable and that investors would turn to buying gold as a hedge. We purchased a number of gold stocks, and they appreciated strongly along with gold prices. By the end of the period, we saw indications that gold prices were getting excessive. In particular, gold mining companies were no longer hedging against possible price corrections. We decided to take some profits. We sold Barrick Gold and IAMGOLD Corp., which are both Canadian gold mining companies, at a profit during the period.

Another theme in the portfolio is cyber security. We studied this issue to understand the threats to both national security and personal security from foreign enemies and criminals. These threats are significant, and we believe companies that offer services to counter these threats stand to earn growing profits. The fund owns Raytheon, which is developing cyber warfare capabilities. In the personal security area, the fund owns

Top 10 equity holdings

HOLDING (percentage of fund’s net assets)  SECTOR  INDUSTRY 
S&P 500 Index Depository Receipts     
(SPDR Trust Series 1) (4.8%)  N/A (multiple sectors)  N/A (multiple sectors) 
Exxon Mobil Corp. (1.6%)  Energy  Oil and gas 
Microsoft Corp. (1.2%)  Technology  Software 
IBM Corp. (1.1%)  Technology  Computers 
Chevron Corp. (1.0%)  Energy  Oil and gas 
General Electric Co. (1.0%)  Conglomerates  Conglomerates 
Apple, Inc. (1.0%)  Technology  Computers 
JPMorgan Chase & Co. (0.9%)  Financials  Banking 
AT&T, Inc. (0.9%)  Communication services  Regional Bells 
Intel Corp. (0.8%)  Technology  Electronics 

This table shows the fund’s top 10 holdings and the percentage of the fund’s net assets that each represented as of 11/30/09. Short-term holdings are excluded. Holdings will vary over time.

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“We also implemented a gold strategy
  early in 2009 when it appeared that
  the dollar was vulnerable and that
  investors would turn to buying gold
  as a hedge.”

Jeffrey Knight

Symantec, which helps individuals protect their identities and protects computers from viruses. These stocks underperformed the benchmark during the period, but we have confidence in their prospects.

More generally, what stocks contributed to performance?

One of the top performers in the fund was Goldman Sachs. This bank suffered less fundamental damage during the banking crisis than its competitors, and in some ways it is emerging stronger. Another financial stock that contributed to gains was Aflac, an insurance company. The market had doubts about the credit quality of the bonds owned by this company. However, with Putnam’s internal research, we were able to consult with bond analysts, who determined that the risk concerns were misplaced. We purchased Aflac, and it has performed very well.

Apple has been so successful with new products and marketing that it barely experienced a hiccup despite the drop-off in consumer spending during the recession. Another strong contributor was Joy Global, a company that manufactures mining equipment. This is a literal “picks-and-shovels” company that benefits indirectly from demand for a diverse range of resources such as coal, copper, iron ore, oil sands, and gold.

Where did the fund encounter disappointments?

An overweight position in oil refiner Sunoco caused a drag on results. Like other refiners, as oil prices were rising, the company

Portfolio composition comparison


This chart shows how the fund’s top weightings have changed over the past six months. Weightings are shown as a percentage of net assets. Holdings will vary over time.

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expanded capacity until July 2008, and is now faced with higher capital expenditures while the price of its output has fallen.

IN THE NEWS

It is an interest rate that looks as if it may be with us for some time. The Fed (Federal Reserve Board), responsible for implementing U.S. monetary policy, sets short-term interest rates through changes to the federal funds rate, the interest rate at which banks loan funds to other banks, usually on an overnight basis. Since December 2008, the federal funds rate has been near a record low of 0% as the government works to restore liquidity to the credit market. The federal funds rate began at 1.13% in 1954 and hit a high of 22.36% in 1981. In December, Fed Chairman Ben Bernanke hinted that the central bank’s policy of keeping rates “exceptionally low” for an “extended period” would remain. Despite recent signs of improved economic activity, Chairman Bernanke noted that, “we still have some way to go before we can be assured that the recovery will be self-sustaining.”

In a couple of other instances, we had underweight positions in stocks that performed very well. In the health-care sector, the fund owned Merck, a hospital-supply company that outperformed both its sector and the broader market. We also had an underweight position in online retailer Amazon, which has come roaring back this year in what was a very difficult retail environment.

What is your outlook for the rest of the fiscal year?

The portfolio is well diversified, though we have an underweight to U.S. financial stocks, especially those with large consumer businesses, such as credit cards. We believe they are vulnerable to declining earnings and writing down losses on consumer credit. We will continue to focus on stocks with high free cash flows trading at what we consider attractive prices. The economic environment is still challenging, and we think companies with high levels of cash flow are well situated to maintain their maneuverability.

The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.


Portfolio Manager Jeffrey Knight is Head of Global Asset Allocation at Putnam. He holds an M.B.A. from the Tuck School of Business at Dartmouth College and a B.A. from Colgate University. A CFA charterholder, he joined Putnam in 1993 and has been in the investment industry since 1987.

In addition to Jeff, your fund’s portfolio managers are James Fetch, Robert Kea, Robert Schoen, and Jason Vaillancourt.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended November 30, 2009, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represents performance since the fund’s inception date of January 23, 2009. Past performance does not guarantee future results, and the short-term results of a relatively new fund are not necessarily indicative of its long-term prospects. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 11/30/09

  Class A  Class Y 
(inception dates)  (1/23/09)  (1/23/09) 
  NAV  POP  NAV 
Life of fund  40.10%  32.05%  40.20% 
6 months  18.23  11.46  18.31 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns (public offering price, or POP) for class A shares reflect a maximum 5.75% load. Class Y shares have no initial sales charge or CDSC. The short-term results of a relatively new fund are not necessarily indicative of its long-term prospects.

For a portion of the periods, this fund may have limited expenses, without which returns would have been lower.

A 1% short-term trading fee may be applied to shares exchanged or sold within 7 days of purchase.

Comparative index returns For periods ended 11/30/09

    Lipper Multi-Cap Growth Funds 
  Russell 3000 Index  category average* 
Life of fund  36.08%  38.67% 
6 months  20.17  18.51 

Index and Lipper results should be compared to fund performance at net asset value.

* Over the 6-month and life-of-fund periods ended 11/30/09, there were 478 and 467 funds, respectively, in this Lipper category.

Fund price and distribution information For the six-month period ended 11/30/09

Share value  NAV  POP  NAV 
5/31/09  $11.85  $12.57  $11.85 
11/30/09  14.01  14.86  14.02 

The classification of distributions, if any, is an estimate. Final distribution information will appear on your year-end tax forms.

The fund made no distributions during the period.

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Fund performance as of most recent calendar quarter
Total return for periods ended 12/31/09

  Class A  Class Y 
(inception dates)  (1/23/09)  (1/23/09) 
  NAV  POP  NAV 
Life of fund  44.12%  35.84%  44.12% 
6 months  22.03  15.02  21.93 

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. In the most recent six-month period, your fund limited these expenses; had it not done so, expenses would have been higher. 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 Y 
Estimated net expenses for the fiscal year ended 5/31/10 *  1.11%  1.11% 
Estimated total annual operating expenses for the fiscal year ended 5/31/10  1.30%  1.30% 
Annualized expense ratio for the six-month period ended 11/30/09  1.04%  1.04% 

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.

* Reflects Putnam Management’s decision to contractually limit expenses through 7/31/10.

† No payments under the fund’s distribution and service (12b-1) plan have been authorized by the Trustees.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in Putnam Asset Allocation: Equity Portfolio from June 1, 2009, to November 30, 2009. 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 Y  
Expenses paid per $1,000 *†  $5.69  $5.69 
Ending value (after expenses)  $1,182.30  $1,183.10 

* 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 11/30/09. 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; and then dividing that result by the number of days in the year.

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Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended November 30, 2009, use the following calculation method. To find the value of your investment on June 1, 2009, 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 Y  
Expenses paid per $1,000 *†  $5.27  $5.27 
Ending value (after expenses)  $1,019.85  $1,019.85 

* 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 11/30/09. 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; and then dividing that result by the number of days in the year.

Consider these risks before investing:

International investing involves certain risks, such as currency fluctuations, economic instability, and political developments.

Additional risks may be associated with emerging-market securities, including illiquidity and volatility.

The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations.

The use of derivatives involves special risks and may result in losses.

The fund involves the risk that the stock prices of the companies in the portfolio will fall or will fail to rise. Many factors can adversely affect a stock’s performance, including both general financial market conditions and factors related to a specific company or industry.

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Terms and definitions

Important terms

Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.

Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. NAV is calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.75% maximum sales charge for class A shares.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Comparative indexes

Barclays Capital Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.

BofA Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

MSCI World Index is an unmanaged index of equity securities from developed countries.

Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies.

S&P 500 Index is an unmanaged index of common stock performance.

Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.

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Trustee approval of management contract

General conclusions

The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management (“Putnam Management”), the sub-management contract, with respect to your fund, between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”), and the sub-advisory contract among Putnam Management, PIL, and another affiliate, Putnam Advisory Company (“PAC”).

In this regard, the Board of Trustees, with the assistance of its Contract Committee consisting solely of Trustees who are not “interested persons” (as such term is defined in the Investment Company Act of 1940, as amended) of the Putnam funds (the “Independent Trustees”), requests and evaluates all information it deems reasonably necessary under the circumstances. Over the course of several months ending in June 2009, the Contract Committee met several times to consider the information provided by Putnam Management and other information developed with the assistance of the Board’s independent counsel and independent staff. The Contract Committee reviewed and discussed key aspects of this information with all of the Independent Trustees. At the Trustees’ June 12, 2009 meeting, the Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2009. (Because PIL and PAC are affiliates of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL and PAC, the Trustees have not evaluated PIL or PAC as separate entities, and all subsequent references to Putnam Management below should be deemed to include reference to PIL and PAC as necessary or appropriate in the context.)

The Independent Trustees’ approval was based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such services, and

• That such fee schedule represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees, were subject to the continued application of certain expense reductions and waivers pending other considerations noted below, and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the fee arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that certain aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements in prior years.

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Consideration of strategic
pricing proposal

The Trustees considered that the Contract Committee had been engaged in a detailed review of Putnam Management’s strategic pricing proposal that was first presented to the Committee at its May 2009 meeting. The proposal included proposed changes to the basic structure of the management fees in place for all open-end funds (except the Putnam RetirementReady® Funds and Putnam Money Market Liquidity Fund), including implementation of a breakpoint structure based on the aggregate net assets of all such funds in lieu of the individual breakpoint structures in place for each fund, as well as implementation of performance fees for certain funds. In addition, the proposal recommended substituting separate expense limitations on investor servicing fees and on other expenses as a group in lieu of the total expense limitations in place for many funds.

While the Contract Committee noted the likelihood that the Trustees and Putnam Management would reach agreement on the strategic pricing matters in later months, the terms of the management contracts required that the Trustees approve the continuance of the contracts in order to prevent their expiration at June 30, 2009. The Contract Committee’s recommendations in June reflect its conclusion that the terms of the contractual arrangements for your fund continued to be appropriate for the upcoming term, absent any possible agreement with respect to the matters addressed in Putnam Management’s proposal.

The Trustees were mindful of the significant changes that had occurred at Putnam Management in the past two years, including a change of ownership, the installation of a new senior management team at Putnam Management, the substantial decline in assets under management resulting from extraordinary market forces as well as continued net redemptions in many funds, the introduction of new fund products representing novel investment strategies and the introduction of performance fees for certain new funds. The Trustees were also mindful that many other leading firms in the industry had also been experiencing significant challenges due to the changing financial and competitive environment. For these reasons, even though the Trustees believed that the current contractual arrangements in place between the funds and Putnam Management and its affiliates have served shareholders well and continued to be appropriate for the near term, the Trustees believed that it was an appropriate time to reconsider the current structure of the funds’ contractual arrangements with Putnam Management with a view to possible changes that might better serve the interests of shareholders in this new environment. The Trustees concluded their review of Putnam Management’s strategic pricing proposal in July 2009, and their considerations regarding the proposal are discussed below under the heading “Subsequent approval of strategic pricing proposal.” With the exception of the discussion under this heading, the following discussion generally addresses only the Trustees’ reasons for recommending the continuance of the current contractual arrangements as, at the time the Trustees determined to make this recommendation, the Trustees had not yet reached any conclusions with respect to the strategic pricing proposal.

Management fee schedules and
categories; total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints, and the assignment of funds to particular fee categories. The general fee structure has been carefully developed over the years and re-examined on many occasions and adjusted where appropriate. In this regard, the Trustees noted that shareholders of all funds voted by overwhelming

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majorities in 2007 to approve new management contracts containing identical fee schedules.

In reviewing fees and expenses, the Trustees generally focused their attention on material changes in circumstances — for example, changes in a fund’s size or investment style, changes in Putnam Management’s operating costs, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not warrant changes to the management fee structure of your fund at that time but, as indicated above, based on their detailed review of the current fee structure, were prepared to consider possible changes to this arrangement that might better serve the interests of shareholders in the future. The Trustees focused on two areas of particular interest, as discussed further below:

• Competitiveness. The Trustees reviewed comparative fee and expense information for funds in your fund’s Lipper category. The Trustees noted that expense ratios for a number of Putnam funds, which show the percentage of fund assets used to pay for management and administrative services, distribution (12b-1) fees and other expenses, had been increasing recently as a result of declining net assets and the natural operation of fee breakpoints. The Trustees expressed their intention to monitor the funds’ percentile rankings in management fees and in total expenses to ensure that fees and expenses of the funds continue to meet evolving competitive standards.

The Trustees noted that the expense ratio increases described above were being controlled by expense limitations initially implemented in January 2004. These expense limitations give effect to a commitment by Putnam Management that the expense ratio of each open-end fund would be no higher than the average expense ratio of the competitive funds included in the fund’s relevant Lipper universe (exclusive of any applicable 12b-1 charges in each case). The Trustees observed that this commitment to limit fund expenses has served shareholders well since its inception and, while the Contract Committee was reviewing proposed alternative expense limitation arrangements as noted above, the Trustees received a commitment from Putnam Management and its parent company to continue this program through at least June 30, 2010, or such earlier time as the Trustees and Putnam Management reach agreement on alternative arrangements.

In order to ensure that the expenses of the Putnam funds continue to meet evolving competitive standards, the Trustees requested, and Putnam Management agreed, to extend for the twelve months beginning July 1, 2009, or until such earlier time as the Trustees and Putnam Management reach agreement on alternative expense limitation arrangements, an additional expense limitation for certain funds at an amount equal to the average expense ratio (exclusive of 12b-1 charges) of a custom peer group of competitive funds selected by Lipper to correspond to the size of the fund. This additional expense limitation is applicable to those open-end funds that had above-average expense ratios (exclusive of 12b-1 charges) based on the custom peer group data for the period ended December 31, 2007. This additional expense limitation was not applied to your fund because it had only recently commenced operations.

• Economies of scale. Your fund currently has the benefit of breakpoints in its management fee that provide shareholders with significant economies of scale, which means that the effective management fee rate of the fund (as a percentage of fund assets) declines as the fund grows in size and crosses specified asset thresholds. Conversely, as the fund shrinks in size — as has been the case for many Putnam funds in recent years — these breakpoints result in increasing fee levels. In recent years, the

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Trustees have examined the operation of the existing breakpoint structure during periods of both growth and decline in asset levels. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale at that time but, as noted above, were in the process of reviewing a proposal to eliminate individual fund breakpoints for all of the open-end funds (except for the Putnam RetirementReady® Funds and Putnam Money Market Liquidity Fund) in favor of a breakpoint structure based on the aggregate net assets of all such funds.

In connection with their review of the management fees and total expenses of the Putnam funds, the Trustees also reviewed the costs of the services provided and profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability with respect to the funds’ management contracts, allocated on a fund-by-fund basis.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the Investment Oversight Coordinating Committee of the Trustees and the Investment Oversight Committees of the Trustees, which had met on a regular monthly basis with the funds’ portfolio teams throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — as measured by the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period. The Trustees considered the investment performance of each fund (although not your fund) over multiple time periods and considered information comparing each fund’s performance with various benchmarks and with the performance of competitive funds. Because your fund had only recently commenced operations, only limited fund performance information was available to the Trustees when they approved the continuance of your fund’s management, sub-management and sub-advisory contracts.

The Trustees noted the disappointing investment performance of many of the funds for periods ended March 31, 2009. They discussed with senior management of Putnam Management the factors contributing to such underperformance and the actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has taken steps to strengthen its investment personnel and processes to address areas of underperformance, including Putnam Management’s continuing efforts to strengthen the equity research function, recent changes in portfolio managers including increased accountability of individual managers rather than teams, recent changes in Putnam Management’s approach to incentive compensation, including emphasis on top quartile performance over a rolling three-year period, and the recent arrival of a new chief investment officer. The Trustees also recognized the substantial improvement in performance of many funds since the implementation of those changes. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these efforts and to

16


evaluate whether additional changes to address areas of underperformance are warranted.

As a general matter, the Trustees believe that cooperative efforts between the Trustees and Putnam Management represent the most effective way to address investment performance problems. The Trustees noted that investors in the Putnam funds have, in effect, placed their trust in the Putnam organization, under the oversight of the funds’ Trustees, to make appropriate decisions regarding the management of the funds. Based on the responsiveness of Putnam Management in the recent past to Trustee concerns about investment performance, the Trustees concluded that it is preferable to seek change within Putnam Management to address performance shortcomings. In the Trustees’ view, the alternative of engaging a new investment adviser for an underperforming fund would entail significant disruptions and would not provide any greater assurance of improved investment performance.

Brokerage and soft-dollar allocations;
other benefits

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage and soft-dollar allocations, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that may be useful to Putnam Management in managing the assets of the fund and of other clients. The Trustees considered a change made, at Putnam Management’s request, to the Putnam funds’ brokerage allocation policy commencing in 2009, which increased the permitted soft dollar allocation to third-party services over what had been authorized in previous years. The Trustees noted that a portion of available soft dollars continue to be allocated to the payment of fund expenses, although the amount allocated for this purpose has declined in recent years. The Trustees indicated their continued intent to monitor regulatory developments in this area with the assistance of their Brokerage Committee and also indicated their continued intent to monitor the potential benefits associated with the allocation of fund brokerage and trends in industry practice to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

The Trustees’ annual review of your fund’s management contract also included the review of the investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”), which agreement provides benefits to an affiliate of Putnam Management. The Trustees considered that effective January 1, 2009, the Trustees, PSERV and Putnam Management entered into a new fee schedule that includes for the open-end funds (other than funds of Putnam Variable Trust and Putnam Money Market Liquidity Fund) an expense limitation but, as noted above, also considered that this expense limitation is subject to review as part of the Trustees’ pending review of Putnam’s strategic pricing proposal.

In the case of your fund, the Trustees’ annual review of the fund’s management contract also included the review of the fund’s distributor’s contract and distribution plans with Putnam Retail Management Limited Partnership, which contract and plans also provide benefits to an affiliate of Putnam Management.

Comparison of retail and institutional
fee schedules

The information examined by the Trustees as part of their annual contract review has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, etc. This information included comparisons of such fees with fees charged to the funds, as

17


well as a detailed assessment of the differences in the services provided to these two types of clients. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact that fee rates across different asset classes are typically higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutional clients of the firm, but did not rely on such comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Subsequent approval of strategic
pricing proposal

As mentioned above, at a series of meetings beginning in May 2009 and ending on July 10, 2009, the Contract Committee and the Trustees engaged in a detailed review of Putnam Management’s strategic pricing proposal. Following this review, the Trustees of each fund, including all of the Independent Trustees, voted unanimously on July 10, 2009 to approve proposed management contracts reflecting the proposal, as modified based on discussions between the Independent Trustees and Putnam Management, for each fund. In considering the proposed contracts, the Independent Trustees focused largely on the specific proposed changes described below relating to management fees. They also took into account the factors that they considered in connection with their most recent annual approval on June 12, 2009 of the continuance of the funds’ current management contracts and the extensive materials that they had reviewed in connection with that approval process, as described above.

At a meeting held on November 19, 2009, shareholders approved the proposed management contract for your fund. The new management contract was implemented on January 1, 2010.

• Considerations relating to Fund Family fee rate calculations. The Independent Trustees considered that the proposed management contracts would change the manner in which fund shareholders share in potential economies of scale associated with the management of the funds. Under the current management contracts, shareholders of a fund (other than Putnam Money Market Liquidity Fund and the Putnam RetirementReady® Funds) benefit from increased fund size through reductions in the effective management fee paid to Putnam Management once the fund’s net assets exceed the first breakpoint in the fund’s fee schedule ($500 million for most funds). Conversely, in the case of funds with net assets above the level of the first breakpoint, the effective management fee increases as the fund’s average net assets decline below a breakpoint. These breakpoints are measured solely by the net assets of each individual fund and are not affected by possible growth (or decline) of net assets of other funds in the Fund Family. (“Fund Family” for purposes of this discussion refers to all open-end mutual funds sponsored by Putnam Management, except for the Putnam RetirementReady® Funds and Putnam Money Market Liquidity Fund.) Under the proposed management contracts, potential economies of scale would be shared ratably among shareholders of all funds, regardless of their size. The management fees paid by a fund (and indirectly by shareholders) would no longer be affected by the growth (or decline) of assets of the particular fund, but rather would be affected solely by the growth (or decline) of the

18


aggregate net assets of all funds in the Fund Family, regardless of whether the net assets of the particular fund are growing or declining.

The table below shows the proposed effective management fee rate for your fund, based on June 30, 2009 net assets of the Fund Family ($52.3 billion). This table also shows the effective management fee rate payable by your fund under its current management contract, based on the net assets of the fund as of June  30, 2009. Finally, this table shows the difference in the effective management fees, based on net assets as of June 30, 2009, between the proposed management contract and the current contract.

  Proposed Effective  Current Effective   
Name of Fund  Contractual Rate  Contractual Rate  Difference 
Putnam Asset Allocation:       
Equity Portfolio  0.612 %  0.700%  (0.088)% 

As shown in the foregoing table, based on June  30, 2009 net asset levels, the proposed management contract would provide for payment of a management fee rate that is lower for your fund than the management fee rate payable under the current management contract. For a small number of funds (although not your fund), the management fee rate would be slightly higher under the proposed contract at these asset levels, but by only immaterial amounts. In the aggregate, the financial impact on Putnam Management of implementing this proposed change for all funds at June 30, 2009 net asset levels is a reduction in annual management fee revenue of approximately $24.0 million. (Putnam Management has already incurred a significant portion of this revenue reduction through the waiver of a portion of its current management fees for certain funds pending shareholder consideration of the proposed management contracts. Putnam is not obliged to continue such waivers beyond July 31, 2010 in the event that the proposed contracts are not approved by shareholders.) The Independent Trustees carefully considered the implications of this proposed change under a variety of economic circumstances. They considered the fact that at current asset levels the management fees paid by the funds under the proposed contract would be lower for almost all funds, and would not be materially higher for any fund. They considered the possibility that under some circumstances, the current management contract could result in a lower fee for a particular fund than the proposed management contract. Such circumstances might occur, for example, if the aggregate net assets of the Fund Family remain largely unchanged and the net assets of an individual fund grew substantially, or if the net assets of an individual fund remain largely unchanged and the aggregate net assets of the Fund Family declined substantially.

The Independent Trustees noted that future changes in the net assets of individual funds are inherently unpredictable and that experience has shown that funds often grow in size and decline in size over time depending on market conditions and the changing popularity of particular investment styles and asset classes. They noted that, while the aggregate net assets of the Fund Family have changed substantially over time, basing a management fee on the aggregate level of assets of the Fund Family would likely reduce fluctuations in costs paid by individual funds and lead to greater stability and predictability of fund operating costs over time.

The Independent Trustees considered that the proposed management contract would likely be advantageous for newly organized funds, such as your fund, that have yet to attract significant

19


assets and for funds in specialty asset classes that are unlikely to grow to a significant size. In each case, such funds would participate in the benefits of scale made possible by the aggregate size of the Fund Family to an extent that would not be possible based solely on their individual size.

The Independent Trustees also considered that for funds that have achieved or are likely to achieve considerable scale on their own, the proposed management contract could result in sharing of economies which might lead to slightly higher costs under some circumstances, but they noted that any such increases are immaterial at current asset levels and that over time such funds are likely to realize offsetting benefits from their opportunity to participate, both through the exchange privilege and through the Fund Family breakpoint fee structure, in the improved growth prospects of a diversified Fund Family able to offer competitively priced products.

The Independent Trustees noted that the implementation of the proposed management contracts would result in a reduction in aggregate fee revenues for Putnam Management at current asset levels. They also noted that applying various projections of growth equally to the aggregate net assets of the Fund Family and to the net assets of individual funds also showed revenue reductions for Putnam Management. They recognized, however, the possibility that under some scenarios Putnam Management might realize greater future revenues, with respect to certain funds, under the proposed contracts than under the current contracts, but considered such circumstances to be both less likely and inherently unpredictable.

The Independent Trustees considered the extent to which Putnam Management may realize economies of scale in connection with the management of the funds. In this regard, they considered the possibility that such economies of scale as may exist in the management of mutual funds may be associated more closely with the size of the aggregate assets of the mutual fund complex than with the size of any individual fund. In this regard the Independent Trustees considered the financial information provided to them by Putnam Management over a period of many years regarding the allocation of costs involved in calculating the profitability of its mutual fund business as a whole and the profitability of individual funds. The Independent Trustees noted that the methodologies for such cost allocations had been reviewed on a number of occasions in the past by independent financial consultants engaged by the Independent Trustees. The Independent Trustees noted that these methodologies support Putnam Management’s assertion that many of its operating costs and any associated economies of scale are related more to the aggregate net assets under management in various sectors of its business than to the size of individual funds. They noted that on a number of occasions in the past the Independent Trustees had separately considered the possibility of calculating management fees in whole or in part based on aggregate net assets of the Putnam funds.

The Independent Trustees considered the fact that the proposed contracts would result in a sharing among the affected funds of economies of scale that for the most part are now enjoyed by the larger funds, without materially increasing the current costs of any of the larger funds. They concluded that this sharing of economies among funds was appropriate in light of the diverse investment opportunities available to shareholders of all funds through the existence of the exchange privilege. They also considered that the proposed change in management fee structure would allow Putnam Management to introduce new

20


investment products at more attractive pricing levels than may be currently be the case.

After considering all of the foregoing, the Independent Trustees concluded that the proposed calculation of management fees based on the aggregate net assets of the Fund Family represented a fair and reasonable means of sharing possible economies of scale among the shareholders of all funds.

• Considerations relating to addition of fee rate adjustments based on investment performance for certain funds. The Independent Trustees considered that Putnam’s proposal to add fee rate adjustments based on investment performance to the management contracts of certain funds reflected a desire by Putnam Management to align its fee revenues more closely with investment performance in the case of certain funds. They noted that Putnam Management already has a significant financial interest in achieving good performance results for the funds it manages. Putnam Management’s fees are based on the assets under its management (whether calculated on an individual fund or complex-wide basis). Good performance results in higher asset levels and therefore higher revenues to Putnam Management. Moreover, good performance also tends to attract additional investors to particular funds or the complex generally, also resulting in higher revenues. Nevertheless, the Independent Trustees concluded that adjusting management fees based on performance for certain selected funds could provide additional benefits to shareholders.

The Independent Trustees noted that Putnam Management proposed the addition of performance adjustments only for certain of the funds (performance adjustments were not proposed for your fund) and considered whether similar adjustments might be appropriate for other funds. In this regard, they considered Putnam Management’s belief that the addition of performance adjustments would be most appropriate for shareholders of U.S. growth funds, international equity funds and Putnam Global Equity Fund. They also considered Putnam Management’s view that it would continue to monitor whether performance fees would be appropriate for other funds. Accordingly, the Independent Trustees concluded that it would be desirable to gain further experience with the operation of performance adjustments for certain funds and the market’s receptivity to such fee structures before giving further consideration to whether similar performance adjustments would be appropriate for other funds as well.

• Considerations relating to standardization of payment terms. The proposed management contracts for all funds provide that management fees will be computed and paid monthly within 15 days after the end of each month. The current contracts of the funds contain quarterly computation and payment terms in some cases. These differences largely reflect practices in place at earlier times when many of the funds were first organized. Under the proposed contract, certain funds would make payments to Putnam Management earlier than they do under their current contract. This would reduce a fund’s opportunity to earn income on accrued but unpaid management fees by a small amount, but would not have a material effect on a fund’s operating costs.

The Independent Trustees considered the fact that standardizing the payment terms for all funds would involve an acceleration in the timing of payments to Putnam Management for some funds and a corresponding loss of a potential opportunity for such funds to earn income on accrued but unpaid management fees. The Independent Trustees did not view this change as having a material impact on shareholders of any fund. In this regard,

21


the Independent Trustees noted that the proposed contracts conform to the payment terms included in management contracts for all Putnam funds organized in recent years and that standardizing payment terms across all funds would reduce administrative burdens for both the funds and Putnam Management.

• Considerations relating to comparisons with management fees and total expenses of competitive funds. As part of their evaluation of the proposed management contracts, the Independent Trustees also reviewed the general approach taken by Putnam Management and the Independent Trustees in recent years in imposing appropriate limits on total fund expenses. As part of the annual contract review process in recent years, Putnam Management agreed to waive fees as needed to limit total fund expenses to a maximum level equal to the average total expenses of comparable competitive funds in the mutual fund industry. In connection with its proposal to implement new management contracts, Putnam Management also proposed, and the Independent Trustees approved, certain changes in this approach that shift the focus from controlling total expenses to imposing separate limits on certain categories of expenses, as required. As a general matter, Putnam Management and the Independent Trustees concluded that management fees for the Putnam funds are competitive with the fees charged by comparable funds in the industry. Nevertheless, the Independent Trustees considered specific management fee waivers proposed to be implemented as of August 1, 2009 by Putnam Management with respect to the current management fees of certain funds, as well as projected reductions in management fees for almost all funds that would result under the proposed contracts. Putnam Management and the Independent Trustees also agreed to impose separate expense limitations of 37.5  basis points on the general category of shareholder servicing expenses and 20 basis points on the general category of other ordinary operating expenses. These new expense limitations, as well as the fee waivers, were implemented for all funds effective as of August 1, 2009, replacing the expense limitation referred to above.

These changes resulted in lower total expenses for many funds, but in the case of some funds total expenses increased after application of the new waivers and expense limitations (as compared with the results obtained using the expense limitation method previously in place). In this regard, the Independent Trustees considered the likelihood that total expenses for most of these funds would have increased in any event in the normal course under the previous expense limitation arrangement, as the reported total expense levels of many competitive funds increased in response to the major decline in asset values that began in September 2008. These new waivers and expense limitations will continue in effect until at least July 31, 2010 and will be re-evaluated by the Independent Trustees as part of the annual contract review process prior to their scheduled expiration. However, the management fee waivers referred to above would largely become permanent reductions in fees as a result of the implementation of the proposed management contracts.

Under these new expense limitation arrangements effective August 1, 2009, the fixed income funds and asset allocation funds, including your fund, are subject to management fee waivers that reduce these funds’ management fees pending implementation of the proposed management contracts. In addition, your fund is subject to expense limitations of 37.5 basis points on the category of shareholder servicing fees and 20 basis points on the general category of other ordinary operating expenses.

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Other information for shareholders

Important notice regarding delivery
of shareholder documents

In accordance with SEC regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. 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, 2009, are available in the Individual Investors section of putnam.com, and on the SEC’s Web site, www.sec.gov. If you have questions about finding forms on the SEC’s Web site, 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 Putnam’s Shareholder Services at 1-800-225-1581.

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-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s Web site at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s Web site or the operation of the Public Reference Room.

Trustee and employee
fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of November 30, 2009, Putnam employees had approximately $310,000,000 and the Trustees had approximately $42,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

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Financial statements

A guide to 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 noninvestment 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 year.

Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.

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The fund’s portfolio 11/30/09 (Unaudited)

COMMON STOCKS (81.5%)*  Shares  Value 
Advertising and marketing services (—%)     
APAC Customer Services, Inc. †  1,175  $6,145 
    6,145 
Aerospace and defense (2.4%)     
Argon ST, Inc. †  158  2,841 
BAE Systems PLC (United Kingdom)  21,063  113,755 
European Aeronautic Defense and Space Co. (France)  6,152  110,542 
L-3 Communications Holdings, Inc.  1,136  89,028 
Lockheed Martin Corp.  1,765  136,311 
Northrop Grumman Corp.  1,682  92,174 
Raytheon Co.  2,684  138,307 
United Technologies Corp.  2,002  134,614 
    817,572 
Agriculture (0.4%)     
Andersons, Inc. (The)  512  13,379 
Archer Daniels Midland Co.  3,042  93,724 
Austevoll Seafood ASA (Norway) †  857  5,008 
HQ Sustainable Maritime Industries, Inc. †  287  2,041 
Nireus Aquaculture SA (Greece) †  2,696  2,659 
Pescanova SA (Spain)  186  6,264 
    123,075 
Airlines (0.1%)     
British Airways PLC (United Kingdom) †  8,353  26,983 
Hawaiian Holdings, Inc. †  689  4,306 
    31,289 
Automotive (1.3%)     
Dollar Thrifty Automotive Group †  351  6,479 
Ford Motor Co. †  16,367  145,503 
Hertz Global Holdings, Inc. †  2,073  20,315 
Hino Motors, Ltd. (Japan) †  7,000  20,937 
Navistar International Corp. †  1,282  42,319 
Oshkosh Corp.  840  33,373 
Suzuki Motor Corp. (Japan)  5,200  123,580 
Tenneco Automotive, Inc. †  486  7,008 
TRW Automotive Holdings Corp. †  1,126  24,502 
Valeo SA (France) †  1,427  40,984 
    465,000 
Banking (5.5%)     
Banca Monte dei Paschi di Siena SpA (Italy)  38,333  74,053 
Banco Latinoamericano de Exportaciones SA Class E (Panama)  554  7,734 
Banco Popolare SC (Italy) †  7,169  59,063 
Bank of America Corp.  8,899  141,049 
Bank of Hawaii Corp. S  438  20,017 
Bank of New York Mellon Corp. (The)  1,202  32,021 
Bank of the Ozarks, Inc.  279  7,416 
Bankinter SA (Spain)  3,916  41,913 
Barclays PLC (United Kingdom) †  24,533  120,672 
BNP Paribas SA (France)  1,556  129,378 
Citigroup, Inc.  13,609  55,933 

25


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Banking cont.     
Danske Bank A/S (Denmark) †  2,590  $55,996 
DBS Group Holdings, Ltd. (Singapore)  12,000  124,180 
Dexia (Belgium) †  7,980  60,596 
First Bancorp  252  3,279 
First Defiance Financial Corp.  301  3,269 
Flushing Financial Corp.  570  6,219 
Hudson City Bancorp, Inc.  4,376  58,157 
International Bancshares Corp.  403  6,758 
JPMorgan Chase & Co.  7,525  319,737 
Northern Trust Corp.  321  15,890 
Oriental Financial Group (Puerto Rico)  566  5,490 
Smithtown Bancorp, Inc.  259  1,655 
State Street Corp.  1,602  66,163 
Suffolk Bancorp  257  6,921 
U.S. Bancorp S  3,676  88,702 
UniCredito Italiano SpA (Italy)  46,738  160,956 
Wells Fargo & Co.  5,869  164,567 
Westpac Banking Corp. (Australia)  3,870  85,397 
Wilshire Bancorp, Inc.  442  3,098 
    1,926,279 
Basic materials (0.4%)     
Ameron International Corp.  110  6,266 
Antofagasta PLC (United Kingdom)  7,858  116,438 
Minefinders Corp. (Canada) †  365  3,916 
Paladin Energy, Ltd. (Australia) †  911  3,431 
    130,051 
Beverage (1.1%)     
Anheuser-Busch InBev NV (Belgium)  2,239  112,124 
Coca-Cola Enterprises, Inc.  2,723  53,507 
Constellation Brands, Inc. Class A †  2,242  38,361 
Heineken Holding NV (Netherlands)  948  39,041 
PepsiCo, Inc.  2,402  149,452 
    392,485 
Biotechnology (1.4%)     
American Oriental Bioengineering, Inc. (China) †  1,685  6,757 
Amgen, Inc. †  3,026  170,515 
Auxilium Pharmaceuticals, Inc. †  105  3,661 
Biogen Idec, Inc. †  1,495  70,175 
China-Biotics, Inc. (China) †  210  2,969 
Cubist Pharmaceuticals, Inc. †  326  5,438 
Enzon Pharmaceuticals, Inc. †  489  4,748 
Facet Biotech Corp. †  227  3,727 
Genzyme Corp. †  1,122  56,885 
Gilead Sciences, Inc. †  2,162  99,560 
Harvard Bioscience, Inc. †  782  2,792 
Illumina, Inc. †  686  19,839 
Martek Biosciences Corp. †  379  6,595 
Medivation, Inc. †  210  6,447 

26


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Biotechnology cont.     
OSI Pharmaceuticals, Inc. †  105  $3,498 
PDL BioPharma, Inc.  630  4,095 
United Therapeutics Corp. †  107  4,878 
    472,579 
Broadcasting (0.3%)     
LodgeNet Entertainment Corp. †  583  2,618 
Mediaset SpA (Italy)  11,608  88,372 
    90,990 
Building materials (0.3%)     
Boral, Ltd. (Australia)  5,265  26,951 
Geberit International AG (Switzerland)  136  23,431 
Owens Corning, Inc. †  1,774  41,920 
    92,302 
Cable television (0.9%)     
Comcast Corp. Class A  5,364  78,690 
DIRECTV Class A †  1,939  61,331 
DISH Network Corp. Class A †  3,283  67,991 
Liberty Global, Inc. Class A †  3,283  63,329 
Time Warner Cable, Inc.  1,086  45,493 
    316,834 
Chemicals (1.7%)     
Albemarle Corp.  393  13,264 
Ashland, Inc.  2,082  74,806 
BASF SE (Germany)  125  7,576 
Celanese Corp. Ser. A  1,940  57,734 
CF Industries Holdings, Inc.  914  78,019 
Dow Chemical Co. (The)  1,157  32,141 
Eastman Chemical Co.  561  33,727 
Hawkins, Inc.  257  5,613 
Hitachi Chemical Co., Ltd. (Japan)  3,200  62,805 
Innophos Holdings, Inc.  515  12,757 
Koninklijke DSM NV (Netherlands)  624  30,727 
Koppers Holdings, Inc.  409  11,554 
Lubrizol Corp. (The)  836  60,627 
Monsanto Co.  603  48,692 
Mosaic Co. (The)  321  17,478 
Nitto Denko Corp. (Japan)  200  6,422 
OM Group, Inc. †  288  8,821 
Terra Industries, Inc.  134  5,170 
W.R. Grace & Co. †  1,239  28,324 
    596,257 
Coal (0.4%)     
Alpha Natural Resources, Inc. †  1,762  65,194 
Arch Coal, Inc.  91  1,898 
China Coal Energy Co. (China)  2,000  3,391 
China Shenhua Energy Co., Ltd. (China)  1,000  4,890 
CONSOL Energy, Inc.  56  2,572 
Felix Resources, Ltd. (Australia)  116  1,782 
International Coal Group, Inc. †  1,252  5,221 

27


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Coal cont.     
Massey Energy Co.  68  $2,561 
Peabody Energy Corp.  67  2,979 
South Australian Coal Corp. (Australia) F  116  11 
Walter Industries, Inc.  582  39,925 
Yanzhou Coal Mining Co., Ltd. (China)  2,000  3,985 
    134,409 
Combined utilities (0.2%)     
El Paso Corp.  6,484  61,987 
    61,987 
Commercial and consumer services (1.0%)     
Alliance Data Systems Corp. †  169  10,307 
Deluxe Corp.  433  5,586 
Emergency Medical Services Corp. Class A †  114  5,501 
Equifax, Inc.  881  25,241 
Experian Group, Ltd. (Ireland)  1,808  17,020 
EZCORP, Inc. Class A †  1,103  16,291 
Hillenbrand, Inc.  183  3,349 
HMS Holdings Corp. †  260  11,495 
Landauer, Inc.  56  3,185 
Lender Processing Services, Inc.  558  23,313 
QC Holdings, Inc.  513  2,770 
Sotheby’s Holdings, Inc. Class A  578  10,965 
Stantec, Inc. (Canada) †  332  8,404 
Steiner Leisure, Ltd. (Bahamas) †  156  6,170 
Swire Pacific, Ltd. (Hong Kong)  6,500  74,605 
Thomas Cook Group PLC (United Kingdom)  8,014  27,997 
URS Corp. †  401  16,662 
Visa, Inc. Class A  1,041  84,321 
Wheelock and Co., Ltd. (Hong Kong)  1,000  3,232 
Wright Express Corp. †  122  3,559 
    359,973 
Communications equipment (0.9%)     
ADC Telecommunications, Inc. †  1,439  8,821 
ARRIS Group, Inc. †  1,358  13,566 
Cisco Systems, Inc. †  8,567  200,468 
F5 Networks, Inc. †  1,395  65,607 
Harris Corp.  186  8,165 
Netgear, Inc. †  256  5,082 
Qualcomm, Inc.  642  28,890 
    330,599 
Computers (4.5%)     
Acme Packet, Inc. †  436  4,473 
Actuate Corp. †  770  3,103 
ANSYS, Inc. †  118  4,595 
Apple, Inc. †  1,708  341,446 
Black Box Corp.  245  6,907 
Brocade Communications Systems, Inc. †  964  6,835 
Checkpoint Systems, Inc. †  352  4,991 
Dell, Inc. †  1,602  22,620 

28


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Computers cont.     
EMC Corp. †  9,189  $154,651 
Emdeon, Inc. Class A †  604  9,114 
Emulex Corp. †  896  8,727 
Fujitsu, Ltd. (Japan)  19,000  113,216 
Global Defense Technology & Systems, Inc. †  329  4,277 
Hewlett-Packard Co.  3,443  168,914 
IBM Corp.  3,123  394,591 
Interactive Intelligence, Inc. †  276  4,764 
Juniper Networks, Inc. †  1,041  27,201 
Monotype Imaging Holdings, Inc. †  826  6,393 
NCI, Inc. †  108  2,717 
NCR Corp. †  1,441  13,560 
NetApp, Inc. †  1,101  33,933 
Netezza Corp. †  683  6,926 
NetSuite, Inc. †  596  8,320 
Quest Software, Inc. †  1,506  25,346 
Seagate Technology  3,843  58,145 
Silicon Graphics International Corp. †  1,300  7,865 
STEC, Inc. †  209  2,590 
Synaptics, Inc. †  172  4,634 
TeleCommunication Systems, Inc. Class A †  1,341  11,305 
Western Digital Corp. †  3,123  115,051 
    1,577,210 
Conglomerates (1.7%)     
3M Co.  1,282  99,278 
Danaher Corp.  154  10,922 
General Electric Co.  21,547  345,183 
Hutchison Whampoa, Ltd. (Hong Kong)  3,000  20,284 
Marubeni Corp. (Japan)  5,000  26,432 
Silex Systems, Ltd. (Australia) †  399  2,393 
SPX Corp.  780  41,566 
Vivendi SA (France)  1,954  56,502 
    602,560 
Construction (0.3%)     
Acciona SA (Spain)  121  15,589 
Balfour Beatty PLC (United Kingdom)  1,883  7,913 
Broadwind Energy, Inc. †  509  3,639 
Chicago Bridge & Iron Co., NV (Netherlands)  691  12,155 
Fletcher Building, Ltd. (New Zealand)  3,733  20,896 
Grupo Ferrovial SA (Spain)  454  19,881 
Impregilo SpA (Italy)  2,946  9,723 
Insituform Technologies, Inc. †  341  7,059 
Layne Christensen Co. †  429  11,163 
    108,018 
Consumer (0.1%)     
Fuqi International, Inc. (China) † S  336  7,365 
Sony Corp. (Japan)  1,400  37,735 
    45,100 

29


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Consumer finance (0.2%)     
American Express Co.  721  $30,159 
Diamond Lease Co., Ltd. (Japan)  110  3,309 
Dollar Financial Corp. †  249  6,081 
Nelnet, Inc. Class A †  463  8,042 
World Acceptance Corp. †  340  9,972 
    57,563 
Consumer goods (1.7%)     
Bare Escentuals, Inc. †  545  6,971 
Clorox Co.  241  14,525 
Colgate-Palmolive Co.  881  74,171 
Energizer Holdings, Inc. †  160  9,014 
Estee Lauder Cos., Inc. (The) Class A  767  35,919 
Kao Corp. (Japan)  3,000  73,731 
Kimberly-Clark Corp.  1,988  131,148 
National Presto Industries, Inc.  114  10,621 
Newell Rubbermaid, Inc.  2,002  29,049 
Prestige Brands Holdings, Inc. †  851  5,931 
Procter & Gamble Co. (The)  3,217  200,580 
    591,660 
Consumer services (0.2%)     
Brink’s Co. (The)  561  12,611 
Liberty Media Holding Corp. — Interactive Class A †  1,612  17,152 
Phase Forward, Inc. †  598  9,125 
SRA International, Inc. Class A †  197  3,556 
WebMD Health Corp. Class A †  334  12,124 
    54,568 
Containers (0.4%)     
AEP Industries, Inc. †  99  3,741 
Crown Holdings, Inc. †  1,441  36,270 
Owens-Illinois, Inc. †  1,804  56,411 
Pactiv Corp. †  1,441  35,088 
Silgan Holdings, Inc.  102  5,464 
    136,974 
Distribution (0.1%)     
Beacon Roofing Supply, Inc. †  370  5,687 
Core-Mark Holding Co., Inc. †  151  4,542 
MWI Veterinary Supply, Inc. †  146  5,415 
School Specialty, Inc. †  230  5,244 
Spartan Stores, Inc.  301  4,163 
    25,051 
Electric utilities (2.9%)     
A2A SpA (Italy)  18,740  36,585 
BKW FMB Energie AG (Switzerland)  71  5,659 
Chubu Electric Power, Inc. (Japan)  1,500  38,430 
CMS Energy Corp.  1,842  26,230 
Constellation Energy Group, Inc.  930  29,593 
DTE Energy Co.  493  19,774 
EDF (France)  288  16,608 
Edison International  1,641  55,876 

30


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Electric utilities cont.     
Enel SpA (Italy)  5,255  $31,430 
Energias de Portugal (EDP) SA (Portugal)  15,329  70,402 
Entergy Corp.  113  8,887 
Exelon Corp.  1,683  81,087 
FirstEnergy Corp.  481  20,721 
FPL Group, Inc.  1,385  71,978 
Hokkaido Electric Power Co., Inc. (Japan)  300  5,996 
Hokuriku Electric Power Co. (Japan)  300  6,844 
Huaneng Power International, Inc. (China)  2,000  1,249 
Integrys Energy Group, Inc.  541  20,850 
Kansai Electric Power, Inc. (Japan)  500  12,462 
Kyushu Electric Power Co., Inc. (Japan)  400  8,806 
National Grid PLC (United Kingdom)  14,741  160,473 
NSTAR  801  26,537 
NV Energy, Inc.  2,402  27,959 
PG&E Corp.  1,282  54,280 
PPL Corp.  1,682  51,335 
Public Power Corp. SA (Greece) †  1,483  29,947 
Public Service Enterprise Group, Inc.  401  12,575 
Shikoku Electric Power Co., Inc. (Japan)  300  8,990 
Terna SPA (Italy)  12,069  50,079 
Tokyo Electric Power Co. (Japan)  800  21,609 
TransAlta Corp. (Canada)  107  2,236 
    1,015,487 
Electrical equipment (1.0%)     
Capstone Turbine Corp. † S  5,225  6,636 
China High Speed Transmission Equipment Group Co., Ltd. (China)  4,000  9,445 
Conergy AG (Germany) †  1,745  1,908 
Emerson Electric Co.  1,762  72,964 
Fushi Copperweld, Inc. (China) †  857  6,916 
GrafTech International, Ltd. †  336  4,943 
Harbin Electric, Inc. (China) †  492  9,850 
Mitsubishi Electric Corp. (Japan)  16,000  113,146 
Nordex AG (Germany) †  323  5,129 
Powell Industries, Inc. †  229  8,038 
Prysmian SpA (Italy)  3,984  66,958 
Solaria Energia y Medio Ambiente SA (Spain) †  393  1,754 
Solon AG Fuer Solartechnik (Germany) †  96  1,013 
Sunpower Corp. Class A †  126  2,604 
Vestas Wind Systems A/S (Denmark) †  199  13,965 
WESCO International, Inc. †  330  8,613 
Yingli Green Energy Holding Co., Ltd. ADR (China) †  202  2,870 
    336,752 
Electronics (2.5%)     
A123 Systems, Inc. †  229  3,698 
Advanced Battery Technologies, Inc. †  1,781  6,180 
Agilent Technologies, Inc. †  1,851  53,531 

31


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Electronics cont.     
Avnet, Inc. †  1,362  $37,115 
Badger Meter, Inc.  189  6,649 
BYD Co., Ltd. (China) †  1,500  13,113 
Cavium Networks, Inc. †  212  4,276 
China BAK Battery, Inc. (China) †  1,300  3,939 
Energy Conversion Devices, Inc. †  146  1,448 
EnerSys †  489  11,130 
FEI Co. †  2,569  62,735 
Greatbatch, Inc. †  193  3,549 
GS Yuasa Corp. (Japan)  1,000  7,048 
Integrated Device Technology, Inc. †  3,042  17,218 
Intel Corp.  14,329  275,117 
Jabil Circuit, Inc.  1,267  16,864 
LDK Solar Co., Ltd. ADR (China) †  200  1,560 
Marvell Technology Group, Ltd. †  2,723  41,989 
MEMC Electronic Materials, Inc. †  342  4,118 
MIPS Technologies, Inc. †  847  3,185 
Multi-Fineline Electronix, Inc. †  159  3,964 
National Semiconductor Corp.  4,963  72,460 
NEC Corp. (Japan) †  23,000  58,127 
PV Crystalox Solar PLC (United Kingdom)  1,227  1,275 
Renesola, Ltd. ADR (China) †  300  1,203 
Roth & Rau AG (Germany) †  67  2,713 
Saft Groupe SA (France)  167  7,990 
Technitrol, Inc.  258  1,305 
Texas Instruments, Inc.  4,644  117,447 
TTM Technologies, Inc. †  1,266  13,128 
Ultralife Batteries, Inc. †  406  1,494 
Valence Technology, Inc. †  1,616  1,729 
Volterra Semiconductor Corp. †  293  4,832 
Watts Water Technologies, Inc. Class A  319  9,777 
    871,906 
Energy (oil field) (1.6%)     
Basic Energy Services, Inc. †  310  2,133 
Bolt Technology Corp. †  303  3,318 
Boots & Coots International Control, Inc. †  4,271  6,108 
Cameron International Corp. †  1,202  45,436 
Compagnie Generale de Geophysique-Veritas SA (France) †  2,903  59,369 
Complete Production Services, Inc. †  378  3,927 
Dresser-Rand Group, Inc. †  526  14,770 
ENSCO International, Inc.  1,282  56,408 
Geokinetics, Inc. †  450  4,617 
GulfMark Offshore, Inc. †  119  3,244 
Halliburton Co.  1,950  57,252 
Hornbeck Offshore Services, Inc. †  425  9,694 
ION Geophysical Corp. †  2,335  12,702 
National-Oilwell Varco, Inc. †  1,521  65,433 

32


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Energy (oil field) cont.     
Noble Corp. (Switzerland)  1,602  $66,179 
Rowan Cos., Inc. †  1,578  38,961 
Schlumberger, Ltd.  961  61,398 
Superior Well Services, Inc. †  623  8,080 
T-3 Energy Services, Inc. †  292  7,288 
Tidewater, Inc.  485  21,801 
    548,118 
Energy (other) (0.3%)     
Areva SA (France)  10  5,203 
Ballard Power Systems, Inc. (Canada) †  2,071  4,701 
Canadian Solar, Inc. (Canada) †  200  4,404 
China Sunergy Co., Ltd. ADR (China) †  400  1,584 
Covanta Holding Corp. †  662  11,300 
EDP Renovaveis SA (Spain) †  879  8,642 
Evergreen Energy, Inc. †  3,986  1,204 
Evergreen Solar, Inc. †  893  1,250 
Fersa Energias Renovables SA (Spain)  1,477  4,460 
FuelCell Energy, Inc. †  1,679  5,138 
Gamesa Corp Tecnologica SA (Spain)  454  8,711 
GT Solar International, Inc. †  295  1,398 
Gushan Environmental Energy, Ltd. ADR (China)  1,415  1,840 
Headwaters, Inc. †  631  2,972 
Iberdrola Renovables SA (Spain)  2,273  10,876 
JA Solar Holdings Co., Ltd. ADR (China) †  486  1,891 
Q-Cells AG (Germany) †  210  3,296 
Renewable Energy Corp. AS (Norway) †  652  4,172 
Solar Millennium AG (Germany) †  82  3,488 
Solarfun Power Holdings Co., Ltd. ADR (China) †  394  2,596 
Theolia SA (France) †  523  2,641 
Trina Solar, Ltd. ADR (China) †  118  5,496 
    97,263 
Engineering and construction (0.2%)     
Abengoa SA (Spain)  356  10,364 
Aecom Technology Corp. †  483  12,268 
EMCOR Group, Inc. †  539  12,828 
Fluor Corp.  801  34,026 
Stanley, Inc. †  127  3,388 
VSE Corp.  154  6,999 
    79,873 
Entertainment (—%)     
Cinemark Holdings, Inc.  394  4,984 
    4,984 
Environmental (0.3%)     
Bio-Treat Technology, Ltd. (China) †  30,000  1,409 
Energy Recovery, Inc. †  694  3,879 
Epure International, Ltd. (China)  1,000  426 
Foster Wheeler AG †  2,002  59,740 
Fuel Tech, Inc. †  650  5,571 

33


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Environmental cont.     
Hyflux, Ltd. (Singapore)  2,279  $5,040 
Kurita Water Industries, Ltd. (Japan)  200  6,330 
Met-Pro Corp.  171  1,556 
Nalco Holding Co.  411  10,053 
Tetra Tech, Inc. †  620  16,331 
    110,335 
Financial (0.2%)     
Intercontinental Exchange, Inc. †  321  34,280 
Moody’s Corp.  976  22,672 
    56,952 
Food (1.8%)     
Cermaq ASA (Norway) †  770  7,862 
Colruyt SA (Belgium)  33  8,373 
Cosan, Ltd. Class A (Brazil) †  1,772  13,006 
Dean Foods Co. †  2,322  36,920 
Del Monte Foods Co.  1,800  18,882 
General Mills, Inc.  1,682  114,376 
Hormel Foods Corp.  507  19,023 
Kellogg Co.  561  29,497 
Kerry Group PLC Class A (Ireland)  1,155  34,237 
Kraft Foods, Inc. Class A  4,594  122,109 
Leroy Seafood Group ASA (Norway)  200  4,021 
Marine Harvest (Norway) †  21,004  15,836 
Nestle SA (Switzerland)  148  6,991 
Nutreco Holding NV (Netherlands)  50  2,581 
Sara Lee Corp.  4,164  50,551 
SunOpta, Inc. (Canada) †  1,232  4,140 
Toyo Suisan Kaisha, Ltd. (Japan)  3,000  81,904 
Yamazaki Baking Co., Inc. (Japan)  3,000  37,109 
    607,418 
Forest products and packaging (0.5%)     
Amcor, Ltd. (Australia)  8,052  43,500 
Bway Holding Co. †  208  3,311 
KapStone Paper and Packaging Corp. †  798  5,658 
MeadWestvaco Corp.  1,100  30,107 
OJI Paper Co., Ltd. (Japan)  1,000  4,266 
Plum Creek Timber Company, Inc. R  481  16,590 
Rayonier, Inc.  642  25,513 
Rock-Tenn Co. Class A  124  5,601 
Sealed Air Corp.  1,682  37,492 
    172,038 
Gaming and lottery (0.1%)     
Bally Technologies, Inc. †  141  5,856 
Greek Organization of Football Prognostics (OPAP) SA (Greece)  1,646  39,363 
    45,219 
Health-care services (2.6%)     
Aetna, Inc.  1,602  46,634 
Allscripts-Misys Healthcare Solutions, Inc. †  545  10,464 
Amedisys, Inc. †  254  9,408 

34


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Health-care services cont.     
AmerisourceBergen Corp.  1,842  $45,479 
AmSurg Corp. †  176  3,645 
Assisted Living Concepts, Inc. Class A †  371  8,678 
athenahealth, Inc. †  1,074  45,001 
Brookdale Senior Living, Inc. †  1,179  18,369 
Centene Corp. †  302  5,684 
Cerner Corp. †  165  12,423 
Community Health Systems, Inc. †  1,202  36,673 
Computer Programs & Systems, Inc.  162  7,483 
Continucare Corp. †  1,038  3,228 
Eclipsys Corp. †  547  10,032 
Emeritus Corp. †  729  11,402 
Ensign Group, Inc. (The)  128  1,770 
Express Scripts, Inc. †  743  63,749 
Gentiva Health Services, Inc. †  248  5,865 
Health Management Associates, Inc. Class A †  5,951  36,480 
HealthSpring, Inc. †  485  8,032 
Humana, Inc. †  1,122  46,574 
Kindred Healthcare, Inc. †  804  11,947 
LHC Group, Inc. †  210  6,462 
Lincare Holdings, Inc. †  1,345  47,774 
McKesson Corp.  1,973  122,365 
Medco Health Solutions, Inc. †  1,441  91,014 
Quality Systems, Inc.  648  38,550 
Skilled Healthcare Group, Inc. Class A †  242  1,643 
Sun Healthcare Group, Inc. †  1,161  9,822 
UnitedHealth Group, Inc.  3,081  88,332 
WellCare Health Plans, Inc. †  188  6,202 
WellPoint, Inc. †  721  38,956 
    900,140 
Household furniture and appliances (0.6%)     
Electrolux AB Class B (Sweden) †  6,794  167,072 
Tempur-Pedic International, Inc. †  148  3,189 
Whirlpool Corp.  481  35,671 
    205,932 
Insurance (2.5%)     
Aflac, Inc.  1,544  71,070 
Allianz SE (Germany)  46  5,670 
Allied World Assurance Company Holdings, Ltd. (Bermuda)  163  7,790 
American Equity Investment Life Holding Co.  1,095  8,015 
American Financial Group, Inc.  1,770  42,940 
American Safety Insurance Holdings, Ltd. (Bermuda) †  289  4,344 
Amerisafe, Inc. †  574  9,695 
AON Corp.  496  19,210 
Argo Group International Holdings, Ltd. (Bermuda) †  153  4,463 
Aspen Insurance Holdings, Ltd. (Bermuda)  257  6,659 
Assicurazioni Generali SpA (Italy)  5,631  146,036 
Assured Guaranty, Ltd. (Bermuda)  371  8,414 

35


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Insurance cont.     
Chubb Corp. (The)  2,007  $100,631 
CNA Surety Corp. †  310  4,170 
Conseco, Inc. †  2,505  11,999 
First Mercury Financial Corp.  265  3,434 
Fondiaria SAI SpA (Italy)  1,368  22,776 
ING Groep NV (Netherlands) †  2,541  23,933 
ING Groep NV (Rights) (Netherlands)  2,541  6,666 
Loews Corp.  642  22,740 
Maiden Holdings, Ltd. (Bermuda)  852  6,424 
MetLife, Inc.  1,041  35,592 
Old Mutual PLC (South Africa) †  36,821  68,972 
Pico Holdings, Inc. †  300  8,982 
Platinum Underwriters Holdings, Ltd. (Bermuda)  151  5,329 
Principal Financial Group  1,521  38,618 
Prudential Financial, Inc.  1,289  64,257 
QBE Insurance Group, Ltd. (Australia)  302  6,140 
SCOR (France)  249  6,062 
SeaBright Insurance Holdings, Inc. †  1,196  13,156 
Travelers Cos., Inc. (The)  1,202  62,973 
Universal Insurance Holdings, Inc.  769  4,206 
Validus Holdings, Ltd. (Bermuda)  176  4,664 
    856,030 
Investment banking/Brokerage (2.1%)     
3i Group PLC (United Kingdom)  7,850  34,793 
BlackRock, Inc.  206  46,778 
Calamos Asset Management, Inc. Class A  327  3,437 
Charles Schwab Corp. (The)  1,842  33,764 
Credit Suisse Group (Switzerland)  1,642  85,694 
E*Trade Financial Corp. †  7,470  12,251 
Evercore Partners, Inc. Class A  376  11,660 
Federated Investors, Inc.  298  7,682 
Franklin Resources, Inc.  275  29,708 
Goldman Sachs Group, Inc. (The)  1,257  213,263 
Invesco, Ltd.  961  21,382 
Investment Technology Group, Inc. †  1,493  27,247 
Jefferies Group, Inc. †  838  19,651 
Macquarie Bank, Ltd. (Australia)  285  12,505 
Morgan Stanley  2,643  83,466 
Nationale A Portefeuille (Belgium)  67  3,523 
NGP Capital Resources Co.  509  3,914 
Piper Jaffray Cos. †  165  7,153 
SWS Group, Inc.  870  10,823 
T. Rowe Price Group, Inc.  871  42,618 
TradeStation Group, Inc. †  681  5,012 
Uranium Participation Corp. (Canada) †  322  2,005 
Waddell & Reed Financial, Inc. Class A  830  24,178 
    742,507 

36


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Lodging/Tourism (0.1%)     
Sky City Entertainment Group, Ltd. (New Zealand)  7,615  $18,595 
Wyndham Worldwide Corp.  1,682  31,235 
    49,830 
Machinery (0.4%)     
Altra Holdings, Inc. †  615  6,919 
Bucyrus International, Inc. Class A  62  3,211 
Chart Industries, Inc. †  757  12,566 
CLARCOR, Inc.  141  4,494 
Cummins, Inc.  401  18,005 
Deere (John) & Co.  321  17,177 
Doosan Heavy Industries and Construction Co., Ltd. (South Korea)  220  10,902 
Ebara Corp. (Japan) †  3,000  11,477 
Franklin Electric Co., Inc.  152  4,186 
Gardner Denver, Inc. †  249  9,320 
GLV, Inc. Class A (Canada) †  426  3,402 
Gorman-Rupp Co. (The)  201  5,005 
Joy Global, Inc.  153  8,192 
Lindsay Corp.  134  4,702 
Raser Technologies, Inc. †  1,094  1,269 
Spirax-Sarco Engineering PLC (United Kingdom)  507  8,961 
Tanfield Group PLC (United Kingdom) †  1,737  790 
Timken Co.  312  7,697 
    138,275 
Manufacturing (0.7%)     
AZZ, Inc. †  106  3,588 
Dover Corp.  977  39,940 
EnPro Industries, Inc. †  140  3,212 
Exide Technologies †  881  6,608 
Flowserve Corp.  561  55,797 
General Cable Corp. †  768  22,548 
GP Strategies Corp. †  701  4,262 
ITT Corp.  182  9,413 
John Bean Technologies Corp.  311  5,340 
LSB Industries, Inc. †  564  6,892 
Mueller Water Products, Inc. Class A  1,217  6,134 
Pentair, Inc.  373  11,227 
Roper Industries, Inc.  212  11,032 
Smith (A.O.) Corp.  251  10,522 
Thomas & Betts Corp. †  642  23,433 
Valmont Industries, Inc.  129  9,887 
    229,835 
Media (0.6%)     
Time Warner, Inc.  4,323  132,803 
Walt Disney Co. (The)  2,322  70,171 
    202,974 
Medical technology (0.7%)     
AGA Medical Holdings, Inc. †  150  1,872 
Alliance Imaging, Inc. †  1,210  7,163 
American Medical Systems Holdings, Inc. †  341  5,991 

37


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Medical technology cont.     
Baxter International, Inc.  1,041  $56,787 
Hospira, Inc. †  961  45,119 
Immucor, Inc. †  359  6,624 
Invacare Corp.  306  7,619 
Inverness Medical Innovations, Inc. †  141  5,929 
Kinetic Concepts, Inc. †  1,305  43,992 
Medtronic, Inc.  481  20,414 
Millipore Corp. †  103  7,014 
Natus Medical, Inc. †  301  4,009 
NuVasive, Inc. †  136  4,413 
Pall Corp.  205  6,525 
Steris Corp.  425  13,732 
Techne Corp.  59  4,005 
Young Innovations, Inc.  246  5,963 
    247,171 
Metal fabricators (—%)     
Haynes International, Inc. †  99  2,653 
    2,653 
Metals (1.9%)     
Agnico-Eagle Mines, Ltd. (Canada)  101  6,329 
AK Steel Holding Corp.  1,922  38,440 
Ampco-Pittsburgh Corp.  263  7,690 
AngloGold Ashanti, Ltd. ADR (South Africa)  121  5,329 
ArcelorMittal (Luxembourg)  3,823  149,617 
Aurizon Mines, Ltd. (Canada) †  2,314  11,454 
BlueScope Steel, Ltd. (Australia)  44,083  109,203 
Cameco Corp. (Canada)  204  5,875 
Century Aluminum Co. †  505  4,924 
Cia de Minas Buenaventura SA ADR (Peru)  171  6,866 
Cliffs Natural Resources, Inc.  252  11,103 
Coeur d’Alene Mines Corp. †  638  14,553 
Crystallex International Corp. (Canada) †  3,602  1,009 
Denison Mines Corp. (Canada) †  939  1,297 
Eldorado Gold Corp. (Canada) †  466  6,170 
Energy Resources of Australia, Ltd. (Australia)  151  3,310 
Gold Fields, Ltd. ADR (South Africa)  221  3,266 
Goldcorp, Inc. (Canada)  241  10,122 
Golden Star Resources, Ltd. †  1,151  4,443 
Great Basin Gold, Ltd. (South Africa) †  1,675  2,563 
Harmony Gold Mining Co., Ltd. ADR (South Africa)  173  1,920 
Horsehead Holding Corp. †  898  10,076 
JFE Holdings, Inc. (Japan)  500  16,462 
Kinross Gold Corp. (Canada)  353  7,067 
Mitsui Mining & Smelting Co., Ltd. (Japan) †  12,000  29,631 
New Gold, Inc. (Canada) †  1,135  3,974 
Northgate Minerals Corp. (Canada) †  1,489  4,750 
Northwest Pipe Co. †  146  3,689 

38


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Metals cont.     
Nucor Corp.  561  $23,792 
Pan American Silver Corp. (Canada) †  189  4,770 
Rangold Resources, Ltd. ADR (United Kingdom)  109  9,237 
Royal Gold, Inc.  86  4,629 
Schnitzer Steel Industries, Inc. Class A  469  20,927 
Seabridge Gold, Inc. (Canada) †  112  2,824 
Silver Standard Resources, Inc. (Canada) †  158  3,414 
Silver Wheaton Corp. (Canada) †  1,027  16,504 
Thompson Creek Metals Co., Inc. (Canada) †  817  9,788 
UEX Corp. (Canada) †  1,320  1,174 
Umicore NV/SA (Belgium)  340  11,622 
Uranium One, Inc. (Canada) †  700  2,000 
USEC, Inc. †  1,006  3,682 
Voestalpine AG (Austria)  1,887  67,674 
Yamana Gold, Inc. (Canada)  578  7,705 
    670,874 
Natural gas utilities (0.4%)     
Energen Corp.  642  27,927 
Gaz de France SA (France)  476  19,858 
Sempra Energy  1,041  55,319 
UGI Corp.  881  20,686 
    123,790 
Office equipment and supplies (0.2%)     
Canon, Inc. (Japan)  1,600  61,767 
    61,767 
Oil and gas (6.8%)     
Apache Corp.  1,202  114,527 
Aventine Renewable Energy Holdings, Inc. †  1,865  802 
BP PLC (United Kingdom)  6,391  60,621 
Bronco Energy, Ltd. (Canada) †  470  222 
Canadian Oil Sands Trust (Unit) (Canada)  200  5,536 
Chevron Corp.  4,644  362,418 
Connacher Oil and Gas, Ltd. (Canada) †  1,500  1,476 
ConocoPhillips  3,523  182,386 
Contango Oil & Gas Co. †  68  3,018 
CVR Energy, Inc. †  401  2,939 
Devon Energy Corp.  241  16,231 
ENI SpA (Italy)  6,612  163,738 
Exxon Mobil Corp.  7,205  540,879 
Hess Corp.  1,602  92,852 
Marathon Oil Corp.  3,683  120,139 
Murphy Oil Corp.  961  54,191 
Occidental Petroleum Corp.  1,842  148,815 
Oil States International, Inc. †  143  5,129 
Oilsands Quest, Inc. (Canada) †  1,286  1,556 
OPTI Canada, Inc. (Canada) †  519  1,017 
Petroleum Development Corp. †  504  9,057 
Repsol YPF SA (Spain)  928  25,599 

39


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Oil and gas cont.     
Rosetta Resources, Inc. †  486  $7,655 
Royal Dutch Shell PLC Class A (United Kingdom)  1,501  44,430 
Royal Dutch Shell PLC Class B (United Kingdom)  4,033  115,735 
Sasol, Ltd. ADR (South Africa)  150  5,937 
StatoilHydro ASA (Norway)  6,254  153,968 
Suncor Energy, Inc. (Canada)  216  7,821 
Sunoco, Inc.  1,441  36,313 
Swift Energy Co. †  226  4,852 
Unit Corp. †  146  5,491 
UTS Energy Corp. (Canada) †  1,430  2,801 
Vaalco Energy, Inc. †  764  3,201 
Williams Cos., Inc. (The)  2,803  55,752 
    2,357,104 
Pharmaceuticals (4.7%)     
Abbott Laboratories  2,562  139,603 
Actelion NV (Switzerland) †  633  37,211 
AstraZeneca PLC (United Kingdom)  3,598  160,590 
Biovail Corp. (Canada)  432  6,234 
Cephalon, Inc. †  721  39,619 
Eli Lilly & Co.  3,897  143,137 
Endo Pharmaceuticals Holdings, Inc. †  476  10,486 
Forest Laboratories, Inc. †  1,608  49,301 
GlaxoSmithKline PLC (United Kingdom)  4,874  100,750 
Johnson & Johnson  3,116  195,809 
Medicis Pharmaceutical Corp. Class A  612  14,437 
Merck & Co., Inc.  1,616  58,515 
Mylan, Inc. † S  4,724  84,418 
Novartis AG (Switzerland)  1,482  82,172 
Obagi Medical Products, Inc. †  569  6,407 
Par Pharmaceutical Cos., Inc. †  720  17,078 
Perrigo Co.  144  5,780 
Pfizer, Inc.  14,606  265,391 
Questcor Pharmaceuticals, Inc. †  791  3,401 
Salix Pharmaceuticals, Ltd. †  124  2,827 
Sanofi-Aventis (France)  1,464  110,515 
Santarus, Inc. †  1,939  7,737 
Taisho Pharmaceutical Co., Ltd. (Japan)  2,000  36,680 
Takeda Pharmaceutical Co., Ltd. (Japan)  900  37,561 
Valeant Pharmaceuticals International †  196  6,407 
    1,622,066 
Power producers (0.4%)     
AES Corp. (The) †  2,199  28,015 
International Power PLC (United Kingdom)  4,211  19,238 
Mirant Corp. †  3,451  49,142 
Ormat Technologies, Inc.  70  2,882 
SembCorp Industries, Ltd. (Singapore)  12,000  32,086 
    131,363 

40


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Publishing (0.1%)     
Gannett Co., Inc.  1,211  $11,977 
R. R. Donnelley & Sons Co.  1,347  27,721 
    39,698 
Railroads (0.4%)     
Central Japan Railway Co. (Japan)  10  72,455 
Union Pacific Corp.  1,281  81,036 
    153,491 
Real estate (1.2%)     
Agree Realty Corp. R  250  6,158 
American Campus Communities, Inc. R  1,145  30,858 
American Capital Agency Corp. R  197  5,215 
Annaly Capital Management, Inc. R  3,338  61,453 
Anworth Mortgage Asset Corp. R  682  4,910 
Ashford Hospitality Trust, Inc. † R  1,594  6,647 
CB Richard Ellis Group, Inc. Class A †  2,985  34,119 
CBL & Associates Properties R  667  6,176 
CFS Retail Property Trust (Australia) R  23,675  42,633 
Digital Realty Trust, Inc. R  481  23,405 
Entertainment Properties Trust R  150  4,739 
Glimcher Realty Trust R  2,586  7,603 
Hang Lung Group, Ltd. (Hong Kong)  2,000  9,794 
HRPT Properties Trust R  1,019  6,257 
Lexington Corporate Properties Trust R  763  3,708 
Liberty Property Trust R  858  25,431 
LTC Properties, Inc. R  363  9,333 
Macquarie Office Trust (Australia)  36,261  9,778 
National Health Investors, Inc. R  391  12,899 
Nationwide Health Properties, Inc. R  642  21,833 
NorthStar Realty Finance Corp. R  829  2,810 
Omega Healthcare Investors, Inc. R  268  4,848 
PS Business Parks, Inc. R  169  8,034 
Public Storage, Inc. R  561  44,644 
Ramco-Gershenson Properties R  339  3,085 
Saul Centers, Inc. R  128  3,950 
SL Green Realty Corp. R  210  9,328 
Universal Health Realty Income Trust R  86  2,638 
Urstadt Biddle Properties, Inc. Class A R  272  3,732 
Westfield Group (Australia)  768  8,572 
    424,590 
Regional Bells (1.1%)     
AT&T, Inc.  11,047  297,605 
Cincinnati Bell, Inc. †  2,429  7,238 
Verizon Communications, Inc.  2,744  86,326 
    391,169 
Restaurants (0.6%)     
AFC Enterprises †  1,530  11,980 
Brinker International, Inc.  1,202  16,588 
Carrols Restaurant Group, Inc. †  733  4,852 
CEC Entertainment, Inc. †  326  9,506 

41


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Restaurants cont.     
Domino’s Pizza, Inc. †  1,308  $10,294 
McDonald’s Corp.  1,842  116,507 
Yum! Brands, Inc.  1,044  36,822 
    206,549 
Retail (4.9%)     
Advance Auto Parts, Inc.  801  31,479 
Aeropostale, Inc. †  119  3,749 
Amazon.com, Inc. †  112  15,222 
Autonation, Inc. †  1,263  22,292 
AutoZone, Inc. †  164  24,251 
Best Buy Co., Inc.  961  41,160 
Big Lots, Inc. †  434  10,008 
BJ’s Wholesale Club, Inc. †  1,362  47,275 
Buckle, Inc. (The)  431  11,784 
Cash America International, Inc.  169  5,435 
Coach, Inc.  1,362  47,330 
CVS Caremark Corp.  1,762  54,640 
Deckers Outdoor Corp. †  187  17,322 
Dollar Tree, Inc. †  642  31,439 
Dress Barn, Inc. †  538  11,551 
Gap, Inc. (The)  4,003  85,744 
Herbalife, Ltd. (Cayman Islands)  1,391  58,339 
Home Depot, Inc. (The)  2,125  58,140 
Home Retail Group PLC (United Kingdom)  1,559  7,538 
Jos. A. Bank Clothiers, Inc. †  147  5,999 
Kenneth Cole Productions, Inc. Class A  232  2,158 
Koninklijke Ahold NV (Netherlands)  5,707  76,887 
Kroger Co.  3,843  87,390 
Limited Brands, Inc.  2,803  46,502 
Lowe’s Cos., Inc.  1,682  36,684 
Macy’s, Inc.  3,363  54,851 
Nash Finch Co.  187  6,135 
Next PLC (United Kingdom)  4,580  148,735 
OfficeMax, Inc. †  587  6,210 
Rent-A-Center, Inc. †  215  3,803 
Ross Stores, Inc.  1,297  57,042 
Safeway, Inc.  1,922  43,245 
Sally Beauty Holdings, Inc. †  522  3,644 
Steven Madden, Ltd. †  242  8,635 
Target Corp.  1,775  82,644 
Toro Co. (The)  684  27,251 
Tractor Supply Co. †  64  2,988 
USANA Health Sciences, Inc. †  173  5,552 
Wal-Mart Stores, Inc.  4,724  257,693 
Woolworths, Ltd. (Australia)  5,391  138,228 
World Fuel Services Corp.  120  6,382 
    1,693,356 

42


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Schools (0.1%)     
Bridgepoint Education, Inc. †  308  $4,919 
Lincoln Educational Services Corp. †  580  12,830 
    17,749 
Semiconductor (0.1%)     
Atmel Corp. †  1,191  4,728 
Formfactor, Inc. †  132  2,237 
Photronics, Inc. †  678  2,739 
Veeco Instruments, Inc. †  1,429  39,026 
    48,730 
Shipping (0.4%)     
Air Transport Services Group, Inc. †  1,276  2,871 
International Shipholding Corp.  199  6,609 
Ryder System, Inc.  1,441  58,418 
SembCorp Marine, Ltd. (Singapore)  19,000  48,056 
Wabtec Corp.  284  10,934 
    126,888 
Software (3.1%)     
Adobe Systems, Inc. †  604  21,188 
Akamai Technologies, Inc. †  1,144  27,456 
ArcSight, Inc. †  222  5,051 
Blackboard, Inc. †  119  4,966 
BMC Software, Inc. †  1,619  62,704 
Citrix Systems, Inc. †  859  32,797 
Concur Technologies, Inc. †  578  21,421 
Mantech International Corp. Class A †  114  4,934 
McAfee, Inc. †  183  6,981 
Microsoft Corp.  13,821  406,475 
MicroStrategy, Inc. †  99  8,669 
Omnicell, Inc. †  599  6,110 
Oracle Corp.  11,845  261,537 
Symantec Corp. †  7,155  127,001 
TIBCO Software, Inc. †  1,431  12,307 
VMware, Inc. Class A †  1,621  68,050 
    1,077,647 
Technology (0.1%)     
Amkor Technologies, Inc. †  844  4,684 
CACI International, Inc. Class A †  107  4,967 
Solarworld AG (Germany)  182  4,126 
Tech Data Corp. †  205  8,633 
Unisys Corp. †  738  23,682 
    46,092 
Technology services (1.8%)     
3PAR, Inc. †  982  10,066 
Acxiom Corp. †  504  5,816 
Check Point Software Technologies (Israel) †  279  8,814 
CSG Systems International, Inc. †  865  16,746 
Fair Isaac Corp.  298  5,439 
Fidelity National Information Services, Inc.  1,560  35,256 
Google, Inc. Class A †  419  244,276 

43


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Technology services cont.     
HealthStream, Inc. †  1,063  $4,486 
i2 Technologies, Inc. †  579  10,654 
Indra Sistemas SA Class A (Spain)  884  20,999 
Infospace, Inc. †  1,148  9,391 
Ingram Micro, Inc. Class A †  616  10,466 
SAIC, Inc. †  449  8,001 
Salesforce.com, Inc. †  598  37,483 
SAVVIS, Inc. †  299  3,743 
Sohu.com, Inc. (China) †  978  54,532 
Sourcefire, Inc. †  239  4,692 
United Online, Inc.  1,175  7,990 
VeriSign, Inc. †  320  7,181 
Web.com Group, Inc. †  1,115  6,634 
Western Union Co. (The)  2,482  45,793 
Yahoo!, Inc. †  4,568  68,383 
    626,841 
Telecommunications (1.3%)     
AboveNet, Inc. †  243  12,466 
ADTRAN, Inc.  399  8,431 
Applied Signal Technology, Inc.  124  2,451 
Carphone Warehouse Group PLC (The) (United Kingdom)  4,091  12,856 
Earthlink, Inc.  884  7,275 
EchoStar Corp. Class A †  1,007  19,566 
France Telecom SA (France)  2,741  71,248 
InterDigital, Inc. †  120  2,855 
KDDI Corp. (Japan)  18  97,450 
NeuStar, Inc. Class A †  645  15,093 
NII Holdings, Inc. †  1,693  50,451 
Sprint Nextel Corp. †  14,994  55,628 
Telefonica SA (Spain)  1,290  37,081 
Telekom Austria AG (Austria)  376  6,530 
USA Mobility, Inc. †  730  7,285 
Windstream Corp.  3,042  30,177 
    436,843 
Telephone (0.5%)     
Atlantic Tele-Network, Inc.  140  6,562 
Nippon Telegraph & Telephone (NTT) Corp. (Japan)  2,900  126,072 
Qwest Communications International, Inc.  12,568  45,873 
    178,507 
Textiles (0.1%)     
Carter’s, Inc. †  124  2,697 
Gymboree Corp. (The) †  139  5,549 
Maidenform Brands, Inc. †  327  4,738 
Perry Ellis International, Inc. †  349  4,879 
Phillips-Van Heusen Corp.  454  18,160 
True Religion Apparel, Inc. †  163  3,006 
Warnaco Group, Inc. (The) †  235  9,567 
    48,596 

44


COMMON STOCKS (81.5%)* cont.  Shares  Value 
Tire and rubber (0.3%)     
Bridgestone Corp. (Japan)  4,000  $63,761 
Goodyear Tire & Rubber Co. (The) †  1,762  24,157 
    87,918 
Tobacco (1.2%)     
Altria Group, Inc.  6,165  115,964 
Philip Morris International, Inc.  3,603  173,267 
Reynolds American, Inc.  401  20,034 
Swedish Match AB (Sweden)  3,966  85,348 
Universal Corp.  122  5,235 
    399,848 
Toys (0.2%)     
Hasbro, Inc.  1,842  54,615 
    54,615 
Transportation services (—%)     
ComfortDelgro Corp., Ltd. (Singapore)  12,000  12,834 
    12,834 
Trucks and parts (0.2%)     
Aisin Seiki Co., Ltd. (Japan)  1,200  29,075 
ATC Technology Corp. †  376  8,280 
Fuel Systems Solutions, Inc. †  246  11,866 
GUD Holdings, Ltd. (Australia)  384  2,991 
    52,212 
Utilities and power (—%)     
Babcock & Brown Wind Partners (Australia)  5,978  7,295 
EDF Energies Nouvelles SA (France)  187  9,768 
    17,063 
Waste Management (—%)     
Calgon Carbon Corp. †  245  3,428 
EnergySolutions, Inc.  348  2,986 
    6,414 
Water Utilities (0.2%)     
American States Water Co.  137  4,532 
Aqua America, Inc.  366  5,973 
California Water Service Group  120  4,390 
Cia de Saneamento Basico do Estado de Sao Paulo     
ADR (Brazil)  229  8,377 
Consolidated Water Co., Inc. (Cayman Islands)  135  1,769 
Guangdong Investment, Ltd. (China)  20,000  11,122 
Severn Trent PLC (United Kingdom)  464  8,016 
SJW Corp.  154  3,303 
Southwest Water Co.  271  1,599 
Veolia Environnement (France)  459  15,573 
    64,654 
Total common stocks (cost $22,411,467)    $28,247,490 

45


INVESTMENT COMPANIES (6.1%)*  Shares  Value 
Eurazeo (France)  263  $18,630 
Harris & Harris Group, Inc. †  2,567  10,396 
iShares Dow Jones U.S. Real Estate Index Fund  642  27,869 
iShares MSCI EAFE Index Fund  618  34,250 
iShares MSCI Emerging Markets Index Fund  705  28,567 
iShares Russell 2000 Growth Index Fund  285  17,969 
iShares Russell 2000 Value Index Fund  828  44,927 
MCG Capital Corp. †  1,513  6,007 
S&P 500 Index Depository Receipts (SPDR Trust Series 1)  14,992  1,647,321 
S&P Midcap 400 Index Depository Receipts (MidCap     
SPDR Trust Series 1)  1,318  164,262 
SPDR KBW Bank ETF  4,538  100,290 
Total investment companies (cost $1,915,084)    $2,100,488 
   

PURCHASED OPTIONS  Expiration date/  Contract   
OUTSTANDING (0.0%)*  strike price  amount  Value 
Bristol-Myers Squibb. Co. (Call)  12/18/09/$25.00  $6,084  $4,380 
Total purchased options outstanding (cost $1,521)      $4,380 
 
SHORT-TERM INVESTMENTS (12.7%)*  Principal amount/shares  Value 
Short-term investments held as collateral for loaned       
securities with yield 0.35% and due date       
December 1, 2009 d    $112,080  $112,080 
Putnam Money Market Liquidity Fund e    3,847,086  3,847,086 
U.S. Treasury Bills for an effective yield of 0.26%,       
November 18, 2010 #    79,000  78,811 
U.S. Treasury Bills for an effective yield of 0.22%,       
July 15, 2010 #    154,001  153,665 
U.S. Treasury Bills for an effective yield of 0.47%,       
April 01, 2010 #    35,000  34,930 
U.S. Treasury Bills for an effective yield of 0.70%,       
December 17, 2009 #    184,000  183,961 
Total short-term investments (cost $4,410,676)      $4,410,533 
 
TOTAL INVESTMENTS       
Total investments (cost $28,738,748)      $34,762,891 

* Percentages indicated are based on net assets of $34,672,985.

† Non-income-producing security.

# These securities, in part or in entirety, were pledged and segregated with the broker to cover margin requirements for futures contracts at November 30, 2009.

d See Note 1 to the financial statements regarding securities lending.

e See Note 7 to the financial statements regarding investments in Putnam Money Market Liquidity Fund.

F Is valued at fair value following procedures approved by the Trustees. Securities may be classified as a Level 2 or Level 3 for Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures (“ASC 820”) disclosures based on the securities valuation inputs. On November 30, 2009, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).

R Real Estate Investment Trust.

S Securities on loan, in part or in entirety, at November 30, 2009.

46


At November 30, 2009, liquid assets totaling $491,441 have been segregated to cover certain derivative contracts.

ADR after the name of a foreign holding stands for American Depository Receipts represents ownership of foreign securities on deposit with a custodian bank.

DIVERSIFICATION BY COUNTRY       
Distribution of investments by country of risk at November 30, 2009 (as a percentage of Portfolio Value):   
 
United States  77.8%  Belgium  0.6% 
Japan  4.2  Netherlands  0.6 
United Kingdom  3.8  Norway  0.6 
Italy  2.6  Singapore  0.6 
France  2.0  Spain  0.6 
Australia  1.5  Canada  0.5 
Switzerland  0.9  China  0.5 
Sweden  0.7  Other  2.5 
    Total  100.0% 
 

FORWARD CURRENCY CONTRACTS TO BUY at 11/30/09 (aggregate face value $9,223,478) (Unaudited)

        Unrealized 
    Aggregate  Delivery  appreciation/ 
  Value  face value  date  (depreciation) 
Australian Dollar  $1,046,147  $1,023,655  12/17/09  $22,492 
Brazilian Real  84,918  85,987  12/17/09  (1,069) 
British Pound  1,655,133  1,658,874  12/17/09  (3,741) 
Canadian Dollar  528,860  523,645  12/17/09  5,215 
Chilean Peso  53,315  50,444  12/17/09  2,871 
Czech Koruna  59,891  59,535  12/17/09  356 
Euro  1,519,914  1,504,022  12/17/09  15,892 
Hong Kong Dollar  435,359  435,314  12/17/09  45 
Hungarian Forint  57,982  57,009  12/17/09  973 
Japanese Yen  1,443,980  1,379,829  12/17/09  64,151 
Mexican Peso  135,999  133,736  12/17/09  2,263 
New Zealand Dollar  24,604  24,844  12/17/09  (240) 
Norwegian Krone  991,384  990,291  12/17/09  1,093 
Polish Zloty  52,486  50,883  12/17/09  1,603 
South African Rand  38,025  36,974  12/17/09  1,051 
South Korean Won  71,625  70,602  12/17/09  1,023 
Swedish Krona  625,391  619,950  12/17/09  5,441 
Swiss Franc  461,828  450,634  12/17/09  11,194 
Turkish Lira (New)  65,543  67,250  12/17/09  (1,707) 
Total        $128,906 

47


FORWARD CURRENCY CONTRACTS TO SELL at 11/30/09 (aggregate face value $9,171,422) (Unaudited)

        Unrealized 
    Aggregate  Delivery  appreciation/ 
  Value  face value  date  (depreciation) 
Australian Dollar  $495,102  $487,978  12/17/09  $(7,124) 
Brazilian Real  17,949  18,196  12/17/09  247 
British Pound  1,118,090  1,117,592  12/17/09  (498) 
Canadian Dollar  1,183,005  1,161,609  12/17/09  (21,396) 
Chilean Peso  73,016  70,067  12/17/09  (2,949) 
Czech Koruna  93,090  92,489  12/17/09  (601) 
Danish Krone  14,299  14,014  12/17/09  (285) 
Euro  2,856,661  2,821,453  12/17/09  (35,208) 
Hong Kong Dollar  47,972  47,970  12/17/09  (2) 
Hungarian Forint  26,613  26,163  12/17/09  (450) 
Japanese Yen  1,310,772  1,253,511  12/17/09  (57,261) 
Mexican Peso  53,370  51,975  12/17/09  (1,395) 
New Zealand Dollar  26,244  26,479  12/17/09  235 
Norwegian Krone  434,012  432,104  12/17/09  (1,908) 
Singapore Dollar  194,573  192,840  12/17/09  (1,733) 
South African Rand  17,063  16,571  12/17/09  (492) 
South Korean Won  3,048  3,000  12/17/09  (48) 
Swedish Krona  744,698  739,827  12/17/09  (4,871) 
Swiss Franc  527,449  514,498  12/17/09  (12,951) 
Taiwan Dollar  83,937  83,086  12/17/09  (851) 
Total        $(149,541) 
   

FUTURES CONTRACTS OUTSTANDING at 11/30/09 (Unaudited)

        Unrealized 
Number of    Expiration  appreciation/ 
contracts  Value  date  (depreciation) 
Amsterdam Exchange Index (Short)  3  $274,947  Dec-09  $14,718 
DAX Index (Long)  1  211,228  Dec-09  1,983 
Dow Jones Euro Stoxx 50 Index (Short)  4  167,888  Dec-09  (854) 
Euro-CAC 40 Index (Long)  1  55,081  Dec-09  (2,428) 
FTSE/MIB Index (Long)  1  164,530  Dec-09  (632) 
IBEX 35 Index (Short)  3  524,935  Dec-09  13,356 
MSCI EAFE Index E-Mini (Short)  9  702,900  Dec-09  (8,838) 
FTSE 100 Index (Short)  15  1,279,898  Dec-09  (56,989) 
Russell 2000 Index Mini (Long)  2  115,840  Dec-09  (684) 
S&P 500 Index E-Mini (Long)  25  1,368,438  Dec-09  81,860 
S&P 500 Index E-Mini (Short)  3  164,213  Dec-09  (9,996) 
S&P Mid Cap 400 Index E-Mini (Long)  1  68,400  Dec-09  2,341 
S&P TSX 60 Index (Long)  2  257,192  Dec-09  11,384 
SPI 200 Index (Short)  4  429,170  Dec-09  (15,115) 
Topix Index (Long)  1  97,380  Dec-09  (3,889) 
Total        $26,217 

48


WRITTEN OPTIONS OUTSTANDING at 11/30/09 (premiums received $6,084) (Unaudited)

  Contract  Expiration date/   
  amount  strike price  Value 
Bristol-Myers Squibb. Co. (Put)  $6,084  25.00  $2,799 
Total      $2,799 
   

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 11/30/09 (Unaudited)

  Upfront    Fixed payments  Total return  Unrealized 
Swap counterparty /  premium  Termination  received (paid) by  received by  appreciation/ 
Notional amount  received (paid)  date  fund per annum  or paid by fund  (depreciation) 
Citibank, N.A.           
8,534 contracts    1/28/10  (1 month USD-  MSCI Daily Total  $(97,816) 
      LIBOR-BBA plus  Return Net   
      105 bp)  Emerging Markets   
        USD Index   
Goldman Sachs International         
257 baskets    11/24/10  (3 month USD-  A basket  (16,628) 
      LIBOR-BBA)  (GSPMTGCC)   
        of common stocks   
JPMorgan Chase Bank, N.A.         
17,338 shares    10/20/10  (3 month USD-  iShares MSCI  (14,476) 
      LIBOR-BBA plus  Emerging Markets   
      5 bp)  Index   
1,397 shares    7/29/10  (3 month USD-  S&P 500  13,503 
      LIBOR-BBA )  Information   
        Technology Total   
        Return Index   
861 shares    7/29/10  3 month USD-  S&P 500 Energy  1,820 
      LIBOR-BBA  Total Return Index   
Total          $(113,597) 

In September 2006, Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures (“ASC 820”) was issued. ASC 820 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. While the adoption of ASC 820 does not have a material effect on the fund’s net asset value, it does require additional disclosures about fair value measurements. 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.

49


The following is a summary of the inputs used to value the fund’s net assets as of November 30, 2009:

    Valuation inputs
Investments in securities:  Level 1  Level 2  Level 3 
Common stocks:       
Basic materials  $1,349,622  $450,691  $— 
Capital goods  1,637,523  335,139  — 
Communication services  1,195,638  127,715  — 
Conglomerates  546,058  56,502  — 
Consumer cyclicals  2,410,785  560,512  — 
Consumer staples  2,423,362  393,301  — 
Energy  2,461,934  674,949  11 
Financial  2,963,835  1,100,086  — 
Health care  2,750,718  491,238  — 
Technology  4,541,922  37,103  — 
Transportation  297,519  26,983  — 
Utilities and power  940,708  473,636  — 
Total common stocks  23,519,624  4,727,855  11 
Investment companies  2,081,858  18,630  — 
Purchased options outstanding  —  4,380  — 
Short-term investments  3,847,086  563,447  — 
Totals by level  $29,448,568  $5,314,312  $11 
 
  Level 1  Level 2  Level 3 
Other financial instruments:  $26,217  ($137,031)  $— 

Other financial instruments include securities sold short.

The following is a reconciliation of Level 3 assets as of November 30, 2009:

            Net   
        Change in net    transfers  Balance 
  Balance as  Accrued  Realized  unrealized  Net  in and/or  as of 
  of May 31,  discounts/  gain/  appreciation/  purchases/  out of  Nov. 30, 
Investments in securities:  2009  premiums  (loss)  (depreciation) †  sales  Level 3  2009 
Common stocks:               
Energy  $—  $—  $—  $11  $—  $—  $11 
Total common stocks  $—  —  —  11  —  —  $11 
Totals:  $—  $—  $—  $11  $—  $—  $11 

† Includes $11 related to Level 3 securities still held at period end. Total change in unrealized appreciation/(depreciation) for securities (including Level 1 and Level 2) can be found in the Statement of operations.

The accompanying notes are an integral part of these financial statements.

50


Statement of assets and liabilities 11/30/09 (Unaudited)

ASSETS   
Investment in securities, at value, including $106,376 of securities on loan (Note 1):   
Unaffiliated issuers (identified cost $24,891,662)  $30,915,805 
Affiliated issuers (identified cost $3,847,086) (Note 7)  3,847,086 
Cash  45,991 
Foreign currency (cost $17,222) (Note 1)  17,380 
Dividends, interest and other receivables  72,959 
Receivable for shares of the fund sold  27,101 
Receivable for investments sold  334,734 
Unrealized appreciation on swap contracts (Note 1)  15,323 
Receivable for variation margin (Note 1)  16,898 
Unrealized appreciation on forward currency contracts (Note 1)  144,462 
Receivable from Manager (Note 2)  9,308 
Foreign Tax reclaim  11,274 
Total assets  35,458,321 
 
LIABILITIES   
Payable for investments purchased  254,107 
Payable for shares of the fund repurchased  32,661 
Payable for investor servicing fees (Note 2)  15,448 
Payable for custodian fees (Note 2)  25,266 
Payable for Trustee compensation and expenses (Note 2)  652 
Payable for administrative services (Note 2)  267 
Unrealized depreciation on forward currency contracts (Note 1)  165,097 
Written options outstanding, at value (premiums received $6,084) (Notes 1 and 3)  2,799 
Unrealized depreciation on swap contracts (Note 1)  128,920 
Collateral on securities loaned, at value (Note 1)  112,080 
Other accrued expenses  48,039 
Total liabilities  785,336 
 
Net assets  $34,672,985 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $22,371,014 
Undistributed net investment income (Note 1)  1,216,396 
Accumulated net realized gain on investments and foreign currency transactions (Note 1)  5,164,228 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  5,921,347 
Total — Representing net assets applicable to capital shares outstanding  $34,672,985 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($17,881 divided by 1,276 shares)  $14.01 
Offering price per class A share (100/94.25 of $14.01)*  $14.86 
Net asset value, offering price and redemption price per class Y share   
($34,655,104 divided by 2,472,194 shares)  $14.02 

* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.

The accompanying notes are an integral part of these financial statements.

51


Statement of operations Six months ended 11/30/09 (Unaudited)

INVESTMENT INCOME   
Dividends (net of foreign tax of $7,658)  $340,522 
Interest (including interest income of $5,288 from investments in affiliated issuers) (Note 7)  6,388 
Securities lending  740 
Total investment income  347,650 
 
EXPENSES   
Compensation of Manager (Note 2)  132,663 
Investor servicing fees (Note 2)  51,157 
Custodian fees (Note 2)  31,723 
Trustee compensation and expenses (Note 2)  3,794 
Administrative services (Note 2)  1,759 
Auditing  32,693 
Other  29,664 
Fees waived and reimbursed by Manager (Note 2)  (85,433) 
Total expenses  198,020 
 
Expense reduction (Note 2)  (37) 
Net expenses  197,983 
 
Net investment income  149,667 
 
Net realized gain on investments (Notes 1 and 3)  3,496,204 
Net realized gain on swap contracts (Note 1)  993,129 
Net realized loss on futures contracts (Note 1)  (104,440) 
Net realized gain on foreign currency transactions (Note 1)  196,864 
Net unrealized depreciation of assets and liabilities in foreign currencies   
during the period  (39,859) 
Net unrealized appreciation of investments futures contracts and swap contracts   
during the period  1,802,552 
Net gain on investments  6,344,450 
 
Net increase in net assets resulting from operations  $6,494,117 

The accompanying notes are an integral part of these financial statements.

52


Statement of changes in net assets

    For the period 
    1/23/09 
    (commencement of 
    operations) to 
INCREASE (DECREASE) IN NET ASSETS  Six months ended 11/30/09*  5/31/09 
Operations:     
Net investment income  $149,667  $204,115 
Net realized gain on investments and foreign currency transactions  4,581,757  1,445,085 
Net unrealized appreciation of investments and assets     
and liabilities in foreign currencies  1,762,693  4,158,654 
Net increase in net assets resulting from operations  6,494,117  5,807,854 
Redemption fees (Note 1)  101  — 
Increase (decrease) from capital share transactions (Note 4)  (10,098,223)  32,449,136 
Total increase (decrease) in net assets  (3,604,005)  38,256,990 
 
NET ASSETS     
Beginning of period(Note 5)  38,276,990  20,000 
End of period (including undistributed net investment     
income of $1,216,396 and $1,066,729, respectively)  $34,672,985  $38,276,990 

* Unaudited

The accompanying notes are an integral part of these financial statements.

53


Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:   LESS DISTRIBUTIONS:   RATIOS AND SUPPLEMENTAL DATA:
                      Ratio of net   
      Net realized                investment   
  Net asset value,    and unrealized  Total from          Net assets,  Ratio of expenses  income (loss)   
  beginning  Net investment  gain (loss) on  investment    Redemption  Net asset value,  Total return at net  end of period  to average  to average  Portfolio 
Period ended  of period  income (loss) a  investments  operations  Total distributions  fees  end of period  asset value (%) b  (in thousands)  net assets (%) c,d  net assets (%) d  turnover (%) 
Class A                         
November 30, 2009 **  $11.85  .05  2.11  2.16  —  — e  $14.01  18.23 *  $18  .52 *  .39 *  35.11 * 
May 31, 2009 †  10.00  .06  1.79   1.85  —  —  11.85  18.50 *  15  .40 *  .61 *  45.86 * 
Class Y                         
November 30, 2009 **  $11.85  .05  2.12  2.17  —  — e  $14.02  18.3 1 *  $3 4,655  .52 *  .40 *  35.11 * 
May 31, 2009 †  10.00  .06  1.79   1.85  —  —  11.85  18.50 *  3 8,262  .40 *  .61 *  45.86 * 

* Not annualized.

** Unaudited.

† For the period January 23, 2009 (commencement of operations) to November 30, 2009.

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 arrangements (Note 2).

d Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):

  Percentage of 
  average net assets 
November 30, 2009   0.23% 
May 31, 2009   0.30 

e Amount represents less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.

54  55 


Notes to financial statements 11/30/09 (Unaudited)

Note 1: Significant accounting policies

Putnam Asset Allocation: Equity Portfolio is a series of Putnam Funds Trust, a Massachusetts business trust organized on January 22, 1996 (the “Trust”). A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. The Trust is an open-end management investment company with an unlimited number of authorized shares of beneficial interest. The fund seeks long-term growth. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks of companies worldwide in mainly in midsized and large companies that Putnam Investment Management, LLC (“Putnam Management”), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes have favorable potential.

The fund offers class A and class Y shares. Class A shares are sold with a maximum front-end sales charge of 5.75%, and generally do not pay a contingent deferred sales charge. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, but do not bear a distribution fee. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs.

A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 7 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital.

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.

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 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 during the reporting period. 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, January 12, 2009, have been evaluated in the preparation of the financial statements.

A) Security valuation Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets. If no sales are reported — as in the case of some securities traded over-the-counter — a security is valued at its last reported bid price. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign equity securities taking into account multiple factors, including movements in the U.S. securities markets. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. At November 30, 2009, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. 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

56


an actual market price, which may be different by a material amount.

B) 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 is recorded on the accrual basis. Dividend income, net of applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain

C) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments.

D) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns, owned or expects to purchase, or for other investment purposes. The fund may also write options on swaps or securities it owns or in which it may invest to increase its current returns.

The potential risk to the fund is that the change in value of futures and 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. 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. 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.

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.” 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. Options traded over-the-counter are valued using prices supplied by dealers. Futures and written option contracts outstanding at period end, if any, are listed after the fund’s portfolio. The fund had an average of approximately 63 futures contracts for the six months ended November 30, 2009. Outstanding contracts on purchased and written options contracts at the six months ended November 30, 2009 are indicative of the volume of activity during the period.

E) Forward currency contracts: The fund may buy and sell forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short term investments), or for other investment purposes. The U.S. dollar value of forward

57


currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in market value is recorded as an unrealized gain or loss. 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. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities. Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio. Outstanding contracts on forward currency contracts at the six months ended November 30, 2009 are indicative of the volume of activity during the period.

F) Total return swap contracts The fund may enter into total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount to help enhance the funds return and manage the fund’s exposure to credit risk. To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. Total return swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain total return 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 in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk, is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between the fund and the counterparty. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities. Total return swap contracts outstanding at period end, if any, are listed after the fund’s portfolio. Outstanding notional on Total return swap contracts at the six months ended November 30, 2009 are indicative of the volume of activity during the period.

G) Master agreements The fund is a party to ISDA (International Swap and Derivatives Association, Inc.) Master Agreements (“Master Agreements”) with certain counterparties that govern over the counter derivative and foreign exchange contracts 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 posted 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. 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 and 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 November 30, 2009, the fund had net liability position of $170,709 on derivative contracts subject to the Master Agreements.

H) Securities lending The fund may lend securities, through its agents, to qualified borrowers in order to earn additional income. The loans are collateralized by cash and/or securities in an amount at least equal to the market value of the securities loaned. The market value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund’s agents; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending is included in investment income on the Statement of operations. At November 30, 2009, the value of securities loaned amounted to $106,376. The fund received cash collateral of $112,080 which is pooled with collateral of other Putnam funds into 1 issue of short-term investments.

I) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal

58


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 ASC 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 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 and state departments of revenue.

The aggregate identified cost on a tax basis is $28,792,892, resulting in gross unrealized appreciation and depreciation of $6,410,357 and $440,358, respectively, or net unrealized appreciation of $5,969,999.

J) Distributions to shareholders Distributions to shareholders from net investment income 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.

K) Expenses of the trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.

Note 2: Management fee, administrative
services and other transactions

The fund pays Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.70% of the first $500 million of average net assets, 0.60% of the next $500 million, 0.55% of the next $500 million, 0.50% of the next $5 billion, 0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion, 0.43% of the next $5 billion, 0.42% of the next $5 billion, 0.41% of the next $5 billion, 0.40% of the next $5 billion, 0.39% of the next $5 billion, 0.38% of the next $8.5 billion and 0.37% thereafter.

Effective January 1, 2010, the fund will pay Putnam Management for investment management and advisory services monthly, based on the average net assets of the fund, at an annual rate based on the average of the aggregate net assets of all open-end funds sponsored by Putnam Management (but excluding the net assets of certain open-end funds to avoid “double-counting” of such net assets) (“fund family assets”). Such annual rate will be based on the following: 0.75% of the first $5 billion of average net assets, 0.70% of the next $5 billion, 0.65% of the next $10 billion, 0.60% of the next $10 billion, 0.55% of the next $50 billion, 0.53% of the next $50 billion, 0.52% of the next $100 billion, and 0.515% thereafter.

Putnam Management had agreed to waive fees and reimburse expenses of the fund through July 31, 2009 to the extent necessary to ensure that the fund’s expenses do not exceed the simple average of the expenses of all front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The expense reimbursement is based on a comparison of the fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage/service arrangements that may reduce fund expenses. During the six months ended November 30, 2009, the fund’s expenses were reduced by $19,265 as a result of this limit.

Effective August 1, 2009 through July 31, 2010, Putnam Management has also contractually agreed to 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 and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis (or from August 1, 2009 through the fund’s next fiscal year end, as applicable), to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period (or since August 1, 2009, as applicable). During the six months ended November 30, 2009, the fund’s expenses were reduced by $55,092 as a result of this limit.

Putnam Management has contractually agreed, from August 1, 2009 through July 31, 2010, to limit the management fee for the fund to an annual rate of 0.612% of the fund’s average net assets. During the six months ended November 30, 2009, the fund’s expenses were reduced by $11,076 as a result of this limit.

59


Putnam Investments Limited (“PIL”), an affiliate of Putnam Management, 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. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.

The Putnam Advisory Company, LLC (“PAC”), an affiliate of Putnam Management, is authorized by the Trustees to manage and provide investment recommendations with respect to a portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. Putnam Management or PIL, as applicable, pays a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets managed and 0.10% of the average net assets of the portion of the fund’s assets for which PAC provides investment recommendations.

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 Bank and Trust Company (“State Street”). Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Under the custodian contract between the fund and State Street, the custodian bank has a lien on the securities of the fund to the extent permitted by the fund’s investment restrictions to cover any advances made by the custodian bank for the settlement of securities purchased by the fund. At November 30, 2009, the payable to the custodian bank represents the amount due for cash advanced for the settlement of securities purchased.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provided investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing, subject to certain limitations, based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. The amounts incurred for investor servicing agent functions provided by affiliates of Putnam Management during the six months ended November 30, 2009 are included in Investor servicing fees in the Statement of operations.

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 six months ended November 30, 2009, the fund’s expenses were reduced by $37 under the expense offset arrangements.

Each independent Trustee of the fund receives an annual Trustee fee, of which $31, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings and industry seminars and for certain compliance-related matters. 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 on or after July 1, 1995. 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 a distribution plan (the “Plan”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plan is to compensate Putnam Retail Management Limited Partnership, a wholly-owned subsidiary of Putnam Investments, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the fund. The Plan provides for payment by the fund to Retail Management Limited Partnership at an annual rate of up to 0.35% of the average net assets attributable to class A shares. The Trustees currently have not approved payments under the Plan.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the six months ended November 30, 2009, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A redemptions.

60


Note 3: Purchases and sales of securities

During the six months ended November 30, 2009, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $12,663,837 and $21,853,841, respectively. There were no purchases or sales of U.S. government securities.

Written option transactions during the period ended November 30, 2009 are summarized as follows:

  Contract  Premiums 
  Amounts  Received 
Written options     
outstanding at     
beginning of period  $—  $— 
Options opened  6,084  6,084 
Options exercised  —  — 
Options expired  —  — 
Options closed  —  — 
Written options     
outstanding at     
end of period  6,084  $6,084 

Note 4: Capital shares

At November 30, 2009, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:

      For the period 1/23/09 
      (commencement of operations) 
  Six months ended 11/30/09  to 5/31/09 
Class A  Shares  Amount  Shares  Amount 
Shares sold  72  $921  240  $2,300 
Shares issued in connection with         
reinvestment of distributions  —  —  —  — 
  72  921  240  2,300 
Shares repurchased  (36)  (501)  —  — 
Net increase  36  $420  240  $2,300 
 
      For the period 1/23/09 
      (commencement of operations) 
  Six months ended 11/30/09  to 5/31/09 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  514,323  $6,654,077  4,227,198  $42,339,511 
Shares issued in connection with         
reinvestment of distributions  —  —  —  — 
  514,323  6,654,077  4,227,198  42,339,511 
Shares repurchased  (1,270,924)  (16,752,720)  (999,403)  (9,892,675) 
Net increase (decrease)  (756,601)  $(10,098,643)  3,227,795  $32,446,836 

At November 30, 2009, Putnam Investments, LLC owned 1,000 class A shares of the fund (78.4% of class A shares outstanding), valued at $14,010.

At November 30, 2009, funds within the Putnam RetirementReady Funds owned 93.7% of the outstanding shares of the fund.

Note 5: Initial capitalization and offering
of shares

The fund was established as a series of the trust on January 23, 2009. Prior to January 23, 2009, the fund had no operations other than those related to organizational matters, including as noted below, the initial capital contributions by Putnam Investments, LLC and issuance of shares:

  Capital contribution  Shares issued 
Class A  $10,000  1,000 
Class Y  $10,000  1,000 

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Note 6: Summary of derivative activity

The following is a summary of the market values of derivative instruments as of November 30, 2009:

  Asset derivatives  Liability derivatives 
Derivatives not         
accounted for as  Statement of    Statement of   
hedging instruments  assets and    assets and   
under ASC 815  liabilities location  Market value  liabilities location  Market value 
Foreign exchange         
contracts  Receivables  $144,462  Payables  $165,097 
  Investments,    Payables,   
  Receivables, Net    Net assets—   
  assets — Unrealized    Unrealized   
  appreciation /    appreciation /   
Equity contracts  (depreciation)  145,345*  (depreciation)  231,144 * 
Total    $289,807    $396,241 

* Includes cumulative appreciation/depreciation of futures contracts 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 unrealized gains or losses of derivative instruments on the Statement of operations for the six months ended November 30, 2009 (see Note 1):

Amount of Realized Gain or (Loss) on Derivatives Recognized in Income

Derivatives not         
accounted for as         
hedging instruments    Forward currency     
under ASC 815  Futures  contracts  Swaps  Total 
Foreign exchange         
contracts  $—  $194,689  $—  $194,689 
Equity contracts  (104,440)  —  993,129  888,689 
Total  $(104,440)  $194,689  $993,129  $1,083,378 

Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income

Derivatives not           
accounted for as      Forward     
hedging instruments      currency     
under ASC 815  Options  Futures  contracts  Swaps  Total 
Foreign exchange           
contracts  $—  $—  $(38,543)  $—  $(38,543) 
Equity contracts  6,144  (5,765)  —  (249,137)  (248,758) 
Total  $6,144  $(5,765)  $(38,543)  $(249,137)  $(287,301) 

62


Note 7: Investment in Putnam Money Market
Liquidity Fund

The fund invested in Putnam Money Market Liquidity Fund, an open-end management investment company managed by Putnam Management. Investments in Putnam Money Market Liquidity Fund are valued at its closing net asset value each business day. Income distributions earned by the fund are recorded as interest income in the Statement of operations and totaled $5,288 for the period ended November 30, 2009. During the period ended November 30, 2009, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $12,808,604 and $12,202,586, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.

Note 8: Regulatory matters and litigation

In late 2003 and 2004, Putnam Management settled charges brought by the Securities and Exchange Commission (the “SEC”) and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. Distribution of payments from Putnam Management to certain open-end Putnam funds and their shareholders is expected to be completed in the next several months. These allegations and related matters have served as the general basis for certain lawsuits, including purported class action lawsuits against Putnam Management and, in a limited number of cases, some Putnam funds. Putnam Management believes that these lawsuits will have no material adverse effect on the funds or on Putnam Management’s ability to provide investment management services. In addition, Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of these matters.

Note 9: Market and credit risk

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.

63


Shareholder meeting results (unaudited)

November 19, 2009 meeting
At the meeting, each of the nominees for Trustees was elected, as follows:*

  Votes for  Votes withheld 
Ravi Akhoury  2,527,113,902  2,052,455 
Jameson A. Baxter  2,527,135,571  2,030,786 
Charles B. Curtis  2,527,137,300  2,029,057 
Robert J. Darretta  2,527,164,608  2,001,749 
Myra R. Drucker  2,527,111,513  2,054,844 
John A. Hill  2,527,153,836  2,012,521 
Paul L. Joskow  2,527,163,174  2,003,182 
Elizabeth T. Kennan  2,527,100,729  2,065,628 
Kenneth R. Leibler  2,527,164,364  2,001,993 
Robert E. Patterson  2,527,173,350  1,993,007 
George Putnam, III  2,527,168,318  1,998,039 
Robert L. Reynolds  2,527,162,581  2,003,776 
W. Thomas Stephens  2,527,174,525  1,991,832 
Richard B. Worley  2,527,135,097  2,031,259 

* Because all funds of Putnam Funds Trust vote as a single class with respect to election of Trustees, the tabulations reflect preliminary results pending fund tabulation of voting results (including for those funds of Putnam Funds Trust whose meeting was adjourned, the results of voting at any adjourned session of the meeting).

A proposal to approve a new management contract between the fund and Putnam Management was approved as follows:

Votes for  Votes against  Abstentions  Broker non-votes 
3,168,162  —  —  — 

A proposal to amend the fundamental investment restrictions with respect to investments in commodities was approved as follows:

Votes for  Votes against  Abstentions  Broker non-votes 
3,168,162  —  —  — 

All tabulations are rounded to the nearest whole number.

64


Fund information

Founded over 70 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.

Investment Manager  Officers  Francis J. McNamara, III 
Putnam Investment  Robert L. Reynolds  Vice President and 
Management, LLC  President  Chief Legal Officer 
One Post Office Square     
Boston, MA 02109  Jonathan S. Horwitz  Robert R. Leveille 
  Executive Vice President,  Vice President and 
Marketing Services  Principal Executive Officer,  Chief Compliance Officer 
Putnam Retail Management  Treasurer and   
One Post Office Square  Compliance Liaison   Mark C. Trenchard 
Boston, MA 02109   Vice President and  
  Charles E. Porter  BSA Compliance Officer 
Custodian  Senior Advisor   
State Street Bank    Judith Cohen 
and Trust Company  Steven D. Krichmar  Vice President, Clerk and 
  Vice President and  Assistant Treasurer 
Legal Counsel  Principal Financial Officer   
Ropes & Gray LLP    Wanda M. McManus 
  Janet C. Smith  Vice President, Senior Associate 
Trustees  Vice President, Principal  Treasurer and Assistant Clerk 
John A. Hill, Chairman  Accounting Officer and    
Jameson A. Baxter,   Assistant Treasurer  Nancy E. Florek  
Vice Chairman    Vice President, Assistant Clerk, 
Ravi Akhoury   Susan G. Malloy  Assistant Treasurer and  
Charles B. Curtis  Vice President and   Proxy Manager 
Robert J. Darretta  Assistant Treasurer 
Myra R. Drucker 
Paul L. Joskow  Beth S. Mazor   
Elizabeth T. Kennan  Vice President    
Kenneth R. Leibler   
Robert E. Patterson  James P. Pappas   
George Putnam, III  Vice President    
Robert L. Reynolds   
W. Thomas Stephens   
Richard B. Worley     
   

This report is for the information of shareholders of Putnam Asset Allocation: Equity Portfolio. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a 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.




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. Exhibits:

(a)(1) Not applicable


(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.

Putnam Funds Trust

By (Signature and Title):

/s/Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: January 28, 2010

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: January 28, 2010

By (Signature and Title):

/s/Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer

Date: January 28, 2010