N-Q 1 a_strategicvolatility.htm PUTNAM FUNDS TRUST a_strategicvolatility.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY



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: July 31, 2013
Date of reporting period: April 30, 2013



Item 1. Schedule of Investments:













Putnam Strategic Volatility Equity Fund

The fund's portfolio
4/30/13 (Unaudited)
COMMON STOCKS (88.0%)(a)
Shares Value
Aerospace and defense (4.0%)
Boeing Co. (The) 179 $16,362
General Dynamics Corp. 236 17,455
Honeywell International, Inc. 521 38,314
L-3 Communications Holdings, Inc. 89 7,231
Lockheed Martin Corp. 113 11,197
Northrop Grumman Corp. 196 14,845
Raytheon Co. 266 16,327
Rockwell Collins, Inc. 105 6,607
United Technologies Corp. 166 15,154
143,492
Air freight and logistics (1.4%)
C.H. Robinson Worldwide, Inc. 138 8,196
United Parcel Service, Inc. Class B 482 41,375
49,571
Airlines (0.4%)
Copa Holdings SA Class A (Panama) 38 4,772
Southwest Airlines Co. 729 9,987
14,759
Beverages (1.0%)
Coca-Cola Co. (The) 197 8,339
PepsiCo, Inc. 332 27,380
35,719
Biotechnology (0.9%)
Amgen, Inc. 304 31,680
31,680
Capital markets (1.8%)
BlackRock, Inc. 53 14,125
Northern Trust Corp. 403 21,730
T. Rowe Price Group, Inc. 418 30,305
66,160
Chemicals (2.6%)
Ecolab, Inc. 332 28,094
International Flavors & Fragrances, Inc. 138 10,652
PPG Industries, Inc. 163 23,984
Sherwin-Williams Co. (The) 119 21,790
Sigma-Aldrich Corp. 87 6,846
91,366
Commercial banks (1.6%)
Bank of Hawaii Corp. 414 19,744
Cullen/Frost Bankers, Inc. 436 26,339
Wells Fargo & Co. 320 12,154
58,237
Communications equipment (0.7%)
Harris Corp. 144 6,653
Motorola Solutions, Inc. 334 19,105
25,758
Computers and peripherals (3.2%)
Apple, Inc. 255 112,901
112,901
Consumer finance (1.6%)
American Express Co. 290 19,839
Discover Financial Services 815 35,648
55,487
Containers and packaging (0.8%)
Ball Corp. 264 11,648
Bemis Co., Inc. 194 7,634
Packaging Corp. of America 212 10,083
29,365
Diversified financial services (1.3%)
IntercontinentalExchange, Inc.(NON) 131 21,344
JPMorgan Chase & Co. 237 11,615
McGraw-Hill Cos., Inc. (The) 236 12,770
45,729
Diversified telecommunication services (2.6%)
AT&T, Inc. 790 29,593
CenturyLink, Inc. 322 12,098
Verizon Communications, Inc. 980 52,832
94,523
Electric utilities (0.4%)
Pinnacle West Capital Corp. 233 14,190
14,190
Electrical equipment (0.3%)
Roper Industries, Inc. 83 9,931
9,931
Energy equipment and services (0.5%)
Diamond Offshore Drilling, Inc. 116 8,016
Oceaneering International, Inc. 126 8,841
16,857
Food and staples retail (0.1%)
Wal-Mart Stores, Inc. 28 2,176
2,176
Food products (3.2%)
General Mills, Inc. 639 32,218
H.J. Heinz Co. 357 25,854
Hershey Co. (The) 204 18,189
JM Smucker Co. (The) 95 9,807
Kellogg Co. 297 19,317
Kraft Foods Group, Inc. 187 9,629
115,014
Health-care equipment and supplies (1.4%)
Abbott Laboratories 579 21,377
Becton, Dickinson and Co. 151 14,239
C.R. Bard, Inc. 129 12,817
48,433
Health-care providers and services (2.8%)
AmerisourceBergen Corp. 388 20,999
Cardinal Health, Inc. 496 21,933
Henry Schein, Inc.(NON) 143 12,927
McKesson Corp. 293 31,005
Quest Diagnostics, Inc. 240 13,519
100,383
Hotels, restaurants, and leisure (1.6%)
Dunkin' Brands Group, Inc. 106 4,114
McDonald's Corp. 156 15,934
Panera Bread Co. Class A(NON) 34 6,026
Starbucks Corp. 516 31,393
57,467
Household products (2.7%)
Church & Dwight Co., Inc. 149 9,520
Colgate-Palmolive Co. 283 33,793
Kimberly-Clark Corp. 360 37,148
Procter & Gamble Co. (The) 229 17,580
98,041
Industrial conglomerates (2.5%)
3M Co. 444 46,491
Danaher Corp. 428 26,082
General Electric Co. 766 17,074
89,647
Insurance (4.0%)
Alleghany Corp.(NON) 39 15,356
Allied World Assurance Co. Holdings AG 103 9,353
Arch Capital Group, Ltd.(NON) 184 9,763
Arthur J Gallagher & Co. 308 13,075
Berkshire Hathaway, Inc. Class B(NON) 102 10,845
Chubb Corp. (The) 321 28,270
Everest Re Group, Ltd. 125 16,874
PartnerRe, Ltd. 157 14,811
RenaissanceRe Holdings, Ltd. 137 12,863
Validus Holdings, Ltd. 282 10,888
142,098
Internet and catalog retail (2.0%)
Amazon.com, Inc.(NON) 179 45,432
Priceline.com, Inc.(NON) 36 25,056
70,488
Internet software and services (1.7%)
Google, Inc. Class A(NON) 59 48,650
IAC/InterActiveCorp. 295 13,886
62,536
IT Services (5.5%)
IBM Corp. 410 83,041
MasterCard, Inc. Class A 91 50,317
Paychex, Inc. 578 21,045
Visa, Inc. Class A 243 40,936
195,339
Media (2.4%)
Omnicom Group, Inc. 241 14,405
Scripps Networks Interactive Class A 97 6,458
Time Warner, Inc. 664 39,694
Viacom, Inc. Class B 401 25,660
86,217
Multi-utilities (2.1%)
Consolidated Edison, Inc. 476 30,297
DTE Energy Co. 381 27,767
SCANA Corp. 311 16,856
74,920
Multiline retail (1.9%)
Dillards, Inc. Class A 117 9,642
Dollar General Corp.(NON) 190 9,897
Dollar Tree, Inc.(NON) 223 10,606
Macy's, Inc. 151 6,735
Target Corp. 460 32,458
69,338
Oil, gas, and consumable fuels (8.1%)
Chevron Corp. 687 83,821
ConocoPhillips 342 20,674
EQT Corp. 133 9,991
Exxon Mobil Corp. 1,288 114,618
Kinder Morgan, Inc. 355 13,881
Noble Energy, Inc. 81 9,176
Phillips 66 370 22,552
Spectra Energy Corp. 460 14,504
289,217
Pharmaceuticals (6.3%)
AbbVie, Inc. 589 27,123
Bristol-Myers Squibb Co. 668 26,533
Eli Lilly & Co. 408 22,595
Johnson & Johnson 240 20,455
Merck & Co., Inc. 1,079 50,713
Perrigo Co. 45 5,373
Pfizer, Inc. 2,517 73,169
225,961
Professional services (0.6%)
Equifax, Inc. 111 6,793
Towers Watson & Co. Class A 68 4,959
Verisk Analytics, Inc. Class A(NON) 136 8,335
20,087
Real estate investment trusts (REITs) (2.9%)
Essex Property Trust, Inc.(R) 36 5,654
Federal Realty Investment Trust(R) 56 6,553
Health Care REIT, Inc.(R) 196 14,694
Public Storage(R) 104 17,160
Rayonier, Inc.(R) 114 6,774
Simon Property Group, Inc.(R) 189 33,655
Tanger Factory Outlet Centers(R) 101 3,749
Ventas, Inc.(R) 215 17,120
105,359
Road and rail (0.2%)
J. B. Hunt Transport Services, Inc. 89 6,325
6,325
Semiconductors and semiconductor equipment (3.0%)
Analog Devices, Inc. 394 17,332
Avago Technologies, Ltd. 397 12,688
Linear Technology Corp. 384 14,016
Maxim Integrated Products, Inc. 479 14,815
Texas Instruments, Inc. 901 32,625
Xilinx, Inc. 416 15,771
107,247
Software (1.3%)
Intuit, Inc. 408 24,333
Microsoft Corp. 720 23,832
48,165
Specialty retail (3.2%)
Advance Auto Parts, Inc. 78 6,543
AutoZone, Inc.(NON) 33 13,500
Home Depot, Inc. (The) 757 55,526
O'Reilly Automotive, Inc.(NON) 111 11,913
PetSmart, Inc. 110 7,506
Ross Stores, Inc. 189 12,487
Tractor Supply Co. 78 8,359
115,834
Thrifts and mortgage finance (0.9%)
People's United Financial, Inc. 2,459 32,360
32,360
Tobacco (2.2%)
Altria Group, Inc. 943 34,429
Philip Morris International, Inc. 259 24,758
Reynolds American, Inc. 394 18,683
77,870
Trading companies and distributors (0.1%)
MSC Industrial Direct Co., Inc. Class A 48 3,782
3,782
Wireless telecommunication services (0.2%)
SBA Communications Corp. Class A(NON) 89 7,030
7,030
Total common stocks (cost $3,056,499) $3,147,059

INVESTMENT COMPANIES (1.1%)(a)
Shares Value
Ares Capital Corp. 569 $10,333
SPDR S&P 500 ETF Trust 175 27,944
Total investment Companies (cost $37,444) $38,277

PURCHASED EQUITY OPTIONS OUTSTANDING (0.8%)(a)
Expiration Contract
date/strike price amount Value
SPDR S&P 500 ETF Trust (Put) Apr-14/$133.00 2,405 $7,485
SPDR S&P 500 ETF Trust (Put) Mar-14/130.00 2,422 5,886
SPDR S&P 500 ETF Trust (Put) Feb-14/130.00 2,422 4,953
SPDR S&P 500 ETF Trust (Put) Jan-14/125.00 2,422 3,086
SPDR S&P 500 ETF Trust (Put) Dec-13/120.00 2,422 1,971
SPDR S&P 500 ETF Trust (Put) Nov-13/115.00 2,422 1,066
SPDR S&P 500 ETF Trust (Put) Oct-13/123.00 2,422 1,328
SPDR S&P 500 ETF Trust (Put) Sep-13/125.00 2,422 1,083
SPDR S&P 500 ETF Trust (Put) Aug-13/115.00 2,422 321
SPDR S&P 500 ETF Trust (Put) Jul-13/115.00 2,422 145
SPDR S&P 500 ETF Trust (Put) Jun-13/110.00 2,422 29
SPDR S&P 500 ETF Trust (Put) May-13/108.00 2,422 1
Total purchased equity options outstanding (cost $44,463) $27,354

SHORT-TERM INVESTMENTS (10.8%)(a)
Shares Value
Putnam Short Term Investment Fund 0.04%(AFF) 385,337 $385,337
Total short-term investments (cost $385,337) $385,337

TOTAL INVESTMENTS
Total investments (cost $3,523,743) $3,598,027













WRITTEN EQUITY OPTIONS OUTSTANDING at 4/30/13 (premiums $8,658) (Unaudited)


Expiration       Contract
date/strike price       amount Value
SPDR S&P 500 ETF Trust (Call) May-13/$160.00        14,430 $19,956
SPDR S&P 500 ETF Trust (Call) May-13/161.00        14,430 12,987
Total $32,943













OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 4/30/13 (Unaudited)
Upfront     Fixed payments Total return Unrealized
Swap counterparty/ premium     Termination received (paid) by received by appreciation/
Notional amount received (paid)     date fund per annum or paid by fund (depreciation)
Deutsche Bank AG
baskets 14,120 $—      3/18/14 (3 month USD-LIBOR-BBA plus 0.28%) A basket (DBPTNLVE) of common stocks $5,925
Total $5,925










Key to holding's abbreviations
ETF Exchange Traded Fund
SPDR S&P Depository Receipts
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 March 18, 2013 (commencement of operations) through April 30, 2013 (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, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund's manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter.
(a) Percentages indicated are based on net assets of $3,574,519.
(b) The aggregate identified cost on a tax basis is $3,523,743, resulting in gross unrealized appreciation and depreciation of $119,707 and $45,423, respectively, or net unrealized appreciation of $74,284.
(NON) Non-income-producing security.
(AFF) Affiliated company. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. Transactions during the period with Putnam Short Term Investment Fund, which is under common ownership and control, were as follows:
Name of affiliate Market value at the beginning of the reporting period Purchase cost Sale proceeds Investment income Market value at the end of the reporting period
Putnam Short Term Investment Fund * $— $3,223,790 $2,838,453 $35 $385,337
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.
(R) Real Estate Investment Trust.
At the close of the reporting period, the fund maintained liquid assets totaling $32,878 to cover certain derivatives contracts.
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 under ASC 820. If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange traded funds), if any, which can be classified as Level 1 or Level 2 securities, are based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
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 would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. 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. 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.
Options contracts: The fund used 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. OTC traded options are valued using prices supplied by dealers. Forward premium swap options contracts include premiums that do not settle until the expiration date of the contract. The delayed settlement of the premiums are factored into the daily valuation of the option contracts.
For the fund's average contract amount on options contracts, see the appropriate table at the end of these footnotes.
Total return swap contracts: The fund entered into OTC 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 gain exposure to specific sectors or industries.
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. OTC 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 OTC 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.
For the fund's average notional amount on OTC total return swap contracts, see the appropriate table at the end of these footnotes.
Master agreements: The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC 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 $5,589 on open derivative contracts subject to the Master Agreements. There was no collateral posted by the fund for these agreements.












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 $399,344 $— $—
    Consumer staples 328,820 — —
    Energy 306,074 — —
    Financials 505,430 — —
    Health care 406,457 — —
    Industrials 337,594 — —
    Information technology 551,946 — —
    Materials 120,731 — —
    Telecommunication services 101,553 — —
    Utilities 89,110 — —
Total common stocks 3,147,059 — —
Investment companies 38,277 — —
Purchased equity options outstanding — 27,354 —
Short-term investments 385,337 — —
Totals by level $3,570,673 $27,354 $—



Valuation inputs
Other financial instruments: Level 1 Level 2 Level 3
Written equity options outstanding $— $(32,943) $—
Total return swap contracts — 5,925 —
Totals by level $— $(27,018) $—


Market Values of Derivative Instruments as of the close of the reporting period
Asset derivatives Liability derivatives
Derivatives not accounted for as hedging instruments under ASC 815 Market value Market value
Equity contracts $33,279 $32,943
Total $33,279 $32,943


The average volume of activity for the reporting period for any derivative type that was held at the close of the period is listed below and was as follows:
Purchased equity option contracts (number of contracts) 22,000
Written equity option contracts (number of contracts) 22,000
OTC total return swap contracts (notional) $1,100,000

For additional information regarding the fund please see the fund's most recent annual or semiannual shareholder report filed on the Securities and Exchange Commission's Web site, www.sec.gov, or visit Putnam's Individual Investor Web site at www.putnaminvestments.com



Item 2. 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 3. Exhibits:
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.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Putnam Funds Trust
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
Date: June 27, 2013

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: June 27, 2013

By (Signature and Title):
/s/ Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer
Date: June 27, 2013