| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Emerging Markets
Equity Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio manager | 5 | ||
|
|
|||
| Your fund’s performance | 11 | ||
|
|
|||
| Your fund’s expenses | 13 | ||
|
|
|||
| Terms and definitions | 15 | ||
|
|
|||
| Other information for shareholders | 16 | ||
|
|
|||
| Financial statements | 17 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing signs of a turnaround. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing growth opportunities in developing economies
The world’s emerging markets — from Mexico and Brazil to Poland and Turkey — offer investors attractive opportunities. These markets can generate sustained economic growth in excess of most developed economies, and are home to stocks of world-class companies.
Putnam Emerging Markets Equity Fund pursues growth by investing mainly in stocks of companies that are located in or generate a majority of their revenues in a country included in the MSCI Emerging Markets Index.
During the 1990s, emerging markets were set back by several high-profile crises, caused in part by an over-reliance on capital from abroad and a lack of economic infrastructure to channel capital into productive purposes.
Following these crises, a number of the countries involved implemented structural reforms to stabilize investment and economic development potential.
Over the past decade, emerging markets have benefited from more locally generated economic growth. Infrastructure development, such as the construction of roads, port facilities, and urban centers, has provided many countries with greater production capacity. In addition, a higher level of domestic consumer spending has been a source of more sustainable growth.
The fund seeks to invest in companies benefiting from the rising wealth and infrastructure development in emerging markets. It targets stocks believed to be worth more than their current prices indicate. To identify these stocks, Putnam makes use of its extensive global research capabilities and more than 30 years of experience investing internationally.
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 additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound.
Stock selection relies on fundamental research and a thorough process
In selecting holdings for the portfolio, the fund manager works autonomously while taking advantage of Putnam’s global research resources, because investing in emerging economies requires consistent insights from multiple information sources. The investment process has three key stages:
Stock analysis
With support from Putnam’s global industry analysts, the fund’s manager screens over 1,000 stocks from across emerging markets to find the most attractive 250 candidates for the fund. He then analyzes these stocks with fundamental tools to find those with the most attractive valuations relative to their growth potential.
Macroeconomic factors
The fund’s manager incorporates valuable top-down, macroeconomic insights about individual emerging markets from Putnam’s global asset allocation group, emerging markets debt team, and currency investment unit.
Portfolio construction
Putnam’s proprietary risk management tools help in building a balanced portfolio of approximately 80 stocks, ensuring that the portfolio has exposure to diverse sources of return to mitigate risk.
| 2 | 3 |
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 11–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
Emerging markets have had a roller coaster ride over the past six months. How would you describe the environment for stock investors?
August and September of 2011 echoed September and October of 2008, particularly for emerging markets. The United States was thought by many to be on the verge of a renewed recession, China was expected to be heading toward an economic “hard landing,” and the debt and banking crises in Europe seemed to promise a liquidity crunch of potentially global proportions.
All of these factors weighed heavily on emerging-market stocks, and as risk aversion mounted, investor capital fled to safer havens, such as U.S. Treasuries and fixed-income markets. After this period of pronounced volatility, stock fundamentals reasserted themselves in the minds of many investors, and we have seen steady improvement in emerging-market equity performance each month following the August/September sell-off.
In 2011, inflation and Europe’s debt problems were considered key risks to emerging markets. Has that changed, and if so, what are the key risks today?
Inflation peaked in most emerging-market countries in the latter half of 2011. As a result, a variety of emerging-market governments are easing monetary and related policies. Brazil, for example, has cut interest rates aggressively, and India has followed suit. In China, the government has progressively slashed the reserve ratio
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 11–12 for additional fund performance information. Index descriptions can be found on page 15.
5
requirement for banks, which will facilitate increased lending to consumers and businesses and which helps support our case that a “hard landing” in the country is improbable. In Europe, too, the LTROs [longer-term refinancing operations] have significantly lowered the potential for tail risks — already lower-probability, worst-case events — materializing in that zone.
Having said that, there are several risks that we are monitoring closely, which center on political stability in the Middle East. Turmoil in a number of smaller oil-producing countries, and the threat of deeper disruptions to more substantial sources of oil, could hold negative implications for emerging-market growth. While oil-exporting regions of the emerging world, including Latin America and Russia, would likely benefit from higher oil prices, we believe that sustained high oil prices would have an overall negative effect on emerging-market stocks. Policy error is another key risk, whether in China’s attempts to limit over-investment in property construction or in Europe’s efforts to contain its systemic banking crisis.
There are some concerns that China faces more headwinds — especially with falling growth, declining exports, and a growing housing problem. Could you say more about your thesis on China?
We have a more constructive view on China than the consensus. With respect to property, it is important to recognize the differences between China’s issues and the former real estate bubble in the United States. In the first place, there is no subprime mortgage market in China, and the average loan-to-value ratio is around 45% for the bigger banks. That means home prices could fall by 50% or more and most property owners would still be above water. The average mortgage is paid off in seven years. In addition, because the vast majority of household wealth is in property and not the stock market, the Chinese government — which we believe is fiscally quite healthy and still in possession of many powerful policy tools — is highly sensitive to problems in the sector. All of these reasons suggest to us that China is not doomed to repeat the housing crisis of the developed world.
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
As far as exports are concerned, China is typically thought of as a massive exporting economy. While this is true in some respects — particularly in the explosion of trade with other emerging-market economies — China actually imports more than it sells abroad. The domestic engines of growth, including construction and consumption, are the keys to China’s economy, and they rely on imported materials and goods from around the world. Having said that, consumption needs continued to add stimulus in China. As an anti-debt culture, the Chinese people may actually save too much. This, in fact, could be part of the reason why the economy is transitioning from unsustainable double-digit growth to a more sustainable high single-digit growth level.
On balance, though, the Chinese consumer is becoming a global force. Increasingly, trade with Chinese consumers — whether it originates in Europe or the United States, or from other emerging markets — is replacing trade with developed-market consumers, an important long-term development for the global economy.
Have you shifted the portfolio’s sector focus in the wake of economic improvement?
Sector positioning has been relatively stable. Given our constructive view of China’s ability to manage an economic soft landing, and in light of our positive outlook for government policy and the global economic environment, we maintain an overweight position in domestic cyclical stocks. Consumer discretionary positions, for example, are an important focus in the portfolio. By contrast, we remain underexposed to materials relative to the benchmark.
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
In terms of specific countries, could you highlight any areas of especially rapid transformation and opportunity?
One country undergoing a profound transformation is Indonesia. In macroeconomic terms, we believe that Indonesia today is what Brazil was 10 to 15 years ago. Although the government has its work cut out for it in terms of policy and while the country does face some inflation risk with respect to energy prices, Indonesia is finding an enormous market in China for a variety of goods. What’s more, the average person in Indonesia is feeling the positive effects of macroeconomic change as workers are quickly moving from low- to middle-income wage earners. In our view, banks and consumer stocks look attractive, particularly as we consider the rising Indonesian consumer who is enjoying ever-greater access to credit.
Which positions helped the fund the most?
Samsung Electronics has changed from a volatile commodity components maker into a very strong, integrated device maker with its own supply of differentiated display and memory components. We believe the recent rise of its stock has been due to the market’s recognition of this transition, and our expectations are positive for 2012 because we see upside in the company’s earnings.
OGX, the second-largest contributor to the fund’s returns, is a Brazilian oil exploration and production company that has excellent acreage in offshore Brazil. Earlier in 2011, the stock had suffered as the evaluation of a portion of the company by potential buyers proved lower than we expected. But in the wake of that underperformance, the company decided to develop more of its own reserves; to that end, it has not only secured financing for this activity, but has begun producing oil in one of its key fields. As the company continues to deliver on this production and prove up its reserves, we believe the market will support a higher stock price.
BR Malls, the largest mall owner and operator in Brazil, also performed well during the period. Overall, Brazil lacks sufficient retail space to support demand from its burgeoning
This chart shows the fund’s largest allocation shifts, by percentage, over the past six months. Weightings are shown as a percentage of net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
middle-income consumer class, and we believe that BR Malls appears to be well positioned to benefit from the drive to fill this gap as well as from the Brazilian government’s decision to lower interest rates.
Which strategies or holdings held performance back?
Synergy, which may be a long-term industry winner in the Russian spirits market, unfortunately mishandled Street expectations and badly missed its profit guidance as a result of its aggressive pursuit of market share. The company was the largest detractor from the fund’s results, and we have since sold the stock.
Perfect World, a China-based online gaming company, was the second-largest detractor from returns. The shares collapsed in September as management lowered revenue guidance for the third quarter after setting guidance well ahead of consensus following second-quarter results. The change in guidance spooked the market at a time when sentiment was very negative on Chinese investments. We maintain the position, however, as we believe in the company’s ability to grow in the online role-playing industry.
PDG is the largest homebuilder in Brazil. Concerns about consumers’ access to credit and the company’s disappointingly low cash-flow generation weighed on its stock, which we sold by period-end. We believe PDG’s future performance will continue to be highly correlated with the industry, which we expect to continue to underperform as most homebuilders may struggle in the near term.
What is your outlook for emerging-market stocks, and what are you monitoring most closely in the coming months?
Emerging-market stocks suffered a lot in the recent bout of risk aversion, but much of that departing investor capital has returned in the early months of 2012. As I’ve stated, we have a constructive view on China. The U.S. economy, meanwhile, is showing continued signs of strength, and while Europe may tip into recession, we expect the problems will be contained. As emerging markets loosen economic policies — while taking care not to go too far — a positive environment is created for equities, we believe, particularly banks, consumer discretionary stocks, and domestic-focused industrials, in our view.
As I mentioned, the risk of sustained high oil prices is one of the primary factors that could lead to increased risk aversion among investors. But if diplomatic solutions are found that can help defuse some of this geopolitical risk, it should bode well for the price of oil and lend further support to global markets and the continuing recovery.
Thank you, Daniel, for this update on the fund.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 Daniel J. Graña has an M.B.A. from Kellogg School of Management at Northwestern University and two B.S. degrees from the Massachusetts Institute of Technology. A CFA charterholder, he joined Putnam in 1999 and has been in the investment industry since 1993.
9
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
10
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (9/29/08) | (9/29/08) | (9/29/08) | (9/29/08) | (9/29/08) | (9/29/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 24.31% | 17.16% | 21.19% | 18.27% | 21.16% | 21.16% | 22.21% | 17.97% | 23.20% | 25.42% |
| Annual average | 6.58 | 4.74 | 5.79 | 5.03 | 5.78 | 5.78 | 6.05 | 4.96 | 6.30 | 6.85 |
|
| ||||||||||
| 3 years | 103.12 | 91.54 | 98.68 | 95.68 | 98.63 | 98.63 | 100.35 | 93.37 | 101.64 | 104.93 |
| Annual average | 26.64 | 24.19 | 25.71 | 25.08 | 25.70 | 25.70 | 26.07 | 24.58 | 26.34 | 27.02 |
|
| ||||||||||
| 1 year | –9.05 | –14.28 | –9.78 | –13.79 | –9.80 | –10.60 | –9.57 | –12.72 | –9.34 | –8.83 |
|
| ||||||||||
| 6 months | 1.78 | –4.07 | 1.34 | –3.17 | 1.33 | 0.43 | 1.41 | –2.10 | 1.59 | 1.86 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
11
Comparative index returns For periods ended 2/29/12
| Lipper Emerging Markets Funds | ||
| MSCI Emerging Markets Index (ND) | category average* | |
|
| ||
| Life of fund | 50.18% | 43.72% |
| Annual average | 12.64 | 10.99 |
|
| ||
| 3 years | 131.44 | 123.70 |
| Annual average | 32.28 | 30.56 |
|
| ||
| 1 year | –0.11 | –3.11 |
|
| ||
| 6 months | 5.27 | 2.41 |
|
| ||
Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 6-month, 1-year, 3-year, and life-of-fund periods ended 2/29/12, there were 503, 436, 332, and 296 funds, respectively, in this Lipper category.
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | — | — | — | — | — | — | ||
|
| ||||||||
| Capital gains — Long-term | $0.319 | $0.319 | $0.319 | $0.319 | $0.319 | $0.319 | ||
|
| ||||||||
| Capital gains — Short-term | 0.691 | 0.691 | 0.691 | 0.691 | 0.691 | 0.691 | ||
|
| ||||||||
| Total | $1.010 | $1.010 | $1.010 | $1.010 | $1.010 | $1.010 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $11.00 | $11.67 | $10.80 | $10.78 | $10.87 | $11.26 | $10.95 | $11.08 |
|
| ||||||||
| 2/29/12 | 9.99 | 10.60 | 9.74 | 9.72 | 9.82 | 10.18 | 9.92 | 10.08 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (9/29/08) | (9/29/08) | (9/29/08) | (9/29/08) | (9/29/08) | (9/29/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 20.33% | 13.41% | 17.21% | 14.39% | 17.17% | 17.17% | 18.23% | 14.12% | 19.23% | 21.44% |
| Annual average | 5.42 | 3.66 | 4.63 | 3.91 | 4.62 | 4.62 | 4.89 | 3.84 | 5.15 | 5.70 |
|
| ||||||||||
| 3 years | 72.14 | 62.17 | 68.41 | 65.41 | 68.35 | 68.35 | 69.62 | 63.75 | 70.81 | 73.48 |
| Annual average | 19.85 | 17.49 | 18.98 | 18.26 | 18.96 | 18.96 | 19.26 | 17.87 | 19.54 | 20.16 |
|
| ||||||||||
| 1 year | –15.80 | –20.67 | –16.46 | –20.18 | –16.50 | –17.24 | –16.29 | –19.21 | –16.03 | –15.61 |
|
| ||||||||||
| 6 months | 24.56 | 17.41 | 24.09 | 19.09 | 23.98 | 22.98 | 24.15 | 19.83 | 24.31 | 24.61 |
|
| ||||||||||
12
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.68% | 2.43% | 2.43% | 2.18% | 1.93% | 1.43% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 1.83% | 2.58% | 2.58% | 2.33% | 2.08% | 1.58% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12† | 1.55% | 2.30% | 2.30% | 2.05% | 1.80% | 1.30% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/12.
† Includes a decrease of 0.18% from annualizing the performance fee adjustment for the six months ended 2/29/12.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.78 | $11.51 | $11.51 | $10.27 | $9.02 | $6.52 |
|
| ||||||
| Ending value (after expenses) | $1,017.80 | $1,013.40 | $1,013.30 | $1,014.10 | $1,015.90 | $1,018.60 |
|
| ||||||
* 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 2/29/12. 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.
13
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.77 | $11.51 | $11.51 | $10.27 | $9.02 | $6.52 |
|
| ||||||
| Ending value (after expenses) | $1,017.16 | $1,013.43 | $1,013.43 | $1,014.67 | $1,015.91 | $1,018.40 |
|
| ||||||
* 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 2/29/12. 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.
14
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Emerging Markets Index (ND) is an unmanaged index of equity securities from emerging markets.
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.
15
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
16
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
17
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (95.9%)* | Shares | Value |
|
| ||
| Aerospace and defense (1.0%) | ||
| Embraer SA ADR (Brazil) | 13,905 | $417,984 |
|
| ||
| 417,984 | ||
| Airlines (0.8%) | ||
| Korean Air Lines Co., Ltd. (South Korea) | 6,514 | 305,685 |
|
| ||
| 305,685 | ||
| Auto components (1.2%) | ||
| Hyundai Mobis (South Korea) | 1,889 | 482,164 |
|
| ||
| 482,164 | ||
| Automobiles (2.0%) | ||
| Brilliance China Automotive Holdings, Inc. (China) † | 182,000 | 209,362 |
|
| ||
| Kia Motors Corp. (South Korea) | 9,527 | 599,256 |
|
| ||
| 808,618 | ||
| Beverages (1.0%) | ||
| Grupo Modelo SA de CV Ser. C (Mexico) | 61,949 | 404,995 |
|
| ||
| 404,995 | ||
| Capital markets (0.5%) | ||
| Yuanta Financial Holding Co., Ltd. (Taiwan) † | 352,774 | 206,550 |
|
| ||
| 206,550 | ||
| Chemicals (0.4%) | ||
| Formosa Chemicals & Fibre Corp. (Taiwan) | 55,000 | 171,024 |
|
| ||
| 171,024 | ||
| Commercial banks (21.2%) | ||
| Agricultural Bank of China, Ltd. (China) | 1,127,000 | 554,180 |
|
| ||
| Banco Bradesco SA ADR (Brazil) | 38,574 | 699,732 |
|
| ||
| Bank Mandiri (Persero) Tbk PT (Indonesia) | 589,500 | 418,767 |
|
| ||
| China Construction Bank Corp. (China) | 1,956,000 | 1,628,639 |
|
| ||
| ICICI Bank, Ltd. (India) | 10,037 | 183,348 |
|
| ||
| Industrial and Commercial Bank of China, Ltd. (China) | 1,963,000 | 1,427,571 |
|
| ||
| Itau Unibanco Holding SA ADR (Preference) (Brazil) | 44,220 | 930,831 |
|
| ||
| Kasikornbank PCL NVDR (Thailand) | 117,800 | 567,023 |
|
| ||
| KB Financial Group, Inc. (South Korea) | 14,341 | 523,856 |
|
| ||
| PT Bank Rakyat Indonesia (Persero) Tbk (Indonesia) | 434,000 | 331,247 |
|
| ||
| Sberbank of Russia ADR (Russia) † | 87,230 | 1,196,796 |
|
| ||
| 8,461,990 | ||
| Commercial services and supplies (0.5%) | ||
| KEPCO Plant Service & Engineering Co., Ltd. (South Korea) | 5,840 | 202,139 |
|
| ||
| 202,139 | ||
| Communications equipment (1.0%) | ||
| HTC Corp. (Taiwan) | 7,000 | 155,101 |
|
| ||
| Wistron NeWeb Corp. (Taiwan) | 117,348 | 263,885 |
|
| ||
| 418,986 | ||
| Construction and engineering (3.5%) | ||
| Daelim Industrial Co., Ltd. (South Korea) | 5,000 | 559,057 |
|
| ||
| Empresas ICA SAB de CV (Mexico) † | 166,000 | 305,985 |
|
| ||
| KEPCO Engineering & Construction Co., Inc. (South Korea) | 1,484 | 135,736 |
|
| ||
| Samsung Engineering Co., Ltd. (South Korea) | 1,870 | 392,885 |
|
| ||
| 1,393,663 | ||
| Construction materials (4.0%) | ||
| Asia Cement Corp. (Taiwan) | 252,000 | 320,753 |
|
| ||
| China National Building Material Co., Ltd. (China) | 330,000 | 469,636 |
|
| ||
| China Shanshui Cement Group, Ltd. (China) | 366,000 | 335,091 |
|
| ||
| Siam Cement PCL NVDR (Thailand) | 39,500 | 463,912 |
|
| ||
| 1,589,392 | ||
18
| COMMON STOCKS (95.9%)* cont. | Shares | Value |
|
| ||
| Diversified financial services (1.9%) | ||
| African Bank Investments, Ltd. (South Africa) | 87,311 | $456,666 |
|
| ||
| BM&F Bovespa SA (Brazil) | 46,800 | 313,136 |
|
| ||
| 769,802 | ||
| Electrical equipment (0.6%) | ||
| Harbin Equipment Co., Ltd. (China) | 204,000 | 233,861 |
|
| ||
| 233,861 | ||
| Electronic equipment, instruments, and components (3.3%) | ||
| Hollysys Automation Technologies, Ltd. (China) † | 32,398 | 329,164 |
|
| ||
| Hon Hai Precision Industry Co., Ltd. (Taiwan) | 208,072 | 720,546 |
|
| ||
| Tripod Technology Corp. (Taiwan) | 82,900 | 256,139 |
|
| ||
| 1,305,849 | ||
| Energy equipment and services (1.2%) | ||
| Eurasia Drilling Co., Ltd. GDR (Russia) | 16,154 | 475,735 |
|
| ||
| 475,735 | ||
| Food products (2.2%) | ||
| First Resources, Ltd. (Singapore) | 169,000 | 247,059 |
|
| ||
| Golden Agri-Resources, Ltd. (Singapore) | 408,000 | 236,850 |
|
| ||
| Zhongpin, Inc. (China) † | 35,573 | 392,014 |
|
| ||
| 875,923 | ||
| Hotels, restaurants, and leisure (1.7%) | ||
| Genting Bhd (Malaysia) | 128,200 | 451,937 |
|
| ||
| Home Inns & Hotels Management, Inc. ADR (China) † | 6,900 | 211,761 |
|
| ||
| 663,698 | ||
| Household durables (1.4%) | ||
| Skyworth Digital Holdings, Ltd. (China) | 540,000 | 299,482 |
|
| ||
| Woongjin Coway Company, Ltd. (South Korea) | 7,370 | 246,977 |
|
| ||
| 546,459 | ||
| Independent power producers and energy traders (0.7%) | ||
| China WindPower Group, Ltd. (China) † | 5,370,000 | 267,701 |
|
| ||
| 267,701 | ||
| Internet software and services (2.8%) | ||
| Baidu, Inc. ADR (China) † | 1,672 | 228,562 |
|
| ||
| Mail.ru Group., Ltd. GDR (Russia) † | 8,001 | 316,440 |
|
| ||
| Tencent Holdings, Ltd. (China) | 21,700 | 559,864 |
|
| ||
| 1,104,866 | ||
| Machinery (0.9%) | ||
| China National Materials Co., Ltd. (China) | 785,000 | 378,896 |
|
| ||
| 378,896 | ||
| Media (0.5%) | ||
| Media Nusantara Citra Tbk PT (Indonesia) | 1,103,500 | 204,331 |
|
| ||
| 204,331 | ||
| Metals and mining (4.4%) | ||
| Gold Fields, Ltd. (South Africa) | 15,281 | 241,666 |
|
| ||
| Sterlite Industries (India), Ltd. (India) | 65,820 | 165,204 |
|
| ||
| Sterlite Industries (India), Ltd. ADR (India) | 19,980 | 198,202 |
|
| ||
| Vale SA ADR (Brazil) | 24,133 | 606,704 |
|
| ||
| Vale SA ADR (Preference) (Brazil) | 23,014 | 565,684 |
|
| ||
| 1,777,460 | ||
| Multiline retail (1.1%) | ||
| Hyundai Department Store Co., Ltd. (South Korea) | 1,266 | 188,126 |
|
| ||
| PCD Stores Group, Ltd. (China) | 1,310,000 | 251,185 |
|
| ||
| 439,311 | ||
19
| COMMON STOCKS (95.9%)* cont. | Shares | Value |
|
| ||
| Oil, gas, and consumable fuels (12.5%) | ||
| CNOOC, Ltd. (China) | 189,000 | $427,995 |
|
| ||
| Gazprom OAO ADR (Russia) | 101,137 | 1,340,065 |
|
| ||
| Gazprom OAO ADR (Russia) | 7,564 | 99,845 |
|
| ||
| Lukoil OAO ADR (Russia) | 11,898 | 763,257 |
|
| ||
| OGX Petroleo e Gas Participacoes SA (Brazil) † | 56,554 | 559,859 |
|
| ||
| Pacific Rubiales Energy Corp. (Colombia) | 14,200 | 412,316 |
|
| ||
| Petroleo Brasileiro SA ADR (Preference) (Brazil) | 20,006 | 569,971 |
|
| ||
| PT Adaro Energy Tbk (Indonesia) | 2,047,500 | 432,680 |
|
| ||
| Sasol, Ltd. (South Africa) | 7,220 | 384,310 |
|
| ||
| 4,990,298 | ||
| Real estate management and development (4.9%) | ||
| BR Malls Participacoes SA (Brazil) | 73,671 | 944,242 |
|
| ||
| C C Land Holdings, Ltd. (China) | 917,000 | 242,638 |
|
| ||
| China Overseas Land & Investment, Ltd. (China) | 100,000 | 206,700 |
|
| ||
| Guangzhou R&F Properties Co., Ltd. (China) | 286,400 | 377,260 |
|
| ||
| LSR Group OJSC GDR (Russia) | 34,138 | 180,761 |
|
| ||
| 1,951,601 | ||
| Road and rail (1.1%) | ||
| Localiza Rent a Car SA (Brazil) | 23,230 | 429,090 |
|
| ||
| 429,090 | ||
| Semiconductors and semiconductor equipment (6.8%) | ||
| Samsung Electronics Co., Ltd. (South Korea) | 2,017 | 2,165,426 |
|
| ||
| SK hynix, Inc. (South Korea) | 12,890 | 345,730 |
|
| ||
| Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) | 73,889 | 203,000 |
|
| ||
| 2,714,156 | ||
| Software (0.8%) | ||
| Perfect World Co., Ltd. ADR (China) † | 25,298 | 311,165 |
|
| ||
| 311,165 | ||
| Specialty retail (1.9%) | ||
| Cia Hering (Brazil) | 18,102 | 486,901 |
|
| ||
| Lewis Group, Ltd. (South Africa) | 27,221 | 274,930 |
|
| ||
| 761,831 | ||
| Textiles, apparel, and luxury goods (0.8%) | ||
| LG Fashion Corp. (South Korea) | 8,030 | 300,713 |
|
| ||
| 300,713 | ||
| Thrifts and mortgage finance (1.3%) | ||
| Housing Development Finance Corp. (India) | 17,719 | 238,008 |
|
| ||
| LIC Housing Finance, Ltd. (India) | 49,751 | 263,042 |
|
| ||
| 501,050 | ||
| Tobacco (1.2%) | ||
| KT&G Corp. (South Korea) | 7,160 | 467,999 |
|
| ||
| 467,999 | ||
| Wireless telecommunication services (4.8%) | ||
| Bharti Airtel, Ltd. (India) | 53,703 | 381,944 |
|
| ||
| China Mobile, Ltd. (China) | 64,500 | 685,782 |
|
| ||
| Empresa Nacional de Telecomunicaciones SA (ENTEL) (Chile) | 19,960 | 407,644 |
|
| ||
| TIM Participacoes SA ADR (Brazil) | 14,670 | 440,836 |
|
| ||
| 1,916,206 | ||
| Total common stocks (cost $36,153,854) | $38,251,191 | |
20
| INVESTMENT COMPANIES (0.5%)* | Shares | Value |
|
| ||
| iShares FTSE A50 China Index ETF (China) | 122,100 | $186,216 |
|
| ||
| Total investment companies (cost $170,088) | $186,216 | |
| SHORT-TERM INVESTMENTS (3.0%)* | Shares | Value |
|
| ||
| Putnam Money Market Liquidity Fund 0.09% e | 1,200,635 | $1,200,635 |
|
| ||
| Total short-term investments (cost $1,200,635) | $1,200,635 | |
| TOTAL INVESTMENTS | ||
|
| ||
| Total investments (cost $37,524,577) | $39,638,042 | |
Key to holding’s abbreviations
ADR American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
ETF Exchange Traded Fund
GDR Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
NVDR Non-voting Depository Receipt
OAO Open Joint Stock Company
OJSC Open Joint Stock Company
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $39,893,712.
† Non-income-producing security.
e See Note 5 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
| DIVERSIFICATION BY COUNTRY | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| China | 25.8% | United States | 3.0% | |
|
|
| |||
| Brazil | 17.6 | Thailand | 2.6 | |
|
|
| |||
| South Korea | 17.5 | Mexico | 1.8 | |
|
|
| |||
| Russia | 11.0 | Singapore | 1.2 | |
|
|
| |||
| Taiwan | 5.8 | Malaysia | 1.2 | |
|
|
| |||
| India | 3.6 | Colombia | 1.0 | |
|
|
| |||
| Indonesia | 3.5 | Chile | 1.0 | |
|
|
| |||
| South Africa | 3.4 | Total | 100.0% | |
|
|
||||
21
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Consumer discretionary | $973,592 | $3,233,533 | $— | |
|
| ||||
| Consumer staples | 797,009 | 951,908 | — | |
|
| ||||
| Energy | 4,605,358 | 860,675 | — | |
|
| ||||
| Financials | 4,722,164 | 7,168,829 | — | |
|
| ||||
| Industrials | 1,153,059 | 2,208,259 | — | |
|
| ||||
| Information technology | 1,185,331 | 4,669,691 | — | |
|
| ||||
| Materials | 1,612,256 | 1,925,620 | — | |
|
| ||||
| Telecommunication services | 848,480 | 1,067,726 | — | |
|
| ||||
| Utilities | — | 267,701 | — | |
|
| ||||
| Total common stocks | 15,897,249 | 22,353,942 | — | |
| Investment companies | — | 186,216 | — | |
|
| ||||
| Short-term investments | 1,200,635 | — | — | |
|
| ||||
| Totals by level | $17,097,884 | $22,540,158 | $— | |
The accompanying notes are an integral part of these financial statements.
22
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value (Note 1): | |
| Unaffiliated issuers (identified cost $36,323,942) | $38,437,407 |
| Affiliated issuers (identified cost $1,200,635) (Note 5) | 1,200,635 |
|
| |
| Foreign currency (cost $324,960) (Note 1) | 326,013 |
|
| |
| Dividends, interest and other receivables | 121,114 |
|
| |
| Receivable for shares of the fund sold | 68,125 |
|
| |
| Total assets | 40,153,294 |
| LIABILITIES | |
|
| |
| Payable for investments purchased | 39,315 |
|
| |
| Payable for shares of the fund repurchased | 116,088 |
|
| |
| Payable for compensation of Manager (Note 2) | 14,670 |
|
| |
| Payable for investor servicing fees (Note 2) | 8,644 |
|
| |
| Payable for custodian fees (Note 2) | 24,439 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 3,024 |
|
| |
| Payable for administrative services (Note 2) | 132 |
|
| |
| Payable for distribution fees (Note 2) | 15,087 |
|
| |
| Payable for auditing | 26,461 |
|
| |
| Other accrued expenses | 11,722 |
|
| |
| Total liabilities | 259,582 |
| Net assets | $39,893,712 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $43,794,031 |
|
| |
| Accumulated net investment loss (Note 1) | (28,803) |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (5,988,363) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 2,116,847 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $39,893,712 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($29,333,709 divided by 2,936,863 shares) | $9.99 |
|
| |
| Offering price per class A share (100/94.25 of $9.99)* | $10.60 |
|
| |
| Net asset value and offering price per class B share ($2,511,556 divided by 257,836 shares)** | $9.74 |
|
| |
| Net asset value and offering price per class C share ($2,215,658 divided by 227,871 shares)** | $9.72 |
|
| |
| Net asset value and redemption price per class M share ($512,255 divided by 52,144 shares) | $9.82 |
|
| |
| Offering price per class M share (100/96.50 of $9.82)* | $10.18 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($98,943 divided by 9,970 shares) | $9.92 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($5,221,591 divided by 517,953 shares) | $10.08 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $25,077) | $278,484 |
|
| |
| Interest (including interest income of $209 from investments in affiliated issuers) (Note 5) | 209 |
|
| |
| Total investment income | 278,693 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 145,654 |
|
| |
| Investor servicing fees (Note 2) | 66,297 |
|
| |
| Custodian fees (Note 2) | 17,261 |
|
| |
| Trustee compensation and expenses (Note 2) | 1,355 |
|
| |
| Administrative services (Note 2) | 493 |
|
| |
| Distribution fees — Class A (Note 2) | 36,270 |
|
| |
| Distribution fees — Class B (Note 2) | 10,642 |
|
| |
| Distribution fees — Class C (Note 2) | 9,938 |
|
| |
| Distribution fees — Class M (Note 2) | 1,455 |
|
| |
| Distribution fees — Class R (Note 2) | 198 |
|
| |
| Auditing | 36,842 |
|
| |
| Other | 13,668 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (31,082) |
|
| |
| Total expenses | 308,991 |
| Expense reduction (Note 2) | (1,495) |
|
| |
| Net expenses | 307,496 |
| Net investment loss | (28,803) |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (5,674,809) |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (35,428) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 3,209 |
|
| |
| Net unrealized appreciation of investments during the period | 5,213,277 |
|
| |
| Net loss on investments | (493,751) |
| Net decrease in net assets resulting from operations | $(522,554) |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income (loss) | $(28,803) | $156,483 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (5,710,237) | 4,183,095 |
|
| ||
| Net unrealized appreciation (depreciation) of investments | ||
| and assets and liabilities in foreign currencies | 5,216,486 | (4,256,997) |
|
| ||
| Net increase (decrease) in net assets resulting | ||
| from operations | (522,554) | 82,581 |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | (1,781,310) | (1,907,120) |
|
| ||
| Class B | (149,638) | (160,854) |
|
| ||
| Class C | (142,008) | (106,279) |
|
| ||
| Class M | (26,438) | (23,327) |
|
| ||
| Class R | (5,480) | (1,383) |
|
| ||
| Class Y | (336,030) | (326,876) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (822,341) | (402,872) |
|
| ||
| Class B | (69,080) | (33,980) |
|
| ||
| Class C | (65,558) | (22,451) |
|
| ||
| Class M | (12,205) | (4,927) |
|
| ||
| Class R | (2,530) | (293) |
|
| ||
| Class Y | (155,128) | (69,051) |
|
| ||
| Increase in capital from settlement payments | 24,238 | — |
|
| ||
| Redemption fees (Note 1) | 2,774 | 8,265 |
|
| ||
| Increase (decrease) from capital share transactions (Note 4) | (3,012,476) | 14,278,245 |
|
| ||
| Total increase (decrease) in net assets | (7,075,764) | 11,309,678 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 46,969,476 | 35,659,798 |
|
| ||
| End of period (including accumulated net investment | ||
| loss of $28,803 and undistributed net investment income | ||
| of $—, respectively) | $39,893,712 | $46,969,476 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | |||||||||||||
|
| |||||||||||||||
| Ratio | |||||||||||||||
| Net asset | Net realized | Ratio | of net investment | ||||||||||||
| value, | and unrealized | Total from | From | From | Total return | Net assets, | of expenses | income (loss) | |||||||
| beginning | Net investment | gain (loss) | investment | net investment | net realized gain | Total | Redemption | Non-recurring | Net asset value, | at net asset | end of period | to average | to average | Portfolio | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees | reimbursements | end of period | value (%) b | (in thousands) | net assets (%) c,d | net assets (%) c | turnover (%) |
|
| |||||||||||||||
| Class A | |||||||||||||||
| February 29, 2012** | $11.00 | — e | (.01) | (.01) | — | (1.01) | (1.01) | — e | .01 f | $9.99 | 1.78* | $29,334 | .77* | (.05)* | 32* |
| August 31, 2011 | 11.19 | .04 | .57 | .61 | — | (.80) | (.80) | — e | — | 11.00 | 4.65 | 36,188 | 1.67 | .36 | 145 |
| August 31, 2010 | 10.32 | .04 | 1.31 | 1.35 | (.05) | (.43) | (.48) | — e | — | 11.19 | 13.09 | 27,796 | 1.77 | .31 | 212 |
| August 31, 2009† | 10.00 | .08 | .23 | .31 | — | — | — | .01 | — | 10.32 | 3.20* | 15,707 | 1.72* | .94* | 147* |
|
| |||||||||||||||
| Class B | |||||||||||||||
| February 29, 2012** | $10.80 | (.04) | (.02) | (.06) | — | (1.01) | (1.01) | — e | .01 f | $9.74 | 1.34* | $2,512 | 1.15* | (.43)* | 32* |
| August 31, 2011 | 11.07 | (.05) | .58 | .53 | — | (.80) | (.80) | — e | — | 10.80 | 3.95 | 2,446 | 2.42 | (.41) | 145 |
| August 31, 2010 | 10.25 | (.06) | 1.31 | 1.25 | — e | (.43) | (.43) | — e | — | 11.07 | 12.25 | 2,194 | 2.52 | (.49) | 212 |
| August 31, 2009† | 10.00 | .02 | .22 | .24 | — | — | — | .01 | — | 10.25 | 2.50* | 1,909 | 2.41* | .20* | 147* |
|
| |||||||||||||||
| Class C | |||||||||||||||
| February 29, 2012** | $10.78 | (.04) | (.02) | (.06) | — | (1.01) | (1.01) | — e | .01 f | $9.72 | 1.33* | $2,216 | 1.15* | (.43)* | 32* |
| August 31, 2011 | 11.05 | (.04) | .57 | .53 | — | (.80) | (.80) | — e | — | 10.78 | 3.96 | 2,279 | 2.42 | (.31) | 145 |
| August 31, 2010 | 10.25 | (.04) | 1.29 | 1.25 | (.02) | (.43) | (.45) | — e | — | 11.05 | 12.22 | 1,295 | 2.52 | (.34) | 212 |
| August 31, 2009† | 10.00 | .01 | .23 | .24 | — | — | — | .01 | — | 10.25 | 2.50* | 370 | 2.41* | .05* | 147* |
|
| |||||||||||||||
| Class M | |||||||||||||||
| February 29, 2012** | $10.87 | (.03) | (.02) | (.05) | — | (1.01) | (1.01) | — e | .01 f | $9.82 | 1.41* | $512 | 1.02* | (.32)* | 32* |
| August 31, 2011 | 11.11 | (.02) | .58 | .56 | — | (.80) | (.80) | — e | — | 10.87 | 4.22 | 433 | 2.17 | (.13) | 145 |
| August 31, 2010 | 10.27 | (.02) | 1.31 | 1.29 | (.02) | (.43) | (.45) | — e | — | 11.11 | 12.59 | 362 | 2.27 | (.20) | 212 |
| August 31, 2009† | 10.00 | .04 | .22 | .26 | — | — | — | .01 | — | 10.27 | 2.70* | 281 | 2.18* | .41* | 147* |
|
| |||||||||||||||
| Class R | |||||||||||||||
| February 29, 2012** | $10.95 | (.02) | (.01) | (.03) | — | (1.01) | (1.01) | — e | .01 f | $9.92 | 1.59* | $99 | .90* | (.21)* | 32* |
| August 31, 2011 | 11.16 | .04 | .55 | .59 | — | (.80) | (.80) | — e | — | 10.95 | 4.48 | 73 | 1.92 | .31 | 145 |
| August 31, 2010 | 10.29 | .02 | 1.29 | 1.31 | (.01) | (.43) | (.44) | — e | — | 11.16 | 12.81 | 22 | 2.02 | .20 | 212 |
| August 31, 2009† | 10.00 | .06 | .23 | .29 | — | — | — | — e | — | 10.29 | 2.90* | 10 | 1.95* | .78* | 147* |
|
| |||||||||||||||
| Class Y | |||||||||||||||
| February 29, 2012** | $11.08 | .01 | (.01) | — e | — | (1.01) | (1.01) | — e | .01 f | $10.08 | 1.86* | $5,222 | .65* | .08* | 32* |
| August 31, 2011 | 11.23 | .07 | .58 | .65 | — | (.80) | (.80) | — e | — | 11.08 | 5.01 | 5,550 | 1.42 | .60 | 145 |
| August 31, 2010 | 10.35 | .07 | 1.30 | 1.37 | (.06) | (.43) | (.49) | — e | — | 11.23 | 13.29 | 3,990 | 1.52 | .59 | 212 |
| August 31, 2009† | 10.00 | .11 | .23 | .34 | — | — | — | .01 | — | 10.35 | 3.50* | 1,871 | 1.49* | 1.19* | 147* |
|
| |||||||||||||||
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Financial highlights (Continued)
* Not annualized.
** Unaudited.
† For the period September 29, 2008 (commencement of operations) to August 31, 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 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 | |
|
| |
| February 29, 2012 | 0.08% |
|
| |
| August 31, 2011 | 0.15 |
|
| |
| August 31, 2010 | 0.46 |
|
| |
| August 31, 2009 | 4.57 |
|
| |
d Includes amounts paid through expense offset and/or brokerage/service arrangements (Note 2).
e Amount represents less than $0.01 per share.
f Reflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Canadian Imperial Holdings, Inc. and CIBC World Markets Corp. which amounted to $0.01 per share outstanding on November 29, 2011.
The accompanying notes are an integral part of these financial statements.
28
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Emerging Markets Equity Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek long-term capital appreciation. The fund invests mainly in common stocks (growth or value stocks or both) of emerging markets companies that Putnam Management believes have favorable investment potential. For example, the fund may purchase stocks of companies with stock prices that reflect a value lower than which Putnam Management places on the company. Putnam Management may also consider other factors that it believes will cause the stock price to rise. Emerging markets include countries in the MSCI Emerging Markets Index or that Putnam Management considers to be equivalent to those in that index based on their level of economic development or the size and experience of their securities markets. The fund invests significantly in small and midsize companies. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding to buy or sell investments.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
29
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income 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.
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.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
30
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $37,714,091, resulting in gross unrealized appreciation and depreciation of $4,303,079 and $2,379,128, respectively, or net unrealized appreciation of $1,923,951.
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.
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 a management fee (base fee) (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 1.080% | of the first $5 billion, |
| 1.030% | of the next $5 billion, |
| 0.980% | of the next $10 billion, |
| 0.930% | of the next $10 billion, |
| 0.880% | of the next $50 billion, |
| 0.860% | of the next $50 billion, |
| 0.850% | of the next $100 billion and |
| 0.845% | of any excess thereafter. |
31
In addition, beginning with January 2011, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended or, if shorter, the period from January 1, 2010 to the end of the month for which the fee adjustment is being computed. Each month, the performance adjustment is calculated by multiplying the performance adjustment rate and the fund’s average net assets over the performance period and the result is divided by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the MSCI Emerging Markets Index (Net Dividends), each measured over the performance period. The maximum annualized performance adjustment rates are +/– 0.21%. The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the performance period of up to thirty-six months. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have declined significantly over that period, the negative performance adjustment may exceed the base fee. In this event, Putnam Management would make a payment to the fund.
Because the performance adjustment is based on the fund’s performance relative to its applicable benchmark index, and not its absolute performance, the performance adjustment could increase Putnam Management’s fee even if the fund’s shares lose value during the performance period provided that the fund outperformed its benchmark index, and could decrease Putnam Management’s fee even if the fund’s shares increase in value during the performance period provided that the fund underperformed its benchmark index.
For the reporting period, the base fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.46% of the fund’s average net assets before a decrease of $33,913 (0.09% of the fund’s average net assets) based on performance.
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $31,082 as a result of this limit.
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 a separate 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 for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
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. The fund also reduced expenses through brokerage/service arrangements. For the reporting period,
32
the fund’s expenses were reduced by $45 under the expense offset arrangements and by $1,450 under the brokerage/service arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $25, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $3,542 and $10 from the sale of class A and class M shares, respectively, and received $3,076 and $3 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $12,251,832 and $19,451,072, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 351,237 | $3,326,970 | 1,545,327 | $19,595,328 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 289,058 | 2,419,023 | 179,060 | 2,209,608 |
|
| ||||
| 640,295 | 5,745,993 | 1,724,387 | 21,804,936 | |
|
| ||||
| Shares repurchased | (992,222) | (9,399,584) | (920,690) | (11,243,466) |
|
| ||||
| Net increase (decrease) | (351,927) | $(3,653,591) | 803,697 | $10,561,470 |
|
| ||||
33
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 50,638 | $470,577 | 149,272 | $1,874,556 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 24,597 | 200,955 | 14,766 | 179,706 |
|
| ||||
| 75,235 | 671,532 | 164,038 | 2,054,262 | |
|
| ||||
| Shares repurchased | (43,899) | (408,842) | (135,745) | (1,610,317) |
|
| ||||
| Net increase | 31,336 | $262,690 | 28,293 | $443,945 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 29,893 | $270,341 | 152,107 | $1,881,184 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 24,252 | 197,978 | 9,721 | 118,104 |
|
| ||||
| 54,145 | 468,319 | 161,828 | 1,999,288 | |
|
| ||||
| Shares repurchased | (37,687) | (340,754) | (67,537) | (809,721) |
|
| ||||
| Net increase | 16,458 | $127,565 | 94,291 | $1,189,567 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 13,977 | $129,885 | 22,255 | $280,684 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 4,690 | 38,643 | 2,233 | 27,315 |
|
| ||||
| 18,667 | 168,528 | 24,488 | 307,999 | |
|
| ||||
| Shares repurchased | (6,376) | (58,556) | (17,262) | (208,465) |
|
| ||||
| Net increase | 12,291 | $109,972 | 7,226 | $99,534 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 3,873 | $34,872 | 4,512 | $56,384 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 963 | 8,010 | 136 | 1,676 |
|
| ||||
| 4,836 | 42,882 | 4,648 | 58,060 | |
|
| ||||
| Shares repurchased | (1,521) | (14,121) | (1) | (12) |
|
| ||||
| Net increase | 3,315 | $28,761 | 4,647 | $58,048 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 66,780 | $635,766 | 311,457 | $4,005,482 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 47,200 | 398,369 | 31,930 | 395,927 |
|
| ||||
| 113,980 | 1,034,135 | 343,387 | 4,401,409 | |
|
| ||||
| Shares repurchased | (96,800) | (922,008) | (197,806) | (2,475,728) |
|
| ||||
| Net increase | 17,180 | $112,127 | 145,581 | $1,925,681 |
|
| ||||
34
Note 5: 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 $209 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $6,706,078 and $5,526,324, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 6: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments.
Note 7: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
35
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
36
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk and | |
| Marketing Services | Executive Vice President, | Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Emerging Markets Equity Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Global Consumer
Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio manager | 5 | ||
|
|
|||
| Your fund’s performance | 10 | ||
|
|
|||
| Your fund’s expenses | 12 | ||
|
|
|||
| Terms and definitions | 14 | ||
|
|
|||
| Other information for shareholders | 15 | ||
|
|
|||
| Financial statements | 16 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing early signs of recovery. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing growth opportunities in consumer companies worldwide
To understand where Putnam Global Consumer Fund invests, simply take a look around you. Everything you eat, drink, wear, or play with is considered a consumer product. The fund invests at least 80% of its assets in stocks of companies that are engaged in the consumer products and services industries.
The fund can invest in businesses of all sizes and at different stages of growth, from newer, rapidly growing companies to established global corporations. The manager focuses primarily on large and midsize companies, and has the flexibility to invest in U.S. and international markets. The fund’s flexibility is an advantage in difficult economic environments, particularly because it can invest in both consumer staples and consumer cyclical stocks.
The advantage of consumer staples is that they tend to stay in demand regardless of economic conditions. You are purchasing staples when you buy food, beverages, prescription drugs, or household products. On the other hand, if you are planning a vacation or shopping for a high-definition TV, you are considering cyclical products and services. Companies in cyclical industries — such as hotels, restaurants, media companies, and automobile makers — tend to be more sensitive to economic cycles, and struggle more in a slowing economy.
The fund manager analyzes each company’s valuation, financial strength, competitive positioning, earnings, and cash flow. He conducts intensive fundamental research with support from analysts on Putnam’s Global Equity Research team.
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’s policy of concentrating on a limited group of industries and the fund’s non-diversified status, which means the fund may invest in fewer issuers, can increase the fund’s vulnerability to common economic forces and may result in greater losses and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. These risks are generally greater for small and midsize companies. The use of short selling may result in losses if the securities appreciate in value. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer or industry.
Sector investing at Putnam
In recent decades, innovation and business growth have propelled stocks in different industries to market-leading performance. Finding these stocks, many of which are in international markets, requires rigorous research and in-depth knowledge of global markets.
Putnam’s sector funds invest in nine sectors worldwide and offer active management, risk controls, and the expertise of dedicated sector analysts. The funds’ managers invest with flexibility and precision, using fundamental research to hand select stocks for the portfolios.
All sectors in one fund:
Putnam Global Sector Fund
A portfolio of individual Putnam Global Sector Funds that provides exposure to all sectors of the MSCI World Index.
Individual sector funds:
Global Consumer Fund
Retail, hotels, restaurants, media, food and beverages
Global Energy Fund
Oil and gas, energy equipment and services
Global Financials Fund
Commercial banks, insurance, diversified financial services, mortgage finance
Global Health Care Fund
Pharmaceuticals, biotechnology, health-care services
Global Industrials Fund
Airlines, railroads, trucking, aerospace and defense, construction, commercial services
Global Natural Resources Fund
Metals, chemicals, oil and gas, forest products
Global Technology Fund
Software, computers, Internet services
Global Telecommunications Fund
Diversified and wireless telecommunications services
Global Utilities Fund
Electric, gas, and water utilities
| 2 | 3 |
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 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
Walter, what can you tell us about the investing environment and the fund’s performance for the six months ended February 29, 2012?
In September, when the fund’s fiscal year began, financial markets were enduring a series of setbacks that unnerved investors worldwide. Ongoing sovereign debt issues in Europe, a lengthy losing streak for the S&P 500 Index, and an unprecedented downgrade of U.S. sovereign debt all contributed to severe volatility and a generally dismal outlook for global economic growth. Despite the U.S. stock market’s dramatic recovery in October, heightened levels of volatility continued through the close of 2011. However, the period finished on a considerably more positive note as U.S. stocks recovered in dramatic fashion, with major indexes approaching multi-year highs by February. For the six-month period, the fund delivered a solid positive return and outperformed its benchmark index.
What was your strategy in positioning the fund during the period?
I saw the volatility as a great opportunity to invest in stocks that were being unfairly punished by nervous investors. I took advantage of depressed stock prices by adding to existing positions or by investing in new areas. My ultimate goal is to find fundamentally strong companies, and I am fortunate to have access to a team of talented
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on page 14.
5
analysts who carefully follow the consumer sector across global economies.
In addition to targeting attractively priced stocks, I also trimmed some holdings that were in more defensive sectors. Investors tend to seek out defensive stocks as a “safe haven” when economic growth is weakening and stock markets are volatile. In anticipation of improving economic conditions, I added more cyclical stocks, which tend to perform well in a recovering economy.
Can you highlight some holdings that helped performance for the period?
I want to highlight the stock of Wyndham Worldwide — not only because it was a top performer, but also because it is a stock we have held in the portfolio since the fund’s inception in December 2008. Within the lodging and tourism industry, Wyndham operates hotels and time-share properties. The stock fell to very cheap levels when investors became concerned about the funding for its time-share financing business during the depths of the recession following the 2008 financial crisis. As the economy began to recover, so did business travel and lodging demand, and investors gained confidence in the strength of Wyndham’s businesses. The stock declined sharply again in the volatile markets of 2011 — for many of the same reasons — but has since recovered dramatically. The company has solid business fundamentals, generates a lot of cash, and has a management team that uses that cash wisely. Wyndham’s management has taken advantage of its stock’s declines by initiating share buyback programs, and was able to triple its dividend thanks to robust cash flows.
Positive changes in business fundamentals have been beneficial for the stock of Japan Tobacco, another top-performer for the period. The stock advanced as investors began to recognize improvement efforts from company management, including a sharper focus on profit growth and better capital management strategies. We believe the company has strong free-cash flow, and industry trends suggest the potential for strong long-term growth.
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
Another portfolio highlight was Fortune Brands Home & Security, which specializes in kitchen and bath cabinetry, plumbing, and security and storage systems. This is a strong business — a leader in its industry — that had been embedded in a large conglomerate, Fortune Brands. Last October, it was spun off from the holding company and now operates independently. We believe this was a positive development for the business, and, as the U.S. economy and housing markets show signs of healing, the company’s earnings are improving as well. The healing economy has also helped two global advertising agencies in the fund’s portfolio: Interpublic Group and WPP. Both companies are solid, high-quality businesses that have benefited from increasing global demand for advertising.
Which holdings detracted from the fund’s performance?
Arcos Dorados Holdings — one of the top performers for the previous fiscal year — was among the top detractors for this period. The company owns more than 1,800 McDonald’s franchises in Latin America, and is an established business in a developing market with significant growth opportunities. The stock’s recent decline was largely in response to the company’s latest quarterly earnings report, which showed slowing revenue growth in Brazil, one of its largest markets. While we have trimmed the position a bit, the stock remained in the portfolio at period-end. I continue to believe this stock will be beneficial over time for exposing the fund to the impressive growth potential in Latin America.
Another disappointment has been the stock of toy company Hasbro, which has delivered disappointing revenue results for several quarters. The company’s management is working to streamline areas of the business, such as its board-games division, with a focus on innovation. This stock
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
remains in the portfolio; I believe Hasbro offers solid long-term growth potential, thanks to its innovative approaches to driving toy sales. One recent example is its formation of production company, Hasbro Studios, which, together with Discovery Communications, has created the Hub, a TV channel with original programming based on Hasbro products. Over time, this should enable Hasbro to further grow its toy sales, particularly in markets outside the United States.
A slowdown in China’s economic growth has unnerved investors, and stocks such as Home Inns & Hotels Management have felt the effects. Home Inns is one of the leading economy hotel chains in China, and a business that we believe is fundamentally strong. The recent declines in its stock appear to be related to macroeconomic concerns rather than company-specific issues, and the stock remained in the portfolio at period-end.
As we enter the second half of the fund’s fiscal year, what is your outlook?
We are seeing many encouraging signs that the U.S. economy is beginning to recover. Employment has been growing a little more strongly, and data on the housing market are improving, with more encouraging new home sales. Corporate profits remain a bright spot as well, with solid cash flows and many companies delivering results that have exceeded expectations. In international markets, although progress has been made with Europe’s sovereign debt crisis, investors are concerned about slowing economic growth. Investors appear to be focused on the potential impact of China’s cooling economy on global markets.
Of course, with the recent market rally, stocks are not as cheap as they have been, but we are still finding many that in our view offer a combination of solid growth potential and attractive valuations. Regardless of what happens in the markets, we will maintain
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. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
our focus on fundamental research and bottom-up stock selection, which means we focus more on the long-term potential of individual companies than on short-term developments in the markets or economy. We also want to maintain a portfolio that is balanced in terms of geography, cyclicals and staples, and industry sectors.
Thank you, Walter, for your time and insights.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 Walter D. Scully has an M.B.A. from The University of Chicago Booth School of Business and a B.S. from The Ohio State University. A Certified Public Accountant, he has been in the investment industry since he joined Putnam in 1996.
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 77.75% | 67.53% | 73.45% | 70.45% | 73.56% | 73.56% | 74.96% | 68.88% | 76.36% | 79.17% |
| Annual average | 19.72 | 17.52 | 18.80 | 18.16 | 18.83 | 18.83 | 19.13 | 17.82 | 19.42 | 20.02 |
|
| ||||||||||
| 3 years | 103.40 | 91.76 | 98.75 | 95.75 | 98.87 | 98.87 | 100.23 | 93.15 | 101.83 | 104.78 |
| Annual average | 26.70 | 24.24 | 25.73 | 25.09 | 25.75 | 25.75 | 26.04 | 24.54 | 26.38 | 26.99 |
|
| ||||||||||
| 1 year | 4.40 | –1.59 | 3.57 | –1.17 | 3.65 | 2.70 | 3.91 | 0.27 | 4.14 | 4.65 |
|
| ||||||||||
| 6 months | 10.40 | 4.06 | 9.96 | 4.96 | 10.04 | 9.04 | 10.21 | 6.33 | 10.27 | 10.57 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
Comparative index returns For periods ended 2/29/12
| MSCI World Consumer Discretionary & | |
| Consumer Staples Index (ND) | |
|
| |
| Life of fund | 68.89% |
| Annual average | 17.82 |
|
| |
| 3 years | 98.50 |
| Annual average | 25.68 |
|
| |
| 1 year | 7.60 |
|
| |
| 6 months | 9.34 |
|
| |
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
10
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | $0.198 | $0.117 | $0.164 | $0.130 | $0.216 | $0.252 | ||
|
| ||||||||
| Capital gains — Long-term | 0.930 | 0.930 | 0.930 | 0.930 | 0.930 | 0.930 | ||
|
| ||||||||
| Capital gains — Short-term | 0.155 | 0.155 | 0.155 | 0.155 | 0.155 | 0.155 | ||
|
| ||||||||
| Total | $1.283 | $1.202 | $1.249 | $1.215 | $1.301 | $1.337 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $14.62 | $15.51 | $14.43 | $14.44 | $14.53 | $15.06 | $14.60 | $14.67 |
|
| ||||||||
| 2/29/12 | 14.70 | 15.60 | 14.52 | 14.49 | 14.65 | 15.18 | 14.64 | 14.72 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 83.92% | 73.34% | 79.42% | 76.42% | 79.42% | 79.42% | 80.93% | 74.65% | 82.50% | 85.50% |
| Annual average | 20.38 | 18.23 | 19.48 | 18.86 | 19.48 | 19.48 | 19.78 | 18.50 | 20.10 | 20.69 |
|
| ||||||||||
| 3 years | 99.06 | 87.67 | 94.66 | 91.66 | 94.66 | 94.66 | 96.06 | 89.28 | 97.55 | 100.54 |
| Annual average | 25.79 | 23.35 | 24.86 | 24.22 | 24.86 | 24.86 | 25.16 | 23.70 | 25.48 | 26.11 |
|
| ||||||||||
| 1 year | 9.29 | 3.02 | 8.48 | 3.52 | 8.50 | 7.51 | 8.73 | 4.94 | 9.03 | 9.62 |
|
| ||||||||||
| 6 months | 25.37 | 18.19 | 24.91 | 19.91 | 24.92 | 23.92 | 25.07 | 20.70 | 25.27 | 25.61 |
|
| ||||||||||
11
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.40% | 2.15% | 2.15% | 1.90% | 1.65% | 1.15% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 1.80% | 2.55% | 2.55% | 2.30% | 2.05% | 1.55% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12 | 1.43% | 2.18% | 2.18% | 1.93% | 1.68% | 1.18% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/12.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.48 | $11.38 | $11.38 | $10.09 | $8.78 | $6.18 |
|
| ||||||
| Ending value (after expenses) | $1,104.00 | $1,099.60 | $1,100.40 | $1,102.10 | $1,102.70 | $1,105.70 |
|
| ||||||
* 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 2/29/12. 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.
12
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.17 | $10.92 | $10.92 | $9.67 | $8.42 | $5.92 |
|
| ||||||
| Ending value (after expenses) | $1,017.75 | $1,014.02 | $1,014.02 | $1,015.27 | $1,016.51 | $1,019.00 |
|
| ||||||
* 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 2/29/12. 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.
13
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Consumer Discretionary & Consumer Staples Index (ND) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the consumer discretionary and consumer staples sectors.
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.
14
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
15
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
16
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (95.5%)* | Shares | Value |
|
| ||
| Airlines (1.1%) | ||
| Delta Air Lines, Inc. † | 4,860 | $47,677 |
|
| ||
| United Continental Holdings, Inc. † | 3,870 | 79,916 |
|
| ||
| 127,593 | ||
| Auto components (1.1%) | ||
| Valeo SA (France) | 2,315 | 124,558 |
|
| ||
| 124,558 | ||
| Automobiles (7.8%) | ||
| Fiat SpA (Italy) S | 24,635 | 142,510 |
|
| ||
| Ford Motor Co. † | 17,760 | 219,869 |
|
| ||
| Nissan Motor Co., Ltd. (Japan) | 29,700 | 305,488 |
|
| ||
| Porsche Automobil Holding SE (Preference) (Germany) | 1,532 | 99,738 |
|
| ||
| Toyota Motor Corp. (Japan) | 3,000 | 124,006 |
|
| ||
| 891,611 | ||
| Beverages (9.1%) | ||
| Anheuser-Busch InBev NV (Belgium) | 5,161 | 346,688 |
|
| ||
| Beam, Inc. | 1,300 | 71,604 |
|
| ||
| Coca-Cola Co. (The) | 1,710 | 119,461 |
|
| ||
| Coca-Cola Enterprises, Inc. | 9,220 | 266,458 |
|
| ||
| Diageo PLC (United Kingdom) | 9,550 | 228,428 |
|
| ||
| 1,032,639 | ||
| Building products (1.1%) | ||
| Fortune Brands Home & Security, Inc. † | 6,604 | 127,721 |
|
| ||
| 127,721 | ||
| Chemicals (0.8%) | ||
| Monsanto Co. | 1,200 | 92,856 |
|
| ||
| 92,856 | ||
| Food and staples retail (4.5%) | ||
| Jeronimo Martins, SGPS, SA (Portugal) † | 7,768 | 143,441 |
|
| ||
| Lawson, Inc. (Japan) | 3,300 | 194,136 |
|
| ||
| WM Morrison Supermarkets PLC (United Kingdom) | 38,243 | 176,438 |
|
| ||
| 514,015 | ||
| Food products (12.2%) | ||
| Associated British Foods PLC (United Kingdom) | 2,947 | 56,167 |
|
| ||
| BRF — Brasil Foods SA (Brazil) | 2,600 | 54,354 |
|
| ||
| Danone (France) | 3,747 | 253,500 |
|
| ||
| Kerry Group PLC Class A (Ireland) | 5,459 | 232,737 |
|
| ||
| Mead Johnson Nutrition Co. Class A | 2,370 | 184,268 |
|
| ||
| Nestle SA (Switzerland) | 3,959 | 241,995 |
|
| ||
| Post Holdings, Inc. † | 6,100 | 189,954 |
|
| ||
| Toyo Suisan Kaisha, Ltd. (Japan) | 3,000 | 77,057 |
|
| ||
| Zhongpin, Inc. (China) † | 8,500 | 93,670 |
|
| ||
| 1,383,702 | ||
| Hotels, restaurants, and leisure (5.2%) | ||
| Arcos Dorados Holdings, Inc. Class A (Argentina) | 4,870 | 102,367 |
|
| ||
| Asia Entertainment & Resources, Ltd. (Hong Kong) | 19,410 | 123,642 |
|
| ||
| Compass Group PLC (United Kingdom) | 18,961 | 190,040 |
|
| ||
| Home Inns & Hotels Management, Inc. ADR (China) † S | 2,050 | 62,915 |
|
| ||
| Wyndham Worldwide Corp. | 2,528 | 111,207 |
|
| ||
| 590,171 | ||
17
| COMMON STOCKS (95.5%)* cont. | Shares | Value |
|
| ||
| Household durables (0.4%) | ||
| Sharp Corp. (Japan) | 6,000 | $42,312 |
|
| ||
| 42,312 | ||
| Household products (4.0%) | ||
| Procter & Gamble Co. (The) | 6,769 | 457,043 |
|
| ||
| 457,043 | ||
| Internet and catalog retail (3.6%) | ||
| Amazon.com, Inc. † | 300 | 53,907 |
|
| ||
| Priceline.com, Inc. † S | 480 | 300,970 |
|
| ||
| Rakuten, Inc. (Japan) | 59 | 58,671 |
|
| ||
| 413,548 | ||
| Internet software and services (1.6%) | ||
| eBay, Inc. † | 3,400 | 121,516 |
|
| ||
| Tencent Holdings, Ltd. (China) | 2,300 | 59,340 |
|
| ||
| 180,856 | ||
| Leisure equipment and products (1.4%) | ||
| Hasbro, Inc. | 4,660 | 164,591 |
|
| ||
| 164,591 | ||
| Machinery (0.9%) | ||
| Stanley Black & Decker, Inc. | 1,400 | 107,520 |
|
| ||
| 107,520 | ||
| Media (9.6%) | ||
| British Sky Broadcasting Group PLC (United Kingdom) | 10,903 | 116,215 |
|
| ||
| Interpublic Group of Companies, Inc. (The) | 18,720 | 219,398 |
|
| ||
| Kabel Deutschland Holding AG (Germany) † | 4 | 240 |
|
| ||
| Pearson PLC (United Kingdom) | 10,823 | 206,448 |
|
| ||
| Perform Group PLC (United Kingdom) † | 19,659 | 82,943 |
|
| ||
| Time Warner, Inc. | 5,520 | 205,399 |
|
| ||
| Trinity Mirror PLC (United Kingdom) † | 71,241 | 52,135 |
|
| ||
| WPP PLC (Ireland) | 16,129 | 206,175 |
|
| ||
| 1,088,953 | ||
| Multiline retail (4.1%) | ||
| Dollar General Corp. † | 3,270 | 137,536 |
|
| ||
| Target Corp. | 5,720 | 324,267 |
|
| ||
| 461,803 | ||
| Personal products (1.0%) | ||
| Avon Products, Inc. | 6,200 | 115,878 |
|
| ||
| 115,878 | ||
| Real estate management and development (2.3%) | ||
| BR Malls Participacoes SA (Brazil) | 10,300 | 132,015 |
|
| ||
| Daito Trust Construction Co., Ltd. (Japan) | 1,500 | 132,215 |
|
| ||
| 264,230 | ||
| Road and rail (2.0%) | ||
| Hertz Global Holdings, Inc. † | 9,200 | 131,560 |
|
| ||
| Localiza Rent a Car SA (Brazil) | 4,900 | 90,510 |
|
| ||
| 222,070 | ||
| Software (0.6%) | ||
| Perfect World Co., Ltd. ADR (China) † | 5,130 | 63,099 |
|
| ||
| 63,099 | ||
| Specialty retail (8.6%) | ||
| Bed Bath & Beyond, Inc. † | 5,040 | 301,090 |
|
| ||
| Best Buy Co., Inc. | 5,320 | 131,404 |
|
| ||
| Cia Hering (Brazil) | 4,000 | 107,591 |
|
| ||
| Kingfisher PLC (United Kingdom) | 45,123 | 204,016 |
|
| ||
18
| COMMON STOCKS (95.5%)* cont. | Shares | Value | |
|
| |||
| Specialty retail cont. | |||
| Signet Jewelers, Ltd. (Bermuda) | 2,890 | $135,541 | |
|
| |||
| Staples, Inc. | 6,540 | 95,876 | |
|
| |||
| 975,518 | |||
| Textiles, apparel, and luxury goods (3.0%) | |||
| Christian Dior SA (France) | 1,320 | 204,793 | |
|
| |||
| Hanesbrands, Inc. † | 4,600 | 132,158 | |
|
| |||
| 336,951 | |||
| Tobacco (9.5%) | |||
| British American Tobacco (BAT) PLC (United Kingdom) | 2,040 | 103,108 | |
|
| |||
| Imperial Tobacco Group PLC (United Kingdom) | 5,014 | 198,701 | |
|
| |||
| Japan Tobacco, Inc. (Japan) | 52 | 276,325 | |
|
| |||
| Philip Morris International, Inc. | 6,080 | 507,800 | |
|
| |||
| 1,085,934 | |||
| Total common stocks (cost $8,923,786) | $10,865,172 | ||
| CONVERTIBLE BONDS AND NOTES (1.4%)* | Principal amount | Value | |
|
| |||
| TUI Travel PLC cv. sr. unsec. bonds 6s, 2014 | |||
| (United Kingdom) | GBP | 100,000 | $155,851 |
|
| |||
| Total convertible bonds and notes (cost $137,266) | $155,851 | ||
| SHORT-TERM INVESTMENTS (5.7%)* | Shares | Value | |
|
| |||
| Putnam Cash Collateral Pool, LLC 0.18% d | 406,740 | $406,740 | |
|
| |||
| Putnam Money Market Liquidity Fund 0.09% e | 247,489 | 247,489 | |
|
| |||
| Total short-term investments (cost $654,229) | $654,229 | ||
| TOTAL INVESTMENTS | |||
|
| |||
| Total investments (cost $9,715,281) | $11,675,252 | ||
Key to holding’s currency abbreviations
| GBP | British Pound |
| USD/$ | United States Dollar |
Key to holding’s abbreviations
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $11,381,353.
† Non-income-producing security.
d See Note 1 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
e See Note 6 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
S Security on loan, in part or in entirety, at the close of the reporting period.
19
At the close of the reporting period, the fund maintained liquid assets totaling $43,073 to cover certain derivatives contracts.
Debt obligations are considered secured unless otherwise indicated.
The dates shown on debt obligations are the original maturity dates.
| DIVERSIFICATION BY COUNTRY* | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| United States | 46.7% | Switzerland | 2.1% | |
|
|
| |||
| United Kingdom | 15.7 | Portugal | 1.3 | |
|
|
| |||
| Japan | 10.7 | Italy | 1.3 | |
|
|
| |||
| France | 5.2 | Bermuda | 1.2 | |
|
|
| |||
| Ireland | 3.9 | Hong Kong | 1.1 | |
|
|
| |||
| Brazil | 3.4 | Argentina | 0.9 | |
|
|
| |||
| Belgium | 3.1 | Germany | 0.9 | |
|
|
| |||
| China | 2.5 | Total | 100.0% | |
|
|
||||
* Methodology differs from that used for purposes of complying with the fund’s policy regarding investments in securities of foreign issuers, as discussed further in the fund’s prospectus.
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $6,833,314) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Bank of America, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | $121,340 | $121,209 | $131 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 444,275 | 442,358 | (1,917) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 80,344 | 79,607 | (737) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 26,079 | 25,659 | (420) | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 49,419 | 48,970 | (449) | |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 45,048 | 45,003 | 45 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 212,037 | 211,069 | (968) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 119,517 | 118,223 | (1,294) | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 206,437 | 206,456 | (19) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 123,339 | 131,792 | (8,453) | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 30,464 | 30,556 | (92) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 40,727 | 40,050 | 677 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 42,675 | 42,286 | (389) | |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 1,273 | 1,266 | (7) | |
|
| ||||||
| Danish Krone | Buy | 3/22/12 | 18,065 | 17,844 | 221 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 81,676 | 80,757 | (919) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 105,700 | 105,710 | 10 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 182,308 | 180,633 | 1,675 | |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 113,529 | 113,409 | 120 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 11,612 | 11,553 | 59 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 31,844 | 31,503 | (341) | |
|
| ||||||
20
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $6,833,314) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Credit Suisse AG cont. | ||||||
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | $230,828 | $246,487 | $15,659 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 19,016 | 18,829 | 187 | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 10,498 | 10,441 | (57) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 242,098 | 239,390 | (2,708) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 44,714 | 43,977 | 737 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 7,850 | 7,771 | (79) | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 68,909 | 68,829 | (80) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 251,008 | 249,783 | 1,225 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 5,330 | 5,268 | 62 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 128,631 | 137,444 | (8,813) | |
|
| ||||||
| HSBC Bank USA, National Association | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 47,830 | 47,735 | 95 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 84,942 | 84,539 | (403) | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 29,801 | 29,561 | (240) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 76,480 | 75,601 | 879 | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 4,732 | 4,732 | — | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 10,874 | 10,906 | (32) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 34,273 | 33,945 | 328 | |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 95,874 | 95,788 | (86) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 127,890 | 127,322 | 568 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 51,824 | 51,431 | 393 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 78,345 | 77,445 | (900) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 67,265 | 67,274 | 9 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 230,652 | 246,426 | 15,774 | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 41,579 | 41,709 | (130) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 50,936 | 50,099 | 837 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 67,661 | 66,960 | 701 | |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 39,270 | 39,184 | 86 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 225,717 | 224,670 | (1,047) | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 11,314 | 11,217 | (97) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 87,805 | 86,815 | (990) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 212,092 | 226,740 | 14,648 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 58,263 | 57,702 | 561 | |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 105,870 | 105,096 | 774 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 140,568 | 139,311 | (1,257) | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 16,906 | 16,888 | 18 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 348,676 | 347,093 | (1,583) | |
|
| ||||||
21
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $6,833,314) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| UBS AG cont. | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | $506,713 | $501,388 | $5,325 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 44,665 | 44,226 | 439 | |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 22,791 | 22,744 | (47) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 85,419 | 85,040 | 379 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 32,125 | 31,880 | 245 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 185,204 | 183,218 | 1,986 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 461,393 | 484,497 | (23,104) | |
|
| ||||||
| Total | $7,195 | |||||
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Consumer discretionary | $4,559,539 | $530,477 | $— | |
|
| ||||
| Consumer staples | 4,041,693 | 547,518 | — | |
|
| ||||
| Financials | 132,015 | 132,215 | — | |
|
| ||||
| Industrials | 584,904 | — | — | |
|
| ||||
| Information technology | 184,615 | 59,340 | — | |
|
| ||||
| Materials | 92,856 | — | — | |
|
| ||||
| Total common stocks | 9,595,622 | 1,269,550 | — | |
| Convertible bonds and notes | — | 155,851 | — | |
|
| ||||
| Short-term investments | 247,489 | 406,740 | — | |
|
| ||||
| Totals by level | $9,843,111 | $1,832,141 | $— | |
| Valuation inputs | ||||
|
| ||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Forward currency contracts | $— | $7,195 | $— | |
|
| ||||
| Totals by level | $— | $7,195 | $— | |
The accompanying notes are an integral part of these financial statements.
22
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value, including $387,715 of securities on loan (Note 1): | |
| Unaffiliated issuers (identified cost $9,061,052) | $11,021,023 |
| Affiliated issuers (identified cost $654,229) (Notes 1 and 6) | 654,229 |
|
| |
| Dividends, interest and other receivables | 15,162 |
|
| |
| Foreign tax reclaim | 4,155 |
|
| |
| Receivable for shares of the fund sold | 135,137 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 64,853 |
|
| |
| Receivable from Manager (Note 2) | 3,533 |
|
| |
| Total assets | 11,898,092 |
| LIABILITIES | |
|
| |
| Payable for shares of the fund repurchased | 873 |
|
| |
| Payable for investor servicing fees (Note 2) | 2,949 |
|
| |
| Payable for custodian fees (Note 2) | 9,413 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 1,556 |
|
| |
| Payable for administrative services (Note 2) | 42 |
|
| |
| Payable for distribution fees (Note 2) | 4,299 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 57,658 |
|
| |
| Collateral on securities loaned, at value (Note 1) | 406,740 |
|
| |
| Other accrued expenses | 33,209 |
|
| |
| Total liabilities | 516,739 |
| Net assets | $11,381,353 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $9,654,614 |
|
| |
| Undistributed net investment income (Note 1) | 20,094 |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (260,476) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 1,967,121 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $11,381,353 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($7,919,256 divided by 538,787 shares) | $14.70 |
|
| |
| Offering price per class A share (100/94.25 of $14.70)* | $15.60 |
|
| |
| Net asset value and offering price per class B share ($586,810 divided by 40,402 shares)** | $14.52 |
|
| |
| Net asset value and offering price per class C share ($918,255 divided by 63,390 shares)** | $14.49 |
|
| |
| Net asset value and redemption price per class M share ($50,165 divided by 3,425 shares) | $14.65 |
|
| |
| Offering price per class M share (100/96.50 of $14.65)* | $15.18 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($63,496 divided by 4,336 shares) | $14.64 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($1,843,371 divided by 125,244 shares) | $14.72 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $2,097) | $110,686 |
|
| |
| Interest (including interest income of $84 from investments in affiliated issuers) (Note 6) | 2,959 |
|
| |
| Securities lending (Note 1) | 2,707 |
|
| |
| Total investment income | 116,352 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 41,590 |
|
| |
| Investor servicing fees (Note 2) | 22,581 |
|
| |
| Custodian fees (Note 2) | 10,281 |
|
| |
| Trustee compensation and expenses (Note 2) | 463 |
|
| |
| Administrative services (Note 2) | 173 |
|
| |
| Distribution fees — Class A (Note 2) | 12,557 |
|
| |
| Distribution fees — Class B (Note 2) | 1,928 |
|
| |
| Distribution fees — Class C (Note 2) | 3,823 |
|
| |
| Distribution fees — Class M (Note 2) | 194 |
|
| |
| Distribution fees — Class R (Note 2) | 121 |
|
| |
| Auditing | 29,769 |
|
| |
| Reports to shareholders | 7,813 |
|
| |
| Other | 2,092 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (37,447) |
|
| |
| Total expenses | 95,938 |
| Expense reduction (Note 2) | (14) |
|
| |
| Net expenses | 95,924 |
| Net investment income | 20,428 |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (233,721) |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (9,928) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 25,869 |
|
| |
| Net unrealized appreciation of investments during the period | 1,130,743 |
|
| |
| Net gain on investments | 912,963 |
| Net increase in net assets resulting from operations | $933,391 |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income | $20,428 | $59,003 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (243,649) | 1,314,339 |
|
| ||
| Net unrealized appreciation of investments and assets | ||
| and liabilities in foreign currencies | 1,156,612 | 210,634 |
|
| ||
| Net increase in net assets resulting from operations | 933,391 | 1,583,976 |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
|
| ||
| Class A | (117,714) | (91,515) |
|
| ||
| Class B | (3,020) | (519) |
|
| ||
| Class C | (8,957) | (376) |
|
| ||
| Class M | (468) | (192) |
|
| ||
| Class R | (835) | (93) |
|
| ||
| Class Y | (30,946) | (11,806) |
|
| ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | (92,150) | (488,828) |
|
| ||
| Class B | (4,001) | (11,758) |
|
| ||
| Class C | (8,466) | (7,273) |
|
| ||
| Class M | (558) | (2,178) |
|
| ||
| Class R | (600) | (711) |
|
| ||
| Class Y | (19,034) | (50,367) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (552,897) | (130,950) |
|
| ||
| Class B | (24,007) | (3,150) |
|
| ||
| Class C | (50,794) | (1,948) |
|
| ||
| Class M | (3,346) | (583) |
|
| ||
| Class R | (3,597) | (191) |
|
| ||
| Class Y | (114,204) | (13,492) |
|
| ||
| Redemption fees (Note 1) | 1,985 | 6,365 |
|
| ||
| Increase (decrease) from capital share transactions (Note 4) | (3,521,165) | 4,217,501 |
|
| ||
| Total increase (decrease) in net assets | (3,621,383) | 4,991,912 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 15,002,736 | 10,010,824 |
|
| ||
| End of period (including undistributed net investment | ||
| income of $20,094 and $161,606, respectively) | $11,381,353 | $15,002,736 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||
|
| ||||||||||||||
| Ratio | Ratio | |||||||||||||
| Net realized | From | of expenses | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | net realized | Total return | Net assets, | to average | income (loss) | Portfolio | |||||
| beginning | Net investment | gain (loss) | investment | net investment | gain | Total | Redemption | Net asset value, | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees | end of period | value (%) b | (in thousands) | (%) c,d | net assets (%) d | (%) |
|
| ||||||||||||||
| Class A | ||||||||||||||
| February 29, 2012 ** | $14.62 | .03 | 1.34 | 1.37 | (.20) | (1.09) | (1.29) | — e | $14.70 | 10.40 * | $7,919 | .71 * | .18 * | 21 * |
| August 31, 2011 | 13.23 | .06 | 2.27 | 2.33 | (.12) | (.83) | (.95) | .01 | 14.62 | 17.44 | 12,058 | 1.40 | .40 | 82 |
| August 31, 2010 | 12.23 | .07 | 1.38 | 1.45 | (.09) | (.37) | (.46) | .01 | 13.23 | 11.99 | 8,758 | 1.47 | .56 | 84 |
| August 31, 2009† | 10.00 | .11 | 2.13 | 2.24 | (.01) | — | (.01) | — e | 12.23 | 22.42 * | 3,995 | .97 * | 1.03 * | 65 * |
|
| ||||||||||||||
| Class B | ||||||||||||||
| February 29, 2012 ** | $14.43 | (.03) | 1.33 | 1.30 | (.12) | (1.09) | (1.21) | — e | $14.52 | 9.96 * | $587 | 1.08 * | (.23) * | 21 * |
| August 31, 2011 | 13.09 | (.05) | 2.24 | 2.19 | (.03) | (.83) | (.86) | .01 | 14.43 | 16.53 | 335 | 2.15 | (.33) | 82 |
| August 31, 2010 | 12.17 | (.02) | 1.36 | 1.34 | (.06) | (.37) | (.43) | .01 | 13.09 | 11.15 | 239 | 2.22 | (.16) | 84 |
| August 31, 2009† | 10.00 | .05 | 2.13 | 2.18 | (.01) | — | (.01) | — e | 12.17 | 21.80 * | 63 | 1.49 * | .45 * | 65 * |
|
| ||||||||||||||
| Class C | ||||||||||||||
| February 29, 2012 ** | $14.44 | (.03) | 1.33 | 1.30 | (.16) | (1.09) | (1.25) | — e | $14.49 | 10.04 * | $918 | 1.08 * | (.23) * | 21 * |
| August 31, 2011 | 13.10 | (.05) | 2.24 | 2.19 | (.03) | (.83) | (.86) | .01 | 14.44 | 16.55 | 639 | 2.15 | (.31) | 82 |
| August 31, 2010 | 12.17 | (.02) | 1.36 | 1.34 | (.05) | (.37) | (.42) | .01 | 13.10 | 11.11 | 127 | 2.22 | (.16) | 84 |
| August 31, 2009† | 10.00 | .05 | 2.13 | 2.18 | (.01) | — | (.01) | — e | 12.17 | 21.80 * | 48 | 1.49 * | .48 * | 65 * |
|
| ||||||||||||||
| Class M | ||||||||||||||
| February 29, 2012 ** | $14.53 | (.01) | 1.35 | 1.34 | (.13) | (1.09) | (1.22) | — e | $14.65 | 10.21 * | $50 | .96 * | (.08) * | 21 * |
| August 31, 2011 | 13.17 | (.01) | 2.26 | 2.25 | (.06) | (.83) | (.89) | — e | 14.53 | 16.79 | 55 | 1.90 | (.09) | 82 |
| August 31, 2010 | 12.19 | — e | 1.39 | 1.39 | (.04) | (.37) | (.41) | — e | 13.17 | 11.41 | 44 | 1.97 | .02 | 84 |
| August 31, 2009† | 10.00 | .07 | 2.13 | 2.20 | (.01) | — | (.01) | — e | 12.19 | 22.01 * | 30 | 1.32 * | .71 * | 65 * |
|
| ||||||||||||||
| Class R | ||||||||||||||
| February 29, 2012 ** | $14.60 | (.01) | 1.36 | 1.35 | (.22) | (1.09) | (1.31) | — e | $14.64 | 10.27 * | $63 | .84 * | (.04) * | 21 * |
| August 31, 2011 | 13.21 | .02 | 2.28 | 2.30 | (.09) | (.83) | (.92) | .01 | 14.60 | 17.19 | 24 | 1.65 | .16 | 82 |
| August 31, 2010 | 12.21 | .04 | 1.38 | 1.42 | (.05) | (.37) | (.42) | — e | 13.21 | 11.68 | 14 | 1.72 | .28 | 84 |
| August 31, 2009† | 10.00 | .09 | 2.13 | 2.22 | (.01) | — | (.01) | — e | 12.21 | 22.21 * | 12 | 1.14 * | .86 * | 65 * |
|
| ||||||||||||||
| Class Y | ||||||||||||||
| February 29, 2012 ** | $14.67 | .04 | 1.35 | 1.39 | (.25) | (1.09) | (1.34) | — e | $14.72 | 10.57 * | $1,843 | .59 * | .29 * | 21 * |
| August 31, 2011 | 13.27 | .11 | 2.26 | 2.37 | (.15) | (.83) | (.98) | .01 | 14.67 | 17.70 | 1,891 | 1.15 | .69 | 82 |
| August 31, 2010 | 12.25 | .10 | 1.39 | 1.49 | (.10) | (.37) | (.47) | — e | 13.27 | 12.26 | 829 | 1.22 | .78 | 84 |
| August 31, 2009† | 10.00 | .10 | 2.16 | 2.26 | (.01) | — | (.01) | — e | 12.25 | 22.64 * | 330 | .79 * | .85 * | 65 * |
|
| ||||||||||||||
* Not annualized.
** Unaudited.
† For the period December 18, 2008 (commencement of operations) to August 31, 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 and/or brokerage/service 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 | |
|
| |
| February 29, 2012 | 0.28% |
|
| |
| August 31, 2011 | 0.40 |
|
| |
| August 31, 2010 | 1.11 |
|
| |
| August 31, 2009 | 5.13 |
|
| |
e Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Global Consumer Fund (the fund) is a non-diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek capital appreciation. The fund concentrates its investments in the consumer staples and consumer discretionary products and services industries, and invests mainly in common stocks (growth or value stocks or both) of large and midsize companies worldwide that Putnam Management believes have favorable investment potential. Potential investments include companies engaged in the manufacture, sale or distribution of consumer staples and consumer discretionary products and services. The fund may purchase stocks of companies with stock prices that reflect a value lower than that which Putnam Management places on the company. Putnam Management also considers other factors that it believes will cause the stock price to rise and may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
28
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income 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.
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.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk.
The U.S. dollar value of forward 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
29
loss. 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 when the contract matures or by delivery of the currency. 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 forward currency contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $44,622 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash 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 agent; 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. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the value of securities loaned amounted to $387,715 and the fund received cash collateral of $406,740.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
30
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $9,724,728, resulting in gross unrealized appreciation and depreciation of $2,291,279 and $340,755, respectively, or net unrealized appreciation of $1,950,524.
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.
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 a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.780% | of the first $5 billion, |
| 0.730% | of the next $5 billion, |
| 0.680% | of the next $10 billion, |
| 0.630% | of the next $10 billion, |
| 0.580% | of the next $50 billion, |
| 0.560% | of the next $50 billion, |
| 0.550% | of the next $100 billion and |
| 0.545% | of any excess thereafter. |
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $37,447 as a result of this limit.
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
31
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 a separate 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 for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $14 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $8, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $448 and no monies from the sale of class A and class M shares, respectively, and received $38 and $60 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
32
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $2,655,529 and $7,374,138, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 52,004 | $737,139 | 485,148 | $7,458,827 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 37,161 | 486,805 | 45,410 | 691,589 |
|
| ||||
| 89,165 | 1,223,944 | 530,558 | 8,150,416 | |
|
| ||||
| Shares repurchased | (375,402) | (5,208,445) | (367,561) | (5,573,316) |
|
| ||||
| Net increase (decrease) | (286,237) | $(3,984,501) | 162,997 | $2,577,100 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 19,988 | $277,354 | 17,459 | $264,454 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,166 | 28,075 | 882 | 13,324 |
|
| ||||
| 22,154 | 305,429 | 18,341 | 277,778 | |
|
| ||||
| Shares repurchased | (4,980) | (69,168) | (13,394) | (200,445) |
|
| ||||
| Net increase | 17,174 | $236,261 | 4,947 | $77,333 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 19,269 | $265,629 | 38,873 | $579,683 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 5,258 | 67,992 | 564 | 8,530 |
|
| ||||
| 24,527 | 333,621 | 39,437 | 588,213 | |
|
| ||||
| Shares repurchased | (5,390) | (75,383) | (4,847) | (72,966) |
|
| ||||
| Net increase | 19,137 | $258,238 | 34,590 | $515,247 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 1,350 | $19,790 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 335 | 4,372 | 194 | 2,947 |
|
| ||||
| 335 | 4,372 | 1,544 | 22,737 | |
|
| ||||
| Shares repurchased | (681) | (9,533) | (1,077) | (15,763) |
|
| ||||
| Net increase (decrease) | (346) | $(5,161) | 467 | $6,974 |
|
| ||||
33
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 2,283 | $32,687 | 518 | $8,367 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 386 | 5,032 | 65 | 995 |
|
| ||||
| 2,669 | 37,719 | 583 | 9,362 | |
|
| ||||
| Shares repurchased | — | — | — | — |
|
| ||||
| Net increase | 2,669 | $37,719 | 583 | $9,362 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 13,874 | $192,938 | 98,671 | $1,526,078 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 12,523 | 164,184 | 4,051 | 61,813 |
|
| ||||
| 26,397 | 357,122 | 102,722 | 1,587,891 | |
|
| ||||
| Shares repurchased | (30,080) | (420,843) | (36,253) | (556,406) |
|
| ||||
| Net increase (decrease) | (3,683) | $(63,721) | 66,469 | $1,031,485 |
|
| ||||
At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:
| Shares owned | Percentage of ownership | Value | |
|
| |||
| Class A | 192,340 | 35.70% | $2,827,398 |
|
| |||
| Class M | 1,194 | 34.86 | 17,492 |
|
| |||
| Class R | 1,205 | 27.79 | 17,641 |
|
| |||
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | $64,853 | Payables | $57,658 |
|
| ||||
| Total | $64,853 | $57,658 | ||
|
| ||||
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | |
| instruments under ASC 815 | contracts | Total |
|
| ||
| Foreign exchange contracts | $(9,385) | $(9,385) |
|
| ||
| Total | $(9,385) | $(9,385) |
|
| ||
34
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | |
| instruments under ASC 815 | contracts | Total |
|
| ||
| Foreign exchange contracts | $26,083 | $26,083 |
|
| ||
| Total | $26,083 | $26,083 |
|
| ||
Note 6: 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 $84 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $1,163,428 and $1,095,466, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund concentrates its investments in two sectors, which involves more risk than a fund that invests more broadly.
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
35
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
36
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk and | |
| Marketing Services | Executive Vice President, | Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Global Consumer Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Global Energy
Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio managers | 5 | ||
|
|
|||
| Your fund’s performance | 10 | ||
|
|
|||
| Your fund’s expenses | 12 | ||
|
|
|||
| Terms and definitions | 14 | ||
|
|
|||
| Other information for shareholders | 15 | ||
|
|
|||
| Financial statements | 16 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing signs of a turnaround. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the euro-zone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing growth opportunities in energy companies worldwide
The global energy market is a dynamic sector, shaped by the ever-changing balance of geopolitical stability, technological development, and economic growth.
Putnam Global Energy Fund invests at least 80% of its assets in stocks of companies in energy-related industries. The fund’s portfolio managers look for companies around the world that can profit from the global demand for energy.
The fund’s portfolio may include companies engaged in the exploration and production of oil and gas, contractors or owners of drilling rigs, manufacturers of drilling equipment, and providers of supplies and services to oil and gas companies. Fund holdings may also include coal-mining and production companies, oil-refining companies, and businesses that store and transport oil and gas.
While the fund’s managers focus primarily on large and midsize companies, the fund has the flexibility to invest in businesses of all sizes and at different stages of growth, from newer, rapidly growing companies to established global corporations.
To help temper volatility, the fund’s managers seek to diversify the portfolio — geographically and by industry — and to invest with a long-term view, looking for stocks that can help investors build wealth over time. The managers’ disciplined investment process includes analyzing each stock’s valuation as well as the company’s financial strength, competitive positioning, earnings, and cash flow. They conduct their intensive fundamental research with support from analysts in Putnam’s Global Equity Research group.
Consider these risks before investing: International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Additional risks may be associated with emerging-market securities, including illiquidity and volatility. The fund’s policy of concentrating on a limited group of industries and the fund’s non-diversified status, which means the fund may invest in fewer issuers, can increase the fund’s vulnerability to common economic forces and may result in greater losses and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The use of short selling may result in losses if the securities appreciate in value. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer or industry.
Sector investing at Putnam
In recent decades, innovation and business growth have propelled stocks in different industries to market-leading performance. Finding these stocks, many of which are in international markets, requires rigorous research and in-depth knowledge of global markets.
Putnam’s sector funds invest in nine sectors worldwide and offer active management, risk controls, and the expertise of dedicated sector analysts. The funds’ managers invest with flexibility and precision, using fundamental research to hand select stocks for the portfolios.
All sectors in one fund:
Putnam Global Sector Fund
A portfolio of individual Putnam Global Sector Funds that provides exposure to all sectors of the MSCI World Index.
Individual sector funds:
Global Consumer Fund
Retail, hotels, restaurants, media, food and beverages
Global Energy Fund
Oil and gas, energy equipment and services
Global Financials Fund
Commercial banks, insurance, diversified financial services, mortgage finance
Global Health Care Fund
Pharmaceuticals, biotechnology, health-care services
Global Industrials Fund
Airlines, railroads, trucking, aerospace and defense, construction, commercial services
Global Natural Resources Fund
Metals, chemicals, oil and gas, forest products
Global Technology Fund
Software, computers, Internet services
Global Telecommunications Fund
Diversified and wireless telecommunications services
Global Utilities Fund
Electric, gas, and water utilities
| 2 | 3 |
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 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio managers
Global energy markets remained volatile throughout the past six months. How did Putnam Global Energy Fund perform in this environment?
Steve: For the six-month period ending February 29, 2012, the fund’s class A shares underperformed the MSCI World Energy Index [ND]. Active management and stock selection were key drivers of performance, with particularly strong results from several of the fund’s holdings in the exploration and production segment of the oil industry helping, and stocks leveraged to the weaker natural gas industry performed poorly during the period.
What factors influenced the global energy markets during this period?
Steve: With the exception of September 2011, when sovereign debt fears in the eurozone reached a crescendo and sent markets lower, crude oil prices rose steadily during the six-month period. This upward price movement was based initially on signs that global crude inventories were beginning to tighten as a result of improving demand and, more recently, on geopolitical fears about potential supply disruptions emanating from the Middle East and other areas. Meanwhile, North American natural gas prices continued to suffer from a supply imbalance, exacerbated by lower-than-usual seasonal demand during a warm winter, which challenged
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on page 14.
5
companies with exposure to the domestic gas market. While energy stocks in general performed well during the period, we think they could begin to reflect the fundamental worry that if crude prices continue to be driven higher on fears about potential supply disruptions and are not supported by greater overall economic demand, energy stocks’ near-term prospects may be somewhat diminished.
Based on this view, have you made any meaningful shifts in the fund’s investment strategy?
Jessica: We continue to pursue a fundamental, bottom-up approach to managing the portfolio, hewing close to the benchmark in terms of our industry allocations within the sector and seeking to add value through individual security selection. That said, however, both of us — Steve on the domestic side and me on the international side — have become a bit more defensive of late in our positioning, given an environment in which energy prices appear to be driven more by fear than by fundamental measures of supply and demand. Thus, on the margin, each of us incrementally reduced exposures to some higher-risk stocks and added to names that we feel more comfortable owning in the current environment, such as some of the large integrated energy companies.
Which individual holdings would you point to as positive performers for the fund?
Steve: The biggest contribution to the fund’s relative performance was an out-of-benchmark position in Cobalt International Energy, a U.S.-based exploration and production company that recently discovered deepwater assets in the Gulf of Mexico and off the west coast of Africa. This stock is a good example of one of our principal themes in the energy portfolio, namely to invest in companies that can create value by adding resources to their asset base. In the case of Cobalt, while the company hadn’t made any major discoveries, we bought a position based on our belief that even if the company experienced industrywide average drilling
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
success rates, it would create significant value and that there was upside to the stock. That thesis was rewarded late last year when Cobalt made a major discovery off the coast of Angola, and the stock price ran up nicely.
Marathon Oil, an independent exploration company spun off in mid 2011 from its former integrated oil parent, was a strong contributor as well. With new development properties and a new management team, the company was successful in delivering back-to-back quarters of excess production, surprising the market to the upside.
Jessica: An overweight in Tullow Oil also made a significant contribution to performance. Tullow is a U.K.-based oil exploration and production company with major development programs offshore of Angola and onshore in Uganda. During the period, the company made a potentially major new discovery in the Caribbean Sea off the coast of French Guyana, suggesting to the market that the company could still drive value through “wildcat” exploration — high-risk/high-potential-reward drilling in areas where reserves have not yet been discovered — and the stock price advanced nicely. In addition, a major hurdle to the company’s development program in Uganda was removed in January 2012 when final government approval for the program was granted, also serving as a catalyst for the stock’s advance.
Seadrill, a Norwegian offshore drilling company, was another stock that performed well during the period. The demand for deepwater rig companies continues to be very tight as the energy industry intensifies its search for new resources. The company has the youngest rig fleet in the industry and has a high concentration of rigs that are qualified to
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
drill in very deep water. These deepwater and ultra-deepwater rigs continue to take on new contracts at very high day rates, and Seadrill’s cash-flow visibility — as measured by committed contracts — is especially strong, all of which helped make the stock attractive.
What stocks detracted from the fund’s performance?
Steve: Newfield Exploration was the biggest disappointment. I believed this Houston-based company was a good thematic example of the kind of exploration and production company that could benefit from the addition of new resources. The company had put together a sizable position in Utah’s Uinta Basin, and I bought the stock thinking that it was not widely appreciated by the market and that its wells there would beat production expectations. My thesis turned out to be off the mark. The company had to revise its production guidance, the stock took a big hit, and we have since sold out of the position.
Some of the fund’s holdings with leverage to the soft pricing in the natural gas market also detracted. Among these detractors were Baker Hughes, a domestic oilfield services company focused on oil and shale gas reserves, and Southwestern Energy, a Houston-based exploration and production company.
Looking out over the next several months, what is your outlook for investing in the energy sector?
Steve: I’m beginning to think that 2012 may follow a similar pattern to last year’s. We began 2011 with the economy starting to look a little better and oil prices starting to move higher. Then, civil unrest in North Africa and the Middle East caused oil prices to spike, which put a damper on worldwide demand. But after oil prices receded in the summer, the second half of the year turned out to be a pretty good environment for investing in energy stocks. We believe that a similar scenario now seems to be setting up. We have renewed turmoil in the Middle East, particularly current worries about Iran and Israel, which is sending oil prices higher again and could, in turn, put further strain on already-stressed global economic growth. A worst-case scenario, in our view, would be for more-extreme tensions to break out in
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. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
the Middle East, causing oil prices to spike a lot higher and potentially resulting in global demand destruction. As a consequence, we have become more conservative in positioning the fund, while also hoping for a more peaceful resolution to problems in the Middle East, a fall-back in oil prices, improving economic demand, and a better overall investment environment.
Jessica: I would add to that my view that the outlook on the natural gas markets outside of North America is more optimistic, particularly as natural gas is used to fuel electrical power plants. As we look out over the next two to three years, we believe that the incremental supply of liquid natural gas (LNG) is not going to be sufficient to meet the incremental demand, especially after the chilling effects of last year’s tragedy at the Fukushima nuclear power plant. So we tend to be pretty constructive on companies that have strong global LNG positions, such as some of the integrated international energy companies, and on companies that may be hired to engineer and build new LNG plants.
Thank you, Steve and Jessica, for your time and insights.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 Steven W. Curbow has an M.B.A. from The University of Chicago Booth School of Business and a B.S. from the University of Southern California. Steven joined Putnam in 2008 and has been in the investment industry since 1996.
Portfolio Manager Jessica L. Wirth has an M.B.A. from the Wharton School of the University of Pennsylvania and a B.A. from Dartmouth College. Jessica joined Putnam in 2004 and has been in the investment industry since 2001.
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 53.97% | 45.12% | 50.38% | 47.38% | 50.37% | 50.37% | 51.56% | 46.30% | 52.79% | 55.22% |
| Annual average | 14.46 | 12.36 | 13.62 | 12.90 | 13.61 | 13.61 | 13.89 | 12.64 | 14.18 | 14.75 |
|
| ||||||||||
| 3 years | 73.73 | 63.75 | 69.90 | 66.90 | 69.89 | 69.89 | 71.22 | 65.25 | 72.42 | 74.93 |
| Annual average | 20.21 | 17.87 | 19.32 | 18.62 | 19.32 | 19.32 | 19.63 | 18.23 | 19.91 | 20.49 |
|
| ||||||||||
| 1 year | –5.23 | –10.66 | –5.92 | –10.45 | –5.89 | –6.80 | –5.71 | –9.03 | –5.43 | –4.99 |
|
| ||||||||||
| 6 months | 9.53 | 3.22 | 9.14 | 4.14 | 9.18 | 8.18 | 9.25 | 5.43 | 9.42 | 9.68 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
Comparative index returns For periods ended 2/29/12
| MSCI World Energy Index (ND) | |
|
| |
| Life of fund | 53.15% |
| Annual average | 14.27 |
|
| |
| 3 years | 74.75 |
| Annual average | 20.45 |
|
| |
| 1 year | –4.12 |
|
| |
| 6 months | 10.58 |
|
| |
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
10
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | $0.118 | $0.032 | $0.027 | $0.058 | $0.111 | $0.149 | ||
|
| ||||||||
| Capital gains — Long-term | 0.175 | 0.175 | 0.175 | 0.175 | 0.175 | 0.175 | ||
|
| ||||||||
| Capital gains — Short-term | 0.255 | 0.255 | 0.255 | 0.255 | 0.255 | 0.255 | ||
|
| ||||||||
| Total | $0.548 | $0.462 | $0.457 | $0.488 | $0.541 | $0.579 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $13.10 | $13.90 | $12.93 | $12.93 | $12.99 | $13.46 | $13.05 | $13.14 |
|
| ||||||||
| 2/29/12 | 13.74 | 14.58 | 13.60 | 13.61 | 13.65 | 14.15 | 13.68 | 13.77 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 47.02% | 38.57% | 43.52% | 40.52% | 43.52% | 43.52% | 44.68% | 39.65% | 45.87% | 48.24% |
| Annual average | 12.45 | 10.44 | 11.63 | 10.91 | 11.63 | 11.63 | 11.90 | 10.70 | 12.18 | 12.73 |
|
| ||||||||||
| 3 years | 57.53 | 48.46 | 54.14 | 51.14 | 54.14 | 54.14 | 55.20 | 49.74 | 56.31 | 58.65 |
| Annual average | 16.36 | 14.08 | 15.52 | 14.76 | 15.52 | 15.52 | 15.78 | 14.41 | 16.05 | 16.63 |
|
| ||||||||||
| 1 year | –10.51 | –15.64 | –11.16 | –15.44 | –11.13 | –11.98 | –10.94 | –14.05 | –10.66 | –10.28 |
|
| ||||||||||
| 6 months | 20.61 | 13.70 | 20.15 | 15.15 | 20.19 | 19.19 | 20.31 | 16.08 | 20.43 | 20.73 |
|
| ||||||||||
11
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.40% | 2.15% | 2.15% | 1.90% | 1.65% | 1.15% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 2.37% | 3.12% | 3.12% | 2.87% | 2.62% | 2.12% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12 | 1.43% | 2.18% | 2.18% | 1.93% | 1.68% | 1.18% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/11.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.45 | $11.34 | $11.34 | $10.04 | $8.75 | $6.15 |
|
| ||||||
| Ending value (after expenses) | $1,095.30 | $1,091.40 | $1,091.80 | $1,092.50 | $1,094.20 | $1,096.80 |
|
| ||||||
* 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 2/29/12. 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.
12
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.17 | $10.92 | $10.92 | $9.67 | $8.42 | $5.92 |
|
| ||||||
| Ending value (after expenses) | $1,017.75 | $1,014.02 | $1,014.02 | $1,015.27 | $1,016.51 | $1,019.00 |
|
| ||||||
* 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 2/29/12. 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.
13
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Energy Index (ND) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the energy sector.
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.
14
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
15
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
16
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (96.6%)* | Shares | Value |
|
| ||
| Construction and engineering (1.1%) | ||
| Fluor Corp. | 1,700 | $102,816 |
|
| ||
| KBR, Inc. | 3,400 | 123,488 |
|
| ||
| 226,304 | ||
| Energy equipment and services (16.3%) | ||
| Baker Hughes, Inc. | 10,200 | 512,856 |
|
| ||
| Cameron International Corp. † | 8,900 | 495,819 |
|
| ||
| Eurasia Drilling Co., Ltd. GDR (Russia) | 3,854 | 113,500 |
|
| ||
| Key Energy Services, Inc. † | 6,200 | 105,772 |
|
| ||
| National Oilwell Varco, Inc. | 3,100 | 255,843 |
|
| ||
| Oil States International, Inc. † | 1,300 | 105,586 |
|
| ||
| Schlumberger, Ltd. | 12,050 | 935,201 |
|
| ||
| Seadrill, Ltd. (Norway) | 9,038 | 374,656 |
|
| ||
| Technip SA (France) | 4,569 | 498,731 |
|
| ||
| 3,397,964 | ||
| Metals and mining (0.8%) | ||
| Walter Energy, Inc. | 2,700 | 175,041 |
|
| ||
| 175,041 | ||
| Oil, gas, and consumable fuels (78.4%) | ||
| Anadarko Petroleum Corp. | 4,700 | 395,364 |
|
| ||
| Apache Corp. | 5,100 | 550,443 |
|
| ||
| BG Group PLC (United Kingdom) | 46,089 | 1,112,676 |
|
| ||
| BP PLC (United Kingdom) | 60,402 | 473,165 |
|
| ||
| Cabot Oil & Gas Corp. Class A | 4,600 | 160,448 |
|
| ||
| Cairn Energy PLC (United Kingdom) † | 38,142 | 208,861 |
|
| ||
| Canadian Natural Resources, Ltd. (Canada) | 18,100 | 671,902 |
|
| ||
| Chevron Corp. | 11,797 | 1,287,289 |
|
| ||
| CNOOC, Ltd. (China) | 51,000 | 115,490 |
|
| ||
| Cobalt International Energy, Inc. † | 5,848 | 175,790 |
|
| ||
| CONSOL Energy, Inc. | 2,500 | 89,550 |
|
| ||
| Devon Energy Corp. | 3,400 | 249,254 |
|
| ||
| Energen Corp. | 2,400 | 127,752 |
|
| ||
| Exxon Mobil Corp. | 36,598 | 3,165,727 |
|
| ||
| Gazprom OAO ADR (Russia) | 19,392 | 256,944 |
|
| ||
| Hess Corp. | 8,700 | 564,804 |
|
| ||
| Inpex Corp. (Japan) | 74 | 522,480 |
|
| ||
| Kosmos Energy, Ltd. † | 7,995 | 112,010 |
|
| ||
| Linn Energy, LLC (Units) | 2,480 | 94,612 |
|
| ||
| Marathon Oil Corp. | 16,000 | 542,240 |
|
| ||
| Nexen, Inc. (Canada) | 11,854 | 241,645 |
|
| ||
| Noble Energy, Inc. | 4,900 | 478,485 |
|
| ||
| Occidental Petroleum Corp. | 1,429 | 149,145 |
|
| ||
| OGX Petroleo e Gas Participacoes SA (Brazil) † | 10,100 | 99,985 |
|
| ||
| Royal Dutch Shell PLC Class A (United Kingdom) (London Exchange) | 32,177 | 1,170,468 |
|
| ||
| Royal Dutch Shell PLC Class A (United Kingdom) (Amsterdam Exchange) | 24,452 | 892,458 |
|
| ||
| Santos, Ltd. (Australia) | 14,667 | 225,522 |
|
| ||
| Southwestern Energy Co. † | 11,300 | 373,578 |
|
| ||
| Swift Energy Co. † | 3,300 | 99,099 |
|
| ||
17
| COMMON STOCKS (96.6%)* cont. | Shares | Value |
|
| ||
| Oil, gas, and consumable fuels cont. | ||
| Total SA (France) | 19,706 | $1,102,418 |
|
| ||
| Tullow Oil PLC (United Kingdom) | 28,154 | 660,655 |
|
| ||
| 16,370,259 | ||
| Total common stocks (cost $18,147,335) | $20,169,568 | |
| SHORT-TERM INVESTMENTS (2.6%)* | Shares | Value |
|
| ||
| Putnam Money Market Liquidity Fund 0.09% e | 534,346 | $534,346 |
|
| ||
| Total short-term investments (cost $534,346) | $534,346 | |
| TOTAL INVESTMENTS | ||
|
| ||
| Total investments (cost $18,681,681) | $20,703,914 | |
Key to holding’s abbreviations
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| GDR | Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $20,873,561.
† Non-income-producing security.
e See Note 6 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
At the close of the reporting period, the fund maintained liquid assets totaling $19,828 to cover certain derivatives contracts.
| DIVERSIFICATION BY COUNTRY * | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| United States | 57.8% | Norway | 1.8% | |
|
|
| |||
| United Kingdom | 21.8 | Russia | 1.8 | |
|
|
| |||
| France | 7.7 | Australia | 1.1 | |
|
|
| |||
| Canada | 4.4 | China | 0.6 | |
|
|
| |||
| Japan | 2.5 | Brazil | 0.5 | |
|
|
| |||
| Total | 100.0% | |||
*Methodology differs from that used for purposes of complying with the fund’s policy regarding investments in securities of foreign issuers, as discussed further in the fund’s prospectus.
18
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $7,450,129) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Bank of America, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | $19,795 | $19,774 | $21 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 227,466 | 226,298 | (1,168) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 408,326 | 405,051 | 3,275 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 30,379 | 30,100 | (279) | |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 185,632 | 184,784 | (848) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 139,105 | 138,035 | 1,070 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 52,363 | 51,797 | 566 | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 52,579 | 52,596 | 17 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 48,871 | 52,221 | (3,350) | |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 28,677 | 28,651 | 26 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 516,810 | 514,166 | 2,644 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 168,604 | 167,352 | 1,252 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 28,513 | 28,192 | 321 | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 101,291 | 101,300 | 9 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 102,154 | 101,216 | 938 | |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 20,116 | 20,095 | (21) | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 525,241 | 522,568 | (2,673) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 161,229 | 159,952 | 1,277 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 127,244 | 125,879 | 1,365 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 101,337 | 108,211 | (6,874) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 46,763 | 45,023 | (1,740) | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 51,789 | 51,731 | 58 | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 2,526 | 2,506 | (20) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 11,592 | 11,462 | 130 | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 21,293 | 21,269 | 24 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 84,306 | 83,894 | 412 | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 340,844 | 338,239 | (2,605) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 342,960 | 338,998 | 3,962 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 219,935 | 235,004 | 15,069 | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 85,018 | 81,857 | (3,161) | |
|
| ||||||
| HSBC Bank USA, National Association | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 189,131 | 188,234 | (897) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 84,756 | 84,073 | 683 | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 40,253 | 40,257 | (4) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 34,447 | 33,172 | (1,275) | |
|
| ||||||
19
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $7,450,129) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | $33,881 | $33,731 | $(150) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 543,289 | 539,169 | 4,120 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 322,175 | 318,475 | (3,700) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 121,194 | 129,482 | (8,288) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 68,152 | 68,920 | 768 | |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 78,433 | 78,260 | 173 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 107,371 | 106,873 | (498) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 299,829 | 297,242 | 2,587 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 130,309 | 128,839 | (1,470) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 92,190 | 98,557 | 6,367 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 60,253 | 59,672 | (581) | |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 40,812 | 40,514 | 298 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 27,048 | 26,764 | 284 | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 8,132 | 8,123 | 9 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 196,289 | 195,429 | (860) | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 18,386 | 18,243 | (143) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 49,432 | 48,913 | 519 | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 188,984 | 181,968 | 7,016 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 49,308 | 48,823 | 485 | |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 49,756 | 49,653 | 103 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 20,361 | 20,270 | 91 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 151,733 | 150,577 | 1,156 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 27,714 | 27,417 | 297 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 168,611 | 180,258 | 11,647 | |
|
| ||||||
| Total | $28,434 | |||||
20
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Energy | $18,904,731 | $863,492 | $— | |
|
| ||||
| Industrials | 226,304 | — | — | |
|
| ||||
| Materials | 175,041 | — | — | |
|
| ||||
| Total common stocks | 19,306,076 | 863,492 | — | |
| Short-term investments | 534,346 | — | — | |
|
| ||||
| Totals by level | $19,840,422 | $863,492 | $— | |
| Valuation inputs | ||||
|
| ||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Forward currency contracts | $— | $28,434 | $— | |
|
| ||||
| Totals by level | $— | $28,434 | $— | |
The accompanying notes are an integral part of these financial statements.
21
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value, including (Note 1): | |
| Unaffiliated issuers (identified cost $18,147,335) | $20,169,568 |
| Affiliated issuers (identified cost $534,346) (Notes 1 and 6) | 534,346 |
|
| |
| Cash | 19,030 |
|
| |
| Dividends, interest and other receivables | 61,706 |
|
| |
| Receivable for shares of the fund sold | 65,822 |
|
| |
| Receivable for investments sold | 111,910 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 69,039 |
|
| |
| Total assets | 21,031,421 |
| LIABILITIES | |
|
| |
| Payable for investments purchased | 42,226 |
|
| |
| Payable for shares of the fund repurchased | 13,452 |
|
| |
| Payable for compensation of Manager (Note 2) | 228 |
|
| |
| Payable for investor servicing fees (Note 2) | 5,339 |
|
| |
| Payable for custodian fees (Note 2) | 9,112 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 1,618 |
|
| |
| Payable for administrative services (Note 2) | 76 |
|
| |
| Payable for distribution fees (Note 2) | 9,414 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 40,605 |
|
| |
| Other accrued expenses | 35,790 |
|
| |
| Total liabilities | 157,860 |
| Net assets | $20,873,561 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $19,078,432 |
|
| |
| Undistributed net investment income (Note 1) | 234,671 |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (490,500) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 2,050,958 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $20,873,561 |
(Continued on next page)
22
Statement of assets and liabilities (Continued)
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($14,593,518 divided by 1,062,239 shares) | $1r3.74 |
|
| |
| Offering price per class A share (100/94.25 of $13.74)* | $14.58 |
|
| |
| Net asset value and offering price per class B share ($2,624,955 divided by 193,058 shares)** | $13.60 |
|
| |
| Net asset value and offering price per class C share ($1,090,434 divided by 80,144 shares)** | $13.61 |
|
| |
| Net asset value and redemption price per class M share ($401,050 divided by 29,384 shares) | $13.65 |
|
| |
| Offering price per class M share (100/96.50 of $13.65)* | $14.15 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($734,307 divided by 53,672 shares) | $13.68 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($1,429,297 divided by 103,789 shares) | $13.77 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $10,197) | $339,821 |
|
| |
| Interest (including interest income of $146 from investments in affiliated issuers) (Note 6) | 146 |
|
| |
| Securities lending (Note 1) | 161 |
|
| |
| Total investment income | 340,128 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 58,245 |
|
| |
| Investor servicing fees (Note 2) | 31,361 |
|
| |
| Custodian fees (Note 2) | 8,635 |
|
| |
| Trustee compensation and expenses (Note 2) | 660 |
|
| |
| Administrative services (Note 2) | 247 |
|
| |
| Distribution fees — Class A (Note 2) | 16,001 |
|
| |
| Distribution fees — Class B (Note 2) | 11,415 |
|
| |
| Distribution fees — Class C (Note 2) | 4,993 |
|
| |
| Distribution fees — Class M (Note 2) | 1,397 |
|
| |
| Distribution fees — Class R (Note 2) | 1,594 |
|
| |
| Auditing | 29,825 |
|
| |
| Other | 11,808 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (32,809) |
|
| |
| Total expenses | 143,372 |
| Expense reduction (Note 2) | (26) |
|
| |
| Net expenses | 143,346 |
| Net investment income | 196,782 |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (340,427) |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (66,342) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 67,649 |
|
| |
| Net unrealized appreciation of investments during the period | 1,935,328 |
|
| |
| Net gain on investments | 1,596,208 |
| Net increase in net assets resulting from operations | $1,792,990 |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income | $196,782 | $72,192 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (406,769) | 896,572 |
|
| ||
| Net unrealized appreciation of investments and assets | ||
| and liabilities in foreign currencies | 2,002,977 | 319,269 |
|
| ||
| Net increase in net assets resulting from operations | 1,792,990 | 1,288,033 |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
|
| ||
| Class A | (117,563) | (101,468) |
|
| ||
| Class B | (5,795) | (6,391) |
|
| ||
| Class C | (2,155) | (3,998) |
|
| ||
| Class M | (1,657) | (1,800) |
|
| ||
| Class R | (5,559) | (396) |
|
| ||
| Class Y | (14,414) | (7,873) |
|
| ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | (254,055) | (81,829) |
|
| ||
| Class B | (46,182) | (9,510) |
|
| ||
| Class C | (20,348) | (5,616) |
|
| ||
| Class M | (7,286) | (2,103) |
|
| ||
| Class R | (12,771) | (328) |
|
| ||
| Class Y | (24,668) | (5,378) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (174,351) | (212,754) |
|
| ||
| Class B | (31,694) | (24,726) |
|
| ||
| Class C | (13,965) | (14,601) |
|
| ||
| Class M | (5,000) | (5,467) |
|
| ||
| Class R | (8,765) | (852) |
|
| ||
| Class Y | (16,929) | (13,983) |
|
| ||
| Redemption fees (Note 1) | 1,335 | 6,786 |
|
| ||
| Increase from capital share transactions (Note 4) | 2,228,320 | 8,116,178 |
|
| ||
| Total increase in net assets | 3,259,488 | 8,911,924 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 17,614,073 | 8,702,149 |
|
| ||
| End of period (including undistributed net investment | ||
| income of $234,671 and $185,032, respectively) | $20,873,561 | $17,614,073 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||
|
| ||||||||||||||
| Ratio | Ratio | |||||||||||||
| Net realized | From | of expenses | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | net realized | Total return | Net assets, | to average | income (loss) | Portfolio | |||||
| beginning | Net investment | gain (loss) | investment | net investment | gain | Total | Redemption | Net asset value, | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees b | end of period | value (%) c | (in thousands) | (%) d,e | net assets (%) e | (%) |
|
| ||||||||||||||
| Class A | ||||||||||||||
| February 29, 2012 ** | $13.10 | .15 f | 1.04 | 1.19 | (.12) | (.43) | (.55) | — | $13.74 | 9.53 * | $14,594 | .71 * | 1.15 *f | 23 * |
| August 31, 2011 | 10.96 | .08 | 2.67 | 2.75 | (.16) | (.45) | (.61) | — | 13.10 | 24.94 | 12,276 | 1.40 | .58 | 61 |
| August 31, 2010 | 11.53 | .10 | (.34) | (.24) | (.14) | (.19) | (.33) | — | 10.96 | (2.45) | 6,891 | 1.48 | .85 | 57 |
| August 31, 2009† | 10.00 | .13 | 1.40 | 1.53 | — b | — | — b | — | 11.53 | 15.34 * | 5,269 | 1.04 * | 1.22 * | 29 * |
|
| ||||||||||||||
| Class B | ||||||||||||||
| February 29, 2012 ** | $12.93 | .10 f | 1.03 | 1.13 | (.03) | (.43) | (.46) | — | $13.60 | 9.14 * | $2,625 | 1.08 * | .76 *f | 23 * |
| August 31, 2011 | 10.84 | (.02) | 2.64 | 2.62 | (.08) | (.45) | (.53) | — | 12.93 | 24.09 | 2,147 | 2.15 | (.14) | 61 |
| August 31, 2010 | 11.47 | .02 | (.34) | (.32) | (.12) | (.19) | (.31) | — | 10.84 | (3.20) | 781 | 2.23 | .18 | 57 |
| August 31, 2009† | 10.00 | .08 | 1.39 | 1.47 | — b | — | — b | — | 11.47 | 14.71 * | 256 | 1.57 * | .74 * | 29 * |
|
| ||||||||||||||
| Class C | ||||||||||||||
| February 29, 2012 ** | $12.93 | .09 f | 1.05 | 1.14 | (.03) | (.43) | (.46) | — | $13.61 | 9.18 * | $1,090 | 1.08 * | .71 *f | 23 * |
| August 31, 2011 | 10.85 | (.02) | 2.64 | 2.62 | (.09) | (.45) | (.54) | — | 12.93 | 24.02 | 991 | 2.15 | (.12) | 61 |
| August 31, 2010 | 11.47 | .02 | (.34) | (.32) | (.11) | (.19) | (.30) | — | 10.85 | (3.19) | 469 | 2.23 | .13 | 57 |
| August 31, 2009† | 10.00 | .08 | 1.39 | 1.47 | — b | — | — b | — | 11.47 | 14.71 * | 150 | 1.57 * | .70 * | 29 * |
|
| ||||||||||||||
| Class M | ||||||||||||||
| February 29, 2012 ** | $12.99 | .11 f | 1.04 | 1.15 | (.06) | (.43) | (.49) | — | $13.65 | 9.25 * | $401 | .96 * | .83 *f | 23 * |
| August 31, 2011 | 10.88 | .02 | 2.65 | 2.67 | (.11) | (.45) | (.56) | — | 12.99 | 24.40 | 379 | 1.90 | .12 | 61 |
| August 31, 2010 | 11.49 | .05 | (.35) | (.30) | (.12) | (.19) | (.31) | — | 10.88 | (2.96) | 173 | 1.98 | .45 | 57 |
| August 31, 2009† | 10.00 | .10 | 1.39 | 1.49 | — b | — | — b | — | 11.49 | 14.92 * | 65 | 1.39 * | .91 * | 29 * |
|
| ||||||||||||||
| Class R | ||||||||||||||
| February 29, 2012 ** | $13.05 | .13 f | 1.04 | 1.17 | (.11) | (.43) | (.54) | — | $13.68 | 9.42 * | $734 | .84 * | 1.01 *f | 23 * |
| August 31, 2011 | 10.94 | .09 | 2.62 | 2.71 | (.15) | (.45) | (.60) | — | 13.05 | 24.67 | 592 | 1.65 | .67 | 61 |
| August 31, 2010 | 11.51 | .07 | (.34) | (.27) | (.11) | (.19) | (.30) | — | 10.94 | (2.71) | 14 | 1.73 | .60 | 57 |
| August 31, 2009† | 10.00 | .10 | 1.41 | 1.51 | — b | — | — b | — | 11.51 | 15.12 * | 12 | 1.22* | 1.01* | 29* |
|
| ||||||||||||||
| Class Y | ||||||||||||||
| February 29, 2012 ** | $13.14 | .16 f | 1.05 | 1.21 | (.15) | (.43) | (.58) | — | $13.77 | 9.68 * | $1,429 | .59 * | 1.25 *f | 23 * |
| August 31, 2011 | 10.99 | .12 | 2.66 | 2.78 | (.18) | (.45) | (.63) | — | 13.14 | 25.22 | 1,230 | 1.15 | .88 | 61 |
| August 31, 2010 | 11.55 | .14 | (.35) | (.21) | (.16) | (.19) | (.35) | — | 10.99 | (2.19) | 373 | 1.23 | 1.14 | 57 |
| August 31, 2009† | 10.00 | .16 | 1.39 | 1.55 | — b | — | — b | — | 11.55 | 15.55 * | 244 | .86 * | 1.49 * | 29 * |
|
| ||||||||||||||
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Financial highlights (Continued)
* Not annualized.
** Unaudited.
† For the period December 18, 2008 (commencement of operations) to August 31, 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 Amount represents less than $0.01 per share.
c Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
d Includes amounts paid through expense offset and brokerage/service arrangements (Note 2).
e 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 amount (Note 2):
| Percentage of | |
| average net assets | |
|
| |
| February 29, 2012 | 0.18% |
|
| |
| August 31, 2011 | 0.39 |
|
| |
| August 31, 2010 | 1.14 |
|
| |
| August 31, 2009 | 4.00 |
|
| |
f Reflects a dividend received by the fund from a single issuer which amounted to the following amounts:
| Percentage of | ||
| Per share | average net assets | |
|
| ||
| Class A | $0.11 | 0.89% |
|
| ||
| Class B | 0.11 | 0.87 |
|
| ||
| Class C | 0.11 | 0.84 |
|
| ||
| Class M | 0.11 | 0.84 |
|
| ||
| Class R | 0.11 | 0.86 |
|
| ||
| Class Y | 0.11 | 0.87 |
|
| ||
The accompanying notes are an integral part of these financial statements.
28
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Global Energy Fund (the fund) is a non-diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust which is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks (growth or value stocks or both) of large and midsize companies worldwide that Putnam Management believes have favorable investment potential.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
29
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income 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.
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.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange. The U.S. dollar value of forward 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. 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 when the contract matures or by delivery of the currency. 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.
30
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio. The fund had an average contract amount of approximately $7,100,000 on forward currency contracts for the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $19,954 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash 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 agent; 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. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund had no securities out on loan.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or
31
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.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $18,749,077, resulting in gross unrealized appreciation and depreciation of $2,692,786 and $737,949, respectively, or net unrealized appreciation of $1,954,837.
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.
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 a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.780% | of the first $5 billion, |
| 0.730% | of the next $5 billion, |
| 0.680% | of the next $10 billion, |
| 0.630% | of the next $10 billion, |
| 0.580% | of the next $50 billion, |
| 0.560% | of the next $50 billion, |
| 0.550% | of the next $100 billion and |
| 0.545% | of any excess thereafter. |
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $32,809 as a result of this limit.
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 a separate 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 for which PAC is engaged as sub-adviser.
32
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $26 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $14, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $3,200 and $38 from the sale of class A and class M shares, respectively, and received $1,181 and $150 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies from class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $5,572,159 and $4,206,577, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
33
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 190,345 | $2,477,393 | 535,578 | $7,688,519 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 33,854 | 419,116 | 28,846 | 385,101 |
|
| ||||
| 224,199 | 2,896,509 | 564,424 | 8,073,620 | |
|
| ||||
| Shares repurchased | (99,165) | (1,279,066) | (256,144) | (3,543,498) |
|
| ||||
| Net increase | 125,034 | $1,617,443 | 308,280 | $4,530,122 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 45,322 | $569,519 | 151,503 | $2,156,140 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 6,587 | 80,821 | 3,011 | 39,894 |
|
| ||||
| 51,909 | 650,340 | 154,514 | 2,196,034 | |
|
| ||||
| Shares repurchased | (24,936) | (316,947) | (60,487) | (804,560) |
|
| ||||
| Net increase | 26,973 | $333,393 | 94,027 | $1,391,474 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 10,311 | $131,773 | 59,308 | $843,400 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,964 | 36,397 | 1,260 | 16,700 |
|
| ||||
| 13,275 | 168,170 | 60,568 | 860,100 | |
|
| ||||
| Shares repurchased | (9,759) | (126,290) | (27,177) | (374,434) |
|
| ||||
| Net increase | 3,516 | $41,880 | 33,391 | $485,666 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 991 | $12,759 | 16,056 | $228,447 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 1,118 | 13,764 | 688 | 9,133 |
|
| ||||
| 2,109 | 26,523 | 16,744 | 237,580 | |
|
| ||||
| Shares repurchased | (1,913) | (24,573) | (3,494) | (48,951) |
|
| ||||
| Net increase | 196 | $1,950 | 13,250 | $188,629 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 11,748 | $150,899 | 55,356 | $795,441 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,196 | 27,095 | 118 | 1,576 |
|
| ||||
| 13,944 | 177,994 | 55,474 | 797,017 | |
|
| ||||
| Shares repurchased | (5,601) | (73,738) | (11,436) | (167,028) |
|
| ||||
| Net increase | 8,343 | $104,256 | 44,038 | $629,989 |
|
| ||||
34
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 13,545 | $176,524 | 93,563 | $1,359,555 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 4,485 | 55,661 | 2,006 | 26,818 |
|
| ||||
| 18,030 | 232,185 | 95,569 | 1,386,373 | |
|
| ||||
| Shares repurchased | (7,802) | (102,787) | (35,994) | (496,075) |
|
| ||||
| Net increase | 10,228 | $129,398 | 59,575 | $890,298 |
|
| ||||
At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:
| Shares owned | Percent of ownership | Value | |
|
| |||
| Class A | 210,202 | 19.8% | $2,888,175 |
|
| |||
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | $69,039 | Payables | $40,605 |
|
| ||||
| Total | $69,039 | $40,605 | ||
|
| ||||
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | |
| instruments under ASC 815 | contracts | Total |
|
| ||
| Foreign exchange contracts | $(66,974) | $(66,974) |
|
| ||
| Total | $(66,974) | $(66,974) |
|
| ||
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | |
| instruments under ASC 815 | contracts | Total |
|
| ||
| Foreign exchange contracts | $67,252 | $67,252 |
|
| ||
| Total | $67,252 | $67,252 |
|
| ||
Note 6: 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 $146 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $1,726,998 and $1,582,331, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
35
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund concentrates its investments in one sector, which involves more risk than a fund that invests more broadly.
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
36
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk and | |
| Marketing Services | Executive Vice President, | Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Global Energy Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Global Financials
Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio managers | 5 | ||
|
|
|||
| Your fund’s performance | 11 | ||
|
|
|||
| Your fund’s expenses | 13 | ||
|
|
|||
| Terms and definitions | 15 | ||
|
|
|||
| Other information for shareholders | 16 | ||
|
|
|||
| Financial statements | 17 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing signs of a turnaround. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing growth opportunities in financial companies worldwide
In a market economy, the financials sector performs vital functions. For example, banks provide the flow of funding that allows all industries to grow and thrive, while insurance companies help businesses and households recover from unexpected problems. The importance of these roles means that well-managed financial institutions rarely become obsolete, a feature that can make them attractive investments.
As economies develop over time, the financials sector also evolves. From the popularization of credit cards in the 1960s to the introduction of ATMs, financial services advance along with technology and shifting consumer habits. With these changes comes new potential for investors.
Putnam Global Financials Fund pursues growth opportunities by investing in stocks of financial companies worldwide. The fund’s managers work with sector analysts who analyze companies to identify those best positioned to reward investors. The fund also seeks the most attractive industries within the sector, choosing primarily from banking, insurance, and real estate, as well as credit card companies and brokerage firms.
The fund’s global mandate enables it to benefit from investments in many different countries. Since finance is integrated with all other business sectors, the performance of financial companies often reflects the strength of a nation’s economy. Approximately one third of the financial stocks available to investors (measured by market capitalization) trade in the United States. Other large markets are Japan and the United Kingdom. Each country has a different set of financial regulations, which is why it is beneficial for the fund’s managers to compare opportunities across companies, industries, and countries.
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’s policy of concentrating on a limited group of industries and the fund’s non-diversified status, which means the fund may invest in fewer issuers, can increase the fund’s vulnerability to common economic forces and may result in greater losses and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The use of short selling may result in losses if the securities appreciate in value. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer or industry.
Sector investing at Putnam
In recent decades, innovation and business growth have propelled stocks in different industries to market-leading performance. Finding these stocks, many of which are in international markets, requires rigorous research and in-depth knowledge of global markets.
Putnam’s sector funds invest in nine sectors worldwide and offer active management, risk controls, and the expertise of dedicated sector analysts. The funds’ managers invest with flexibility and precision, using fundamental research to hand select stocks for the portfolios.
All sectors in one fund:
Putnam Global Sector Fund
A portfolio of individual Putnam Global Sector Funds that provides exposure to all sectors of the MSCI World Index.
Individual sector funds:
Global Consumer Fund
Retail, hotels, restaurants, media, food and beverages
Global Energy Fund
Oil and gas, energy equipment and services
Global Financials Fund
Commercial banks, insurance, diversified financial services, mortgage finance
Global Health Care Fund
Pharmaceuticals, biotechnology, health-care services
Global Industrials Fund
Airlines, railroads, trucking, aerospace and defense, construction, commercial services
Global Natural Resources Fund
Metals, chemicals, oil and gas, forest products
Global Technology Fund
Software, computers, Internet services
Global Telecommunications Fund
Diversified and wireless telecommunications services
Global Utilities Fund
Electric, gas, and water utilities
| 2 | 3 |
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 11–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio managers
Although the period opened amid a deepening crisis in Europe, the fund advanced over the past six months. What turned markets around?
Jacquelyne: As you mentioned, markets were in retreat when the period began on September 1, 2011, and the financials sector in particular was caught in a tailspin. Worsening concerns about the ability of several European nations to service their debts had snowballed into the potential for a severe banking crisis. Financial stocks retreated until December, when action by the European Central Bank brought much-needed relief to bank funding needs in the form of the Long-Term Refinancing Operation, or LTRO. This action also put markets in general on more stable footing. The LTRO provided a stable source of funding for the European banks and has given them time to address their balance sheet problems.
What was the root of the crisis in Europe?
David: The banks have two major fundamental problems: funding their large balance sheets and maintaining adequate capital levels. European banks in general have high reliance on wholesale funding, which is less stable than customer deposit accounts, which are a more meaningful source of funding for U.S. banks. The cost of wholesale funding for a bank is linked to the cost at which the government can borrow, and in Europe these borrowing costs were generally rising during
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 11–12 for additional fund performance information. Index descriptions can be found on page 15.
5
2011, reaching drastic levels, and for many banks, access to wholesale funding became virtually non-existent.
At the same time, bank capital ratios were worsening because many banks owned sovereign debt of eurozone member states with mounting debt burdens. The value of these bonds decreased as markets grew increasingly skeptical about the ability of several countries, including Greece, Portugal, Spain, and Italy, to service their debt. This trend left banks across Europe with less capital on their balance sheets, and raised the prospect that they would need to go to the equity markets to raise new capital. This increased pressure on bank stock prices.
In the depths of the crisis, the dynamic turned into a vicious feedback loop. Deteriorating capital ratios prompted concern that banks might need to raise capital by selling sovereign bonds at distressed prices, and falling bond prices continued to worsen the capital ratios.
How has the LTRO helped address the problems? Do you see further reforms ahead?
David: The LTRO provides cheap short-term liquidity, and it’s difficult to underestimate the importance of this policy, because it gives time for the industry to address the capital and funding issues. Time was of the essence, and since December we have seen an improvement in a range of factors. Bank stock prices have risen as capital ratios have improved. Sovereign bond prices have increased, and the global economic outlook has become less negative.
Now that banks have the liquidity they need, they can move on to the next steps of restructuring their operations, which include selling some non-core businesses and the further shrinking of non-core assets. If banks are successful in restructuring, shrinking, and de-risking their balance sheets, this should allow them in time to enjoy cheaper and better access to long-term wholesale funding markets.
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
At the same time, the risks of Europe’s heavily indebted major economies — Italy and Spain — must be addressed. This is the key to resolving the fundamental weakness of the sovereign bond assets owned by banks. We believe that Italy and Spain need to steer a careful course, introducing enough budgetary austerity to give markets confidence while neither diminishing economic potential nor losing domestic political support.
How was the fund positioned in the turmoil?
David: We protected the fund from the full brunt of the crisis, though there was still significant volatility. For the six-month period, class A shares returned 9.16% before sales charges, compared with 6.59% for the benchmark index. Foreign currency exposure had only a small effect on results.
We maintained a significant underweight position to European banks, and even within this weighting the positions we held featured relatively stronger capital ratios and better credit quality. An example was Barclays. We built up a position in this stock on the belief that the price was falling because of concerns about its exposure to continental Europe. In our view, its true vulnerability was exaggerated. This overweight position turned into an outperformer relative to the benchmark for the period.
We also favored U.S. banks and emerging markets. U.S. financials have been valued at a small premium over their European counterparts, but we believe they carry significantly less risk. The U.S. economy is also stronger. Emerging markets offer even higher rates of growth, along with reasonable stock valuations. As businesses, banks are leveraged to overall economic growth.
How was the situation for U.S. financials different?
Jacquelyne: In addition to the market fears spreading from Europe, U.S. financials faced
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
specific problems of their own in the form of new regulation, mortgage issues, and the Consumer Financial Protection Bureau. The biggest question centers around implementation of the Volcker Rule, which limits proprietary trading by banks, and was a provision of the 2010 financial reform legislation. The question is how stringent the rule will be. If the implementation of Volcker forces banks to give up their market-making operations, it could have a major impact on bank earnings as well as capital markets more broadly.
The mortgage overhang is being driven by lawsuits, including some by state attorneys general, against major banks. As a result of these lawsuits, there remains a possibility that banks will need to take non-performing loans back onto their balance sheets. At the same time, housing prices remain weak. Both of these factors are limiting banks’ willingness to extend new mortgages, which would be a source of potential earnings growth and would afford greater stability to the housing market.
Third, the new Consumer Financial Protection Bureau is getting off the ground, and it is unclear what effect it might have. While greater transparency and oversight for consumers can help build trust and promote new lending, we believe, it’s possible that lending rules for high-risk borrowers may make this line of business less attractive for banks to undertake.
How did fund holdings perform relative to the benchmark index?
Jacquelyne: Wells Fargo was a large position on an absolute basis and an overweight relative to the benchmark, and contributed strong results in the period. We chose this position because Wells has relatively less exposure than peers to the businesses with regulatory uncertainty. For example, Wells has less exposure to investment banking, which faces regulatory risk as the government mulls implementation of the Volcker Rule. Wells has some exposure to the frail housing market, but based on our research it is less likely to suffer from possible mortgage putbacks. Overall, we continue to favor Wells because we consider it well managed with a durable business model. The opposite was the case with Bank of America, which had large exposure to housing and to mortgage putbacks. This holding
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. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
was previously an underweight relative to the benchmark and was eliminated during the period.
We owned an overweight position in Aflac, an insurance company that provides supplemental health and workplace insurance, and is also a major provider of accident and health insurance in Japan. This stock was undervalued, in our view, because it owned a significant amount of preferred stock issued by European banks. Fortunately, we saw Aflac address these balance sheet issues without having to cut its dividend. As European banks have recovered, so too has Aflac, contributing to fund performance.
What were the results of international holdings?
David: Swiss Reinsurance was a top relative performer. This non-benchmark choice had a clean balance sheet and no capital leverage concerns at a time when the market was highly focused on that factor. Also, pricing of its reinsurance services was improving in the wake of several natural disasters. Following strong relative performance the stock became more fully valued and we eliminated the position.
In Spain, BBVA detracted from relative results. We built a holding in this company during the period, though it remained an underweight position versus the benchmark because the crisis drove down its valuation. The market was undervaluing the fact that the bank has more exposure to emerging markets, including Latin America and Turkey, than to Europe. We favor the stock’s longer-term prospects as we believe the market will recognize that it is less affected by Spain’s problems than by global opportunities.
What is your outlook for the fund and the sector in coming months?
Jacquelyne: We continue to have an underweight position to European banks as they go about rebuilding capital ratios, and as the eurozone addresses sovereign debt risk. We are closely watching Italy and Spain. In Italy, a technocratic government with support from the major parties is making the needed changes, and there are reasonable prospects for success. In Spain, a recently elected national government has a mandate to implement austerity measures, but may need to adjust its policies as it courts voters during local elections this spring.
We see better prospects in the United States and emerging markets. The U.S. economy appears to be doing better and credit conditions are improving. We continue to analyze the risks of regulatory overhang, weak housing, and potential mortgage putbacks, but we believe there are opportunities to position the portfolio in stocks with attractive potential.
David and Jacquelyne, thanks for your insights about the fund and the sector.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 Jacquelyne J. Cavanaugh holds an M.B.A. from Harvard Business School and a B.A. from Brown University. She joined Putnam in 2011 and has been in the investment industry since 1995.
Portfolio Manager David Morgan has a B.S. from Bristol University. He joined Putnam in 2004 and has been in the investment industry since 1995.
9
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
10
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 29.83% | 22.37% | 26.80% | 23.80% | 26.79% | 26.79% | 27.77% | 23.33% | 28.77% | 30.98% |
| Annual average | 8.51 | 6.52 | 7.71 | 6.91 | 7.71 | 7.71 | 7.97 | 6.78 | 8.23 | 8.81 |
|
| ||||||||||
| 3 years | 81.95 | 71.60 | 77.98 | 74.98 | 77.96 | 77.96 | 79.32 | 73.00 | 80.48 | 83.54 |
| Annual average | 22.08 | 19.72 | 21.19 | 20.50 | 21.18 | 21.18 | 21.49 | 20.05 | 21.75 | 22.44 |
|
| ||||||||||
| 1 year | –12.74 | –17.76 | –13.37 | –17.63 | –13.41 | –14.25 | –13.21 | –16.25 | –12.97 | –12.48 |
|
| ||||||||||
| 6 months | 9.16 | 2.90 | 8.72 | 3.72 | 8.73 | 7.73 | 8.81 | 5.05 | 8.89 | 9.34 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
Comparative index returns For periods ended 2/29/12
| MSCI World Financials Index (ND) | |
|
| |
| Life of fund | 29.25% |
| Annual average | 8.36 |
|
| |
| 3 years | 88.70 |
| Annual average | 23.57 |
|
| |
| 1 year | –12.91 |
|
| |
| 6 months | 6.59 |
|
| |
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
11
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | $0.146 | $0.065 | $0.143 | $0.122 | $0.128 | $0.173 | ||
|
| ||||||||
| Capital gains — Long-term | 0.073 | 0.073 | 0.073 | 0.073 | 0.073 | 0.073 | ||
|
| ||||||||
| Capital gains — Short-term | — | — | — | — | — | — | ||
|
| ||||||||
| Total | $0.219 | $0.138 | $0.216 | $0.195 | $0.201 | $0.246 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $10.36 | $10.99 | $10.24 | $10.25 | $10.33 | $10.70 | $10.31 | $10.39 |
|
| ||||||||
| 2/29/12 | 11.05 | 11.72 | 10.97 | 10.89 | 11.01 | 11.41 | 10.99 | 11.07 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 32.18% | 24.58% | 28.99% | 25.99% | 29.00% | 29.00% | 29.97% | 25.45% | 31.12% | 33.23% |
| Annual average | 8.86 | 6.92 | 8.06 | 7.29 | 8.06 | 8.06 | 8.31 | 7.15 | 8.60 | 9.13 |
|
| ||||||||||
| 3 years | 62.06 | 52.69 | 58.37 | 55.37 | 58.38 | 58.38 | 59.56 | 53.89 | 60.77 | 63.12 |
| Annual average | 17.46 | 15.15 | 16.56 | 15.82 | 16.56 | 16.56 | 16.85 | 15.45 | 17.15 | 17.72 |
|
| ||||||||||
| 1 year | –8.77 | –14.02 | –9.47 | –13.93 | –9.50 | –10.39 | –9.26 | –12.45 | –8.99 | –8.65 |
|
| ||||||||||
| 6 months | 29.95 | 22.48 | 29.58 | 24.58 | 29.59 | 28.59 | 29.64 | 25.10 | 29.90 | 30.13 |
|
| ||||||||||
12
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.40% | 2.15% | 2.15% | 1.90% | 1.65% | 1.15% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 2.37% | 3.12% | 3.12% | 2.87% | 2.62% | 2.12% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12 | 1.43% | 2.18% | 2.18% | 1.93% | 1.68% | 1.18% |
|
| ||||||
* Reflects Putnam management’s contractual obligation to limit expenses through 12/30/12.
Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report. Expenses are shown as a percentage of average net assets.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.44 | $11.31 | $11.31 | $10.02 | $8.73 | $6.14 |
|
| ||||||
| Ending value (after expenses) | $1,091.60 | $1,087.20 | $1,087.30 | $1,088.10 | $1,088.90 | $1,093.40 |
|
| ||||||
* 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 2/29/12. 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.
13
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.17 | $10.92 | $10.92 | $9.67 | $8.42 | $5.92 |
|
| ||||||
| Ending value (after expenses) | $1,017.75 | $1,014.02 | $1,014.02 | $1,015.27 | $1,016.51 | $1,019.00 |
|
| ||||||
* 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 2/29/12. 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.
14
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Financials Index (ND) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the financials sector.
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.
15
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
16
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
17
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (97.8%)* | Shares | Value |
|
| ||
| Capital markets (14.4%) | ||
| Apollo Global Management, LLC. Class A | 1,400 | $19,628 |
|
| ||
| Ashmore Group PLC (United Kingdom) | 11,030 | 67,699 |
|
| ||
| BGP Holdings PLC (Malta) F | 82,319 | 110 |
|
| ||
| Blackstone Group LP (The) | 5,900 | 92,158 |
|
| ||
| Charles Schwab Corp. (The) | 7,800 | 108,264 |
|
| ||
| Deutsche Bank AG (Germany) | 3,448 | 161,035 |
|
| ||
| Fortress Investment Group LLC Class A | 7,100 | 27,335 |
|
| ||
| Franklin Resources, Inc. | 900 | 106,101 |
|
| ||
| Goldman Sachs Group, Inc. (The) | 1,987 | 228,783 |
|
| ||
| Invesco, Ltd. | 5,400 | 133,758 |
|
| ||
| Julius Baer Group, Ltd. (Switzerland) † | 2,790 | 109,324 |
|
| ||
| Macquarie Group, Ltd. (Australia) | 3,152 | 89,734 |
|
| ||
| State Street Corp. | 4,800 | 202,704 |
|
| ||
| WisdomTree Investments, Inc. † | 7,243 | 51,280 |
|
| ||
| 1,397,913 | ||
| Commercial banks (37.1%) | ||
| Australia & New Zealand Banking Group, Ltd. (Australia) | 12,706 | 295,874 |
|
| ||
| Banco Bilbao Vizcaya Argentaria SA (BBVA) (Spain) | 25,448 | 228,142 |
|
| ||
| Barclays PLC (United Kingdom) | 46,884 | 182,740 |
|
| ||
| China Construction Bank Corp. (China) | 159,000 | 132,389 |
|
| ||
| DBS Group Holdings, Ltd. (Singapore) | 15,487 | 174,712 |
|
| ||
| DnB NOR ASA (Norway) | 8,548 | 109,729 |
|
| ||
| Fifth Third Bancorp | 8,400 | 114,324 |
|
| ||
| HSBC Holdings PLC (London Exchange) (United Kingdom) | 13,311 | 117,593 |
|
| ||
| Industrial and Commercial Bank of China, Ltd. (China) | 178,000 | 129,449 |
|
| ||
| Itau Unibanco Holding SA ADR (Preference) (Brazil) | 4,600 | 96,830 |
|
| ||
| Kasikornbank PCL NVDR (Thailand) | 17,700 | 85,198 |
|
| ||
| KB Financial Group, Inc. (South Korea) | 1 | 37 |
|
| ||
| KeyCorp | 8,100 | 65,610 |
|
| ||
| Mitsubishi UFJ Financial Group, Inc. (Japan) | 54,700 | 282,176 |
|
| ||
| National Bank of Canada (Canada) | 1,083 | 84,368 |
|
| ||
| PNC Financial Services Group, Inc. | 950 | 56,544 |
|
| ||
| Royal Bank of Scotland Group PLC (United Kingdom) † | 163,662 | 72,695 |
|
| ||
| Sberbank of Russia ADR (Russia) † | 11,414 | 156,600 |
|
| ||
| Standard Chartered PLC (United Kingdom) | 8,908 | 229,227 |
|
| ||
| Swedbank AB Class A (Sweden) | 4,717 | 80,698 |
|
| ||
| Toronto-Dominion Bank (Canada) | 2,341 | 191,241 |
|
| ||
| Turkiye Garanti Bankasi AS (Turkey) | 12,390 | 47,030 |
|
| ||
| Turkiye Vakiflar Bankasi Tao (Turkey) | 44,233 | 78,387 |
|
| ||
| UniCredito Italiano SpA (Italy) | 30,494 | 158,690 |
|
| ||
| Wells Fargo & Co. | 13,891 | 434,649 |
|
| ||
| 3,604,932 | ||
| Consumer finance (1.8%) | ||
| Capital One Financial Corp. | 3,400 | 172,040 |
|
| ||
| 172,040 | ||
| Diversified financial services (11.3%) | ||
| BM&F Bovespa SA (Brazil) | 11,300 | 75,608 |
|
| ||
| Citigroup, Inc. | 12,770 | 425,495 |
|
| ||
| ING Groep NV GDR (Netherlands) † | 13,275 | 117,755 |
|
| ||
18
| COMMON STOCKS (97.8%)* cont. | Shares | Value | ||
|
| ||||
| Diversified financial services cont. | ||||
| JPMorgan Chase & Co. | 6,947 | $272,600 | ||
|
| ||||
| ORIX Corp. (Japan) | 1,570 | 151,468 | ||
|
| ||||
| Warsaw Stock Exchange (Poland) | 4,511 | 60,993 | ||
|
| ||||
| 1,103,919 | ||||
| Insurance (19.0%) | ||||
| ACE, Ltd. | 1,600 | 114,736 | ||
|
| ||||
| Aflac, Inc. | 3,188 | 150,633 | ||
|
| ||||
| AIA Group, Ltd. (Hong Kong) | 43,800 | 165,769 | ||
|
| ||||
| Allianz SE (Germany) | 1,692 | 205,203 | ||
|
| ||||
| AXA SA (France) | 4,319 | 69,655 | ||
|
| ||||
| Brown & Brown, Inc. | 3,000 | 70,890 | ||
|
| ||||
| Marsh & McLennan Cos., Inc. | 4,200 | 131,040 | ||
|
| ||||
| MetLife, Inc. | 4,700 | 181,185 | ||
|
| ||||
| Old Mutual PLC (United Kingdom) | 54,774 | 138,640 | ||
|
| ||||
| Progressive Corp. (The) | 5,200 | 111,384 | ||
|
| ||||
| Prudential Financial, Inc. | 2,537 | 155,163 | ||
|
| ||||
| Prudential PLC (United Kingdom) | 14,346 | 162,614 | ||
|
| ||||
| SCOR (France) | 3,956 | 104,700 | ||
|
| ||||
| XL Group PLC | 3,972 | 82,618 | ||
|
| ||||
| 1,844,230 | ||||
| Real estate investment trusts (REITs) (7.4%) | ||||
| American Capital Agency Corp. R | 1,200 | 36,852 | ||
|
| ||||
| American Tower REIT, Inc. Class A R | 2,300 | 143,934 | ||
|
| ||||
| British Land Company PLC (United Kingdom) R | 13,147 | 98,366 | ||
|
| ||||
| Chimera Investment Corp. R | 15,600 | 47,892 | ||
|
| ||||
| Digital Realty Trust, Inc. R | 1,375 | 99,688 | ||
|
| ||||
| MFA Financial, Inc. R | 6,600 | 48,180 | ||
|
| ||||
| Prologis, Inc. R | 4,708 | 158,471 | ||
|
| ||||
| Westfield Retail Trust (Australia) R | 32,447 | 86,949 | ||
|
| ||||
| 720,332 | ||||
| Real estate management and development (6.8%) | ||||
| CBRE Group, Inc. † | 5,300 | 97,149 | ||
|
| ||||
| Henderson Land Development Co., Ltd. (Hong Kong) | 26,360 | 165,193 | ||
|
| ||||
| Hysan Development Co., Ltd (Hong Kong) | 27,000 | 117,066 | ||
|
| ||||
| Mitsui Fudosan Co., Ltd. (Japan) | 15,000 | 285,196 | ||
|
| ||||
| 664,604 | ||||
| Total common stocks (cost $8,655,876) | $9,507,970 | |||
| WARRANTS (1.1%)* † | Expiration | Strike | ||
| date | price | Warrants | Value | |
|
| ||||
| JPMorgan Chase & Co. W | 10/28/18 | $42.42 | 1,309 | $15,381 |
|
| ||||
| LIC Housing Finance, Ltd. 144A (India) | 6/3/14 | 0.000001 | 17,362 | 92,248 |
|
| ||||
| Total warrants (cost $92,737) | $107,629 | |||
| SHORT-TERM INVESTMENTS (1.4%)* | Shares | Value | ||
|
| ||||
| Putnam Money Market Liquidity Fund 0.09% e | 134,259 | $134,259 | ||
|
| ||||
| Total short-term investments (cost $134,259) | $134,259 | |||
| TOTAL INVESTMENTS | ||||
|
| ||||
| Total investments (cost $8,882,872) | $9,749,858 | |||
19
| Key to holding’s abbreviations | |
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| GDR | Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| NVDR | Non-voting Depository Receipt |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $9,722,079.
† Non-income-producing security.
e See Note 6 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
F Is valued at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).
R Real Estate Investment Trust.
W Warrants issued to the U.S. Treasury under the Troubled Asset Relief Program (TARP).
At the close of the reporting period, the fund maintained liquid assets totaling $12,942 to cover certain derivatives contracts.
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
| DIVERSIFICATION BY COUNTRY * | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| United States | 44.0% | Brazil | 1.8% | |
|
|
| |||
| United Kingdom | 11.0 | Italy | 1.6 | |
|
|
| |||
| Japan | 7.4 | Russia | 1.6 | |
|
|
| |||
| Australia | 4.9 | Turkey | 1.3 | |
|
|
| |||
| Hong Kong | 4.6 | Netherlands | 1.2 | |
|
|
| |||
| Germany | 3.8 | Norway | 1.1 | |
|
|
| |||
| Canada | 2.8 | Switzerland | 1.1 | |
|
|
| |||
| China | 2.7 | India | 0.9 | |
|
|
| |||
| Spain | 2.3 | Thailand | 0.9 | |
|
|
| |||
| Singapore | 1.8 | Sweden | 0.8 | |
|
|
| |||
| France | 1.8 | Poland | 0.6 | |
|
|
| |||
| Total | 100.0% | |||
*Methodology differs from that used for purposes of complying with the fund’s policy regarding investments in securities of foreign issuers, as discussed further in the fund’s prospectus.
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $3,814,968) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | $9,309 | $9,300 | $9 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 3,977 | 3,959 | (18) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 140,116 | 139,038 | 1,078 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 99,664 | 98,585 | 1,079 | |
|
| ||||||
20
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $3,814,968) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Barclays Bank PLC (cont.) | ||||||
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | $8,303 | $8,311 | $(8) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 30,709 | 32,813 | (2,104) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 33,106 | 31,898 | 1,208 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 35,246 | 34,660 | 586 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 27,529 | 28,017 | (488) | |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 14,157 | 14,085 | (72) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 12,122 | 12,032 | 90 | |
|
| ||||||
| Danish Krone | Buy | 3/22/12 | 20,610 | 20,358 | 252 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 420,373 | 418,318 | (2,055) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 228,072 | 228,092 | 20 | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 23,435 | 22,588 | (847) | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 4,798 | 4,814 | (16) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 96,848 | 95,397 | 1,451 | |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 32,957 | 32,922 | 35 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 33,563 | 33,392 | (171) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 99,707 | 98,920 | 787 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 30,912 | 30,580 | (332) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 17,266 | 18,437 | (1,171) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 11,351 | 10,929 | (422) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 442 | 438 | 4 | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 10,272 | 10,246 | 26 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 17,179 | 17,086 | 93 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 64,089 | 63,372 | 717 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 41,858 | 44,738 | (2,880) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 5,391 | 5,302 | (89) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 35,157 | 34,807 | 350 | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 5,408 | 5,382 | (26) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 44,635 | 44,120 | 515 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 105,343 | 112,560 | (7,217) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 42,652 | 41,066 | (1,586) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 52,642 | 52,105 | 537 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 12,272 | 12,159 | 113 | |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 69,872 | 69,810 | 62 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 47,720 | 47,439 | 281 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 220,932 | 219,257 | 1,675 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 72,483 | 71,650 | 833 | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 76,639 | 76,652 | 13 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 90,728 | 96,933 | 6,205 | |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 103,899 | 103,671 | 228 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 34,200 | 34,041 | 159 | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 9,294 | 9,214 | (80) | |
|
| ||||||
21
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $3,814,968) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Royal Bank of Scotland PLC (The) cont. | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | $241,964 | $239,234 | $2,730 | |
|
| ||||||
| Israeli Shekel | Buy | 3/22/12 | 5,073 | 5,151 | (78) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 48,416 | 51,760 | (3,344) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 31,509 | 31,205 | 304 | |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 131,399 | 131,273 | 126 | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 14,345 | 14,240 | (105) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 95,533 | 94,316 | 1,217 | |
|
| ||||||
| Israeli Shekel | Buy | 3/22/12 | 5,099 | 5,174 | (75) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 16,838 | 16,569 | 269 | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 2,568 | 2,565 | (3) | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 225,080 | 224,094 | (986) | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 5,152 | 5,112 | (40) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 93,002 | 92,644 | 358 | |
|
| ||||||
| Israeli Shekel | Buy | 3/22/12 | 5,099 | 5,178 | (79) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 16,732 | 16,111 | (621) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 27,750 | 27,477 | 273 | |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 4,066 | 4,058 | 8 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 28,950 | 28,488 | 462 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 150,419 | 149,057 | 1,362 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 54,629 | 54,043 | (586) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 16,580 | 17,726 | 1,146 | |
|
| ||||||
| Total | $1,162 | |||||
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Financials | $7,346,650 | $2,161,210 | $110 | |
|
| ||||
| Total common stocks | 7,346,650 | 2,161,210 | 110 | |
| Warrants | $15,381 | $92,248 | $— | |
|
| ||||
| Short-term investments | 134,259 | — | — | |
|
| ||||
| Totals by level | $7,496,290 | $2,253,458 | $110 | |
| Valuation inputs | ||||
|
| ||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Forward currency contracts | $— | $1,162 | $— | |
|
| ||||
| Totals by level | $— | $1,162 | $— | |
At the start and/or close of the reporting period, Level 3 investments in securities and other financial instruments were not considered a significant portion of the fund’s portfolio.
The accompanying notes are an integral part of these financial statements.
22
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value, (Note 1): | |
| Unaffiliated issuers (identified cost $8,748,613) | $9,615,599 |
| Affiliated issuers (identified cost $134,259) (Notes 1 and 6) | 134,259 |
|
| |
| Foreign currency (cost $2,774) (Note 1) | 2,774 |
|
| |
| Dividends, interest and other receivables | 13,139 |
|
| |
| Receivable for shares of the fund sold | 988 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 26,661 |
|
| |
| Receivable from Manager (Note 2) | 9,682 |
|
| |
| Total assets | 9,803,102 |
| LIABILITIES | |
|
| |
| Payable for shares of the fund repurchased | 554 |
|
| |
| Payable for investor servicing fees (Note 2) | 2,514 |
|
| |
| Payable for custodian fees (Note 2) | 13,630 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 1,332 |
|
| |
| Payable for administrative services (Note 2) | 35 |
|
| |
| Payable for distribution fees (Note 2) | 4,927 |
|
| |
| Payable for auditing fees | 25,741 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 25,499 |
|
| |
| Other accrued expenses | 6,791 |
|
| |
| Total liabilities | 81,023 |
| Net assets | $9,722,079 |
|
| |
| REPRESENTED BY | |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $9,224,912 |
|
| |
| Undistributed net investment income (Note 1) | 29,873 |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (401,042) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 868,336 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $9,722,079 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($5,280,694 divided by 477,845 shares) | $11.05 |
|
| |
| Offering price per class A share (100/94.25 of $11.05)* | $11.72 |
|
| |
| Net asset value and offering price per class B share ($356,051 divided by 32,461 shares)** | $10.97 |
|
| |
| Net asset value and offering price per class C share ($2,758,873 divided by 253,325 shares)** | $10.89 |
|
| |
| Net asset value and redemption price per class M share ($74,022 divided by 6,723 shares) | $11.01 |
|
| |
| Offering price per class M share (100/96.50 of $11.01)* | $11.41 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($353,463 divided by 32,152 shares) | $10.99 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($898,976 divided by 81,241 shares) | $11.07 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $2,156) | $87,430 |
|
| |
| Interest (including interest income of $96 from investments in affiliated issuers) (Note 6) | 153 |
|
| |
| Securities lending (Note 1) | 4 |
|
| |
| Total investment income | 87,587 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 25,963 |
|
| |
| Investor servicing fees (Note 2) | 14,065 |
|
| |
| Custodian fees (Note 2) | 13,501 |
|
| |
| Trustee compensation and expenses (Note 2) | 289 |
|
| |
| Administrative services (Note 2) | 111 |
|
| |
| Distribution fees — Class A (Note 2) | 6,085 |
|
| |
| Distribution fees — Class B (Note 2) | 1,668 |
|
| |
| Distribution fees — Class C (Note 2) | 8,991 |
|
| |
| Distribution fees — Class M (Note 2) | 244 |
|
| |
| Distribution fees — Class R (Note 2) | 732 |
|
| |
| Reports to shareholders | 6,988 |
|
| |
| Auditing | 29,759 |
|
| |
| Other | 1,069 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (43,537) |
|
| |
| Total expenses | 65,928 |
| Expense reduction (Note 2) | (29) |
|
| |
| Net expenses | 65,899 |
| Net investment income | 21,688 |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (241,264) |
|
| |
| Net realized gain on swap contracts (Note 1) | 6,472 |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (69,496) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 13,714 |
|
| |
| Net unrealized appreciation of investments and swap contracts during the period | 1,024,761 |
|
| |
| Net gain on investments | 734,187 |
| Net increase in net assets resulting from operations | $755,875 |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income | $21,688 | $67,085 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (304,288) | 130,341 |
|
| ||
| Net unrealized appreciation (depreciation) of investments | ||
| and assets and liabilities in foreign currencies | 1,038,475 | (493,196) |
|
| ||
| Net increase (decrease) in net assets resulting | ||
| from operations | 755,875 | (295,770) |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
|
| ||
| Class A | (73,380) | (51,683) |
|
| ||
| Class B | (2,289) | (1,492) |
|
| ||
| Class C | (35,001) | (1,215) |
|
| ||
| Class M | (803) | (116) |
|
| ||
| Class R | (3,926) | (2,296) |
|
| ||
| Class Y | (14,226) | (9,714) |
|
| ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | — | (243,121) |
|
| ||
| Class B | — | (18,463) |
|
| ||
| Class C | — | (16,391) |
|
| ||
| Class M | — | (1,112) |
|
| ||
| Class R | — | (9,595) |
|
| ||
| Class Y | — | (36,073) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (36,690) | (151,236) |
|
| ||
| Class B | (2,571) | (11,485) |
|
| ||
| Class C | (17,868) | (10,196) |
|
| ||
| Class M | (481) | (692) |
|
| ||
| Class R | (2,239) | (5,969) |
|
| ||
| Class Y | (6,003) | (22,439) |
|
| ||
| Redemption fees (Note 1) | 926 | 2,407 |
|
| ||
| Increase from capital share transactions (Note 4) | 2,365,157 | 1,818,104 |
|
| ||
| Total increase in net assets | 2,926,481 | 931,453 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 6,795,598 | 5,864,145 |
|
| ||
| End of period (including undistributed net investment | ||
| income of $29,873 and $137,810, respectively) | $9,722,079 | $6,795,598 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||
|
| ||||||||||||||
| Ratio | Ratio | |||||||||||||
| Net realized | From | of expenses | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | net realized | Total return | Net assets, | to average | income (loss) | Portfolio | |||||
| beginning | Net investment | gain (loss) | investment | net investment | gain | Total | Redemption | Net asset value, | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees b | end of period | value (%) c | (in thousands) | (%) d,e | net assets (%) e | (%) |
|
| ||||||||||||||
| Class A | ||||||||||||||
| February 29, 2012** | $10.36 | .03 | .88 | .91 | (.15) | (.07) | (.22) | — | $11.05 | 9.16* | $5,281 | .71* | .34* | 40* |
| August 31, 2011 | 11.59 | .12 | (.25) | (.13) | (.13) | (.97) | (1.10) | — | 10.36 | (2.42) | 4,838 | 1.40 | .95 | 103 |
| August 31, 2010 | 13.64 | .14 | (1.53) | (1.39) | (.23) | (.43) | (.66) | — | 11.59 | (10.71) | 4,647 | 1.49 | 1.05 | 101 |
| August 31, 2009† | 10.00 | .12 | 3.53 | 3.65 | (.01) | — | (.01) | — | 13.64 | 36.51* | 7,166 | 1.06* | 1.12* | 46* |
|
| ||||||||||||||
| Class B | ||||||||||||||
| February 29, 2012** | $10.24 | — b | .87 | .87 | (.07) | (.07) | (.14) | — | $10.97 | 8.72* | $356 | 1.09* | (.05)* | 40* |
| August 31, 2011 | 11.47 | .02 | (.23) | (.21) | (.05) | (.97) | (1.02) | — | 10.24 | (3.08) | 344 | 2.15 | .18 | 103 |
| August 31, 2010 | 13.57 | .03 | (1.51) | (1.48) | (.19) | (.43) | (.62) | — | 11.47 | (11.38) | 326 | 2.24 | .25 | 101 |
| August 31, 2009† | 10.00 | .03 | 3.55 | 3.58 | (.01) | — | (.01) | — | 13.57 | 35.78* | 226 | 1.58* | .23* | 46* |
|
| ||||||||||||||
| Class C | ||||||||||||||
| February 29, 2012** | $10.25 | — b | .85 | .85 | (.14) | (.07) | (.21) | — | $10.89 | 8.73* | $2,759 | 1.09* | .05* | 40* |
| August 31, 2011 | 11.48 | .04 | (.25) | (.21) | (.05) | (.97) | (1.02) | — | 10.25 | (3.10) | 446 | 2.15 | .33 | 103 |
| August 31, 2010 | 13.57 | .03 | (1.51) | (1.48) | (.18) | (.43) | (.61) | — | 11.48 | (11.37) | 345 | 2.24 | .21 | 101 |
| August 31, 2009† | 10.00 | .01 | 3.57 | 3.58 | (.01) | — | (.01) | — | 13.57 | 35.78* | 233 | 1.58* | .12* | 46* |
|
| ||||||||||||||
| Class M | ||||||||||||||
| February 29, 2012** | $10.33 | .01 | .86 | .87 | (.12) | (.07) | (.19) | — | $11.01 | 8.81* | $74 | .96* | .08* | 40* |
| August 31, 2011 | 11.54 | .07 | (.24) | (.17) | (.07) | (.97) | (1.04) | — | 10.33 | (2.77) | 68 | 1.90 | .54 | 103 |
| August 31, 2010 | 13.59 | .08 | (1.54) | (1.46) | (.16) | (.43) | (.59) | — | 11.54 | (11.20) | 23 | 1.99 | .59 | 101 |
| August 31, 2009† | 10.00 | .08 | 3.52 | 3.60 | (.01) | — | (.01) | — | 13.59 | 36.00* | 22 | 1.41* | .74* | 46* |
|
| ||||||||||||||
| Class R | ||||||||||||||
| February 29, 2012** | $10.31 | .02 | .86 | .88 | (.13) | (.07) | (.20) | — | $10.99 | 8.89* | $353 | .84* | .20* | 40* |
| August 31, 2011 | 11.57 | .11 | (.25) | (.14) | (.15) | (.97) | (1.12) | — | 10.31 | (2.57) | 250 | 1.65 | .89 | 103 |
| August 31, 2010 | 13.61 | .10 | (1.52) | (1.42) | (.19) | (.43) | (.62) | — | 11.57 | (10.88) | 13 | 1.74 | .80 | 101 |
| August 31, 2009† | 10.00 | .11 | 3.51 | 3.62 | (.01) | — | (.01) | — | 13.61 | 36.20* | 14 | 1.23* | 1.07* | 46* |
|
| ||||||||||||||
| Class Y | ||||||||||||||
| February 29, 2012** | $10.39 | .05 | .87 | .92 | (.17) | (.07) | (.24) | — | $11.07 | 9.34* | $899 | .59* | .46* | 40* |
| August 31, 2011 | 11.62 | .16 | (.26) | (.10) | (.16) | (.97) | (1.13) | — | 10.39 | (2.14) | 849 | 1.15 | 1.27 | 103 |
| August 31, 2010 | 13.66 | .18 | (1.54) | (1.36) | (.25) | (.43) | (.68) | — | 11.62 | (10.47) | 509 | 1.24 | 1.38 | 101 |
| August 31, 2009† | 10.00 | .12 | 3.55 | 3.67 | (.01) | — | (.01) | — | 13.66 | 36.72* | 578 | .88* | 1.05* | 46* |
|
| ||||||||||||||
* Not annualized.
** Unaudited.
† For the period December 18, 2008 (commencement of operations) to August 31, 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 Amount represents less than $0.01 per share.
c Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
d Includes amounts paid through expense offset arrangements (Note 2).
e 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 | |
|
| |
| February 29, 2012 | 0.53% |
|
| |
| August 31, 2011 | 0.97 |
|
| |
| August 31, 2010 | 1.50 |
|
| |
| August 31, 2009 | 3.88 |
|
| |
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Global Financials Fund (the fund) is a non-diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks of companies worldwide in the financial industries that Putnam Management believes have favorable potential.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
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
28
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income 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.
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.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk and to gain exposure on currency. The U.S. dollar value of forward 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. 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 when the contract matures or by delivery of the currency. 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 forward currency contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
29
Total return swap contracts The fund entered 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 hedge sector exposure, to manage exposure to specific sectors or industries, to manage exposure to credit risk, to gain exposure to specific markets or countries, to gain exposure to specific sectors or industries, to gain exposure to rates of inflation in specific regions or countries and to hedge inflation in specific regions or countries. 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 an independent pricing service or 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. The fund had an average notional amount of approximately $10,000 on total return swap contracts for the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $13,075 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash 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 agent; 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. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund had no securities out on loan.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
30
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $8,976,625, resulting in gross unrealized appreciation and depreciation of $930,110 and $156,877 respectively, or net unrealized appreciation of $773,233.
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.
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 a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.780% | of the first $5 billion, |
| 0.730% | of the next $5 billion, |
| 0.680% | of the next $10 billion, |
| 0.630% | of the next $10 billion, |
| 0.580% | of the next $50 billion, |
| 0.560% | of the next $50 billion, |
| 0.550% | of the next $100 billion and |
| 0.545% | of any excess thereafter. |
31
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $43,537 as a result of this limit.
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 a separate 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 for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $29 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $7, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
32
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $1,354 and $0 from the sale of class A and class M shares, respectively, and received $0 and $403 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $5,503,129 and $3,238,058, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 94,656 | $944,221 | 128,452 | $1,555,361 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 5,831 | 54,577 | 36,800 | 441,598 |
|
| ||||
| 100,487 | 998,798 | 165,252 | 1,996,959 | |
|
| ||||
| Shares repurchased | (89,486) | (912,077) | (99,565) | (1,220,696) |
|
| ||||
| Net increase | 11,001 | $86,721 | 65,687 | $776,263 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 8,228 | $79,379 | 18,600 | $229,216 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 517 | 4,813 | 2,628 | 31,321 |
|
| ||||
| 8,745 | 84,192 | 21,228 | 260,537 | |
|
| ||||
| Shares repurchased | (9,897) | (101,999) | (16,043) | (201,530) |
|
| ||||
| Net increase (decrease) | (1,152) | $(17,807) | 5,185 | $59,007 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 210,468 | $2,243,719 | 35,255 | $425,138 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 5,721 | 52,866 | 2,324 | 27,723 |
|
| ||||
| 216,189 | 2,296,585 | 37,579 | 452,861 | |
|
| ||||
| Shares repurchased | (6,384) | (63,293) | (24,138) | (279,727) |
|
| ||||
| Net increase | 209,805 | $2,233,292 | 13,441 | $173,134 |
|
| ||||
33
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 5,118 | $53,013 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 138 | 1,284 | 160 | 1,920 |
|
| ||||
| 138 | 1,284 | 5,278 | 54,933 | |
|
| ||||
| Shares repurchased | — | — | (724) | (9,146) |
|
| ||||
| Net increase | 138 | $1,284 | 4,554 | $45,787 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 11,889 | $112,482 | 25,665 | $320,898 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 661 | 6,165 | 1,495 | 17,860 |
|
| ||||
| 12,550 | 118,647 | 27,160 | 338,758 | |
|
| ||||
| Shares repurchased | (4,658) | (46,576) | (4,055) | (45,183) |
|
| ||||
| Net increase | 7,892 | $72,071 | 23,105 | $293,575 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 17,071 | $167,782 | 66,485 | $834,062 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,159 | 20,229 | 5,681 | 68,226 |
|
| ||||
| 19,230 | 188,011 | 72,166 | 902,288 | |
|
| ||||
| Shares repurchased | (19,651) | (198,415) | (34,279) | (431,950) |
|
| ||||
| Net increase (decrease) | (421) | $(10,404) | 37,887 | $470,338 |
|
| ||||
At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:
| Shares owned | Percentage of ownership | Value | |
|
| |||
| Class A | 247,792 | 51.9% | $2,738,101 |
|
| |||
| Class M | 1,160 | 17.3 | 12,777 |
|
| |||
| Class R | 1,172 | 3.6 | 12,877 |
|
| |||
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | $26,661 | Payables | $25,499 |
|
| ||||
| Investments, | ||||
| Equity contracts | Receivables | 107,629 | Payables | — |
|
| ||||
| Total | $134,290 | $25,499 | ||
|
| ||||
34
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not | ||||
| accounted for as | ||||
| hedging instruments | Forward currency | |||
| under ASC 815 | Warrants* | contracts | Swaps | Total |
|
| ||||
| Foreign exchange | ||||
| contracts | $— | $(67,951) | $— | $(67,951) |
|
| ||||
| Equity contracts | 416 | — | 6,472 | 6,888 |
|
| ||||
| Total | $416 | $(67,951) | $6,472 | $(61,063) |
|
| ||||
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not | ||||
| accounted for as | ||||
| hedging instruments | Forward currency | |||
| under ASC 815 | Warrants* | contracts | Swaps | Total |
|
| ||||
| Foreign exchange | ||||
| contracts | $— | $13,615 | $— | $13,615 |
|
| ||||
| Equity contracts | 12,196 | — | (3,485) | 8,711 |
|
| ||||
| Total | $12,196 | $13,615 | $(3,485) | $22,326 |
|
| ||||
*For the reporting period, the transaction volume for warrants was minimal.
Note 6: 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 $96 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $1,703,488 and $1,840,722, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund concentrates its investments in one sector, which involves more risk than a fund that invests more broadly.
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
35
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
36
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk and | |
| Marketing Services | Executive Vice President, | Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Global Financials Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Global Industrials
Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio managers | 5 | ||
|
|
|||
| Your fund’s performance | 10 | ||
|
|
|||
| Your fund’s expenses | 12 | ||
|
|
|||
| Terms and definitions | 14 | ||
|
|
|||
| Other information for shareholders | 15 | ||
|
|
|||
| Financial statements | 16 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing early signs of recovery. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing opportunities in industrial products and services worldwide
When Wilbur and Orville Wright successfully flew the first airplane in 1903, they introduced to the world more than fuel-powered flight. Their innovative thinking also helped to found the aerospace industry. Today, aerospace companies are creating state-of-the-art commercial airplanes and developing advanced engineering solutions that reach across businesses. At the same time, companies in a broad range of manufacturing industries — among them electronics, machinery, and construction — are designing groundbreaking technologies that increase efficiency while reducing the impact of industrial production on the environment. Together, these industries help to drive demand in the industrials sector.
Putnam Global Industrials Fund seeks companies that can profit from the worldwide demand for industrial products, services, and equipment.
This can include those companies that produce aerospace and defense equipment, building and home improvement products, electrical components and machinery, and other commodities. The fund may also invest in service providers such as civil engineering firms and contractors, commercial printers, and transportation companies.
The fund’s portfolio managers conduct their fundamental research with support from analysts across Putnam’s Global Equity Research organization. Their disciplined process includes analyzing each company’s valuation, financial strength, competitive positioning, earnings, and cash flow.
The fund invests primarily in midsize and large companies, but can invest in companies of any size. The fund also diversifies geographically, targeting stocks in markets around the world.
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’s policy of concentrating on a limited group of industries and the fund’s non-diversified status, which means the fund may invest in fewer issuers, can increase the fund’s vulnerability to common economic forces and may result in greater losses and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. These risks are generally greater for small and midsize companies. The use of short selling may result in losses if the securities appreciate in value. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer or industry.
Sector investing at Putnam
In recent decades, innovation and business growth have propelled stocks in different industries to market-leading performance. Finding these stocks, many of which are in international markets, requires rigorous research and in-depth knowledge of global markets.
Putnam’s sector funds invest in nine sectors worldwide and offer active management, risk controls, and the expertise of dedicated sector analysts. The funds’ managers invest with flexibility and precision, using fundamental research to hand select stocks for the portfolios.
All sectors in one fund:
Putnam Global Sector Fund
A portfolio of individual Putnam Global Sector Funds that provides exposure to all sectors of the MSCI World Index.
Individual sector funds:
Global Consumer Fund
Retail, hotels, restaurants, media, food and beverages
Global Energy Fund
Oil and gas, energy equipment and services
Global Financials Fund
Commercial banks, insurance, diversified financial services, mortgage finance
Global Health Care Fund
Pharmaceuticals, biotechnology, health-care services
Global Industrials Fund
Airlines, railroads, trucking, aerospace and defense, construction, commercial services
Global Natural Resources Fund
Metals, chemicals, oil and gas, forest products
Global Technology Fund
Software, computers, Internet services
Global Telecommunications Fund
Diversified and wireless telecommunications services
Global Utilities Fund
Electric, gas, and water utilities
| 2 | 3 |
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 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio managers
How did Putnam Global Industrials Fund perform for the six-month period ended February 29, 2012?
Ned: Despite a volatile investment environment and continued economic uncertainty, Putnam Global Industrials Fund outperformed its benchmark, MSCI World Industrials Index. Several subsectors contributed to the fund’s outperformance, including aerospace and defense, machinery, and engineering and construction. During a tumultuous time in the markets — which raised concerns about the momentum of the global economic recovery — stocks within the cyclical sectors, such as materials and industrials, became less expensive in 2011, creating opportunities for selective stock picking.
How would you characterize the investment environment during the period?
Ned: The first half of the period was marked by heightened volatility. The fourth quarter followed a global sell-off in equities in August after mounting debt problems in Europe and the United States. Concerns about a double-dip recession in developed markets also fueled investor anxiety. The European debt crisis played a central role during this period, raising concerns among investors and fueling risk aversion. However, with improving economic data in the United States, fears of a double-dip recession faded throughout the fourth quarter. Corporate earnings continued to show strength. And following several European Union [EU] summits, and elections
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on page 14.
5
in Greece and Italy, equities rallied in the final weeks of the quarter. Most markets recouped their losses by the end of the year.
The equity rally continued into the first two months of 2012. But investor anxiety would remain, driven by macroeconomic events, as ongoing news about the European debt crisis made headlines. It was not until the final weeks of the reporting period that Greece received a second bailout, a detailed agreement was worked out to deal with the ongoing debt problems in the region, and EU leaders announced a turning point in the crisis.
How have the sovereign debt issues in the eurozone countries affected the industrials sector?
Ferat: The European sovereign debt crisis has had a significant impact on the global economic recovery story and the outlook for global growth. Dampened expectations for growth resulted in a slowdown in demand and manufacturing in many sectors. The focus on sovereign debt, not only in the eurozone, but also globally, has led many governments to pare back spending, engage in austerity budget planning, and revise growth expectations. In addition to austerity measures across the eurozone, restrictive “cooling” measures taken by China in 2011 have had an impact on aggregate demand for industrial goods and services.
How would a decline in U.S. defense spending affect the sector?
Ferat: The investment opportunities in the defense sector tend to be U.S.-based, as defense budgets in many countries, especially Europe, have not grown for many years. In the United States, the core defense budget is expected to be slightly down, making it challenging for companies to grow. But, in our view, that trend will create differentiation within the sector in several ways. First, we prefer providers of force multipliers, such as defense electronics and unmanned systems. Secondly, we choose to invest with management teams who minimize contract risk. In addition, we are monitoring the potential for corporate transactions within the defense sector that could unlock shareholder value.
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
Where are you finding opportunities within the automotive subsector?
Ned: We believe that recovery in the automotive industry remains on track in key markets, such as the United States. Despite an expected contraction in European automotive production in 2012, we expect global automotive production to grow in the mid-single digits in 2012. The future of global automotive growth will continue, in our view, to be underpinned by strength in the emerging markets, such as Brazil, Russia, India, and China. Continually rising per-capita incomes support our bullish medium-term view. The portfolio’s strategy focuses on suppliers to the industry such as manufacturers of replacement parts, tires, and navigation equipment as well as grinding equipment, conveyor belts, and robotics needed to assemble the cars.
How did the fund use derivatives during the reporting period?
Ferat: We used forward currency contracts to hedge foreign exchange risk. We also purchased options to express stock-specific views in a way to optimize our risk/reward. We always pay a premium and, as a policy, do not sell options on stocks.
What were some of the holdings that contributed to fund performance?
Ferat: Brazilian airplane manufacturer Embraer, an out-of-benchmark selection, was a top contributor to fund performance. The stock benefited from continued market share gains. Embraer became a significant manufacturer of regional jets in the 1990s. Embraer also entered the business jet market and continues to grow its product line. Finally, we believe that the company is well positioned to benefit from growth opportunities in the Brazilian defense industry.
Ohio-based Timken also contributed to performance. Timken provides friction management tools. As makers of precision and temperature resistant tools, Timken
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
serves a range of industries, including aerospace, agriculture, automotive, coal, oil and gas, construction, and health care. In recent years, Timken has grown in new areas of mechanical power transmission and has shown strong execution.
Honeywell International, a U.S. conglomerate, also contributed to fund performance. Honeywell has exposure to attractive end markets such as aviation, automation, and safety control technology. Management continued to focus on strong execution, new product introductions, and geographic expansion.
What were some of the detractors from performance?
Ned: French aerospace supplier Safran detracted from performance. Safran is a manufacturer in the aerospace, defense, and security industries, making propulsion systems for aircraft, engines, missiles, and drones. Safran is also involved in the service business, providing maintenance, repair, and parts. With the uncertainty surrounding the European debt crisis, prospects for growth in government spending in the region have dimmed, and Safran’s stocks suffered as a result. Safran is no longer a holding in the fund.
Mitsubishi Electric, a maker of electric and electronic equipment, also detracted from performance. Mitsubishi has been the focus of several investigations, including by the Japan Fair Trade Commission and the FBI in 2011 regarding automotive equipment. In recent weeks, Mitsubishi received from Japan’s Ministry of Defense a 90-day suspension from bidding on government contracts. The suspension followed the revelation that Mitsubishi had overcharged Japan’s Ministry of Defense, as well as two other government agencies, for expenses.
First Solar, an Arizona-based manufacturer of solar panels, also held back fund performance. Investors began losing confidence in the company as it struggled to adjust its business model to meet the challenges of falling solar module prices in the market, higher manufacturing costs, and rising warranty claims. This past fall, First Solar announced a restructuring, including
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. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
management changes, shift in strategy, and layoffs. The company also lowered its revenue outlook. First Solar is no longer a holding in the fund.
What is your outlook for the industrials sector, and how is the fund positioned?
Ned: Corporate earnings, especially among large-cap companies, have remained strong over the reporting period. We have identified many names where we have conviction in the trajectory and sustainability of earnings. Our conviction relative to the market’s fear is the source of our opportunity.
Ferat: Long-term trends, such as ongoing urbanization, an emerging middle class in the developing world, and an appetite for energy continue to favor industrials. That being said, tail risks, which are low-probability events — both geopolitical and macroeconomic — that could have significant impact, should be factored in, especially considering that the industrial cycle has been going up for over two years now. Our focus has been to identify the most convex risk/reward profiles. In other words, we want to be invested in stocks with promising long-term potential if the economy continues to grow, but we also want to make sure that we have relative downside protection if the tail risks materialize.
Thank you, Ned and Ferat, for the update on the fund.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 Ferat Ongoren has an M.B.A. from the Stern School of Business at New York University and a B.A. from Bosphorus University in Istanbul, Turkey. He joined Putnam in 2009 and has been in the investment industry since 1997.
Portfolio Manager Nathaniel N. Salter has an M.B.A. from Harvard Business School and an A.B. from Kenyon College. He has been in the investment industry since he joined Putnam in 2001.
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 67.02% | 57.41% | 63.23% | 60.23% | 63.22% | 63.22% | 64.62% | 58.90% | 65.94% | 68.41% |
| Annual average | 17.41 | 15.25 | 16.57 | 15.89 | 16.57 | 16.57 | 16.88 | 15.59 | 17.17 | 17.71 |
|
| ||||||||||
| 3 years | 110.67 | 98.62 | 106.19 | 103.19 | 106.18 | 106.18 | 107.69 | 100.34 | 109.33 | 112.14 |
| Annual average | 28.19 | 25.70 | 27.28 | 26.66 | 27.28 | 27.28 | 27.59 | 26.06 | 27.92 | 28.49 |
|
| ||||||||||
| 1 year | –7.57 | –12.90 | –8.27 | –12.60 | –8.26 | –9.12 | –8.03 | –11.23 | –7.80 | –7.38 |
|
| ||||||||||
| 6 months | 10.72 | 4.33 | 10.27 | 5.27 | 10.32 | 9.32 | 10.36 | 6.47 | 10.52 | 10.80 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
Class B share performance does not reflect conversion to class A shares.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
10
Comparative index returns For periods ended 2/29/12
| MSCI World Industrials Index (ND) | |
|
| |
| Life of fund | 61.77% |
| Annual average | 16.24 |
|
| |
| 3 years | 109.11 |
| Annual average | 27.88 |
|
| |
| 1 year | –3.19 |
|
| |
| 6 months | 10.30 |
|
| |
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | $0.312 | $0.255 | $0.224 | $0.256 | $0.281 | $0.361 | ||
|
| ||||||||
| Capital gains — Long-term | 0.451 | 0.451 | 0.451 | 0.451 | 0.451 | 0.451 | ||
|
| ||||||||
| Capital gains — Short-term | — | — | — | — | — | — | ||
|
| ||||||||
| Total | $0.763 | $0.706 | $0.675 | $0.707 | $0.732 | $0.812 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $13.24 | $14.05 | $13.06 | $13.04 | $13.16 | $13.64 | $13.24 | $13.30 |
|
| ||||||||
| 2/29/12 | 13.77 | 14.61 | 13.58 | 13.60 | 13.70 | 14.20 | 13.78 | 13.79 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 68.83% | 59.13% | 64.91% | 61.91% | 64.90% | 64.90% | 66.42% | 60.64% | 67.74% | 70.25% |
| Annual average | 17.28 | 15.19 | 16.45 | 15.80 | 16.45 | 16.45 | 16.77 | 15.52 | 17.05 | 17.58 |
|
| ||||||||||
| 3 years | 100.54 | 89.06 | 96.38 | 93.38 | 96.38 | 96.38 | 97.95 | 91.12 | 99.50 | 102.20 |
| Annual average | 26.11 | 23.65 | 25.23 | 24.59 | 25.23 | 25.23 | 25.56 | 24.10 | 25.89 | 26.45 |
|
| ||||||||||
| 1 year | –7.15 | –12.47 | –7.79 | –12.14 | –7.78 | –8.65 | –7.54 | –10.80 | –7.38 | –6.95 |
|
| ||||||||||
| 6 months | 28.30 | 20.97 | 27.86 | 22.86 | 27.94 | 26.94 | 28.12 | 23.59 | 28.18 | 28.42 |
|
| ||||||||||
11
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.40% | 2.15% | 2.15% | 1.90% | 1.65% | 1.15% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 1.88% | 2.63% | 2.63% | 2.38% | 2.13% | 1.63% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12 | 1.44% | 2.19% | 2.19% | 1.94% | 1.69% | 1.19% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/12.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.54 | $11.45 | $11.45 | $10.15 | $8.85 | $6.24 |
|
| ||||||
| Ending value (after expenses) | $1,107.20 | $1,102.70 | $1,103.20 | $1,103.60 | $1,105.20 | $1,108.00 |
|
| ||||||
* 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 2/29/12. 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.
12
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.22 | $10.97 | $10.97 | $9.72 | $8.47 | $5.97 |
|
| ||||||
| Ending value (after expenses) | $1,017.70 | $1,013.97 | $1,013.97 | $1,015.22 | $1,016.46 | $1,018.95 |
|
| ||||||
* 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 2/29/12. 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.
13
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Industrials Index (ND) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the industrial sector.
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.
14
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
15
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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 recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.
16
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (98.1%)* | Shares | Value |
|
| ||
| Aerospace and defense (35.9%) | ||
| Embraer SA ADR (Brazil) | 18,354 | $551,721 |
|
| ||
| General Dynamics Corp. | 9,000 | 659,070 |
|
| ||
| Honeywell International, Inc. | 14,528 | 865,433 |
|
| ||
| L-3 Communications Holdings, Inc. | 1,954 | 137,269 |
|
| ||
| MTU Aero Engines Holding AG (Germany) | 3,359 | 255,847 |
|
| ||
| Northrop Grumman Corp. | 5,319 | 318,129 |
|
| ||
| Precision Castparts Corp. | 957 | 160,231 |
|
| ||
| Rockwell Collins, Inc. | 500 | 29,645 |
|
| ||
| United Technologies Corp. | 10,761 | 902,525 |
|
| ||
| 3,879,870 | ||
| Air freight and logistics (0.6%) | ||
| Deutsche Post AG (Germany) | 3,822 | 67,139 |
|
| ||
| 67,139 | ||
| Airlines (1.8%) | ||
| US Airways Group, Inc. † | 26,500 | 196,365 |
|
| ||
| 196,365 | ||
| Auto components (1.1%) | ||
| Johnson Controls, Inc. | 3,600 | 117,468 |
|
| ||
| 117,468 | ||
| Automobiles (0.6%) | ||
| Fiat SpA (Italy) S | 11,507 | 66,566 |
|
| ||
| 66,566 | ||
| Commercial services and supplies (0.1%) | ||
| Iron Mountain, Inc. | 463 | 14,376 |
|
| ||
| 14,376 | ||
| Construction and engineering (2.5%) | ||
| Daelim Industrial Co., Ltd. (South Korea) | 806 | 90,120 |
|
| ||
| Fluor Corp. | 700 | 42,336 |
|
| ||
| JGC Corp. (Japan) | 3,000 | 86,869 |
|
| ||
| KEPCO Engineering & Construction Co., Inc. (South Korea) | 566 | 51,770 |
|
| ||
| 271,095 | ||
| Construction materials (0.5%) | ||
| China Shanshui Cement Group, Ltd. (China) | 63,000 | 57,680 |
|
| ||
| 57,680 | ||
| Electrical equipment (9.0%) | ||
| Cooper Industries PLC | 1,737 | 106,339 |
|
| ||
| Hubbell, Inc. Class B | 2,100 | 157,962 |
|
| ||
| Mitsubishi Electric Corp. (Japan) | 30,000 | 269,685 |
|
| ||
| Schneider Electric SA (France) | 2,786 | 189,338 |
|
| ||
| Sensata Technologies Holding NV (Netherlands) † | 7,519 | 243,616 |
|
| ||
| 966,940 | ||
| Electronic equipment, instruments, and components (1.2%) | ||
| Hollysys Automation Technologies, Ltd. (China) † | 12,300 | 124,968 |
|
| ||
| 124,968 | ||
| Household durables (1.1%) | ||
| Lennar Corp. | 5,000 | 116,900 |
|
| ||
| 116,900 | ||
| Independent power producers and energy traders (0.3%) | ||
| China WindPower Group, Ltd. (China) † | 680,000 | 33,899 |
|
| ||
| 33,899 | ||
17
| COMMON STOCKS (98.1%)* cont. | Shares | Value |
|
| ||
| Industrial conglomerates (22.3%) | ||
| General Electric Co. | 43,960 | $837,438 |
|
| ||
| Siemens AG (Germany) | 6,185 | 616,867 |
|
| ||
| Tyco International, Ltd. | 18,337 | 950,223 |
|
| ||
| 2,404,528 | ||
| Machinery (16.4%) | ||
| China National Materials Co., Ltd. (China) | 72,000 | 34,752 |
|
| ||
| Eaton Corp. | 3,187 | 166,330 |
|
| ||
| Fiat Industrial SpA (Italy) † | 49,850 | 531,321 |
|
| ||
| Illinois Tool Works, Inc. | 1,008 | 56,136 |
|
| ||
| Ingersoll-Rand PLC | 1,692 | 67,477 |
|
| ||
| Invensys PLC (United Kingdom) | 26,821 | 88,795 |
|
| ||
| Joy Global, Inc. | 2,335 | 203,052 |
|
| ||
| Metso Corp. OYJ (Finland) | 2,914 | 138,405 |
|
| ||
| Sumitomo Heavy Industries, Ltd. (Japan) | 25,000 | 136,471 |
|
| ||
| Timken Co. | 5,242 | 274,681 |
|
| ||
| Zardoya Otis SA (Spain) | 5,494 | 74,075 |
|
| ||
| 1,771,495 | ||
| Trading companies and distributors (3.6%) | ||
| Mitsui & Co., Ltd. (Japan) | 13,100 | 226,028 |
|
| ||
| WESCO International, Inc. † | 2,558 | 160,873 |
|
| ||
| 386,901 | ||
| Transportation infrastructure (1.1%) | ||
| Fraport AG (Germany) | 2,011 | 123,685 |
|
| ||
| 123,685 | ||
| Total common stocks (cost $9,583,875) | $10,599,875 | |
| SHORT-TERM INVESTMENTS (2.4%)* | Shares | Value |
|
| ||
| Putnam Cash Collateral Pool, LLC 0.18% d | 67,314 | $67,314 |
|
| ||
| Putnam Money Market Liquidity Fund 0.09% e | 193,674 | 193,674 |
|
| ||
| Total short-term investments (cost $260,988) | $260,988 | |
| TOTAL INVESTMENTS | ||
|
| ||
| Total investments (cost $9,844,863) | $10,860,863 | |
Key to holding’s abbreviations
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $10,809,889.
† Non-income-producing security.
d See Note 1 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
e See Note 6 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
18
S Security on loan, in part or in entirety, at the close of the reporting period.
At the close of the reporting period, the fund maintained liquid assets totaling $99,751 to cover certain derivatives contracts.
| DIVERSIFICATION BY COUNTRY* | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| United States | 62.3% | France | 1.8% | |
|
|
| |||
| Germany | 9.9 | South Korea | 1.3 | |
|
|
| |||
| Japan | 6.7 | Finland | 1.3 | |
|
|
| |||
| Italy | 5.5 | United Kingdom | 0.8 | |
|
|
| |||
| Brazil | 5.1 | Spain | 0.7 | |
|
|
| |||
| China | 2.3 | Total | 100.0% | |
|
|
||||
| Netherlands | 2.3 | |||
|
|
||||
* Methodology differs from that used for purposes of complying with the fund’s policy regarding investments in securities of foreign issuers, as discussed further in the fund’s prospectus.
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $8,548,058) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Bank of America, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | $43,443 | $43,396 | $47 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 17,656 | 17,566 | (90) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 54,854 | 54,414 | 440 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 147,630 | 146,277 | 1,353 | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 6,400 | 6,163 | 237 | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 46,856 | 47,035 | (179) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 250,405 | 246,364 | 4,041 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 43,449 | 43,054 | (395) | |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 41,624 | 41,583 | 41 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 129,799 | 129,206 | 593 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 47,985 | 47,616 | 369 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 259,419 | 256,674 | 2,745 | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 27,424 | 27,427 | 3 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 186,057 | 198,808 | 12,751 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 50,362 | 49,525 | (837) | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 50,635 | 50,173 | (462) | |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 90,828 | 90,363 | 465 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 20,305 | 20,154 | 151 | |
|
| ||||||
| Danish Krone | Buy | 3/22/12 | 91,975 | 90,850 | 1,125 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 365,212 | 361,340 | (3,872) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 322,387 | 322,416 | 29 | |
|
| ||||||
| Singapore Dollar | Sell | 3/22/12 | 10,715 | 10,752 | 37 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 36,393 | 35,841 | 552 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 172,579 | 170,994 | 1,585 | |
|
| ||||||
19
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $8,548,058) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | $39,131 | $38,931 | $(200) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 84,756 | 84,087 | 669 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 79,544 | 78,691 | (853) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 135,296 | 143,971 | (8,675) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 13,550 | 13,046 | 504 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 69,933 | 68,726 | (1,207) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 15,589 | 15,436 | 153 | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | 18,387 | 18,182 | 205 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 103,276 | 101,574 | 1,702 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 122,829 | 121,607 | 1,222 | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 45,904 | 45,851 | 53 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 28,632 | 28,492 | (140) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 84,857 | 84,209 | 648 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 364,679 | 360,466 | (4,213) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 741,264 | 792,052 | (50,788) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 20,843 | 20,069 | 774 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 86,951 | 85,496 | 1,455 | |
|
| ||||||
| HSBC Bank USA, National Association | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 26,537 | 26,484 | 53 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 161,613 | 160,846 | 767 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 38,773 | 38,327 | (446) | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 200,892 | 200,912 | (20) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 14,873 | 14,322 | (551) | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 64,847 | 65,036 | (189) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 114,426 | 113,332 | 1,094 | |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 43,744 | 43,549 | (195) | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 55,965 | 55,541 | (424) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 118,584 | 117,222 | 1,362 | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 145,489 | 145,510 | (21) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 346,651 | 370,358 | (23,707) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 17,411 | 16,775 | (636) | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 66,366 | 66,574 | (208) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 54,152 | 53,262 | 890 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 69,540 | 68,820 | 720 | |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 73,012 | 72,673 | 339 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 26,467 | 26,239 | 228 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 28,647 | 28,323 | 324 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 142,449 | 152,287 | (9,838) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 50,452 | 49,577 | (875) | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 59,037 | 58,468 | (569) | |
|
| ||||||
20
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $8,548,058) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | $12,947 | $12,935 | $(12) | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 14,143 | 14,040 | (103) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 324,307 | 320,899 | (3,408) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 124,764 | 122,775 | 1,989 | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 29,319 | 29,287 | 32 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 27,519 | 27,398 | 121 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 25,356 | 25,159 | 197 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 521,769 | 516,937 | (4,832) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 66,068 | 70,592 | (4,524) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 13,693 | 13,185 | 508 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 19,126 | 18,938 | 188 | |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 85,737 | 85,357 | 380 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 10,405 | 10,326 | 79 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 532,695 | 526,981 | 5,714 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 124,198 | 135,998 | 11,800 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 64,995 | 63,937 | (1,058) | |
|
| ||||||
| Total | $(62,793) | |||||
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Consumer discretionary | $300,934 | $— | $— | |
|
| ||||
| Industrials | 9,186,699 | 895,695 | — | |
|
| ||||
| Information technology | 124,968 | — | — | |
|
| ||||
| Materials | — | 57,680 | — | |
|
| ||||
| Utilities | — | 33,899 | — | |
|
| ||||
| Total common stocks | 9,612,601 | 987,274 | — | |
| Short-term investments | 193,674 | 67,314 | — | |
|
| ||||
| Totals by level | $9,806,275 | $1,054,588 | $— | |
| Valuation inputs | ||||
|
| ||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Forward currency contracts | $— | $(62,793) | $— | |
|
| ||||
| Totals by level | $— | $(62,793) | $— | |
The accompanying notes are an integral part of these financial statements.
21
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value, including $60,151 of securities on loan (Note 1): | |
| Unaffiliated issuers (identified cost $9,583,875) | $10,599,875 |
| Affiliated issuers (identified cost $260,988) (Notes 1 and 6) | 260,988 |
|
| |
| Dividends, interest and other receivables | 27,445 |
|
| |
| Receivable for shares of the fund sold | 3,284 |
|
| |
| Receivable for investments sold | 454,769 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 60,734 |
|
| |
| Receivable from Manager (Note 2) | 5,167 |
|
| |
| Total assets | 11,412,262 |
| LIABILITIES | |
|
| |
| Payable for investments purchased | 348,688 |
|
| |
| Payable for shares of the fund repurchased | 7,281 |
|
| |
| Payable for investor servicing fees (Note 2) | 2,764 |
|
| |
| Payable for custodian fees (Note 2) | 13,196 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 1,448 |
|
| |
| Payable for administrative services (Note 2) | 40 |
|
| |
| Payable for distribution fees (Note 2) | 4,325 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 123,527 |
|
| |
| Collateral on securities loaned, at value (Note 1) | 67,314 |
|
| |
| Other accrued expenses | 33,790 |
|
| |
| Total liabilities | 602,373 |
| Net assets | $10,809,889 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $10,664,194 |
|
| |
| Undistributed net investment income (Note 1) | 45,806 |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (853,414) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 953,303 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $10,809,889 |
(Continued on next page)
22
Statement of assets and liabilities (Continued)
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($8,315,465 divided by 603,883 shares) | $13.77 |
|
| |
| Offering price per class A share (100/94.25 of $13.77)* | $14.61 |
|
| |
| Net asset value and offering price per class B share ($440,715 divided by 32,446 shares)** | $13.58 |
|
| |
| Net asset value and offering price per class C share ($624,593 divided by 45,931 shares)** | $13.60 |
|
| |
| Net asset value and redemption price per class M share ($60,860 divided by 4,441 shares) | $13.70 |
|
| |
| Offering price per class M share (100/96.50 of $13.70)* | $14.20 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($16,599 divided by 1,204 shares)*** | $13.78 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($1,351,657 divided by 97,994 shares) | $13.79 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
***Net asset value may not recalculate due to rounding of fractional shares.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $6,081) | $113,175 |
|
| |
| Interest (including interest income of $41 from investments in affiliated issuers) (Note 6) | 41 |
|
| |
| Securities lending (Note 1) | 897 |
|
| |
| Total investment income | 114,113 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 33,206 |
|
| |
| Investor servicing fees (Note 2) | 18,205 |
|
| |
| Custodian fees (Note 2) | 16,297 |
|
| |
| Trustee compensation and expenses (Note 2) | 380 |
|
| |
| Administrative services (Note 2) | 130 |
|
| |
| Distribution fees — Class A (Note 2) | 10,222 |
|
| |
| Distribution fees — Class B (Note 2) | 2,325 |
|
| |
| Distribution fees — Class C (Note 2) | 2,987 |
|
| |
| Distribution fees — Class M (Note 2) | 278 |
|
| |
| Distribution fees — Class R (Note 2) | 37 |
|
| |
| Reports to shareholders | 9,164 |
|
| |
| Auditing | 30,268 |
|
| |
| Other | 1,698 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (47,465) |
|
| |
| Total expenses | 77,732 |
| Expense reduction (Note 2) | (14) |
|
| |
| Net expenses | 77,718 |
| Net investment income | 36,395 |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (707,146) |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (22,501) |
|
| |
| Net realized gain on written options (Notes 1 and 3) | 54,400 |
|
| |
| Net unrealized depreciation of assets and liabilities in foreign currencies during the period | (42,021) |
|
| |
| Net unrealized appreciation of investments during the period | 1,661,298 |
|
| |
| Net gain on investments | 944,030 |
| Net increase in net assets resulting from operations | $980,425 |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income | $36,395 | $83,618 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (675,247) | 729,698 |
|
| ||
| Net unrealized appreciation (depreciation) of investments | ||
| and assets and liabilities in foreign currencies | 1,619,277 | (866,526) |
|
| ||
| Net increase (decrease) in net assets resulting | ||
| from operations | 980,425 | (53,210) |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
|
| ||
| Class A | (191,035) | (163,249) |
|
| ||
| Class B | (10,581) | (3,807) |
|
| ||
| Class C | (10,409) | (6,085) |
|
| ||
| Class M | (1,395) | (631) |
|
| ||
| Class R | (319) | (303) |
|
| ||
| Class Y | (31,339) | (15,393) |
|
| ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | — | (532,748) |
|
| ||
| Class B | — | (16,422) |
|
| ||
| Class C | — | (23,822) |
|
| ||
| Class M | — | (2,480) |
|
| ||
| Class R | — | (1,128) |
|
| ||
| Class Y | — | (46,277) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (276,145) | (83,390) |
|
| ||
| Class B | (18,714) | (2,570) |
|
| ||
| Class C | (20,957) | (3,729) |
|
| ||
| Class M | (2,458) | (388) |
|
| ||
| Class R | (510) | (177) |
|
| ||
| Class Y | (39,152) | (7,244) |
|
| ||
| Redemption fees (Note 1) | 2,308 | 7,643 |
|
| ||
| Increase (decrease) from capital share transactions (Note 4) | (1,047,154) | 6,965,953 |
|
| ||
| Total increase (decrease) in net assets | (667,435) | 6,010,543 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 11,477,324 | 5,466,781 |
|
| ||
| End of period (including undistributed net investment | ||
| income of $45,806 and $254,489, respectively) | $10,809,889 | $11,477,324 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||
|
| ||||||||||||||
| Ratio | Ratio | |||||||||||||
| Net realized | From | of expenses | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | net realized | Total return | Net assets, | to average | income (loss) | Portfolio | |||||
| beginning | Net investment | gain (loss) | investment | net investment | gain | Total | Redemption | Net asset value, | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees | end of period | value (%) b | (in thousands) | (%) c,d | net assets (%) d | (%) |
|
| ||||||||||||||
| Class A | ||||||||||||||
| February 29, 2012 ** | $13.24 | .05 | 1.24 | 1.29 | (.31) | (.45) | (.76) | — e | $13.77 | 10.72 * | $8,315 | .71 * | .37 * | 70 * |
| August 31, 2011 | 12.51 | .10 | 1.99 f | 2.09 | (.29) | (1.08) | (1.37) | .01 | 13.24 | 15.62 | 9,243 | 1.40 | .65 | 122 |
| August 31, 2010 | 11.67 | .01 | 1.33 | 1.34 | (.17) | (.33) | (.50) | — e | 12.51 | 11.55 | 4,749 | 1.46 | .08 | 129 |
| August 31, 2009† | 10.00 | .12 | 1.57 | 1.69 | (.02) | — | (.02) | — e | 11.67 | 16.96 * | 3,787 | .94 * | 1.22 * | 211 * |
|
| ||||||||||||||
| Class B | ||||||||||||||
| February 29, 2012 ** | $13.06 | — e | 1.23 | 1.23 | (.26) | (.45) | (.71) | — e | $13.58 | 10.27 * | $441 | 1.09 * | (.01) * | 70 * |
| August 31, 2011 | 12.38 | (.02) | 1.99 f | 1.97 | (.22) | (1.08) | (1.30) | .01 | 13.06 | 14.82 | 376 | 2.15 | (.11) | 122 |
| August 31, 2010 | 11.61 | (.08) | 1.33 | 1.25 | (.15) | (.33) | (.48) | — e | 12.38 | 10.81 | 128 | 2.21 | (.64) | 129 |
| August 31, 2009† | 10.00 | .05 | 1.58 | 1.63 | (.02) | — | (.02) | — e | 11.61 | 16.34 * | 45 | 1.47 * | .44 * | 211 * |
|
| ||||||||||||||
| Class C | ||||||||||||||
| February 29, 2012 ** | $13.04 | — e | 1.23 | 1.23 | (.22) | (.45) | (.67) | — e | $13.60 | 10.32 * | $625 | 1.09 * | — * | 70 * |
| August 31, 2011 | 12.38 | (.02) | 1.99 f | 1.97 | (.24) | (1.08) | (1.32) | .01 | 13.04 | 14.81 | 648 | 2.15 | (.10) | 122 |
| August 31, 2010 | 11.62 | (.08) | 1.31 | 1.23 | (.14) | (.33) | (.47) | — e | 12.38 | 10.67 | 145 | 2.21 | (.63) | 129 |
| August 31, 2009† | 10.00 | .05 | 1.59 | 1.64 | (.02) | — | (.02) | — e | 11.62 | 16.44 * | 21 | 1.47 * | .54 * | 211 * |
|
| ||||||||||||||
| Class M | ||||||||||||||
| February 29, 2012 ** | $13.16 | .01 | 1.24 | 1.25 | (.26) | (.45) | (.71) | — e | $13.70 | 10.36 * | $61 | .96 * | .11 * | 70 * |
| August 31, 2011 | 12.44 | .02 | 2.01 f | 2.03 | (.24) | (1.08) | (1.32) | .01 | 13.16 | 15.24 | 82 | 1.90 | .12 | 122 |
| August 31, 2010 | 11.64 | (.05) | 1.32 | 1.27 | (.14) | (.33) | (.47) | — e | 12.44 | 10.98 | 24 | 1.96 | (.41) | 129 |
| August 31, 2009† | 10.00 | .09 | 1.57 | 1.66 | (.02) | — | (.02) | — e | 11.64 | 16.64 * | 12 | 1.29 * | .88 * | 211 * |
|
| ||||||||||||||
| Class R | ||||||||||||||
| February 29, 2012 ** | $13.24 | .03 | 1.24 | 1.27 | (.28) | (.45) | (.73) | — e | $13.78 | 10.52 * | $17 | .84 * | .26 * | 70 * |
| August 31, 2011 | 12.49 | .05 | 2.02 f | 2.07 | (.25) | (1.08) | (1.33) | .01 | 13.24 | 15.52 | 15 | 1.65 | .30 | 122 |
| August 31, 2010 | 11.66 | (.02) | 1.32 | 1.30 | (.14) | (.33) | (.47) | — e | 12.49 | 11.22 | 13 | 1.71 | (.16) | 129 |
| August 31, 2009† | 10.00 | .10 | 1.58 | 1.68 | (.02) | — | (.02) | — e | 11.66 | 16.85 * | 12 | 1.12 * | 1.06 * | 211 * |
|
| ||||||||||||||
| Class Y | ||||||||||||||
| February 29, 2012 ** | $13.30 | .06 | 1.24 | 1.30 | (.36) | (.45) | (.81) | — e | $13.79 | 10.80 * | $1,352 | .59 * | .50 * | 70 * |
| August 31, 2011 | 12.54 | .13 | 2.01 f | 2.14 | (.31) | (1.08) | (1.39) | .01 | 13.30 | 16.00 | 1,114 | 1.15 | .86 | 122 |
| August 31, 2010 | 11.69 | .04 | 1.33 | 1.37 | (.19) | (.33) | (.52) | — e | 12.54 | 11.82 | 408 | 1.21 | .33 | 129 |
| August 31, 2009† | 10.00 | .12 | 1.59 | 1.71 | (.02) | — | (.02) | — e | 11.69 | 17.18 * | 144 | .76 * | 1.15 * | 211 * |
|
| ||||||||||||||
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Financial highlights (Continued)
* Not annualized.
** Unaudited.
† For the period December 18, 2008 (commencement of operations) to August 31, 2009.
a Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
c Includes amounts paid through expense offset and/or brokerage/service arrangements (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 | |
|
| |
| February 29, 2012 | 0.45% |
|
| |
| August 31, 2011 | 0.48 |
|
| |
| August 31, 2010 | 2.16 |
|
| |
| August 31, 2009 | 5.57 |
|
| |
e Amount represents less than $0.01 per share.
f The amount of net realized and unrealized gain shown for a share outstanding for the period ending August 31, 2011, does not correspond with the aggregate net loss on investments for the period due to the timing of sales and repurchases of fund shares in relation to fluctuating market values of the investments of the portfolio.
The accompanying notes are an integral part of these financial statements.
28
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Global Industrials Fund (the fund) is a non-diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek capital appreciation by concentrating in the industrial products, services or equipment industries. The fund invests mainly in common stocks (growth or value or both) of large and midsize companies worldwide that Putnam Management believes have favorable investment potential.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
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
29
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income 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.
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.
Options contracts The fund uses options contracts to hedge against changes in values of securities it owns, owned or expects to own and to generate additional income for the portfolio.
The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Exchange traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers.
30
Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio. See Note 3 for the volume of written options contracts activity for the reporting period. For the reporting period, the transaction volume of purchased options contracts was minimal.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk.
The U.S. dollar value of forward 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. 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 when the contract matures or by delivery of the currency. 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 forward currency contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $104,274 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash 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 agent; 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. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the value of securities loaned amounted to $60,151 and the fund received cash collateral of $67,314.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
31
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior periods remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $10,022,416, resulting in gross unrealized appreciation and depreciation of $1,136,004 and $297,557, respectively, or net unrealized appreciation of $838,447.
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.
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 a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.780% | of the first $5 billion, |
| 0.730% | of the next $5 billion, |
| 0.680% | of the next $10 billion, |
| 0.630% | of the next $10 billion, |
| 0.580% | of the next $50 billion, |
| 0.560% | of the next $50 billion, |
| 0.550% | of the next $100 billion and |
| 0.545% | of any excess thereafter. |
32
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $47,465 as a result of this limit.
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 a separate 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 for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $14 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $8, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
33
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $738 and no monies from the sale of class A and class M shares, respectively, and received no monies and $253 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $7,413,409 and $9,379,672, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Written option transactions during the reporting period are summarized as follows:
| Written equity option | Written equity option | |
| contract amounts | premiums received | |
|
| ||
| Written options outstanding at the | ||
| beginning of the reporting period | — | $— |
|
| ||
| Options opened | 160,000 | 54,400 |
|
| ||
| Options exercised | — | — |
|
| ||
| Options expired | (160,000) | (54,400) |
|
| ||
| Options closed | — | — |
|
| ||
| Written options outstanding at the | ||
| end of the reporting period | — | $— |
|
| ||
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 63,885 | $852,364 | 787,677 | $12,211,385 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 25,034 | 295,907 | 50,894 | 752,215 |
|
| ||||
| 88,919 | 1,148,271 | 838,571 | 12,963,600 | |
|
| ||||
| Shares repurchased | (182,942) | (2,332,950) | (520,216) | (7,728,646) |
|
| ||||
| Net increase (decrease) | (94,023) | $(1,184,679) | 318,355 | $5,234,954 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 20,046 | $236,800 | 30,335 | $456,872 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,510 | 29,295 | 1,551 | 22,728 |
|
| ||||
| 22,556 | 266,095 | 31,886 | 479,600 | |
|
| ||||
| Shares repurchased | (18,877) | (245,365) | (13,434) | (185,410) |
|
| ||||
| Net increase | 3,679 | $20,730 | 18,452 | $294,190 |
|
| ||||
34
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 3,450 | $43,123 | 48,087 | $729,214 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,669 | 31,201 | 2,262 | 33,095 |
|
| ||||
| 6,119 | 74,324 | 50,349 | 762,309 | |
|
| ||||
| Shares repurchased | (9,888) | (121,496) | (12,344) | (185,340) |
|
| ||||
| Net increase (decrease) | (3,769) | $(47,172) | 38,005 | $576,969 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 4,164 | $65,635 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 327 | 3,853 | 238 | 3,499 |
|
| ||||
| 327 | 3,853 | 4,402 | 69,134 | |
|
| ||||
| Shares repurchased | (2,095) | (27,278) | (87) | (1,298) |
|
| ||||
| Net increase (decrease) | (1,768) | $(23,425) | 4,315 | $67,836 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 201 | $3,001 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 70 | 829 | 109 | 1,607 |
|
| ||||
| 70 | 829 | 310 | 4,608 | |
|
| ||||
| Shares repurchased | — | — | (217) | (2,630) |
|
| ||||
| Net increase | 70 | $829 | 93 | $1,978 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 24,046 | $312,716 | 68,349 | $1,062,226 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 5,959 | 70,491 | 4,650 | 68,913 |
|
| ||||
| 30,005 | 383,207 | 72,999 | 1,131,139 | |
|
| ||||
| Shares repurchased | (15,744) | (196,644) | (21,818) | (341,113) |
|
| ||||
| Net increase | 14,261 | $186,563 | 51,181 | $790,026 |
|
| ||||
At the close of the reporting period, Putnam Investments, LLC owned the following class shares:
| Shares owned | Percentage of ownership | Value at 2/29/12 | |
|
| |||
| Class A | 196,001 | 32.5% | $2,698,930 |
|
| |||
| Class R | 1,204 | 100.0 | 16,599 |
|
| |||
35
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | $60,734 | Payables | $123,527 |
|
| ||||
| Total | $60,734 | $123,527 | ||
|
| ||||
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | ||
| instruments under ASC 815 | Options | contracts | Total |
|
| |||
| Foreign exchange contracts | $— | $(22,404) | $(22,404) |
|
| |||
| Equity contracts | (208,189) | — | $(208,189) |
|
| |||
| Total | $(208,189) | $(22,404) | $(230,593) |
|
| |||
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | ||
| instruments under ASC 815 | Options | contracts | Total |
|
| |||
| Foreign exchange contracts | $— | $(42,156) | $(42,156) |
|
| |||
| Equity contracts | 90,854 | — | $90,854 |
|
| |||
| Total | $90,854 | $(42,156) | $48,698 |
|
| |||
Note 6: 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 $41 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $1,652,819 and $1,505,191, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund concentrates its investments in one sector, which involves more risk than a fund that invests more broadly.
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
| 36 |
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk and | |
| Marketing Services | Executive Vice President, | Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Global Industrials Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Global Technology
Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio manager | 5 | ||
|
|
|||
| Your fund’s performance | 10 | ||
|
|
|||
| Your fund’s expenses | 12 | ||
|
|
|||
| Terms and definitions | 14 | ||
|
|
|||
| Other information for shareholders | 15 | ||
|
|
|||
| Financial statements | 16 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing signs of a turnaround. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing growth opportunities in technology companies worldwide
In 1937, the year Putnam Investments was founded, a law student named Chester Carlson developed an innovative process for reproducing words on a page in just minutes. Despite the usefulness of his invention, he had a difficult time finding investors for his photocopier — which did not become commercially available until the Xerox Corporation began selling it in 1950. Successful investing, particularly in the technology sector, requires the ability to identify the value of a product, service, or business, and to capitalize on its long-term growth potential.
The magnitude of technological advances since Mr. Carlson invented his photocopier is astounding. Putnam Global Technology Fund seeks to capitalize on the potential of this sector — and the many innovations that are still to come. The fund combines the growth potential of technology stocks with Putnam’s investment expertise, research capabilities, and global reach.
The fund can invest worldwide in small entrepreneurial firms, midsize companies with significant market share in new industries, and well-established giants with years of profitability.
Most areas of the economy are influenced by technology — from emerging companies with revolutionary new products to traditional businesses dependent on technological innovation. The fund’s manager, with support from analysts in Putnam’s Global Equity Research group, looks across industries to find stocks that can help investors build wealth over time. Companies in the portfolio may range from computer hardware, software, storage, and security to technology consulting and Internet services.
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’s policy of concentrating on a limited group of industries and the fund’s non-diversified status, which means the fund may invest in fewer issuers, can increase the fund’s vulnerability to common economic forces and may result in greater losses and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. These risks are generally greater for small and midsize companies. The use of short selling may result in losses if the securities appreciate in value. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer or industry.
Sector investing at Putnam
In recent decades, innovation and business growth have propelled stocks in different industries to market-leading performance. Finding these stocks, many of which are in international markets, requires rigorous research and in-depth knowledge of global markets.
Putnam’s sector funds invest in nine sectors worldwide and offer active management, risk controls, and the expertise of dedicated sector analysts. The funds’ managers invest with flexibility and precision, using fundamental research to hand select stocks for the portfolios.
All sectors in one fund:
Putnam Global Sector Fund
A portfolio of individual Putnam Global Sector Funds that provides exposure to all sectors of the MSCI World Index.
Individual sector funds:
Global Consumer Fund
Retail, hotels, restaurants, media, food and beverages
Global Energy Fund
Oil and gas, energy equipment and services
Global Financials Fund
Commercial banks, insurance, diversified financial services, mortgage finance
Global Health Care Fund
Pharmaceuticals, biotechnology, health-care services
Global Industrials Fund
Airlines, railroads, trucking, aerospace and defense, construction, commercial services
Global Natural Resources Fund
Metals, chemicals, oil and gas, forest products
Global Technology Fund
Software, computers, Internet services
Global Telecommunications Fund
Diversified and wireless telecommunications services
Global Utilities Fund
Electric, gas, and water utilities
| 2 | 3 |
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 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
Putnam Global Technology Fund underperformed its benchmark during the period. What factors contributed?
Putnam Global Technology Fund underperformed its benchmark, the MSCI World Information Technology Index, for the six-month reporting period.
The portfolio underperformed largely because of unanticipated pressure in the solar energy subsector and some specific stock selections that detracted from performance. In the solar energy industry, several holdings, such as First Solar, suffered when the sovereign debt crisis and austerity measures implemented in Europe put pressure on energy subsidies designed to be supportive of alternative energy. Certain stock selections had an impact, such as Corning, which suffered from weak growth in television sales. A decision not to hold a position in Intel also detracted as the company surpassed earnings expectations, fueled by increased sales in emerging markets.
How would you describe the investment environment during the six-month period?
While most equity markets had a strong first half of 2011, the final two quarters were challenged by volatility and macroeconomic events. Europe’s sovereign debt crisis, as well as the U.S. federal deficit problem that had resulted in a protracted, contentious debate about the debt ceiling, weighed on markets at the beginning of the period. Risk aversion and fears of a double-dip recession in the United States prevailed until more positive economic
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on page 14.
5
data helped to restore some confidence in the markets. The technology sector in general performed well and was pretty resilient during the period. But we believe that there is a lot of value in the sector. In our estimation, many companies that have good balance sheets are trading at reasonable multiples, and there is growth. But certain subsectors, such as telecommunications equipment companies, experienced weak spending due to uncertainty surrounding mergers and acquisitions in the industry. For example, when companies propose to merge, as AT&T and T-Mobile did during the period, there is typically a pause in spending. But once there is clarity that a merger is not moving forward, spending may come back.
Mobility continued to be a leading theme in technology. How was the fund positioned with this view?
Apple clearly dominates the industry and has a lot of growth from emerging markets, particularly China. Emerging markets have become another growth platform for smartphones as penetration rates begin to slow down in the United States and other developed countries. Many emerging markets never had wired connections or personal computers, and for many people, the wireless phone is their first experience with the Internet. In addition to investing in companies that make smartphones, some of the portfolio is directed toward finding secondary and tertiary investments in this theme. For example, in our view, the carriers that provide the wireless services will at some point have to start spending more to keep up with the increasing use of iPhones, iPads, and other technology. Unfortunately, during the reporting period, the outlook for spending was weak. But the fund holds positions in companies like Cisco and Juniper Networks, with the expectation that more spending is on the horizon to make networks more reliable.
How is the portfolio positioned for the growing trends in so-called “cloud” computing, which involves delivering hosted services and applications over the Internet?
In general, we concentrate on more value-based stocks in this subsector. In our
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
view, this has helped fund performance. To get exposure to the world of cloud computing, we invest in companies like Cisco, which makes computer networking equipment and services, and other companies like Ericsson and Juniper, which help the telecom networks create the cloud. It is our view that these companies may benefit from increased spending on cloud computing.
Social media is another technology sector trend. How does the fund gain exposure to this area?
There are still limited opportunities to invest directly in social media enterprises. But social media is one of the main reasons why people use smartphones. Investing in smartphones and companies that build wireless networks to support social media are strategies to gain secondary exposure.
The United States continues to dominate the technology industry, but how would you describe the competitive landscape, such as China?
In a few subsectors of technology, Chinese companies priced their goods more aggressively relative to non-Chinese competition. As a result, some of the other competitors around the world followed that lead, which may have reduced industry profits in some areas. At the same time, China is a very good end-market for companies like Apple that are seeking to sell more smartphones.
What holdings contributed to fund performance?
Apple was the top contributor to the fund’s performance. From a consumer perspective, Apple continued to dominate handset and tablet sales, and the company benefited from an increase in consumer spending. Apple was the dominant technology story over the past six months, setting records with its share price.
Cisco was another contributor. The company experienced a challenging 6- to 12-month
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
period, but we believe it has now gotten back on track. In my view, Cisco faced some of the headwinds in the economy before other competitors and was able to restructure its business ahead of the competition. Cisco restructured across business groups and focused on margins in its switching business. The company also has some new products in carrier routing that are garnering attention in the market.
SanDisk also contributed to performance. SanDisk makes memory that is used in tablets and smartphones, as well as flash memory. In our view, with the proliferation of all these devices, there is likely to be increasing demand for memory products. Wireless device users also need more memory as they increasingly store music, books, and video on phones and tablets. Cloud computing has not negatively affected the need for device memory. While people may store music in the cloud, they still need to download it onto wireless devices.
Which holdings detracted from fund performance?
As previously noted, First Solar detracted from fund performance. Other holdings in the solar subsector that detracted included JinkoSolar and Yingli Green Energy. We invested in these stocks because we believed that the solar industry would perform well given the worldwide focus on green technologies. Although we expected some pressure on energy subsidies in Europe, the impact was more significant than expected. In addition, there was significant competition from China. We scaled back the position in this industry, but the fund still has some exposure to First Solar and Yingli. JinkoSolar is no longer a holding in the fund.
Corning, a glassmaker, also held back performance. In our view, Corning has a good management team. With the proliferation of iPhones, tablets, and smartphones, which all utilize glass, we thought Corning would outperform expectations. But the demand for televisions, another market for Corning, was weak, and this had a negative impact on growth.
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. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
What is your outlook for the sector, and how is the fund positioned?
We plan to maintain our current strategy. Apple still holds a significant position. We also believe that many of the telecommunication infrastructure companies will rebound because carriers have to spend to improve the quality of their networks as wireless users demand more quality. The economy has begun to show some improvement, with the jobs picture improving. This may result in increased spending for information technology by both businesses and government.
We believe that the sector is at a juncture where there will be clearly defined winners and losers. Investors need to be selective, and we believe we are identifying good stocks. We target companies that we believe have a good position within important industries and are poised to gain market share. It is also essential that the companies have good balance sheets and management teams and reasonable valuations, and that the consensus view underestimates their long-term earnings power.
We are monitoring the situation in Europe. Even as various countries receive financial bailouts, we are focused on the real economic impact as the countries take on austerity measures. We also are watchful of the financial state of municipal, state, and federal budgets in the United States.
Thank you, George, for your time and insights today.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 George Gianarikas has an M.A. in Economics from Boston University and a B.A. from Boston University. George joined Putnam in 2009 and has been in the investment industry since 1998.
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 84.84% | 74.21% | 80.46% | 77.46% | 80.55% | 80.55% | 81.96% | 75.63% | 83.42% | 86.41% |
| Annual average | 21.19 | 18.97 | 20.29 | 19.66 | 20.30 | 20.30 | 20.60 | 19.27 | 20.90 | 21.51 |
|
| ||||||||||
| 3 years | 103.34 | 91.74 | 98.74 | 95.74 | 98.85 | 98.85 | 100.17 | 93.16 | 101.79 | 104.84 |
| Annual average | 26.69 | 24.23 | 25.73 | 25.09 | 25.75 | 25.75 | 26.03 | 24.54 | 26.37 | 27.00 |
|
| ||||||||||
| 1 year | 2.28 | –3.58 | 1.52 | –3.29 | 1.58 | 0.62 | 1.82 | –1.76 | 2.05 | 2.58 |
|
| ||||||||||
| 6 months | 14.40 | 7.80 | 13.97 | 8.97 | 13.97 | 12.97 | 14.15 | 10.18 | 14.25 | 14.59 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
Comparative index returns For periods ended 2/29/12
| MSCI World Information Technology Index (ND) | |
|
| |
| Life of fund | 89.08% |
| Annual average | 22.05 |
|
| |
| 3 years | 107.35 |
| Annual average | 27.52 |
|
| |
| 1 year | 5.74 |
|
| |
| 6 months | 17.40 |
|
| |
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
10
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | — | — | — | — | — | — | ||
|
| ||||||||
| Capital gains — Long-term | $0.520 | $0.520 | $0.520 | $0.520 | $0.520 | $0.520 | ||
|
| ||||||||
| Capital gains — Short-term | 0.225 | 0.225 | 0.225 | 0.225 | 0.225 | 0.225 | ||
|
| ||||||||
| Total | $0.745 | $0.745 | $0.745 | $0.745 | $0.745 | $0.745 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $14.86 | $15.77 | $14.59 | $14.59 | $14.69 | $15.22 | $14.80 | $14.94 |
|
| ||||||||
| 2/29/12 | 16.13 | 17.11 | 15.76 | 15.76 | 15.90 | 16.48 | 16.04 | 16.25 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 92.97% | 81.88% | 88.24% | 85.24% | 88.34% | 88.34% | 89.85% | 83.25% | 91.43% | 94.55% |
| Annual average | 22.15 | 19.97 | 21.23 | 20.64 | 21.25 | 21.25 | 21.55 | 20.25 | 21.86 | 22.46 |
|
| ||||||||||
| 3 years | 89.94 | 79.01 | 85.64 | 82.64 | 85.74 | 85.74 | 87.05 | 80.47 | 88.41 | 91.30 |
| Annual average | 23.84 | 21.42 | 22.90 | 22.24 | 22.92 | 22.92 | 23.21 | 21.75 | 23.51 | 24.14 |
|
| ||||||||||
| 1 year | 10.17 | 3.85 | 9.30 | 4.30 | 9.37 | 8.37 | 9.63 | 5.79 | 9.95 | 10.44 |
|
| ||||||||||
| 6 months | 27.50 | 20.16 | 26.98 | 21.98 | 26.98 | 25.98 | 27.16 | 22.70 | 27.32 | 27.63 |
|
| ||||||||||
11
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.40% | 2.15% | 2.15% | 1.90% | 1.65% | 1.15% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 2.00% | 2.75% | 2.75% | 2.50% | 2.25% | 1.75% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12 | 1.43% | 2.18% | 2.18% | 1.93% | 1.68% | 1.18% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/12.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.62 | $11.60 | $11.60 | $10.28 | $8.95 | $6.30 |
|
| ||||||
| Ending value (after expenses) | $1,144.00 | $1,139.70 | $1,139.70 | $1,141.50 | $1,142.50 | $1,145.90 |
|
| ||||||
* 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 2/29/12. 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.
12
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.17 | $10.92 | $10.92 | $9.67 | $8.42 | $5.92 |
|
| ||||||
| Ending value (after expenses) | $1,017.75 | $1,014.02 | $1,014.02 | $1,015.27 | $1,016.51 | $1,019.00 |
|
| ||||||
* 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 2/29/12. 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.
13
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Information Technology Index (ND) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the information technology sector.
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.
14
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
15
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
16
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (96.3%)* | Shares | Value |
|
| ||
| Communications equipment (17.3%) | ||
| ADTRAN, Inc. | 1,376 | $48,504 |
|
| ||
| Alcatel-Lucent ADR (France) † | 25,185 | 62,207 |
|
| ||
| Cisco Systems, Inc. | 50,430 | 1,002,548 |
|
| ||
| HTC Corp. (Taiwan) | 105 | 2,327 |
|
| ||
| Juniper Networks, Inc. † | 8,700 | 198,012 |
|
| ||
| Polycom, Inc. † | 1,928 | 39,813 |
|
| ||
| Qualcomm, Inc. | 7,771 | 483,201 |
|
| ||
| Telefonaktiebolaget LM Ericsson ADR (Sweden) | 28,369 | 283,123 |
|
| ||
| 2,119,735 | ||
| Computers and peripherals (30.5%) | ||
| Apple, Inc. † | 4,876 | 2,644,937 |
|
| ||
| Asustek Computer, Inc. (Taiwan) | 2,440 | 22,828 |
|
| ||
| Compal Electronics, Inc. (Taiwan) | 217 | 255 |
|
| ||
| EMC Corp. † | 6,951 | 192,473 |
|
| ||
| Fujitsu, Ltd. (Japan) | 21,000 | 113,232 |
|
| ||
| Hewlett-Packard Co. | 10,710 | 271,070 |
|
| ||
| Lenovo Group, Ltd. (China) | 154,000 | 136,188 |
|
| ||
| SanDisk Corp. † | 5,776 | 285,681 |
|
| ||
| Toshiba Corp. (Japan) | 17,000 | 74,207 |
|
| ||
| Wistron Corp. (Taiwan) | 580 | 960 |
|
| ||
| 3,741,831 | ||
| Diversified telecommunication services (2.5%) | ||
| Verizon Communications, Inc. | 8,120 | 309,453 |
|
| ||
| 309,453 | ||
| Electronic equipment, instruments, and components (7.5%) | ||
| Corning, Inc. | 22,816 | 297,521 |
|
| ||
| Hitachi, Ltd. (Japan) | 35,000 | 203,837 |
|
| ||
| KEMET Corp. † | 2,700 | 24,327 |
|
| ||
| Kyocera Corp. (Japan) | 1,000 | 88,623 |
|
| ||
| LG Display Co., Ltd. ADR (South Korea) | 1,600 | 21,056 |
|
| ||
| Murata Manufacturing Co., Ltd. (Japan) | 2,600 | 155,248 |
|
| ||
| Nippon Electric Glass Co., Ltd. (Japan) | 7,000 | 65,604 |
|
| ||
| TE Connectivity, Ltd. (Switzerland) | 1,600 | 58,480 |
|
| ||
| 914,696 | ||
| Household durables (0.7%) | ||
| Pace PLC (United Kingdom) | 10,474 | 14,789 |
|
| ||
| Skyworth Digital Holdings, Ltd. (China) | 135,783 | 75,305 |
|
| ||
| 90,094 | ||
| Internet software and services (7.8%) | ||
| Baidu, Inc. ADR (China) † | 1,868 | 255,356 |
|
| ||
| DeNA Co., Ltd. (Japan) | 900 | 29,315 |
|
| ||
| eBay, Inc. † | 7,060 | 252,324 |
|
| ||
| Google, Inc. Class A † | 523 | 323,345 |
|
| ||
| Mail.ru Group, Ltd. 144A GDR (Russia) | 353 | 13,961 |
|
| ||
| Tencent Holdings, Ltd. (China) | 800 | 20,640 |
|
| ||
| Yahoo!, Inc. † | 3,800 | 56,354 |
|
| ||
| 951,295 | ||
17
| COMMON STOCKS (96.3%)* cont. | Shares | Value | ||
|
| ||||
| IT Services (6.0%) | ||||
| Accenture PLC Class A | 1,500 | $89,310 | ||
|
| ||||
| IBM Corp. | 1,242 | 244,339 | ||
|
| ||||
| MasterCard, Inc. Class A | 415 | 174,300 | ||
|
| ||||
| Unisys Corp. † | 1,505 | 28,113 | ||
|
| ||||
| Visa, Inc. Class A | 1,704 | 198,294 | ||
|
| ||||
| 734,356 | ||||
| Leisure equipment and products (0.3%) | ||||
| Nikon Corp. (Japan) | 1,300 | 35,260 | ||
|
| ||||
| 35,260 | ||||
| Office electronics (1.2%) | ||||
| Canon, Inc. (Japan) | 700 | 31,709 | ||
|
| ||||
| Canon, Inc. ADR (Japan) | 2,512 | 113,894 | ||
|
| ||||
| 145,603 | ||||
| Semiconductors and semiconductor equipment (2.9%) | ||||
| Advanced Micro Devices, Inc. † | 12,322 | 90,567 | ||
|
| ||||
| ASML Holding NV (Netherlands) | 1,297 | 59,616 | ||
|
| ||||
| Cymer, Inc. † | 500 | 22,990 | ||
|
| ||||
| First Solar, Inc. † | 638 | 20,607 | ||
|
| ||||
| Lam Research Corp. † | 700 | 29,190 | ||
|
| ||||
| Samsung Electronics Co., Ltd. (South Korea) | 107 | 114,874 | ||
|
| ||||
| Sumco Corp. (Japan) † | 700 | 7,515 | ||
|
| ||||
| Yingli Green Energy Holding Co., Ltd. ADR (China) † S | 4,000 | 14,960 | ||
|
| ||||
| 360,319 | ||||
| Software (19.2%) | ||||
| Adobe Systems, Inc. † | 4,100 | 134,849 | ||
|
| ||||
| Konami Corp. (Japan) | 3,300 | 90,843 | ||
|
| ||||
| Microsoft Corp. | 34,219 | 1,086,108 | ||
|
| ||||
| Nintendo Co., Ltd. (Japan) | 500 | 73,163 | ||
|
| ||||
| Nintendo Co., Ltd. ADR (Japan) | 1,125 | 20,824 | ||
|
| ||||
| Oracle Corp. | 24,995 | 731,604 | ||
|
| ||||
| Red Hat, Inc. † | 615 | 30,418 | ||
|
| ||||
| Salesforce.com, Inc. † S | 747 | 106,941 | ||
|
| ||||
| Synchronoss Technologies, Inc. † | 1,297 | 43,398 | ||
|
| ||||
| VMware, Inc. Class A † | 321 | 31,744 | ||
|
| ||||
| 2,349,892 | ||||
| Specialty retail (0.4%) | ||||
| Best Buy Co., Inc. | 2,200 | 54,340 | ||
|
| ||||
| 54,340 | ||||
| Total common stocks (cost $9,046,501) | $11,806,874 | |||
| WARRANTS (0.4%)* † | Expiration | Strike | ||
| date | price | Warrants | Value | |
|
| ||||
| Bharti Airtel, Ltd. 144A (India) | 2/18/14 | $0.00 | 7,211 | $51,526 |
|
| ||||
| Total warrants (cost $53,823) | $51,526 | |||
18
| SHORT-TERM INVESTMENTS (3.5%)* | Shares | Value |
|
| ||
| Putnam Cash Collateral Pool, LLC 0.18% d | 55,950 | $55,950 |
|
| ||
| Putnam Money Market Liquidity Fund 0.09% e | 375,482 | 375,482 |
|
| ||
| Total short-term investments (cost $431,432) | $431,432 | |
| TOTAL INVESTMENTS | ||
|
| ||
| Total investments (cost $9,531,756) | $12,289,832 | |
| Key to holding’s abbreviations | |
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| GDR | Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $12,267,059.
† Non-income-producing security.
d See Note 1 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
e See Note 6 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
S Security on loan, in part or in entirety, at the close of the reporting period.
At the close of the reporting period, the fund maintained liquid assets totaling $20,916 to cover certain derivatives contracts.
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
| DIVERSIFICATION BY COUNTRY * | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| United States | 81.1% | France | 0.5% | |
|
|
| |||
| Japan | 9.0 | Netherlands | 0.5 | |
|
|
| |||
| China | 4.1 | Switzerland | 0.5 | |
|
|
| |||
| Sweden | 2.3 | Other | 0.9 | |
|
|
| |||
| South Korea | 1.1 | Total | 100.0% | |
|
|
||||
* Methodology differs from that used for purposes of complying with the fund’s policy regarding investments in securities of foreign issuers, as discussed further in the fund’s prospectus.
19
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $2,446,848) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Bank of America, N.A. | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | $38,494 | $38,297 | $(197) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 21,719 | 21,545 | 174 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 121,782 | 120,665 | 1,117 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 1,631 | 1,605 | 26 | |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| Euro | Sell | 3/22/12 | 12,125 | 11,994 | (131) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 144,174 | 144,198 | 24 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 112,252 | 119,945 | (7,693) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 35,367 | 34,779 | 588 | |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 22,269 | 22,156 | 113 | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 20,406 | 20,255 | (151) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 67,286 | 66,529 | (757) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 30,247 | 29,756 | 491 | |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| Euro | Sell | 3/22/12 | 26,248 | 25,967 | (281) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 127,873 | 136,548 | (8,675) | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 23,639 | 23,452 | 187 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 3,198 | 3,162 | (36) | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 42,631 | 42,305 | (326) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 58,093 | 57,422 | 671 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 9,903 | 10,582 | (679) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 38,296 | 37,655 | 641 | |
|
| ||||||
| HSBC Bank USA, National Association | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | 111,122 | 109,845 | 1,277 | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 8,174 | 8,175 | (1) | |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 173,543 | 172,772 | 771 | |
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 28,791 | 28,573 | (218) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 59,159 | 58,479 | (680) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 69,895 | 69,905 | 10 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 7,461 | 7,971 | (510) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 76,184 | 74,933 | (1,251) | |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| Canadian Dollar | Sell | 3/22/12 | 1,313 | 1,302 | (11) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 171,214 | 169,282 | 1,932 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 283,526 | 303,106 | 19,580 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 38,870 | 38,196 | (674) | |
|
| ||||||
20
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $2,446,848) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | $41,418 | $41,116 | $302 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 54,895 | 54,173 | (722) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 98,217 | 96,651 | (1,566) | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 50,902 | 50,678 | (224) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 63,643 | 63,148 | 495 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 3,065 | 1,383 | 1,682 | |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 50,265 | 50,042 | (223) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 3,536 | 3,509 | 27 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 22,384 | 22,144 | (240) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 11,565 | 12,364 | 799 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 40,954 | 40,284 | (670) | |
|
| ||||||
| Total | $4,991 | |||||
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Consumer discretionary | $69,129 | $110,565 | $— | |
|
| ||||
| Information technology | 10,086,359 | 1,231,368 | — | |
|
| ||||
| Telecommunication services | 309,453 | — | — | |
|
| ||||
| Total common stocks | 10,464,941 | 1,341,933 | — | |
| Warrants | — | 51,526 | — | |
|
| ||||
| Short-term investments | 375,482 | 55,950 | — | |
|
| ||||
| Totals by level | $10,840,423 | $1,449,409 | $— | |
| Valuation inputs | ||||
|
| ||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Forward currency contracts | $— | $4,991 | $— | |
|
| ||||
| Totals by level | $— | $4,991 | $— | |
The accompanying notes are an integral part of these financial statements.
21
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value, including $54,168 of securities on loan (Note 1): | |
| Unaffiliated issuers (identified cost $9,100,324) | $11,858,400 |
| Affiliated issuers (identified cost $431,432) (Notes 1 and 6) | 431,432 |
|
| |
| Cash | 20,270 |
|
| |
| Dividends, interest and other receivables | 13,011 |
|
| |
| Receivable for shares of the fund sold | 8,299 |
|
| |
| Receivable for investments sold | 117,732 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 30,907 |
|
| |
| Receivable from Manager (Note 2) | 2,605 |
|
| |
| Total assets | 12,482,656 |
| LIABILITIES | |
|
| |
| Payable for investments purchased | 82,016 |
|
| |
| Payable for shares of the fund repurchased | 1,445 |
|
| |
| Payable for investor servicing fees (Note 2) | 3,096 |
|
| |
| Payable for custodian fees (Note 2) | 7,264 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 1,450 |
|
| |
| Payable for administrative services (Note 2) | 42 |
|
| |
| Payable for auditing | 25,749 |
|
| |
| Payable for distribution fees (Note 2) | 4,821 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 25,916 |
|
| |
| Collateral on securities loaned, at value (Note 1) | 55,950 |
|
| |
| Other accrued expenses | 7,848 |
|
| |
| Total liabilities | 215,597 |
| Net assets | $12,267,059 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $9,836,728 |
|
| |
| Accumulated net investment loss (Note 1) | (22,082) |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (310,646) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 2,763,059 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $12,267,059 |
(Continued on next page)
22
Statement of assets and liabilities (Continued)
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($8,961,196 divided by 555,468 shares) | $16.13 |
|
| |
| Offering price per class A share (100/94.25 of $16.13)* | $17.11 |
|
| |
| Net asset value and offering price per class B share ($800,661 divided by 50,799 shares)** | $15.76 |
|
| |
| Net asset value and offering price per class C share ($977,345 divided by 62,019 shares)** | $15.76 |
|
| |
| Net asset value and redemption price per class M share ($122,321 divided by 7,695 shares) | $15.90 |
|
| |
| Offering price per class M share (100/96.50 of $15.90)* | $16.48 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($33,362 divided by 2,080 shares) | $16.04 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($1,372,174 divided by 84,467 shares) | $16.25 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $692) | $58,467 |
|
| |
| Interest (including interest income of $63 from investments in affiliated issuers) (Note 6) | 63 |
|
| |
| Securities lending (Note 1) | 2,172 |
|
| |
| Total investment income | 60,702 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 34,109 |
|
| |
| Investor servicing fees (Note 2) | 18,475 |
|
| |
| Custodian fees (Note 2) | 7,037 |
|
| |
| Trustee compensation and expenses (Note 2) | 390 |
|
| |
| Administrative services (Note 2) | 144 |
|
| |
| Distribution fees — Class A (Note 2) | 9,903 |
|
| |
| Distribution fees — Class B (Note 2) | 3,515 |
|
| |
| Distribution fees — Class C (Note 2) | 3,910 |
|
| |
| Distribution fees — Class M (Note 2) | 386 |
|
| |
| Distribution fees — Class R (Note 2) | 72 |
|
| |
| Reports to shareholders | 7,674 |
|
| |
| Auditing | 30,271 |
|
| |
| Other | 1,449 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (36,201) |
|
| |
| Total expenses | 81,134 |
| Expense reduction (Note 2) | (77) |
|
| |
| Net expenses | 81,057 |
| Net investment loss | (20,355) |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (121,185) |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (19,953) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 4,065 |
|
| |
| Net unrealized appreciation of investments during the period | 1,657,157 |
|
| |
| Net gain on investments | 1,520,084 |
| Net increase in net assets resulting from operations | $1,499,729 |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment loss | $(20,355) | $(35,658) |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (141,138) | 583,969 |
|
| ||
| Net unrealized appreciation of investments and assets | ||
| and liabilities in foreign currencies | 1,661,222 | 439,960 |
|
| ||
| Net increase in net assets resulting from operations | 1,499,729 | 988,271 |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | (116,823) | (162,378) |
|
| ||
| Class B | (10,586) | (9,831) |
|
| ||
| Class C | (11,886) | (9,959) |
|
| ||
| Class M | (1,648) | (2,571) |
|
| ||
| Class R | (425) | (448) |
|
| ||
| Class Y | (17,546) | (16,313) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (269,991) | (54,889) |
|
| ||
| Class B | (24,467) | (3,323) |
|
| ||
| Class C | (27,470) | (3,366) |
|
| ||
| Class M | (3,809) | (869) |
|
| ||
| Class R | (982) | (151) |
|
| ||
| Class Y | (40,551) | (5,514) |
|
| ||
| Redemption fees (Note 1) | 900 | 2,272 |
|
| ||
| Increase from capital share transactions (Note 4) | 653,755 | 1,986,461 |
|
| ||
| Total increase in net assets | 1,628,200 | 2,707,392 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 10,638,859 | 7,931,467 |
|
| ||
| End of period (including accumulated net investment loss | ||
| of $22,082 and $1,727, respectively) | $12,267,059 | $10,638,859 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||
|
| ||||||||||||||
| Ratio | Ratio | |||||||||||||
| Net realized | From | of expenses | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | net realized | Total return | Net assets, | to average | income (loss) | Portfolio | |||||
| beginning | Net investment | gain (loss) | investment | net investment | gain | Total | Redemption | Net asset value, | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees | end of period | value (%) b | (in thousands) | (%) c,d | net assets (%) d | (%) |
|
| ||||||||||||||
| Class A | ||||||||||||||
| February 29, 2012** | $14.86 | (.02) | 2.04 | 2.02 | — | (.75) | (.75) | — e | $16.13 | 14.40* | $8,961 | .71* | (.15)* | 10* |
| August 31, 2011 | 13.26 | (.04) | 2.02 | 1.98 | — | (.38) | (.38) | — e | 14.86 | 14.78 | 7,886 | 1.40 | (.24) | 101 |
| August 31, 2010 | 13.67 | (.07) | .54 | .47 | (.05) | (.84) | (.89) | .01 | 13.26 | 2.98 | 6,261 | 1.48 | (.46) | 161 |
| August 31, 2009† | 10.00 | (.02) | 3.69 | 3.67 | — | — | — | — e | 13.67 | 36.70* | 5,650 | 1.12* | (.14)* | 132* |
|
| ||||||||||||||
| Class B | ||||||||||||||
| February 29, 2012** | $14.59 | (.08) | 2.00 | 1.92 | — | (.75) | (.75) | — e | $15.76 | 13.97* | $801 | 1.08* | (.52)* | 10* |
| August 31, 2011 | 13.12 | (.15) | 2.00 | 1.85 | — | (.38) | (.38) | — e | 14.59 | 13.93 | 691 | 2.15 | (1.00) | 101 |
| August 31, 2010 | 13.60 | (.17) | .53 | .36 | (.01) | (.84) | (.85) | .01 | 13.12 | 2.19 | 443 | 2.23 | (1.19) | 161 |
| August 31, 2009† | 10.00 | (.08) | 3.68 | 3.60 | — | — | — | — e | 13.60 | 36.00* | 210 | 1.65* | (.70)* | 132* |
|
| ||||||||||||||
| Class C | ||||||||||||||
| February 29, 2012** | $14.59 | (.08) | 2.00 | 1.92 | — | (.75) | (.75) | — e | $15.76 | 13.97* | $977 | 1.08* | (.52)* | 10* |
| August 31, 2011 | 13.12 | (.15) | 2.00 | 1.85 | — | (.38) | (.38) | — e | 14.59 | 13.93 | 749 | 2.15 | (1.00) | 101 |
| August 31, 2010 | 13.60 | (.16) | .52 | .36 | (.02) | (.84) | (.86) | .02 | 13.12 | 2.24 | 429 | 2.23 | (1.14) | 161 |
| August 31, 2009† | 10.00 | (.08) | 3.68 | 3.60 | — | — | — | — e | 13.60 | 36.00* | 66 | 1.65* | (.71)* | 132* |
|
| ||||||||||||||
| Class M | ||||||||||||||
| February 29, 2012** | $14.69 | (.06) | 2.02 | 1.96 | — | (.75) | (.75) | — e | $15.90 | 14.15* | $122 | .96* | (.40)* | 10* |
| August 31, 2011 | 13.18 | (.12) | 2.01 | 1.89 | — | (.38) | (.38) | — e | 14.69 | 14.18 | 98 | 1.90 | (.77) | 101 |
| August 31, 2010 | 13.62 | (.13) | .54 | .41 | (.02) | (.84) | (.86) | .01 | 13.18 | 2.50 | 79 | 1.98 | (.94) | 161 |
| August 31, 2009† | 10.00 | (.08) | 3.70 | 3.62 | — | — | — | — e | 13.62 | 36.20* | 47 | 1.47* | (.65)* | 132* |
|
| ||||||||||||||
| Class R | ||||||||||||||
| February 29, 2012** | $14.80 | (.04) | 2.03 | 1.99 | — | (.75) | (.75) | — e | $16.04 | 14.25* | $33 | .84* | (.27)* | 10* |
| August 31, 2011 | 13.24 | (.08) | 2.02 | 1.94 | — | (.38) | (.38) | — e | 14.80 | 14.50 | 32 | 1.65 | (.51) | 101 |
| August 31, 2010 | 13.64 | (.10) | .55 | .45 | (.02) | (.84) | (.86) | .01 | 13.24 | 2.80 | 14 | 1.73 | (.71) | 161 |
| August 31, 2009† | 10.00 | (.03) | 3.67 | 3.64 | — | — | — | — e | 13.64 | 36.40* | 14 | 1.29* | (.28)* | 132* |
|
| ||||||||||||||
| Class Y | ||||||||||||||
| February 29, 2012** | $14.94 | — e | 2.06 | 2.06 | — | (.75) | (.75) | — e | $16.25 | 14.59* | $1,372 | .59* | (.02)* | 10* |
| August 31, 2011 | 13.30 | — e | 2.02 | 2.02 | — | (.38) | (.38) | — e | 14.94 | 15.04 | 1,182 | 1.15 | — f | 101 |
| August 31, 2010 | 13.69 | (.03) | .55 | .52 | (.08) | (.84) | (.92) | .01 | 13.30 | 3.29 | 705 | 1.23 | (.18) | 161 |
| August 31, 2009† | 10.00 | — e | 3.69 | 3.69 | — | — | — | — e | 13.69 | 36.90* | 318 | .94* | .01* | 132* |
|
| ||||||||||||||
* Not annualized.
** Unaudited.
† For the period December 18, 2008 (commencement of operations) to August 31, 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 and/or brokerage/service 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 | |
|
| |
| February 29, 2012 | 0.34% |
|
| |
| August 31, 2011 | 0.60 |
|
| |
| August 31, 2010 | 1.15 |
|
| |
| August 31, 2009 | 4.13 |
|
| |
e Amount represents less than $0.01 per share.
f Amount represents less than 0.01%.
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Global Technology Fund (the fund) is a non-diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks (growth or value stocks or both) of large and midsize companies in the technology industries worldwide that Putnam Management believes have favorable investment potential.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
28
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income 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.
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.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk.
The U.S. dollar value of forward 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. 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 when the contract matures or by delivery of the currency. 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.
29
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio. Outstanding forward currency contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $20,643 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash 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 agent; 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. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the value of securities loaned amounted to $54,168 and the fund received cash collateral of $55,950.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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
30
expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior periods remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $9,689,424, resulting in gross unrealized appreciation and depreciation of $3,303,189 and $702,781, respectively, or net unrealized appreciation of $2,600,408.
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.
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 a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.780% | of the first $5 billion, |
| 0.730% | of the next $5 billion, |
| 0.680% | of the next $10 billion, |
| 0.630% | of the next $10 billion, |
| 0.580% | of the next $50 billion, |
| 0.560% | of the next $50 billion, |
| 0.550% | of the next $100 billion and |
| 0.545% | of any excess thereafter. |
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $36,201 as a result of this limit.
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 a separate 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 for which PAC is engaged as sub-adviser.
31
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
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. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $46 under the expense offset arrangements and by $31 under the brokerage/service arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $8, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $604 and $10 from the sale of class A and class M shares, respectively, and received $217 and $40 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $1,081,032 and $1,347,282, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
32
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 56,091 | $845,975 | 312,057 | $4,967,817 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 19,886 | 274,821 | 13,510 | 211,977 |
|
| ||||
| 75,977 | 1,120,796 | 325,567 | 5,179,794 | |
|
| ||||
| Shares repurchased | (51,049) | (760,460) | (267,231) | (4,157,597) |
|
| ||||
| Net increase | 24,928 | $360,336 | 58,336 | $1,022,197 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 5,063 | $74,274 | 27,693 | $431,880 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,539 | 34,327 | 821 | 12,724 |
|
| ||||
| 7,602 | 108,601 | 28,514 | 444,604 | |
|
| ||||
| Shares repurchased | (4,155) | (60,940) | (14,958) | (231,187) |
|
| ||||
| Net increase | 3,447 | $47,661 | 13,556 | $213,417 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 10,704 | $158,490 | 32,963 | $518,298 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,910 | 39,349 | 860 | 13,312 |
|
| ||||
| 13,614 | 197,839 | 33,823 | 531,610 | |
|
| ||||
| Shares repurchased | (2,961) | (42,275) | (15,149) | (228,931) |
|
| ||||
| Net increase | 10,653 | $155,564 | 18,674 | $302,679 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 1,380 | $20,844 | 4,808 | $73,499 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 343 | 4,673 | 221 | 3,440 |
|
| ||||
| 1,723 | 25,517 | 5,029 | 76,939 | |
|
| ||||
| Shares repurchased | (698) | (9,841) | (4,368) | (69,401) |
|
| ||||
| Net increase | 1,025 | $15,676 | 661 | $7,538 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 203 | $3,013 | 1,662 | $25,205 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 102 | 1,407 | 38 | 599 |
|
| ||||
| 305 | 4,420 | 1,700 | 25,804 | |
|
| ||||
| Shares repurchased | (413) | (5,717) | (574) | (8,657) |
|
| ||||
| Net increase (decrease) | (108) | $(1,297) | 1,126 | $17,147 |
|
| ||||
33
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 10,478 | $156,013 | 36,491 | $585,719 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 4,170 | 58,006 | 1,383 | 21,780 |
|
| ||||
| 14,648 | 214,019 | 37,874 | 607,499 | |
|
| ||||
| Shares repurchased | (9,291) | (138,204) | (11,770) | (184,016) |
|
| ||||
| Net increase | 5,357 | $75,815 | 26,104 | $423,483 |
|
| ||||
At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:
| Shares owned | Percentage of ownership | Value | |
|
| |||
| Class A | 141,167 | 25.4% | $2,277,024 |
|
| |||
| Class R | 1,144 | 55.0 | 18,350 |
|
| |||
At the close of the reporting period, a shareholder of record owned 8.5% of the outstanding shares of the fund.
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | $30,907 | Payables | $25,916 |
|
| ||||
| Equity contracts | Investments | 51,526 | Payables | — |
|
| ||||
| Total | $82,433 | $25,916 | ||
|
| ||||
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | ||
| instruments under ASC 815 | contracts | Total | |
|
| |||
| Foreign exchange contracts | $(17,641) | $(17,641) | |
|
| |||
| Total | $(17,641) | $(17,641) | |
|
| |||
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | ||
| instruments under ASC 815 | Warrants* | contracts | Total |
|
| |||
| Foreign exchange contracts | $— | $3,438 | $3,438 |
|
| |||
| Equity contracts | (11,838) | — | (11,838) |
|
| |||
| Total | $(11,838) | $3,438 | $(8,400) |
|
| |||
* For the reporting period, the transaction volume for warrants was minimal.
34
Note 6: 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 $63 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $721,927 and $452,267, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund concentrates its investments in one sector, which involves more risk than a fund that invests more broadly.
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
35
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
36
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 | John A. Hill | Mark C. Trenchard |
| Putnam Investment | Paul L. Joskow | Vice President and |
| Management, LLC | Elizabeth T. Kennan | BSA Compliance Officer |
| One Post Office Square | Kenneth R. Leibler | |
| Boston, MA 02109 | Robert E. Patterson | Robert T. Burns |
| George Putnam, III | Vice President and | |
| Investment Sub-Manager | Robert L. Reynolds | Chief Legal Officer |
| Putnam Investments Limited | W. Thomas Stephens | |
| 57–59 St James’s Street | James P. Pappas | |
| London, England SW1A 1LD | Officers | Vice President |
| Robert L. Reynolds | ||
| Investment Sub-Advisor | President | Judith Cohen |
| The Putnam Advisory | Vice President, Clerk and | |
| Company, LLC | Jonathan S. Horwitz | Assistant Treasurer |
| One Post Office Square | Executive Vice President, | |
| Boston, MA 02109 | Principal Executive | Michael Higgins |
| Officer, Treasurer and | Vice President, Senior Associate | |
| Marketing Services | Compliance Liaison | Treasurer and Assistant Clerk |
| Putnam Retail Management | ||
| One Post Office Square | Steven D. Krichmar | Nancy E. Florek |
| Boston, MA 02109 | Vice President and | Vice President, Assistant Clerk, |
| Principal Financial Officer | Assistant Treasurer and | |
| Custodian | Proxy Manager | |
| State Street Bank | Janet C. Smith | |
| and Trust Company | Vice President, Assistant | Susan G. Malloy |
| Treasurer and Principal | Vice President and | |
| Legal Counsel | Accounting Officer | Assistant Treasurer |
| Ropes & Gray LLP | ||
| Robert R. Leveille | ||
| Trustees | Vice President and | |
| Jameson A. Baxter, Chair | Chief Compliance Officer | |
| Ravi Akhoury | ||
| Barbara M. Baumann | ||
| Charles B. Curtis | ||
| Robert J. Darretta |
This report is for the information of shareholders of Putnam Global Technology Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam Global
Telecommunications
Fund
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio manager | 5 | ||
|
|
|||
| Your fund’s performance | 10 | ||
|
|
|||
| Your fund’s expenses | 12 | ||
|
|
|||
| Terms and definitions | 14 | ||
|
|
|||
| Other information for shareholders | 15 | ||
|
|
|||
| Financial statements | 16 | ||
|
|
|||
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing signs of a turnaround. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
About the fund
Pursuing growth opportunities in telecommunications companies worldwide
In 1979, in Tokyo, Japan, the first commercial cellular telephone system began operations. Today — over 30 years later — billions of consumers worldwide carry their telephones, music, movies, games, Internet access, and computer systems in devices considerably smaller than those first cell phones.
Telecommunications — defined as the transmission of information, such as words, sounds, or images, usually over great distances —has experienced an astounding array of advances over the years. Putnam Global Telecommunications Fund seeks to capitalize on the potential of this dynamic sector — and the many innovations that are still to come. Under normal circumstances, the fund invests at least 80% of its assets in stocks of companies engaged in telecommunications industries.
The fund’s portfolio can include businesses of all sizes and at different stages of growth, from newer, rapidly growing companies to established global corporations. The fund’s manager focuses primarily on large and midsize companies, and has the flexibility to invest in U.S. and international markets.
The telecommunications sector includes telephone and wireless companies; providers of mobile devices and services such as text messaging and mobile Internet connectivity; and cable companies offering high-speed Internet access and video programming.
The fund’s manager conducts intensive research with support from analysts in Putnam’s Global Equity Research group. Their disciplined process includes analyzing each company’s valuation, financial strength, competitive positioning, earnings, and cash flow.
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’s policy of concentrating on a limited group of industries and the fund’s non-diversified status, which means the fund may invest in fewer issuers, can increase the fund’s vulnerability to common economic forces and may result in greater losses and volatility. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The use of short selling may result in losses if the securities appreciate in value. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer or industry.
Sector investing at Putnam
In recent decades, innovation and business growth have propelled stocks in different industries to market-leading performance. Finding these stocks, many of which are in international markets, requires rigorous research and in-depth knowledge of global markets.
Putnam’s sector funds invest in nine sectors worldwide and offer active management, risk controls, and the expertise of dedicated sector analysts. The funds’ managers invest with flexibility and precision, using fundamental research to hand select stocks for the portfolios.
All sectors in one fund:
Putnam Global Sector Fund
A portfolio of individual Putnam Global Sector Funds that provides exposure to all sectors of the MSCI World Index.
Individual sector funds:
Global Consumer Fund
Retail, hotels, restaurants, media, food and beverages
Global Energy Fund
Oil and gas, energy equipment and services
Global Financials Fund
Commercial banks, insurance, diversified financial services, mortgage finance
Global Health Care Fund
Pharmaceuticals, biotechnology, health-care services
Global Industrials Fund
Airlines, railroads, trucking, aerospace and defense, construction, commercial services
Global Natural Resources Fund
Metals, chemicals, oil and gas, forest products
Global Technology Fund
Software, computers, Internet services
Global Telecommunications Fund
Diversified and wireless telecommunications services
Global Utilities Fund
Electric, gas, and water utilities
| 2 | 3 |
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 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
Vivek, how would you describe the market environment for the fund’s fiscal period?
The first half of the fund’s current fiscal year was marked by a broad rally off of low levels reached in the closing months of 2011. At the beginning of the fiscal period in September, global stock markets had already begun tumbling on concerns about Europe’s sovereign debt crisis, reaction to the downgrade of U.S. Treasury debt, and fear of a renewed global recession. Market direction turned around only in December, after repeated signs that the U.S. economic recovery remained on track, and on news of a more credible plan by the European Central Bank to ease pressure on the eurozone’s banking system. Thanks to solid gains in January and February, all sectors of the MSCI World Index posted positive returns for the period as a whole.
Did the telecommunications sector demonstrate its typical defensive characteristics?
Yes, and to a great extent telecommunication stocks displayed much less volatility than the broader markets, declining less during the early months of the period, and then appreciating less during the recovery phase. Overall, the sector continued to deliver positive results. In fact, for the calendar year 2011, in which the eurozone went into recession, China’s economic growth rate slowed, and the U.S. economy temporarily faltered, the
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on page 14.
5
telecommunications sector was one of the better performers of the MSCI World Index. Spending on telecommunications services and products tends not to be significantly influenced by broader economic patterns, which can make the sector an attractive addition to prepare a portfolio for periods of economic weakness.
In the past, you have discussed how the “convergence” theme within the sector has stimulated growth for this sector. Did this theme remain on track?
Convergence describes the technological capability to provide all voice and data services through any network device, from mobile telephones to tablet computers to television sets. The driving force in convergence is the demand for video on mobile devices, as well as access to entertainment through multiple Internet sites and cable platforms. This trend is generating large and sustainable growth in traffic over both fixed and mobile networks.
What impact did the convergence theme have on fund results?
The fund’s relative results benefited from stock selections that in many cases reflected the convergence trade. The key to our positioning was an emphasis on cable television companies and a below-benchmark weighting in incumbent European telecommunication companies — the traditional large-cap telecom names with large fixed-line subscriber businesses. As an example, in the United States, the fund owned Comcast, an out-of-benchmark selection that delivered excellent results thanks to growth in video and Internet services.
Thanks largely to this positioning, the fund had a significant edge over its benchmark, as class A shares delivered 3.68% before sales charges, compared with the index return of 0.23%. We saw advantages in every region — Europe, Asia, the Americas, and a number of emerging markets. Foreign currency exposure had minimal effect on results. We hedged a portion of the fund’s foreign exchange risk — the potential impact of foreign currencies declining
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
6
in U.S.-dollar terms — by using forward currency contracts, a type of derivative.
Could you provide other examples of how you executed this strategy?
A good illustration is that the fund held a large position in Kabel Deutschland, a German cable television provider, which is not in the fund’s benchmark, and at the same time we had a large underweight to Deutsche Telekom, Germany’s large incumbent telephone service provider. This positioning was helpful to performance, as Kabel Deutschland had much better results, achieving growth by bundling telephone and Internet services for homeowners that it can reach through its cable network. In my view, the company is well positioned in terms of cost and quality, and telephone companies are challenged to respond. Deutsche Telekom was no longer in the portfolio at the close of the period.
This positioning was generally consistent across most European markets. The fund did not own France Telecom or Portugal Telecom, for example, and it had an underweight position in Telefonica, Spain’s incumbent telephone company.
Why do you believe the large European phone companies are unattractive investment opportunities?
Regulators in Europe are promoting competition in wireless telephony, and this keeps profit margins low. In most markets, three to five companies compete for customers, with little differentiation in network quality among them. Customers can easily switch to the company that offers the lowest price or the most compelling combination of services.
As an investor, I find the European landscape less attractive than that of the United States.
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
Let me give an example. The French market saw a new entrant, Iliad, launch wireless services earlier this year offering substantial discounts. This triggered a price war, and the casualties were established companies such as Vivendi and France Telecom. Neither stock was held in the fund.
Poor macroeconomic conditions and increased competition in European markets are putting pressure on profits and cash flows of incumbent operators, which leads to dividend cuts. Late last year, Telefonica and Telekom Austria announced dividend cuts. We believe many others may have difficulty supporting their current dividends given the outlook for shrinking revenues and earnings, and the need for new capital investment in networks. We are carefully monitoring this and have sought to minimize exposure to companies where dividend cuts are a high risk.
What different opportunities do you see in the United States?
U.S. regulatory authorities show ostensible support for competition, but investment conditions are more favorable than those in Europe. We saw a major example of competition policy during the fiscal period, as the U.S. Justice Department opposed the proposed acquisition of T-Mobile by AT&T, on grounds that it would have reduced competition in many major metropolitan markets. Blocking this combination, however, does not mean the United States is becoming more like Europe, nor did it cause lasting harm to AT&T stock, which appreciated in the period.
U.S. wireless services competition is based more on network quality rather than price. Companies have invested more in 4G/LTE [Long Term Evolution] mobile standards, to continue to enhance the quality and capability of their networks. Verizon and AT&T have differentiated their wireless offering on the back of better network quality and wider choices of handsets. This means that they don’t face as much competitive pressure as their counterparts in Europe. T-Mobile is a laggard on both these fronts and is still not offering the iPhone as a choice to its customers. It is no surprise that T-Mobile continues to lose
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. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Holdings will vary over time.
8
its contract customer base. This is part of the reason why we continue to avoid Deutsche Telekom (T-Mobile’s parent) in the portfolio.
In the fiscal period we maintained an overweight position in Verizon, which contributed positively to results versus the index, and an underweight in AT&T because of the uncertainty surrounding the merger.
How is the fund positioned in Asia and emerging markets?
It is more difficult to speak about these markets in a general fashion. Emerging markets offer the attractions of strong economic growth and lower penetration rates for telecommunications services. However, the fund’s exposure is selective because the quality of telecom companies is spotty. In China, for example, we do not consider any of the companies to be worthy of investment, despite the country’s compelling growth profile.
On other hand, the fund has exposure to Brazil through wireless provider TIM. In the Philippines, the fund owns Globe Telecom. This market became more attractive when the regulatory authorities approved moving from three carriers to only two, which helped to reduce competitive pressure. Neither TIM nor Globe Telecom is in the benchmark index. We also achieved exposure to the markets of South Africa and India via the position in Vodafone Group of the United Kingdom, which also owns a major position in Verizon Wireless.
Elsewhere in Asia, the fund has a position in Jupiter Telecommunications of Japan, a cable operator that benefits from the same advantages of cable companies in other developed markets. The fund also has a position in NTT DoCoMo.
What is your outlook for the fund and the markets in the coming six months?
We continue to look for attractive mispriced opportunities to generate superior performance for the fund. We tend to prefer companies that are growing, generating compelling free cash-flow yields, and paying solid dividends. This requires paying attention to business and management quality, competitive landscape, regulatory environment, and economic trends among others. We tend to avoid stocks that may be cheap superficially, because we find in many cases that these companies either face secular headwinds that weigh down their profitability and dividends or, in some cases, they have corporate governance problems.
We continue to emphasize the cable and smaller wireless providers over large incumbent fixed-line telecom companies. We also continue to favor the United States over Europe because U.S. price competition and regulation are less problematic for investors and the macroeconomy is stronger. Select emerging markets, such as Brazil and the Philippines, offer companies that, in my view, will be capable of executing growth strategies to capture the potential of these markets.
Vivek, thanks for providing this review of the fund.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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 Vivek Gandhi has an M.B.A. from Xavier Labour Relations Institute in Jamshedpur, India, and a B.Eng. from Regional Engineering College in Bhopal, India. A CFA charterholder, he joined Putnam in 1999 and has been in the investment industry since 1994.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 50.39% | 41.75% | 46.89% | 43.89% | 46.92% | 46.92% | 48.12% | 42.97% | 49.32% | 51.65% |
| Annual average | 13.62 | 11.53 | 12.78 | 12.06 | 12.79 | 12.79 | 13.08 | 11.83 | 13.36 | 13.91 |
|
| ||||||||||
| 3 years | 74.67 | 64.54 | 70.81 | 67.81 | 70.84 | 70.84 | 72.04 | 66.06 | 73.43 | 75.92 |
| Annual average | 20.43 | 18.06 | 19.54 | 18.83 | 19.54 | 19.54 | 19.82 | 18.42 | 20.15 | 20.72 |
|
| ||||||||||
| 1 year | –0.05 | –5.79 | –0.74 | –5.49 | –0.75 | –1.70 | –0.45 | –3.92 | –0.20 | 0.27 |
|
| ||||||||||
| 6 months | 3.68 | –2.27 | 3.33 | –1.62 | 3.32 | 2.33 | 3.44 | –0.15 | 3.60 | 3.85 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
Comparative index returns For periods ended 2/29/12
| MSCI World Telecommunications Services Index (ND) | |
|
| |
| Life of fund | 25.77% |
| Annual average | 7.44 |
|
| |
| 3 years | 49.01 |
| Annual average | 14.22 |
|
| |
| 1 year | –2.92 |
|
| |
| 6 months | 0.23 |
|
| |
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
10
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 1 | 1 | 1 | 1 | 1 | 1 | ||
|
| ||||||||
| Income | $0.438 | $0.369 | $0.396 | $0.386 | $0.446 | $0.469 | ||
|
| ||||||||
| Capital gains — Long-term | 0.067 | 0.067 | 0.067 | 0.067 | 0.067 | 0.067 | ||
|
| ||||||||
| Capital gains — Short-term | 0.105 | 0.105 | 0.105 | 0.105 | 0.105 | 0.105 | ||
|
| ||||||||
| Total | $0.610 | $0.541 | $0.568 | $0.558 | $0.618 | $0.641 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $13.13 | $13.93 | $12.94 | $12.94 | $13.05 | $13.52 | $13.11 | $13.17 |
|
| ||||||||
| 2/29/12 | 12.97 | 13.76 | 12.80 | 12.77 | 12.91 | 13.38 | 12.93 | 13.00 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | (12/18/08) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 53.99% | 45.13% | 50.22% | 47.22% | 50.26% | 50.26% | 51.45% | 46.19% | 52.79% | 55.26% |
| Annual average | 14.05 | 12.01 | 13.19 | 12.49 | 13.20 | 13.20 | 13.47 | 12.25 | 13.77 | 14.33 |
|
| ||||||||||
| 3 years | 77.00 | 66.83 | 73.07 | 70.07 | 73.11 | 73.11 | 74.28 | 68.09 | 75.62 | 78.26 |
| Annual average | 20.96 | 18.60 | 20.06 | 19.36 | 20.07 | 20.07 | 20.34 | 18.90 | 20.65 | 21.25 |
|
| ||||||||||
| 1 year | 1.16 | –4.66 | 0.39 | –4.41 | 0.39 | –0.57 | 0.60 | –2.94 | 0.93 | 1.40 |
|
| ||||||||||
| 6 months | 12.14 | 5.68 | 11.71 | 6.71 | 11.70 | 10.70 | 11.85 | 7.91 | 11.99 | 12.30 |
|
| ||||||||||
11
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Net expenses for the fiscal year ended 8/31/11* | 1.40% | 2.15% | 2.15% | 1.90% | 1.65% | 1.15% |
|
| ||||||
| Total annual operating expenses for the fiscal year | ||||||
| ended 8/31/11 | 2.35% | 3.10% | 3.10% | 2.85% | 2.60% | 2.10% |
|
| ||||||
| Annualized expense ratio for the six-month period | ||||||
| ended 2/29/12 | 1.43% | 2.18% | 2.18% | 1.93% | 1.68% | 1.18% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/12.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.24 | $11.02 | $11.02 | $9.76 | $8.50 | $5.98 |
|
| ||||||
| Ending value (after expenses) | $1,036.80 | $1,033.30 | $1,033.20 | $1,034.40 | $1,036.00 | $1,038.50 |
|
| ||||||
* 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 2/29/12. 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.
12
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $7.17 | $10.92 | $10.92 | $9.67 | $8.42 | $5.92 |
|
| ||||||
| Ending value (after expenses) | $1,017.75 | $1,014.02 | $1,014.02 | $1,015.27 | $1,016.51 | $1,019.00 |
|
| ||||||
* 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 2/29/12. 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.
13
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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 U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) 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 Telecommunications Services Index (ND) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets in the telecommunications sector.
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.
14
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
15
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
16
The fund’s portfolio 2/29/12 (Unaudited)
| COMMON STOCKS (97.1%)* | Shares | Value |
|
| ||
| Communications equipment (4.1%) | ||
| Cisco Systems, Inc. | 9,900 | $196,812 |
|
| ||
| Qualcomm, Inc. | 3,500 | 217,630 |
|
| ||
| 414,442 | ||
| Diversified telecommunication services (46.3%) | ||
| AT&T, Inc. | 47,266 | 1,445,867 |
|
| ||
| BT Group PLC (United Kingdom) | 46,328 | 158,462 |
|
| ||
| CenturyLink, Inc. | 8,800 | 354,200 |
|
| ||
| Hutchison Telecommunications Hong Kong Holdings, Ltd. | ||
| (Hong Kong) | 522,000 | 221,845 |
|
| ||
| Nippon Telegraph & Telephone (NTT) Corp. (Japan) | 6,100 | 287,531 |
|
| ||
| Swisscom AG (Switzerland) | 489 | 194,800 |
|
| ||
| TDC A/S (Denmark) | 16,973 | 134,527 |
|
| ||
| Telefonica SA (Spain) | 10,692 | 182,478 |
|
| ||
| Telenet Group Holding NV (Belgium) | 7,757 | 305,699 |
|
| ||
| Verizon Communications, Inc. | 36,418 | 1,387,890 |
|
| ||
| 4,673,299 | ||
| Internet software and services (3.2%) | ||
| Telecity Group PLC (United Kingdom) † | 28,932 | 317,363 |
|
| ||
| 317,363 | ||
| IT Services (1.6%) | ||
| InterXion Holding NV (Netherlands) † | 10,400 | 164,112 |
|
| ||
| 164,112 | ||
| Media (16.3%) | ||
| Comcast Corp. Class A | 14,683 | 431,387 |
|
| ||
| Jupiter Telecommunications Co., Ltd. (Japan) | 299 | 291,651 |
|
| ||
| Kabel Deutschland Holding AG (Germany) † | 8,258 | 495,866 |
|
| ||
| Time Warner Cable, Inc. | 1,500 | 119,010 |
|
| ||
| Virgin Media, Inc. (United Kingdom) | 8,300 | 209,160 |
|
| ||
| Zon Multimedia Servicos de Telecomunicacoes e Multimedia | ||
| SGPS SA (Portugal) | 30,975 | 96,154 |
|
| ||
| 1,643,228 | ||
| Wireless telecommunication services (25.6%) | ||
| Globe Telecom, Inc. (Philippines) | 6,570 | 177,147 |
|
| ||
| NII Holdings, Inc. † | 5,435 | 97,178 |
|
| ||
| NTT DoCoMo, Inc. (Japan) | 156 | 265,774 |
|
| ||
| Softbank Corp. (Japan) | 4,400 | 131,239 |
|
| ||
| Sprint Nextel Corp. † | 32,078 | 79,233 |
|
| ||
| TIM Participacoes SA ADR (Brazil) | 6,900 | 207,345 |
|
| ||
| Vodafone Group PLC (United Kingdom) | 601,896 | 1,621,620 |
|
| ||
| 2,579,536 | ||
| Total common stocks (cost $8,736,786) | $9,791,980 | |
| SHORT-TERM INVESTMENTS (2.7%)* | Shares | Value |
|
| ||
| Putnam Money Market Liquidity Fund 0.09% e | 270,064 | $270,064 |
|
| ||
| Total short-term investments (cost $270,064) | $270,064 | |
| TOTAL INVESTMENTS | ||
|
| ||
| Total investments (cost $9,006,850) | $10,062,044 | |
17
Key to holding’s abbreviations
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $10,085,387.
† Non-income-producing security.
e See Note 6 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
At the close of the reporting period, the fund maintained liquid assets totaling $19,916 to cover certain derivatives contracts.
| DIVERSIFICATION BY COUNTRY * | ||||
|
| ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| United States | 45.8% | Switzerland | 1.9% | |
|
|
| |||
| United Kingdom | 22.9 | Spain | 1.8 | |
|
|
| |||
| Japan | 9.7 | Philippines | 1.8 | |
|
|
| |||
| Germany | 4.9 | Netherlands | 1.6 | |
|
|
| |||
| Belgium | 3.0 | Denmark | 1.3 | |
|
|
| |||
| Hong Kong | 2.2 | Portugal | 1.0 | |
|
|
| |||
| Brazil | 2.1 | Total | 100.0% | |
|
|
||||
* Methodology differs from that used for purposes of complying with the fund’s policy regarding investments in securities of foreign issuers, as discussed further in the fund’s prospectus.
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $5,021,131) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Bank of America, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | $44,299 | $44,251 | $48 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 39,608 | 39,404 | 204 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 248,893 | 246,611 | 2,282 | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 8,688 | 8,366 | 322 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 42,207 | 41,526 | 681 | |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 47,830 | 47,783 | 47 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 15,907 | 15,834 | 73 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 35,761 | 35,486 | 275 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 65,021 | 64,318 | 703 | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 15,163 | 15,164 | (1) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 271,566 | 290,177 | 18,611 | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 44,511 | 42,886 | 1,625 | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 42,139 | 42,264 | (125) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 19,390 | 19,067 | 323 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 22,111 | 21,910 | 201 | |
|
| ||||||
18
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $5,021,131) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | $40,447 | $40,410 | $(37) | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 99,735 | 99,225 | (510) | |
|
| ||||||
| Danish Krone | Sell | 3/22/12 | 117,496 | 116,058 | (1,438) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 24,516 | 24,240 | (276) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 130,817 | 130,828 | 11 | |
|
| ||||||
| Singapore Dollar | Sell | 3/22/12 | 31,024 | 31,132 | 108 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 11,975 | 11,781 | 194 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 52,846 | 52,361 | (485) | |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 72,058 | 71,691 | (367) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 63,845 | 63,341 | 504 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 116,319 | 115,070 | 1,249 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 97,056 | 103,641 | (6,585) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 31,748 | 30,566 | 1,182 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 73,315 | 72,050 | 1,265 | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 16,692 | 16,674 | 18 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 21,951 | 21,832 | (119) | |
|
| ||||||
| Euro | Sell | 3/22/12 | 36,774 | 36,363 | (411) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 57,444 | 56,498 | 946 | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 61,877 | 61,575 | 302 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 37,681 | 37,393 | 288 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 171,747 | 169,763 | 1,984 | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 296,694 | 317,022 | (20,328) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 9,760 | 9,397 | 363 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 4,847 | 4,766 | 81 | |
|
| ||||||
| HSBC Bank USA, National Association | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 18,452 | 18,364 | (88) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 303,388 | 299,901 | 3,487 | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 26,406 | 26,408 | 2 | |
|
| ||||||
| New Zealand Dollar | Buy | 3/22/12 | 37,832 | 37,776 | 56 | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 17,751 | 17,803 | (52) | |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 14,980 | 14,967 | 13 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 302,546 | 301,026 | (1,520) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 56,066 | 55,641 | 425 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 78,745 | 77,841 | (904) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 58,549 | 58,557 | 8 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 121,185 | 130,919 | 9,734 | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 181,428 | 180,932 | 496 | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 32,512 | 31,978 | 534 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 103,371 | 102,300 | (1,071) | |
|
| ||||||
19
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $5,021,131) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | $47,830 | $47,725 | $105 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 25,292 | 25,174 | (118) | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 17,376 | 17,226 | 150 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 68,619 | 67,845 | 774 | |
|
| ||||||
| Israeli Shekel | Buy | 3/22/12 | 24,995 | 25,379 | (384) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 19,957 | 21,335 | (1,378) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 22,380 | 21,991 | 389 | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 11,940 | 11,825 | 115 | |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 103,950 | 103,191 | 759 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 91,270 | 90,115 | 1,155 | |
|
| ||||||
| Israeli Shekel | Buy | 3/22/12 | 9,750 | 9,891 | (141) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 16,520 | 16,257 | 263 | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 22,429 | 22,330 | 99 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 34,650 | 34,380 | 270 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 113,654 | 112,437 | 1,217 | |
|
| ||||||
| Israeli Shekel | Buy | 3/22/12 | 9,750 | 9,900 | (150) | |
|
| ||||||
| Norwegian Krone | Buy | 3/22/12 | 27,743 | 26,713 | 1,030 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 69,721 | 68,560 | (1,161) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 15,810 | 15,654 | 156 | |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 21,400 | 21,356 | 44 | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 39,926 | 39,749 | 177 | |
|
| ||||||
| Canadian Dollar | Buy | 3/22/12 | 55,056 | 54,637 | 419 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 96,333 | 95,300 | 1,033 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 35,021 | 39,024 | 4,003 | |
|
| ||||||
| Total | $23,154 | |||||
20
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||
|
| ||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Common stocks: | ||||
|
| ||||
| Consumer discretionary | $1,351,577 | $291,651 | $— | |
|
| ||||
| Information technology | 895,917 | — | — | |
|
| ||||
| Telecommunication services | 6,169,299 | 1,083,536 | — | |
|
| ||||
| Total common stocks | 8,416,793 | 1,375,187 | — | |
| Short-term investments | 270,064 | — | — | |
|
| ||||
| Totals by level | $8,686,857 | $1,375,187 | $— | |
| Valuation inputs | ||||
|
| ||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |
|
| ||||
| Forward currency contracts | $— | $23,154 | $— | |
|
| ||||
| Totals by level | $— | $23,154 | $— | |
The accompanying notes are an integral part of these financial statements.
21
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value (Note 1): | |
| Unaffiliated issuers (identified cost $8,736,786) | $9,791,980 |
| Affiliated issuers (identified cost $270,064) (Note 6) | 270,064 |
|
| |
| Cash | 26,670 |
|
| |
| Dividends, interest and other receivables | 8,483 |
|
| |
| Receivable for shares of the fund sold | 26,695 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 60,803 |
|
| |
| Receivable from Manager (Note 2) | 5,563 |
|
| |
| Total assets | 10,190,258 |
| LIABILITIES | |
|
| |
| Payable for shares of the fund repurchased | 16,808 |
|
| |
| Payable for investor servicing fees (Note 2) | 2,612 |
|
| |
| Payable for custodian fees (Note 2) | 9,419 |
|
| |
| Payable for Trustee compensation and expenses (Note 2) | 1,305 |
|
| |
| Payable for administrative services (Note 2) | 38 |
|
| |
| Payable for distribution fees (Note 2) | 4,058 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 37,649 |
|
| |
| Payable for auditing fees | 25,742 |
|
| |
| Payable for reports to shareholders | 6,487 |
|
| |
| Other accrued expenses | 753 |
|
| |
| Total liabilities | 104,871 |
| Net assets | $10,085,387 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $9,169,323 |
|
| |
| Undistributed net investment income (Note 1) | 47,220 |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (209,399) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 1,078,243 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $10,085,387 |
(Continued on next page)
22
Statement of assets and liabilities (Continued)
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($8,096,243 divided by 624,030 shares) | $12.97 |
|
| |
| Offering price per class A share (100/94.25 of $12.97)* | $13.76 |
|
| |
| Net asset value and offering price per class B share ($241,888 divided by 18,898 shares)** | $12.80 |
|
| |
| Net asset value and offering price per class C share ($911,187 divided by 71,345 shares)** | $12.77 |
|
| |
| Net asset value and redemption price per class M share ($38,651 divided by 2,995 shares) | $12.91 |
|
| |
| Offering price per class M share (100/96.50 of $12.91)* | $13.38 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($69,727 divided by 5,394 shares) | $12.93 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($727,691 divided by 55,971 shares) | $13.00 |
|
| |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
23
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $3,797) | $173,974 |
|
| |
| Interest (including interest income of $83 from investments in affiliated issuers) (Note 6) | 83 |
|
| |
| Total investment income | 174,057 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 29,009 |
|
| |
| Investor servicing fees (Note 2) | 15,790 |
|
| |
| Custodian fees (Note 2) | 10,222 |
|
| |
| Trustee compensation and expenses (Note 2) | 337 |
|
| |
| Administrative services (Note 2) | 143 |
|
| |
| Distribution fees — Class A (Note 2) | 9,395 |
|
| |
| Distribution fees — Class B (Note 2) | 1,142 |
|
| |
| Distribution fees — Class C (Note 2) | 2,690 |
|
| |
| Distribution fees — Class M (Note 2) | 145 |
|
| |
| Distribution fees — Class R (Note 2) | 128 |
|
| |
| Reports to shareholders | 7,505 |
|
| |
| Auditing | 29,761 |
|
| |
| Other | 1,845 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (40,664) |
|
| |
| Total expenses | 67,448 |
| Expense reduction (Note 2) | (20) |
|
| |
| Net expenses | 67,428 |
| Net investment income | 106,629 |
|
| |
| Net realized loss on investments (Notes 1 and 3) | (116,849) |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (58,004) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 18,820 |
|
| |
| Net unrealized appreciation of investments during the period | 399,176 |
|
| |
| Net gain on investments | 243,143 |
| Net increase in net assets resulting from operations | $349,772 |
|
| |
The accompanying notes are an integral part of these financial statements.
24
Statement of changes in net assets
| INCREASE IN NET ASSETS | Six months ended 2/29/12* | Year ended 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income | $106,629 | $250,950 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (174,853) | 256,974 |
|
| ||
| Net unrealized appreciation of investments and assets | ||
| and liabilities in foreign currencies | 417,996 | 350,251 |
|
| ||
| Net increase in net assets resulting from operations | 349,772 | 858,175 |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
|
| ||
| Class A | (259,043) | (132,743) |
|
| ||
| Class B | (7,206) | (1,804) |
|
| ||
| Class C | (18,475) | (3,544) |
|
| ||
| Class M | (1,168) | (317) |
|
| ||
| Class R | (2,270) | (302) |
|
| ||
| Class Y | (27,961) | (11,554) |
|
| ||
| Net realized short-term gain on investments | ||
|
| ||
| Class A | (62,099) | (125,175) |
|
| ||
| Class B | (2,051) | (1,935) |
|
| ||
| Class C | (4,899) | (4,069) |
|
| ||
| Class M | (317) | (374) |
|
| ||
| Class R | (535) | (320) |
|
| ||
| Class Y | (6,260) | (10,233) |
|
| ||
| From net realized long-term gain on investments | ||
| Class A | (39,625) | (79,546) |
|
| ||
| Class B | (1,308) | (1,230) |
|
| ||
| Class C | (3,126) | (2,586) |
|
| ||
| Class M | (203) | (237) |
|
| ||
| Class R | (341) | (204) |
|
| ||
| Class Y | (3,994) | (6,503) |
|
| ||
| Redemption fees (Note 1) | 706 | 1,796 |
|
| ||
| Increase from capital share transactions (Note 4) | 1,448,898 | 4,051,174 |
|
| ||
| Total increase in net assets | 1,358,495 | 4,528,469 |
| NET ASSETS | ||
|
| ||
| Beginning of period | 8,726,892 | 4,198,423 |
|
| ||
| End of period (including undistributed net investment | ||
| income of $47,220 and $256,714, respectively) | $10,085,387 | $8,726,892 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
25
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||||
|
| ||||||||||||||
| Ratio | Ratio | |||||||||||||
| Net realized | From | of expenses | of net investment | |||||||||||
| Net asset value, | and unrealized | Total from | From | net realized | Total return | Net assets, | to average | income (loss) | Portfolio | |||||
| beginning | Net investment | gain (loss) | investment | net investment | gain | Total | Redemption | Net asset value, | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | fees b | end of period | value (%) c | (in thousands) | (%) d,e | net assets (%) d | (%) |
|
| ||||||||||||||
| Class A | ||||||||||||||
| February 29, 2012 ** | $13.13 | .15 | .30 | .45 | (.44) | (.17) | (.61) | — | $12.97 | 3.68 * | $8,096 | .71 * | 1.18 * | 16 * |
| August 31, 2011 | 11.67 | .46 | 1.84 | 2.30 | (.33) | (.51) | (.84) | — | 13.13 | 20.01 | 7,395 | 1.40 | 3.42 | 43 |
| August 31, 2010 | 10.56 | .28 | 1.22 | 1.50 | (.39) | — | (.39) | — | 11.67 | 14.46 | 3,636 | 1.48 | 2.53 | 80 |
| August 31, 2009† | 10.00 | .26 f | .30 | .56 | — | — | — | — | 10.56 | 5.60 * | 3,193 | 1.02 * | 2.79 *f | 45 * |
|
| ||||||||||||||
| Class B | ||||||||||||||
| February 29, 2012 ** | $12.94 | .10 | .30 | .40 | (.37) | (.17) | (.54) | — | $12.80 | 3.33 * | $242 | 1.09 * | .82 * | 16 * |
| August 31, 2011 | 11.56 | .41 | 1.77 | 2.18 | (.29) | (.51) | (.80) | — | 12.94 | 19.14 | 201 | 2.15 | 3.08 | 43 |
| August 31, 2010 | 10.50 | .15 | 1.27 | 1.42 | (.36) | — | (.36) | — | 11.56 | 13.65 | 40 | 2.23 | 1.38 | 80 |
| August 31, 2009† | 10.00 | .24 f | .26 | .50 | — | — | — | — | 10.50 | 5.00 * | 21 | 1.55 * | 2.57 *f | 45 * |
|
| ||||||||||||||
| Class C | ||||||||||||||
| February 29, 2012 ** | $12.94 | .10 | .30 | .40 | (.40) | (.17) | (.57) | — | $12.77 | 3.32 * | $911 | 1.09 * | .82 * | 16 * |
| August 31, 2011 | 11.54 | .40 | 1.78 | 2.18 | (.27) | (.51) | (.78) | — | 12.94 | 19.17 | 345 | 2.15 | 3.01 | 43 |
| August 31, 2010 | 10.50 | .27 | 1.14 | 1.41 | (.37) | — | (.37) | — | 11.54 | 13.65 | 135 | 2.23 | 2.43 | 80 |
| August 31, 2009† | 10.00 | .21 f | .29 | .50 | — | — | — | — | 10.50 | 5.00 * | 11 | 1.55 * | 2.25 *f | 45 * |
|
| ||||||||||||||
| Class M | ||||||||||||||
| February 29, 2012 ** | $13.05 | .12 | .30 | .42 | (.39) | (.17) | (.56) | — | $12.91 | 3.44 * | $39 | .96 * | .95 * | 16 * |
| August 31, 2011 | 11.60 | .50 | 1.72 | 2.22 | (.26) | (.51) | (.77) | — | 13.05 | 19.45 | 39 | 1.90 | 3.71 | 43 |
| August 31, 2010 | 10.52 | .20 | 1.25 | 1.45 | (.37) | — | (.37) | — | 11.60 | 13.95 | 12 | 1.98 | 1.80 | 80 |
| August 31, 2009† | 10.00 | .23 f | .29 | .52 | — | — | — | — | 10.52 | 5.20 * | 11 | 1.37 * | 2.43 *f | 45 * |
|
| ||||||||||||||
| Class R | ||||||||||||||
| February 29, 2012 ** | $13.11 | .14 | .30 | .44 | (.45) | (.17) | (.62) | — | $12.93 | 3.60 * | $70 | .84 * | 1.09 * | 16 * |
| August 31, 2011 | 11.65 | .41 | 1.85 | 2.26 | (.29) | (.51) | (.80) | — | 13.11 | 19.73 | 17 | 1.65 | 3.04 | 43 |
| August 31, 2010 | 10.54 | .26 | 1.22 | 1.48 | (.37) | — | (.37) | — | 11.65 | 14.22 | 12 | 1.73 | 2.32 | 80 |
| August 31, 2009† | 10.00 | .24 f | .30 | .54 | — | — | — | — | 10.54 | 5.40 * | 11 | 1.19 * | 2.60 *f | 45 * |
|
| ||||||||||||||
| Class Y | ||||||||||||||
| February 29, 2012 ** | $13.17 | .17 | .30 | .47 | (.47) | (.17) | (.64) | — | $13.00 | 3.85 * | $728 | .59 * | 1.33 * | 16 * |
| August 31, 2011 | 11.70 | .50 | 1.83 | 2.33 | (.35) | (.51) | (.86) | — | 13.17 | 20.27 | 729 | 1.15 | 3.75 | 43 |
| August 31, 2010 | 10.57 | .35 | 1.20 | 1.55 | (.42) | — | (.42) | — | 11.70 | 14.87 | 363 | 1.23 | 3.17 | 80 |
| August 31, 2009† | 10.00 | .33 f | .24 | .57 | — | — | — | — | 10.57 | 5.70 * | 98 | .84 * | 3.42 *f | 45 * |
|
| ||||||||||||||
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 26 | 27 |
Financial highlights (Continued)
* Not annualized.
** Unaudited.
† For the period December 18, 2008 (commencement of operations) to August 31, 2009.
a Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
b Amount represents less than $0.01 per share.
c Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
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 | |
|
| |
| February 29, 2012 | 0.44% |
|
| |
| August 31, 2011 | 0.95 |
|
| |
| August 31, 2010 | 2.64 |
|
| |
| August 31, 2009 | 5.90 |
|
| |
e Includes amounts paid through expense offset and/or brokerage/service arrangements.
f Reflects dividends received by the fund from two issuers which amounted to the following amounts:
| Percentage of | ||
| Per share | average net assets | |
|
| ||
| Class A | $0.04 | 0.39% |
|
| ||
| Class B | 0.03 | 0.37 |
|
| ||
| Class C | 0.04 | 0.39 |
|
| ||
| Class M | 0.04 | 0.39 |
|
| ||
| Class R | 0.04 | 0.39 |
|
| ||
| Class Y | 0.02 | 0.26 |
|
| ||
The accompanying notes are an integral part of these financial statements.
28
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Global Telecommunications Fund (the fund) is a non-diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks of companies worldwide in the telecommunication industries that Putnam Management believes have favorable investment potential.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 90 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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1 securities. 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 and is generally categorized as a Level 2 security.
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
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
29
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
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 an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income 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.
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.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk.
The U.S. dollar value of forward 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. 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 when the contract matures or by delivery of the currency. 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.
30
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio. Outstanding forward currency contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $22,842 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior periods remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
31
The aggregate identified cost on a tax basis is $9,034,702, resulting in gross unrealized appreciation and depreciation of $1,372,099 and $344,757, respectively, or net unrealized appreciation of $1,027,342.
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.
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 a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.780% | of the first $5 billion, |
| 0.730% | of the next $5 billion, |
| 0.680% | of the next $10 billion, |
| 0.630% | of the next $10 billion, |
| 0.580% | of the next $50 billion, |
| 0.560% | of the next $50 billion, |
| 0.550% | of the next $100 billion and |
| 0.545% | of any excess thereafter. |
Putnam Management has contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $40,664 as a result of this limit.
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 a separate 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 for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in
32
the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $20 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $7, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $2,853 and no monies from the sale of class A and class M shares, respectively, and received $96 and $25 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $2,449,996 and $1,443,147, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 110,321 | $1,411,905 | 364,891 | $4,891,849 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 14,299 | 175,731 | 26,136 | 326,487 |
|
| ||||
| 124,620 | 1,587,636 | 391,027 | 5,218,336 | |
|
| ||||
| Shares repurchased | (63,708) | (809,666) | (139,414) | (1,898,776) |
|
| ||||
| Net increase | 60,912 | $777,970 | 251,613 | $3,319,560 |
|
| ||||
33
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 5,261 | $66,602 | 16,003 | $209,938 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 797 | 9,679 | 383 | 4,742 |
|
| ||||
| 6,058 | 76,281 | 16,386 | 214,680 | |
|
| ||||
| Shares repurchased | (2,720) | (34,247) | (4,267) | (56,871) |
|
| ||||
| Net increase | 3,338 | $42,034 | 12,119 | $157,809 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 45,072 | $576,651 | 17,341 | $234,095 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 2,134 | 25,847 | 774 | 9,580 |
|
| ||||
| 47,206 | 602,498 | 18,115 | 243,675 | |
|
| ||||
| Shares repurchased | (2,546) | (32,549) | (3,127) | (41,075) |
|
| ||||
| Net increase | 44,660 | $569,949 | 14,988 | $202,600 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 2,834 | $37,912 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 122 | 1,496 | 75 | 928 |
|
| ||||
| 122 | 1,496 | 2,909 | 38,840 | |
|
| ||||
| Shares repurchased | (152) | (1,918) | (917) | (11,209) |
|
| ||||
| Net increase (decrease) | (30) | $(422) | 1,992 | $27,631 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 4,042 | $53,111 | 179 | $2,435 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 257 | 3,146 | 66 | 826 |
|
| ||||
| 4,299 | 56,257 | 245 | 3,261 | |
|
| ||||
| Shares repurchased | (183) | (2,288) | — | — |
|
| ||||
| Net increase | 4,116 | $53,969 | 245 | $3,261 |
|
| ||||
| Six months ended 2/29/12 | Year ended 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 12,276 | $157,514 | 43,194 | $584,258 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 3,104 | 38,215 | 2,260 | 28,290 |
|
| ||||
| 15,380 | 195,729 | 45,454 | 612,548 | |
|
| ||||
| Shares repurchased | (14,775) | (190,331) | (21,157) | (272,235) |
|
| ||||
| Net increase | 605 | $5,398 | 24,297 | $340,313 |
|
| ||||
34
At the close of the reporting period, Putnam Investments, LLC owned the following shares:
| Shares owned | Percentage of ownership | Value at 2/29/12 | |
|
| |||
| Class A | 216,403 | 34.7% | $2,808,916 |
|
| |||
| Class M | 1,147 | 38.3% | 14,812 |
|
| |||
| Class R | 1,155 | 21.4% | 14,932 |
|
| |||
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | $60,803 | Payables | $37,649 |
|
| ||||
| Total | $60,803 | $37,649 | ||
|
| ||||
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | |
| instruments under ASC 815 | contracts | Total |
|
| ||
| Foreign exchange contracts | $(58,770) | $(58,770) |
|
| ||
| Total | $(58,770) | $(58,770) |
|
| ||
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for as hedging | Forward currency | |
| instruments under ASC 815 | contracts | Total |
|
| ||
| Foreign exchange contracts | $19,142 | $19,142 |
|
| ||
| Total | $19,142 | $19,142 |
|
| ||
Note 6: 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 $83 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $1,557,755 and $1,501,006, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund concentrates its investments in one sector, which involves more risk than a fund that invests more broadly.
35
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
36
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk | |
| Marketing Services | Executive Vice President, | and Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Global Telecommunications Fund. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |
| 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: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
| Registrant’s telephone number, including area code: | (617) 292-1000 |
| Date of fiscal year end: | August 31, 2012 |
| Date of reporting period: | September 1, 2011 — February 29, 2012 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Retirement Income
Fund Lifestyle 2
Semiannual report
2 | 29 | 12
| Message from the Trustees | 1 | ||
|
|
|||
| About the fund | 2 | ||
|
|
|||
| Performance snapshot | 4 | ||
|
|
|||
| Interview with your fund’s portfolio manager | 5 | ||
|
|
|||
| Your fund’s performance | 10 | ||
|
|
|||
| Your fund’s expenses | 12 | ||
|
|
|||
| Terms and definitions | 14 | ||
|
|
|||
| Other information for shareholders | 15 | ||
|
|
|||
| Financial statements | 16 | ||
|
|
|||
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. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. Our allocation of assets among permitted asset categories may hurt performance. The use of derivatives involves additional risks, such as the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. It is important to understand that you can lose money by investing in the fund. There is no guarantee that the fund will provide adequate income at and through an investor’s retirement.
Message from the Trustees
Dear Fellow Shareholder:
Stock markets around the world have rebounded in 2012, despite concerns over the threat of another recession in Europe.
U.S. stocks posted their strongest February in years, thanks to improving industrial output, consumer confidence, and unemployment data. Even the beleaguered housing market is showing early signs of recovery. Asia is benefiting from the global recovery, with China in particular seeing some improvements in manufacturing activity. While the eurozone may slip into another recession this year, economists believe the region could return to growth by the second half of 2012 if European officials devise a lasting plan to address the sovereign debt problem.
We believe that the market turmoil in recent years presents opportunities to pursue returns for our shareholders. Putnam’s bottom-up, fundamental investment approach is designed for this type of environment, and our investment team is committed to uncovering returns, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
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 4.00%; had they, returns would have been lower. See pages 5 and 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
* Returns for the six-month period and since inception are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
Jeff, after a mostly volatile year, global markets appeared to rebound in 2012. What contributed to the turnaround?
The U.S. economy had surprised on the upside in the final months of the period. Economic data including housing, jobs, consumer confidence, and spending were either stable or slowly improving — suggesting that the U.S. economy, and the global economic outlook for that matter, might not be as bleak as first thought.
Signs of a U.S. recovery were welcome news amid Europe’s clear economic deceleration and China’s more measured slowdown. The positive U.S. economic reports were enough to tempt cautious investors who had waited out the uncertainty in lower-risk investments to shift assets into higher-risk strategies, thus driving up stock prices. While global equity markets were lifted by the positive news, U.S. stocks outperformed international stocks for the six months ended February 29, 2012, with the S&P 500 Index’s 13.31% return surpassing the 4.13% return of non-U.S. equities as measured by the MSCI EAFE Index [ND].
Interest rates around the world remain at historic lows, given global growth challenges. How has this affected your fixed-income strategy?
We continue to favor limited exposure to interest-rate risk in our fixed-income strategies, which detracted somewhat from relative returns during much of the period. With interest rates in a number of markets near historic lows, we believe the potential rewards
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/29/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on pages 14–15.
5
from a long-duration stance are minimal, while the potential risks are great. That said, we believe there are opportunities to take tactical positions at the long end of the yield curve, which we think will continue to exhibit volatility. While central banks have anchored the short end of the curve, the long end — represented by bonds with maturities of 20 to 30 years — may be forced to absorb all of the policy uncertainty or any additional shocks to the global financial system, providing short-term opportunities.
Do you think that European sovereign debt challenges will continue to set the tone for global markets?
Yes, we believe Europe’s debt woes and policymakers’ efforts to address the long-term structural challenges are likely to dominate the course of the global markets for the foreseeable future — much as they have for the past two years. It’s unlikely that a simple solution exists for overcoming these policy hurdles given the disparity of the needs and goals of the countries involved. In many ways, markets currently reflect this reality. For example, the spread between Italian and German interest rates today closely matches the differences we saw in the pre-European Monetary Union era. In the 1990s, those differences were the result primarily of currency risks, while today those differences are driven by credit risks.
The funding arrangements put in place have likely helped the European Union avoid a crisis, but long-term fiscal challenges remain, and the outcome appears anything but clear. We should add, however, that even if Greece eventually were to default on its debt, we believe the direct implications to the U.S. economy would be limited, given that U.S. banks today are generally better capitalized than their European counterparts.
Putnam Retirement Income Fund Lifestyle 2 takes a moderate approach to producing income for retirees. Could you review the fund’s strategy in the context of the markets?
Certainly. As one of a suite of three Putnam Retirement Income Lifestyle Funds, Lifestyle 2
Portfolio holdings and allocations may vary over time. Allocations are represented as a percentage of net assets as of 2/29/12. Cash and net other assets represents the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of underlying fund holdings and derivative securities, the exclusion of as-of trades, if any, and the use of different classifications of securities for presentation purposes.
6
is designed for investors who are in or near retirement and fits in between the more conservative Putnam Retirement Income Fund Lifestyle 1 and the more aggressive Putnam Retirement Income Fund Lifestyle 3. We adjust the portfolio across a wide range of securities, including domestic and international stocks, bonds, and convertible securities, as well as in Putnam Absolute Return 100, 300, 500, and 700 Funds. Putnam’s Absolute Return Funds pursue positive returns with less volatility over time than the securities markets have historically offered.
By utilizing global asset allocation strategies, the fund is managed for comprehensive diversification, greater stability, and income while prudently managing risk. We believe the effectiveness of the fund’s approach can be seen when the fund’s returns for the six months ended February 29, 2012, are considered in the context of the various asset classes and sectors composing the financial markets.
While all asset classes generally delivered positive performance for the six-month period, results varied. Market leaders included U.S. large-cap stocks [Russell 1000 Index], energy stocks [MSCI World Energy Index (ND)], and high-yield bonds [JPMorgan Developed High Yield Index], which generated returns of 13.31%, 10.58%, and 8.87%, respectively. On the other hand, less-favorable but nevertheless still-positive performers included European stocks [MSCI EAFE Index (ND)], U.S. bonds [Barclays Capital U.S. Aggregate Bond Index], and utilities [MSCI World Utilities Index (ND)], which posted returns of 4.13%, 2.73%, and 0.11%, respectively, for the same period.
This table shows the fund’s top 10 individual holdings and the percentage of the fund’s net assets that each represented as of 2/29/12. Short-term holdings are excluded. Holdings will vary over time.
7
We believe the fund’s flexible approach to investing across asset classes and strategies can help provide greater stability of returns and income while moderating volatility.
Did the fund employ derivatives to any significant degree during the period?
Yes we did, because the derivative of a security oftentimes can be less expensive and more liquid than the actual physical security. This strategy is especially efficient in the high-yield and fixed-income emerging markets. We used credit default swaps to hedge credit and market risks and to gain exposure to individual holdings.
What factors do you think will drive global markets for the remainder of 2012?
We think that geography is likely to be quite meaningful again in 2012. Europe will continue to struggle against an intensifying debt crisis, we believe, and steps taken to address the debt crisis will necessarily subdue economic activity there as resources are directed away from more productive uses. Meanwhile, China’s economy is decelerating, and many Asian countries are trying to gradually dampen inflation to achieve a soft landing. Many investors are looking to the United States, with its improving job market and rising consumer confidence and spending, as a pacesetter for global growth in the coming months.
While a slow-growth environment may not be ideal for equity investors or for the global economy as a whole, a somewhat cautionary environment creates a fairly attractive setting for corporate credit, in our view. Thus, in the fixed-income universe, the fundamentals across a range of fixed-income sectors remain attractive in our opinion. Defaults in corporate debt are well below the long-term average, and we believe that the default rate is likely to remain low, even in a relatively anemic economic environment. As a result, credit risk gained through exposure to corporate bonds and certain mortgage-backed securities continues to be attractively priced in our estimation.
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. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of underlying fund holdings and derivative securities, the exclusion of as-of trades, if any, and the use of different classifications of securities for presentation purposes. Holdings will vary over time.
8
The flight to quality in 2011 created myriad opportunities in the crisis-sensitive or higher-risk assets. Investors appeared to have taken note in the first quarter of 2012, which resulted in the best first-quarter rally in global stocks since 1998. If macroeconomic worries recede at all, we think these higher-risk strategies could see increased demand in the coming months.
Jeff, thank you for your time today.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. 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.
Of special interest
Effective February 2012, the fund’s monthly dividend rate of $0.005 decreased to $0.004 per class A share. Similar reductions were made to some of the fund’s other share classes. The reduction was the result of market yields decreasing in combination with credit spreads tightening (the difference in yield between Treasuries and debt in other sectors). With Greece averting the immediate threat of default and optimism about the U.S. economy rising during the period, the improved clarity eased pressures in the credit markets, tightened risk spreads, and pushed yields lower — leading to an overall decrease in interest and dividend income earned in the fund.
Portfolio Manager Jeffrey L. 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 Jeffrey Knight, your fund’s portfolio managers are Robert J. Kea, CFA; Joshua B. Kutin, CFA; and Robert J. Schoen.
IN THE NEWS
Europe looks as if it may be headed back into recession. Sharp declines in household spending, exports, and manufacturing activity led to an economic downdraft in the final months of 2011. Economic output for the 17 eurozone countries contracted 0.3% from October to December, according to Eurostat, the European Union’s statistics office. Officials are forecasting a recession in 2012, the region’s second slowdown in three years. However, there are vast differences in health among the various eurozone economies. Officials warn that Greece is likely to remain in recession in 2012 and will likely not return to growth until 2014. Conversely, Germany and France, the eurozone’s largest and healthiest economies, are seen avoiding recession this year. If European officials can find a solution to stave off financial crises for the region’s most indebted member countries, economists believe that growth could turn positive in the second half of 2012.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 29, 2012, 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 represent past performance. Past performance does not guarantee future results. 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 R and class Y shares are not available to all investors. 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 2/29/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (6/13/11) | (6/13/11) | (6/13/11) | (6/13/11) | (6/13/11) | (6/13/11) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 1.45% | –2.64% | 0.94% | –4.02% | 0.94% | –0.05% | 1.24% | –2.09% | 1.30% | 1.63% |
|
| ||||||||||
| 6 months | 4.05 | –0.14 | 3.64 | –1.36 | 3.64 | 2.64 | 3.84 | 0.44 | 3.89 | 4.13 |
|
| ||||||||||
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 4.00% and 3.25% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
Comparative index returns For periods ended 2/29/12
| Barclays Capital U.S. Aggregate | ||
| Bond Index | S&P 500 Index | |
|
| ||
| Life of fund | 5.35% | 9.09% |
|
| ||
| 6 months | 2.73 | 13.31 |
|
| ||
Index results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
10
Fund price and distribution information For the six-month period ended 2/29/12
| Distributions | Class A | Class B | Class C | Class M | Class R | Class Y | ||
|
| ||||||||
| Number | 6 | 1 | 1 | 5 | 5 | 6 | ||
|
| ||||||||
| Income | $0.207 | $0.177 | $0.177 | $0.196 | $0.192 | $0.224 | ||
|
| ||||||||
| Capital gains | — | — | — | — | — | — | ||
|
| ||||||||
| Total | $0.207 | $0.177 | $0.177 | $0.196 | $0.192 | $0.224 | ||
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Share value | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| 8/31/11 | $9.75 | $10.16 | $9.74 | $9.74 | $9.75 | $10.08 | $9.75 | $9.76 |
|
| ||||||||
| 2/29/12 | 9.93 | 10.34 | 9.91 | 9.91 | 9.92 | 10.25 | 9.93 | 9.93 |
|
| ||||||||
| Before | After | Net | Net | Before | After | Net | Net | |
| sales | sales | asset | asset | sales | sales | asset | asset | |
| Current yield (end of period) | charge | charge | value | value | charge | charge | value | value |
|
| ||||||||
| Current dividend rate 1,2 | 0.48% | 0.46% | — | — | 0.24% | 0.23% | 0.24% | 0.73% |
|
| ||||||||
| Current 30-day SEC yield 3,4 | ||||||||
| (with expense limitation) | N/A | 1.28 | 0.58% | 0.56% | N/A | 1.04 | 1.05 | 1.56 |
|
| ||||||||
| Current 30-day SEC yield 3 | ||||||||
| (without expense limitation | N/A | –0.87 | –1.65 | –1.67 | N/A | –1.13 | –1.18 | –0.68 |
|
| ||||||||
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares and 3.25% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
1 Most recent distribution, excluding capital gains, annualized and divided by share price before or after sales charge at period-end.
2 Current dividend rate excludes dividends received from underlying Putnam funds.
3 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.
4 For a portion of the period, the fund may have limited expenses, without which yields would have been lower.
Fund performance as of most recent calendar quarter
Total return for periods ended 3/31/12
| Class A | Class B | Class C | Class M | Class R | Class Y | |||||
| (inception dates) | (6/13/11) | (6/13/11) | (6/13/11) | (6/13/11) | (6/13/11) | (6/13/11) | ||||
|
| ||||||||||
| Before | After | Before | After | Net | Net | |||||
| sales | sales | Before | After | Before | After | sales | sales | asset | asset | |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value | value | |
|
| ||||||||||
| Life of fund | 2.41% | –1.72% | 1.76% | –3.24% | 1.76% | 0.76% | 2.18% | –1.18% | 2.23% | 2.61% |
|
| ||||||||||
| 6 months | 7.86 | 3.50 | 7.34 | 2.34 | 7.34 | 6.34 | 7.67 | 4.16 | 7.73 | 7.99 |
|
| ||||||||||
11
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’s expenses were limited; had expenses not been limited, they 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 B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Estimated net expenses for the fiscal year | ||||||
| ended 8/31/11* | 1.03% | 1.78% | 1.78% | 1.28% | 1.28% | 0.78% |
|
| ||||||
| Estimated total annual operating expenses | ||||||
| for the fiscal year ended 8/31/11 | 3.04% | 3.79% | 3.79% | 3.29% | 3.29% | 2.79% |
|
| ||||||
| Annualized expense ratio for the six-month | ||||||
| period ended 2/29/12† | 0.70% | 1.45% | 1.45% | 0.95% | 0.95% | 0.45% |
|
| ||||||
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 contractual obligation to limit expenses through 12/30/12.
† Excludes the expense ratios of the underlying Putnam funds.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2011, to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $3.55 | $7.34 | $7.34 | $4.81 | $4.82 | $2.28 |
|
| ||||||
| Ending value (after expenses) | $1,040.50 | $1,036.40 | $1,036.40 | $1,038.40 | $1,038.90 | $1,041.30 |
|
| ||||||
* 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 2/29/12. 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.
12
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 29, 2012, use the following calculation method. To find the value of your investment on September 1, 2011, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class M | Class R | Class Y | |
|
| ||||||
| Expenses paid per $1,000*† | $3.52 | $7.27 | $7.27 | $4.77 | $4.77 | $2.26 |
|
| ||||||
| Ending value (after expenses) | $1,021.38 | $1,017.65 | $1,017.65 | $1,020.14 | $1,020.14 | $1,022.63 |
|
| ||||||
* 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 2/29/12. 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.
13
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 4.00% maximum sales charge for class A shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
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 B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
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.
Fixed-income terms
Current yield is the annual rate of return earned from dividends or interest of an investment. Current yield is expressed as a percentage of the price of a security, fund share, or principal investment.
Mortgage-backed security (MBS), also known as a mortgage “pass-through,” is a type of asset-backed security that is secured by a mortgage or collection of mortgages. The following are types of MBSs:
•Agency “pass-through” has its principal and interest backed by a U.S. government agency, such as the Federal National Mortgage Association (Fannie Mae), Government National Mortgage Association (Ginnie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac).
•Collateralized mortgage obligation (CMO) represents claims to specific cash flows from pools of home mortgages. The streams of principal and interest payments on the mortgages are distributed to the different classes of CMO interests in “tranches.” Each tranche may have different principal balances, coupon rates, prepayment risks, and maturity dates. A CMO is highly sensitive to changes in interest rates and any resulting change in the rate at which homeowners sell their properties, refinance, or otherwise prepay loans. CMOs are subject to prepayment, market, and liquidity risks.
•Interest-only (IO) security is a type of CMO in which the underlying asset is the interest portion of mortgage, Treasury, or bond payments.
•Non-agency residential mortgage-backed security (RMBS) is an MBS not backed by Fannie Mae, Ginnie Mae, or Freddie Mac. One type of RMBS is an Alt-A mortgage-backed security.
•Commercial mortgage-backed security (CMBS) is secured by the loan on a commercial property.
Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.
Comparative indexes
Barclays Capital U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
14
BofA (Bank of America) 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.
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.
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (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, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling 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 website 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 website 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 February 29, 2012, Putnam employees had approximately $345,000,000 and the Trustees had approximately $78,000,000 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.
15
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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal 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.
16
The fund’s portfolio 2/29/12 (Unaudited)
| INVESTMENT COMPANIES (43.2%)* | Shares | Value |
|
| ||
| iShares MSCI EAFE Index Fund | 40 | $2,188 |
|
| ||
| Putnam Absolute Return 100 Fund Class Y § | 48,527 | 488,669 |
|
| ||
| Putnam Absolute Return 300 Fund Class Y § | 113,623 | 1,185,089 |
|
| ||
| Putnam Absolute Return 500 Fund Class Y § | 188,086 | 2,061,427 |
|
| ||
| Putnam Absolute Return 700 Fund Class Y § | 27,520 | 311,524 |
|
| ||
| Putnam Money Market Fund Class A § | 388,266 | 388,266 |
|
| ||
| SPDR S&P 500 ETF Trust | 65 | 8,897 |
|
| ||
| SPDR S&P Midcap 400 ETF Trust | 7 | 1,244 |
|
| ||
| Vanguard Small Cap ETF Fund (VIPERS) R | 53 | 3,232 |
|
| ||
| Total investment companies (cost $4,556,509) | $4,450,536 | |
| COMMON STOCKS (16.9%)* | Shares | Value |
|
| ||
| Basic materials (0.8%) | ||
| Albemarle Corp. | 36 | $2,395 |
|
| ||
| BASF SE (Germany) | 62 | 5,444 |
|
| ||
| Bemis Co., Inc. | 47 | 1,474 |
|
| ||
| CF Industries Holdings, Inc. | 22 | 4,092 |
|
| ||
| Chicago Bridge & Iron Co., NV (Netherlands) | 48 | 2,233 |
|
| ||
| Cliffs Natural Resources, Inc. | 52 | 3,301 |
|
| ||
| Cytec Industries, Inc. | 22 | 1,308 |
|
| ||
| Domtar Corp. (Canada) | 16 | 1,534 |
|
| ||
| Fletcher Building, Ltd. (New Zealand) | 736 | 3,998 |
|
| ||
| Fortune Brands Home & Security, Inc. † | 82 | 1,586 |
|
| ||
| Fresnillo PLC (Mexico) | 318 | 9,622 |
|
| ||
| LyondellBasell Industries NV Class A (Netherlands) | 103 | 4,440 |
|
| ||
| Monsanto Co. | 143 | 11,065 |
|
| ||
| Nippon Paper Group, Inc. (Japan) | 300 | 6,438 |
|
| ||
| Nitto Denko Corp. (Japan) | 200 | 8,207 |
|
| ||
| PPG Industries, Inc. | 52 | 4,745 |
|
| ||
| Rio Tinto PLC (United Kingdom) | 30 | 1,711 |
|
| ||
| Sealed Air Corp. | 85 | 1,669 |
|
| ||
| Steel Dynamics, Inc. | 94 | 1,392 |
|
| ||
| Syngenta AG (Switzerland) | 10 | 3,261 |
|
| ||
| Valspar Corp. | 39 | 1,808 |
|
| ||
| voestalpine AG (Austria) | 48 | 1,701 |
|
| ||
| Westlake Chemical Corp. | 11 | 663 |
|
| ||
| 84,087 | ||
| Capital goods (1.0%) | ||
| AGCO Corp. † | 44 | 2,272 |
|
| ||
| Bekaert NV (Belgium) | 93 | 3,109 |
|
| ||
| Cummins, Inc. | 66 | 7,958 |
|
| ||
| Dover Corp. | 73 | 4,673 |
|
| ||
| Emerson Electric Co. | 232 | 11,672 |
|
| ||
| European Aeronautic Defense and Space Co. NV (France) | 152 | 5,521 |
|
| ||
| Exelis, Inc. | 104 | 1,093 |
|
| ||
| Fluor Corp. | 70 | 4,234 |
|
| ||
| Hitachi, Ltd. (Japan) | 2,000 | 11,648 |
|
| ||
17
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Capital goods cont. | ||
| ITT Corp. | 51 | $1,272 |
|
| ||
| Lockheed Martin Corp. | 90 | 7,957 |
|
| ||
| McDermott International, Inc. † | 116 | 1,515 |
|
| ||
| Metso Corp. OYJ (Finland) | 82 | 3,895 |
|
| ||
| Mitsubishi Electric Corp. (Japan) | 1,000 | 8,990 |
|
| ||
| Raytheon Co. | 128 | 6,467 |
|
| ||
| SembCorp Industries, Ltd. (Singapore) | 1,000 | 4,207 |
|
| ||
| Societe BIC SA (France) | 89 | 8,949 |
|
| ||
| Staples, Inc. | 235 | 3,445 |
|
| ||
| Textron, Inc. | 119 | 3,274 |
|
| ||
| 102,151 | ||
| Communication services (0.7%) | ||
| AT&T, Inc. | 253 | 7,739 |
|
| ||
| Cellcom Israel, Ltd. (Israel) | 233 | 3,160 |
|
| ||
| Comcast Corp. Class A | 537 | 15,777 |
|
| ||
| France Telecom SA (France) | 456 | 6,959 |
|
| ||
| IAC/InterActiveCorp. | 58 | 2,645 |
|
| ||
| MetroPCS Communications, Inc. † | 75 | 773 |
|
| ||
| Portugal Telecom SGPS SA (Portugal) | 1,390 | 7,187 |
|
| ||
| Telecom Corp. of New Zealand, Ltd. (New Zealand) | 2,273 | 4,059 |
|
| ||
| Telstra Corp., Ltd. (Australia) | 2,622 | 9,260 |
|
| ||
| Verizon Communications, Inc. | 453 | 17,264 |
|
| ||
| 74,823 | ||
| Conglomerates (0.3%) | ||
| AMETEK, Inc. | 69 | 3,284 |
|
| ||
| Danaher Corp. | 180 | 9,509 |
|
| ||
| General Electric Co. | 488 | 9,296 |
|
| ||
| Tyco International, Ltd. | 159 | 8,239 |
|
| ||
| 30,328 | ||
| Consumer cyclicals (1.6%) | ||
| Advance Auto Parts, Inc. | 28 | 2,390 |
|
| ||
| Alliance Data Systems Corp. † | 26 | 3,155 |
|
| ||
| Bed Bath & Beyond, Inc. † | 76 | 4,540 |
|
| ||
| Best Buy Co., Inc. | 107 | 2,643 |
|
| ||
| Bridgestone Corp. (Japan) | 100 | 2,411 |
|
| ||
| CBS Corp. Class B | 194 | 5,801 |
|
| ||
| Coach, Inc. | 81 | 6,062 |
|
| ||
| Daito Trust Construction Co., Ltd. (Japan) | 100 | 8,814 |
|
| ||
| Dillards, Inc. Class A | 33 | 2,018 |
|
| ||
| Dolby Laboratories, Inc. Class A † | 33 | 1,256 |
|
| ||
| Dun & Bradstreet Corp. (The) | 25 | 2,066 |
|
| ||
| Expedia, Inc. | 43 | 1,464 |
|
| ||
| Foot Locker, Inc. | 135 | 3,938 |
|
| ||
| GameStop Corp. Class A † | 66 | 1,503 |
|
| ||
| Gannett Co., Inc. | 104 | 1,543 |
|
| ||
| General Motors Co. † | 218 | 5,672 |
|
| ||
| Global Payments, Inc. | 53 | 2,736 |
|
| ||
| Home Depot, Inc. (The) | 325 | 15,460 |
|
| ||
18
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Consumer cyclicals cont. | ||
| Host Marriott Corp. R | 418 | $6,596 |
|
| ||
| Kingfisher PLC (United Kingdom) | 1,419 | 6,416 |
|
| ||
| Lear Corp. | 42 | 1,899 |
|
| ||
| Macy’s, Inc. | 128 | 4,860 |
|
| ||
| Marriott International, Inc. Class A | 88 | 3,105 |
|
| ||
| McGraw-Hill Cos., Inc. (The) | 94 | 4,376 |
|
| ||
| Mediaset SpA (Italy) | 670 | 1,985 |
|
| ||
| Navistar International Corp. † | 37 | 1,546 |
|
| ||
| News Corp. Class A | 353 | 7,014 |
|
| ||
| Next PLC (United Kingdom) | 142 | 6,260 |
|
| ||
| O’Reilly Automotive, Inc. † | 41 | 3,547 |
|
| ||
| PETsMART, Inc. | 43 | 2,397 |
|
| ||
| Peugeot SA (France) | 156 | 3,127 |
|
| ||
| R. R. Donnelley & Sons Co. | 99 | 1,368 |
|
| ||
| Swire Pacific, Ltd. (Hong Kong) | 500 | 5,668 |
|
| ||
| TABCORP Holdings, Ltd. (Australia) | 2,891 | 8,407 |
|
| ||
| Towers Watson & Co. Class A | 28 | 1,790 |
|
| ||
| URS Corp. † | 39 | 1,702 |
|
| ||
| Viacom, Inc. Class B | 151 | 7,191 |
|
| ||
| VistaPrint NV † | 51 | 2,075 |
|
| ||
| Volkswagen AG (Preference) (Germany) | 57 | 10,658 |
|
| ||
| Volvo AB Class B (Sweden) | 83 | 1,211 |
|
| ||
| Wal-Mart Stores, Inc. | 40 | 2,363 |
|
| ||
| Wyndham Worldwide Corp. | 57 | 2,507 |
|
| ||
| Wynn Resorts, Ltd. | 27 | 3,201 |
|
| ||
| 174,741 | ||
| Consumer staples (1.5%) | ||
| Brinker International, Inc. | 40 | 1,104 |
|
| ||
| British American Tobacco (BAT) PLC (United Kingdom) | 113 | 5,711 |
|
| ||
| Coca-Cola Co. (The) | 67 | 4,681 |
|
| ||
| ConAgra Foods, Inc. | 180 | 4,725 |
|
| ||
| Corrections Corporation of America † | 56 | 1,403 |
|
| ||
| Costco Wholesale Corp. | 129 | 11,102 |
|
| ||
| CVS Caremark Corp. | 343 | 15,469 |
|
| ||
| Dr. Pepper Snapple Group, Inc. | 107 | 4,071 |
|
| ||
| Heineken NV (Netherlands) | 43 | 2,270 |
|
| ||
| Herbalife, Ltd. | 60 | 3,973 |
|
| ||
| ITOCHU Corp. (Japan) | 400 | 4,562 |
|
| ||
| Kao Corp. (Japan) | 300 | 7,681 |
|
| ||
| Kroger Co. (The) | 230 | 5,472 |
|
| ||
| Lorillard, Inc. | 49 | 6,423 |
|
| ||
| McDonald’s Corp. | 24 | 2,383 |
|
| ||
| Molson Coors Brewing Co. Class B | 77 | 3,383 |
|
| ||
| Nestle SA (Switzerland) | 294 | 17,971 |
|
| ||
| PepsiCo, Inc. | 34 | 2,140 |
|
| ||
| Philip Morris International, Inc. | 257 | 21,465 |
|
| ||
| Procter & Gamble Co. (The) | 122 | 8,237 |
|
| ||
19
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Consumer staples cont. | ||
| Reckitt Benckiser Group PLC (United Kingdom) | 26 | $1,439 |
|
| ||
| Robert Half International, Inc. | 72 | 2,047 |
|
| ||
| Safeway, Inc. | 178 | 3,818 |
|
| ||
| Suedzucker AG (Germany) | 98 | 2,839 |
|
| ||
| Tesco PLC (United Kingdom) | 1,072 | 5,391 |
|
| ||
| Woolworths, Ltd. (Australia) | 108 | 2,913 |
|
| ||
| 152,673 | ||
| Energy (1.5%) | ||
| BP PLC (United Kingdom) | 1,124 | 8,805 |
|
| ||
| Chevron Corp. | 236 | 25,752 |
|
| ||
| ConocoPhillips | 53 | 4,057 |
|
| ||
| Diamond Offshore Drilling, Inc. | 28 | 1,917 |
|
| ||
| Exxon Mobil Corp. | 290 | 25,085 |
|
| ||
| Helmerich & Payne, Inc. | 35 | 2,146 |
|
| ||
| HollyFrontier Corp. | 70 | 2,284 |
|
| ||
| Marathon Oil Corp. | 168 | 5,694 |
|
| ||
| Marathon Petroleum Corp. | 96 | 3,989 |
|
| ||
| Murphy Oil Corp. | 56 | 3,581 |
|
| ||
| National Oilwell Varco, Inc. | 92 | 7,593 |
|
| ||
| Occidental Petroleum Corp. | 94 | 9,811 |
|
| ||
| Oceaneering International, Inc. | 76 | 4,125 |
|
| ||
| Peabody Energy Corp. | 84 | 2,930 |
|
| ||
| Petrofac, Ltd. (United Kingdom) | 199 | 5,037 |
|
| ||
| Royal Dutch Shell PLC Class A (United Kingdom) | 181 | 6,584 |
|
| ||
| Schlumberger, Ltd. | 32 | 2,484 |
|
| ||
| Seadrill, Ltd. (Norway) | 201 | 8,332 |
|
| ||
| Superior Energy Services † | 63 | 1,848 |
|
| ||
| Tesoro Corp. † | 62 | 1,645 |
|
| ||
| Total SA (France) | 237 | 13,259 |
|
| ||
| Valero Energy Corp. | 237 | 5,804 |
|
| ||
| WPX Energy, Inc. | 90 | 1,634 |
|
| ||
| 154,396 | ||
| Financials (5.2%) | ||
| Acadia Realty Trust R | 102 | 2,161 |
|
| ||
| Alexandria Real Estate Equities, Inc. R | 21 | 1,505 |
|
| ||
| Allied World Assurance Co. Holdings AG | 24 | 1,583 |
|
| ||
| American Financial Group, Inc. | 47 | 1,760 |
|
| ||
| AON Corp. | 136 | 6,366 |
|
| ||
| Arch Capital Group, Ltd. † | 70 | 2,594 |
|
| ||
| Ashford Hospitality Trust, Inc. R | 343 | 2,895 |
|
| ||
| Assurant, Inc. | 54 | 2,293 |
|
| ||
| Assured Guaranty, Ltd. (Bermuda) | 109 | 1,831 |
|
| ||
| AvalonBay Communities, Inc. R | 142 | 18,413 |
|
| ||
| Aviva PLC (United Kingdom) | 1,594 | 9,340 |
|
| ||
| Baloise Holding AG Class R (Switzerland) | 26 | 2,046 |
|
| ||
| Bank of America Corp. | 100 | 797 |
|
| ||
| Barclays PLC (United Kingdom) | 1,155 | 4,502 |
|
| ||
20
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Financials cont. | ||
| Berkshire Hathaway, Inc. Class B † | 61 | $4,785 |
|
| ||
| Boston Properties, Inc. R | 104 | 10,561 |
|
| ||
| BRE Properties R | 145 | 7,022 |
|
| ||
| Camden Property Trust R | 151 | 9,362 |
|
| ||
| CBOE Holdings, Inc. | 86 | 2,371 |
|
| ||
| Cedar Shopping Centers, Inc. R | 537 | 2,556 |
|
| ||
| Chimera Investment Corp. R | 428 | 1,314 |
|
| ||
| CIT Group, Inc. † | 39 | 1,588 |
|
| ||
| Citigroup, Inc. | 55 | 1,833 |
|
| ||
| City National Corp. | 10 | 470 |
|
| ||
| CommonWealth REIT R | 263 | 4,892 |
|
| ||
| Credit Agricole SA (France) | 717 | 4,592 |
|
| ||
| CubeSmart R | 359 | 4,050 |
|
| ||
| DCT Industrial Trust, Inc. R | 928 | 5,252 |
|
| ||
| Delek Group, Ltd. (Israel) | 6 | 1,085 |
|
| ||
| Digital Realty Trust, Inc. R | 43 | 3,118 |
|
| ||
| Douglas Emmett, Inc. R | 309 | 6,511 |
|
| ||
| Duke Realty Investments, Inc. R | 24 | 333 |
|
| ||
| DuPont Fabros Technology, Inc. R | 157 | 3,595 |
|
| ||
| Eaton Vance Corp. | 111 | 3,198 |
|
| ||
| Education Realty Trust, Inc. R | 423 | 4,348 |
|
| ||
| Entertainment Properties Trust R | 137 | 6,234 |
|
| ||
| Equity Residential Trust R | 301 | 17,124 |
|
| ||
| Essex Property Trust, Inc. R | 15 | 2,100 |
|
| ||
| Everest Re Group, Ltd. | 24 | 2,108 |
|
| ||
| Federal Realty Investment Trust R | 92 | 8,772 |
|
| ||
| Fidelity National Financial, Inc. Class A | 124 | 2,140 |
|
| ||
| General Growth Properties R | 197 | 3,205 |
|
| ||
| Hartford Financial Services Group, Inc. (The) | 204 | 4,225 |
|
| ||
| HCP, Inc. R | 299 | 11,811 |
|
| ||
| Health Care REIT, Inc. R | 108 | 5,880 |
|
| ||
| Highwoods Properties, Inc. R | 184 | 5,888 |
|
| ||
| Hospitality Properties Trust R | 232 | 5,737 |
|
| ||
| Investment AB Kinnevik Class B (Sweden) | 378 | 8,615 |
|
| ||
| Jefferies Group, Inc. | 170 | 2,842 |
|
| ||
| JPMorgan Chase & Co. | 531 | 20,836 |
|
| ||
| Kimco Realty Corp. R | 550 | 10,109 |
|
| ||
| Liberty Property Trust R | 194 | 6,580 |
|
| ||
| Link REIT (The) (Hong Kong) R | 500 | 1,874 |
|
| ||
| Macerich Co. (The) R | 67 | 3,617 |
|
| ||
| Mack-Cali Realty Corp. R | 179 | 5,119 |
|
| ||
| Man Group PLC (United Kingdom) | 2,675 | 5,571 |
|
| ||
| Morgan Stanley | 537 | 9,956 |
|
| ||
| Nasdaq OMX Group, Inc. (The) † | 116 | 3,055 |
|
| ||
| National Australia Bank, Ltd. (Australia) | 458 | 11,542 |
|
| ||
| National Retail Properties, Inc. R | 207 | 5,517 |
|
| ||
21
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Financials cont. | ||
| NKSJ Holdings, Inc. (Japan) | 400 | $9,397 |
|
| ||
| Northern Trust Corp. | 114 | 5,063 |
|
| ||
| Pennsylvania Real Estate Investment Trust R | 264 | 3,543 |
|
| ||
| Piedmont Office Realty Trust, Inc. Class A R | 357 | 6,290 |
|
| ||
| PNC Financial Services Group, Inc. | 85 | 5,059 |
|
| ||
| Post Properties, Inc. R | 139 | 6,070 |
|
| ||
| Prologis, Inc. R | 312 | 10,502 |
|
| ||
| Public Storage R | 194 | 26,010 |
|
| ||
| Rayonier, Inc. R | 45 | 2,003 |
|
| ||
| Realty Income Corp. R | 46 | 1,697 |
|
| ||
| Regency Centers Corp. R | 163 | 6,975 |
|
| ||
| Reinsurance Group of America, Inc. Class A | 40 | 2,307 |
|
| ||
| RenaissanceRe Holdings, Ltd. | 25 | 1,799 |
|
| ||
| Rouse Properties, Inc. (Rights) F | 7 | 1 |
|
| ||
| Rouse Properties, Inc. Class B † R | 7 | 102 |
|
| ||
| RSA Insurance Group PLC (United Kingdom) | 3,474 | 6,041 |
|
| ||
| Senior Housing Properties Trust R | 37 | 792 |
|
| ||
| Simon Property Group, Inc. R | 367 | 49,728 |
|
| ||
| SL Green Realty Corp. R | 42 | 3,194 |
|
| ||
| Societe Generale SA (France) | 187 | 6,042 |
|
| ||
| Sovran Self Storage, Inc. R | 95 | 4,513 |
|
| ||
| Sumitomo Mitsui Financial Group, Inc. (Japan) | 400 | 13,587 |
|
| ||
| Svenska Handelsbanken AB Class A (Sweden) | 228 | 7,657 |
|
| ||
| Swire Properties, Ltd. (Hong Kong) | 350 | 862 |
|
| ||
| Taubman Centers, Inc. R | 15 | 1,036 |
|
| ||
| TD Ameritrade Holding Corp. | 183 | 3,417 |
|
| ||
| UDR, Inc. R | 102 | 2,552 |
|
| ||
| Vornado Realty Trust R | 119 | 9,726 |
|
| ||
| W.R. Berkley Corp. | 63 | 2,252 |
|
| ||
| Wells Fargo & Co. | 479 | 14,988 |
|
| ||
| Westpac Banking Corp. (Australia) | 342 | 7,610 |
|
| ||
| 532,194 | ||
| Health care (1.6%) | ||
| Abbott Laboratories | 22 | 1,245 |
|
| ||
| Aetna, Inc. | 111 | 5,190 |
|
| ||
| AmerisourceBergen Corp. | 85 | 3,175 |
|
| ||
| AstraZeneca PLC (United Kingdom) | 242 | 10,809 |
|
| ||
| C.R. Bard, Inc. | 28 | 2,621 |
|
| ||
| Eli Lilly & Co. | 262 | 10,281 |
|
| ||
| Endo Pharmaceuticals Holdings, Inc. † | 68 | 2,521 |
|
| ||
| Forest Laboratories, Inc. † | 216 | 7,024 |
|
| ||
| Gilead Sciences, Inc. † | 210 | 9,555 |
|
| ||
| GlaxoSmithKline PLC (United Kingdom) | 378 | 8,341 |
|
| ||
| HCA Holdings, Inc. | 48 | 1,280 |
|
| ||
| Health Management Associates, Inc. Class A † | 123 | 908 |
|
| ||
| Humana, Inc. | 50 | 4,355 |
|
| ||
| Johnson & Johnson | 117 | 7,614 |
|
| ||
22
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Health care cont. | ||
| McKesson Corp. | 71 | $5,929 |
|
| ||
| Merck & Co., Inc. | 87 | 3,321 |
|
| ||
| Novartis AG (Switzerland) | 96 | 5,230 |
|
| ||
| Omnicare, Inc. | 46 | 1,618 |
|
| ||
| Orion Oyj Class B (Finland) | 159 | 3,425 |
|
| ||
| Pfizer, Inc. | 916 | 19,328 |
|
| ||
| ResMed, Inc. † | 57 | 1,670 |
|
| ||
| Sabra Health Care REIT, Inc. R | 211 | 3,013 |
|
| ||
| Sanofi (France) | 67 | 4,955 |
|
| ||
| Takeda Pharmaceutical Co., Ltd. (Japan) | 200 | 9,037 |
|
| ||
| United Therapeutics Corp. † | 43 | 2,052 |
|
| ||
| UnitedHealth Group, Inc. | 252 | 14,049 |
|
| ||
| Ventas, Inc. R | 196 | 10,960 |
|
| ||
| Warner Chilcott PLC Class A (Ireland) † | 133 | 2,225 |
|
| ||
| 161,731 | ||
| Technology (2.0%) | ||
| Agilent Technologies, Inc. † | 119 | 5,191 |
|
| ||
| AOL, Inc. † | 115 | 2,065 |
|
| ||
| Apple, Inc. † | 84 | 45,565 |
|
| ||
| Applied Materials, Inc. | 295 | 3,611 |
|
| ||
| BMC Software, Inc. † | 87 | 3,257 |
|
| ||
| Broadcom Corp. Class A † | 115 | 4,272 |
|
| ||
| Brocade Communications Systems, Inc. † | 255 | 1,474 |
|
| ||
| CA, Inc. | 155 | 4,190 |
|
| ||
| Cadence Design Systems, Inc. † | 211 | 2,483 |
|
| ||
| Cisco Systems, Inc. | 589 | 11,709 |
|
| ||
| Dell, Inc. † | 314 | 5,432 |
|
| ||
| Fujitsu, Ltd. (Japan) | 1,000 | 5,392 |
|
| ||
| Google, Inc. Class A † | 36 | 22,257 |
|
| ||
| IBM Corp. | 61 | 12,001 |
|
| ||
| Intel Corp. | 189 | 5,080 |
|
| ||
| KLA-Tencor Corp. | 49 | 2,372 |
|
| ||
| L-3 Communications Holdings, Inc. | 45 | 3,161 |
|
| ||
| Lam Research Corp. † | 46 | 1,918 |
|
| ||
| Microsoft Corp. | 885 | 28,090 |
|
| ||
| Nikon Corp. (Japan) | 100 | 2,712 |
|
| ||
| Nokia OYJ (Finland) | 1,026 | 5,386 |
|
| ||
| NVIDIA Corp. † | 167 | 2,530 |
|
| ||
| Oracle Corp. | 103 | 3,015 |
|
| ||
| Polycom, Inc. † | 76 | 1,569 |
|
| ||
| QLogic Corp. † | 230 | 3,954 |
|
| ||
| Qualcomm, Inc. | 40 | 2,487 |
|
| ||
| Symantec Corp. † | 273 | 4,870 |
|
| ||
| Tech Data Corp. † | 25 | 1,337 |
|
| ||
| Teradyne, Inc. † | 91 | 1,494 |
|
| ||
| Vishay Intertechnology, Inc. † | 104 | 1,275 |
|
| ||
| Western Digital Corp. † | 67 | 2,630 |
|
| ||
| 202,779 | ||
23
| COMMON STOCKS (16.9%)* cont. | Shares | Value |
|
| ||
| Transportation (0.1%) | ||
| ComfortDelgro Corp., Ltd. (Singapore) | 2,000 | $2,442 |
|
| ||
| Delta Air Lines, Inc. † | 361 | 3,541 |
|
| ||
| Firstgroup PLC (United Kingdom) | 268 | 1,254 |
|
| ||
| United Continental Holdings, Inc. † | 145 | 2,994 |
|
| ||
| Wabtec Corp. | 23 | 1,719 |
|
| ||
| Yangzijiang Shipbuilding Holdings, Ltd. (China) | 3,000 | 3,237 |
|
| ||
| 15,187 | ||
| Utilities and power (0.6%) | ||
| AES Corp. (The) † | 285 | 3,865 |
|
| ||
| Ameren Corp. | 109 | 3,496 |
|
| ||
| CenterPoint Energy, Inc. | 187 | 3,645 |
|
| ||
| CMS Energy Corp. | 120 | 2,569 |
|
| ||
| DTE Energy Co. | 73 | 3,941 |
|
| ||
| Enel SpA (Italy) | 1,009 | 4,049 |
|
| ||
| Energias de Portugal (EDP) SA (Portugal) | 565 | 1,649 |
|
| ||
| Entergy Corp. | 72 | 4,797 |
|
| ||
| NRG Energy, Inc. † | 124 | 2,120 |
|
| ||
| PG&E Corp. | 153 | 6,377 |
|
| ||
| Red Electrica Corp. SA (Spain) | 172 | 8,684 |
|
| ||
| RWE AG (Preference) (Germany) | 252 | 10,593 |
|
| ||
| TECO Energy, Inc. | 111 | 1,992 |
|
| ||
| Westar Energy, Inc. | 63 | 1,734 |
|
| ||
| 59,511 | ||
| Total common stocks (cost $1,696,488) | $1,744,601 | |
| U.S. TREASURY OBLIGATIONS (13.5%)* | Principal amount | Value |
|
| ||
| U.S. Treasury Bonds | ||
| 7 7/8s, February 15, 2021 | $44,000 | $66,658 |
| 5 1/4s, November 15, 2028 | 18,000 | 24,312 |
|
| ||
| U.S. Treasury Notes | ||
| 3 1/8s, May 15, 2021 | 50,000 | 55,520 |
| 3 1/8s, October 31, 2016 | 190,000 | 210,217 |
| 2 3/4s, December 31, 2017 | 283,000 | 309,675 |
| 2 5/8s, February 29, 2016 | 98,000 | 105,664 |
| 2 3/8s, August 31, 2014 | 60,000 | 62,972 |
| 2s, January 31, 2016 | 118,000 | 124,246 |
| 1 3/8s, May 15, 2013 | 187,000 | 189,582 |
| 1s, August 31, 2016 | 236,000 | 238,434 |
|
| ||
| Total U.S. treasury obligations (cost $1,358,544) | $1,387,280 | |
| CORPORATE BONDS AND NOTES (2.6%)* | Principal amount | Value |
|
| ||
| Basic materials (0.3%) | ||
| Allegheny Technologies, Inc. sr. unsec. | ||
| unsub. notes 9 3/8s, 2019 | $5,000 | $6,446 |
|
| ||
| Dow Chemical Co. (The) sr. unsec. notes 5 1/4s, 2041 | 5,000 | 5,469 |
|
| ||
| International Paper Co. sr. unsec. notes 9 3/8s, 2019 | 5,000 | 6,618 |
|
| ||
| PPG Industries, Inc. sr. unsec. unsub. debs. 7.4s, 2019 | 5,000 | 6,177 |
|
| ||
| Xstrata Finance Canada, Ltd. 144A company | ||
| guaranty sr. unsec. notes 6s, 2041 (Canada) | 5,000 | 5,407 |
|
| ||
| 30,117 | ||
24
| CORPORATE BONDS AND NOTES (2.6%)* cont. | Principal amount | Value |
|
| ||
| Communication services (0.6%) | ||
| American Tower REIT, Inc. sr. unsec. notes 7s, 2017 R | $5,000 | $5,767 |
|
| ||
| Clearwire Communications, LLC/Clearwire Finance, Inc. 144A | ||
| company guaranty sr. notes 12s, 2017 | 5,000 | 4,250 |
|
| ||
| Comcast Corp. company guaranty sr. unsec. | ||
| unsub. notes 6.95s, 2037 | 10,000 | 13,207 |
|
| ||
| Corning, Inc. sr. unsec. unsub. notes 5 3/4s, 2040 | 5,000 | 5,722 |
|
| ||
| France Telecom sr. unsec. unsub. notes 8 1/2s, 2031 (France) | 3,000 | 4,382 |
|
| ||
| France Telecom sr. unsec. unsub. notes 5 3/8s, 2019 (France) | 5,000 | 5,679 |
|
| ||
| France Telecom sr. unsec. unsub. notes 4 1/8s, 2021 (France) | 3,000 | 3,156 |
|
| ||
| Koninklijke (Royal) KPN NV sr. unsec. unsub. bonds 8 3/8s, | ||
| 2030 (Netherlands) | 5,000 | 6,567 |
|
| ||
| Qwest Corp. notes 6 3/4s, 2021 | 4,000 | 4,541 |
|
| ||
| Telecom Italia Capital SA company guaranty sr. unsec. | ||
| unsub. notes 6.175s, 2014 (Italy) | 5,000 | 5,150 |
|
| ||
| Time Warner Cable, Inc. company guaranty sr. unsec. | ||
| unsub. notes 5 1/2s, 2041 | 10,000 | 10,992 |
|
| ||
| 69,413 | ||
| Consumer cyclicals (0.1%) | ||
| Expedia, Inc. company guaranty sr. unsec. | ||
| unsub. notes 5.95s, 2020 | 5,000 | 5,107 |
|
| ||
| Toyota Motor Credit Corp. sr. unsec. unsub. notes 3.3s, 2022 | 5,000 | 5,137 |
|
| ||
| Walt Disney Co. (The) sr. unsec. notes 2 3/4s, 2021 | 5,000 | 5,068 |
|
| ||
| 15,312 | ||
| Consumer staples (0.1%) | ||
| Kraft Foods, Inc. sr. unsec. notes 6 1/2s, 2017 | 5,000 | 6,068 |
|
| ||
| 6,068 | ||
| Energy (0.3%) | ||
| Anadarko Petroleum Corp. sr. notes 5.95s, 2016 | 5,000 | 5,798 |
|
| ||
| Petrobras International Finance Co. company | ||
| guaranty sr. unsec. notes 3 7/8s, 2016 (Brazil) | 5,000 | 5,215 |
|
| ||
| Petrohawk Energy Corp. company guaranty sr. unsec. | ||
| notes 7 1/4s, 2018 | 5,000 | 5,719 |
|
| ||
| Statoil ASA company guaranty sr. unsec. notes 5.1s, 2040 | ||
| (Norway) | 5,000 | 5,956 |
|
| ||
| Weatherford Bermuda company guaranty sr. unsec. | ||
| notes 9 7/8s, 2039 | 5,000 | 6,968 |
|
| ||
| 29,656 | ||
| Financials (0.7%) | ||
| Associates First Capital Corp. sr. unsec. notes 6.95s, 2018 | 10,000 | 11,312 |
|
| ||
| Credit Suisse Guernsey, Ltd. jr. unsec. sub. notes FRN | ||
| 1.193s, 2017 (United Kingdom) | 4,000 | 2,681 |
|
| ||
| DDR Corp. sr. unsec. unsub. notes 7 7/8s, 2020 R | 5,000 | 5,974 |
|
| ||
| Deutsche Bank Capital Funding Trust VII 144A jr. unsec. | ||
| sub. bonds FRB 5.628s, perpetual maturity | 5,000 | 4,150 |
|
| ||
| General Electric Capital Corp. sr. unsec. notes 6 3/4s, 2032 | 15,000 | 18,228 |
|
| ||
| HSBC Holdings PLC sr. unsec. notes 4 7/8s, 2022 | ||
| (United Kingdom) | 5,000 | 5,392 |
|
| ||
| JPMorgan Chase Capital XX company guaranty jr. unsec. | ||
| sub. notes Ser. T, 6.55s, 2036 | 10,000 | 10,050 |
|
| ||
| Liberty Mutual Group, Inc. 144A company guaranty jr. unsec. | ||
| sub. bonds 7.8s, 2037 | 5,000 | 4,875 |
|
| ||
25
| CORPORATE BONDS AND NOTES (2.6%)* cont. | Principal amount | Value |
|
| ||
| Financials cont. | ||
| Rayonier, Inc. company guaranty sr. unsec. | ||
| unsub. notes 3 3/4s, 2022 R | $5,000 | $4,989 |
|
| ||
| Willis Group Holdings Ltd. company guaranty sr. unsec. | ||
| unsub. notes 5 3/4s, 2021 (United Kingdom) | 5,000 | 5,453 |
|
| ||
| 73,104 | ||
| Health care (—%) | ||
| Fresenius Medical Care US Finance II, Inc. 144A company | ||
| guaranty sr. unsec. notes 5 5/8s, 2019 | 2,000 | 2,130 |
|
| ||
| 2,130 | ||
| Transportation (0.1%) | ||
| CSX Corp. sr. unsec. unsub. notes 4 3/4s, 2042 | 5,000 | 5,219 |
|
| ||
| 5,219 | ||
| Utilities and power (0.4%) | ||
| Dolphin Subsidiary II, Inc. 144A sr. unsec. notes 6 1/2s, 2016 | 5,000 | 5,450 |
|
| ||
| Duke Energy Carolinas, LLC sr. mtge. notes 4 1/4s, 2041 | 5,000 | 5,295 |
|
| ||
| Energy Transfer Partners LP sr. unsec. unsub. notes 6 1/2s, 2042 | 5,000 | 5,537 |
|
| ||
| Enterprise Products Operating, LLC company | ||
| guaranty sr. unsec. unsub. notes 5.7s, 2042 | 5,000 | 5,657 |
|
| ||
| Kinder Morgan Energy Partners LP sr. unsec. notes 6.85s, 2020 | 5,000 | 5,970 |
|
| ||
| Texas-New Mexico Power Co. 144A 1st mtge. sec. 9 1/2s, 2019 | 5,000 | 6,651 |
|
| ||
| Westar Energy, Inc. sr. mtge. notes 4 1/8s, 2042 | 5,000 | 4,985 |
|
| ||
| 39,545 | ||
| Total corporate bonds and notes (cost $258,093) | $270,564 | |
| CONVERTIBLE BONDS AND NOTES (2.4%)* | Principal amount | Value |
|
| ||
| Basic materials (0.1%) | ||
| Steel Dynamics, Inc. cv. sr. notes 5 1/8s, 2014 | $3,000 | $3,413 |
|
| ||
| U.S. Steel Corp. cv. sr. unsec. notes 4s, 2014 | 4,000 | 4,550 |
|
| ||
| USEC, Inc. cv. sr. unsec. notes 3s, 2014 | 4,000 | 2,340 |
|
| ||
| 10,303 | ||
| Capital goods (0.2%) | ||
| General Cable Corp. cv. unsec. sub. notes stepped-coupon | ||
| 4 1/2s (2 1/4s, 11/15/19) 2029 †† | 5,000 | 5,475 |
|
| ||
| Icahn Enterprises LP/Icahn Enterprises | ||
| Finance Corp. cv. sr. unsec. notes FRN 4s, 2013 | 5,000 | 4,982 |
|
| ||
| Meritor, Inc. cv. company guaranty sr. unsec. | ||
| notes stepped-coupon 4 5/8s (zero %, 3/1/16) 2026 †† | 6,000 | 5,325 |
|
| ||
| Owens-Brockway Glass Container, Inc. 144A cv. company | ||
| guaranty sr. unsec. notes 3s, 2015 | 4,000 | 3,950 |
|
| ||
| 19,732 | ||
| Communication services (0.3%) | ||
| Cogent Communication Group, Inc. cv. sr. unsec. notes 1s, 2027 | 5,000 | 4,588 |
|
| ||
| Equinix, Inc. cv. unsec. sub. notes 3s, 2014 | 6,000 | 8,288 |
|
| ||
| Leap Wireless International, Inc. cv. sr. unsec. | ||
| notes 4 1/2s, 2014 | 8,000 | 7,600 |
|
| ||
| Level 3 Communications, Inc. cv. sr. unsec. | ||
| unsub. notes 6 1/2s, 2016 | 4,000 | 6,145 |
|
| ||
| Powerwave Technologies, Inc. cv. sr. unsec. | ||
| sub. notes 3 7/8s, 2027 | 7,000 | 2,660 |
|
| ||
| Virgin Media, Inc. cv. sr. unsec. notes 6 1/2s, 2016 (United Kingdom) | 3,000 | 4,684 |
|
| ||
| 33,965 | ||
26
| CONVERTIBLE BONDS AND NOTES (2.4%)* cont. | Principal amount | Value |
|
| ||
| Consumer cyclicals (0.7%) | ||
| CBIZ, Inc. 144A cv. sr. sub. notes 4 7/8s, 2015 | $4,000 | $4,385 |
|
| ||
| Charming Shoppes, Inc. cv. sr. unsec. notes 1 1/8s, 2014 | 8,000 | 7,380 |
|
| ||
| Digital River, Inc. cv. sr. unsec. notes 2s, 2030 | 6,000 | 5,625 |
|
| ||
| Ford Motor Co. cv. sr. unsec. notes 4 1/4s, 2016 | 3,000 | 4,770 |
|
| ||
| Liberty Interactive, LLC cv. sr. unsec. | ||
| unsub. notes 3 1/8s, 2023 | 7,000 | 8,418 |
|
| ||
| Liberty Interactive, LLC cv. sr. unsec. | ||
| unsub. notes 3 1/2s, 2031 | 13,000 | 7,882 |
|
| ||
| Live Nation Entertainment, Inc. cv. sr. unsec. | ||
| notes 2 7/8s, 2027 | 9,000 | 8,471 |
|
| ||
| MGM Resorts International Co. cv. company | ||
| guaranty sr. unsec. notes 4 1/4s, 2015 | 9,000 | 9,641 |
|
| ||
| PHH Corp. cv. sr. unsec. notes 4s, 2014 | 5,000 | 4,684 |
|
| ||
| XM Satellite Radio, Inc. 144A cv. company | ||
| guaranty sr. unsec. sub. notes 7s, 2014 | 4,000 | 5,880 |
|
| ||
| 67,136 | ||
| Consumer staples (0.1%) | ||
| Rite Aid Corp. cv. sr. unsec. unsub. notes 8 1/2s, 2015 | 3,000 | 2,970 |
|
| ||
| Spartan Stores, Inc. cv. sr. unsec. notes 3 3/8s, 2027 | 4,000 | 3,815 |
|
| ||
| 6,785 | ||
| Energy (0.2%) | ||
| Alpha Natural Resources, Inc. cv. sr. unsec. notes 2 3/8s, 2015 | 4,000 | 3,785 |
|
| ||
| Chesapeake Energy Corp. cv. sr. unsec. notes company | ||
| guaranty 2 1/4s, 2038 | 5,000 | 4,000 |
|
| ||
| Endeavour International Corp. 144A cv. company | ||
| guaranty sr. unsec. notes 5 1/2s, 2016 | 4,000 | 3,845 |
|
| ||
| Goodrich Petroleum Corp. cv. sr. unsec. unsub. notes 5s, 2029 | 4,000 | 3,840 |
|
| ||
| James River Coal Co. 144A cv. sr. unsec. notes 3 1/8s, 2018 | 5,000 | 2,475 |
|
| ||
| Peabody Energy Corp. cv. jr. unsec. sub. debs. 4 3/4s, 2041 | 5,000 | 5,019 |
|
| ||
| 22,964 | ||
| Financials (0.3%) | ||
| Amtrust Financial Services, Inc. 144A cv. sr. unsec. | ||
| notes 5 1/2s, 2021 | 2,000 | 2,186 |
|
| ||
| Ares Capital Corp. 144A cv. sr. unsec. notes 5 3/4s, 2016 | 6,000 | 6,371 |
|
| ||
| Hercules Technology Growth Capital, Inc. | ||
| 144A cv. sr. unsec. notes 6s, 2016 | 3,000 | 2,959 |
|
| ||
| iStar Financial, Inc. cv. sr. unsec. unsub. notes FRN | ||
| 1.081s, 2012 R | 5,000 | 4,688 |
|
| ||
| KKR Financial Holdings, LLC cv. sr. unsec. notes 7 1/2s, 2017 | 4,000 | 5,610 |
|
| ||
| Morgans Hotel Group Co. cv. sr. sub. notes 2 3/8s, 2014 | 6,000 | 5,205 |
|
| ||
| Old Republic International Corp. cv. sr. unsec. | ||
| unsub. notes 8s, 2012 | 2,000 | 2,033 |
|
| ||
| 29,052 | ||
| Health care (0.3%) | ||
| Brookdale Senior Living, Inc. cv. sr. unsec. | ||
| unsub. notes 2 3/4s, 2018 | 5,000 | 4,669 |
|
| ||
| China Medical Technologies, Inc. cv. sr. unsec. | ||
| bonds Ser. CMT, 4s, 2013 (China) (In default) † | 5,000 | 1,850 |
|
| ||
| China Medical Technologies, Inc. 144A cv. sr. unsec. | ||
| notes 6 1/4s, 2016 (China) (In default) † | 3,000 | 990 |
|
| ||
| Dendreon Corp. cv. sr. unsec. notes 2 7/8s, 2016 | 7,000 | 5,836 |
|
| ||
27
| CONVERTIBLE BONDS AND NOTES (2.4%)* cont. | Principal amount | Value |
|
| ||
| Health care cont. | ||
| Hologic, Inc. cv. sr. unsec. unsub. notes stepped-coupon 2s | ||
| (zero %, 12/15/13) 2037 †† | $6,000 | $5,940 |
|
| ||
| Illumina, Inc. 144A cv. sr. unsec. notes 1/4s, 2016 | 2,000 | 1,898 |
|
| ||
| LifePoint Hospitals, Inc. cv. sr. sub. notes 3 1/2s, 2014 | 4,000 | 4,205 |
|
| ||
| Providence Service Corp. (The) cv. sr. unsec. | ||
| sub. notes 6 1/2s, 2014 | 2,000 | 1,998 |
|
| ||
| Teleflex, Inc. cv. sr. unsec. sub. notes 3 7/8s, 2017 | 5,000 | 5,831 |
|
| ||
| 33,217 | ||
| Technology (0.2%) | ||
| Advanced Micro Devices, Inc. cv. sr. unsec. notes 6s, 2015 | 9,000 | 9,338 |
|
| ||
| TeleCommunication Systems, Inc. 144A cv. sr. unsec. | ||
| notes 4 1/2s, 2014 | 5,000 | 4,513 |
|
| ||
| TTM Technologies, Inc. cv. sr. unsec. notes 3 1/4s, 2015 | 4,000 | 4,338 |
|
| ||
| 18,189 | ||
| Transportation (—%) | ||
| Genco Shipping & Trading, Ltd. cv. sr. unsec. notes 5s, 2015 | 4,000 | 2,810 |
|
| ||
| 2,810 | ||
| Total convertible bonds and notes (cost $252,753) | $244,153 | |
| CONVERTIBLE PREFERRED STOCKS (2.2%)* | Shares | Value |
|
| ||
| Basic materials (0.1%) | ||
| Vale Capital II $3.375 cv. pfd. (Cayman Islands) | 125 | $8,531 |
|
| ||
| 8,531 | ||
| Communication services (0.1%) | ||
| Cincinnati Bell, Inc. Ser. B, $3.378 cum. cv. pfd. | 180 | 7,560 |
|
| ||
| 7,560 | ||
| Consumer cyclicals (0.5%) | ||
| Callaway Golf Co. Ser. B, 7.50% cv. pfd. | 34 | 3,434 |
|
| ||
| FelCor Lodging Trust, Inc. Ser. A, $0.488 cum. cv. pfd. R | 374 | 9,584 |
|
| ||
| General Motors Co. Ser. B, $2.375 cv. pfd. | 395 | 16,862 |
|
| ||
| Interpublic Group of Cos, Inc. (The) Ser. B, 5.25% cv. pfd. | 8 | 8,360 |
|
| ||
| Nielsen Holdings NV $3.125 cv. pfd. | 125 | 7,156 |
|
| ||
| Stanley Black & Decker, Inc. $4.75 cv. pfd. | 65 | 7,989 |
|
| ||
| 53,385 | ||
| Consumer staples (0.1%) | ||
| Bunge, Ltd. $4.875 cv. pfd. | 70 | 6,965 |
|
| ||
| Dole Food Automatic Exchange 144A 7.00% cv. pfd. † | 267 | 2,526 |
|
| ||
| Newell Financial Trust I $2.625 cum. cv. pfd. | 107 | 4,976 |
|
| ||
| 14,467 | ||
| Energy (0.2%) | ||
| Apache Corp. Ser. D, $3.00 cv. pfd. | 100 | 6,050 |
|
| ||
| Chesapeake Energy Corp. 144A 5.75% cv. pfd. | 11 | 11,770 |
|
| ||
| 17,820 | ||
| Financials (0.7%) | ||
| Alexandria Real Estate Equities, Inc. Ser. D, $1.75 cv. pfd. R | 229 | 5,854 |
|
| ||
| AMG Capital Trust II $2.575 cv. pfd. | 183 | 7,766 |
|
| ||
| Assured Guaranty, Ltd. $4.25 cv. pfd. (Bermuda) | 26 | 1,719 |
|
| ||
| Bank of America Corp. Ser. L, 7.25% cv. pfd. | 14 | 13,125 |
|
| ||
| Citigroup, Inc. $7.50 cv. pfd. | 150 | 14,849 |
|
| ||
| Entertainment Properties Trust Ser. C, $1.438 cum. cv. pfd. R | 255 | 5,154 |
|
| ||
| Hartford Financial Services Group, Inc. (The) Ser. F, $1.182 cv. pfd. | 180 | 4,022 |
|
| ||
28
| CONVERTIBLE PREFERRED STOCKS (2.2%)* cont. | Shares | Value |
|
| ||
| Financials cont. | ||
| Health Care REIT, Inc. Ser. I, $3.25 cv. pfd. R | 140 | $7,382 |
|
| ||
| Huntington Bancshares Ser. A, 8.50% cv. pfd. | 6 | 6,900 |
|
| ||
| MetLife, Inc. $3.75 cv. pfd. | 87 | 6,298 |
|
| ||
| Wells Fargo & Co. Ser. L, 7.50% cv. pfd. | 9 | 9,889 |
|
| ||
| 82,958 | ||
| Technology (0.1%) | ||
| Lucent Technologies Capital Trust I 7.75% cv. pfd. | 8 | 6,550 |
|
| ||
| 6,550 | ||
| Transportation (0.1%) | ||
| Swift Mandatory Common Exchange Security Trust 144A | ||
| 6.00% cv. pfd. | 492 | 5,676 |
|
| ||
| 5,676 | ||
| Utilities and power (0.3%) | ||
| AES Trust III $3.375 cv. pfd. | 178 | 8,811 |
|
| ||
| El Paso Energy Capital Trust I $2.375 cv. pfd. | 177 | 8,264 |
|
| ||
| Great Plains Energy, Inc. $6.00 cv. pfd. | 97 | 5,822 |
|
| ||
| PPL Corp. $4.375 cv. pfd. | 99 | 5,307 |
|
| ||
| 28,204 | ||
| Total convertible preferred stocks (cost $236,658) | $225,151 | |
| MORTGAGE-BACKED SECURITIES (0.3%)* | Principal amount | Value |
|
| ||
| Banc of America Commercial Mortgage, Inc. Ser. 06-5, | ||
| Class A3, 5.39s, 2047 | $20,000 | $20,838 |
|
| ||
| LB-UBS Commercial Mortgage Trust Ser. 07-C1, Class A2, | ||
| 5.318s, 2040 | 12,184 | 12,184 |
|
| ||
| Total mortgage-backed securities (cost $33,030) | $33,022 | |
| SHORT-TERM INVESTMENTS (19.7%)* | Principal amount/shares | Value |
|
| ||
| Putnam Money Market Liquidity Fund 0.09% e | 1,864,201 | $1,864,201 |
|
| ||
| U.S. Treasury Bills with an effective yield of 0.074%, | ||
| June 28, 2012 # | $50,000 | 49,987 |
|
| ||
| U.S. Treasury Bills with an effective yield of 0.066%, | ||
| July 26, 2012 # | 110,000 | 109,967 |
|
| ||
| Total short-term investments (cost $2,024,159) | $2,024,155 | |
| TOTAL INVESTMENTS | ||
|
| ||
| Total investments (cost $10,416,234) | $10,379,462 | |
| Key to holding’s abbreviations | |
| ETF | Exchange Traded Fund |
| FRB | Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period |
| FRN | Floating Rate Notes: the rate shown is the current interest rate at the close of the reporting period |
| SPDR | S&P Depository Receipts |
29
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2011 through February 29, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $10,300,321.
† Non-income-producing security.
†† The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate.
§ Affiliated Company (Note 8).
# This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period.
e See Note 7 to the financial statements regarding investments in Putnam Money Market Liquidity Fund. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
F Is valued at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).
R Real Estate Investment Trust.
At the close of the reporting period, the fund maintained liquid assets totaling $3,892,621 to cover certain derivatives contracts.
Debt obligations are considered secured unless otherwise indicated.
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The dates shown on debt obligations are the original maturity dates.
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $250,126) (Unaudited)
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Bank of America, N.A. | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | $1,909 | $1,899 | $10 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 17,188 | 17,020 | (168) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 1,103 | 1,085 | (18) | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 1,437 | 1,424 | (13) | |
|
| ||||||
| Barclays Bank PLC | ||||||
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 7,750 | 8,281 | (531) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 1,327 | 1,315 | 12 | |
|
| ||||||
| Citibank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 1,498 | 1,497 | (1) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 1,591 | 1,583 | 8 | |
|
| ||||||
| Danish Krone | Buy | 3/22/12 | 4,032 | 3,983 | 49 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 3,997 | 3,941 | (56) | |
|
| ||||||
| Hong Kong Dollar | Sell | 3/22/12 | 3,571 | 3,572 | 1 | |
|
| ||||||
| New Zealand Dollar | Sell | 3/22/12 | 1,250 | 1,248 | (2) | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 1,519 | 1,525 | (6) | |
|
| ||||||
| Swedish Krona | Buy | 3/22/12 | 5,315 | 5,229 | 86 | |
|
| ||||||
| Credit Suisse AG | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 1,605 | 1,603 | (2) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 9,703 | 9,654 | 49 | |
|
| ||||||
30
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $250,126) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Credit Suisse AG cont. | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | $2,931 | $2,916 | $15 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 2,931 | 2,900 | (31) | |
|
| ||||||
| Deutsche Bank AG | ||||||
|
| ||||||
| British Pound | Sell | 3/22/12 | 1,273 | 1,266 | (7) | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 1,027 | 1,010 | (17) | |
|
| ||||||
| Goldman Sachs International | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 1,177 | 1,176 | (1) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 955 | 950 | 5 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 1,732 | 1,712 | (20) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 502 | 536 | 34 | |
|
| ||||||
| Swedish Krona | Sell | 3/22/12 | 5,557 | 5,464 | (93) | |
|
| ||||||
| HSBC Bank USA, National Association | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 2,996 | 2,990 | (6) | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 15,112 | 15,040 | (72) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 2,665 | 2,634 | 31 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 2,665 | 2,651 | (14) | |
|
| ||||||
| New Zealand Dollar | Buy | 3/22/12 | 10,500 | 10,484 | 16 | |
|
| ||||||
| Singapore Dollar | Buy | 3/22/12 | 2,559 | 2,566 | (7) | |
|
| ||||||
| Swiss Franc | Buy | 3/22/12 | 13,046 | 12,921 | 125 | |
|
| ||||||
| JPMorgan Chase Bank, N.A. | ||||||
|
| ||||||
| Australian Dollar | Sell | 3/22/12 | 5,885 | 5,880 | (5) | |
|
| ||||||
| British Pound | Buy | 3/22/12 | 4,613 | 4,592 | 21 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 4,797 | 4,757 | 40 | |
|
| ||||||
| Hong Kong Dollar | Buy | 3/22/12 | 7,839 | 7,840 | (1) | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 5,953 | 6,360 | 407 | |
|
| ||||||
| Singapore Dollar | Sell | 3/22/12 | 5,037 | 5,053 | 16 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 1,217 | 1,204 | (13) | |
|
| ||||||
| Royal Bank of Scotland PLC (The) | ||||||
|
| ||||||
| British Pound | Buy | 3/22/12 | 3,022 | 3,008 | 14 | |
|
| ||||||
| Euro | Buy | 3/22/12 | 1,865 | 1,861 | 4 | |
|
| ||||||
| Japanese Yen | Sell | 3/22/12 | 6,249 | 6,681 | 432 | |
|
| ||||||
| Swiss Franc | Sell | 3/22/12 | 2,211 | 2,190 | (21) | |
|
| ||||||
| State Street Bank and Trust Co. | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | 20,386 | 20,141 | 245 | |
|
| ||||||
| UBS AG | ||||||
|
| ||||||
| Australian Dollar | Buy | 3/22/12 | 11,342 | 11,330 | 12 | |
|
| ||||||
| British Pound | Sell | 3/22/12 | 4,772 | 4,749 | (23) | |
|
| ||||||
| Euro | Buy | 3/22/12 | 1,466 | 1,472 | (6) | |
|
| ||||||
| Israeli Shekel | Sell | 3/22/12 | 2,061 | 2,093 | 32 | |
|
| ||||||
| New Zealand Dollar | Sell | 3/22/12 | 16,249 | 16,208 | (41) | |
|
| ||||||
| Norwegian Krone | Sell | 3/22/12 | 3,451 | 3,322 | (129) | |
|
| ||||||
31
FORWARD CURRENCY CONTRACTS at 2/29/12 (aggregate face value $250,126) (Unaudited) cont.
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type | date | Value | face value | (depreciation) |
|
| ||||||
| Westpac Banking Corp. | ||||||
|
| ||||||
| Euro | Buy | 3/22/12 | $3,065 | $3,032 | $33 | |
|
| ||||||
| Euro | Sell | 3/22/12 | 3,065 | 3,049 | (16) | |
|
| ||||||
| Japanese Yen | Buy | 3/22/12 | 3,020 | 3,229 | (209) | |
|
| ||||||
| Total | $168 | |||||
FUTURES CONTRACTS OUTSTANDING at 2/29/12 (Unaudited)
| Unrealized | |||||
| Number of | Expiration | appreciation/ | |||
| contracts | Value | date | (depreciation) | ||
|
| |||||
| U.S. Treasury Bond 30 yr (Long) | 1 | $157,250 | Jun-12 | $1,060 | |
|
| |||||
| U.S. Treasury Bond 30 yr (Short) | 1 | 141,656 | Jun-12 | (400) | |
|
| |||||
| U.S. Treasury Note 2 yr (Long) | 2 | 440,469 | Jun-12 | (66) | |
|
| |||||
| U.S. Treasury Note 5 yr (Short) | 6 | 739,031 | Jun-12 | (58) | |
|
| |||||
| U.S. Treasury Note 10 yr (Long) | 3 | 392,859 | Jun-12 | 41 | |
|
| |||||
| Total | $577 | ||||
CREDIT DEFAULT CONTRACTS OUTSTANDING at 2/29/12 (Unaudited)
| Upfront | Fixed payments | ||||||
| premium | Termi- | received | Unrealized | ||||
| Swap counterparty / | received | Notional | nation | (paid) by fund | appreciation/ | ||
| Referenced debt* | Rating*** | (paid)** | amount | date | per annum | (depreciation) | |
|
| |||||||
| Deutsche Bank AG | |||||||
| DJ CDX NA IG Series | |||||||
| 17 Index | BBB+/P | $12,821 | $650,000 | 12/20/16 | 100 bp | $16,220 | |
|
| |||||||
| JPMorgan Chase Bank, NA | |||||||
| DJ CDX EM Series 15 | |||||||
| Version 1 Index | Ba1 | (50,000) | 400,000 | 6/20/16 | 500 bp | (4,316) | |
|
| |||||||
| DJ CDX NA HY Series | |||||||
| 17 Version 1 Index | B+/P | 99,375 | 970,000 | 12/20/16 | 500 bp | 91,974 | |
|
| |||||||
| Total | $103,878 | ||||||
* Payments related to the referenced debt are made upon a credit default event.
** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.
*** Ratings are presented for credit default contracts in which the fund has sold protection on the underlying referenced debt. Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody’s, Standard & Poor’s or Fitch ratings are believed to be the most recent ratings available at February 29, 2012. Securities rated by Putnam are indicated by “/P.”
32
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | ||||||
|
| ||||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | |||
|
| ||||||
| Common stocks: | ||||||
|
| ||||||
| Basic materials | $65,444 | $18,643 | $— | |||
|
| ||||||
| Capital goods | 77,306 | 24,845 | — | |||
|
| ||||||
| Communication services | 61,504 | 13,319 | — | |||
|
| ||||||
| Conglomerates | 30,328 | — | — | |||
|
| ||||||
| Consumer cyclicals | 149,441 | 25,300 | — | |||
|
| ||||||
| Consumer staples | 137,517 | 15,156 | — | |||
|
| ||||||
| Energy | 154,396 | — | — | |||
|
| ||||||
| Financials | 487,321 | 44,872 | 1 | |||
|
| ||||||
| Health care | 152,694 | 9,037 | — | |||
|
| ||||||
| Technology | 194,675 | 8,104 | — | |||
|
| ||||||
| Transportation | 9,508 | 5,679 | — | |||
|
| ||||||
| Utilities and power | 59,511 | — | — | |||
|
| ||||||
| Total common stocks | 1,579,645 | 164,955 | 1 | |||
| Convertible bonds and notes | — | 244,153 | — | |||
|
| ||||||
| Convertible preferred stocks | — | 225,151 | — | |||
|
| ||||||
| Corporate bonds and notes | — | 270,564 | — | |||
|
| ||||||
| Investment companies | 4,450,536 | — | — | |||
|
| ||||||
| Mortgage-backed securities | — | 33,022 | — | |||
|
| ||||||
| U.S. Treasury obligations | — | 1,387,280 | — | |||
|
| ||||||
| Short-term investments | 1,864,201 | 159,954 | — | |||
|
| ||||||
| Totals by level | $7,894,382 | $2,485,079 | $1 | |||
| Valuation inputs | ||||||
|
| ||||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | |||
|
| ||||||
| Forward currency contracts | $— | $168 | $— | |||
|
| ||||||
| Futures contracts | 577 | — | — | |||
|
| ||||||
| Credit default contracts | — | 41,682 | — | |||
|
| ||||||
| Totals by level | $577 | $41,850 | $— | |||
At the start and/or close of the reporting period, Level 3 investments in securities were not considered a significant portion of the fund’s portfolio.
The accompanying notes are an integral part of these financial statements.
33
Statement of assets and liabilities 2/29/12 (Unaudited)
| ASSETS | |
|
| |
| Investment in securities, at value (Note 1): | |
| Unaffiliated issuers (identified cost $4,008,716) | $4,080,286 |
| Affiliated issuers (identified cost $6,407,518) (Notes 1 and 8) | 6,299,176 |
|
| |
| Dividends, interest and other receivables | 20,494 |
|
| |
| Receivable for investments sold | 490,013 |
|
| |
| Unrealized appreciation on swap contracts (Note 1) | 108,194 |
|
| |
| Unrealized appreciation on forward currency contracts (Note 1) | 1,697 |
|
| |
| Receivable from Manager (Note 2) | 37,003 |
|
| |
| Premium paid on swap contracts (Note 1) | 50,000 |
|
| |
| Unamortized offering costs (Note 1) | 37,702 |
|
| |
| Total assets | 11,124,565 |
| LIABILITIES | |
|
| |
| Payable to custodian | 9,623 |
|
| |
| Payable for variation margin (Note 1) | 125 |
|
| |
| Distributions payable to shareholders | 3,907 |
|
| |
| Payable for investments purchased | 477,728 |
|
| |
| Payable for shares of the fund repurchased | 31,585 |
|
| |
| Payable for investor servicing fees (Note 2) | 718 |
|
| |
| Payable for custodian fees (Note 2) | 12,353 |
|
| |
| Payable for administrative services (Note 2) | 23 |
|
| |
| Payable for distribution fees (Note 2) | 4,270 |
|
| |
| Payable for offering costs (Note 1) | 129,267 |
|
| |
| Unrealized depreciation on forward currency contracts (Note 1) | 1,529 |
|
| |
| Premium received on swap contracts (Note 1) | 112,196 |
|
| |
| Unrealized depreciation on swap contracts (Note 1) | 4,316 |
|
| |
| Other accrued expenses | 36,604 |
|
| |
| Total liabilities | 824,244 |
| Net assets | $10,300,321 |
|
| |
| REPRESENTED BY | |
|
| |
| Paid-in capital (Unlimited shares authorized) (Notes 1, 4 and 6) | $10,341,662 |
|
| |
| Distributions in excess of net investment income (Note 1) | (50,827) |
|
| |
| Accumulated net realized loss on investments and foreign currency transactions (Note 1) | (58,334) |
|
| |
| Net unrealized appreciation of investments and assets and liabilities in foreign currencies | 67,820 |
|
| |
| Total — Representing net assets applicable to capital shares outstanding | $10,300,321 |
(Continued on next page)
34
Statement of assets and liabilities (Continued)
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| |
| Net asset value and redemption price per class A share ($9,725,403 divided by 979,306 shares) | $9.93 |
|
| |
| Offering price per class A share (100/96.00 of $9.93)* | $10.34 |
|
| |
| Net asset value and offering price per class B share ($155,663 divided by 15,712 shares)** | $9.91 |
|
| |
| Net asset value and offering price per class C share ($99,075 divided by 10,000 shares)** | $9.91 |
|
| |
| Net asset value and redemption price per class M share ($121,355 divided by 12,228 shares) | $9.92 |
|
| |
| Offering price per class M share (100/96.75 of $9.92)† | $10.25 |
|
| |
| Net asset value, offering price and redemption price per class R share | |
| ($99,313 divided by 10,003 shares) | $9.93 |
|
| |
| Net asset value, offering price and redemption price per class Y share | |
| ($99,512 divided by 10,020 shares) | $9.93 |
|
| |
* On single retail sales of less than $100,000. On sales of $100,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
† 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.
35
Statement of operations Six months ended 2/29/12 (Unaudited)
| INVESTMENT INCOME | |
|
| |
| Dividends (net of foreign tax of $499) (including dividend income of $101,256 from | |
| investments in affiliated issuers) (Note 8) | $131,992 |
|
| |
| Interest (including interest income of $661 from investments in affiliated issuers) (Notes 7 and 8) | 21,078 |
|
| |
| Total investment income | 153,070 |
| EXPENSES | |
|
| |
| Compensation of Manager (Note 2) | 15,127 |
|
| |
| Investor servicing fees (Note 2) | 4,141 |
|
| |
| Custodian fees (Note 2) | 11,568 |
|
| |
| Trustee compensation and expenses (Note 2) | 202 |
|
| |
| Administrative services (Note 2) | 77 |
|
| |
| Distribution fees — Class A (Note 2) | 11,823 |
|
| |
| Distribution fees — Class B (Note 2) | 771 |
|
| |
| Distribution fees — Class C (Note 2) | 484 |
|
| |
| Distribution fees — Class M (Note 2) | 295 |
|
| |
| Distribution fees — Class R (Note 2) | 242 |
|
| |
| Amortization of offering costs (Note 1) | 66,619 |
|
| |
| Reports to shareholders | 10,540 |
|
| |
| Auditing | 29,362 |
|
| |
| Other | 246 |
|
| |
| Fees waived and reimbursed by Manager (Note 2) | (115,341) |
|
| |
| Total expenses | 36,156 |
| Expense reduction (Note 2) | (9) |
|
| |
| Net expenses | 36,147 |
| Net investment income | 116,923 |
|
| |
| Net realized loss on investments (including net realized loss of $6,528 on sales of investments | |
| in affiliated issuers) (Notes 1, 3 and 8) | (9,040) |
|
| |
| Net realized loss on swap contracts (Note 1) | (55,209) |
|
| |
| Net realized gain on futures contracts (Note 1) | 7,457 |
|
| |
| Net realized loss on foreign currency transactions (Note 1) | (639) |
|
| |
| Net unrealized appreciation of assets and liabilities in foreign currencies during the period | 215 |
|
| |
| Net unrealized appreciation of investments, futures contracts and swap contracts | |
| during the period | 338,376 |
|
| |
| Net gain on investments | 281,160 |
| Net increase in net assets resulting from operations | $398,083 |
|
| |
The accompanying notes are an integral part of these financial statements.
36
Statement of changes in net assets
| For the period 6/13/11 | ||
| Six months | (commencement of | |
| INCREASE (DECREASE) IN NET ASSETS | ended 2/29/12* | operations) to 8/31/11 |
|
| ||
| Operations: | ||
| Net investment income | $116,923 | $7,318 |
|
| ||
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | (57,431) | 16,815 |
|
| ||
| Net unrealized appreciation (depreciation) of investments | ||
| and assets and liabilities in foreign currencies | 338,591 | (270,771) |
|
| ||
| Net increase (decrease) in net assets resulting from operations | 398,083 | (246,638) |
|
| ||
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
|
| ||
| Class A | (202,872) | — |
|
| ||
| Class B | (2,820) | — |
|
| ||
| Class C | (1,770) | — |
|
| ||
| Class M | (2,388) | — |
|
| ||
| Class R | (1,921) | — |
|
| ||
| Class Y | (2,244) | — |
|
| ||
| Increase from capital share transactions (Note 4) | 120,713 | 242,178 |
|
| ||
| Total increase (decrease) in net assets | 304,781 | (4,460) |
| NET ASSETS | ||
|
| ||
| Beginning of period (Note 6) | 9,995,540 | 10,000,000 |
|
| ||
| End of period (including distributions in excess of net investment | ||
| income of $50,827 and undistributed net investment income of | ||
| $46,265, respectively) | $10,300,321 | $9,995,540 |
|
| ||
* Unaudited
The accompanying notes are an integral part of these financial statements.
37
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||
|
| ||||||||||||
| Ratio of net | ||||||||||||
| Ratio | investment | |||||||||||
| Net asset | Net realized | of expenses | income (loss) | |||||||||
| value, | and unrealized | Total from | From | Total return | Net assets, | to average | to average | Portfolio | ||||
| beginning | Net investment | gain (loss) | investment | net investment | Total | Net asset value, | at net asset | end of period | net assets | net assets | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | distributions | end of period | value (%) *b | (in thousands) | (%) *c,d,e | (%) *d | (%) * |
|
| ||||||||||||
| Class A | ||||||||||||
| February 29, 2012 ** | $9.75 | .11 f | .28 | .39 | (.21) | (.21) | $9.93 | 4.05 | $9,725 | .35 | 1.17 f | 29 |
| August 31, 2011† | 10.00 | .01 | (.26) | (.25) | — | — | 9.75 | (2.50) | 9,431 | .15 | .08 | 11 |
|
| ||||||||||||
| Class B | ||||||||||||
| February 29, 2012 ** | $9.74 | .08 f | .27 | .35 | (.18) | (.18) | $9.91 | 3.64 | $156 | .72 | .80 f | 29 |
| August 31, 2011† | 10.00 | (.01) | (.25) | (.26) | — | — | 9.74 | (2.60) | 153 | .32 | (.09) | 11 |
|
| ||||||||||||
| Class C | ||||||||||||
| February 29, 2012 ** | $9.74 | .08 f | .27 | .35 | (.18) | (.18) | $9.91 | 3.64 | $99 | .72 | .80 f | 29 |
| August 31, 2011† | 10.00 | (.01) | (.25) | (.26) | — | — | 9.74 | (2.60) | 98 | .32 | (.09) | 11 |
|
| ||||||||||||
| Class M | ||||||||||||
| February 29, 2012 ** | $9.75 | .10 f | .27 | .37 | (.20) | (.20) | $9.92 | 3.84 | $121 | .47 | 1.05 f | 29 |
| August 31, 2011† | 10.00 | — g | (.25) | (.25) | — | — | 9.75 | (2.50) | 119 | .21 | .02 | 11 |
|
| ||||||||||||
| Class R | ||||||||||||
| February 29, 2012 ** | $9.75 | .10 f | .27 | .37 | (.19) | (.19) | $9.93 | 3.89 | $99 | .47 | 1.05 f | 29 |
| August 31, 2011† | 10.00 | — g | (.25) | (.25) | — | — | 9.75 | (2.50) | 97 | .21 | .02 | 11 |
|
| ||||||||||||
| Class Y | ||||||||||||
| February 29, 2012 ** | $9.76 | .13 f | .26 | .39 | (.22) | (.22) | $9.93 | 4.13 | $100 | .22 | 1.30 f | 29 |
| August 31, 2011† | 10.00 | .01 | (.25) | (.24) | — | — | 9.76 | (2.40) | 98 | .10 | .13 | 11 |
|
| ||||||||||||
* Not annualized.
** Unaudited.
† For the period June 13, 2011 (commencement of operations) to August 31, 2011.
a Per share net investment income 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 | |
|
| |
| February 29, 2012 | 1.15% |
|
| |
| August 31, 2011 | 1.04 |
|
| |
e Expense ratios do not include expenses of the underlying funds.
f Reflects a dividend received by the fund from a single issuer which amounted to the following amounts (Note 8):
| Percentage of | ||
| Per share | average net assets | |
|
| ||
| Class A | $0.06 | 0.65% |
|
| ||
| Class B | 0.06 | 0.65 |
|
| ||
| Class C | 0.06 | 0.65 |
|
| ||
| Class M | 0.06 | 0.65 |
|
| ||
| Class R | 0.06 | 0.65 |
|
| ||
| Class Y | 0.06 | 0.65 |
|
| ||
g Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial statements.
| 38 | 39 |
Notes to financial statements 2/29/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Retirement Income Fund Lifestyle 2 (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek current income consistent with what Putnam Management believes to be prudent risk. The fund invests mainly in a combination of bonds and common stocks of U.S. and non-U.S. companies and in Putnam Absolute Return 100 Fund, Putnam Absolute Return 300 Fund, Putnam Absolute Return 500 Fund, Putnam Absolute Return 700 Fund and Putnam Money Market Fund, which are other Putnam mutual funds and referred to as underlying funds. The fund may invest without limit in bonds that are either investment-grade or below investment-grade in quality (sometimes referred to as “junk bonds”) and have short- to long-term maturities. The fund also invests in other fixed-income securities, such as mortgage backed investments, and invests in money market securities or affiliated money market funds for cash management. The fund also invests, to a lesser extent, in equity securities (growth or value stocks or both) of companies of any size. Putnam Management may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell fixed-income investments, and, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell equity investments, which may include common or preferred stocks.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
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. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from September 1, 2011 through February 29, 2012.
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, and are classified as Level 1
40
securities. 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 and is generally categorized as a Level 2 security.
Investments in other open-end investment companies, which are classified as Level 1 securities, are based on their net asset value. The net asset value of an investment company equals the total value of its assets less its liabilities and divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange each day that the exchange is open.
Market quotations are not considered to be readily available for certain debt obligations and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which considers such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.
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, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which will generally represent a transfer from a Level 1 to a Level 2 security, will be classified as Level 2. 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 the close of the reporting period, 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. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
Such valuations and procedures are reviewed periodically by the Trustees. Certain securities may be valued on the basis of a price provided by a single source. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income 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. All premiums/discounts are amortized/accreted on a yield-to-maturity basis.
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
41
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.
Futures contracts The fund uses futures contracts to manage exposure to market risk, to hedge prepayment risk, to hedge interest rate risk, to gain exposure to interest rates and to equitize cash.
The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”
Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio. Outstanding number of contracts on futures contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
Forward currency contracts The fund buys and sells 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 hedge foreign exchange risk and to gain exposure on currency.
The U.S. dollar value of forward 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. 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 when the contract matures or by delivery of the currency. 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. The fund had an average contract amount of approximately $200,000 on forward currency contracts for the reporting period.
Credit default contracts The fund entered into credit default contracts to hedge credit risk, to hedge market risk and to gain exposure on individual names and/or baskets of securities.
In a credit default contract, the protection buyer typically makes an up front payment and a periodic stream of payments to a counterparty, the protection seller, in exchange for the right to receive a contingent payment upon the occurrence of a credit event on the reference obligation or all other equally ranked obligations of the reference entity. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. An upfront payment received by the fund, as the protection seller, is recorded as a liability on the fund’s books. An upfront payment made by the fund, as the protection buyer, is recorded as an asset on the fund’s books. Periodic payments received or paid by the fund are recorded as realized gains or losses. The credit default contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Upon the occurrence of a credit event, the difference between the par value and market value of the reference obligation, net of any proportional amount of the upfront payment, is recorded as a realized gain or loss.
In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index or the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased the underlying reference obligations. In certain circumstances, the fund may enter into offsetting credit default contracts which would mitigate its risk of loss. Risks of loss may exceed amounts recognized on the Statement of assets and liabilities. The fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between
42
the fund and the counterparty. Where the fund is a seller of protection, the maximum potential amount of future payments the fund may be required to make is equal to the notional amount of the relevant credit default contract.
Credit default contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio. Outstanding notional amount on credit default swap contracts at the close of the reporting period are indicative of the volume of activity during the reporting period.
Master agreements The fund is a party to ISDA (International Swaps 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 the close of the reporting period, the fund had a net liability position of $1,130 on derivative contracts subject to the Master Agreements. There was no collateral posted by the fund.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. The fund’s federal tax return for the prior period remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are
43
reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
The aggregate identified cost on a tax basis is $10,416,238, resulting in gross unrealized appreciation and depreciation of $164,007 and $200,783, respectively, or net unrealized depreciation of $36,776.
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.
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.
Offering costs The offering costs of $133,604 are being fully amortized on a straight-line basis over a twelve-month period. The fund will reimburse Putnam Management for the payment of these expenses.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee, computed and paid monthly, (based on the fund’s average net assets, excluding assets that are invested in other Putnam funds, except Putnam Money Market Liquidity Fund or any other Putnam funds that do not charge a management fee) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| 0.680% | of the first $5 billion, |
| 0.630% | of the next $5 billion, |
| 0.580% | of the next $10 billion, |
| 0.530% | of the next $10 billion, |
| 0.480% | of the next $50 billion, |
| 0.460% | of the next $50 billion, |
| 0.450% | of the next $100 billion and |
| 0.445% | of any excess thereafter. |
Putnam Management has agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through December 30, 2012, to the extent that expenses of the fund (excluding brokerage, interest, taxes, investment-related expenses, such as borrowing costs, payments under distribution plans, and extraordinary expenses and acquired fund fees and expenses) would exceed an annual rate of 0.45% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $2,406 as a result of this limit.
Putnam Management has also contractually agreed, through December 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets, that do not represent the fund’s investments in other Putnam funds, other than Putnam Money Market Liquidity Fund over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $112,935 as a result of this limit.
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 a separate 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
44
the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing 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. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations. Effective March 1, 2012, investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $9 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $4, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable 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 distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, 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 Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.50% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $57 and no monies from the sale of class A and class M shares, respectively, and received no monies in contingent deferred sales charges from redemptions of class B and class C shares.
A deferred sales charge of up to 1.00% and 0.40% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $2,720,783 and $2,363,075, respectively. These figures include the cost of purchases and proceeds from sales of long-term U.S. government securities of $1,270,218 and $999,934, respectively.
45
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| For the period 6/13/11 | ||||
| (commencement of operations) | ||||
| Six months ended 2/29/12 | to 8/31/11 | |||
|
| ||||
| Class A | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 18,545 | $180,491 | 16,876 | $163,603 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 1,599 | 15,374 | — | — |
|
| ||||
| 20,144 | 195,865 | 16,876 | 163,603 | |
|
| ||||
| Shares repurchased | (7,714) | (75,739) | — | — |
|
| ||||
| Net increase | 12,430 | $120,126 | 16,876 | $163,603 |
|
| ||||
| For the period 6/13/11 | ||||
| (commencement of operations) | ||||
| Six months ended 2/29/12 | to 8/31/11 | |||
|
| ||||
| Class B | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | 486 | $4,705 | 5,713 | $56,783 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 110 | 1,050 | — | — |
|
| ||||
| 596 | 5,755 | 5,713 | 56,783 | |
|
| ||||
| Shares repurchased | (546) | (5,348) | (51) | (497) |
|
| ||||
| Net increase | 50 | $407 | 5,662 | $56,286 |
|
| ||||
| For the period 6/13/11 | ||||
| (commencement of operations) | ||||
| Six months ended 2/29/12 | to 8/31/11 | |||
|
| ||||
| Class C | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 51 | $514 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | — | — | — | — |
|
| ||||
| — | — | 51 | 514 | |
|
| ||||
| Shares repurchased | (51) | (498) | — | — |
|
| ||||
| Net increase (decrease) | (51) | $(498) | 51 | $514 |
|
| ||||
| For the period 6/13/11 | ||||
| (commencement of operations) | ||||
| Six months ended 2/29/12 | to 8/31/11 | |||
|
| ||||
| Class M | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | 2,180 | $21,775 |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 48 | 458 | — | — |
|
| ||||
| 48 | 458 | 2,180 | 21,775 | |
|
| ||||
| Shares repurchased | — | — | — | — |
|
| ||||
| Net increase | 48 | $458 | 2,180 | $21,775 |
|
| ||||
46
| For the period 6/13/11 | ||||
| (commencement of operations) | ||||
| Six months ended 2/29/12 | to 8/31/11 | |||
|
| ||||
| Class R | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | — | $— |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 3 | 30 | — | — |
|
| ||||
| 3 | 30 | — | — | |
|
| ||||
| Shares repurchased | — | — | — | — |
|
| ||||
| Net increase | 3 | $30 | — | $— |
|
| ||||
| For the period 6/13/11 | ||||
| (commencement of operations) | ||||
| Six months ended 2/29/12 | to 8/31/11 | |||
|
| ||||
| Class Y | Shares | Amount | Shares | Amount |
|
| ||||
| Shares sold | — | $— | — | $— |
|
| ||||
| Shares issued in connection with | ||||
| reinvestment of distributions | 20 | 190 | — | — |
|
| ||||
| 20 | 190 | — | — | |
|
| ||||
| Shares repurchased | — | — | — | — |
|
| ||||
| Net increase | 20 | $190 | — | $— |
|
| ||||
At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:
| Shares owned | Percentage of ownership | Value | |
|
| |||
| Class A | 950,985 | 97.11% | $9,443,281 |
|
| |||
| Class B | 10,000 | 63.65 | 99,100 |
|
| |||
| Class C | 10,000 | 100.00 | 99,075 |
|
| |||
| Class M | 10,003 | 81.80 | 99,230 |
|
| |||
| Class R | 10,003 | 100.00 | 99,313 |
|
| |||
| Class Y | 10,020 | 100.00 | 99,512 |
|
| |||
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| Asset derivatives | Liability derivatives | |||
|
| ||||
| Derivatives not | ||||
| accounted for as | Statement of | Statement of | ||
| hedging instruments | assets and | assets and | ||
| under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
| ||||
| Credit contracts | Receivables | $49,083 | Payables | $7,401 |
|
| ||||
| Foreign exchange | ||||
| contracts | Receivables | 1,697 | Payables | 1,529 |
|
| ||||
| Receivables, Net assets — | Payables, Net assets — | |||
| Unrealized appreciation/ | Unrealized appreciation/ | |||
| Interest rate contracts | (depreciation) | 1,101* | (depreciation) | 524* |
|
| ||||
| Total | $51,881 | $9,454 | ||
|
| ||||
* 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.
47
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for | Forward | |||
| as hedging instruments under | currency | |||
| ASC 815 | Futures | contracts | Swaps | Total |
|
| ||||
| Credit contracts | $— | $— | $(55,209) | $(55,209) |
|
| ||||
| Foreign exchange contracts | — | (613) | — | $(613) |
|
| ||||
| Interest rate contracts | 7,457 | — | — | $7,457 |
|
| ||||
| Total | $7,457 | $(613) | $(55,209) | $(48,365) |
|
| ||||
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| Derivatives not accounted for | Forward | |||
| as hedging instruments under | currency | |||
| ASC 815 | Futures | contracts | Swaps | Total |
|
| ||||
| Credit contracts | $— | $— | $149,984 | $149,984 |
|
| ||||
| Foreign exchange contracts | — | 259 | — | $259 |
|
| ||||
| Interest rate contracts | (322) | — | — | $(322) |
|
| ||||
| Total | $(322) | $259 | $149,984 | $149,921 |
|
| ||||
Note 6: Initial capitalization and offering of shares
The fund was established as a series of the Trust on June 6, 2011. From June 6, 2011 to June 13, 2011, 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 | $9,500,000 | 950,000 | ||
|
| ||||
| Class B | 100,000 | 10,000 | ||
|
| ||||
| Class C | 100,000 | 10,000 | ||
|
| ||||
| Class M | 100,000 | 10,000 | ||
|
| ||||
| Class R | 100,000 | 10,000 | ||
|
| ||||
| Class Y | 100,000 | 10,000 | ||
|
| ||||
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 $642 for the reporting period. During the reporting period, cost of purchases and proceeds of sales of investments in Putnam Money Market Liquidity Fund aggregated $518,424 and $786,204, respectively. Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
48
Note 8: Transactions with affiliated issuers
Transactions during the reporting period with a company which is under common ownership or control, or with companies in which the fund owned at least 5% of the voting securities, were as follows:
| Market value | Market value | |||||
| at beginning of | at end of the | |||||
| the reporting | Purchase | Sale | Investment | Capital gain | reporting | |
| Name of affiliates | period | cost | proceeds | income | distributions | period |
|
| ||||||
| Putnam Absolute Return | ||||||
| 100 Fund Class Y | $503,894 | $18,834 | $24,746 | $8,719 | $— | $488,669 |
|
| ||||||
| Putnam Absolute Return | ||||||
| 300 Fund Class Y | 1,184,448 | 39,692 | 35,500 | 14,790 | — | 1,185,089 |
|
| ||||||
| Putnam Absolute Return | ||||||
| 500 Fund Class Y | 1,985,344 | 111,707 | 59,120 | 65,243 | — | 2,061,427 |
|
| ||||||
| Putnam Absolute Return | ||||||
| 700 Fund Class Y | 295,114 | 22,753 | 8,868 | 12,504 | — | 311,524 |
|
| ||||||
| Putnam Money Market | ||||||
| Fund Class A | 409,688 | 8,114 | 29,536 | 19 | — | 388,266 |
|
| ||||||
| Totals | $4,378,488 | $201,100 | $157,770 | $101,275 | $— | $4,434,975 |
Market values are shown for those securities affiliated at the close of the reporting period.
Note 9: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. The fund may invest a significant portion of its assets in securitized debt instruments, including mortgage-backed and asset-backed investments. The yields and values of these investments are sensitive to changes in interest rates, the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market for these investments may be volatile and limited, which may make them difficult to buy or sell.
Note 10: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
49
The Putnam family of funds
The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial advisor at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing.
| Growth | Income |
| Growth Opportunities Fund | American Government Income Fund |
| International Growth Fund | Diversified Income Trust |
| Multi-Cap Growth Fund | Floating Rate Income Fund |
| Small Cap Growth Fund | Global Income Trust |
| Voyager Fund | High Yield Advantage Fund |
| High Yield Trust | |
| Blend | Income Fund |
| Asia Pacific Equity Fund | Money Market Fund* |
| Capital Opportunities Fund | Short Duration Income Fund |
| Capital Spectrum Fund | U.S. Government Income Trust |
| Emerging Markets Equity Fund | |
| Equity Spectrum Fund | Tax-free income |
| Europe Equity Fund | AMT-Free Municipal Fund |
| Global Equity Fund | Tax Exempt Income Fund |
| International Capital Opportunities Fund | Tax Exempt Money Market Fund* |
| International Equity Fund | Tax-Free High Yield Fund |
| Investors Fund | |
| Multi-Cap Core Fund | State tax-free income funds: |
| Research Fund | Arizona, California, Massachusetts, Michigan, |
| Minnesota, New Jersey, New York, Ohio, | |
| Value | and Pennsylvania. |
| Convertible Securities Fund | |
| Equity Income Fund | Absolute Return |
| George Putnam Balanced Fund | Absolute Return 100 Fund |
| The Putnam Fund for Growth and Income | Absolute Return 300 Fund |
| International Value Fund | Absolute Return 500 Fund |
| Multi-Cap Value Fund | Absolute Return 700 Fund |
| Small Cap Value Fund |
* An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
50
| Global Sector | Putnam RetirementReady Funds — portfolios |
| Global Consumer Fund | with automatically adjusting allocations to |
| Global Energy Fund | stocks, bonds, and money market instruments, |
| Global Financials Fund | becoming more conservative over time. |
| Global Health Care Fund | |
| Global Industrials Fund | RetirementReady 2055 Fund |
| Global Natural Resources Fund | RetirementReady 2050 Fund |
| Global Sector Fund | RetirementReady 2045 Fund |
| Global Technology Fund | RetirementReady 2040 Fund |
| Global Telecommunications Fund | RetirementReady 2035 Fund |
| Global Utilities Fund | RetirementReady 2030 Fund |
| RetirementReady 2025 Fund | |
| Asset Allocation | RetirementReady 2020 Fund |
| Putnam Global Asset Allocation Funds — | RetirementReady 2015 Fund |
| portfolios with allocations to stocks, bonds, | |
| and money market instruments that are | Putnam Retirement Income Lifestyle |
| adjusted dynamically within specified ranges | Funds — portfolios with managed |
| as market conditions change. | allocations to stocks, bonds, and money |
| market investments to generate | |
| Dynamic Asset Allocation Balanced Fund | retirement income. |
| Prior to November 30, 2011, this fund was known as | |
| Putnam Asset Allocation: Balanced Portfolio. | Retirement Income Fund Lifestyle 1 |
| Dynamic Asset Allocation | Prior to June 16, 2011, this fund was known as |
| Conservative Fund | Putnam RetirementReady Maturity Fund. |
| Prior to November 30, 2011, this fund was known as | Retirement Income Fund Lifestyle 2 |
| Putnam Asset Allocation: Conservative Portfolio. | Retirement Income Fund Lifestyle 3 |
| Dynamic Asset Allocation Growth Fund | Prior to June 16, 2011, this fund was known as |
| Prior to November 30, 2011, this fund was known as | Putnam Income Strategies Fund. |
| Putnam Asset Allocation: Growth Portfolio. | |
| Dynamic Risk Allocation Fund |
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund's prospectus.
Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.
51
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
52
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 | Barbara M. Baumann | Robert R. Leveille |
| Putnam Investment | Charles B. Curtis | Vice President and |
| Management, LLC | Robert J. Darretta | Chief Compliance Officer |
| One Post Office Square | John A. Hill | |
| Boston, MA 02109 | Paul L. Joskow | Mark C. Trenchard |
| Elizabeth T. Kennan | Vice President and | |
| Investment Sub-Manager | Kenneth R. Leibler | BSA Compliance Officer |
| Putnam Investments Limited | Robert E. Patterson | |
| 57–59 St James’s Street | George Putnam, III | Robert T. Burns |
| London, England SW1A 1LD | Robert L. Reynolds | Vice President and |
| W. Thomas Stephens | Chief Legal Officer | |
| Investment Sub-Advisor | ||
| The Putnam Advisory | Officers | James P. Pappas |
| Company, LLC | Robert L. Reynolds | Vice President |
| One Post Office Square | President | |
| Boston, MA 02109 | Judith Cohen | |
| Jonathan S. Horwitz | Vice President, Clerk and | |
| Marketing Services | Executive Vice President, | Assistant Treasurer |
| Putnam Retail Management | Principal Executive | |
| One Post Office Square | Officer, Treasurer and | Michael Higgins |
| Boston, MA 02109 | Compliance Liaison | Vice President, Senior Associate |
| Treasurer and Assistant Clerk | ||
| Custodian | Steven D. Krichmar | |
| State Street Bank | Vice President and | Nancy E. Florek |
| and Trust Company | Principal Financial Officer | Vice President, Assistant Clerk, |
| Assistant Treasurer and | ||
| Legal Counsel | Janet C. Smith | Proxy Manager |
| Ropes & Gray LLP | Vice President, Assistant | |
| Treasurer and Principal | Susan G. Malloy | |
| Trustees | Accounting Officer | Vice President and |
| Jameson A. Baxter, Chair | Assistant Treasurer | |
| Ravi Akhoury |
This report is for the information of shareholders of Putnam Retirement Income Fund Lifestyle 2. 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 objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| 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: April 27, 2012 |
| 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: April 27, 2012 |
| By (Signature and Title): |
| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer |
| Date: April 27, 2012 |