a_lowvolatilityequity.htm

Putnam
Low Volatility Equity
Fund

Annual report
7 | 31 | 16


Message from the Trustees	1

Interview with your fund’s portfolio managers	2

Performance snapshot	2

Your fund’s performance	9

Your fund’s expenses	11

Terms and definitions	13

Other information for shareholders	14

Important notice regarding Putnam’s privacy policy	15

Trustee approval of management contract	16

Financial statements	22

Federal tax information	48

About the Trustees	49

Officers	51

Consider these risks before investing: Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Stock prices may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific company, issuer 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. You can lose money by investing in the fund.

Message from the Trustees

Dear Fellow Shareholder:

Through the first half of 2016, markets around the world have shown great resilience in the face of multiple challenges. Now, as we enter the fall, many additional factors raise new concerns.

Against a backdrop of sluggish growth and following a colorful political campaign, the United States will be electing a new president in a few short weeks. Overseas, challenges are widespread, from sluggish growth in Europe, Japan, and many emerging markets to global fallout from the United Kingdom’s decision to leave the European Union. As non-U.S. central banks consider new actions to boost economic growth, here at home the Federal Reserve seeks stronger economic data before it raises interest rates. The uncertainty caused by these unfolding events could well spur renewed bouts of market volatility.

But we believe that opportunities can emerge despite the markets’ ups and downs. At Putnam, our portfolio managers actively pursue these opportunities. Backed by a network of global analysts, they draw on their long experience and expertise in navigating changing conditions.

We share Putnam’s deep conviction that an active approach based on fundamental research can play a valuable role in your portfolio. In the following pages, you will find an overview of your fund’s performance for the reporting period ended July 31, 2016, as well as an outlook for the coming months.

Now may be a good time for you to consult with your financial advisor, who can help you in determining if your portfolio remains aligned with your long-term goals, time horizon, and tolerance for risk.

As always, thank you for investing with Putnam.

Interview with your fund’s portfolio managers

What factors most influenced the investment environment for stocks during the 12-month reporting period ended July 31, 2016?

Adrian: Periods of volatility continued to define the U.S. stock market over the 12-month reporting period ended July 31, 2016. The first episode occurred soon after the reporting period began in August 2015, with global equities stumbling on further concerns about the decelerating growth of the Chinese economy. Global markets also receded in response to the Chinese government’s devaluing of the yuan in an effort to jump-start domestic growth. By October 2015, however, stocks were on the rebound, with U.S. markets posting close to all-time highs during the fourth calendar quarter of 2015, only to fall back again late in the year. The setback in equity prices came partially as a result of continuing softness in the energy sector, driven by weak global demand and an overabundant supply of oil. In addition, the U.S. Federal Reserve finally raised short-term interest rates in mid-December, ending seven years of accommodative monetary policy in the United States, which also had a negative impact on the U.S. stock market. Stocks bounced back in mid-February 2016, propelled in part

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See pages 3 and 9–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

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by a recovery in oil prices, and remained on a generally healthy trajectory through the end of the period, in spite of a sharp, but temporary, decline in stock prices in the aftermath of the United Kingdom’s vote to leave the European Union [Brexit]. During this latter part of the reporting period, the U.S. economy demonstrated both its resiliency and its greater relative strength compared with the economic fortunes of the rest of the developed world.

For the 12 months ended July 31, 2016, the S&P 500 Index, a broad measure of U.S. stock market performance, posted a mid-single-digit gain, returning 5.61%. As might be expected during such a period of market volatility, the more-defensive sectors, with their lower-risk profiles, were the best performers. Telecommunication services, utilities, consumer staples, and industrials each produced double-digit sector returns. Meanwhile, in an environment of still-low interest rates, the financials sector continued to struggle, putting up a small negative return for the 12-month reporting period. Health care and energy also were relatively weak sectors during the reporting period.

How did the fund perform during the reporting period?

Rob: The fund’s performance was essentially flat. In absolute terms, the fund had a modest loss for the period, returning –0.55%. While this result was well shy of the fund’s S&P 500 Index benchmark, it was within the range of expectations given the market conditions and our investment strategy, which favors low-volatility securities and also seeks to protect against downside risk through the use of an options overlay discipline.

As co-managers, Adrian and I run the fund on a sector-neutral basis, meaning that we maintain the fund’s sector allocations in line with those of the S&P 500 Index. We do not seek to generate excess returns for the fund by over- or under-emphasizing our investments in different economic sectors. Instead, we seek outperformance through the process of individual stock selection, making use of both quantitative and qualitative research and analysis to assemble a portfolio of low-beta, or low-risk, equity securities that we believe will replicate the broad market’s performance but with lower volatility.

This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 7/31/16. See pages 2 and 9–11 for additional fund performance information. Index descriptions can be found on page 13.

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Our strategy of investing in stocks that tend to exhibit less volatility than the broader market proved beneficial to the fund’s relative results during the period. At the same time, however, the fund’s two options strategies, which we use to further reduce volatility and enhance risk-adjusted returns, both worked against us, especially during those periods when the stock market was in rally mode.

Would you describe in greater detail how the options strategies detracted from the fund’s performance during the reporting period?

Adrian: The fund performed well during periods of heightened volatility — in August 2015 and again during the mid-winter months in 2016 — because of its low-volatility bias and also because of the downside protection of its options strategy. But the same overall strategy detracted from fund performance during October 2015 and again in the second half of the reporting period, when the U.S. stock market experienced a snapback recovery.

To review, the fund implements an underlying options strategy in an effort to reduce volatility in the portfolio and smooth out its long-term performance. To execute this strategy, we write (or sell) short-term index call options on the S&P 500 Index. In so doing, the fund earns a cash premium, but it foregoes the potential of realizing unusually high returns in the short term, should they occur. This call-writing strategy is negatively correlated to equity returns, but can detract from relative performance when equity returns rise sharply, as they did during October 2015 and again in the first half of 2016. In addition, we buy long-term index put options for the fund. Puts — which give us the right to sell assets at an agreed-upon price — are expensive to purchase and thus

Allocations are shown as a percentage of the fund’s net assets as of 7/31/16. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

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can reduce returns, but they were used as a means to reduce downside risk and generate additional portfolio income. In essence, our dual options strategy allows us to sell some potential upside performance in order to provide greater downside protection in the event of broad losses at the index level.

Overall, during the past 12 months, the fund’s options strategy proved to be a drag on our results versus the S&P 500 Index. The call-writing strategy put a lid on realizing the full measure of gains during the periods when the market rallied strongly, and while our put-option buying helped provide downside protection during the market’s pullbacks, puts are expensive to purchase, and we lost money buying them.

As co-managers, Rob and I actively manage our options strategies to reflect our current expectations of market volatility, and we adjust our use of these strategies based on anticipated changes with the intention of smoothing out the effects of the market’s inevitable ups and downs over time.

Which holdings contributed the most to the fund’s performance versus the benchmark during the reporting period?

Rob: A significant underweight position in consumer electronics giant Apple was especially beneficial. The company’s growth trajectory faltered a bit on concerns about its current and future earnings prospects, so our decision to hold less Apple stock than was represented in the S&P 500 Index helped shield the fund from the full impact

This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 7/31/16. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time.

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of Apple’s stock price weakness. Choosing not to hold positions in biopharmaceutical company Gilead Sciences and financial services behemoth Citigroup also contributed to relative performance, as these higher-beta stocks lagged during the market’s pullback.

A substantial overweight position in tobacco-products manufacturer Altria Group — often a stalwart of the consumer staples sector — also helped buoy the fund’s performance versus the benchmark. Our view of Altria as a low-beta, cash-flow-generating company that would tend to withstand market volatility proved accurate during the 12-month period. Similarly, a large overweight position in The Southern Company, an electric utility, was beneficial to the fund’s relative performance, as this holding in the defensive utilities sector withstood the market’s volatility better than the average S&P 500 stock. We sold our position in Southern Company by period’s end.

Which stocks detracted from the fund’s relative results?

Adrian: The fund’s largest detractor was its solid overweight position in WestRock Company, a corrugated packaging company formed in a mid-2015 merger. WestRock shares slid after a rating downgrade based on worries about future containerboard pricing and its potential impact on WestRock’s earnings. We sold our position in WestRock by period’s end. Another big detractor was our decision to avoid the stock of retail giant Amazon.com, a large, strong-performing index constituent. Amazon tends to be a higher-beta stock and thus does not fit the fund’s low-volatility profile. Similarly, we chose to maintain a substantial underweight position in software kingpin Microsoft, a higher-beta stock that did not fit the fund’s

This chart shows the fund’s largest allocation shifts, by percentage, over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

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low-volatility profile, and Microsoft performed well during the period, which detracted from relative results.

Conversely, the fund held sizeable overweight positions in office-products retailer Staples and department store chain Macy’s, both of which detracted from the fund’s relative performance. Staples had a lackluster period, mainly due to concerns about regulatory approval of the company’s proposed merger with Office Depot, which ultimately was blocked. Macy’s lagged based on earnings disappointments and concerns about its restructuring plans. We sold our positions in Staples and Macy’s by period’s end.

What is your outlook for the equity markets over the next several months?

Rob: As the period ended, the U.S. equity market was close to an all-time high. U.S. stocks seemed to shake off volatility surrounding Brexit in late June. The U.S. economy continued to grow at a slow, but steady, pace, which helped support investor sentiment for buying equities. That said, looking ahead, there are a few areas of potential concern. One is the U.S. presidential election, which has the possibility of disrupting investor sentiment, depending on the outcome of the November vote. Ongoing worries about the Brexit vote and its potential repercussions across Europe and the global stage are another concerning factor. Lastly, the Fed and its future decisions about further interest-rate hikes could be a deterrent to further market growth. Given the current solid footing of the U.S. economy, we believe another Fed rate hike later this year is well within the realm of possibility.

Our outlook at the moment sees the U.S. economy continuing to grow as it has in the recent past. That growth, if not overly strong, is at least steady and, we believe, superior to that of any of the world’s other developed markets. It is our view, therefore, that the fund’s low-volatility bias, combined with its options strategies aimed at smoothing out market highs and lows, has the potential to continue delivering solid, risk-adjusted returns.

Thanks for your time and insights, gentlemen.

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

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

Portfolio Manager Robert J. Schoen is Co-Head of Global Asset Allocation at Putnam. He holds an M.B.A. from the Stern School of Business at New York University and a B.A. from Tufts University. Rob joined Putnam in 1997 and has been in the investment industry since 1990.

Portfolio Manager Adrian H. Chan, CFA, holds an M.B.A. from The Wharton School, University of Pennsylvania, and an A.B. from Harvard University. Adrian has been in the investment industry since he first joined Putnam in 2003.

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IN THE NEWS

With central banks exhausting the more traditional methods aimed at stimulating their economies, some are considering more novel strategies. Increasingly, central bankers and economists are discussing the merits of so-called “helicopter money,” which conjures images of money being dropped on the populace from the sky. Considered somewhat radical, the term was adopted in 1969 by economist Milton Friedman, who described the idea of a central bank printing money and injecting the cash directly into the economy, with the aim of boosting consumer demand and spending, and kick-starting a recovery. It differs from traditional stimulus measures, such as the U.S. government selling U.S. Treasury securities to the public in order to finance spending. With interest rates at zero — or even in negative territory — in major world economies like Japan and some European nations, the concept of helicopter money is gaining popularity. Under this strategy, cash could be transferred to people in the form of a government tax break or by simply making a direct deposit into individual bank accounts. Critics of helicopter money, however, say it could cause runaway inflation.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended July 31, 2016, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 7/31/16


	Class A		Class B		Class C		Class M		Class Y
(inception dates)	(3/18/13)		(3/18/13)		(3/18/13)		(3/18/13)		(3/18/13)

	Before	After					Before	After	Net
	sales	sales	Before	After	Before	After	sales	sales	asset
	charge	charge	CDSC	CDSC	CDSC	CDSC	charge	charge	value

Life of fund	21.61%	14.62%	18.58%	15.58%	18.57%	18.57%	19.62%	15.43%	22.61%
Annual average	5.98	4.13	5.19	4.39	5.19	5.19	5.46	4.35	6.24

3 years	17.96	11.17	15.35	12.35	15.34	15.34	16.25	12.18	18.81
Annual average	5.66	3.59	4.88	3.96	4.87	4.87	5.15	3.90	5.91

1 year	–0.55	–6.26	–1.31	–6.02	–1.26	–2.20	–0.97	–4.43	–0.32

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class Y shares have no initial sales charge or CDSC.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

Comparative index returns For periods ended 7/31/16


		Lipper Large-Cap Core
	S&P 500 Index	Funds category average*

Life of fund	50.24%	41.49%
Annual average	12.85	10.82

3 years	37.35	29.59
Annual average	11.16	8.99

1 year	5.61	2.39

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

* Over the 1-year, 3-year, and life-of-fund periods ended 7/31/16, there were 856, 772, and 761 funds, respectively, in this Lipper category.

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Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B shares would have been valued at $11,858 ($11,558 with a contingent deferred sales charge). A $10,000 investment in the fund’s class C shares would have been valued at $11,857 and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $11,543. A $10,000 investment in the fund’s class Y shares would have been valued at $12,261.

Fund price and distribution information For the 12-month period ended 7/31/16


Distributions	Class A		Class B	Class C	Class M		Class Y

Number	1		1	1	1		1

Income	$0.236495		$0.174495	$0.180495	$0.172495		$0.261495

Capital gains

Long-term gains	0.145336		0.145336	0.145336	0.145336		0.145336

Short-term gains	0.179169		0.179169	0.179169	0.179169		0.179169

Total	$0.561000		$0.499000	$0.505000	$0.497000		$0.586000

	Before	After	Net	Net	Before	After	Net
	sales	sales	asset	asset	sales	sales	asset
Share value	charge	charge	value	value	charge	charge	value

7/31/15	$11.58	$12.29	$11.43	$11.41	$11.48	$11.90	$11.59

7/31/16	10.94	11.61	10.77	10.75	10.86	11.25	10.95

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

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Fund performance as of most recent calendar quarter
Total return for periods ended 6/30/16


	Class A		Class B		Class C		Class M		Class Y
(inception dates)	(3/18/13)		(3/18/13)		(3/18/13)		(3/18/13)		(3/18/13)

	Before	After					Before	After	Net
	sales	sales	Before	After	Before	After	sales	sales	asset
	charge	charge	CDSC	CDSC	CDSC	CDSC	charge	charge	value

Life of fund	19.95%	13.05%	17.04%	14.04%	17.02%	17.02%	17.96%	13.84%	20.93%
Annual average	5.70	3.81	4.91	4.08	4.91	4.91	5.16	4.03	5.96

3 years	19.11	12.26	16.46	13.46	16.44	16.44	17.26	13.16	19.97
Annual average	6.00	3.93	5.21	4.30	5.21	5.21	5.45	4.21	6.26

1 year	0.43	–5.34	–0.32	–5.08	–0.27	–1.22	–0.07	–3.57	0.66

See the discussion following the fund performance table on page 9 for information about the calculation of fund performance.

Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund’s expenses were limited; had expenses not been limited, they would have been higher. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Expense ratios


	Class A	Class B	Class C	Class M	Class Y

Net expenses for the fiscal year ended
7/31/15*	1.20%	1.95%	1.95%	1.70%	0.95%

Total annual operating expenses for the fiscal
year ended 7/31/15	1.40%	2.15%	2.15%	1.90%	1.15%

Annualized expense ratio for the six-month
period ended 7/31/16†	1.20%	1.95%	1.95%	1.70%	0.95%

Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

* Reflects Putnam Management’s contractual obligation to limit expenses through 11/30/16.

† Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

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Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 2/1/16 to 7/31/16. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.


	Class A	Class B	Class C	Class M	Class Y

Expenses paid per $1,000*†	$6.17	$10.00	$10.00	$8.73	$4.89

Ending value (after expenses)	$1,068.40	$1,063.20	$1,063.30	$1,065.80	$1,069.30

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 7/31/16. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 7/31/16, use the following calculation method. To find the value of your investment on 2/1/16, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.


	Class A	Class B	Class C	Class M	Class Y

Expenses paid per $1,000*†	$6.02	$9.77	$9.77	$8.52	$4.77

Ending value (after expenses)	$1,018.90	$1,015.17	$1,015.17	$1,016.41	$1,020.14

† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.

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Terms and definitions

Important terms

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

Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.

Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.

Share classes

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

Class B shares are not subject to an initial sales charge and may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.

Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC.

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

Comparative indexes

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

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

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

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

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

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Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2016, are available in the Individual Investors section of putnam.com, and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of July 31, 2016, Putnam employees had approximately $495,000,000 and the Trustees had approximately $131,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

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Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

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Trustee approval of management contract

General conclusions

The Board of Trustees of The Putnam Funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”) and the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”). The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of The Putnam Funds (“Independent Trustees”).

At the outset of the review process, members of the Board’s independent staff and independent legal counsel discussed with representatives of Putnam Management the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review, identifying possible changes in these materials that might be necessary or desirable for the coming year. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2016, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided, as well as supplemental information provided in response to an additional request made by the Contract Committee. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2016, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 24, 2016 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee then recommended, and the Independent Trustees approved, the continuance of your fund’s management and sub-management contracts, effective July 1, 2016. (Because PIL is an affiliate of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL, the Trustees have not attempted to evaluate PIL as a separate entity, and all subsequent references to Putnam Management below should be deemed to include reference to PIL as necessary or appropriate in the context.)

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

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

16 Low Volatility Equity Fund

fund, and the continued application of certain reductions and waivers noted below; and

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

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with some minor exceptions, the funds’ current fee arrangements under the management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to shareholders. (In a few instances, funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment style, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee structure for your fund would be appropriate at this time.

Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee rates as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations that were in effect during your fund’s fiscal year ending in 2015. These expense limitations were: (i) a contractual expense limitation applicable to specified retail open-end funds, including your fund, of 32 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses,

Low Volatility Equity Fund 17

interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2015. However, in the case of your fund, the second of the expense limitations applied during its fiscal year ending in 2015. Putnam Management has agreed to maintain these expense limitations until at least November 30, 2017 and to reduce the contractual expense limitation on investor servicing fees and expenses from 32 basis points to 25 basis points effective September 1, 2016. In addition, effective through at least November 30, 2017, Putnam Management will waive fees and/or reimburse expenses of your fund to the extent that expenses of the fund (excluding payments under the fund’s distribution plans, brokerage, interest, taxes, investment-related expenses, extraordinary expenses, and acquired fund fees and expenses) would exceed an annual rate of 0.95% of its average net assets. Putnam Management’s support for these expense limitation arrangements was an important factor in the Trustees’ decision to approve the continuance of your fund’s management and sub-management contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Lipper Inc. (“Lipper”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fee), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the 2nd quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the third quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2015. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Lipper as of December 31, 2015 reflected the most recent fiscal year-end data available in Lipper’s database at that time.

In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees as part of their annual contract review for the Putnam funds included information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, sub-advised third-party mutual funds, and the like. This information included comparisons of those fees with fees charged to the Putnam

18 Low Volatility Equity Fund

funds, as well as an assessment of the differences in the services provided to these different types of clients. The Trustees observed that the differences in fee rates between these clients and the Putnam funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect, among other things, historical competitive forces operating in separate markets. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the investment oversight committees of the Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officer and other senior members of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that 2015 was a year of mixed performance results for the Putnam funds, with generally strong results for the international equity, global sector and global asset allocation funds, but generally disappointing results for the U.S. and small-cap equity, Spectrum and fixed income funds. They noted that the longer-term performance of the Putnam funds generally continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the 18th-best performing mutual fund complex out of 58 complexes for the five-year period ended December 31, 2015. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2015 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these efforts and to evaluate whether additional actions to address areas of underperformance are warranted.

For purposes of evaluating investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and, in most cases, comparisons of those returns with the returns of selected investment benchmarks. In the case of your fund, which commenced operations on March 18, 2013, the Trustees considered that its class A share cumulative total return performance at net asset value was in the

Low Volatility Equity Fund 19

fourth quartile of its Lipper peer group (Lipper Large-Cap Core Funds) for the one-year period ended December 31, 2015 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds). Over the one-year period ended December 31, 2015, there were 876 funds in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.) The Trustees also considered that the 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). Because your fund commenced operations on March 18, 2013, the Trustees observed that the fund had not yet operated for a full market cycle and that there had not been a sufficiently long period of time to allow for definitive conclusions about the fund’s performance.

The Trustees expressed concern about your fund’s fourth quartile performance over the one-year period ended December 31, 2015 and considered the circumstances that may have contributed to this disappointing performance. The Trustees considered Putnam Management’s observation that the fund’s underperformance over the one-year period was due in significant part to poor stock selection and the fund’s underperforming option positions during the 4th quarter of 2015.

The Trustees considered that Putnam Management remained confident in the fund’s portfolio managers. The Trustees also considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management continued to strengthen its fundamental research capabilities by adding new investment personnel.

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

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used primarily to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research

20 Low Volatility Equity Fund

efforts. However, the Trustees noted that a portion of available soft dollars continues to be used to pay fund expenses. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee and also indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management and sub-management contracts, the Trustees reviewed your fund’s investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”) and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services.

Low Volatility Equity Fund 21

Financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s financial statements.

The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type/and industry sector, country, or state to show areas of concentration and/diversification.

Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)

Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal year.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were/earned.

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

22 Low Volatility Equity Fund

Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Putnam Funds Trust:

We have audited the accompanying statement of assets and liabilities of Putnam Low Volatility Equity Fund (the fund), a series of Putnam Funds Trust, including the fund’s portfolio, as of July 31, 2016, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the three-year period then ended and the period from March 18, 2013 (commencement of operations) through July 31, 2013. These financial statements and financial highlights are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2016, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Low Volatility Equity Fund as of July 31, 2016, the results of its operations, the changes in its net assets and the financial highlights for the periods specified in the first paragraph above, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts
September 13, 2016

Low Volatility Equity Fund 23

The fund’s portfolio 7/31/16


COMMON STOCKS (96.2%)*	Shares	Value

Aerospace and defense (6.0%)
BWX Technologies, Inc.	1,956	$72,000

General Dynamics Corp.	2,247	330,062

Honeywell International, Inc.	4,984	579,789

L-3 Communications Holdings, Inc.	722	109,477

Northrop Grumman Corp.	2,955	640,142

Raytheon Co.	4,736	660,814

		2,392,284
Air freight and logistics (1.8%)
United Parcel Service, Inc. Class B	6,528	705,677

		705,677
Airlines (0.3%)
Southwest Airlines Co.	3,515	130,090

		130,090
Banks (4.4%)
Associated Banc-Corp.	1,270	23,622

PNC Financial Services Group, Inc. (The)	5,887	486,561

Popular, Inc. (Puerto Rico)	2,454	82,675

SunTrust Banks, Inc.	4,464	188,783

TCF Financial Corp.	4,089	55,570

U.S. Bancorp	5,565	234,676

Wells Fargo & Co.	13,533	649,178

Western Alliance Bancorp †	1,377	46,859

		1,767,924
Beverages (0.2%)
Constellation Brands, Inc. Class A	312	51,365

PepsiCo, Inc.	476	51,846

		103,211
Capital markets (0.5%)
Bank of New York Mellon Corp. (The)	4,997	196,882

		196,882
Chemicals (1.0%)
Ashland, Inc.	618	69,982

Scotts Miracle-Gro Co. (The) Class A	737	54,354

Sherwin-Williams Co. (The)	864	258,967

		383,303
Commercial services and supplies (1.2%)
Waste Management, Inc.	7,523	497,421

		497,421
Communications equipment (3.4%)
Cisco Systems, Inc.	27,944	853,130

Juniper Networks, Inc.	16,506	374,521

Motorola Solutions, Inc.	1,619	112,326

		1,339,977
Consumer finance (1.5%)
Ally Financial, Inc. †	5,765	104,001

Capital One Financial Corp.	3,334	223,645

Discover Financial Services	4,691	266,636

		594,282
Containers and packaging (1.5%)
Avery Dennison Corp.	3,368	262,334

Bemis Co., Inc.	1,731	88,350

Berry Plastics Group, Inc. †	1,720	70,520

24 Low Volatility Equity Fund


COMMON STOCKS (96.2%)* cont.	Shares	Value

Containers and packaging cont.
Crown Holdings, Inc. †	1,853	$98,153

Sonoco Products Co.	1,451	73,899

		593,256
Distributors (0.2%)
Pool Corp.	586	59,936

		59,936
Diversified consumer services (0.3%)
ServiceMaster Global Holdings, Inc. †	3,379	127,828

		127,828
Diversified financial services (1.9%)
Berkshire Hathaway, Inc. Class B †	2,385	344,084

Intercontinental Exchange, Inc.	815	215,323

MSCI, Inc.	615	52,915

Voya Financial, Inc.	6,456	165,467

		777,789
Diversified telecommunication services (3.1%)
AT&T, Inc.	6,538	283,030

Verizon Communications, Inc.	17,332	960,366

		1,243,396
Electric utilities (3.2%)
American Electric Power Co., Inc.	3,917	271,448

Eversource Energy	1,697	99,258

Great Plains Energy, Inc.	2,891	86,094

PG&E Corp.	6,168	394,382

Southern Co. (The)	6,398	342,293

Westar Energy, Inc.	1,569	87,189

		1,280,664
Electronic equipment, instruments, and components (0.4%)
Fitbit, Inc. Class A †	10,770	147,118

		147,118
Energy equipment and services (2.3%)
Dril-Quip, Inc. †	564	30,699

FMC Technologies, Inc. †	4,836	122,738

Schlumberger, Ltd.	9,330	751,252

		904,689
Food and staples retail (2.5%)
CVS Health Corp.	5,988	555,207

Sysco Corp.	8,227	426,076

US Foods Holding Corp. †	802	19,376

		1,000,659
Food products (2.5%)
General Mills, Inc.	6,719	483,029

Hershey Co. (The)	4,480	496,205

		979,234
Health-care equipment and supplies (1.3%)
C.R. Bard, Inc.	735	164,442

Intuitive Surgical, Inc. †	524	364,578

		529,020
Health-care providers and services (4.5%)
AmerisourceBergen Corp.	2,125	181,029

DaVita HealthCare Partners, Inc. †	3,847	298,296

McKesson Corp.	3,106	604,303

UnitedHealth Group, Inc.	5,000	716,000

		1,799,628

Low Volatility Equity Fund 25


COMMON STOCKS (96.2%)* cont.	Shares	Value

Hotels, restaurants, and leisure (2.1%)
Aramark	1,310	$46,964

Hyatt Hotels Corp. Class A †	1,372	69,204

McDonald’s Corp.	5,789	681,076

Vail Resorts, Inc.	166	23,750

		820,994
Household products (2.4%)
Church & Dwight Co., Inc.	1,001	98,338

Clorox Co. (The)	355	46,530

Colgate-Palmolive Co.	6,849	509,771

Kimberly-Clark Corp.	538	69,698

Procter & Gamble Co. (The)	2,599	222,448

		946,785
Industrial conglomerates (0.1%)
Carlisle Cos., Inc.	571	58,979

		58,979
Insurance (3.2%)
Aflac, Inc.	2,793	201,878

Alleghany Corp. †	72	39,132

Allstate Corp. (The)	1,031	70,448

American Financial Group, Inc.	645	47,150

Aspen Insurance Holdings, Ltd.	1,486	68,297

Assured Guaranty, Ltd.	1,483	39,730

Everest Re Group, Ltd.	642	121,344

Hanover Insurance Group, Inc. (The)	380	31,289

Marsh & McLennan Cos., Inc.	4,395	288,971

Reinsurance Group of America, Inc.	825	81,881

Travelers Cos., Inc. (The)	2,355	273,698

		1,263,818
Internet software and services (4.2%)
Alphabet, Inc. Class A †	1,295	1,024,785

CommerceHub, Inc. †	2,419	33,866

eBay, Inc. †	20,422	636,350

		1,695,001
IT Services (5.8%)
Amdocs, Ltd.	2,704	157,805

Automatic Data Processing, Inc.	6,906	614,289

Broadridge Financial Solutions, Inc.	1,968	133,194

CoreLogic, Inc. †	1,681	67,711

Fiserv, Inc. †	3,533	389,902

Genpact, Ltd. †	2,524	67,567

Paychex, Inc.	9,248	548,221

Vantiv, Inc. Class A †	6,187	338,862

		2,317,551
Leisure products (0.6%)
Hasbro, Inc.	3,132	254,412

		254,412
Life sciences tools and services (2.4%)
Agilent Technologies, Inc.	2,950	141,925

Charles River Laboratories International, Inc. †	587	51,615

Thermo Fisher Scientific, Inc.	4,360	692,542

26 Low Volatility Equity Fund


COMMON STOCKS (96.2%)* cont.	Shares	Value

Life sciences tools and services cont.
VWR Corp. †	1,163	$36,425

Waters Corp. †	281	44,659

		967,166
Machinery (0.4%)
Allison Transmission Holdings, Inc.	5,257	151,507

		151,507
Media (3.0%)
CBS Corp. Class B (non-voting shares)	4,435	231,596

Comcast Corp. Class A	4,183	281,307

Interpublic Group of Cos., Inc. (The)	7,987	184,180

John Wiley & Sons, Inc. Class A	768	44,314

Madison Square Garden Co. (The) Class A †	174	31,805

News Corp. Class B	2,093	28,130

Omnicom Group, Inc.	240	19,750

Twenty-First Century Fox, Inc.	13,618	362,784

		1,183,866
Metals and mining (0.2%)
Reliance Steel & Aluminum Co.	1,127	88,402

		88,402
Multi-utilities (0.3%)
NiSource, Inc.	4,300	110,338

		110,338
Multiline retail (1.5%)
Dollar General Corp.	6,508	616,568

		616,568
Oil, gas, and consumable fuels (3.7%)
Exxon Mobil Corp.	13,968	1,242,448

Phillips 66	2,076	157,901

World Fuel Services Corp.	1,244	59,214

		1,459,563
Pharmaceuticals (6.4%)
Johnson & Johnson	9,679	1,212,101

Merck & Co., Inc.	5,765	338,175

Pfizer, Inc.	26,760	987,176

		2,537,452
Real estate investment trusts (REITs) (4.5%)
American Capital Agency Corp.	18,915	370,545

Annaly Capital Management, Inc.	17,319	190,163

Brandywine Realty Trust	2,400	40,488

Chimera Investment Corp.	7,704	129,273

Corporate Office Properties Trust	1,362	40,806

Equity Commonwealth †	2,026	60,821

Equity Lifestyle Properties, Inc.	634	52,140

Equity One, Inc.	1,475	49,073

Equity Residential Trust	3,061	208,117

Highwoods Properties, Inc.	1,236	68,870

Liberty Property Trust	1,486	61,491

Macerich Co. (The)	1,164	103,875

MFA Financial, Inc.	10,054	75,606

Post Properties, Inc.	627	39,871

Public Storage	159	37,988

Low Volatility Equity Fund 27


COMMON STOCKS (96.2%)* cont.	Shares	Value

Real estate investment trusts (REITs) cont.
Regency Centers Corp.	1,208	$102,595

Retail Properties of America, Inc. Class A	2,065	36,406

Two Harbors Investment Corp.	10,020	87,675

Weingarten Realty Investors	1,036	44,745

		1,800,548
Semiconductors and semiconductor equipment (2.3%)
Applied Materials, Inc.	17,126	450,243

Texas Instruments, Inc.	6,428	448,353

		898,596
Software (1.4%)
Intuit, Inc.	1,950	216,431

Microsoft Corp.	3,696	209,489

Synopsys, Inc. †	2,630	142,441

		568,361
Specialty retail (3.9%)
AutoZone, Inc. †	629	511,987

Home Depot, Inc. (The)	694	95,939

Lowe’s Cos., Inc.	7,373	606,650

TJX Cos., Inc. (The)	4,338	354,501

		1,569,077
Technology hardware, storage, and peripherals (1.1%)
Apple, Inc.	4,218	439,558

		439,558
Textiles, apparel, and luxury goods (0.3%)
Carter’s, Inc.	745	75,431

PVH Corp.	626	63,264

		138,695
Tobacco (2.1%)
Altria Group, Inc.	12,120	820,524

Philip Morris International, Inc.	199	19,952

		840,476
Water utilities (0.3%)
American Water Works Co., Inc.	1,636	135,101

		135,101

Total common stocks (cost $34,355,342)		$38,417,082


INVESTMENT COMPANIES (1.4%)*	Shares	Value

SPDR S&P 500 ETF Trust	2,632	$571,539

Total investment companies (cost $572,090)		$571,539


PURCHASED OPTIONS	Expiration date/	Contract
OUTSTANDING (1.4%)*	strike price	amount	Value

SPDR S&P 500 ETF Trust (Put)	Jun-17/$175.00	$30,144	$117,241

SPDR S&P 500 ETF Trust (Put)	Jul-17/180.00	27,863	140,851

SPDR S&P 500 ETF Trust (Put)	May-17/177.00	28,261	95,786

SPDR S&P 500 ETF Trust (Put)	Apr-17/180.00	31,827	107,713

SPDR S&P 500 ETF Trust (Put)	Mar-17/175.00	30,290	73,017

SPDR S&P 500 ETF Trust (Put)	Feb-17/156.00	30,290	29,452

Total purchased options outstanding (cost $1,167,929)			$564,060

28 Low Volatility Equity Fund


SHORT-TERM INVESTMENTS (3.6%)*	Principal amount/shares		Value

Putnam Cash Collateral Pool, LLC 0.62% ^d	Shares	439,259	$439,259

Putnam Short Term Investment Fund 0.44% ^L	Shares	116,905	116,905

SSgA Prime Money Market Fund Class N 0.34% ^P	Shares	600,000	600,000

U.S. Treasury Bills 0.259%, 9/8/16		$131,000	130,971

U.S. Treasury Bills 0.279%, 9/1/16 ∆		161,000	160,972

Total short-term investments (cost $1,448,091)			$1,448,107


TOTAL INVESTMENTS

Total investments (cost $37,543,452)			$41,000,788

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 July 31, 2016 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $39,936,928.

† This security is non-income-producing.

∆ 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.

^dAffiliated company. See Note 1 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

^LAffiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

^PThis 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 (Note 1).

At the close of the reporting period, the fund maintained liquid assets totaling $15,731 to cover certain derivative contracts.

The dates shown on debt obligations are the original maturity dates.


WRITTEN OPTIONS OUTSTANDING at 7/31/16 (premiums $15,730)
	Expiration	Contract
	date/strike price	amount	Value

SPDR S&P 500 ETF Trust (Call)	Aug-16/$223.50	$62,919	$14,550

SPDR S&P 500 ETF Trust (Call)	Aug-16/223.00	26,965	4,797

Total			$19,347

Low Volatility Equity Fund 29

ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1: Valuations based on quoted prices for identical securities in active markets.

Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


			Valuation inputs

Investments in securities:	Level 1	Level 2		Level 3

Common stocks*:

Consumer discretionary	$4,771,376	$—		$—

Consumer staples	3,870,365	—		—

Energy	2,364,252	—		—

Financials	6,401,243	—		—

Health care	5,833,266	—		—

Industrials	3,935,958	—		—

Information technology	7,406,162	—		—

Materials	1,064,961	—		—

Telecommunication services	1,243,396	—		—

Utilities	1,526,103	—		—

Total common stocks	38,417,082	—		—

Investment companies	571,539	—		—

Purchased options outstanding	—	564,060		—

Short-term investments	716,905	731,202		—

Totals by level	$39,705,526	$1,295,262		$—

			Valuation inputs

Other financial instruments:	Level 1	Level 2		Level 3

Written options outstanding	$—	$(19,347)		$—

Totals by level	$—	$(19,347)		$—

* 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, 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.

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

30 Low Volatility Equity Fund

Statement of assets and liabilities 7/31/16


ASSETS

Investment in securities, at value, including $429,387 of securities on loan (Note 1):
Unaffiliated issuers (identified cost $36,987,288)	$40,444,624
Affiliated issuers (identified cost $556,164) (Notes 1 and 5)	556,164

Cash	11,880

Dividends, interest and other receivables	38,650

Receivable for shares of the fund sold	584,011

Receivable for investments sold	14,092,913

Receivable from Manager (Note 2)	3,202

Prepaid assets	26,251

Total assets	55,757,695

LIABILITIES

Payable for investments purchased	14,672,348

Payable for shares of the fund repurchased	9,692

Payable for custodian fees (Note 2)	6,916

Payable for investor servicing fees (Note 2)	13,639

Payable for Trustee compensation and expenses (Note 2)	2,172

Payable for administrative services (Note 2)	161

Payable for distribution fees (Note 2)	3,627

Written options outstanding, at value (premiums $15,730) (Notes 1 and 3)	19,347

Collateral on securities loaned, at value (Note 1)	439,259

Collateral on certain derivative contracts, at value (Note 1)	600,000

Other accrued expenses	53,606

Total liabilities	15,820,767

Net assets	$39,936,928


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1, 4 and 5)	$38,851,147

Accumulated net investment loss (Note 1)	(1)

Accumulated net realized loss on investments (Note 1)	(2,367,937)

Net unrealized appreciation of investments	3,453,719

Total — Representing net assets applicable to capital shares outstanding	$39,936,928

(Continued on next page)

Low Volatility Equity Fund 31

Statement of assets and liabilities (Continued)


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($7,313,677 divided by 668,663 shares)	$10.94

Offering price per class A share (100/94.25 of $10.94)*	$11.61

Net asset value and offering price per class B share ($760,003 divided by 70,569 shares)**	$10.77

Net asset value and offering price per class C share ($1,524,950 divided by 141,860 shares)**	$10.75

Net asset value and redemption price per class M share ($428,044 divided by 39,428 shares)	$10.86

Offering price per class M share (100/96.50 of $10.86)*	$11.25

Net asset value, offering price and redemption price per class Y share
($29,910,254 divided by 2,731,466 shares)	$10.95

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

** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

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

32 Low Volatility Equity Fund

Statement of operations Year ended 7/31/16


INVESTMENT INCOME

Dividends (net of foreign tax of $999)	$1,281,099

Interest (including interest income of $1,018 from investments in affiliated issuers) (Note 5)	1,222

Securities lending (Note 1)	1,974

Total investment income	1,284,295

EXPENSES

Compensation of Manager (Note 2)	281,932

Investor servicing fees (Note 2)	90,822

Custodian fees (Note 2)	17,853

Trustee compensation and expenses (Note 2)	3,052

Distribution fees (Note 2)	32,786

Administrative services (Note 2)	1,234

Auditing and tax fees	42,044

Blue sky expense	63,097

Other	26,874

Fees waived and reimbursed by Manager (Note 2)	(96,839)

Total expenses	462,855

Expense reduction (Note 2)	(28)

Net expenses	462,827

Net investment income	821,468


Net realized loss on investments (Notes 1 and 3)	(48,081)

Net realized loss on written options (Notes 1 and 3)	(918,747)

Net unrealized depreciation of investments and written options during the year	(444,700)

Net loss on investments	(1,411,528)

Net decrease in net assets resulting from operations	$(590,060)

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

Low Volatility Equity Fund 33

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 7/31/16	Year ended 7/31/15

Operations:
Net investment income	$821,468	$530,611

Net realized gain (loss) on investments	(966,828)	1,719,157

Net unrealized appreciation (depreciation) of investments	(444,700)	920,074

Net increase (decrease) in net assets resulting
from operations	(590,060)	3,169,842

Distributions to shareholders (Note 1):
From ordinary income
Net investment income

Class A	(92,157)	(6,853)

Class B	(11,307)	—

Class C	(13,718)	—

Class M	(1,963)	(273)

Class Y	(1,007,059)	(256,420)

Net realized short-term gain on investments

Class A	(69,818)	—

Class B	(11,609)	—

Class C	(13,618)	—

Class M	(2,040)	—

Class Y	(690,007)	—

From net realized long-term gain on investments
Class A	(56,635)	(96,169)

Class B	(9,417)	(12,978)

Class C	(11,047)	(15,399)

Class M	(1,654)	(6,975)

Class Y	(559,713)	(1,527,983)

Increase (decrease) from capital share transactions (Note 4)	(8,126,505)	22,310,688

Total increase (decrease) in net assets	(11,268,327)	23,557,480

NET ASSETS

Beginning of year	51,205,255	27,647,775

End of year (including undistributed net investment income
of $1 and $326,725, respectively)	$39,936,928	$51,205,255

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

34 Low Volatility Equity Fund

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

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Ratio

investment

Net asset

Net realized

of expenses

income (loss)

value,

and unrealized

Total from

From

Total

Net asset

Total return

Net assets,

to average

Portfolio

beginning

Net investment

gain (loss)

investment

net investment

net realized gain

distribu-

value, end

at net asset

end of period

net assets

turnover

Period ended

of period

income (loss)^a

on investments

operations

income

on investments

tions

of period

value (%)^b

(in thousands)

(%)^c,d

(%)^d

(%)

Class A

July 31, 2016

$11.58

.16

(.24)

(.08)

(.24)

(.32)

(.56)

$10.94

(.55)

$7,314

1.20

1.50

135

July 31, 2015

11.17

.12

.76

.88

(.03)

(.44)

(.47)

11.58

7.91

4,783

1.20

1.00

123

July 31, 2014

10.31

.10

.92

1.02

(.16)

—

(.16)

11.17

9.91

2,388

1.20

.89

July 31, 2013†

10.00

.02

.29

.31

—

10.31

3.10*

3,776

.45*

.23*

17*

Class B

July 31, 2016

$11.43

.09

(.26)

(.17)

(.17)

(.32)

(.49)

$10.77

(1.31)

$760

1.95

.85

135

July 31, 2015

11.08

.02

.77

.79

—

(.44)

(.44)

11.43

7.13

648

1.95

.20

123

July 31, 2014

10.28

.01

.92

.93

(.13)

—

(.13)

11.08

9.11

264

1.95

.08

July 31, 2013†

10.00

(.01)^e

.29

.28

—

10.28

2.80*

77

.73*

(.14)*^e

17*

Class C

July 31, 2016

$11.41

.07

(.23)

(.16)

(.18)

(.32)

(.50)

$10.75

(1.26)

$1,525

1.95

.71

135

July 31, 2015

11.07

.03

.75

.78

—

(.44)

(.44)

11.41

7.04

642

1.95

.24

123

July 31, 2014

10.28

(.02)

.95

.93

(.14)

—

(.14)

11.07

9.12

299

1.95

(.13)

July 31, 2013†

10.00

—^f

.28

.28

—

10.28

2.80*

65

.73*

.01*

17*

Class M

July 31, 2016

$11.48

.10

(.23)

(.13)

(.17)

(.32)

(.49)

$10.86

(.97)

$428

1.70

.99

135

July 31, 2015

11.12

.06

.76

.82

(.02)

(.44)

(.46)

11.48

7.35

139

1.70

.52

123

July 31, 2014

10.29

.04

.92

.96

(.13)

—

(.13)

11.12

9.34

157

1.70

.33

July 31, 2013†

10.00

—^f

.29

.29

—

10.29

2.90*

20

.63*

.02*

17*

Class Y

July 31, 2016

$11.59

.21

(.27)

(.06)

(.26)

(.32)

(.58)

$10.95

(.32)

$29,910

.95

1.92

135

July 31, 2015

11.19

.15

.76

.91

(.07)

(.44)

(.51)

11.59

8.19

44,993

.95

1.27

123

July 31, 2014

10.32

.12

.92

1.04

(.17)

—

(.17)

11.19

10.16

24,539

.95

1.15

July 31, 2013†

10.00

.04

.28

.32

—

10.32

3.20*

25,991

.35*

.37*

17*

* 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 (Note 2). 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 (Note 2):


	Percentage of
	average net assets

July 31, 2016	0.21%

July 31, 2015	0.20

July 31, 2014	0.53

July 31, 2013	0.58

^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.

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


36 Low Volatility Equity Fund	Low Volatility Equity Fund 37

Notes to financial statements 7/31/16

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, 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. Unless otherwise noted, the “reporting period” represents the period from August 1, 2015 through July 31, 2016.

Putnam Low Volatility Equity Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek 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). 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 Putnam Management believes are likely to have lower sensitivity to broader market or sector movements. Putnam Management refers 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. Putnam Management generally emphasizes investments within each sector in low beta stocks (measured relative to the S&P 500 Index) because Putnam Management believes 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. Under normal circumstances, the fund invests at least 80% of its net assets in equity investments. This policy may be changed only after 60 days’ notice to shareholders. The fund intends to write (sell) call options, generally on equity indices but also on individual portfolio securities. The fund sells call options to earn premium income. Selling call options may also reduce the volatility of the fund’s portfolio. The fund intends to buy put options, generally on equity indices but also on individual portfolio securities. The fund buys 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, the fund 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. Putnam Management 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. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends, as well as general market conditions when deciding whether to buy or sell investments. As noted above, Putnam Management will also consider the fund’s overall exposure to each sector.

The fund offers class A, class B, class C, class M and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively. Class A shares generally are not subject to a contingent deferred sales charge, and class M (effective November 1, 2015) and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C, and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, and class M shares, but do not bear a distribution fee. Class Y shares are not available to all investors.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual

38 Low Volatility Equity Fund

arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the fund’s Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Note 1: Significant accounting policies

The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

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 Accounting Standards Codification 820 Fair Value Measurements and Disclosures (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 scheduled 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 scheduled 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 are valued using an independent pricing service approved by the Trustees, 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.

Low Volatility Equity Fund 39

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.

Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

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

Options contracts The fund uses options contracts to 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 option 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.

Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.

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.

40 Low Volatility Equity Fund

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.

Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the 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 remaining maturities of the securities lending transactions are considered overnight and continuous. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund received cash collateral of $429,387 and the value of securities loaned amounted to $439,259. Certain of these securities were sold prior to the close of the reporting period and are included in Receivable for investments sold on the Statement of assets and liabilities.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Lines of credit The fund participates, along with other Putnam funds, in a $392.5 million syndicated unsecured committed line of credit provided by State Street ($292.5 million) and Northern Trust Company ($100 million) and a $235.5 million unsecured uncommitted line of credit provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the higher of (1) the Federal Funds rate and (2) the overnight LIBOR plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.16% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.

The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer certain capital losses of $2,288,540 recognized during the period between November 1, 2015 and July 31, 2016 to its fiscal year ending July 31, 2017.

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.

These differences include temporary and/or permanent differences from losses on wash sale transactions, from late year loss deferrals, and from nontaxable dividends. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the reporting period, the fund reclassified $21,990 to decrease accumulated net investment loss, and $21,990 to decrease accumulated net realized loss.

Low Volatility Equity Fund 41

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$4,218,800
Unrealized depreciation	(840,864)

Net unrealized appreciation	3,377,936
Post-October capital loss deferral	(2,288,540)
Cost for federal income tax purposes	$37,622,852

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

Note 2: Management fee, administrative services and other transactions

The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:


0.780%	of the first $5 billion,	0.580%	of the next $50 billion,

0.730%	of the next $5 billion,	0.560%	of the next $50 billion,

0.680%	of the next $10 billion,	0.550%	of the next $100 billion and

0.630%	of the next $10 billion,	0.545%	of any excess thereafter.

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.623% of the fund’s average net assets.

Putnam Management has contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through November 30, 2017, to the extent that total expenses of the fund (excluding brokerage, interest, taxes, investment-related expenses, payments under distribution plans, extraordinary expenses and acquired fund fees and expenses) would exceed an annual rate of 0.95% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $33,591 as a result of this limit.

Putnam Management has also contractually agreed, through November 30, 2017, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $63,248 as a result of this limit.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.

The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.

Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (“retail account”) of the fund and each of the other funds in its specified category, which was totaled and then allocated to each fund in the category based on its average daily net assets; (2) a specified rate of the fund’s assets

42 Low Volatility Equity Fund

attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.320% of the fund’s average assets attributable to such accounts.

Effective September 1, 2016, Putnam Investor Services, Inc. will receive fees for investor servicing for class A, class B, class C, class M and class Y shares that include (1) a per account fee for each retail account of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:


Class A	$10,533	Class M	559

Class B	1,416	Class Y	76,187

Class C	2,127	Total	$90,822

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $28 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $31, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.

The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C and class M shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of the average net assets attributable to class A, class B, class C and class M shares, respectively. During the reporting period, the class specific expenses related to distribution fees were as follows:


Class A	$13,145	Class M	2,059

Class B	7,042	Total	$32,786

Class C	10,540

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $2,286 and $99 from the sale of class A and class M shares, respectively, and received $790 and $236 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% and 0.65% (no longer applicable effective November 1, 2015) is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.

Low Volatility Equity Fund 43

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:


	Cost of purchases	Proceeds from sales

Investments in securities (Long-term)	$59,882,489	$70,703,898

U.S. government securities (Long-term)	—	—

Total	$59,882,489	$70,703,898

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

Written option transactions during the reporting period are summarized as follows:


	Written option	Written option
	contract amounts	premiums

Written options outstanding at the
beginning of the reporting period	$235,156	$73,288

Options opened	2,110,644	887,370
Options exercised	(1,715,348)	(677,043)
Options expired	—	—
Options closed	(540,568)	(267,885)

Written options outstanding at the
end of the reporting period	$89,884	$15,730

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 7/31/16		Year ended 7/31/15

Class A	Shares	Amount	Shares	Amount

Shares sold	545,058	$5,774,911	317,817	$3,641,682

Shares issued in connection with
reinvestment of distributions	20,087	213,723	8,879	101,223

	565,145	5,988,634	326,696	3,742,905

Shares repurchased	(309,691)	(3,311,506)	(127,295)	(1,447,087)

Net increase	255,454	$2,677,128	199,401	$2,295,818


	Year ended 7/31/16		Year ended 7/31/15

Class B	Shares	Amount	Shares	Amount

Shares sold	22,340	$241,248	33,489	$381,870

Shares issued in connection with
reinvestment of distributions	3,070	32,332	1,148	12,978

	25,410	273,580	34,637	394,848

Shares repurchased	(11,551)	(122,875)	(1,771)	(20,063)

Net increase	13,859	$150,705	32,866	$374,785

44 Low Volatility Equity Fund


	Year ended 7/31/16		Year ended 7/31/15

Class C	Shares	Amount	Shares	Amount

Shares sold	122,039	$1,274,980	29,722	$336,260

Shares issued in connection with
reinvestment of distributions	3,652	38,382	1,364	15,398

	125,691	1,313,362	31,086	351,658

Shares repurchased	(40,113)	(420,709)	(1,804)	(20,447)

Net increase	85,578	$892,653	29,282	$331,211


	Year ended 7/31/16		Year ended 7/31/15

Class M	Shares	Amount	Shares	Amount

Shares sold	27,915	$289,290	1,885	$21,262

Shares issued in connection with
reinvestment of distributions	534	5,657	639	7,247

	28,449	294,947	2,524	28,509

Shares repurchased	(1,099)	(12,176)	(4,595)	(51,001)

Net increase (decrease)	27,350	$282,771	(2,071)	$(22,492)


	Year ended 7/31/16		Year ended 7/31/15

Class Y	Shares	Amount	Shares	Amount

Shares sold	337,806	$3,586,143	2,336,709	$26,761,063

Shares issued in connection with
reinvestment of distributions	144,925	1,542,000	104,564	1,190,990

	482,731	5,128,143	2,441,273	27,952,053

Shares repurchased	(1,634,131)	(17,257,905)	(750,962)	(8,620,687)

Net increase (decrease)	(1,151,400)	$(12,129,762)	1,690,311	$19,331,366

At the close of the reporting period, Putnam Investments, LLC owned 1,101 class M shares of the fund (2.8% of class M shares outstanding), valued at $11,957.

At the close of the reporting period, three shareholders of record owned 29.7%, 13.3% and 8.9% respectively, of the outstanding shares of the fund.

Note 5: Affiliated transactions

Transactions during the reporting period with Putnam Short Term Investment Fund, which is under common ownership and control, were as follows:


	Fair value at the				Fair value at
	beginning of				the end of
	the reporting			Investment	the reporting
Name of affiliate	period	Purchase cost	Sale proceeds	income	period

Putnam Short Term
Investment Fund*	$375,842	$12,135,127	$12,394,064	$1,018	$116,905

* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default.

Low Volatility Equity Fund 45

Note 7: Summary of derivative activity

The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:


Purchased equity option contracts (contract amount)	$210,000

Written equity option contracts (contract amount) (Note 3)	$130,000

The following is a summary of the fair value of derivative instruments as of the close of the reporting period:

Fair value of derivative instruments as of the close of the reporting period


	Asset derivatives		Liability derivatives

Derivatives not
accounted for as	Statement of		Statement of
hedging instruments	assets and		assets and
under ASC 815	liabilities location	Fair value	liabilities location	Fair value

	Investments,
	Receivables, Net		Payables, Net
	assets — Unrealized		assets — Unrealized
Equity contracts	appreciation	$564,060	depreciation	$19,347

Total		$564,060		$19,347

The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (see Note 1):

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments


Derivatives not accounted for as hedging
instruments under ASC 815	Options	Total

Equity contracts	$(1,652,251)	$(1,652,251)

Total	$(1,652,251)	$(1,652,251)

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments


Derivatives not accounted for as hedging
instruments under ASC 815	Options	Total

Equity contracts	$(115,089)	$(115,089)

Total	$(115,089)	$(115,089)

46 Low Volatility Equity Fund

Note 8: Offsetting of financial and derivative assets and liabilities

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 or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.


		JPMorgan Chase
	Citibank, N.A.	Bank N.A.	Total

Assets:

Purchased options**^#	$395,257	$168,803	$564,060

Total Assets	$395,257	$168,803	$564,060

Liabilities:

Written options^#	19,347	—	19,347

Total Liabilities	$19,347	$—	$19,347

Total Financial and Derivative Net Assets	$375,910	$168,803	$544,713

Total collateral received (pledged)†^##	$340,000	$168,803

Net amount	$35,910	$—

** Included with Investments in securities on the Statement of assets and liabilities.

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

^#Covered by master netting agreement (Note 1).

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

Low Volatility Equity Fund 47

Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:


Jonathan S. Horwitz (Born 1955)	Janet C. Smith (Born 1965)
Executive Vice President, Principal Executive	Vice President, Principal Accounting Officer,
Officer, and Compliance Liaison	and Assistant Treasurer
Since 2004	Since 2007
	Director of Fund Administration Services,
Steven D. Krichmar (Born 1958)	Putnam Investments and Putnam Management
Vice President and Principal Financial Officer
Since 2002	Susan G. Malloy (Born 1957)
Chief of Operations, Putnam Investments and	Vice President and Assistant Treasurer
Putnam Management	Since 2007
	Director of Accounting & Control Services,
Robert T. Burns (Born 1961)	Putnam Investments and Putnam Management
Vice President and Chief Legal Officer
Since 2011	James P. Pappas (Born 1953)
General Counsel, Putnam Investments, Putnam	Vice President
Management, and Putnam Retail Management	Since 2004
	Director of Trustee Relations,
James F. Clark (Born 1974)	Putnam Investments and Putnam Management
Vice President and Chief Compliance Officer
Since 2016	Mark C. Trenchard (Born 1962)
Chief Compliance Officer, Putnam Investments	Vice President and BSA Compliance Officer
and Putnam Management	Since 2002
	Director of Operational Compliance,
Michael J. Higgins (Born 1976)	Putnam Investments and Putnam
Vice President, Treasurer, and Clerk	Retail Management
Since 2010
Manager of Finance, Dunkin’ Brands (2008–	Nancy E. Florek (Born 1957)
2010); Senior Financial Analyst, Old Mutual Asset	Vice President, Director of Proxy Voting
Management (2007–2008); Senior Financial	and Corporate Governance, Assistant Clerk,
Analyst, Putnam Investments (1999–2007)	and Associate Treasurer
	Since 2000

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is One Post Office Square, Boston, MA 02109.

Low Volatility Equity Fund 51

Services for shareholders

Investor services

Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.

Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.

Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.

Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.

Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.

Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.

Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.

Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.

For more information

Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

52 Low Volatility Equity Fund

Fund information

Founded over 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.


Investment Manager	Trustees	James F. Clark
Putnam Investment	Jameson A. Baxter, Chair	Vice President and
Management, LLC	Kenneth R. Leibler, Vice Chair	Chief Compliance Officer
One Post Office Square	Liaquat Ahamed
Boston, MA 02109	Ravi Akhoury	Michael J. Higgins
	Barbara M. Baumann	Vice President, Treasurer,
Investment Sub-Advisor	Robert J. Darretta	and Clerk
Putnam Investments Limited	Katinka Domotorffy
57–59 St James’s Street	John A. Hill	Janet C. Smith
London, England SW1A 1LD	Paul L. Joskow	Vice President,
	Robert E. Patterson	Principal Accounting Officer,
Marketing Services	George Putnam, III	and Assistant Treasurer
Putnam Retail Management	Robert L. Reynolds
One Post Office Square	W. Thomas Stephens	Susan G. Malloy
Boston, MA 02109		Vice President and
	Officers	Assistant Treasurer
Custodian	Robert L. Reynolds
State Street Bank	President	James P. Pappas
and Trust Company		Vice President
	Jonathan S. Horwitz
Legal Counsel	Executive Vice President,	Mark C. Trenchard
Ropes & Gray LLP	Principal Executive Officer, and	Vice President and
	Compliance Liaison	BSA Compliance Officer
Independent Registered
Public Accounting Firm	Steven D. Krichmar	Nancy E. Florek
KPMG LLP	Vice President and	Vice President, Director of
	Principal Financial Officer	Proxy Voting and Corporate
		Governance, Assistant Clerk,
	Robert T. Burns	and Associate Treasurer
	Vice President and
	Chief Legal Officer

This report is for the information of shareholders of Putnam Low Volatility Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.


Fiscal year ended	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees


July 31, 2016	$36,124	$ —	$3,700	$ —
July 31, 2015	$39,625	$ —	$3,600	$ —


Fiscal year ended	Audit-Related Fees	Tax Fees	All Other Fees	Total Non-Audit Fees


July 31, 2016	$ —	$ —	$ —	$ —

July 31, 2015	$ —	$ —	$ —	$ —


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


	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


	The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:


	The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor:


	For the fiscal years ended July 31, 2016 and July 31, 2015, the fund's independent auditor billed aggregate non-audit fees in the amounts of $3,700 and $3,600 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.


	Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	FORM N-CSR


	Item 1. Report to Stockholders:


	Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.


	Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.


	Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.


	The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.


	Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:


	Item 8. Portfolio Managers of Closed-End Investment Companies


	Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:


	Item 10. Submission of Matters to a Vote of Security Holders:


	(b) Changes in internal control over financial reporting: Not applicable


	(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.


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


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


	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.


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


	/s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer


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