Fund summaries
Putnam Low Volatility Equity Fund
Goal
Putnam Low Volatility Equity Fund seeks a total return comparable to that of the U.S. equity markets, but with lower volatility, over a market cycle (generally at least three years or more).
Fees and expenses
The following table describes the fees and expenses you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Putnam funds. More information about these and other discounts is available from your financial advisor and in How do I buy fund shares? beginning on page 19 of the fund’s prospectus and in How to buy shares beginning on page II-1 of the fund’s statement of additional information (SAI).
Shareholder fees (fees paid directly from your investment)
Share class | Maximum sales charge (load) imposed on purchases (as a percentage of offering price) | Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, whichever is lower) |
Class A | 5.75% | 1.00%* |
Class B | NONE | 5.00%** |
Class C | NONE | 1.00%*** |
Class M | 3.50% | 0.65%* |
Class Y | NONE | NONE |
Annual fund operating expenses (expenses you pay each year as a percentage of the value of your investment)
Share class | Management fees | Distribution and service (12b-1) fees | Other expenses= | Acquired fund fees and expenses | Total annual fund operating expenses | Expense reimbursement# | Total annual fund operating expenses after expense reimbursement |
Class A | 0.62% | 0.25% | 0.63% | 0.01% | 1.51% | (0.30)% | 1.21% |
Class B | 0.62% | 1.00% | 0.63% | 0.01% | 2.26% | (0.30)% | 1.96% |
Class C | 0.62% | 1.00% | 0.63% | 0.01% | 2.26% | (0.30)% | 1.96% |
Class M | 0.62% | 0.75% | 0.63% | 0.01% | 2.01% | (0.30)% | 1.71% |
Class Y | 0.62% | N/A | 0.63% | 0.01% | 1.26% | (0.30)% | 0.96% |
* Applies only to certain redemptions of shares bought with no initial sales charge.
** This charge is phased out over six years.
*** This charge is eliminated after one year.
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= Restated to reflect current fees.
# Reflects Putnam Investment Management, LLC’s contractual obligation to limit certain fund expenses through November 30, 2015. This obligation may be modified or discontinued only with the approval of the Board of Trustees.
Example
The following hypothetical example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. It assumes that you invest $10,000 in the fund for the time periods indicated and then, except as indicated, redeem all your shares at the end of those periods. It assumes a 5% return on your investment each year and that the fund’s operating expenses remain the same. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.
Share class | 1 year | 3 years | 5 years | 10 years |
Class A | $691 | $997 | $1,325 | $2,249 |
Class B | $699 | $978 | $1,383 | $2,383 |
Class B (no redemption) | $199 | $678 | $1,183 | $2,383 |
Class C | $299 | $678 | $1,183 | $2,572 |
Class C (no redemption) | $199 | $678 | $1,183 | $2,572 |
Class M | $518 | $930 | $1,368 | $2,583 |
Class Y | $98 | $370 | $663 | $1,496 |
Portfolio turnover
The fund pays transaction-related costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the above example, affect fund performance. The fund’s turnover rate in the most recent fiscal year was 91%.
Investments, risks, and performance
Investments
The fund invests mainly in common stocks of large U.S. companies across all sectors. The fund expects to allocate its investments across sectors so that the fund’s portfolio approximately reflects sector weightings across the broader equity markets. Within each sector, the fund generally focuses its investments on those stocks that we believe are likely to have lower sensitivity to broader market or sector movements. We refer to these stocks as “low beta” stocks. Beta is a measurement of a stock’s anticipated sensitivity to price movements in a particular market, as measured by a market or sector
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index. A stock with a beta higher than 1.0 is generally expected to be more volatile than the index, and a stock with a beta of less than 1.0 should be less volatile than the index and may be expected to rise and fall in price more slowly than the market or sector. We generally emphasize investments within each sector in low beta stocks (measured relative to the S&P 500 Index) because we believe that, over a full market cycle (generally at least three years or more), a portfolio of low beta stocks may be able to earn investment returns comparable to market returns, but with less volatility than the market, thus earning an attractive risk-adjusted return relative to the market.
We intend to write (sell) call options, generally on equity indices but also on individual portfolio securities. We sell call options to earn premium income. Selling call options may also reduce the volatility of the fund’s portfolio.
We intend to buy put options, generally on equity indices but also on individual portfolio securities. We buy put options to reduce the volatility of the fund’s portfolio by protecting the fund from the impact of significant market declines.
In addition to call options and put options, we may use derivatives, such as futures, options, warrants and swap contracts, for hedging purposes and to adjust the return and volatility characteristics of the fund’s investments. We may also make other investments, including in derivatives, intended to protect the fund from market volatility, or to take advantage of the potential for returns from instruments that perform well during periods of market volatility.
We 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, as well as general market conditions, when deciding whether to buy or sell investments. As noted above, we will also consider the fund’s overall exposure to each sector.
Risks
It is important to understand that you can lose money by investing in the fund.
The value 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 company, industry or sector. There may be times when stocks in the fund’s portfolio exhibit higher volatility than we expect, are not correlated with market movements as we expect, or underperform the markets. By selling covered call options, the fund limits its opportunity to profit from an increase in the price of the underlying portfolio securities, but continues to bear the risk of a decline in the value of these securities. The fund also risks losing all or part of the cash paid for purchasing put options. Our use of derivatives may increase the
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fund’s risk of loss by increasing investment exposure or, in the case of many over-the-counter instruments, because of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations.
The fund may not achieve its goal, and it is not intended to be a complete investment program. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Performance
Performance information will be available after the fund completes a full calendar year of operation.
Your fund’s management
Investment advisor
Putnam Investment Management, LLC
Portfolio managers
Adrian Chan, Portfolio Manager, portfolio manager of the fund since 2013
Robert Schoen, Co-Head of Global Asset Allocation, portfolio manager of the fund since 2013
For important information about the purchase and sale of fund shares, tax information, and financial intermediary compensation, please turn to Important Additional Information About All Funds beginning on page 9.
Putnam Strategic Volatility Equity Fund
Goal
Putnam Strategic Volatility Equity Fund seeks a total return in excess of that of the U.S. equity markets, but with comparable volatility, over a market cycle (generally at least three years or more).
Fees and expenses
The following table describes the fees and expenses you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Putnam funds. More information about these and other discounts is available from your financial advisor and in How do I buy fund shares? beginning on page 19 of the fund’s prospectus and in How to buy shares beginning on page II-1 of the fund’s statement of additional information (SAI).
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Shareholder fees (fees paid directly from your investment)
Share class | Maximum sales charge (load) imposed on purchases (as a percentage of offering price) | Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, whichever is lower) |
Class A | 5.75% | 1.00%* |
Class B | NONE | 5.00%** |
Class C | NONE | 1.00%*** |
Class M | 3.50% | 0.65%* |
Class Y | NONE | NONE |
Annual fund operating expenses (expenses you pay each year as a percentage of the value of your investment)
Share class | Management fees† | Distribution and service (12b-1) fees | Other expenses= | Acquired fund fees and expenses | Total annual fund operating expenses | Expense reimbursement# | Total annual fund operating expenses after expense reimbursement |
Class A | 0.68% | 0.25% | 2.34% | 0.01% | 3.28% | (2.01)% | 1.27% |
Class B | 0.68% | 1.00% | 2.34% | 0.01% | 4.03% | (2.01)% | 2.02% |
Class C | 0.68% | 1.00% | 2.34% | 0.01% | 4.03% | (2.01)% | 2.02% |
Class M | 0.68% | 0.75% | 2.34% | 0.01% | 3.78% | (2.01)% | 1.77% |
Class Y | 0.68% | N/A | 2.34% | 0.01% | 3.03% | (2.01)% | 1.02% |
* Applies only to certain redemptions of shares bought with no initial sales charge.
** This charge is phased out over six years.
*** This charge is eliminated after one year.
† Management fees are subject to a performance adjustment.
= Restated to reflect current fees.
# Reflects Putnam Investment Management, LLC’s contractual obligation to limit certain fund expenses through November 30, 2015. This obligation may be modified or discontinued only with the approval of the Board of Trustees.
Example
The following hypothetical example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. It assumes that you invest $10,000 in the fund for the time periods indicated and then, except as indicated, redeem all your shares at the end of those periods. It assumes a 5% return on your investment each year and that the fund’s operating expenses remain the same. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.
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Share class | 1 year | 3 years | 5 years | 10 years |
Class A | $697 | $1,349 | $2,024 | $3,816 |
Class B | $705 | $1,343 | $2,098 | $3,946 |
Class B (no redemption) | $205 | $1,043 | $1,898 | $3,946 |
Class C | $305 | $1,043 | $1,898 | $4,107 |
Class C (no redemption) | $205 | $1,043 | $1,898 | $4,107 |
Class M | $524 | $1,286 | $2,067 | $4,104 |
Class Y | $104 | $747 | $1,415 | $3,204 |
Portfolio turnover
The fund pays transaction-related costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the above example, affect fund performance. The fund’s turnover rate in the most recent fiscal year was 68%.
Investments, risks, and performance
Investments
The fund invests mainly in common stocks of large U.S. companies across all sectors. The fund expects to allocate its investments across sectors so that the fund’s portfolio approximately reflects sector weightings across the broader equity markets. Within each sector, the fund generally focuses its investments on those stocks that we believe are likely to have lower sensitivity to broader market or sector movements. We refer to these stocks as “low beta” stocks. Beta is a measurement of a stock’s anticipated sensitivity to price movements in a particular market, as measured by a market or sector index. A stock with a beta higher than 1.0 is generally expected to be more volatile than the index, and a stock with a beta of less than 1.0 should be less volatile than the index and may be expected to rise and fall in price more slowly than the market or sector. We generally emphasize investments within each sector in low beta stocks (measured relative to the S&P 500 Index) because we believe that, over a full market cycle (generally at least three years or more), a portfolio of low beta stocks combined with the options, total return swaps, and other derivative strategies described below, may be able to earn investment returns in excess of market returns, but with volatility comparable to the market, thus earning an attractive risk-adjusted return relative to the market.
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We intend to invest in total return swaps on market indices, the fund’s individual portfolio securities, or baskets of securities, and in other derivatives to increase the fund’s exposure to low beta stocks, which will create investment leverage.
We intend to write (sell) call options, generally on equity indices but also on individual portfolio securities. We sell call options to earn premium income. Selling call options may also reduce the volatility of the fund’s portfolio.
We intend to buy put options, generally on equity indices but also on individual portfolio securities. We buy put options to reduce the volatility of the fund’s portfolio by protecting the fund from the impact of significant market declines.
In addition to call options and put options, we may use derivatives, such as futures, options, warrants and swap contracts, for hedging purposes and to adjust the return and volatility characteristics of the fund’s investments. We may also make other investments, including in derivatives, intended to protect the fund from market volatility, or to take advantage of the potential for returns from instruments that perform well during periods of market volatility.
We 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, as well as general market conditions, when deciding whether to buy or sell investments. As noted above, we will also consider the fund’s overall exposure to each sector.
Risks
It is important to understand that you can lose money by investing in the fund.
The value 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 company, industry or sector. There may be times when stocks in the fund’s portfolio exhibit higher volatility than we expect, are not correlated with market movements as we expect, or underperform the markets. By selling covered call options, the fund limits its opportunity to profit from an increase in the price of the underlying portfolio securities, but continues to bear the risk of a decline in the value of these securities. The fund also risks losing all or part of the cash paid for purchasing put options. Our use of leverage obtained through derivatives may increase the fund’s risk of loss by increasing investment exposure. Derivatives also involve the risk, in the case of over-the-counter instruments, of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations.
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The fund may not achieve its goal, and it is not intended to be a complete investment program. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Performance
Performance information will be available after the fund completes a full calendar year of operation.
Your fund’s management
Investment advisor
Putnam Investment Management, LLC
Portfolio managers
Adrian Chan, Portfolio Manager, portfolio manager of the fund since 2013
Robert Schoen, Co-Head of Global Asset Allocation, portfolio manager of the fund since 2013
Important Additional Information About All Funds
Purchase and sale of fund shares
You can open an account, purchase and/or sell fund shares, or exchange them for shares of another Putnam fund by contacting your financial advisor or by calling Putnam Investor Services at 1-800-225-1581.
When opening an account, you must complete and mail a Putnam account application, along with a check made payable to the fund, to: Putnam Investor Services, P.O. Box 8383, Boston, MA 02266-8383. The minimum initial investment of $500 is currently waived, although Putnam reserves the right to reject initial investments under $500 at its discretion. There is no minimum for subsequent investments.
You can sell your shares back to the fund or exchange them for shares of another Putnam fund any day the New York Stock Exchange (NYSE) is open. Shares may be sold or exchanged by mail, by phone, or online at putnam.com. Some restrictions may apply.
Tax information
The fund’s distributions will be taxed as ordinary income or capital gains unless you hold the shares through a tax-advantaged arrangement, in which case you will generally be taxed only upon withdrawal of monies from the arrangement.
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Financial intermediary compensation
If you purchase the fund through a broker/dealer or other financial intermediary (such as a bank or financial advisor), the fund and its related companies may pay that intermediary for the sale of fund shares and related services. Please bear in mind that these payments may create a conflict of interest by influencing the broker/dealer or other intermediary to recommend the fund over another investment. Ask your advisor or visit your advisor’s website for more information.
What are each fund’s main investment strategies and related risks?
This section contains greater detail on each fund’s main investment strategies and the related risks you would face as a fund shareholder. It is important to keep in mind that risk and reward generally go hand in hand; the higher the potential reward, the greater the risk. As mentioned in the fund summaries, we pursue each fund’s goal by investing mainly in common stocks of large U.S. companies across all sectors.
Each fund generally expects to allocate its investments across sectors so that the fund’s portfolio approximately reflects sector weightings across the broader equity markets. Within each sector, each fund generally focuses its investments on stocks that we believe have a lower sensitivity to broader market or sector movements than is average for the sector. Under normal circumstances, we invest at least 80% of each fund’s net assets in equity investments. This policy may be changed only after 60 days’ notice to shareholders.
Beta is a measurement of a stock’s anticipated sensitivity to price movements in a particular market, as measured by a market or sector index. A stock with a beta higher than 1.0 is generally expected to be more volatile than the index, and a stock with a beta of less than 1.0 should be less volatile than the index and may be expected to rise and fall in price more slowly than the market or sector. We generally emphasize investments within each sector in low beta stocks (measured relative to the S&P 500 Index) because we believe that, over a market cycle (generally at least three years or more), a portfolio of low
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beta stocks may be able to earn investment returns comparable to market returns, but with less volatility than the market, thus earning an attractive risk-adjusted return relative to the market.
One measure of risk-adjusted return is the Sharpe ratio. The Sharpe ratio is calculated by taking a fund’s rate of return, subtracting the so-called “risk-free rate” (typically the rate of return that may be earned on an investment in U.S. Treasury bonds), and dividing the result by the standard deviation of the fund’s returns. The Sharpe ratio can help indicate whether a fund’s investment returns are the result of excessive risk. Higher Sharpe ratios signify better risk-adjusted performance (that is, relatively lower risk associated with a particular level of investment return, or, conversely, better investment return associated with a particular level of risk).
Different sectors often exhibit different average betas over time. For example, the utilities sector currently has a lower beta than the technology sector relative to the broader equity markets. The funds do not intend to concentrate their investments in sectors characterized by low beta companies, however. Instead, as noted above, the funds’ portfolios are expected to approximately reflect sector weightings across the broader equity markets.
Our low beta strategy generally depends upon our ability to estimate correctly the beta of a fund’s investments relative to the broader markets or sectors. We use third-party risk models in our process. These models typically determine the historical volatility and correlation of a stock to a market index. We adjust the results of these models based on our research and analysis to develop an estimate of what a stock’s beta will be on a forward-looking basis. We cannot assure you that our assessments of beta will be correct. For example, volatility may be higher than we expected or securities may be less correlated with markets than we expected. If our assessments of volatility and beta are incorrect, a fund may not achieve the risk-adjusted returns that we seek and could significantly underperform the markets in general, particular markets, or other funds that make similar investments. Even if our assessments are successful, a fund may fail to meet its objective or may lose money if the particular investments that we make do not perform as we expect.
A call option is a contract that gives the buyer of the option the right to purchase an underlying security or index at a specified price (the “strike price”) before a specified future date (the “expiration date”). A put option is a contract that gives the buyer of the option the right to sell an underlying
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security or index at the strike price before the expiration date. The price of an option (or “premium”) is determined from trading activity in the broad options market, and generally reflects the relationship between the current market price for the underlying security or index and the strike price, as well as the time remaining until the expiration date. The funds generally write call options with a strike price above the current market price of the underlying asset (or “out-of-the-money”) in order to generate premium income. The funds generally buy out-of-the-money put options in order to reduce portfolio volatility by protecting against the risk of a significant decline in the value of portfolio securities.
There is no guarantee that the funds’ options strategy will produce premium income or reduce portfolio volatility to the extent desired. A transaction in options may be unsuccessful because of market behavior or unexpected events. For example, unusual market conditions or the lack of a ready market for any particular option at a specific time may impair a fund’s ability to enter into new positions or close out existing positions, which may reduce the effectiveness of the funds’ options strategy. We expect that the funds’ options transactions will generally involve call or put options on a market index (although the fund may also write a call option or buy a put option on an individual portfolio security). Because the funds’ portfolios will not replicate any market index, the funds’ options transactions in market indices will not exactly offset any risk associated with their portfolio investments. When a fund writes a call option on a portfolio security, the fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the underlying security above the sum of the premium and the strike price of the call, but retains the risk of loss should the price of the underlying security decline. A fund also risks losing all or part of the cash paid for purchasing call and put options if the fund does not exercise the options before they expire. The writer of an option has no control over the time when it may be required to fulfill its obligation and must deliver the underlying security (or cash in the case of an option on a security index) at the exercise price upon receipt of an exercise notice. Portfolio assets covering written options cannot be sold while the option is outstanding, unless replaced with similar assets.
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Under normal market conditions, we expect that, on average, investment leverage associated with the fund’s low beta strategy will result in a net notional investment exposure of up to 200% of the net assets of the fund, although the amounts of leverage may be significantly higher or lower at any given time. This expected average level of investment leverage means that, for every $100 invested in the fund, the fund will obtain an exposure of up to $200 of underlying investments after long and short positions are netted against each other. We may make an investment directly, or we may obtain exposure to an investment through the use of one or more derivatives. We treat a derivative investment as having the same net notional investment exposure as the equivalent direct investment. There are costs associated with investment leverage, and these costs may vary over time. When determining the appropriate amount of investment leverage for the fund, we will take into account these costs, as well as our goal that the fund will experience comparable volatility to that of the U.S. equity markets over a market cycle. If our judgments about the performance of investments prove incorrect while the fund’s exposure to underperforming investments is increased through the use of investment leverage, a relatively small market or stock price movement may result in significant losses to the fund.
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investment strategies. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indexes or currencies. We may use total return swaps, which could result in losses if the underlying security, basket of securities or index does not perform as expected. We may make use of “short” derivatives positions, the values of which typically move in the opposite direction from the price of the underlying investment, pool of investments, index or currency. We may use derivatives both for hedging and non-hedging purposes, including as a substitute for a direct investment in the securities of one or more issuers. However, we may also choose not to use derivatives based on our evaluation of market conditions or the availability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. Each fund’s investment in derivatives may be limited by its intention to qualify as a regulated investment company.
Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. Some derivatives are “leveraged,” which means they provide a fund with investment exposure greater than the value of the fund’s investment in the derivatives. As a result, these derivatives may magnify or otherwise increase investment losses to the fund. The risk of loss from certain short derivatives positions is theoretically unlimited. The value of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility.
Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for a fund’s derivatives positions. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivatives transaction will not meet its obligations. For further information about the risks of derivatives, see Miscellaneous Investments, Investment Practices and Risks in the SAI.
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Who oversees and manages the funds?
The funds’ Trustees
As a shareholder of a mutual fund, you have certain rights and protections, including representation by a Board of Trustees. The Putnam Funds’ Board of Trustees oversees the general conduct of the funds’ business and represents the interests of the Putnam fund shareholders. At least 75% of the members of
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the Putnam Funds’ Board of Trustees are independent, which means they are not officers of the funds or affiliated with Putnam Investment Management, LLC (Putnam Management).
The Trustees periodically review each fund’s investment performance and the quality of other services such as administration, custody, and investor services. At least annually, the Trustees review the fees paid to Putnam Management and its affiliates for providing or overseeing these services, as well as the overall level of each fund’s operating expenses. In carrying out their responsibilities, the Trustees are assisted by an administrative staff, auditors and legal counsel that are selected by the Trustees and are independent of Putnam Management and its affiliates.
Contacting
the funds’ Trustees
Address correspondence to:
The Putnam Funds Trustees
One Post Office Square
Boston, MA 02109
The funds’ investment manager
The Trustees have retained Putnam Management, which has managed mutual funds since 1937, to be each fund’s investment manager, responsible for making investment decisions for each fund and managing each fund’s other affairs and business.
The basis for the Trustees’ approval of each fund’s management contract and the sub-management contract described below is discussed in each fund’s annual report to shareholders dated July 31, 2014.
Each fund pays a monthly base management fee to Putnam Management. The base fee is calculated by applying a rate to each fund’s average net assets for the month. The rate is based on the monthly average of the aggregate net assets of all open-end funds sponsored by Putnam Management (excluding fund assets that are invested in other Putnam funds), and generally declines as the aggregate net assets increase.
In the case of Strategic Volatility Equity Fund, the monthly base fee described above is increased or reduced by a performance adjustment. The amount of the performance adjustment is calculated monthly based on a performance adjustment rate that 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 S&P 500 Index, each measured over the performance period. The performance period is the thirty-six month period then ended or, if shorter, the period from the date the fund commenced
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operations (3/18/2013) to the end of the month for which the fee adjustment is being computed. The performance adjustment rate is multiplied by the fund’s average net assets over the performance period, divided by twelve, and added to, or subtracted from, the base fee for that month. The maximum annualized performance adjustment rate is 0.15%.
Putnam Low Volatility Equity Fund paid Putnam Management a management fee (after any applicable waivers) of 0.10% of average net assets for the fund’s last fiscal year.
Due to the expense limitations in effect during the fiscal year, Putnam Strategic Volatility Equity Fund did not pay a management fee to Putnam Management.
Putnam Management’s address is One Post Office Square, Boston, MA 02109.
Putnam Management has retained its affiliate Putnam Investments Limited (PIL) to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management. Putnam Management (and not the funds) will pay a quarterly sub-management fee to PIL for its services at the annual rate of 0.35% of the average net asset value of any fund assets managed by PIL. PIL, which provides a full range of international investment advisory services to institutional clients, is located at Cassini House, 57–59 St James’s Street, London, England, SW1A 1LD.
Pursuant to this arrangement, Putnam investment professionals who are based in foreign jurisdictions may serve as portfolio managers of the funds or provide other investment services, consistent with local regulations.
Portfolio managers | Joined funds | Employer | Positions over past five years |
Adrian Chan | 2013 | Putnam Management 2003 – Present | Portfolio Manager Previously, Analyst |
Robert Schoen | 2013 | Putnam Management 1997 – Present | Co-Head of Global Asset Allocation Previously, Portfolio Manager |
The SAI provides information about these individuals’ compensation, other accounts managed by these individuals and these individuals’ ownership of securities in the funds.
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How do the funds price their shares?
The price of each fund’s shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the NYSE each day the exchange is open.
Each fund values its investments for which market quotations are readily available at market value. It values short-term investments that will mature within 60 days at amortized cost, which approximates market value. It values all other investments and assets at their fair value, which may differ from recent market prices. For example, a fund may value a stock traded on a U.S. exchange at its fair value when the exchange closes early or trading in the stock is suspended. It may also value a stock at fair value if recent transactions in the stock have been very limited or if, in the case of a security traded on a market that closes before the NYSE closes, material information about the issuer becomes available after the close of the relevant market.
Each fund translates prices for its investments quoted in foreign currencies into U.S. dollars at current exchange rates, which are generally determined as of 4:00 p.m. Eastern Time each day the NYSE is open. As a result, changes in the value of those currencies in relation to the U.S. dollar may affect a fund’s NAV. Because foreign markets may be open at different times than the NYSE, the value of a fund’s shares may change on days when shareholders are not able to buy or sell them. Many securities markets and exchanges outside the U.S. close before the close of the NYSE 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 NYSE. As a result, each fund has adopted fair value pricing procedures, which, among other things, require a fund to fair value foreign equity securities if there has been a movement in the U.S. market that exceeds a specified threshold that may change from time to time. As noted above, the value determined for an investment using a fund’s fair value pricing procedures may differ from recent market prices for the investment.
Each fund’s most recent NAV is available on Putnam Investments’ website at putnam.com/individual or by contacting Putnam Investor Services at 1-800-225-1581.
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How do I buy fund shares?
Opening an account
You can open a fund account and purchase class A, B, C, and M shares by contacting your financial representative or Putnam Investor Services at 1-800-225-1581 and obtaining a Putnam account application. The completed application, along with a check made payable to the fund, must then be returned to Putnam Investor Services at the following address:
Putnam
Investor Services
P.O. Box 8383
Boston, MA 02266-8383
You can open a fund account with as little as $500. The minimum investment is waived if you make regular investments weekly, semi-monthly or monthly through automatic deductions from your bank checking or savings account. Although Putnam is currently waiving the minimum, it reserves the right to reject initial investments under the minimum at its discretion.
Each fund sells its shares at the offering price, which is the NAV plus any applicable sales charge (class A and class M shares only). Your financial representative or Putnam Investor Services generally must receive your completed buy order before the close of regular trading on the NYSE for your shares to be bought at that day’s offering price.
If you participate in an employer-sponsored retirement plan that offers any of the funds, please consult your employer for information on how to purchase shares of the funds through the plan, including any restrictions or limitations that may apply.
Mutual funds must obtain and verify information that identifies investors opening new accounts. If the funds are unable to collect the required information, Putnam Investor Services may not be able to open your account. Investors must provide their full name, residential or business address, Social Security or tax identification number, and date of birth. Entities, such as trusts, estates, corporations and partnerships, must also provide other identifying information. Putnam Investor Services may share identifying information with third parties for the purpose of verification. If Putnam Investor Services cannot verify identifying information after opening your account, the funds reserve the right to close your account.
Also, each fund may periodically close to new purchases of shares or refuse any order to buy shares if the fund determines that doing so would be in the best interests of the fund and its shareholders.
Prospectus 19
Purchasing additional shares
Once you have an existing account, you can make additional investments at any time in any amount in the following ways:
Which class of shares is best for me?
This prospectus offers you four classes of fund shares: A, B, C and M. Certain investors described below may also choose class Y shares. Each share class represents investments in the same portfolio of securities, but each class has its own sales charge and expense structure, as illustrated in the Fund summaries — Fees and expenses section, allowing you and your financial representative to choose the class that best suits your investment needs. When you purchase shares of a fund, you must choose a share class. Deciding which share class best suits your situation depends on a number of factors that you should discuss with your financial representative, including:
20 Prospectus
Here is a summary of the differences among the classes of shares
Class A shares
Class B shares
Class C shares
Prospectus 21
Class M shares
Class Y shares (available only to investors listed below)
The following investors may purchase class Y shares if approved by Putnam:
22 Prospectus
corporate IRAs administered by Putnam, if another retirement plan of the sponsor is eligible to purchase class Y shares;
Trust companies or bank trust departments that purchased class Y shares for trust accounts may transfer them to the beneficiaries of the trust accounts, who may continue to hold them or exchange them for class Y shares of other Putnam funds. Defined contribution plans (including corporate IRAs) that purchased class Y shares under prior eligibility criteria may continue to purchase class Y shares.
Prospectus 23
Initial sales charges for class A and M shares
Class A sales charge as a percentage of*: | Class M sales charge as a percentage of*: | |||
Amount of purchase at offering price ($) | Net amount invested | Offering price** | Net amount invested | Offering price** |
Under 50,000 | 6.10% | 5.75% | 3.63% | 3.50% |
50,000 but under 100,000 | 4.71 | 4.50 | 2.56 | 2.50 |
100,000 but under 250,000 | 3.63 | 3.50 | 1.52 | 1.50 |
250,000 but under 500,000 | 2.56 | 2.50 | 1.01 | 1.00 |
500,000 but under 1,000,000 | 2.04 | 2.00 | 1.01 | 1.00 |
1,000,000 and above | NONE | NONE | N/A*** | N/A*** |
* Because of rounding in the calculation of offering price and the number of shares purchased, actual sales charges you pay may be more or less than these percentages.
** Offering price includes sales charge.
*** The funds will not accept purchase orders for class M shares (other than by employer-sponsored retirement plans) where the total of the current purchase, plus existing account balances that are eligible to be linked under a right of accumulation (as described below) is $1 million or more.
Reducing your class A or class M sales charge
Each fund offers two principal ways for you to qualify for discounts on initial sales charges on class A and class M shares, often referred to as “breakpoint discounts”:
To calculate the total value of your existing accounts and any linked accounts, a fund will use the higher of (a) the current maximum public offering price of those shares or (b) if you purchased the shares after December 31, 2007, the initial value of the total purchases, or, if you held the shares on December 31, 2007, the market value at maximum public offering price on that date, in either case, less the market value on the applicable redemption date of any of those shares that you have redeemed.
24 Prospectus
Account types that may be linked with each other to obtain breakpoint discounts using the methods described above include:
In order to obtain a breakpoint discount, you should inform your financial representative at the time you purchase shares of the existence of other accounts or purchases that are eligible to be linked for the purpose of calculating the initial sales charge. A fund or your financial representative may ask you for records or other information about other shares held in your accounts and linked accounts, including accounts opened with a different financial representative. Restrictions may apply to certain accounts and transactions. Further details about breakpoint discounts can be found on Putnam Investments’ website at putnam.com/individual by selecting Mutual Funds, then Pricing and performance, and then About fund costs, and in the SAI.
Prospectus 25
including deferred sales charges, is included in the SAI. You may consult your financial representative or Putnam Retail Management for assistance.
How do I sell or exchange fund shares?
You can sell your shares back to the appropriate fund or exchange them for shares of another Putnam fund any day the NYSE is open, either through your financial representative or directly to the fund. If you redeem your shares shortly after purchasing them, your redemption payment for the shares may be delayed until the fund collects the purchase price of the shares, which may be up to 10 calendar days after the purchase date.
Regarding exchanges, not all Putnam funds offer all classes of shares or may be open to new investors. If you exchange shares otherwise subject to a deferred sales charge, the transaction will not be subject to the deferred sales charge. When you redeem the shares acquired through the exchange, however, the redemption may be subject to the deferred sales charge, depending upon when and from which fund you originally purchased the shares. The deferred sales charge will be computed using the schedule of any fund into or from which you have exchanged your shares that would result in your paying the highest deferred sales charge applicable to your class of shares. For purposes of computing the deferred sales charge, the length of time you have owned your shares will be measured from the date of original purchase, unless you originally purchased the shares from another Putnam fund that does not directly charge a deferred sales charge, in which case the length of time you have owned your shares will be measured from the date you exchange those shares for shares of another Putnam fund that does charge a deferred sales charge, and will not be affected by any subsequent exchanges among funds.
26 Prospectus
Each fund also reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. The fund into which you would like to exchange may also reject your exchange. These actions may apply to all shareholders or only to those shareholders whose exchanges Putnam Management determines are likely to have a negative effect on the fund or other Putnam funds. Consult Putnam Investor Services before requesting an exchange. Ask your financial representative or Putnam Investor Services for prospectuses of other Putnam funds. Some Putnam funds are not available in all states.
Deferred sales charges for class B, class C and certain class A and class M shares
If you sell (redeem) class B shares within six years of purchase, you will generally pay a deferred sales charge according to the following schedule:
Year after purchase | 1 | 2 | 3 | 4 | 5 | 6 | 7+ |
Charge | 5% | 4% | 3% | 3% | 2% | 1% | 0% |
Prospectus 27
A deferred sales charge of 1.00% will apply to class C shares if redeemed within one year of purchase. Class A shares that are part of a purchase of $1 million or more (other than by an employer-sponsored retirement plan) will be subject to a 1.00% deferred sales charge if redeemed within nine months of purchase. A deferred sales charge of 0.65% may apply to class M shares purchased without a sales charge for certain rollover IRA accounts if redeemed within one year of purchase.
Deferred sales charges will be based on the lower of the shares’ cost and current NAV. Shares not subject to any charge will be redeemed first, followed by shares held longest. You may sell shares acquired by reinvestment of distributions without a charge at any time.
Policy on excessive short-term trading
When each fund invests in foreign securities, its performance may be adversely impacted and the interests of longer-term shareholders may be diluted as a result of time-zone arbitrage, a short-term trading practice that seeks to exploit changes in the value of the fund’s investments that result
28 Prospectus
from events occurring after the close of the foreign markets on which the investments trade, but prior to the later close of trading on the NYSE, the time as of which the fund determines its NAV. If an arbitrageur is successful, he or she may dilute the interests of other shareholders by trading shares at prices that do not fully reflect their fair value.
When each fund invests in securities that may trade infrequently or may be more difficult to value, such as securities of smaller companies, it may be susceptible to trading by short-term traders who seek to exploit perceived price inefficiencies in the fund’s investments. In addition, the market for securities of smaller companies may at times show “market momentum,” in which positive or negative performance may continue from one day to the next for reasons unrelated to the fundamentals of the issuer. Short-term traders may seek to capture this momentum by trading frequently in the fund’s shares, which will reduce the fund’s performance and may dilute the interests of other shareholders. Because securities of smaller companies may be less liquid than securities of larger companies, each fund may also be unable to buy or sell these securities at desirable prices when the need arises (for example, in response to volatile cash flows caused by short-term trading). Similar risks may apply if a fund holds other types of less liquid securities, including below-investment-grade bonds.
Prospectus 29
investor and/or his or her financial intermediary, if any, a written warning. Putnam Management’s practices for measuring excessive short-term trading activity and issuing warnings may change from time to time. Certain types of transactions are exempt from monitoring, such as those in connection with systematic investment or withdrawal plans and reinvestment of dividend and capital gain distributions.
In particular, many purchase, redemption and exchange orders are received from financial intermediaries that hold omnibus accounts with a fund. Omnibus accounts, in which shares are held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among retirement plans and financial intermediaries such as brokers, advisers and third-party administrators. The funds are generally not able to identify trading by a particular beneficial owner within an omnibus account, which makes it difficult or impossible to determine if a particular shareholder is engaging in excessive short-term trading. Putnam Management monitors
30 Prospectus
aggregate cash flows in omnibus accounts on an ongoing basis. If high cash flows or other information indicate that excessive short-term trading may be taking place, Putnam Management will contact the financial intermediary, plan sponsor or recordkeeper that maintains accounts for the beneficial owner and attempt to identify and remedy any excessive trading. However, a fund’s ability to monitor and deter excessive short-term traders in omnibus accounts ultimately depends on the capabilities and cooperation of these third-party financial firms. A financial intermediary or plan sponsor may impose different or additional limits on short-term trading.
Distribution plans and payments to dealers
Putnam funds are distributed primarily through dealers (including any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator, and any other institution having a selling, services, or any similar agreement with Putnam Retail Management or one of its affiliates). In order to pay for the marketing of fund shares and services provided to shareholders, each fund has adopted distribution and service (12b-1) plans, which increase the annual operating expenses you pay each year in certain share classes, as shown in the tables of annual fund operating expenses in the section Fund summaries — Fees and expenses. Putnam Retail Management and its affiliates also make additional payments to dealers that do not increase your fund expenses, as described below.
Prospectus 31
Putnam Retail Management and its affiliates also pay additional compensation to selected dealers in recognition of their marketing support and/or program servicing (each of which is described in more detail below). These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the funds or other Putnam funds to its customers. These additional payments are made by Putnam Retail Management and its affiliates and do not increase the amount paid by you or a fund as shown under Fund summaries — Fees and expenses.
The additional payments to dealers by Putnam Retail Management and its affiliates are generally based on one or more of the following factors: average net assets of a fund attributable to that dealer, sales or net sales of a fund attributable to that dealer, or reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in fund shares), or on the basis of a negotiated lump sum payment for services provided.
Marketing support payments are generally available to most dealers engaging in significant sales of Putnam fund shares. These payments are individually negotiated with each dealer firm, taking into account the marketing support services provided by the dealer, including business planning assistance, educating dealer personnel about the Putnam funds and shareholder financial planning needs, placement on the dealer’s preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the dealer, as well as the size of the dealer’s relationship with Putnam Retail Management. Although the total amount of marketing support payments made to dealers in any year may vary, on average, the aggregate payments are not expected, on an annual basis, to exceed 0.085% of the average net assets of Putnam’s retail mutual funds attributable to the dealers.
Program servicing payments, which are paid in some instances to dealers in connection with investments in a fund through retirement plans, dealer platforms, and other investment programs, are not expected, with certain limited exceptions, to exceed 0.20% of the total assets in the program on an annual basis. These payments are made for program services provided by the dealer, including participant or shareholder recordkeeping, reporting, or transaction processing, as well as services rendered in connection with dealer platform development and maintenance and services rendered in connection with retirement plans, such as fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services.
32 Prospectus
You can find a list of all dealers to which Putnam made marketing support and/or program servicing payments in 2013 in the SAI, which is on file with the SEC and is also available on Putnam’s website at putnam.com. You can also find other details in the SAI about the payments made by Putnam Retail Management and its affiliates and the services provided by your dealer. Your dealer may charge you fees or commissions in addition to those disclosed in this prospectus. You can also ask your dealer about any payments it receives from Putnam Retail Management and its affiliates and any services your dealer provides, as well as about fees and/or commissions it charges.
Fund distributions and taxes
Each fund normally distributes any net investment income and any net realized capital gains annually. You may choose to reinvest distributions from net investment income, capital gains or both in additional shares of your fund or other Putnam funds, or you may receive them in cash in the form of a check or an electronic deposit to your bank account. If you do not select an option when you open your account, all distributions will be reinvested. If you choose to receive distributions in cash, but correspondence from a fund or Putnam Investor Services is returned as “undeliverable,” the distribution option on your account may be converted to reinvest future distributions in the fund. You will not receive interest on uncashed distribution checks.
For shares purchased through your employer’s retirement plan, the terms of the plan will govern how the plan may receive distributions from a fund.
For federal income tax purposes, distributions of net investment income are generally taxable to you as ordinary income. Taxes on distributions of capital gains are determined by how long a fund owned (or is deemed to have owned) the investments that generated them, rather than by how long you have owned (or are deemed to have owned) your shares. Distributions that a fund properly reports to you as gains from investments that a fund owned for more than one year are generally taxable to you as long-term capital gains includible in net capital gain and taxed to individuals at reduced rates.
Prospectus 33
Distributions of gains from investments that a fund owned for one year or less are generally taxable to you as ordinary income. Distributions that the fund properly reports to you as “qualified dividend income” are taxable at the reduced rates applicable to your net capital gain provided that both you and the fund meet certain holding period and other requirements. Distributions are taxable in the manner described in this paragraph whether you receive them in cash or reinvest them in additional shares of the relevant fund or other Putnam funds.
Distributions by a fund to retirement plans that qualify for tax-exempt treatment under federal income tax laws will not be taxable. Special tax rules apply to investments through such plans. You should consult your tax advisor to determine the suitability of a fund as an investment through such a plan and the tax treatment of distributions (including distributions of amounts attributable to an investment in a fund) from such a plan.
Unless you are investing through a tax-advantaged retirement account (such as an IRA), you should consider avoiding a purchase of fund shares shortly before a fund makes a distribution because doing so may cost you money in taxes. Distributions are taxable to you even if they are paid from income or gains earned by a fund before your investment (and thus were included in the price you paid). Contact your financial representative or Putnam to find out the distribution schedule for your fund.
A fund’s investments in foreign securities, if any, may be subject to foreign withholding taxes. In that case, a fund’s return on those investments would be decreased. Shareholders generally will not be entitled to claim a credit or deduction with respect to these foreign taxes. In addition, a fund’s investments in foreign securities or foreign currencies may increase or accelerate the fund’s recognition of ordinary income and may affect the timing or amount of a fund’s distributions.
A fund’s investments in derivative financial instruments, including investments by which the fund seeks exposure to assets other than securities, are subject to numerous special and complex tax rules. Moreover, a fund’s intention to qualify as a “regulated investment company” and receive favorable treatment under the federal income tax rules may limit its ability to invest in such instruments. The applicable tax rules could affect whether gains and losses recognized by a fund are treated as ordinary or capital, accelerate the recognition of income or gains to the fund, defer or possibly prevent the recognition or use of certain losses by the fund and cause adjustments in the holding periods of the fund’s securities, thereby affecting whether capital gains and losses are treated as short-term or long-term. The rules could, in turn, affect the amount, timing and character of the income distributed to
34 Prospectus
shareholders by a fund and, therefore may increase the amount of taxes payable by shareholders. In particular, a fund’s options transactions could cause a substantial portion of its income to consist of net short-term capital gains, which, when distributed, are treated and taxable to shareholders as ordinary income; other derivative positions could result in a fund’s realization and distribution of ordinary income rather than capital gain. In addition, because the application of these rules may be uncertain under current law, an adverse determination or future Internal Revenue Service guidance with respect to these rules (which determination may be retroactive) may affect whether the fund has made sufficient distributions and otherwise satisfied the relevant requirements to maintain its qualification as a regulated investment company and avoid a fund-level tax.
Any gain resulting from the sale or exchange of your shares generally also will be subject to tax.
The above is a general summary of the tax implications of investing in a fund. Please refer to the SAI for further details. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes.
Financial highlights
The financial highlights tables are intended to help you understand each fund’s recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund’s financial statements, which have been audited by KPMG LLP. The auditor’s report and each fund’s financial statements are included in each fund’s annual report to shareholders, which is available upon request.
Prospectus 35
Financial highlights
(For a common share outstanding throughout the period) Putnam Low Volatility Equity
Fund * Not
annualized. † For
the period March 18, 2013 (commencement of operations) to July 31, 2013. a Per
share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during
the period. b Total
return assumes dividend reinvestment and does not reflect the effect of sales charges. c Includes
amounts paid through expense offset and/or brokerage/service arrangements, if any. Also excludes acquired fund fees
and expenses, if any. 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 amount: e The
net investment income ratio and per share amount shown for the period ended may not correspond with the expected class specific
differences for the period due to the timing of subscriptions into the class. f Amount
represents less than $0.01 per share.
INVESTMENT OPERATIONS:
LESS DISTRIBUTIONS:
RATIOS AND SUPPLEMENTAL DATA:
Period ended
Net asset value, beginning of period
Net investment income (loss) a
Net realized and unrealized gain (loss) on investments
Total from investment operations
From net investment income
Total distributions
Net asset value, end of period
Total return at net asset value (%) b
Net assets, end of period (in thousands)
Ratio of expenses to average net assets(%) c,d
Ratio of net investment income (loss) to average net assets (%) d
Portfolio turnover (%)
Class A
July 31, 2014
$10.31
.10
.92
1.02
(.16)
(.16)
$11.17
9.91
$2,388
1.20
.89
91
July 31, 2013†
10.00
.02
.29
.31
—
—
10.31
.3.10*
3,776
.45*
.23*
17*
Class B
July 31, 2014
$10.28
.01
.92
.93
(.13)
(.13)
$11.08
9.11
$264
1.95
.08
91
July 31, 2013†
10.00
(.01) e
.29
.28
—
—
10.28
2.80*
77
.73*
(.14)*e
17*
Class C
July 31, 2014
$10.28
(.02)
.95
.93
(.14)
(.14)
$11.07
9.12
$299
1.95
(.13)
91
July 31, 2013†
10.00
— f
.28
.28
—
—
10.28
2.80*
65
.73*
.01*
17*
Class M
July 31, 2014
$10.29
.04
.92
.96
(.13)
(.13)
$11.12
9.34
$157
1.70
.33
91
July 31, 2013†
10.00
— f
.29
.29
—
—
10.29
2.90*
20
.63*
.02*
17*
Class Y
July 31, 2014
$10.32
.12
.92
1.04
(.17)
(.17)
$11.19
10.16
$24,539
.95
1.15
91
July 31, 2013†
10.00
.04
.28
.32
—
—
10.32
3.20*
25,991
.35*
.37*
17*
Percentage of average net assets
July 31, 2014
0.53%
July 31, 2013
0.58
36 Prospectus
Prospectus 37
Financial highlights
(For a common share outstanding throughout the period)
Putnam Strategic Volatility
Equity Fund
INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | RATIOS AND SUPPLEMENTAL DATA: | ||||||||||
Period ended | Net asset value, beginning of period | Net investment income (loss) a | Net realized and unrealized gain (loss) on investments | Total from investment operations | From net investment income | Total distributions | Net asset value, end of period | Total return at net asset value (%) b | Net assets, end of period (in thousands) | Ratio of expenses to average net assets(%) c,d | Ratio of net investment income (loss) to average net assets (%) d | Portfolio turnover (%) |
Class A | ||||||||||||
July 31, 2014 | $10.35 | .08 | 1.19 | 1.27 | (.62) | (.62) | $11.00 | 12.53 | $4,269 | 1.26 | .75 | 68 |
July 31, 2013† | 10.00 | .02 | .33 | .35 | — | — | 10.35 | 3.50* | 3,090 | .49* | .18* | 21* |
Class B | ||||||||||||
July 31, 2014 | $10.32 | — e | 1.19 | 1.19 | (.58) | (.58) | $10.93 | 11.74 | $48 | 2.01 | (.03) | 68 |
July 31, 2013† | 10.00 | (.01) | .33 | .32 | — | — | 10.32 | 3.20* | 21 | .76* | (.09) * | 21* |
Class C | ||||||||||||
July 31, 2014 | $10.32 | — e | 1.18 | 1.18 | (.61) | (.61) | $10.89 | 11.74 | $162 | 2.01 | — f | 68 |
July 31, 2013† | 10.00 | (.01) | .33 | .32 | — | — | 10.32 | 3.20* | 16 | .76* | (.08) * | 21* |
Class M | ||||||||||||
July 31, 2014 | $10.33 | .02 | 1.20 | 1.22 | (.58) | (.58) | $10.97 | 12.05 | $68 | 1.76 | .20 | 68 |
July 31, 2013† | 10.00 | — e | .33 | .33 | — | — | 10.33 | 3.30* | 10 | .67* | —* f | 21* |
Class Y | ||||||||||||
July 31, 2014 | $10.36 | .11 | 1.18 | 1.29 | (.63) | (.63) | $11.02 | 12.81 | $2,010 | 1.01 | .99 | 68 |
July 31, 2013† | 10.00 | .03 | .33 | .36 | — | — | 10.36 | 3.60* | 878 | .39* | .30* | 21* |
* Not annualized.
† For the period March 18, 2013 (commencement of operations) to July 31, 2013.
a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
c Includes amounts paid through expense offset and/or brokerage service arrangements, if any. Also excludes acquired fund fees and expenses, if any.
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:
Percentage of average net assets | |
July 31, 2014 | 3.40% |
July 31, 2013 | 2.69 |
e Amount represents less than $0.01 per share.
f Amount represents less than .01%.
38 Prospectus |
Prospectus 39 |
Appendix A — Supplemental Performance Information of Similar Accounts
PUTNAM LOW VOLATILITY EQUITY FUND AND PUTNAM STRATEGIC LOW VOLATILITY EQUITY FUND ARE RECENTLY ORGANIZED AND HAVE LESS THAN ONE FULL CALENDAR YEAR OF PERFORMANCE HISTORY. THE PERFORMANCE INFORMATION PRESENTED BELOW IS FOR ACCOUNTS SUBSTANTIALLY SIMILAR TO THE FUNDS. IT IS NOT THAT OF EITHER FUND AND SHOULD NOT BE CONSIDERED A SUBSTITUTE FOR EITHER FUND’S OWN PERFORMANCE. PAST RETURNS ARE NOT INDICATIVE OF FUTURE PERFORMANCE.
Putnam Management, the funds’ investment adviser, and its affiliates act as investment advisers to other accounts (Other Accounts – Low Volatility) that have investment objectives, policies and strategies that are substantially similar to those of Putnam Low Volatility Equity Fund. Putnam Management and its affiliates also act as investment advisers to other accounts (Other Accounts – Strategic Volatility) that have investment objectives, policies and strategies that are substantially similar to those of Putnam Strategic Volatility Equity Fund. This supplemental performance information is provided to illustrate the past performance of Putnam Management and its affiliates in managing these other accounts that are substantially similar to the funds; it does not represent the performance of either fund. Each fund’s portfolio managers played a role in the management of all of these Other Accounts during the entire period for which performance is shown.
We have stated below the average annual total return information for the periods ended 9/30/14 as well as the average total returns by quarter and total by year for the years ended 2011, 2012, and 2013 for the Other Accounts – Low Volatility and the Other Accounts – Strategic Volatility. Each of these Other Accounts represents all substantially similar accounts, including carve-out assets of broader mandate portfolios, managed by Putnam Management and its affiliates. Some of the Other Accounts are not registered under the Investment Company Act of 1940 (1940 Act) and, therefore, are not subject to certain investment restrictions, diversification requirements, and other regulatory requirements imposed by the 1940 Act and the Internal Revenue Code. If these Other Accounts had been registered under the 1940 Act, their returns might have been lower. As of 9/30/14, there were three accounts with approximately $523 million in assets under management included in Other Accounts – Low Volatility and four accounts with approximately $193 million in assets under management included in Other Accounts – Strategic Volatility. An Other Account’s returns are typically
40 Prospectus
included in the appropriate composite following one full calendar month of operation. The average annual total returns of the Other Accounts – Low Volatility and Other Accounts – Strategic Volatility are composites that represent time-weighted rate of return calculations. The Other Accounts’ returns have been adjusted to reflect the level of expenses that is expected to be borne by shareholders of class A shares of the appropriate fund. Returns are calculated in U.S. dollars and are inclusive of currency fluctuations. The results of the Composite for all periods shown include the reinvestment of dividends and other earnings and are net of foreign withholding taxes. Composite returns are calculated monthly by asset weighting account returns using beginning of month market values and are geometrically linked to determine quarterly and annual returns.
We have included information about the average annual total return for the S&P 500 Index, which is used as a benchmark for assessing the performance of each fund. The index results assume the reinvestment of dividends or interest paid on the securities constituting the index. Unlike the Other Accounts (and the funds), the index does not incur fees or expenses.
We have also included information about the Sharpe ratio for the Other Accounts – Low Volatility, Other Accounts – Strategic Volatility and the S&P 500 Index. The Sharpe ratio is a measure of risk-adjusted return calculated by taking a fund’s rate of return, subtracting the so-called “risk-free rate” (typically the rate of return that may be earned on an investment in U.S. Treasury bonds), and dividing the result by the standard deviation of the fund’s returns. The Sharpe ratio can help to indicate whether a fund’s returns are the result of excessive risk. Higher Sharpe ratios signify better risk-adjusted performance. A negative Sharpe ratio indicates that a risk-free asset would perform better.
Average Annual Total Returns (for periods ended 9/30/14)
Past 1 year | Past 3 years | |||
Return | Sharpe Ratio | Return | Sharpe Ratio | |
Other Accounts – Low Volatility | 13.09 | 2.08 | 12.67 | 1.79 |
Other Accounts – Strategic Volatility | 16.25 | 2.04 | 16.89 | 1.82 |
S&P 500 Index (benchmark) | 19.73 | 2.32 | 22.99 | 2.20 |
Prospectus 41
Average Total Returns (Quarterly and by Year)
Other Accounts — Low Volatility | Other Accounts — Strategic Volatility | S&P 500 Index (benchmark) | |
Q3 2014 | 0.48 | 0.42 | 1.13 |
Q2 2014 | 3.17 | 4.11 | 5.23 |
Q1 2014 | 1.28 | 1.45 | 1.81 |
Total year ended 2013 | 17.73 | 23.34 | 32.39 |
Q4 2013 | 7.71 | 9.61 | 10.51 |
Q3 2013 | 2.29 | 2.66 | 5.24 |
Q2 2013 | –1.53 | –1.90 | 2.91 |
Q1 2013 | 8.52 | 11.74 | 10.61 |
Total year ended 2012 | 8.31 | 11.62 | 16.00 |
Q4 2012 | –2.81 | –3.48 | –0.38 |
Q3 2012 | 3.68 | 4.95 | 6.35 |
Q2 2012 | –0.49 | –0.53 | –2.75 |
Q1 2012 | 8.00 | 10.78 | 12.59 |
Total year ended 2011 | 9.00 | 12.28 | 2.11 |
Q4 2011 | 6.84 | 9.39 | 11.82 |
Q3 2011 | –5.68 | –7.80 | –13.87 |
Q2 2011 | 1.71 | 2.31 | 0.10 |
Q1 2011 | 6.36 | 8.82 | 5.92 |
Make the most of your Putnam privileges
The following services are available to you as a Putnam mutual fund shareholder.
Systematic investment plan
Invest as much as you wish. The amount you choose will be automatically transferred weekly, semi-monthly or monthly from your checking or savings account.
Systematic withdrawal
Make regular withdrawals monthly, quarterly, semiannually, or annually from your Putnam mutual fund account.
Systematic exchange
Transfer assets automatically from one Putnam account to another on a regular, prearranged basis.
Exchange privilege
Exchange money between Putnam funds. The exchange privilege allows you to adjust your investments as your objectives change. A signature guarantee is required for exchanges of more than $500,000 and shares of all Putnam funds may not be available to all investors.
Investors may not maintain, within the same fund, simultaneous plans for systematic investment or exchange (into the fund) and systematic withdrawal or exchange (out of the fund). These privileges are subject to change or termination.
Many of these services can be accessed online at putnam.com.
For more information about any of these services and privileges, call your financial representative or a Putnam customer service representative toll-free at 1-800-225-1581.
42 Prospectus
Prospectus 43
For more information about Putnam Low Volatility Equity Fund and Putnam Strategic Volatility Equity Fund
The funds’ SAI and annual and semiannual reports to shareholders include additional information about the funds. The SAI is incorporated by reference into this prospectus, which means it is part of this prospectus for legal purposes. Each fund’s annual report discusses the market conditions and investment strategies that significantly affected each fund’s performance during its last fiscal year. You may get free copies of these materials, request other information about any Putnam fund, or make shareholder inquiries, by contacting your financial representative, by visiting Putnam’s website at putnam.com/individual, or by calling Putnam toll-free at 1-800-225-1581.
You may review and copy information about a fund, including its SAI, at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. You may call the Commission at 1-202-551-8090 for information about the operation of the Public Reference Room. You may also access reports and other information about each fund on the EDGAR Database on the Commission’s website at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commission’s Public Reference Section, Washington, D.C. 20549-1520. You may need to refer to the fund’s file number.
Putnam Investments
One Post Office Square
Boston, MA 02109
1-800-225-1581
Address correspondence to:
Putnam Investor Services
P.O. Box 8383
Boston, MA 02266-8383
putnam.com
File No. 811-07513 SP122 291124
11/14
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