N-Q 1 a_lowvolatility.htm PUTNAM FUNDS TRUST a_lowvolatility.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:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant’s telephone number, including area code: (617) 292-1000
Date of fiscal year end: July 31, 2016
Date of reporting period: October 31, 2015



Item 1. Schedule of Investments:













Putnam Low Volatility Equity Fund

The fund's portfolio
10/31/15 (Unaudited)
COMMON STOCKS (97.1%)(a)
Shares Value
Aerospace and defense (4.8%)
Boeing Co. (The) 3,808 $563,851
General Dynamics Corp. 5,670 842,449
L-3 Communications Holdings, Inc. 4,693 593,195
Orbital ATK, Inc. 1,812 155,143
TransDigm Group, Inc.(NON) 1,159 254,806
2,409,444
Air freight and logistics (1.9%)
Expeditors International of Washington, Inc. 1,195 59,499
United Parcel Service, Inc. Class B 8,811 907,709
967,208
Auto components (0.3%)
Gentex Corp. 6,954 113,976
Lear Corp. 444 55,527
169,503
Automobiles (0.3%)
Harley-Davidson, Inc. 794 39,263
Thor Industries, Inc. 1,928 104,266
143,529
Banks (4.4%)
Citizens Financial Group, Inc. 3,929 95,475
First Niagara Financial Group, Inc. 12,641 130,834
PNC Financial Services Group, Inc. 7,582 684,351
Wells Fargo & Co. 23,758 1,286,258
2,196,918
Chemicals (0.6%)
Airgas, Inc. 1,246 119,815
Sherwin-Williams Co. (The) 681 181,711
301,526
Commercial services and supplies (1.2%)
Rollins, Inc. 2,480 66,514
Waste Management, Inc. 10,168 546,632
613,146
Communications equipment (2.3%)
Cisco Systems, Inc. 38,233 1,103,022
Motorola Solutions, Inc. 428 29,947
1,132,969
Consumer finance (1.9%)
Capital One Financial Corp. 10,400 820,560
SLM Corp.(NON) 21,357 150,780
971,340
Containers and packaging (1.9%)
Avery Dennison Corp. 4,477 290,871
Bemis Co., Inc. 2,310 105,752
WestRock Co. 10,444 561,469
958,092
Diversified financial services (2.3%)
Berkshire Hathaway, Inc. Class B(NON) 6,972 948,331
CBOE Holdings, Inc. 2,953 197,969
1,146,300
Diversified telecommunication services (2.6%)
AT&T, Inc. 10,919 365,896
Verizon Communications, Inc. 20,144 944,351
1,310,247
Electric utilities (3.1%)
American Electric Power Co., Inc. 2,331 132,051
Entergy Corp. 7,829 533,625
Hawaiian Electric Industries, Inc. 1,861 54,453
Southern Co. (The) 18,656 841,386
1,561,515
Energy equipment and services (0.6%)
Schlumberger, Ltd. 3,676 287,316
287,316
Food and staples retail (2.1%)
Kroger Co. (The) 21,159 799,810
Wal-Mart Stores, Inc. 4,605 263,590
1,063,400
Food products (3.2%)
Bunge, Ltd. 2,947 215,013
ConAgra Foods, Inc. 7,079 287,053
Kraft Heinz Co. (The) 10,627 828,587
Pinnacle Foods, Inc. 6,568 289,517
1,620,170
Health-care equipment and supplies (2.3%)
C.R. Bard, Inc. 2,398 446,867
Hologic, Inc.(NON) 18,455 717,161
1,164,028
Health-care providers and services (2.9%)
AmerisourceBergen Corp. 7,539 727,589
Cardinal Health, Inc. 2,444 200,897
DaVita HealthCare Partners, Inc.(NON) 5,069 392,898
Mednax, Inc.(NON) 1,873 131,990
1,453,374
Hotels, restaurants, and leisure (2.6%)
Dunkin' Brands Group, Inc.(S) 8,249 341,591
McDonald's Corp. 8,437 947,053
1,288,644
Household products (1.6%)
Clorox Co. (The) 1,601 195,226
Colgate-Palmolive Co. 9,345 620,041
815,267
Insurance (3.5%)
Allied World Assurance Co. Holdings AG 4,575 166,347
American Financial Group, Inc. 1,627 117,453
Aspen Insurance Holdings, Ltd. 2,007 97,560
Assurant, Inc. 3,752 305,901
Endurance Specialty Holdings, Ltd. 1,340 84,594
Everest Re Group, Ltd. 834 148,427
ProAssurance Corp. 1,254 66,412
RenaissanceRe Holdings, Ltd. 907 99,434
Validus Holdings, Ltd. 2,747 121,692
XL Group PLC 14,196 540,584
1,748,404
Internet software and services (1.6%)
eBay, Inc.(NON) 29,066 810,941
810,941
IT Services (7.8%)
Accenture PLC Class A 3,073 329,426
Amdocs, Ltd. 3,587 213,678
Automatic Data Processing, Inc. 10,406 905,218
Black Knight Financial Services, Inc. Class A(NON) 1,557 56,099
Computer Sciences Corp. 3,370 224,408
DST Systems, Inc. 3,148 384,528
Fidelity National Information Services, Inc. 2,968 216,427
Fiserv, Inc.(NON) 3,748 361,719
Gartner, Inc.(NON) 1,613 146,251
Genpact, Ltd.(NON) 3,444 85,342
Leidos Holdings, Inc. 1,995 104,877
Paychex, Inc. 12,485 643,976
PayPal Holdings, Inc.(NON) 2,857 102,881
Vantiv, Inc. Class A(NON) 3,046 152,757
3,927,587
Life sciences tools and services (0.1%)
Bio-Rad Laboratories, Inc.(NON) 512 71,414
71,414
Machinery (1.9%)
Allison Transmission Holdings, Inc. 9,379 269,177
Deere & Co. 8,759 683,202
952,379
Media (2.9%)
Discovery Communications, Inc. Class C(NON) 5,284 145,416
Liberty Media Corp.(NON) 678 26,544
Morningstar, Inc. 364 29,888
Omnicom Group, Inc. 9,283 695,482
Scripps Networks Interactive Class A 6,618 397,609
Thomson Reuters Corp. (Canada) 4,390 180,078
1,475,017
Multiline retail (3.5%)
Dollar General Corp. 7,167 485,708
Macy's, Inc. 8,623 439,601
Target Corp. 10,753 829,917
1,755,226
Oil, gas, and consumable fuels (5.6%)
Columbia Pipeline Group, Inc. 14,012 291,029
Exxon Mobil Corp. 19,328 1,599,199
Occidental Petroleum Corp. 12,528 933,837
2,824,065
Pharmaceuticals (8.9%)
Eli Lilly & Co. 11,124 907,385
Johnson & Johnson 13,603 1,374,311
Merck & Co., Inc. 18,362 1,003,668
Pfizer, Inc. 34,947 1,181,908
4,467,272
Real estate investment trusts (REITs) (3.9%)
American Capital Agency Corp. 24,329 433,786
Annaly Capital Management, Inc. 54,616 543,429
Apple Hospitality REIT, Inc. 3,377 66,594
Chimera Investment Corp. 9,318 131,197
HCP, Inc. 8,556 318,283
MFA Financial, Inc. 12,242 84,715
Rayonier, Inc. 6,693 151,596
Starwood Property Trust, Inc. 10,332 207,570
Two Harbors Investment Corp. 2,517 21,294
1,958,464
Semiconductors and semiconductor equipment (2.0%)
Analog Devices, Inc. 2,529 152,043
Maxim Integrated Products, Inc. 20,227 828,902
980,945
Software (1.9%)
FactSet Research Systems, Inc. 739 129,414
Intuit, Inc. 5,306 516,964
Microsoft Corp. 2,950 155,288
Synopsys, Inc.(NON) 3,438 171,831
973,497
Specialty retail (1.3%)
Staples, Inc. 48,141 625,352
625,352
Technology hardware, storage, and peripherals (3.9%)
Apple, Inc. 7,169 856,696
EMC Corp. 32,039 840,063
NetApp, Inc. 7,332 249,288
1,946,047
Textiles, apparel, and luxury goods (2.3%)
Carter's, Inc. 1,270 115,418
NIKE, Inc. Class B 8,061 1,056,233
1,171,651
Thrifts and mortgage finance (0.6%)
New York Community Bancorp, Inc. 17,636 291,347
TFS Financial Corp. 1,809 31,766
323,113
Tobacco (2.1%)
Altria Group, Inc. 17,779 1,075,096
1,075,096
Water utilities (0.3%)
American Water Works Co., Inc. 2,258 129,519
129,519
Wireless telecommunication services (0.1%)
SBA Communications Corp. Class A(NON) 338 40,229
40,229
Total common stocks (cost $47,177,182) $48,830,154

PURCHASED OPTIONS OUTSTANDING (1.6%)(a)
Expiration Contract
date/strike price amount Value
SPDR S&P 500 ETF Trust (Put) Oct-16/$173.00 $37,204 $205,738
SPDR S&P 500 ETF Trust (Put) Sep-16/168.00 41,113 175,964
SPDR S&P 500 ETF Trust (Put) Aug-16/165.00 39,935 130,826
SPDR S&P 500 ETF Trust (Put) Jul-16/165.00 39,935 112,526
SPDR S&P 500 ETF Trust (Put) Jun-16/165.00 39,935 97,841
SPDR S&P 500 ETF Trust (Put) May-16/163.00 41,237 79,175
Total purchased options outstanding (cost $1,644,876) $802,070

SHORT-TERM INVESTMENTS (2.6%)(a)
Principal amount/shares Value
Putnam Cash Collateral Pool, LLC 0.26%(d) Shares 314,500 $314,500
Putnam Short Term Investment Fund 0.15%(AFF) Shares 163,369 163,369
SSgA Prime Money Market Fund Class N 0.09%(P) Shares 350,000 350,000
U.S. Treasury Bills 0.14%, April 28, 2016(SEGSF) $310,000 309,644
U.S. Treasury Bills 0.06%, April 7, 2016(SEGSF) 180,000 179,874
Total short-term investments (cost $1,317,612) $1,317,387

TOTAL INVESTMENTS
Total investments (cost $50,139,670)(b) $50,949,611













WRITTEN OPTIONS OUTSTANDING at 10/31/15 (premiums $38,434) (Unaudited)


Expiration       Contract
date/strike price       amount Value
SPDR S&P 500 ETF Trust (Call) Nov-15/$215.00        $35,233 $9,513
SPDR S&P 500 ETF Trust (Call) Nov-15/215.00        35,233 8,104
SPDR S&P 500 ETF Trust (Call) Nov-15/210.00        36,004 36,363
SPDR S&P 500 ETF Trust (Call) Nov-15/209.00        33,694 29,314
Total $83,294












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 August 1, 2015 through October 31, 2015 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 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 $50,307,176.
(b) The aggregate identified cost on a tax basis is $50,223,140, resulting in gross unrealized appreciation and depreciation of $3,593,626 and $2,867,155, respectively, or net unrealized appreciation of $726,471.
(NON) This security is non-income-producing.
(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 Fair value at the beginning of the reporting period Purchase cost Sale proceeds Investment income Fair value at the end of the reporting period
Putnam Short Term Investment Fund* $375,842 $2,208,231 $2,420,704 $117 $163,369
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.

(SEGSF) This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period.
(d) Affiliated company. The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral.
The fund received cash collateral of $306,434, which is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. The rate quoted in the security description is the annualized 7-day yield at the close of the reporting period. At the close of the reporting period, the value of securities loaned amounted to $314,500.
(P) This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
(S) This security is on loan, in part or in entirety, at the close of the reporting period.
At the close of the reporting period, the fund maintained liquid assets totaling $83,294 to cover certain derivative contracts.
Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.
Security valuation: Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
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 valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
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. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value, and are classified as Level 2 securities.
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 in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. 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 generate additional income for the portfolio, and to manage downside risks.
The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.
Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap options contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract.
For the fund's average contract amount on options 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, is 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 did not have a net liability position on open derivative contracts subject to the Master 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 $6,628,922 $— $—
    Consumer staples 4,573,933 — —
    Energy 3,111,381 — —
    Financials 8,344,539 — —
    Health care 7,156,088 — —
    Industrials 4,942,177 — —
    Information technology 9,771,986 — —
    Materials 1,259,618 — —
    Telecommunication services 1,350,476 — —
    Utilities 1,691,034 — —
Total common stocks 48,830,154 — —
Purchased options outstanding $— $802,070 $—
Short-term investments 513,369 804,018 —
Totals by level $49,343,523 $1,606,088 $—



Valuation inputs
Other financial instruments: Level 1 Level 2 Level 3
Written options outstanding — (83,294) —
Totals by level $— $(83,294) $—


* Common stock classifications are presented at the sector level, which may differ from the fund's portfolio presentation.
During the reporting period, transfers within the fair value hierarchy, if any, (other than certain transfers involving non-U.S. equity securities as described in the Security valuation note above) did not represent, in the aggregate, more than 1% of the fund's net assets measured as of the end of the period. Transfers are accounted for using the end of period pricing valuation method.

Fair Value 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 Fair value Fair value
Equity contracts $802,070 $83,294
Total $802,070 $83,294


The 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 based on an average of the holdings of that derivative at the end of each fiscal quarter in the reporting period:
Purchased equity option contracts (contract amount)$240,000
Written equity option contracts (contract amount)$160,000
   
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions, if applicable, see note "(d)" above, and for borrowing transactions associated with securities sold short, if applicable, see the "Short sales of securities" note above.
   
Citibank, N.A. JPMorgan Chase Bank N.A. Total
Assets:
Purchased options#  460,877  341,193  802,070
Total Assets  $460,877  $341,193  $802,070
Liabilities:
Written options#  65,677  17,617  83,294
Total Liabilities  $65,677  $17,617  $83,294
Total Financial and Derivative Net Assets  $395,200  $323,576  $718,776
Total collateral received (pledged)##†  $(489,546)  $323,576
Net amount  $884,746 $—

†		  Additional collateral may be required from certain brokers based on individual agreements.

#		 Covered by master netting agreement.

##
Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.

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: December 29, 2015

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: December 29, 2015

By (Signature and Title):
/s/ Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer
Date: December 29, 2015