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


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

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY




Investment Company Act file number: (811-07513)
Exact name of registrant as specified in charter: Putnam Funds Trust
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109
Name and address of agent for service: Robert T. Burns, Vice President
One Post Office Square
Boston, Massachusetts 02109
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant's telephone number, including area code: (617) 292-1000
Date of fiscal year end: April 30, 2018
Date of reporting period: July 31, 2017



Item 1. Schedule of Investments:














Putnam Capital Spectrum Fund

The fund's portfolio
7/31/17 (Unaudited)
COMMON STOCKS (83.4%)(a)
Shares Value

Aerospace and defense (5.4%)
General Dynamics Corp. 169,700 $33,317,201
Northrop Grumman Corp. 664,478 174,844,096

208,161,297
Airlines (5.7%)
American Airlines Group, Inc. 2,499,900 126,094,956
United Continental Holdings, Inc.(NON) 1,407,800 95,279,904

221,374,860
Biotechnology (0.4%)
Medicines Co. (The)(NON)(S) 359,400 13,818,930

13,818,930
Cable television (20.7%)
DISH Network Corp. Class A(NON) 12,370,384 792,075,688
Global Eagle Entertainment, Inc.(NON)(S)(AFF) 4,779,420 15,102,967

807,178,655
Chemicals (2.1%)
CF Industries Holdings, Inc. 490,600 14,399,110
W.R. Grace & Co. 990,432 68,300,191

82,699,301
Commercial and consumer services (5.1%)
New Bigfoot Other Assets GmbH (acquired 8/2/13, cost $351) (Private) (Germany)(F)(RES)(NON) 264 234
New Middle East Other Assets GmbH (acquired 8/2/13, cost $136) (Private) (Germany)(F)(RES)(NON) 102 91
Priceline Group, Inc. (The)(NON) 98,404 199,612,514

199,612,839
Consumer finance (0.5%)
Ocwen Financial Corp.(NON)(AFF) 7,125,700 20,450,759

20,450,759
Consumer services (1.1%)
Delivery Hero Holding GmbH (acquired 6/12/15, cost $33,218,730) (Private) (Germany)(F)(RES)(NON) 1,293,900 38,185,763
Global Fashion Holding SA (acquired 8/2/13, cost $17,399,601) (Private) (Luxembourg)(F)(RES)(NON) 410,732 4,402,206

42,587,969
Electronics (0.9%)
Agilent Technologies, Inc. 599,369 35,836,273

35,836,273
Household furniture and appliances (—%)
FabFurnish GmbH (acquired 8/2/13, cost $351) (Private) (Germany)(F)(RES)(NON) 528 469

469
Industrial (1.1%)
Johnson Controls International PLC 1,100,455 42,862,722

42,862,722
Investment banking/Brokerage (0.7%)
Altisource Portfolio Solutions SA(NON)(AFF) 940,901 24,548,107

24,548,107
Medical technology (0.3%)
STAAR Surgical Co.(NON) 938,559 9,620,228

9,620,228
Metals (—%)
Alcoa Corp. 363,600 13,235,040

13,235,040
Oil and gas (3.1%)
Cheniere Energy, Inc.(NON) 310,200 14,021,040
EQT Corp. 140,800 8,968,960
Pioneer Natural Resources Co. 528,800 86,247,280
Stone Energy Corp.(NON)(S) 576,855 12,448,531

121,685,811
Pharmaceuticals (20.9%)
Jazz Pharmaceuticals PLC(NON)(AFF) 5,295,022 813,368,329

813,368,329
Real estate (1.8%)
Altisource Residential Corp.(R)(AFF) 5,314,754 69,144,950

69,144,950
Telecommunications (13.6%)
EchoStar Corp. Class A(NON) 8,703,360 528,555,053

528,555,053

Total common stocks (cost $2,234,106,717) $3,254,741,592

CONVERTIBLE PREFERRED STOCKS (4.1%)(a)
Shares Value

Allergan PLC Ser. A, 5.50% cv. pfd. 12,961 $11,583,894
Altisource Asset Management Corp. zero % cv. pfd. (acquired 3/17/14, cost $31,800,000) (Virgin Islands)(RES)(NON) 31,800 11,543,400
Uber Technologies, Inc. Ser. E, 8.00% cv. pfd. (acquired 2/18/15, cost $104,097,986) (Private)(F)(RES)(NON) 3,078,243 135,118,861

Total convertible preferred stocks (cost $148,858,986) $158,246,155

INVESTMENT COMPANIES (1.4%)(a)
Shares Value

SPDR S&P Oil & Gas Exploration & Production ETF(S) 636,400 $20,695,728
VanEck Vectors Gold Miners ETF(S) 1,542,100 35,252,406

Total investment companies (cost $60,429,836) $55,948,134

SENIOR LOANS (0.8%)(a)(c)
Principal amount Value

Caesars Entertainment Operating Co., Inc. bank term loan FRN Ser. B6, 11.75%, 3/1/18 (In default)(NON) $2,791,395 $3,360,840
LightSquared LP bank term loan FRN 13.72%, 12/7/20(PIK) 42,431,525 28,216,964

Total senior loans (cost $43,457,074) $31,577,804

PREFERRED STOCKS (0.7%)(a)
Shares Value

Ligado Networks, LLC Ser. A-2, 16.63% sr. pfd. (acquired 12/7/15, cost $27,599,994) (Private)(F)(RES)(NON) 2,840,908 $27,600,031

Total preferred stocks (cost $27,599,994) $27,600,031

CORPORATE BONDS AND NOTES (0.7%)(a)
Principal amount Value

CNG Holdings, Inc. 144A sr. notes 9.375%, 5/15/20 $10,000,000 $9,000,000
DFC Finance Corp. 144A company guaranty sr. notes 10.50%, 6/15/20 11,801,000 6,549,555
Digicel Group, Ltd. 144A sr. unsec. notes 8.25%, 9/30/20 (Jamaica) 5,500,000 5,273,125
Stone Energy Corp. company guaranty notes 7.50%, 5/31/22 6,831,196 6,506,714

Total corporate bonds and notes (cost $32,528,196) $27,329,394

CONVERTIBLE BONDS AND NOTES (0.2%)(a)
Principal amount Value

Whiting Petroleum Corp. cv. company guaranty sr. unsec. unsub. notes 1.25%, 4/1/20 $10,900,000 $9,408,063

Total convertible bonds and notes (cost $10,900,000) $9,408,063

WARRANTS (—%)(a)(NON)
Expiration date Strike Price Warrants Value

Global Eagle Entertainment, Inc.(F)(AFF) 1/31/18 $11.50 859,187 $38,663

Total warrants (cost $1,168,800) $38,663

SHORT-TERM INVESTMENTS (10.3%)(a)
Principal amount/shares Value

Federal Home Loan Banks unsec. discount notes 1.001%, 8/24/17 $31,000,000 $30,980,191
Interest in $275,000,000 joint tri-party repurchase agreement dated 7/31/17 with HSBC Bank USA, National Association due 8/1/17 - maturity value of $89,348,581 for an effective yield of 1.040% (collateralized by a mortgage backed security with a coupon rate of 3.500% and a due date of 6/20/47, valued at $280,501,840) 89,346,000 89,346,000
Putnam Short Term Investment Fund 1.15%(AFF) Shares 227,369,702 227,369,702
Putnam Cash Collateral Pool, LLC 1.29%(AFF) Shares 55,213,731 55,213,731

Total short-term investments (cost $402,909,627) $402,909,624

TOTAL INVESTMENTS

Total investments (cost $2,961,959,230)(b) $3,967,799,460














Key to holding's abbreviations
ETF Exchange Traded Fund
FRN Floating Rate Notes: the rate shown is the current interest rate or yield at the close of the reporting period
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 May 1, 2017 through July 31, 2017 (the reporting period). Within the following notes to the portfolio, references to "ASC 820" represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, references to "Putnam Management" represent Putnam Investment Management, LLC, the fund's manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to "OTC", if any, represent over-the-counter.
(a) Percentages indicated are based on net assets of $3,904,325,492.
(b) The aggregate identified cost on a tax basis is $2,962,640,221, resulting in gross unrealized appreciation and depreciation of $1,267,015,623 and $261,856,384, respectively, or net unrealized appreciation of $1,005,159,239.
(NON) This security is non-income-producing.
(RES) This security is restricted with regard to public resale. The total fair value of this security and any other restricted securities (excluding 144A securities), if any, held at the close of the reporting period was $216,851,055, or 5.6% of net assets.
(PIK) Income may be received in cash or additional securities at the discretion of the issuer.
(AFF) Affiliated company. For investments in Putnam Cash Collateral Pool, LLC and Putnam Short Term Investment Fund, the rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. Transactions during the period with any company which is under common ownership or control, or involving securities of companies in which the fund owned at least 5% of the outstanding voting securities, were as follows:

                   
  Name of affiliate Fair value as of 4/30/17 Purchase cost Sale proceeds Investment income Realized gain (loss) Change in unrealized appreciation (depreciation) Shares outstanding at period end Fair value as of 7/31/17
  Short-term investments                
  Putnam Cash Collateral Pool, LLC*# $70,799,425  $119,089,795  $134,675,489  $154,288  $—  $—  $55,213,731  $55,213,731 
  Putnam Short Term Investment Fund** 273,369,702  70,000,000  116,000,000  625,800  —  —  227,369,702  227,369,702 
  Total Short-term investments 344,169,127  189,089,795  250,675,489  780,088  —  —  282,583,433  282,583,433 
  Common stocks                
  Communication services                
  Global Eagle Entertainment, Inc. 14,816,202  —  —  —  —  286,765  4,779,420  15,102,967 
  Financials                
  Altisource Portfolio Solutions SA 20,784,503  —  —  —  —  3,763,604  940,901  24,548,107 
  Altisource Residential Corp. 76,426,163  —  —  797,213  —  (7,281,213) 5,314,754  69,144,950 
  Ocwen Financial Corp. 16,317,853  —  —  —  —  4,132,906  7,125,700  20,450,759 
  Health care                
  Jazz Pharmaceuticals PLC 843,391,104  —  —  —  —  (30,022,778) 5,295,022  813,368,329 
  Total Common stocks 971,735,825  —  —  797,213    (29,120,716) 23,455,797  942,615,112 
  Warrants         —       
  Global Eagle Entertainment, Inc. 38,663  —  —  —  —  —  859,187  38,663 
  Total Warrants 38,663  —  —  —  —  —  859,187  38,663 
  Totals $1,315,943,615  $189,089,795  $250,675,489  $1,577,301  $—  $(29,120,716) $306,898,417  $1,225,237,208 
* No management fees are charged to Putnam Cash Collateral Pool, LLC.
# 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. The fund received cash collateral of $55,213,731, which is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. The rate quoted in the security description is the annualized 7-day yield at the close of the reporting period. At the close of the reporting period, the value of securities loaned amounted to $53,734,835.
** Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.

(c) Senior loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for senior loans are the current interest rates at the close of the reporting period. Senior loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown. Senior loans are purchased or sold on a when-issued or delayed delivery basis and may be settled a month or more after the trade date, which from time to time can delay the actual investment of available cash balances; interest income is accrued based on the terms of the securities.
Senior loans can be acquired through an agent, by assignment from another holder of the loan, or as a participation interest in another holder's portion of the loan. When the fund invests in a loan or participation, the fund is subject to the risk that an intermediate participant between the fund and the borrower will fail to meet its obligations to the fund, in addition to the risk that the borrower under the loan may default on its obligations.
(F) This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities' valuation inputs.
(R) Real Estate Investment Trust.
(S) This security is on loan, in part or in entirety, at the close of the reporting period.
Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.
Debt obligations are considered secured unless otherwise indicated.
144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The dates shown on debt obligations are the original maturity dates.

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 (including securities sold short, if any) for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under ASC 820. If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price (ask price for securities sold short, if any) 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.
Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.
Many securities markets and exchanges outside the U.S. close prior to the 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 certain 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. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security's fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Repurchase agreements: The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the fair value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings.













ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund's investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund's net assets as of the close of the reporting period:

Valuation inputs

Investments in securities: Level 1 Level 2 Level 3
Common stocks*:
    Basic materials $95,934,341 $— $—
    Capital goods 251,024,019
    Communication services 1,335,733,708
    Consumer cyclicals 199,612,514 794
    Consumer staples 42,587,969
    Energy 121,685,811
    Financials 114,143,816
    Health care 836,807,487
    Technology 35,836,273
    Transportation 221,374,860
Total common stocks 3,212,152,829 42,588,763
Convertible bonds and notes 9,408,063
Convertible preferred stocks 11,583,894 146,662,261
Corporate bonds and notes 27,329,394
Investment companies 55,948,134
Preferred stocks 27,600,031
Senior loans 31,577,804
Warrants 38,663
Short-term investments 227,369,702 175,539,922



Totals by level $3,495,470,665 $255,477,740 $216,851,055


* Common stock classifications are presented at the sector level, which may differ from the fund's portfolio presentation.
During the reporting period, transfers between Level 1 and Level 2 within the fair value hierarchy, if any (other than certain transfers involving non-U.S. equity securities as described in the Security valuation note above), did not represent, in the aggregate, more than 1% of the fund's net assets measured as of the end of the period. Transfers are accounted for using the end of period pricing valuation method.
The following is a reconciliation of Level 3 assets as of the close of the reporting period:

                     
  Investments in securities: Balance as of 4/30/17 Accrued discounts/
premiums
Realized
gain/(loss)
Change in net unrealized appreciation/
(depreciation)#
Cost of purchases Proceeds from sales Total transfers into Level 3† Total transfers out of Level 3† Balance as of 7/31/17
  Common stocks*:                  
  Consumer cyclicals $730 $— $— $64 $— $— $— $— $794
  Consumer staples 32,607,932 9,980,037 42,587,969
  Total common stocks $32,608,662 $— $— $9,980,101 $— $— $— $— $42,588,763
  Convertible preferred stocks $146,582,761 79,500 $146,662,261
  Preferred stocks $27,600,031 $27,600,031
  Totals $206,791,454 $— $— $10,059,601 $— $— $— $— $216,851,055
* Common stock classifications are presented at the sector level, which may differ from the fund's portfolio presentation.
† Transfers during the reporting period are accounted for using the end of period market value and did not represent, in the aggregate, more than 1% of the fund's net assets measured as of the end of the period.
# Includes $10,059,601 related to Level 3 securities still held at period end.
The table below represents quantitative information on internally priced Level 3 securities that were valued using unobservable inputs. The table excludes securities with valuations provided by a broker.
             
  Description Fair Value Valuation Techniques Unobservable Input Range of unobservable inputs (Weighted Average) Impact to Valuation from an Increase in Input (1)
             
  Private Equity $38,185,763 Market transaction price Liquidity discount  10% Decrease
             
             
  Private Equity $135,118,861 Market transaction price Liquidity discount  10% Decrease
             
             
  Private Equity $794 Market transaction price Liquidity discount  25% Decrease
             
        EV/sales multiple  1.1x-2.0x (1.518x) Increase
  Private equity $4,402,206 Comparable multiples Liquidity discount  25% Decrease
        Uncertainty discount 10% Decrease
(1) Expected directional change in fair value that would result from an increase in the unobservable input.

Fair Value of Derivative Instruments as of the close of the reporting period
Asset derivatives Liability derivatives

Derivatives not accounted for as hedging instruments under ASC 815 Fair value Fair value
Equity contracts $38,663 $—


Total $38,663 $—


The volume of activity for the reporting period for any derivative type that was held at the close of the period is listed below and was based on an average of the holdings of that derivative at the end of each fiscal quarter in the reporting period:
Warrants (number of warrants)859,187
   
  The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions, if applicable, see note "(AFF)" above, and for borrowing transactions associated with securities sold short, if applicable, see the "Short sales of securities" note above.
   
      HSBC Bank USA, National Association   Total
           
  Assets:        
  Repurchase agreements   $89,346,000   $89,346,000
           
  Total Assets   $89,346,000   $89,346,000
           
  Liabilities:        
           
  Total Liabilities   $—   $—
           
  Total Financial and Derivative Net Assets   $89,346,000   $89,346,000
  Total collateral received (pledged)##†   $89,346,000    
  Net amount   $—    
           
 Additional collateral may be required from certain brokers based on individual agreements.
## Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.

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



Item 2. Controls and Procedures:
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

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

Item 3. Exhibits:
Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

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

Putnam Funds Trust
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
Date: September 29, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title):
/s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer
Date: September 29, 2017

By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer
Date: September 29, 2017