| UNITED STATES SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
FORM N-CSR | ||
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES | ||
| Investment Company Act file number: | (811–07513) |
| Exact name of registrant as specified in charter: | Putnam Funds Trust |
| Address of principal executive offices: | 100 Federal Street, Boston, Massachusetts 02110 |
| Name and address of agent for service: | Robert T. Burns, Vice President 100 Federal Street Boston, Massachusetts 02110 |
| 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: | May 31, 2019 |
| Date of reporting period: | June 1, 2018 — May 31, 2019 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Mortgage Opportunities
Fund
Annual report
5 | 31 | 19
IMPORTANT NOTICE: Delivery of paper fund reports
In accordance with regulations adopted by the Securities and Exchange Commission, beginning on January 1, 2021, reports like this one will no longer be sent by mail unless you specifically request it. Instead, they will be on Putnam’s website, and you will be notified by mail whenever a new one is available, and provided with a website link to access the report.
If you wish to stop receiving paper reports sooner, or if you wish to continue to receive paper reports free of charge after January 1, 2021, please see the back cover or insert for instructions. If you invest through a bank or broker, your choice will apply to all funds held in your account. If you invest directly with Putnam, your choice will apply to all Putnam funds in your account.
If you already receive these reports electronically, no action is required.
Message from the Trustees
July 16, 2019
Dear Fellow Shareholder:
If there is any lesson to be learned from constantly changing financial markets, it is the importance of positioning your investment portfolio for your long-term goals. We believe that one strategy is to diversify across different asset classes and investment approaches.
We also believe your mutual fund investment offers a number of advantages, including constant monitoring by experienced investment professionals who maintain a long-term perspective. Putnam’s portfolio managers and analysts take a research-intensive approach that includes risk management strategies designed to serve you through changing conditions.
Another key strategy, in our view, is seeking the counsel of a financial advisor. For over 80 years, Putnam has recognized the importance of professional investment advice. Your financial advisor can help in many ways, including defining and planning for goals such as retirement, evaluating the level of risk appropriate for you, and reviewing your investments on a regular basis and making adjustments as necessary.
As always, your fund’s Board of Trustees remains committed to protecting the interests of Putnam shareholders like you, and we thank you for investing with Putnam.
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. Class I shares have no initial sales charge or CDSC. Performance of class I shares assumes reinvestment of distributions and does not account for taxes. See below and pages 7–8 for additional performance information.
For the periods, the fund had expense limitations, without which returns would have been lower.
This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 5/31/19. See above and pages 7–8 for additional fund performance information. Index descriptions can be found on page 11.
| 2 Mortgage Opportunities Fund |
Mike, what was the fund’s investment environment like during the period?
The prices of mortgage-related securities rose, as the calm market early in the period turned volatile before settling down in the new year.
Tension between the United States and major global trading partners, most notably China, marked the period. By period-end, negotiations with China were ongoing, although an ultimate resolution remained uncertain.
The U.S. Federal Reserve [Fed] raised its target for short-term interest rates four times in 2018 as it pursued its dual mandate of promoting price stability and full employment. U.S. unemployment reached a 50-year low during the period amid accelerating economic growth, while inflation remained muted.
In October, Fed Chair Jerome Powell said that he believed the U.S. economy was “a long way from neutral” — referring to the point at which interest rates are neither spurring nor slowing economic growth. Then in late November, he stated that interest rates were “just below” neutral. These comments confused the market regarding the Fed’s policy stance and contributed to a volatile fourth quarter of 2018.
In January 2019, investor sentiment improved markedly following comments from Powell that mild inflation would give the central bank greater flexibility to set policy in 2019. By the end of the month, the Fed signaled that further rate increases were on hold, helping fuel a major rally in risk assets. Progress in U.S.–China trade talks provided a further boost to sentiment across risk-driven markets.
The risk rally continued until mid-May, at which point, fears of an extended trade conflict with China sparked a renewed flight to safer assets.
| Mortgage Opportunities Fund 3 |
Allocations are shown as a percentage of the fund’s net assets as of 5/31/19. 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 use of different classifications of securities for presentation purposes, and rounding. Allocations may not total 100% because the table includes the notional value (non-cash investments) of certain derivatives (the economic value for purposes of calculating periodic payment obligations), including to-be-announced (TBA) commitments, if any, in addition to the market value of securities. Holdings and allocations may vary over time.
Credit qualities are shown as a percentage of the fund’s net assets as of 5/31/19. A bond rated BBB or higher (A-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. To-be-announced (TBA) mortgage commitments, if any, are included based on their issuer ratings. Ratings may vary over time.
Cash, derivative instruments, and net other assets are shown in the not-rated category. Payables and receivables for TBA mortgage commitments are included in the not-rated category and may result in negative weights. The fund itself has not been rated by an independent rating agency.
| 4 Mortgage Opportunities Fund |
Would you remind us of the fund’s investment process?
The fund focuses on securitized mortgage sectors, seeking to capitalize on the fundamentally different risk-adjusted return opportunities that we believe are available in those areas of the market. We emphasize agency collateralized mortgage obligations [CMOs], commercial mortgage-backed securities [CMBS], and residential mortgage-backed securities [RMBS]. In addition, we expect to use various derivatives and agency pass-throughs to hedge interest-rate and other risks within our CMO holdings. We will also use derivatives for non-hedging purposes, such as gaining or adjusting our exposure to mortgage-backed investments.
Which holdings and strategies had the greatest influence on the fund’s performance during the past 12 months?
Our allocation to mezzanine CMBS drove the fund’s positive performance, led by exposure to the CMBX [an index that references a basket of CMBS issued in a particular year], specifically the BBB-rated tranche representing 2012 issuance. In addition to CMBX, the fund had exposure to CMBS (and indirectly to the underlying property types) via BBB-rated cash bonds that were issued between 2011 and 2014. These holdings moderately contributed during the period.
CMBX spreads widened amid the volatility and risk aversion of 2018’s fourth quarter. The bankruptcy filing by Sears Holdings in October 2018 also weighed on investor sentiment and reignited fears about the health of retailers. However, CMBX rallied strongly during the first few months of 2019 as investors regained their appetite for risk.
Within our holdings of RMBS, positions in agency credit-risk transfer securities [CRTs] contributed. CRT spreads modestly tightened during the period, as credit-rating agencies upgraded certain CRT tranches, recognizing the improved outlook for their underlying collateral. CRTs also benefited from renewed demand in the early months of 2019, as a more favorable outlook for risk-taking prompted investors to move back into higher-yielding investments.
Strategies targeting prepayment risk were the primary, albeit modest, detractor for the period. Agency interest-only CMOs underperformed in the latter months of 2018. Declining longer-term interest rates in November and December increased the incentive for homeowners to refinance their mortgages, sparking fears of higher prepayment levels. Risk-off sentiment and selling by hedge funds also hampered the sector.
How did you use derivatives during the period?
We used CMBX credit default swaps to gain exposure to CMBS. We also used interest-rate swaps to help manage the fund’s duration and options to offset the volatility associated with our CMO holdings.
What is your outlook, and where were you finding value during the period?
We continue to have a generally favorable outlook for mortgage credit. We think the underlying fundamentals for commercial real estate appear stable, supported by a growing labor market, interest rates that remain historically low, and a positive U.S. economic backdrop. That said, we think these favorable factors will be partially offset by higher capital costs and low capitalization rates.
In terms of CMBS security selection, we have been focusing on mezzanine tranches rated BBB- that were issued between 2011 and 2014. We also plan to maintain select positions in pre-2008 mezzanine tranches that offer low spread duration. We increased the fund’s exposure to CMBX, rather than cash bonds, believing that the negative sentiment toward the retail industry reflected in the index provided an attractive entry point. Moreover, we think the index offers sufficient protection, even at the BBB-rated level, should the outlook for retail become more problematic. We have been avoiding mezzanine securities issued in 2015 or later.
Within agency CRT, we continued to focus on opportunities among securities that have a few years of seasoning rather than newly issued CRTs, as we think this area of the market offers a more favorable risk/reward profile. CRTs structured from mortgages with relatively low loan-to-value [LTV] ratios also appear attractive to us.
We continued to find value among legacy RMBS, where we think a steadily shrinking market and stable investor base provide a supportive technical backdrop. A low level of new and existing homes has resulted in lower current LTV ratios and declining delinquencies, even though affordability has become more difficult. We favor securities backed by higher-quality collateral, as well as bonds from what we consider to be more favorable regions of the country.
Within prepayment-sensitive areas of the market, declining Treasury yields during the latter months of the period triggered concern about the potential for increased refinancing. Within this environment, we are focusing our selection efforts on securities backed by reverse mortgages, jumbo loan balances, and seasoned collateral. We also think inverse interest-only securities are attractive, especially if the Fed remains on hold and considers the possibility of rate reductions.
Mike, thanks for your time and for bringing us up to date.
| Mortgage Opportunities Fund 5 |
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.
ABOUT DERIVATIVES
Derivatives are an increasingly common type of investment instrument, the performance of which is derived from an underlying security, index, currency, or other area of the capital markets. Derivatives employed by the fund’s managers generally serve one of two main purposes: to implement a strategy that may be difficult or more expensive to invest in through traditional securities, or to hedge unwanted risk associated with a particular position.
For example, the fund’s managers might use currency forward contracts to capitalize on an anticipated change in exchange rates between two currencies. This approach would require a significantly smaller outlay of capital than purchasing traditional bonds denominated in the underlying currencies. In another example, the managers may identify a bond that they believe is undervalued relative to its risk of default, but may seek to reduce the interest-rate risk of that bond by using interest-rate swaps, a derivative through which two parties “swap” payments based on the movement of certain rates. In other examples, the managers may use options and futures contracts to hedge against a variety of risks by establishing a combination of long and short exposures to specific equity markets or sectors.
Like any other investment, derivatives may not appreciate in value and may lose money. Derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities. And because derivatives typically represent contractual agreements between two financial institutions, derivatives entail “counterparty risk,” which is the risk that the other party is unable or unwilling to pay. Putnam monitors the counterparty risks we assume. For example, Putnam often enters into collateral agreements that require the counterparties to post collateral on a regular basis to cover their obligations to the fund. Counterparty risk for exchange-traded futures and centrally cleared swaps is mitigated by the daily exchange of margin and other safeguards against default through their respective clearinghouses.
| 6 Mortgage Opportunities Fund |
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2019, 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 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 Institutional Investors section at putnam.com or call Putnam at 1-800-487-0024. See the Terms and definitions section in this report for the definition of the share class offered by your fund.
Fund performance Total return for periods ended 5/31/19
| Life of fund | Annual average | 3 years | Annual average | 1 year | |
| Class I (4/7/15) | |||||
| Net asset value | 18.78% | 4.23% | 21.46% | 6.70% | 3.25% |
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or a loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Class I shares have no initial sales charge or CDSC. For the most recent month-end performance, please visit putnam.com.
For the periods, the fund had expense limitations, without which returns would have been lower.
Comparative index returns For periods ended 5/31/19
| Life of fund | Annual average | 3 years | Annual average | 1 year | |
| ICE BofAML U.S. Treasury | |||||
| Bill Index | 4.24% | 1.00% | 4.03% | 1.32% | 2.31% |
| Bloomberg Barclays U.S. | |||||
| MBS Index | 9.17 | 2.14 | 6.41 | 2.09 | 5.51 |
| Lipper Absolute Return | |||||
| Funds category average* | 4.96 | 1.09 | 7.77 | 2.45 | –1.14 |
Index and Lipper results should be compared with fund performance at net asset value.
* Over the 1-year, 3-year, and life-of-fund periods ended 5/31/19, there were 211, 179, and 150 funds, respectively, in this Lipper category.
Past performance does not indicate future results. Class I shares have no initial sales charge or CDSC.
| Mortgage Opportunities Fund 7 |
Fund price and distribution information For the 12-month period ended 5/31/19
| Distributions | Class I |
| Number | 1 |
| Income | $0.596 |
| Capital gains | — |
| Total | $0.596 |
| Share value | Net asset value |
| 5/31/18 | $10.73 |
| 5/31/19 | 10.46 |
The classification of distributions, if any, is an estimate. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter Total return for periods ended 6/30/19
| Life of fund | Annual average | 3 years | Annual average | 1 year | |
| Class I (4/7/15) | |||||
| Net asset value | 19.35% | 4.27% | 22.43% | 6.98% | 2.97% |
See the discussion following the fund performance table on page 7 for information about the calculation of fund performance.
As a mutual fund investor, you pay ongoing expenses, such as management 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 I | |
| Net expenses for the fiscal year ended 5/31/18* | 0.47% |
| Total annual operating expenses for the fiscal year ended 5/31/18 | 0.79% |
| Annualized expense ratio for the six-month period ended 5/31/19† | 0.47% |
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 certain fund expenses through September 30, 2019. This obligation may be modified or discontinued only with approval of the Board of Trustees.
† 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.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from 12/1/18 to 5/31/19. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class I | |
| Expenses paid per $1,000*† | $2.38 |
| Ending value (after expenses) | $1,034.40 |
* Expenses are calculated using the fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/19.
† 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.
| 8 Mortgage Opportunities Fund |
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended 5/31/19, use the following calculation method. To find the value of your investment on 12/1/18, 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 I | |
| Expenses paid per $1,000*† | $2.37 |
| Ending value (after expenses) | $1,022.59 |
* Expenses are calculated using the fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/19.
† 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.
| Mortgage Opportunities Fund 9 |
Consider these risks before investing
The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography (such as a region of the United States), industry or sector, such as the housing or real estate markets. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings or in relevant markets. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Default risk is generally higher for non-qualified mortgages. Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Mortgage-and asset-backed securities are subject to prepayment risk and the risk that they may increase in value less than other bonds when interest rates decline and decline in value more than other bonds when interest rates rise. The fund’s investments in mortgage-backed securities and asset-backed securities, and in certain other securities and derivatives, may be or become illiquid. The fund’s concentration in an industry group comprising privately issued mortgage-backed securities and mortgage-backed securities issued or guaranteed by the U.S. government or its agencies or instrumentalities may make the fund’s net asset value more susceptible to economic, market, political, and other developments affecting the housing or real estate markets. 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. Our use of short selling may result in losses if the securities appreciate in value. You can lose money by investing in the fund.
| 10 Mortgage Opportunities Fund |
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.
Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. Net asset values fluctuate with market conditions and are calculated by dividing the net assets of the fund’s shares by the number of outstanding fund shares.
Share class
Class I shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are only available to institutional clients and other investors who meet minimum investment requirements.
Fixed-income terms
Mortgage-backed security (MBS), also known as a mortgage “pass-through,” is a type of asset-backed security that is secured by a mortgage or collection of mortgages. The following are types of MBSs:
• Agency credit-risk transfer security (CRT) is backed by a reference pool of agency mortgages. Unlike a regular agency pass-through, the principal invested in a CRT is not backed by a U.S. government agency. To compensate investors for this risk, a CRT typically offers a higher yield than conventional pass-through securities. Similar to a CMBS, a CRT is structured into various tranches for investors, offering different levels of risk and yield based on the underlying reference pool.
• Agency “pass-through” has its principal and interest backed by a U.S. government agency, such as the Federal National Mortgage Association (Fannie Mae), Government National Mortgage Association (Ginnie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac).
• Collateralized mortgage obligation (CMO) represents claims to specific cash flows from pools of home mortgages. The streams of principal and interest payments on the mortgages are distributed to the different classes of CMO interests in “tranches.” Each tranche may have different principal balances, coupon rates, prepayment risks, and maturity dates. A CMO is highly sensitive to changes in interest rates and any resulting change in the rate at which homeowners sell their properties, refinance, or otherwise prepay loans. CMOs are subject to prepayment, market, and liquidity risks.
° Interest-only (IO) security is a type of CMO in which the underlying asset is the interest portion of mortgage, Treasury, or bond payments.
• Non-agency residential mortgage-backed security (RMBS) is an MBS not backed by Fannie Mae, Ginnie Mae, or Freddie Mac. One type of RMBS is an Alt-A mortgage-backed security.
• Commercial mortgage-backed security (CMBS) is secured by the loan on a commercial property.
Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.
Comparative indexes
Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
Bloomberg Barclays U.S. MBS Index tracks the performance of mortgage-backed pass-through securities guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
CMBX Index is an unmanaged index that tracks the performance of a basket of CMBS issued in a particular year.
ICE BofAML (Intercontinental Exchange Bank of America Merrill Lynch) U.S. Treasury Bill Index is an unmanaged index that tracks the performance of U.S. dollar-denominated U.S. Treasury bills publicly issued in the U.S. domestic market. Qualifying securities must have a remaining term of at least one month to final maturity and a minimum amount outstanding of $1 billion.
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.
ICE Data Indices, LLC (“ICE BofAML”), used with permission. ICE BofAML permits use of the ICE BofAML indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.
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.
| Mortgage Opportunities Fund 11 |
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, 2018, 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-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.
Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.
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 May 31, 2019, Putnam employees had approximately $488,000,000 and the Trustees had approximately $69,000,000 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.
| 12 Mortgage Opportunities Fund |
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.
| Mortgage Opportunities Fund 13 |
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.
| 14 Mortgage Opportunities Fund |
Report of Independent Registered Public Accounting Firm
To the Trustees of Putnam Funds Trust and Shareholders of Putnam Mortgage Opportunities Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam Mortgage Opportunities Fund (one of the funds constituting Putnam Funds Trust, referred to hereafter as the “Fund”) as of May 31, 2019, the related statement of operations for the year ended May 31, 2019, the statement of changes in net assets for each of the two years in the period ended May 31, 2019, including the related notes, and the financial highlights for periods indicated therein in the period ended May 31, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2019 and the financial highlights for periods indicated therein in the period ended May 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2019 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 16, 2019
We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.
| Mortgage Opportunities Fund 15 |
The fund’s portfolio 5/31/19
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* | amount | Value |
| Agency collateralized mortgage obligations (31.4%) | ||
| Federal Home Loan Mortgage Corporation | ||
| Ser. 4451, Class CI, IO, 7.00%, 3/15/45 | $1,214,310 | $307,767 |
| Ser. 324, Class C21, IO, 6.00%, 6/15/39 | 908,517 | 212,156 |
| Ser. 4560, IO, 5.785%, 5/15/39 | 1,866,169 | 374,633 |
| IFB Ser. 3829, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.95%), 4.51%, 3/15/41 | 126,363 | 21,085 |
| Ser. 4601, Class PI, IO, 4.50%, 12/15/45 | 222,357 | 36,130 |
| Ser. 4127, Class PI, IO, 4.50%, 7/15/42 | 1,465,713 | 234,822 |
| Ser. 4024, Class PI, IO, 4.50%, 12/15/41 | 406,755 | 60,346 |
| Ser. 3714, Class KI, IO, 4.50%, 11/15/39 | 622,419 | 46,380 |
| IFB Ser. 4074, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.70%), 4.26%, 2/15/41 | 75,810 | 10,519 |
| IFB Ser. 4076, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.70%), 4.26%, 7/15/40 | 657,895 | 70,575 |
| IFB Ser. 3852, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.65%), 4.21%, 4/15/40 | 411,682 | 44,976 |
| IFB Ser. 3981, Class WS, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 4.11%, 5/15/41 | 1,554,644 | 182,935 |
| IFB Ser. 4033, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 4.11%, 10/15/36 | 1,636,587 | 120,467 |
| IFB Ser. 3346, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 4.11%, 10/15/33 | 3,111,332 | 552,691 |
| IFB Ser. 3747, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.50%), 4.06%, 10/15/40 | 491,217 | 82,633 |
| Ser. 4707, Class AI, IO, 4.00%, 7/15/47 | 1,743,184 | 263,657 |
| Ser. 4635, Class PI, IO, 4.00%, 12/15/46 | 1,438,039 | 206,431 |
| Ser. 4568, Class MI, IO, 4.00%, 4/15/46 | 620,544 | 95,409 |
| Ser. 4530, Class TI, IO, 4.00%, 11/15/45 | 195,972 | 31,354 |
| Ser. 4500, Class GI, IO, 4.00%, 8/15/45 | 79,810 | 13,537 |
| Ser. 4462, Class PI, IO, 4.00%, 4/15/45 | 86,424 | 14,337 |
| Ser. 4425, IO, 4.00%, 1/15/45 | 550,487 | 89,261 |
| Ser. 4452, Class QI, IO, 4.00%, 11/15/44 | 73,674 | 15,856 |
| Ser. 4403, Class CI, IO, 4.00%, 10/15/44 | 329,533 | 55,197 |
| Ser. 4389, Class IA, IO, 4.00%, 9/15/44 | 56,524 | 9,014 |
| Ser. 4355, Class DI, IO, 4.00%, 3/15/44 | 47,214 | 4,751 |
| Ser. 4386, Class IL, IO, 4.00%, 12/15/43 | 797,357 | 102,539 |
| Ser. 4299, Class JI, IO, 4.00%, 7/15/43 | 325,377 | 43,112 |
| Ser. 4193, Class PI, IO, 4.00%, 3/15/43 | 481,125 | 59,756 |
| Ser. 4425, Class WI, IO, 4.00%, 3/15/43 | 509,702 | 60,037 |
| Ser. 4386, Class LI, IO, 4.00%, 2/15/43 | 466,826 | 48,929 |
| Ser. 4694, Class GI, IO, 4.00%, 2/15/43 | 509,567 | 64,868 |
| Ser. 4000, Class LI, IO, 4.00%, 2/15/42 | 74,615 | 9,221 |
| Ser. 4015, Class GI, IO, 4.00%, 3/15/27 | 177,576 | 17,589 |
| IFB Ser. 4290, Class LS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.66%, 7/15/35 | 9,484,957 | 1,574,466 |
| IFB Ser. 4267, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 3.61%, 5/15/39 | 1,448,034 | 78,614 |
| IFB Ser. 4073, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 3.61%, 8/15/38 | 44,945 | 2,592 |
| IFB Ser. 3984, Class DS, IO, ((-1 x 1 Month US LIBOR) + 5.95%), 3.51%, 1/15/42 | 644,487 | 86,735 |
| Ser. 4604, Class QI, IO, 3.50%, 7/15/46 | 1,226,024 | 167,291 |
| Ser. 4591, Class QI, IO, 3.50%, 4/15/46 | 140,270 | 18,755 |
| Ser. 4580, Class ID, IO, 3.50%, 8/15/45 | 146,815 | 18,769 |
| Ser. 4560, Class PI, IO, 3.50%, 5/15/45 | 384,320 | 50,038 |
| Ser. 4475, Class CI, IO, 3.50%, 1/15/44 | 2,052,010 | 266,720 |
| Ser. 4501, Class BI, IO, 3.50%, 10/15/43 | 78,888 | 9,848 |
| Ser. 4663, Class KI, IO, 3.50%, 11/15/42 | 445,601 | 32,377 |
| Ser. 4663, Class TI, IO, 3.50%, 10/15/42 | 370,942 | 27,602 |
| Ser. 4413, Class HI, IO, 3.50%, 3/15/40 | 1,525,956 | 125,891 |
| Ser. 4099, Class BI, IO, 3.50%, 6/15/39 | 878,002 | 59,265 |
| Ser. 3904, Class NI, IO, 3.50%, 8/15/26 | 570,769 | 41,563 |
| Ser. 4801, Class IG, IO, 3.00%, 6/15/48 | 1,544,462 | 223,054 |
| Ser. 4134, Class PI, IO, 3.00%, 11/15/42 | 1,417,425 | 146,108 |
| Ser. 4182, Class PI, IO, 3.00%, 12/15/41 | 535,427 | 27,735 |
| Ser. 4206, Class IP, IO, 3.00%, 12/15/41 | 91,950 | 6,957 |
| Ser. 4550, Class AI, IO, 3.00%, 10/15/40 | 1,391,182 | 149,552 |
| Ser. 4510, Class HI, IO, 3.00%, 3/15/40 | 464,419 | 27,910 |
| Ser. 4656, Class AI, IO, 3.00%, 9/15/37 | 1,140,316 | 63,915 |
| Ser. 4666, Class AI, IO, 3.00%, 9/15/35 | 195,075 | 9,064 |
| 16 Mortgage Opportunities Fund |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Agency collateralized mortgage obligations cont. | ||
| Federal National Mortgage Association | ||
| IFB Ser. 11-4, Class CS, ((-2 x 1 Month US LIBOR) + 12.90%), 8.041%, 5/25/40 | $20,620 | $24,197 |
| Connecticut Avenue Securities FRB Ser. 15-C03, Class 2M2, (1 Month US LIBOR + 5.00%), 7.43%, 7/25/25 | 183,230 | 200,442 |
| Ser. 17-8, IO, 6.00%, 2/25/47 | 897,909 | 231,005 |
| Ser. 16-3, Class NI, IO, 6.00%, 2/25/46 | 108,766 | 25,941 |
| Ser. 15-69, IO, 6.00%, 9/25/45 | 504,670 | 123,733 |
| Ser. 10-99, Class NI, IO, 6.00%, 9/25/40 | 2,404,186 | 491,343 |
| Ser. 11-59, Class BI, IO, 6.00%, 8/25/40 | 302,466 | 13,886 |
| Ser. 10-109, Class IM, IO, 5.50%, 9/25/40 | 1,811,094 | 322,447 |
| Ser. 18-1, Class JI, IO, 5.00%, 2/25/48 | 1,378,753 | 265,450 |
| Ser. 12-132, Class PI, IO, 5.00%, 10/25/42 | 1,976,687 | 345,920 |
| Ser. 397, Class 2, IO, 5.00%, 9/25/39 | 538,003 | 110,417 |
| Ser. 12-49, Class QI, IO, 4.50%, 12/25/40 | 2,536,659 | 263,178 |
| Ser. 404, Class 2, IO, 4.50%, 5/25/40 | 430,228 | 84,105 |
| IFB Ser. 13-90, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.60%), 4.17%, 9/25/43 | 823,863 | 168,905 |
| IFB Ser. 12-36, Class SN, IO, ((-1 x 1 Month US LIBOR) + 6.45%), 4.02%, 4/25/42 | 251,163 | 41,073 |
| Ser. 18-15, Class PI, IO, 4.00%, 10/25/47 | 1,742,020 | 237,932 |
| Ser. 17-48, Class LI, IO, 4.00%, 5/25/47 | 2,361,681 | 345,868 |
| Ser. 17-2, Class KI, IO, 4.00%, 2/25/47 | 400,340 | 62,101 |
| Ser. 17-7, Class JI, IO, 4.00%, 2/25/47 | 516,194 | 81,946 |
| Ser. 17-15, Class LI, IO, 4.00%, 6/25/46 | 396,130 | 43,859 |
| Ser. 16-24, Class CI, IO, 4.00%, 2/25/46 | 344,357 | 50,516 |
| Ser. 12-90, Class DI, IO, 4.00%, 3/25/42 | 1,812,291 | 292,250 |
| Ser. 14-95, Class TI, IO, 4.00%, 5/25/39 | 118,856 | 5,923 |
| IFB Ser. 10-35, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.40%), 3.97%, 4/25/40 | 180,255 | 32,897 |
| IFB Ser. 18-36, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 3.82%, 6/25/48 | 3,289,822 | 531,041 |
| IFB Ser. 14-87, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 3.82%, 1/25/45 | 2,753,518 | 443,151 |
| IFB Ser. 13-41, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 3.77%, 6/25/40 | 81,468 | 5,127 |
| IFB Ser. 19-18, Class SH, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 3.72%, 5/25/49 | 6,774,000 | 1,105,517 |
| IFB Ser. 14-35, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 3.72%, 6/25/44 | 3,072,810 | 516,601 |
| IFB Ser. 19-18, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 5/25/49 | 7,814,648 | 1,274,725 |
| IFB Ser. 19-17, Class JS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 4/25/49 | 4,186,571 | 741,072 |
| IFB Ser. 17-8, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 2/25/47 | 4,863,394 | 816,856 |
| IFB Ser. 16-88, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 12/25/46 | 3,230,493 | 530,512 |
| IFB Ser. 16-91, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 12/25/46 | 6,636,455 | 1,049,356 |
| IFB Ser. 16-83, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 11/25/46 | 2,053,408 | 342,344 |
| IFB Ser. 16-85, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 11/25/46 | 5,616,622 | 837,584 |
| IFB Ser. 16-65, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 9/25/46 | 1,592,384 | 257,622 |
| IFB Ser. 16-78, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 5/25/39 | 4,272,745 | 704,242 |
| IFB Ser. 12-86, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.67%, 4/25/39 | 57,892 | 2,464 |
| IFB Ser. 17-16, Class QS, IO, ((-1 x 1 Month US LIBOR) + 6.08%), 3.65%, 3/25/47 | 3,401,355 | 850,339 |
| IFB Ser. 19-21, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 3.62%, 5/25/49 | 8,403,042 | 1,310,890 |
| IFB Ser. 12-103, Class SD, ((-1 x 1 Month US LIBOR) + 6.05%), 3.62%, 9/25/42 | 311,436 | 56,113 |
| IFB Ser. 19-32, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 3.608%, 6/25/49 | 11,722,289 | 2,022,087 |
| IFB Ser. 11-134, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 3.57%, 2/25/41 | 2,162,876 | 238,803 |
| IFB Ser. 10-140, Class GS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 3.57%, 7/25/39 | 759,761 | 49,126 |
| Ser. 17-78, Class KI, IO, 3.50%, 10/25/47 | 681,055 | 111,659 |
| Ser. 16-70, Class QI, IO, 3.50%, 10/25/46 | 239,559 | 33,098 |
| Ser. 16-102, Class JI, IO, 3.50%, 2/25/46 | 2,798,161 | 324,687 |
| Ser. 15-73, Class PI, IO, 3.50%, 10/25/45 | 3,312,515 | 332,523 |
| Ser. 13-40, Class YI, IO, 3.50%, 6/25/42 | 150,377 | 18,093 |
| Ser. 12-90, Class EI, IO, 3.50%, 2/25/39 | 92,035 | 5,637 |
| Ser. 11-98, Class AI, IO, 3.50%, 11/25/37 | 1,546,992 | 37,948 |
| IFB Ser. 11-101, Class SA, IO, ((-1 x 1 Month US LIBOR) + 5.90%), 3.47%, 10/25/41 | 605,410 | 84,757 |
| Ser. 13-6, Class JI, IO, 3.00%, 2/25/43 | 67,021 | 6,032 |
| Ser. 13-35, Class PI, IO, 3.00%, 2/25/42 | 246,004 | 12,592 |
| Ser. 13-27, Class PI, IO, 3.00%, 12/25/41 | 485,036 | 25,230 |
| Ser. 13-57, Class IQ, IO, 3.00%, 6/25/41 | 354,688 | 32,325 |
| Ser. 16-97, Class KI, IO, 3.00%, 6/25/40 | 907,199 | 70,362 |
| Mortgage Opportunities Fund 17 |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Agency collateralized mortgage obligations cont. | ||
| Government National Mortgage Association | ||
| Ser. 16-164, IO, 6.50%, 12/20/46 | $1,329,407 | $296,710 |
| Ser. 16-75, Class LI, IO, 6.00%, 1/20/40 | 71,808 | 15,708 |
| Ser. 17-132, Class IB, IO, 5.50%, 9/20/47 | 1,121,403 | 256,521 |
| Ser. 16-149, Class MI, IO, 5.50%, 5/20/39 | 235,609 | 28,568 |
| Ser. 18-77, IO, 5.00%, 6/20/48 | 1,389,621 | 225,536 |
| Ser. 17-123, Class IO, IO, 5.00%, 8/16/47 | 662,523 | 159,208 |
| Ser. 17-38, Class DI, IO, 5.00%, 3/16/47 | 193,164 | 40,300 |
| Ser. 16-150, Class I, IO, 5.00%, 11/20/46 | 2,288,492 | 445,661 |
| Ser. 16-42, IO, 5.00%, 2/20/46 | 462,605 | 91,826 |
| Ser. 18-127, Class ID, IO, 5.00%, 7/20/45 | 845,728 | 110,308 |
| Ser. 17-136, Class IY, IO, 5.00%, 3/20/45 | 757,403 | 150,004 |
| Ser. 15-35, Class AI, IO, 5.00%, 3/16/45 | 1,880,301 | 398,389 |
| Ser. 15-89, Class LI, IO, 5.00%, 12/20/44 | 1,131,802 | 239,716 |
| Ser. 14-132, IO, 5.00%, 9/20/44 | 1,911,340 | 396,813 |
| Ser. 14-133, Class IP, IO, 5.00%, 9/16/44 | 48,068 | 9,636 |
| Ser. 13-3, Class IT, IO, 5.00%, 1/20/43 | 291,064 | 62,902 |
| Ser. 11-135, Class DI, IO, 5.00%, 4/16/40 | 660,238 | 150,847 |
| Ser. 10-35, Class UI, IO, 5.00%, 3/20/40 | 21,838 | 4,548 |
| Ser. 17-26, Class EI, IO, 5.00%, 2/20/40 | 1,124,622 | 167,089 |
| Ser. 10-9, Class UI, IO, 5.00%, 1/20/40 | 100,372 | 21,689 |
| Ser. 09-121, Class UI, IO, 5.00%, 12/20/39 | 22,007 | 4,621 |
| Ser. 15-105, Class LI, IO, 5.00%, 10/20/39 | 1,276,799 | 264,182 |
| Ser. 15-79, Class GI, IO, 5.00%, 10/20/39 | 133,520 | 26,598 |
| Ser. 17-132, Class IA, IO, 4.50%, 9/20/47 | 1,958,491 | 372,113 |
| Ser. 16-37, Class IW, IO, 4.50%, 2/20/46 | 185,285 | 33,815 |
| Ser. 16-104, Class GI, IO, 4.50%, 1/20/46 | 72,195 | 9,679 |
| Ser. 15-182, Class IC, IO, 4.50%, 12/20/45 | 5,861,028 | 1,285,989 |
| Ser. 16-49, IO, 4.50%, 11/16/45 | 607,964 | 126,194 |
| Ser. 15-80, Class IA, IO, 4.50%, 6/20/45 | 87,421 | 17,144 |
| Ser. 18-127, Class IB, IO, 4.50%, 6/20/45 | 1,119,369 | 124,821 |
| Ser. 15-167, Class BI, IO, 4.50%, 4/16/45 | 105,426 | 22,234 |
| Ser. 16-17, Class IA, IO, 4.50%, 3/20/45 | 433,076 | 81,909 |
| Ser. 14-161, Class HI, IO, 4.50%, 6/20/44 | 652,145 | 97,007 |
| Ser. 14-100, Class LI, IO, 4.50%, 10/16/43 | 71,052 | 10,486 |
| Ser. 13-34, Class HI, IO, 4.50%, 3/20/43 | 272,604 | 52,678 |
| Ser. 12-129, IO, 4.50%, 11/16/42 | 132,003 | 28,540 |
| Ser. 12-91, Class IN, IO, 4.50%, 5/20/42 | 97,041 | 19,318 |
| Ser. 12-98, Class AI, IO, 4.50%, 4/16/42 | 938,929 | 165,308 |
| Ser. 14-98, Class AI, IO, 4.50%, 10/20/41 | 698,625 | 52,044 |
| Ser. 10-35, Class DI, IO, 4.50%, 3/20/40 | 62,796 | 11,970 |
| Ser. 10-35, Class QI, IO, 4.50%, 3/20/40 | 46,129 | 8,978 |
| Ser. 10-9, Class QI, IO, 4.50%, 1/20/40 | 32,214 | 6,256 |
| Ser. 09-121, Class DI, IO, 4.50%, 12/16/39 | 3,674,811 | 695,311 |
| Ser. 14-95, Class JI, IO, 4.50%, 12/16/39 | 1,608,727 | 319,654 |
| IFB Ser. 13-9, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.75%), 4.309%, 1/20/43 | 4,135,742 | 823,685 |
| IFB Ser. 13-182, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.70%), 4.259%, 12/20/43 | 1,812,484 | 352,311 |
| IFB Ser. 11-148, Class SN, IO, ((-1 x 1 Month US LIBOR) + 6.69%), 4.252%, 11/16/41 | 1,168,938 | 241,164 |
| IFB Ser. 10-125, Class SD, ((-1 x 1 Month US LIBOR) + 6.68%), 4.242%, 1/16/40 | 3,273,657 | 458,312 |
| IFB Ser. 11-156, Class SK, IO, ((-1 x 1 Month US LIBOR) + 6.60%), 4.159%, 4/20/38 | 70,407 | 14,345 |
| IFB Ser. 10-50, Class QS, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 4.109%, 12/20/38 | 95,011 | 3,207 |
| IFB Ser. 10-167, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.50%), 4.062%, 8/16/38 | 1,789,690 | 51,454 |
| Ser. 17-130, Class IB, IO, 4.00%, 8/20/47 | 1,247,240 | 193,964 |
| Ser. 17-120, Class IJ, IO, 4.00%, 4/20/47 | 1,073,062 | 120,720 |
| Ser. 17-99, Class AI, IO, 4.00%, 1/20/47 | 1,216,848 | 179,765 |
| Ser. 17-11, Class PI, IO, 4.00%, 12/20/46 | 1,100,568 | 123,814 |
| Ser. 16-138, Class DI, IO, 4.00%, 10/20/46 | 700,150 | 113,914 |
| Ser. 16-69, IO, 4.00%, 5/20/46 | 127,194 | 20,043 |
| Ser. 16-29, IO, 4.00%, 2/16/46 | 440,331 | 81,461 |
| 18 Mortgage Opportunities Fund |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Agency collateralized mortgage obligations cont. | ||
| Government National Mortgage Association | ||
| Ser. 15-186, Class AI, IO, 4.00%, 12/20/45 | $121,678 | $20,301 |
| Ser. 15-149, Class KI, IO, 4.00%, 10/20/45 | 84,690 | 13,653 |
| Ser. 16-47, Class CI, IO, 4.00%, 9/20/45 | 450,018 | 61,805 |
| Ser. 15-106, Class CI, IO, 4.00%, 5/20/45 | 306,477 | 43,800 |
| Ser. 15-53, Class MI, IO, 4.00%, 4/16/45 | 159,221 | 31,762 |
| Ser. 15-187, Class JI, IO, 4.00%, 3/20/45 | 76,725 | 12,757 |
| Ser. 15-89, Class IP, IO, 4.00%, 2/20/45 | 78,398 | 11,007 |
| Ser. 14-188, Class IB, IO, 4.00%, 12/20/44 | 8,131,223 | 1,113,002 |
| Ser. 17-45, Class IM, IO, 4.00%, 10/20/44 | 1,788,285 | 210,124 |
| Ser. 17-17, Class EI, IO, 4.00%, 9/20/44 | 1,772,704 | 135,169 |
| Ser. 17-68, Class IL, IO, 4.00%, 8/20/44 | 1,645,100 | 225,221 |
| Ser. 15-40, Class KI, IO, 4.00%, 7/20/44 | 1,478,721 | 223,278 |
| Ser. 17-63, Class PI, IO, 4.00%, 12/20/43 | 427,884 | 50,796 |
| Ser. 13-67, Class IP, IO, 4.00%, 4/16/43 | 1,863,134 | 378,812 |
| Ser. 15-144, Class IA, IO, 4.00%, 1/16/43 | 265,386 | 32,930 |
| Ser. 12-47, Class CI, IO, 4.00%, 3/20/42 | 189,389 | 33,615 |
| Ser. 15-162, Class BI, IO, 4.00%, 11/20/40 | 283,842 | 32,185 |
| Ser. 14-115, Class EI, IO, 4.00%, 6/20/38 | 45,474 | 1,238 |
| IFB Ser. 18-91, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 3.809%, 7/20/48 | 1,654,427 | 239,892 |
| IFB Ser. 18-89, Class LS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 3.759%, 6/20/48 | 1,855,806 | 257,493 |
| IFB Ser. 19-35, Class SE, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 3.712%, 1/16/44 | 3,713,090 | 576,747 |
| IFB Ser. 13-167, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 3.709%, 11/20/43 | 2,681,456 | 439,088 |
| IFB Ser. 16-77, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 3.709%, 3/20/43 | 576,575 | 59,255 |
| IFB Ser. 16-77, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.659%, 10/20/45 | 67,360 | 12,080 |
| IFB Ser. 14-58, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.659%, 4/20/44 | 942,461 | 154,215 |
| IFB Ser. 14-60, Class SE, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.659%, 4/20/44 | 53,921 | 8,801 |
| IFB Ser. 14-27, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.659%, 2/20/44 | 5,234,811 | 905,648 |
| IFB Ser. 14-3, Class SM, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.659%, 1/20/44 | 5,910,957 | 1,024,066 |
| IFB Ser. 13-182, Class SY, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 3.659%, 12/20/43 | 49,111 | 9,014 |
| IFB Ser. 13-99, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 3.609%, 6/20/43 | 1,935,152 | 325,545 |
| IFB Ser. 11-22, Class PS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 3.559%, 7/20/40 | 108,172 | 8,130 |
| IFB Ser. 10-134, Class ES, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 3.559%, 11/20/39 | 276,669 | 19,024 |
| IFB Ser. 16-167, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 3.559%, 4/20/38 | 67,713 | 1,198 |
| Ser. 17-141, Class ID, IO, 3.50%, 7/20/47 | 1,285,653 | 122,170 |
| Ser. 16-156, Class PI, IO, 3.50%, 11/20/46 | 118,203 | 8,637 |
| Ser. 18-127, Class IE, IO, 3.50%, 1/20/46 | 90,902 | 12,086 |
| Ser. 15-111, Class IJ, IO, 3.50%, 8/20/45 | 1,042,340 | 138,245 |
| Ser. 16-75, Class EI, IO, 3.50%, 8/20/45 | 2,316,236 | 306,517 |
| Ser. 16-83, Class PI, IO, 3.50%, 6/20/45 | 141,319 | 19,134 |
| Ser. 15-52, Class IK, IO, 3.50%, 4/20/45 | 257,655 | 34,221 |
| Ser. 15-20, Class PI, IO, 3.50%, 2/20/45 | 60,841 | 10,159 |
| Ser. 17-6, Class DI, IO, 3.50%, 1/20/44 | 2,343,697 | 138,093 |
| Ser. 15-168, Class IG, IO, 3.50%, 3/20/43 | 97,947 | 12,976 |
| Ser. 13-100, Class MI, IO, 3.50%, 2/20/43 | 63,933 | 7,754 |
| Ser. 13-14, IO, 3.50%, 12/20/42 | 100,951 | 11,539 |
| Ser. 12-103, Class CI, IO, 3.50%, 8/16/42 | 809,483 | 147,495 |
| Ser. 18-127, Class IA, IO, 3.50%, 4/20/42 | 87,419 | 7,455 |
| Ser. 15-165, Class IC, IO, 3.50%, 7/16/41 | 3,926,603 | 358,399 |
| Ser. 13-6, Class AI, IO, 3.50%, 8/20/39 | 2,348,322 | 252,445 |
| Ser. 15-134, Class LI, IO, 3.50%, 5/20/39 | 339,143 | 21,620 |
| Ser. 15-96, Class NI, IO, 3.50%, 1/20/39 | 963,439 | 72,627 |
| Ser. 15-82, Class GI, IO, 3.50%, 12/20/38 | 63,178 | 2,969 |
| Ser. 15-87, Class AI, IO, 3.50%, 12/20/38 | 675,004 | 36,106 |
| Ser. 15-69, Class IK, IO, 3.50%, 3/20/38 | 763,212 | 61,020 |
| Ser. 14-139, Class NI, IO, 3.50%, 8/20/28 | 486,414 | 28,966 |
| Ser. 14-44, Class IA, IO, 3.50%, 5/20/28 | 1,136,123 | 95,855 |
| Ser. 13-23, Class IK, IO, 3.00%, 9/20/37 | 800,171 | 60,245 |
| Ser. 17-H08, Class DI, IO, 2.699%, 2/20/67 W | 884,445 | 147,039 |
| Mortgage Opportunities Fund 19 |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Agency collateralized mortgage obligations cont. | ||
| Government National Mortgage Association | ||
| Ser. 17-H05, Class CI, IO, 2.623%, 2/20/67 W | $7,154,109 | $918,337 |
| Ser. 17-H04, Class BI, IO, 2.54%, 2/20/67 W | 5,193,842 | 694,676 |
| Ser. 18-H11, Class JI, IO, 2.466%, 7/20/68 W | 3,809,404 | 476,937 |
| Ser. 17-H08, Class EI, IO, 2.433%, 2/20/67 W | 2,601,662 | 334,964 |
| Ser. 17-H03, Class EI, IO, 2.417%, 1/20/67 W | 623,257 | 94,268 |
| Ser. 18-H11, Class AI, IO, 2.416%, 2/20/68 W | 3,523,763 | 427,256 |
| Ser. 18-H07, Class IE, IO, 2.408%, 2/20/68 W | 9,586,384 | 683,030 |
| Ser. 18-H02, Class HI, IO, 2.389%, 1/20/68 W | 5,004,927 | 681,921 |
| Ser. 17-H22, Class EI, IO, 2.375%, 10/20/67 W | 1,372,130 | 152,650 |
| Ser. 10-H22, Class CI, IO, 2.374%, 10/20/60 W | 363,352 | 18,622 |
| Ser. 17-H16, Class JI, IO, 2.361%, 8/20/67 W | 575,792 | 82,050 |
| Ser. 17-H06, Class BI, IO, 2.361%, 2/20/67 W | 1,280,478 | 147,255 |
| Ser. 18-H05, Class BI, IO, 2.357%, 2/20/68 W | 2,112,350 | 280,546 |
| Ser. 17-H11, Class NI, IO, 2.347%, 5/20/67 W | 4,781,520 | 514,492 |
| Ser. 17-H02, Class BI, IO, 2.346%, 1/20/67 W | 3,084,407 | 365,533 |
| Ser. 18-H02, Class IM, IO, 2.341%, 2/20/68 W | 2,576,632 | 380,053 |
| Ser. 16-H22, Class AI, IO, 2.325%, 10/20/66 W | 4,961,569 | 539,839 |
| Ser. 17-H06, Class MI, IO, 2.305%, 2/20/67 W | 1,869,963 | 211,108 |
| Ser. 16-H27, Class BI, IO, 2.292%, 12/20/66 W | 841,064 | 94,123 |
| Ser. 16-H23, Class NI, IO, 2.265%, 10/20/66 W | 263,519 | 29,330 |
| Ser. 19-H09, Class EI, IO, 2.249%, 4/20/69 W | 3,993,000 | 499,125 |
| Ser. 19-H03, Class AI, IO, 2.241%, 11/20/68 W | 13,461,066 | 1,581,675 |
| FRB Ser. 16-H16, Class DI, IO, 2.24%, 6/20/66 W | 995,348 | 114,465 |
| Ser. 17-H21, Class AI, IO, 2.231%, 10/20/67 W | 7,382,719 | 824,222 |
| Ser. 17-H08, Class NI, IO, 2.227%, 3/20/67 W | 557,753 | 61,799 |
| Ser. 18-H01, Class AI, IO, 2.225%, 1/20/68 W | 8,704,610 | 1,149,008 |
| Ser. 17-H20, Class GI, IO, 2.22%, 9/20/67 W | 5,995,295 | 704,447 |
| Ser. 16-H21, Class AI, IO, 2.217%, 9/20/66 W | 3,582,536 | 403,035 |
| Ser. 17-H03, Class AI, IO, 2.215%, 12/20/66 W | 1,419,227 | 164,985 |
| Ser. 16-H18, Class QI, IO, 2.211%, 6/20/66 W | 2,145,350 | 250,362 |
| Ser. 17-H14, Class JI, IO, 2.205%, 6/20/67 W | 2,254,360 | 329,700 |
| Ser. 17-H03, Class DI, IO, 2.20%, 12/20/66 W | 3,078,443 | 396,350 |
| Ser. 16-H27, Class EI, IO, 2.187%, 12/20/66 W | 4,199,824 | 400,050 |
| Ser. 17-H20, Class DI, IO, 2.182%, 10/20/67 W | 1,406,773 | 194,838 |
| Ser. 17-H03, Class CI, IO, 2.182%, 12/20/66 W | 2,748,372 | 336,676 |
| Ser. 17-H20, Class AI, IO, 2.157%, 10/20/67 W | 3,539,773 | 460,170 |
| Ser. 17-H18, Class DI, IO, 2.155%, 9/20/67 W | 1,559,234 | 206,598 |
| Ser. 17-H13, Class QI, IO, 2.131%, 6/20/67 W | 2,091,436 | 230,775 |
| Ser. 17-H22, Class DI, IO, 2.129%, 11/20/67 W | 3,611,716 | 501,126 |
| Ser. 16-H20, Class NI, IO, 2.128%, 9/20/66 W | 780,994 | 80,052 |
| Ser. 16-H17, Class DI, IO, 2.125%, 7/20/66 W | 2,421,352 | 236,300 |
| Ser. 17-H20, Class HI, IO, 2.123%, 10/20/67 W | 1,138,591 | 155,133 |
| Ser. 16-H24, IO, 2.104%, 9/20/66 W | 340,234 | 37,851 |
| Ser. 15-H29, Class HI, IO, 2.097%, 9/20/65 W | 2,554,214 | 209,446 |
| Ser. 16-H11, Class HI, IO, 2.095%, 1/20/66 W | 181,578 | 16,115 |
| Ser. 16-H06, Class HI, IO, 2.075%, 2/20/66 | 169,528 | 14,569 |
| Ser. 15-H10, Class HI, IO, 2.067%, 4/20/65 W | 189,306 | 16,242 |
| Ser. 16-H14, Class AI, IO, 2.059%, 6/20/66 W | 195,352 | 19,785 |
| Ser. 17-H19, Class MI, IO, 2.045%, 4/20/67 W | 1,253,624 | 139,654 |
| Ser. 15-H22, Class HI, IO, 2.044%, 8/20/65 W | 2,897,369 | 297,560 |
| Ser. 15-H24, Class HI, IO, 2.026%, 9/20/65 W | 181,141 | 11,861 |
| FRB Ser. 15-H16, Class XI, IO, 2.012%, 7/20/65 W | 87,752 | 8,951 |
| Ser. 16-H06, Class AI, IO, 2.001%, 2/20/66 | 1,650,213 | 147,466 |
| Ser. 15-H03, Class DI, IO, 2.00%, 1/20/65 W | 275,633 | 23,980 |
| Ser. 15-H20, Class CI, IO, 1.987%, 8/20/65 W | 153,735 | 15,213 |
| Ser. 15-H15, Class JI, IO, 1.97%, 6/20/65 W | 172,839 | 16,662 |
| Ser. 15-H25, Class CI, IO, 1.963%, 10/20/65 W | 131,746 | 11,778 |
| Ser. 17-H11, Class DI, IO, 1.956%, 5/20/67 W | 381,559 | 42,925 |
| 20 Mortgage Opportunities Fund |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Agency collateralized mortgage obligations cont. | ||
| Government National Mortgage Association | ||
| Ser. 15-H26, Class DI, IO, 1.923%, 10/20/65 W | $128,178 | $12,356 |
| Ser. 15-H13, Class AI, IO, 1.923%, 6/20/65 W | 330,277 | 31,376 |
| Ser. 15-H25, Class BI, IO, 1.917%, 10/20/65 W | 136,970 | 12,218 |
| Ser. 17-H09, Class DI, IO, 1.906%, 3/20/67 W | 1,935,428 | 176,085 |
| Ser. 16-H02, Class HI, IO, 1.899%, 1/20/66 W | 246,537 | 19,797 |
| Ser. 16-H22, IO, 1.865%, 10/20/66 W | 4,491,327 | 386,151 |
| Ser. 17-H16, Class IB, IO, 1.864%, 8/20/67 W | 5,032,630 | 479,358 |
| Ser. 17-H09, IO, 1.863%, 4/20/67 W | 520,904 | 50,465 |
| Ser. 15-H04, Class AI, IO, 1.863%, 12/20/64 W | 4,092,513 | 332,517 |
| Ser. 17-H10, Class MI, IO, 1.862%, 4/20/67 W | 5,942,372 | 559,177 |
| Ser. 15-H25, Class EI, IO, 1.861%, 10/20/65 W | 155,469 | 13,635 |
| Ser. 15-H23, Class DI, IO, 1.859%, 9/20/65 W | 163,312 | 14,704 |
| Ser. 15-H20, Class AI, IO, 1.84%, 8/20/65 W | 148,376 | 13,102 |
| Ser. 15-H18, Class IA, IO, 1.822%, 6/20/65 W | 130,990 | 8,410 |
| Ser. 15-H10, Class CI, IO, 1.815%, 4/20/65 W | 159,098 | 13,815 |
| Ser. 15-H26, Class GI, IO, 1.801%, 10/20/65 W | 85,361 | 7,589 |
| Ser. 16-H04, Class KI, IO, 1.798%, 2/20/66 W | 114,087 | 8,414 |
| Ser. 17-H06, Class DI, IO, 1.778%, 2/20/67 W | 795,949 | 67,417 |
| Ser. 13-H15, Class CI, IO, 1.775%, 7/20/63 W | 2,654,427 | 100,789 |
| Ser. 16-H26, Class KI, IO, 1.757%, 11/20/66 W | 4,253,921 | 334,996 |
| Ser. 15-H23, Class BI, IO, 1.738%, 9/20/65 W | 104,130 | 8,528 |
| Ser. 15-H26, Class EI, IO, 1.736%, 10/20/65 W | 215,238 | 18,790 |
| Ser. 17-H14, Class DI, IO, 1.709%, 6/20/67 W | 620,501 | 42,311 |
| Ser. 15-H09, Class BI, IO, 1.70%, 3/20/65 W | 64,754 | 4,930 |
| Ser. 16-H24, Class CI, IO, 1.695%, 10/20/66 W | 5,034,889 | 402,403 |
| Ser. 14-H25, Class BI, IO, 1.689%, 12/20/64 W | 1,829,361 | 136,128 |
| Ser. 17-H16, Class HI, IO, 1.67%, 8/20/67 W | 3,599,448 | 346,447 |
| Ser. 17-H16, Class CI, IO, 1.667%, 7/20/67 W | 6,301,109 | 370,127 |
| Ser. 13-H14, Class XI, IO, 1.661%, 3/20/63 W | 242,170 | 11,019 |
| Ser. 16-H12, Class AI, IO, 1.655%, 7/20/65 W | 346,608 | 26,448 |
| Ser. 14-H21, Class AI, IO, 1.654%, 10/20/64 W | 190,712 | 15,588 |
| Ser. 18-H01, Class IB, IO, 1.621%, 1/20/68 W | 8,782,345 | 481,273 |
| Ser. 15-H22, Class EI, IO, 1.62%, 8/20/65 W | 192,392 | 9,774 |
| Ser. 15-H24, Class BI, IO, 1.618%, 8/20/65 W | 318,161 | 13,640 |
| Ser. 15-H25, Class AI, IO, 1.615%, 9/20/65 W | 238,316 | 18,422 |
| Ser. 18-H08, Class FI, IO, 1.613%, 6/20/68 W | 3,274,886 | 333,121 |
| Ser. 14-H13, Class BI, IO, 1.587%, 5/20/64 W | 209,458 | 10,211 |
| Ser. 17-H06, Class EI, 1.582%, 2/20/67 W | 146,291 | 9,915 |
| Ser. 15-H14, Class BI, IO, 1.581%, 5/20/65 W | 321,973 | 14,949 |
| FRB Ser. 12-H23, Class WI, IO, 1.572%, 10/20/62 W | 574,442 | 23,908 |
| Ser. 14-H23, Class BI, IO, 1.567%, 11/20/64 W | 5,568,926 | 430,339 |
| Ser. 15-H01, Class BI, IO, 1.566%, 1/20/65 W | 5,668,575 | 361,910 |
| Ser. 17-H03, Class HI, IO, 1.557%, 1/20/67 W | 463,845 | 34,788 |
| Ser. 17-H14, Class EI, IO, 1.537%, 6/20/67 W | 2,864,345 | 247,050 |
| Ser. 11-H15, Class AI, IO, 1.535%, 6/20/61 W | 1,703,088 | 87,283 |
| Ser. 16-H25, Class GI, IO, 1.509%, 11/20/66 W | 628,884 | 29,243 |
| Ser. 14-H08, Class CI, IO, 1.496%, 3/20/64 W | 9,718,226 | 482,996 |
| Ser. 13-H24, Class AI, IO, 1.492%, 9/20/63 W | 453,828 | 17,363 |
| Ser. 14-H06, Class BI, IO, 1.484%, 2/20/64 W | 6,329,201 | 289,472 |
| Ser. 17-H16, Class KI, IO, 1.472%, 8/20/67 W | 3,915,588 | 287,298 |
| Ser. 10-H19, Class BI, IO, 1.472%, 8/20/60 W | 270,142 | 14,979 |
| Ser. 12-H29, Class AI, IO, 1.471%, 10/20/62 W | 1,481,307 | 46,365 |
| Ser. 12-H29, Class FI, IO, 1.471%, 10/20/62 W | 1,481,307 | 46,365 |
| Ser. 14-H08, Class BI, IO, 1.461%, 4/20/64 W | 143,518 | 11,302 |
| Ser. 10-H20, Class IF, IO, 1.452%, 10/20/60 W | 2,208,004 | 113,160 |
| Ser. 14-H09, Class AI, IO, 1.435%, 1/20/64 W | 151,149 | 6,424 |
| Ser. 16-H08, Class GI, IO, 1.431%, 4/20/66 W | 165,933 | 8,894 |
| Ser. 12-H29, Class CI, IO, 1.431%, 2/20/62 W | 5,234,662 | 229,016 |
| Mortgage Opportunities Fund 21 |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Agency collateralized mortgage obligations cont. | ||
| Government National Mortgage Association | ||
| Ser. 12-H06, Class AI, IO, 1.351%, 1/20/62 W | $586,471 | $24,192 |
| Ser. 11-H08, Class GI, IO, 1.27%, 3/20/61 W | 204,664 | 8,739 |
| FRB Ser. 11-H07, Class FI, IO, 1.243%, 2/20/61 W | 438,612 | 12,807 |
| Ser. 12-H11, Class FI, IO, 1.221%, 2/20/62 W | 7,554,916 | 246,215 |
| Ser. 12-H10, Class AI, IO, 1.211%, 12/20/61 W | 4,391,777 | 148,222 |
| Ser. 11-H16, Class FI, IO, 1.048%, 7/20/61 W | 1,565,047 | 55,184 |
| Ser. 15-H26, Class CI, IO, 0.608%, 8/20/65 W | 238,240 | 2,597 |
| 69,716,495 | ||
| Commercial mortgage-backed securities (8.8%) | ||
| Banc of America Commercial Mortgage Trust Ser. 08-1, Class AJ, 6.567%, 2/10/51 W | 9,423 | 9,556 |
| Bear Stearns Commercial Mortgage Securities Trust FRB Ser. 07-T26, Class AJ, 5.464%, 1/12/45 W | 1,162,000 | 1,022,560 |
| Bear Stearns Commercial Mortgage Securities Trust 144A FRB Ser. 07-T28, Class D, 5.534%, 9/11/42 W | 213,000 | 120,340 |
| CFCRE Commercial Mortgage Trust 144A FRB Ser. 11-C2, Class F, 5.25%, 12/15/47 W | 100,000 | 94,394 |
| Citigroup Commercial Mortgage Trust 144A FRB Ser. 15-GC27, Class D, 4.427%, 2/10/48 W | 980,000 | 897,775 |
| COMM Mortgage Trust 144A | ||
| FRB Ser. 14-CR17, Class D, 4.842%, 5/10/47 W | 467,000 | 459,925 |
| FRB Ser. 14-CR17, Class E, 4.842%, 5/10/47 W | 917,000 | 852,810 |
| FRB Ser. 12-CR3, Class E, 4.752%, 10/15/45 W | 100,000 | 89,707 |
| Ser. 12-CR4, Class B, 3.703%, 10/15/45 | 218,000 | 205,239 |
| Credit Suisse Commercial Mortgage Trust 144A | ||
| FRB Ser. 08-C1, Class AJ, 5.803%, 2/15/41 W | 63,742 | 42,841 |
| FRB Ser. 07-C4, Class C, 5.719%, 9/15/39 W | 9,091 | 9,091 |
| GS Mortgage Securities Trust 144A | ||
| FRB Ser. 12-GC6, Class D, 5.651%, 1/10/45 W | 19,000 | 19,501 |
| Ser. 11-GC3, Class E, 5.00%, 3/10/44 W | 290,000 | 294,713 |
| FRB Ser. 14-GC24, Class D, 4.529%, 9/10/47 W | 1,074,000 | 960,165 |
| FRB Ser. 13-GC10, Class E, 4.397%, 2/10/46 W | 658,000 | 555,413 |
| JPMBB Commercial Mortgage Securities Trust 144A | ||
| FRB Ser. 14-C18, Class D, 4.817%, 2/15/47 W | 274,000 | 262,940 |
| FRB Ser. 14-C23, Class D, 3.969%, 9/15/47 W | 542,000 | 518,316 |
| Ser. 13-C14, Class F, 3.598%, 8/15/46 W | 402,000 | 300,228 |
| Ser. 14-C25, Class E, 3.332%, 11/15/47 W | 100,000 | 68,492 |
| JPMorgan Chase Commercial Mortgage Securities Trust | ||
| Ser. 06-LDP9, Class AMS, 5.337%, 5/15/47 | 959,330 | 889,616 |
| FRB Ser. 13-LC11, Class D, 4.168%, 4/15/46 W | 441,000 | 388,083 |
| JPMorgan Chase Commercial Mortgage Securities Trust 144A | ||
| FRB Ser. 07-CB20, Class E, 6.183%, 2/12/51 W | 933,000 | 930,668 |
| FRB Ser. 11-C3, Class D, 5.661%, 2/15/46 W | 641,000 | 629,013 |
| FRB Ser. 11-C3, Class E, 5.661%, 2/15/46 W | 242,000 | 238,794 |
| FRB Ser. 12-C6, Class E, 5.148%, 5/15/45 W | 224,000 | 209,247 |
| FRB Ser. 13-LC11, Class E, 3.25%, 4/15/46 W | 643,000 | 533,852 |
| Ser. 12-C6, Class G, 2.972%, 5/15/45 W | 100,000 | 82,442 |
| ML-CFC Commercial Mortgage Trust FRB Ser. 06-4, Class C, 5.324%, 12/12/49 W | 428,803 | 404,747 |
| Morgan Stanley Bank of America Merrill Lynch Trust 144A | ||
| FRB Ser. 13-C11, Class D, 4.357%, 8/15/46 W | 932,000 | 489,300 |
| FRB Ser. 13-C7, Class D, 4.232%, 2/15/46 W | 255,000 | 244,621 |
| FRB Ser. 13-C10, Class E, 4.082%, 7/15/46 W | 482,000 | 416,317 |
| FRB Ser. 13-C10, Class F, 4.082%, 7/15/46 W | 1,286,000 | 1,077,379 |
| Morgan Stanley Capital I Trust | ||
| Ser. 07-HQ11, Class B, 5.538%, 2/12/44 W | 5,188 | 5,181 |
| Ser. 06-HQ10, Class B, 5.448%, 11/12/41 W | 74,366 | 68,893 |
| Morgan Stanley Capital I Trust 144A | ||
| FRB Ser. 08-T29, Class F, 6.107%, 1/11/43 W | 37,487 | 37,975 |
| FRB Ser. 12-C4, Class D, 5.42%, 3/15/45 W | 211,000 | 208,141 |
| FRB Ser. 12-C4, Class E, 5.42%, 3/15/45 W | 392,000 | 329,315 |
| FRB Ser. 11-C3, Class G, 5.111%, 7/15/49 W | 753,000 | 683,642 |
| UBS Commercial Mortgage Trust 144A FRB Ser. 12-C1, Class E, 5.00%, 5/10/45 W | 422,000 | 385,840 |
| 22 Mortgage Opportunities Fund |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Commercial mortgage-backed securities cont. | ||
| UBS-Barclays Commercial Mortgage Trust 144A | ||
| Ser. 12-C2, Class F, 4.891%, 5/10/63 W | $37,000 | $26,591 |
| FRB Ser. 12-C2, Class E, 4.891%, 5/10/63 W | 24,000 | 21,216 |
| FRB Ser. 12-C4, Class D, 4.482%, 12/10/45 W | 485,000 | 474,367 |
| Wells Fargo Commercial Mortgage Trust 144A | ||
| FRB Ser. 13-LC12, Class D, 4.286%, 7/15/46 W | 482,000 | 442,880 |
| Ser. 10-C1, Class E, 4.00%, 11/15/43 | 275,000 | 263,711 |
| Ser. 14-LC16, Class D, 3.938%, 8/15/50 | 777,000 | 632,036 |
| WF-RBS Commercial Mortgage Trust 144A | ||
| FRB Ser. 12-C7, Class D, 4.815%, 6/15/45 W | 228,000 | 218,465 |
| FRB Ser. 12-C7, Class E, 4.815%, 6/15/45 W | 653,000 | 565,113 |
| FRB Ser. 12-C9, Class E, 4.811%, 11/15/45 W | 524,000 | 474,080 |
| FRB Ser. 13-C15, Class D, 4.473%, 8/15/46 W | 868,000 | 696,843 |
| FRB Ser. 12-C10, Class D, 4.441%, 12/15/45 W | 674,000 | 605,336 |
| 19,457,710 | ||
| Residential mortgage-backed securities (non-agency) (18.7%) | ||
| American Home Mortgage Investment Trust FRB Ser. 07-1, Class GA1C, (1 Month US LIBOR + 0.19%), | ||
| 2.62%, 5/25/47 | 88,188 | 65,337 |
| Bear Stearns Alt-A Trust | ||
| FRB Ser. 05-8, Class 21A1, 4.605%, 10/25/35 W | 774,483 | 718,262 |
| FRB Ser. 05-7, Class 21A1, 4.474%, 9/25/35 W | 410,613 | 388,299 |
| FRB Ser. 06-6, Class 1A1, (1 Month US LIBOR + 0.32%), 2.75%, 11/25/36 | 606,141 | 608,929 |
| Bear Stearns Mortgage Funding Trust FRB Ser. 06-AR2, Class 2A1, (1 Month US LIBOR + 0.23%), 2.66%, 9/25/46 | 104,978 | 105,431 |
| Bellemeade Re Ltd. 144A FRB Ser. 15-1A, Class B1, (1 Month US LIBOR + 6.30%), 8.73%, 7/25/25 (Bermuda) | 150,000 | 150,213 |
| Chevy Chase Funding LLC Mortgage-Backed Certificates 144A FRB Ser. 06-4A, Class A2, (1 Month US LIBOR | ||
| + 0.18%), 2.61%, 11/25/47 | 1,926,863 | 1,632,577 |
| Citigroup Mortgage Loan Trust, Inc. | ||
| FRB Ser. 07-AR5, Class 1A1A, 4.742%, 4/25/37 W | 498,806 | 503,275 |
| FRB Ser. 07-AMC3, Class A2D, (1 Month US LIBOR + 0.35%), 2.78%, 3/25/37 | 264,325 | 227,795 |
| FRB Ser. 07-WFH3, Class M1, (1 Month US LIBOR + 0.26%), 2.69%, 6/25/37 | 206,000 | 195,700 |
| Countrywide Alternative Loan Trust | ||
| FRB Ser. 06-OA10, Class 1A1, (1 Month US LIBOR + 0.96%), 3.441%, 8/25/46 | 144,143 | 134,989 |
| FRB Ser. 06-OA7, Class 1A2, (1 Month US LIBOR + 0.94%), 3.421%, 6/25/46 | 39,048 | 35,804 |
| FRB Ser. 05-51, Class 3A3A, (1 Month US LIBOR + 0.64%), 3.082%, 11/20/35 | 199,304 | 181,113 |
| FRB Ser. 05-59, Class 1A1, (1 Month US LIBOR + 0.33%), 2.772%, 11/20/35 | 40,489 | 38,449 |
| FRB Ser. 06-45T1, Class 2A7, (1 Month US LIBOR + 0.34%), 2.77%, 2/25/37 | 306,337 | 164,273 |
| FRB Ser. 06-OA10, Class 2A1, (1 Month US LIBOR + 0.19%), 2.62%, 8/25/46 | 146,053 | 132,908 |
| FRB Ser. 06-OA10, Class 3A1, (1 Month US LIBOR + 0.19%), 2.62%, 8/25/46 | 373,938 | 345,893 |
| FRB Ser. 06-OA10, Class 4A1, (1 Month US LIBOR + 0.19%), 2.62%, 8/25/46 | 398,623 | 347,599 |
| Countrywide Home Loan Mortgage Pass-Through Trust FRB Ser. 06-OA5, Class 2A1, (1 Month US LIBOR | ||
| + 0.20%), 2.63%, 4/25/46 | 52,811 | 46,057 |
| Federal Home Loan Mortgage Corporation | ||
| Structured Agency Credit Risk Debt FRN Ser. 15-HQA2, Class B, (1 Month US LIBOR + 10.50%), 12.93%, 5/25/28 | 249,187 | 331,842 |
| Structured Agency Credit Risk Debt FRN Ser. 15-DNA3, Class B, (1 Month US LIBOR + 9.35%), 11.78%, 4/25/28 | 312,354 | 411,597 |
| Structured Agency Credit Risk Debt FRN Ser. 15-DNA2, Class B, (1 Month US LIBOR + 7.55%), 9.98%, 12/25/27 | 473,542 | 562,093 |
| Structured Agency Credit Risk Debt FRN Ser. 16-HQA1, Class M3, (1 Month US LIBOR + 6.35%), 8.78%, 9/25/28 | 1,370,000 | 1,612,608 |
| Structured Agency Credit Risk Debt FRN Ser. 17-DNA2, Class B1, (1 Month US LIBOR + 5.15%), 7.58%, 10/25/29 | 250,000 | 281,365 |
| FRB Ser. 16-DNA3, Class M3, (1 Month US LIBOR + 5.00%), 7.43%, 12/25/28 | 420,000 | 471,419 |
| Structured Agency Credit Risk Debt FRN Ser. 17-DNA1, Class B1, (1 Month US LIBOR + 4.95%), 7.38%, 7/25/29 | 773,000 | 870,847 |
| Structured Agency Credit Risk Debt FRN Ser. 16-HQA3, Class M3, (1 Month US LIBOR + 3.85%), 6.28%, 3/25/29 | 343,000 | 376,777 |
| Structured Agency Credit Risk Debt FRN Ser. 17-HQA1, Class M2, (1 Month US LIBOR + 3.55%), 5.98%, 8/25/29 | 490,000 | 524,075 |
| Structured Agency Credit Risk Debt FRN Ser. 18-DNA1, Class B1, (1 Month US LIBOR + 3.15%), 5.58%, 7/25/30 | 498,000 | 489,377 |
| Structured Agency Credit Risk Debt FRN Ser. 18-HQA1, Class M2, (1 Month US LIBOR + 2.30%), 4.73%, 9/25/30 | 900,000 | 904,493 |
| Structured Agency Credit Risk Debt FRN Ser. 18-DNA1, Class M2, (1 Month US LIBOR + 1.80%), 4.23%, 7/25/30 | 1,286,000 | 1,264,830 |
| Federal Home Loan Mortgage Corporation 144A | ||
| Structured Agency Credit Risk Debt FRN Ser. 19-DNA2, Class B1, (1 Month US LIBOR + 4.35%), 6.78%, 3/25/49 | 270,000 | 281,181 |
| Structured Agency Credit Risk Debt FRN Ser. 18-HQA2, Class B1, (1 Month US LIBOR + 4.25%), 6.68%, 10/25/48 | 1,500,000 | 1,526,228 |
| Structured Agency Credit Risk Debt FRN Ser. 18-DNA3, Class B1, (1 Month US LIBOR + 3.90%), 6.33%, 9/25/48 | 500,000 | 505,691 |
| Structured Agency Credit Risk Debt FRN Ser. 18-DNA2, Class B1, (1 Month US LIBOR + 3.70%), 6.13%, 12/25/30 | 1,427,000 | 1,443,053 |
| Mortgage Opportunities Fund 23 |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Residential mortgage-backed securities (non-agency) cont. | ||
| Federal Home Loan Mortgage Corporation 144A | ||
| Structured Agency Credit Risk Trust FRN Ser. 19-DNA1, Class M2, (1 Month US LIBOR + 2.65%), 5.08%, 1/25/49 | $117,000 | $120,499 |
| Structured Agency Credit Risk Debt FRN Ser. 19-DNA2, Class M2, (1 Month US LIBOR + 2.45%), 4.88%, 3/25/49 | 627,000 | 634,256 |
| Seasoned Credit Risk Transfer Trust Ser. 19-2, Class M, 4.75%, 8/25/58 W | 244,000 | 230,824 |
| Structured Agency Credit Risk Trust FRN Ser. 18-DNA2, Class M2, (1 Month US LIBOR + 2.15%), 4.58%, 12/25/30 | 838,000 | 838,381 |
| Federal National Mortgage Association | ||
| Connecticut Avenue Securities FRB Ser. 16-C03, Class 2B, (1 Month US LIBOR + 12.75%), 15.18%, 10/25/28 | 816,533 | 1,166,556 |
| Connecticut Avenue Securities FRB Ser. 16-C02, Class 1B, (1 Month US LIBOR + 12.25%), 14.68%, 9/25/28 | 60,809 | 88,082 |
| Connecticut Avenue Securities FRB Ser. 16-C03, Class 1B, (1 Month US LIBOR + 11.75%), 14.18%, 10/25/28 | 86,591 | 125,550 |
| Connecticut Avenue Securities FRB Ser. 16-C01, Class 1B, (1 Month US LIBOR + 11.75%), 14.18%, 8/25/28 | 26,852 | 38,886 |
| Connecticut Avenue Securities FRB Ser. 16-C05, Class 2B, (1 Month US LIBOR + 10.75%), 13.18%, 1/25/29 | 44,882 | 59,463 |
| Connecticut Avenue Securities FRB Ser. 16-C03, Class 2M2, (1 Month US LIBOR + 5.90%), 8.33%, 10/25/28 | 891,036 | 1,002,321 |
| Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2, (1 Month US LIBOR + 5.70%), 8.13%, 4/25/28 | 502,049 | 568,856 |
| Connecticut Avenue Securities FRB Ser. 15-C04, Class 2M2, (1 Month US LIBOR + 5.55%), 7.98%, 4/25/28 | 700,288 | 777,894 |
| Connecticut Avenue Securities FRB Ser. 17-C02, Class 2B1, (1 Month US LIBOR + 5.50%), 7.93%, 9/25/29 | 1,085,000 | 1,236,662 |
| Connecticut Avenue Securities FRB Ser. 16-C03, Class 1M2, (1 Month US LIBOR + 5.30%), 7.73%, 10/25/28 | 384,000 | 434,936 |
| Connecticut Avenue Securities FRB Ser. 17-C04, Class 2B1, (1 Month US LIBOR + 5.05%), 7.48%, 11/25/29 | 964,000 | 1,076,315 |
| Connecticut Avenue Securities FRB Ser. 17-C03, Class 1B1, (1 Month US LIBOR + 4.85%), 7.28%, 10/25/29 | 1,000,000 | 1,109,579 |
| Connecticut Avenue Securities FRB Ser. 16-C05, Class 2M2, (1 Month US LIBOR + 4.45%), 6.88%, 1/25/29 | 324,000 | 348,410 |
| Connecticut Avenue Securities FRB Ser. 16-C07, Class 2M2, (1 Month US LIBOR + 4.35%), 6.78%, 5/25/29 | 464,000 | 501,143 |
| Connecticut Avenue Securities FRB Ser. 18-C05, Class 1B1, (1 Month US LIBOR + 4.25%), 6.68%, 1/25/31 | 20,000 | 20,790 |
| Connecticut Avenue Securities FRB Ser. 16-C06, Class 1M2, (1 Month US LIBOR + 4.25%), 6.68%, 4/25/29 | 312,000 | 343,444 |
| Connecticut Avenue Securities FRB Ser. 17-C05, Class 1B1, (1 Month US LIBOR + 3.60%), 6.03%, 1/25/30 | 755,000 | 782,536 |
| Connecticut Avenue Securities FRB Ser. 18-C01, Class 1B1, (1 Month US LIBOR + 3.55%), 5.98%, 7/25/30 | 847,000 | 848,694 |
| Connecticut Avenue Securities FRB Ser. 17-C01, Class 1M2, (1 Month US LIBOR + 3.55%), 5.98%, 7/25/29 | 359,000 | 382,575 |
| Connecticut Avenue Securities FRB Ser. 17-C06, Class 2M2, (1 Month US LIBOR + 2.80%), 5.23%, 2/25/30 | 862,000 | 889,517 |
| Connecticut Avenue Securities FRB Ser. 17-C06, Class 1M2, (1 Month US LIBOR + 2.65%), 5.08%, 2/25/30 | 1,234,000 | 1,269,733 |
| Connecticut Avenue Securities FRB Ser. 18-C04, Class 2M2, (1 Month US LIBOR + 2.55%), 4.98%, 12/25/30 | 317,000 | 321,822 |
| Connecticut Avenue Securities FRB Ser. 18-C05, Class 1M2, (1 Month US LIBOR + 2.35%), 4.78%, 1/25/31 | 78,000 | 78,522 |
| Connecticut Avenue Securities FRB Ser. 18-C01, Class 1M2, (1 Month US LIBOR + 2.25%), 4.68%, 7/25/30 | 195,000 | 197,723 |
| Federal National Mortgage Association 144A | ||
| Connecticut Avenue Securities Trust FRB Ser. 19-R02, Class 1B1, (1 Month US LIBOR + 4.15%), 6.58%, 8/25/31 | 977,000 | 1,005,039 |
| Connecticut Avenue Securities Trust FRB Ser. 19-R03, Class 1B1, (1 Month US LIBOR + 4.10%), 6.53%, 9/25/31 | 184,000 | 188,214 |
| Connecticut Avenue Securities Trust FRB Ser. 19-R03, Class 1M2, (1 Month US LIBOR + 2.15%), 4.58%, 9/25/31 | 270,000 | 272,208 |
| GSAA Home Equity Trust | ||
| FRB Ser. 05-15, Class 2A2, (1 Month US LIBOR + 0.25%), 2.68%, 1/25/36 | 479,480 | 301,257 |
| FRB Ser. 06-8, Class 2A2, (1 Month US LIBOR + 0.18%), 2.61%, 5/25/36 | 94,845 | 41,613 |
| GSR Mortgage Loan Trust FRB Ser. 07-OA1, Class 2A3A, (1 Month US LIBOR + 0.31%), 2.74%, 5/25/37 | 599,750 | 443,239 |
| HarborView Mortgage Loan Trust FRB Ser. 04-11, Class 1A, (1 Month US LIBOR + 0.70%), 3.141%, 1/19/35 | 389,161 | 252,954 |
| IndyMac INDX Mortgage Loan Trust FRB Ser. 06-AR11, Class 2A1, 4.111%, 6/25/36 W | 43,573 | 40,835 |
| JPMorgan Alternative Loan Trust FRB Ser. 07-A2, Class 12A1, IO, (1 Month US LIBOR + 0.20%), 2.63%, 6/25/37 | 219,905 | 131,236 |
| Legacy Mortgage Asset Trust 144A FRB Ser. 19-GS2, Class A2, 4.25%, 1/25/59 | 238,000 | 231,860 |
| Morgan Stanley ABS Capital I, Inc. Trust FRB Ser. 04-NC1, Class M2, (1 Month US LIBOR + 2.33%), | ||
| 4.755%, 12/27/33 | 168,346 | 168,102 |
| Morgan Stanley Re-REMIC Trust 144A FRB Ser. 10-R4, Class 4B, (1 Month US LIBOR + 0.23%), 2.244%, 2/26/37 | 462,350 | 410,053 |
| MortgageIT Trust FRB Ser. 05-3, Class M4, (1 Month US LIBOR + 0.95%), 3.375%, 8/25/35 | 25,199 | 24,362 |
| Oaktown Re, Ltd. 144A | ||
| FRB Ser. 17-1A, Class B1, (1 Month US LIBOR + 6.00%), 8.18%, 4/25/27 (Bermuda) | 617,000 | 661,347 |
| FRB Ser. 18-1A, Class M2, (1 Month US LIBOR + 2.85%), 5.28%, 7/25/28 (Bermuda) | 662,000 | 671,909 |
| Radnor Re, Ltd. 144A FRB Ser. 18-1, Class M2, (1 Month US LIBOR + 2.70%), 5.13%, 3/25/28 (Bermuda) | 964,000 | 972,111 |
| Structured Asset Mortgage Investments II Trust | ||
| FRB Ser. 06-AR7, Class A1A, (1 Month US LIBOR + 0.21%), 2.64%, 8/25/36 | 134,019 | 122,628 |
| FRB Ser. 07-AR1, Class 2A1, (1 Month US LIBOR + 0.18%), 2.61%, 1/25/37 | 50,291 | 46,307 |
| FRB Ser. 06-AR7, Class A1BG, (1 Month US LIBOR + 0.12%), 2.55%, 8/25/36 | 404,990 | 374,130 |
| VOLT LXIX, LLC 144A Ser. 18-NPL5, Class A1B, 4.704%, 8/25/48 | 321,000 | 322,404 |
| WaMu Mortgage Pass-Through Certificates Trust | ||
| FRB Ser. 05-AR10, Class 1A3, 4.104%, 9/25/35 W | 391,715 | 396,273 |
| FRB Ser. 04-AR12, Class A2B, (1 Month US LIBOR + 0.92%), 3.35%, 10/25/44 | 184,649 | 183,227 |
| FRB Ser. 05-AR13, Class A1C4, (1 Month US LIBOR + 0.43%), 2.86%, 10/25/45 | 122,992 | 120,747 |
| 24 Mortgage Opportunities Fund |
| Principal | ||
| MORTGAGE-BACKED SECURITIES (58.9%)* cont. | amount | Value |
| Residential mortgage-backed securities (non-agency) cont. | ||
| Wells Fargo Mortgage Backed Securities Trust | ||
| FRB Ser. 06-AR5, Class 1A1, 5.205%, 4/25/36 W | $422,906 | $431,364 |
| FRB Ser. 06-AR2, Class 1A1, 4.92%, 3/25/36 W | 426,242 | 428,345 |
| FRB Ser. 05-AR16, Class 6A4, 4.834%, 10/25/35 W | 11,706 | 11,635 |
| 41,627,747 | ||
| Total mortgage-backed securities (cost $129,418,757) | $130,801,952 |
| Principal | ||
| U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (30.5%)* | amount | Value |
| U.S. Government Guaranteed Mortgage Obligations (3.4%) | ||
| Government National Mortgage Association Pass-Through Certificates | ||
| 5.50%, 5/20/49 | $89,000 | $98,531 |
| 5.00%, with due dates from 4/20/49 to 5/20/49 | 745,881 | 799,930 |
| 4.50%, TBA, 6/1/49 | 4,000,000 | 4,160,000 |
| 4.50%, 5/20/49 | 473,000 | 500,590 |
| 4.00%, TBA, 6/1/49 | 2,000,000 | 2,068,438 |
| 7,627,489 | ||
| U.S. Government Agency Mortgage Obligations (27.1%) | ||
| Federal National Mortgage Association Pass-Through Certificates | ||
| 5.00%, TBA, 6/1/49 | 1,000,000 | 1,055,625 |
| 5.00%, 5/1/49 | 94,000 | 101,159 |
| 4.50%, 5/1/49 | 76,000 | 80,857 |
| 4.00%, TBA, 7/1/49 | 8,000,000 | 8,253,125 |
| 4.00%, TBA, 6/1/49 | 15,000,000 | 15,479,297 |
| 3.00%, TBA, 6/1/49 | 35,000,000 | 35,128,517 |
| 60,098,580 | ||
| Total U.S. government and agency mortgage obligations (cost $67,116,881) | $67,726,069 |
| Principal | ||
| ASSET-BACKED SECURITIES (2.5%)* | amount | Value |
| Finance of America Structured Securities Trust 144A Ser. 19-HB1, Class M5, 6.00%, 4/25/29 W | $1,115,000 | $1,060,254 |
| Mello Warehouse Securitization Trust 144A FRB Ser. 19-1, Class A, (1 Month US LIBOR + 0.80%), 3.327%, 6/25/52 | 707,000 | 707,000 |
| Nationstar HECM Loan Trust 144A Ser. 18-2A, Class M5, 6.00%, 7/25/28 W | 600,000 | 587,933 |
| Station Place Securitization Trust 144A | ||
| FRB Ser. 18-8, Class A, (1 Month US LIBOR + 0.70%), 3.187%, 2/24/20 | 913,000 | 913,000 |
| FRB Ser. 18-5, Class A, (1 Month US LIBOR + 0.70%), 3.187%, 9/24/19 | 775,000 | 775,000 |
| FRB Ser. 18-3, Class A, (1 Month US LIBOR + 0.70%), 3.187%, 7/24/19 | 590,000 | 590,000 |
| FRB Ser. 19-3, Class A, (1 Month US LIBOR + 0.70%), zero %, 6/24/20 | 907,000 | 907,000 |
| Total asset-backed securities (cost $5,524,866) | $5,540,187 |
| PURCHASED SWAP OPTIONS OUTSTANDING (0.2%)* | |||
| Counterparty | Notional/ | ||
| Fixed right % to receive or (pay)/ | Expiration | Contract | |
| Floating rate index/Maturity date | date/strike | amount | Value |
| Goldman Sachs International | |||
| 2.145/3 month USD-LIBOR-BBA/Jun-29 | Jun-19/2.145 | $43,254,600 | $384,101 |
| JPMorgan Chase Bank N.A. | |||
| 2.29/3 month USD-LIBOR-BBA/Jun-49 | Jun-19/2.29 | 5,595,500 | 73,133 |
| Total purchased swap options outstanding (cost $181,221) | $457,234 |
| Expiration | ||||
| PURCHASED OPTIONS OUTSTANDING (0.1%)* | date/strike | Notional | Contract | |
| Counterparty | price | amount | amount | Value |
| JPMorgan Chase Bank N.A. | ||||
| Federal National Mortgage Association 30 yr 3.00% TBA commitments (Put) | Jun-19/$98.89 | $3,000,000 | $3,000,000 | $3 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Call) | Jun-19/100.98 | 28,000,000 | 28,000,000 | 277,816 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/101.29 | 13,000,000 | 13,000,000 | 13,286 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/101.10 | 13,000,000 | 13,000,000 | 9,295 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/99.79 | 13,000,000 | 13,000,000 | 494 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/99.60 | 13,000,000 | 13,000,000 | 299 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/100.71 | 11,000,000 | 11,000,000 | 11 |
| Mortgage Opportunities Fund 25 |
| Expiration | ||||
| PURCHASED OPTIONS OUTSTANDING (0.1%)* cont. | date/strike | Notional | Contract | |
| Counterparty | price | amount | amount | Value |
| JPMorgan Chase Bank N.A. cont. | ||||
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/$99.02 | $11,000,000 | $11,000,000 | $11 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/100.52 | 11,000,000 | 11,000,000 | 11 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/99.21 | 11,000,000 | 11,000,000 | 11 |
| Total purchased options outstanding (cost $251,641) | $301,237 |
| Principal amount/ | |||
| SHORT-TERM INVESTMENTS (41.4%)* | shares | Value | |
| Putnam Short Term Investment Fund 2.52% L | Shares | 44,234,078 | $44,234,078 |
| Interest in $375,565,000 joint tri-party repurchase agreement dated 5/31/19 with Citigroup Global Markets, | |||
| Inc. due 6/3/19 — maturity value of $36,224,545 for an effective yield of 2.500% (collateralized by various | |||
| mortgage backed securities and a U.S. Treasury note with coupon rates ranging from 0.125% to 6.000% and | |||
| due dates ranging from 4/15/20 to 1/20/64, valued at $383,076,300) | $36,217,000 | 36,217,000 | |
| State Street Institutional U.S. Government Money Market Fund, Premier Class 2.32% P | Shares | 415,000 | 415,000 |
| U.S. Treasury Bills 2.330%, 7/16/19 ∆ | $65,000 | 64,822 | |
| U.S. Treasury Bills 2.388%, 8/15/19 § | 414,000 | 412,086 | |
| U.S. Treasury Bills 2.441%, 6/6/19 ∆ | 447,000 | 446,920 | |
| U.S. Treasury Bills 2.463%, 8/1/19 ∆ § | 3,120,000 | 3,108,276 | |
| U.S. Treasury Bills 2.466%, 7/18/19 ∆ | 3,660,000 | 3,649,500 | |
| U.S. Treasury Bills 2.473%, 7/25/19 ∆ § | 3,323,000 | 3,311,992 | |
| Total short-term investments (cost $91,856,478) | $91,859,674 | ||
| TOTAL INVESTMENTS | |
| Total investments (cost $294,349,844) | $296,686,353 |
Key to holding’s abbreviations
| bp | Basis Points |
| FRB | Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the close of the reporting period. |
| FRN | Floating Rate Notes: the rate shown is the current interest rate or yield at the close of the reporting period. Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the close of the reporting period. |
| IFB | Inverse Floating Rate Bonds, which are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The rate shown is the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. |
| IO | Interest Only |
| TBA | To Be Announced Commitments |
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 June 1, 2018 through May 31, 2019 (the reporting period). Within the following notes to the portfolio, 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 “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $222,073,453.
∆ 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. Collateral at period end totaled $8,012,255 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).
§ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on the initial margin on certain centrally cleared derivative contracts at the close of the reporting period. Collateral at period end totaled $2,260,810 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).
L Affiliated 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.
P This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts and TBA commitments. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
W The rate shown represents the weighted average coupon associated with the underlying mortgage pools. Rates may be subject to a cap or floor.
At the close of the reporting period, the fund maintained liquid assets totaling $74,683,417 to cover certain derivative contracts and delayed delivery securities.
Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.
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.
See Note 1 to the financial statements regarding TBA commitments.
The dates shown on debt obligations are the original maturity dates.
| 26 Mortgage Opportunities Fund |
| WRITTEN SWAP OPTIONS OUTSTANDING at 5/31/19 (premiums $176,097) | |||
| Counterparty | Notional/ | ||
| Fixed Obligation % to receive or (pay)/ | Expiration | contract | |
| Floating rate index/Maturity date | date/strike | amount | Value |
| Goldman Sachs International | |||
| (2.245)/3 month USD-LIBOR-BBA/Jun-29 | Jun-19/2.245 | $21,627,300 | $333,277 |
| JPMorgan Chase Bank N.A. | |||
| (2.38)/3 month USD-LIBOR-BBA/Jun-49 | Jun-19/2.38 | 2,797,700 | 68,739 |
| Total | $402,016 |
| WRITTEN OPTIONS OUTSTANDING at 5/31/19 (premiums $179,961) | ||||
| Expiration | Notional | Contract | ||
| Counterparty | date/strike price | amount | amount | Value |
| JPMorgan Chase Bank N.A. | ||||
| Federal National Mortgage Association 30 yr 3.00% TBA commitments (Call) | Jun-19/$98.89 | $3,000,000 | $3,000,000 | $44,763 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/100.79 | 13,000,000 | 13,000,000 | 4,979 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/100.60 | 13,000,000 | 13,000,000 | 3,354 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/100.29 | 13,000,000 | 13,000,000 | 1,664 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jul-19/100.10 | 13,000,000 | 13,000,000 | 1,066 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/100.98 | 28,000,000 | 28,000,000 | 56 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/100.02 | 11,000,000 | 11,000,000 | 11 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/99.52 | 11,000,000 | 11,000,000 | 11 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/100.21 | 11,000,000 | 11,000,000 | 11 |
| Federal National Mortgage Association 30 yr 3.50% TBA commitments (Put) | Jun-19/99.71 | 11,000,000 | 11,000,000 | 11 |
| Total | $55,926 |
| FORWARD PREMIUM SWAP OPTION CONTRACTS OUTSTANDING at 5/31/19 | ||||
| Counterparty | Notional/ | Premium | Unrealized | |
| Fixed right or obligation % to receive or (pay)/ | Expiration | contract | receivable/ | appreciation/ |
| Floating rate index/Maturity date | date/strike | amount | (payable) | (depreciation) |
| UBS AG | ||||
| 2.647/3 month USD-LIBOR-BBA/Jun-49 (Purchased) | Jun-19/2.647 | $3,546,800 | $(42,562) | $228,946 |
| (2.647)/3 month USD-LIBOR-BBA/Jun-49 (Purchased) | Jun-19/2.647 | 3,546,800 | (42,562) | (42,526) |
| Unrealized appreciation | 228,946 | |||
| Unrealized (depreciation) | (42,526) | |||
| Total | $186,420 |
| TBA SALE COMMITMENTS OUTSTANDING at 5/31/19 (proceeds receivable $14,378,828) | |||
| Principal | Settlement | ||
| Agency | amount | date | Value |
| Federal National Mortgage Association, 4.50%, 6/1/49 | $3,000,000 | 6/13/19 | $3,134,063 |
| Federal National Mortgage Association, 4.00%, 6/1/49 | 8,000,000 | 6/13/19 | 8,255,624 |
| Federal National Mortgage Association, 3.50%, 6/1/49 | 3,000,000 | 6/13/19 | 3,058,594 |
| Total | $14,448,281 |
| CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/19 | ||||||
| Upfront | ||||||
| premium | Unrealized | |||||
| received | Termination | Payments | Payments | appreciation/ | ||
| Notional amount | Value | (paid) | date | made by fund | received by fund | (depreciation) |
| $90,727,600 | $1,025,948 E | $475,382 | 6/19/21 | 2.55% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | $(550,566) |
| 141,435,800 | 3,874,068 E | 1,799,780 | 6/19/24 | 2.50% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (2,074,287) |
| 30,726,700 | 1,552,159 E | (741,090) | 6/19/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.65% — Semiannually | 811,069 |
| 2,740,600 | 304,801 E | (138,730) | 6/19/49 | 3 month USD-LIBOR-BBA — Quarterly | 2.80% — Semiannually | 166,072 |
| 4,134,000 | 92,544 | (55) | 3/29/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.33973% — Semiannually | 89,763 |
| 21,822,300 | 274,372 | (206) | 4/10/24 | 3 month USD-LIBOR-BBA — Quarterly | 2.20% — Semiannually | 260,728 |
| 18,185,200 | 462,268 | (258) | 4/16/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.375% — Semiannually | 455,559 |
| 9,858,000 | 162,016 | (80) | 4/2/24 | 2.28456% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (156,292) |
| 10,491,500 | 181,146 | 36,481 | 5/7/24 | 3 month USD-LIBOR-BBA — Quarterly | 2.2975% — Semiannually | 215,008 |
| 5,206,000 | 192,029 | (69) | 4/5/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.502% — Semiannually | 190,808 |
| Mortgage Opportunities Fund 27 |
| CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/19 cont. | ||||||
| Upfront | ||||||
| premium | Unrealized | |||||
| received | Termination | Payments | Payments | appreciation/ | ||
| Notional amount | Value | (paid) | date | made by fund | received by fund | (depreciation) |
| $1,080,000 | $91,444 | $(37) | 4/10/49 | 2.6835% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | $(91,555) |
| 6,609,000 | 234,315 | (88) | 4/11/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.486% — Semiannually | 232,880 |
| 5,324,000 | 186,303 | (71) | 4/12/29 | 2.4811% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (185,101) |
| 6,121,000 | 243,065 | (81) | 4/16/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.5335% — Semiannually | 242,025 |
| 8,514,000 | 353,953 | (113) | 4/17/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.554% — Semiannually | 352,874 |
| 2,656,000 | 113,860 | (35) | 4/18/29 | 2.5685% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (113,601) |
| 6,685,000 | 276,191 | (89) | 4/24/29 | 2.551% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (275,593) |
| 5,777,000 | 246,089 | (77) | 4/25/29 | 2.56515% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (245,664) |
| 43,254,600 | 1,467,758 | (120,998) | 5/28/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.4675% — Semiannually | 1,343,540 |
| 23,141,200 | 959,318 | 115,202 | 5/28/29 | 2.55% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (842,554) |
| 3,311,000 | 127,305 | (44) | 4/29/29 | 2.5185% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (126,923) |
| 13,792,800 | 253,663 | (130) | 5/1/24 | 3 month USD-LIBOR-BBA — Quarterly | 2.3225% — Semiannually | 249,597 |
| 41,965,900 | 591,383 | (62,309) | 5/30/24 | 3 month USD-LIBOR-BBA — Quarterly | 2.226% — Semiannually | 525,785 |
| 20,982,900 | 385,687 | 60,751 | 5/30/24 | 2.316% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (323,344) |
| 8,895,000 | 334,141 | (118) | 5/1/29 | 2.5095% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (333,106) |
| 8,251,000 | 155,325 | (67) | 5/3/24 | 2.3315% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (153,236) |
| 1,216,800 | 26,049 | (11) | 5/7/24 | 2.3855% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (25,828) |
| 2,974,000 | 122,068 | (39) | 5/8/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.5475% — Semiannually | 121,793 |
| 12,773,000 | 96,909 | (48) | 5/8/21 | 2.407% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (94,801) |
| 6,983,000 | 120,911 | (56) | 5/9/24 | 2.298% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (119,344) |
| 5,839,000 | 94,060 | (47) | 5/13/24 | 2.271% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (92,925) |
| 785,700 | 53,139 E | (27) | 6/12/49 | 2.6059% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (53,166) |
| 4,566,000 | 138,578 | (61) | 5/14/29 | 2.429% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (138,105) |
| 445,800 | 26,057 E | (15) | 6/12/49 | 2.565% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (26,072) |
| 10,976,000 | 147,177 | (89) | 5/16/24 | 2.213% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (145,072) |
| 640,800 | 33,354 E | (22) | 6/12/49 | 2.5365% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (33,376) |
| 11,536,000 | 147,880 | (93) | 5/20/24 | 2.2% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (146,039) |
| 626,900 | 37,205 E | (21) | 6/12/49 | 3 month USD-LIBOR-BBA — Quarterly | 2.569% — Semiannually | 37,184 |
| 5,357,000 | 54,743 | (43) | 5/17/24 | 2.1455% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (53,620) |
| 5,215,000 | 64,134 | (42) | 5/20/24 | 2.189% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (63,284) |
| 5,469,000 | 65,759 | (44) | 5/22/24 | 2.183% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (64,955) |
| 766,200 | 39,968 E | (26) | 6/12/49 | 2.537% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (39,994) |
| 710,500 | 36,504 E | (24) | 6/12/49 | 2.5335% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (36,528) |
| 585,100 | 24,084 E | (20) | 6/12/49 | 2.488% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (24,104) |
| 1,474,600 | 20,106 E | (21) | 6/26/29 | 2.245% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (20,127) |
| 8,391,000 | 78,271 | (79) | 5/29/24 | 2.125% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (77,576) |
| 188,800 | 3,211 E | (6) | 7/2/49 | 2.38% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | (3,217) |
| 3,819,000 | 5,690 | (51) | 6/4/29 | 3 month USD-LIBOR-BBA — Quarterly | 2.1116% — Semiannually | 5,640 |
| 239,600 | 350 E | (8) | 6/12/49 | 2.299% — Semiannually | 3 month USD-LIBOR-BBA — Quarterly | 342 |
| Total | $1,421,958 | $(1,429,288) | ||||
E Extended effective date.
| OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/19 | ||||||
| Upfront | ||||||
| premium | Termina- | Payments | Total return | Unrealized | ||
| Swap counterparty/ | received | tion | received (paid) | received by | appreciation/ | |
| Notional amount | Value | (paid) | date | by fund | or paid by fund | (depreciation) |
| Barclays Bank PLC | ||||||
| $106,398 | $100,448 | $— | 1/12/43 | (3.50%) 1 month USD-LIBOR — Monthly | Synthetic TRS Index 3.50% 30 year Fannie | $5,060 |
| Mae pools — Monthly | ||||||
| 36,899 | 34,476 | — | 1/12/41 | (4.00%) 1 month USD-LIBOR — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | 2,079 |
| Mae pools — Monthly | ||||||
| 46,378 | 43,333 | — | 1/12/41 | (4.00%) 1 month USD-LIBOR — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | 2,613 |
| Mae pools — Monthly | ||||||
| 28 Mortgage Opportunities Fund |
| OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/19 cont. | ||||||
| Upfront | ||||||
| premium | Termina- | Payments | Total return | Unrealized | ||
| Swap counterparty/ | received | tion | received (paid) | received by | appreciation/ | |
| Notional amount | Value | (paid) | date | by fund | or paid by fund | (depreciation) |
| Credit Suisse International | ||||||
| $220,854 | $208,504 | $— | 1/12/41 | 3.50% (1 month USD-LIBOR) — Monthly | Synthetic TRS Index 3.50% 30 year Fannie | $(10,505) |
| Mae pools — Monthly | ||||||
| 83,277 | 77,809 | — | 1/12/41 | 4.00% (1 month USD-LIBOR) — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | (4,692) |
| Mae pools — Monthly | ||||||
| 20,257 | 18,877 | — | 1/12/45 | 4.00% (1 month USD-LIBOR) — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | (1,193) |
| Mae pools — Monthly | ||||||
| 18,342 | 17,164 | — | 1/12/44 | 4.00% (1 month USD-LIBOR) — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | (1,014) |
| Mae pools — Monthly | ||||||
| Goldman Sachs International | ||||||
| 7,189 | 6,856 | — | 1/12/44 | (3.00%) 1 month USD-LIBOR — Monthly | Synthetic TRS Index 3.00% 30 year Fannie | 276 |
| Mae pools — Monthly | ||||||
| 114,456 | 108,056 | — | 1/12/43 | (3.50%) 1 month USD-LIBOR — Monthly | Synthetic TRS Index 3.50% 30 year Fannie | 5,444 |
| Mae pools — Monthly | ||||||
| 22,106 | 20,600 | — | 1/12/45 | 4.00% (1 month USD-LIBOR) — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | (1,302) |
| Mae pools — Monthly | ||||||
| JPMorgan Securities LLC | ||||||
| 12,464 | 11,663 | — | 1/12/44 | 4.00% (1 month USD-LIBOR) — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | (689) |
| Mae pools — Monthly | ||||||
| 30,807 | 28,827 | — | 1/12/44 | (4.00%) 1 month USD-LIBOR — Monthly | Synthetic TRS Index 4.00% 30 year Fannie | 1,703 |
| Mae pools — Monthly | ||||||
| Upfront premium received | — | Unrealized appreciation | 17,175 | |||
| Upfront premium (paid) | — | Unrealized (depreciation) | (19,395) | |||
| Total | $— | Total | $(2,220) | |||
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/19 | |||||||
| Upfront | |||||||
| premium | Termi- | Unrealized | |||||
| Swap counterparty/ | received | Notional | nation | Payments | appreciation/ | ||
| Referenced debt* | Rating*** | (paid)** | amount | Value | date | received by fund | (depreciation) |
| Barclays Bank PLC | |||||||
| CMBX NA BBB–.7 Index | BBB–/P | $34 | $6,000 | $284 | 1/17/47 | 300 bp — Monthly | $(247) |
| Citigroup Global Markets, Inc. | |||||||
| CMBX NA BB.7 Index | BB/P | 29,437 | 212,000 | 26,161 | 1/17/47 | 500 bp — Monthly | 3,482 |
| CMBX NA BB.7 Index | BB/P | 55,526 | 432,000 | 53,309 | 1/17/47 | 500 bp — Monthly | 2,638 |
| CMBX NA BB.7 Index | BB/P | 72,834 | 603,000 | 74,410 | 1/17/47 | 500 bp — Monthly | (990) |
| CMBX NA BBB–.6 Index | BBB–/P | 2,564 | 18,000 | 1,944 | 5/11/63 | 300 bp — Monthly | 630 |
| CMBX NA BBB–.6 Index | BBB–/P | 4,488 | 40,000 | 4,320 | 5/11/63 | 300 bp — Monthly | 192 |
| CMBX NA BBB–.6 Index | BBB–/P | 6,256 | 46,000 | 4,968 | 5/11/63 | 300 bp — Monthly | 1,314 |
| CMBX NA BBB–.6 Index | BBB–/P | 4,583 | 48,000 | 5,184 | 5/11/63 | 300 bp — Monthly | (573) |
| CMBX NA BBB–.6 Index | BBB–/P | 6,159 | 58,000 | 6,264 | 5/11/63 | 300 bp — Monthly | (72) |
| CMBX NA BBB–.6 Index | BBB–/P | 6,218 | 58,000 | 6,264 | 5/11/63 | 300 bp — Monthly | (12) |
| CMBX NA BBB–.6 Index | BBB–/P | 22,652 | 172,000 | 18,576 | 5/11/63 | 300 bp — Monthly | 4,177 |
| CMBX NA BBB–.6 Index | BBB–/P | 26,075 | 173,000 | 18,684 | 5/11/63 | 300 bp — Monthly | 7,492 |
| CMBX NA BBB–.6 Index | BBB–/P | 19,767 | 185,000 | 19,980 | 5/11/63 | 300 bp — Monthly | (105) |
| CMBX NA BBB–.6 Index | BBB–/P | 20,040 | 203,000 | 21,924 | 5/11/63 | 300 bp — Monthly | (1,765) |
| CMBX NA BBB–.6 Index | BBB–/P | 22,051 | 231,000 | 24,948 | 5/11/63 | 300 bp — Monthly | (2,762) |
| CMBX NA BBB–.6 Index | BBB–/P | 27,114 | 237,000 | 25,596 | 5/11/63 | 300 bp — Monthly | 1,657 |
| CMBX NA BBB–.6 Index | BBB–/P | 43,997 | 393,000 | 42,444 | 5/11/63 | 300 bp — Monthly | 1,782 |
| CMBX NA BBB–.6 Index | BBB–/P | 46,462 | 448,000 | 48,384 | 5/11/63 | 300 bp — Monthly | (1,661) |
| CMBX NA BBB–.6 Index | BBB–/P | 92,365 | 807,000 | 87,156 | 5/11/63 | 300 bp — Monthly | 5,680 |
| CMBX NA BBB–.6 Index | BBB–/P | 158,673 | 1,480,000 | 159,840 | 5/11/63 | 300 bp — Monthly | (304) |
| CMBX NA BBB–.6 Index | BBB–/P | 240,038 | 2,199,000 | 237,492 | 5/11/63 | 300 bp — Monthly | 3,829 |
| Mortgage Opportunities Fund 29 |
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/19 cont. | |||||||
| Upfront | |||||||
| premium | Termi- | Unrealized | |||||
| Swap counterparty/ | received | Notional | nation | Payments | appreciation/ | ||
| Referenced debt* | Rating*** | (paid)** | amount | Value | date | received by fund | (depreciation) |
| Credit Suisse International | |||||||
| CMBX NA BBB–.6 Index | BBB–/P | $23,756 | $170,000 | $18,360 | 5/11/63 | 300 bp — Monthly | $5,495 |
| CMBX NA BBB–.6 Index | BBB–/P | 38,296 | 247,000 | 26,676 | 5/11/63 | 300 bp — Monthly | 11,764 |
| CMBX NA A.7 Index | A-/P | 110 | 3,000 | 39 | 1/17/47 | 200 bp — Monthly | 151 |
| CMBX NA BB.7 Index | BB/P | 44,810 | 335,000 | 41,339 | 1/17/47 | 500 bp — Monthly | 3,797 |
| CMBX NA BBB–.6 Index | BBB–/P | 1,768 | 16,000 | 1,728 | 5/11/63 | 300 bp — Monthly | 49 |
| CMBX NA BBB–.6 Index | BBB–/P | 4,088 | 37,000 | 3,996 | 5/11/63 | 300 bp — Monthly | 114 |
| CMBX NA BBB–.6 Index | BBB–/P | 9,751 | 77,000 | 8,316 | 5/11/63 | 300 bp — Monthly | 1,480 |
| CMBX NA BBB–.6 Index | BBB–/P | 15,910 | 94,000 | 10,152 | 5/11/63 | 300 bp — Monthly | 5,812 |
| CMBX NA BBB–.6 Index | BBB–/P | 12,423 | 107,000 | 11,556 | 5/11/63 | 300 bp — Monthly | 929 |
| CMBX NA BBB–.6 Index | BBB–/P | 11,606 | 116,000 | 12,528 | 5/11/63 | 300 bp — Monthly | (854) |
| CMBX NA BBB–.6 Index | BBB–/P | 11,676 | 120,000 | 12,960 | 5/11/63 | 300 bp — Monthly | (1,214) |
| CMBX NA BBB–.6 Index | BBB–/P | 14,905 | 141,000 | 15,228 | 5/11/63 | 300 bp — Monthly | (241) |
| CMBX NA BBB–.6 Index | BBB–/P | 19,262 | 178,000 | 19,224 | 5/11/63 | 300 bp — Monthly | 141 |
| CMBX NA BBB–.6 Index | BBB–/P | 57,183 | 379,000 | 40,932 | 5/11/63 | 300 bp — Monthly | 16,472 |
| CMBX NA BBB–.6 Index | BBB–/P | 45,232 | 402,000 | 43,416 | 5/11/63 | 300 bp — Monthly | 2,050 |
| CMBX NA BBB–.6 Index | BBB–/P | 51,613 | 423,000 | 45,684 | 5/11/63 | 300 bp — Monthly | 6,175 |
| CMBX NA BBB–.7 Index | BBB–/P | 1,379 | 21,000 | 993 | 1/17/47 | 300 bp — Monthly | 398 |
| Goldman Sachs International | |||||||
| CMBX NA A.6 Index | A/P | 7,402 | 144,000 | 360 | 5/11/63 | 200 bp — Monthly | 7,098 |
| CMBX NA BBB–.6 Index | BBB–/P | 79 | 1,000 | 108 | 5/11/63 | 300 bp — Monthly | (28) |
| CMBX NA BBB–.6 Index | BBB–/P | 68 | 1,000 | 108 | 5/11/63 | 300 bp — Monthly | (39) |
| CMBX NA BBB–.6 Index | BBB–/P | 520 | 6,000 | 648 | 5/11/63 | 300 bp — Monthly | (125) |
| CMBX NA BBB–.6 Index | BBB–/P | 833 | 6,000 | 648 | 5/11/63 | 300 bp — Monthly | 189 |
| CMBX NA BBB–.6 Index | BBB–/P | 758 | 7,000 | 756 | 5/11/63 | 300 bp — Monthly | 6 |
| CMBX NA BBB–.6 Index | BBB–/P | 780 | 7,000 | 756 | 5/11/63 | 300 bp — Monthly | 28 |
| CMBX NA BBB–.6 Index | BBB–/P | 580 | 7,000 | 756 | 5/11/63 | 300 bp — Monthly | (172) |
| CMBX NA BBB–.6 Index | BBB–/P | 1,433 | 13,000 | 1,404 | 5/11/63 | 300 bp — Monthly | 37 |
| CMBX NA BBB–.6 Index | BBB–/P | 1,959 | 13,000 | 1,404 | 5/11/63 | 300 bp — Monthly | 563 |
| CMBX NA BBB–.6 Index | BBB–/P | 1,266 | 15,000 | 1,620 | 5/11/63 | 300 bp — Monthly | (345) |
| CMBX NA BBB–.6 Index | BBB–/P | 1,382 | 16,000 | 1,728 | 5/11/63 | 300 bp — Monthly | (337) |
| CMBX NA BBB–.6 Index | BBB–/P | 2,196 | 19,000 | 2,052 | 5/11/63 | 300 bp — Monthly | 155 |
| CMBX NA BBB–.6 Index | BBB–/P | 4,985 | 35,000 | 3,780 | 5/11/63 | 300 bp — Monthly | 1,226 |
| CMBX NA BBB–.6 Index | BBB–/P | 2,932 | 39,000 | 4,212 | 5/11/63 | 300 bp — Monthly | (1,258) |
| CMBX NA BBB–.6 Index | BBB–/P | 6,344 | 40,000 | 4,320 | 5/11/63 | 300 bp — Monthly | 2,047 |
| CMBX NA BBB–.6 Index | BBB–/P | 4,589 | 41,000 | 4,428 | 5/11/63 | 300 bp — Monthly | 185 |
| CMBX NA BBB–.6 Index | BBB–/P | 4,408 | 47,000 | 5,076 | 5/11/63 | 300 bp — Monthly | (640) |
| CMBX NA BBB–.6 Index | BBB–/P | 6,102 | 52,000 | 5,616 | 5/11/63 | 300 bp — Monthly | 516 |
| CMBX NA BBB–.6 Index | BBB–/P | 6,807 | 61,000 | 6,588 | 5/11/63 | 300 bp — Monthly | 254 |
| CMBX NA BBB–.6 Index | BBB–/P | 6,807 | 61,000 | 6,588 | 5/11/63 | 300 bp — Monthly | 254 |
| CMBX NA BBB–.6 Index | BBB–/P | 18,576 | 121,000 | 13,068 | 5/11/63 | 300 bp — Monthly | 5,579 |
| CMBX NA BBB–.6 Index | BBB–/P | 19,769 | 166,000 | 17,928 | 5/11/63 | 300 bp — Monthly | 1,938 |
| CMBX NA BBB–.6 Index | BBB–/P | 28,389 | 179,000 | 19,332 | 5/11/63 | 300 bp — Monthly | 9,162 |
| CMBX NA BBB–.6 Index | BBB–/P | 22,767 | 192,000 | 20,736 | 5/11/63 | 300 bp — Monthly | 2,143 |
| CMBX NA BBB–.6 Index | BBB–/P | 22,689 | 192,000 | 20,736 | 5/11/63 | 300 bp — Monthly | 2,065 |
| CMBX NA BBB–.6 Index | BBB–/P | 31,086 | 196,000 | 21,168 | 5/11/63 | 300 bp — Monthly | 10,032 |
| CMBX NA BBB–.6 Index | BBB–/P | 42,824 | 274,000 | 29,592 | 5/11/63 | 300 bp — Monthly | 13,392 |
| CMBX NA BBB–.6 Index | BBB–/P | 37,025 | 300,000 | 32,400 | 5/11/63 | 300 bp — Monthly | 4,800 |
| CMBX NA BBB–.6 Index | BBB–/P | 34,253 | 310,000 | 33,480 | 5/11/63 | 300 bp — Monthly | 953 |
| CMBX NA BBB–.6 Index | BBB–/P | 36,669 | 328,000 | 35,424 | 5/11/63 | 300 bp — Monthly | 1,436 |
| CMBX NA BBB–.7 Index | BBB–/P | 370 | 5,000 | 237 | 1/17/47 | 300 bp — Monthly | 136 |
| CMBX NA BBB–.7 Index | BBB–/P | 3,816 | 37,000 | 1,750 | 1/17/47 | 300 bp — Monthly | 2,087 |
| CMBX NA BBB–.7 Index | BBB–/P | 4,227 | 52,000 | 2,460 | 1/17/47 | 300 bp — Monthly | 1,798 |
| CMBX NA BBB–.7 Index | BBB–/P | 4,856 | 57,000 | 2,696 | 1/17/47 | 300 bp — Monthly | 2,193 |
| 30 Mortgage Opportunities Fund |
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/19 cont. | |||||||
| Upfront | |||||||
| premium | Termi- | Unrealized | |||||
| Swap counterparty/ | received | Notional | nation | Payments | appreciation/ | ||
| Referenced debt* | Rating*** | (paid)** | amount | Value | date | received by fund | (depreciation) |
| Goldman Sachs International cont. | |||||||
| CMBX NA BBB–.7 Index | BBB–/P | $7,472 | $86,000 | $4,068 | 1/17/47 | 300 bp — Monthly | $3,454 |
| CMBX NA BBB–.7 Index | BBB–/P | 23,196 | 206,000 | 9,744 | 1/17/47 | 300 bp — Monthly | 13,572 |
| JPMorgan Securities LLC | |||||||
| CMBX NA BB.6 Index | BB/P | 48,723 | 230,000 | 48,001 | 5/11/63 | 500 bp — Monthly | 946 |
| CMBX NA BB.6 Index | BB/P | 12,113 | 50,000 | 10,435 | 5/11/63 | 500 bp — Monthly | 1,726 |
| CMBX NA BB.6 Index | BB/P | 176,585 | 700,000 | 146,090 | 5/11/63 | 500 bp — Monthly | 31,176 |
| CMBX NA BBB–.6 Index | BBB–/P | 49,571 | 406,000 | 43,848 | 5/11/63 | 300 bp — Monthly | 5,960 |
| CMBX NA BBB–.6 Index | BBB–/P | 247,321 | 2,174,000 | 234,792 | 5/11/63 | 300 bp — Monthly | 13,797 |
| CMBX NA BBB–.6 Index | BBB–/P | 8,391,432 | 63,430,000 | 6,850,440 | 5/11/63 | 300 bp — Monthly | 1,577,993 |
| CMBX NA BBB–.7 Index | BBB–/P | 505,912 | 4,493,000 | 212,519 | 1/17/47 | 300 bp — Monthly | 296,014 |
| Merrill Lynch International | |||||||
| CMBX NA BB.7 Index | BB/P | 16,216 | 134,000 | 16,536 | 1/17/47 | 500 bp — Monthly | (189) |
| CMBX NA BBB–.6 Index | BBB–/P | 17,601 | 133,000 | 14,364 | 5/11/63 | 300 bp — Monthly | 3,315 |
| CMBX NA BBB–.6 Index | BBB–/P | 37,360 | 318,000 | 34,344 | 5/11/63 | 300 bp — Monthly | 3,202 |
| CMBX NA BBB–.6 Index | BBB–/P | 203,475 | 1,790,000 | 193,320 | 5/11/63 | 300 bp — Monthly | 11,200 |
| Morgan Stanley & Co. International PLC | |||||||
| CMBX NA BBB–.6 Index | BBB–/P | 43,572 | 315,000 | 34,020 | 5/11/63 | 300 bp — Monthly | 9,736 |
| CMBX NA BB.6 Index | BB/P | 100,413 | 418,000 | 87,237 | 5/11/63 | 500 bp — Monthly | 13,583 |
| CMBX NA BBB–.6 Index | BBB–/P | 108 | 1,000 | 108 | 5/11/63 | 300 bp — Monthly | — |
| CMBX NA BBB–.6 Index | BBB–/P | 834 | 6,000 | 648 | 5/11/63 | 300 bp — Monthly | 190 |
| CMBX NA BBB–.6 Index | BBB–/P | 1,472 | 13,000 | 1,404 | 5/11/63 | 300 bp — Monthly | 76 |
| CMBX NA BBB–.6 Index | BBB–/P | 1,725 | 14,000 | 1,512 | 5/11/63 | 300 bp — Monthly | 221 |
| CMBX NA BBB–.6 Index | BBB–/P | 2,150 | 15,000 | 1,620 | 5/11/63 | 300 bp — Monthly | 539 |
| CMBX NA BBB–.6 Index | BBB–/P | 2,831 | 25,000 | 2,700 | 5/11/63 | 300 bp — Monthly | 146 |
| CMBX NA BBB–.6 Index | BBB–/P | 3,313 | 31,000 | 3,348 | 5/11/63 | 300 bp — Monthly | (17) |
| CMBX NA BBB–.6 Index | BBB–/P | 4,240 | 35,000 | 3,780 | 5/11/63 | 300 bp — Monthly | 480 |
| CMBX NA BBB–.6 Index | BBB–/P | 6,984 | 54,000 | 5,832 | 5/11/63 | 300 bp — Monthly | 1,183 |
| CMBX NA BBB–.6 Index | BBB–/P | 5,821 | 55,000 | 5,940 | 5/11/63 | 300 bp — Monthly | (87) |
| CMBX NA BBB–.6 Index | BBB–/P | 7,980 | 68,000 | 7,344 | 5/11/63 | 300 bp — Monthly | 676 |
| CMBX NA BBB–.6 Index | BBB–/P | 12,583 | 77,000 | 8,316 | 5/11/63 | 300 bp — Monthly | 4,312 |
| CMBX NA BBB–.6 Index | BBB–/P | 11,302 | 87,000 | 9,396 | 5/11/63 | 300 bp — Monthly | 1,957 |
| CMBX NA BBB–.6 Index | BBB–/P | 9,263 | 88,000 | 9,504 | 5/11/63 | 300 bp — Monthly | (189) |
| CMBX NA BBB–.6 Index | BBB–/P | 14,346 | 98,000 | 10,584 | 5/11/63 | 300 bp — Monthly | 3,819 |
| CMBX NA BBB–.6 Index | BBB–/P | 13,256 | 112,000 | 12,096 | 5/11/63 | 300 bp — Monthly | 1,225 |
| CMBX NA BBB–.6 Index | BBB–/P | 20,826 | 170,000 | 18,360 | 5/11/63 | 300 bp — Monthly | 2,565 |
| CMBX NA BBB–.6 Index | BBB–/P | 22,319 | 180,000 | 19,440 | 5/11/63 | 300 bp — Monthly | 2,984 |
| CMBX NA BBB–.6 Index | BBB–/P | 25,578 | 200,000 | 21,600 | 5/11/63 | 300 bp — Monthly | 4,095 |
| CMBX NA BBB–.6 Index | BBB–/P | 20,446 | 214,000 | 23,112 | 5/11/63 | 300 bp — Monthly | (2,542) |
| CMBX NA BBB–.6 Index | BBB–/P | 25,899 | 220,000 | 23,760 | 5/11/63 | 300 bp — Monthly | 2,268 |
| CMBX NA BBB–.6 Index | BBB–/P | 34,750 | 234,000 | 25,272 | 5/11/63 | 300 bp — Monthly | 9,615 |
| CMBX NA BBB–.6 Index | BBB–/P | 33,202 | 274,000 | 29,592 | 5/11/63 | 300 bp — Monthly | 3,770 |
| CMBX NA BBB–.6 Index | BBB–/P | 32,694 | 276,000 | 29,808 | 5/11/63 | 300 bp — Monthly | 3,047 |
| CMBX NA BBB–.6 Index | BBB–/P | 43,114 | 376,000 | 40,608 | 5/11/63 | 300 bp — Monthly | 2,725 |
| CMBX NA BBB–.6 Index | BBB–/P | 49,803 | 411,000 | 44,388 | 5/11/63 | 300 bp — Monthly | 5,655 |
| CMBX NA BBB–.6 Index | BBB–/P | 279,765 | 2,602,000 | 281,016 | 5/11/63 | 300 bp — Monthly | (600) |
| CMBX NA BBB–.7 Index | BBB–/P | 2,965 | 30,000 | 1,419 | 1/17/47 | 300 bp — Monthly | 1,563 |
| Upfront premium received | 12,211,178 | Unrealized appreciation | 2,196,757 | ||||
| Upfront premium (paid) | — | Unrealized (depreciation) | (17,368) | ||||
| Total | $12,211,178 | Total | $2,179,389 | ||||
* Payments related to the referenced debt are made upon a credit default event.
** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.
*** Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody’s, Standard & Poor’s or Fitch ratings are believed to be the most recent ratings available at May 31, 2019. Securities rated by Fitch are indicated by “/F.” Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.
| Mortgage Opportunities Fund 31 |
| OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/19 | ||||||
| Upfront | ||||||
| premium | Termi- | Payments | Unrealized | |||
| Swap counterparty/ | received | Notional | nation | (paid) | appreciation/ | |
| Referenced debt* | (paid)** | amount | Value | date | by fund | (depreciation) |
| Citigroup Global Markets, Inc. | ||||||
| CMBX NA A.7 Index | $(22) | $3,000 | $39 | 1/17/47 | (200 bp) — Monthly | $(63) |
| CMBX NA BB.10 Index | (29,495) | 269,000 | 31,634 | 11/17/59 | (500 bp) — Monthly | 1,877 |
| CMBX NA BB.10 Index | (13,985) | 134,000 | 15,758 | 11/17/59 | (500 bp) — Monthly | 1,643 |
| CMBX NA BB.11 Index | (78,125) | 603,000 | 78,812 | 11/18/54 | (500 bp) — Monthly | 101 |
| CMBX NA BB.9 Index | (66,515) | 432,000 | 55,771 | 9/17/58 | (500 bp) — Monthly | (11,164) |
| CMBX NA BB.9 Index | (64,391) | 418,000 | 53,964 | 9/17/58 | (500 bp) — Monthly | (10,833) |
| CMBX NA BB.9 Index | (64,681) | 418,000 | 53,964 | 9/17/58 | (500 bp) — Monthly | (11,124) |
| CMBX NA BB.9 Index | (52,257) | 402,000 | 51,898 | 9/17/58 | (500 bp) — Monthly | (750) |
| CMBX NA BB.9 Index | (54,038) | 402,000 | 51,898 | 9/17/58 | (500 bp) — Monthly | (2,531) |
| CMBX NA BBB–.7 Index | (8,135) | 196,000 | 9,271 | 1/17/47 | (300 bp) — Monthly | 1,021 |
| Credit Suisse International | ||||||
| CMBX NA BB.10 Index | (50,421) | 424,000 | 49,862 | 11/17/59 | (500 bp) — Monthly | (971) |
| CMBX NA BB.10 Index | (27,719) | 223,000 | 26,225 | 11/17/59 | (500 bp) — Monthly | (1,711) |
| CMBX NA BB.9 Index | (34,229) | 223,000 | 28,789 | 9/17/58 | (500 bp) — Monthly | (5,657) |
| Goldman Sachs International | ||||||
| CMBX NA BB.7 Index | (68,887) | 367,000 | 45,288 | 1/17/47 | (500 bp) — Monthly | (23,957) |
| CMBX NA BB.9 Index | (62,086) | 390,000 | 50,349 | 9/17/58 | (500 bp) — Monthly | (12,116) |
| CMBX NA BB.9 Index | (31,123) | 197,000 | 25,433 | 9/17/58 | (500 bp) — Monthly | (5,882) |
| CMBX NA BB.9 Index | (30,349) | 190,000 | 24,529 | 9/17/58 | (500 bp) — Monthly | (6,004) |
| JPMorgan Securities LLC | ||||||
| CMBX NA BB.7 Index | (535,052) | 4,228,000 | 521,735 | 1/17/47 | (500 bp) — Monthly | (17,426) |
| CMBX NA BB.9 Index | (44,770) | 317,000 | 40,925 | 9/17/58 | (500 bp) — Monthly | (4,153) |
| CMBX NA BB.9 Index | (42,747) | 274,000 | 35,373 | 9/17/58 | (500 bp) — Monthly | (7,640) |
| CMBX NA BB.9 Index | (7,666) | 50,000 | 6,455 | 9/17/58 | (500 bp) — Monthly | (1,260) |
| Merrill Lynch International | ||||||
| CMBX NA BB.10 Index | (23,893) | 201,000 | 23,638 | 11/17/59 | (500 bp) — Monthly | (451) |
| CMBX NA BB.10 Index | (14,122) | 134,000 | 15,758 | 11/17/59 | (500 bp) — Monthly | 1,506 |
| CMBX NA BB.9 Index | (26,313) | 201,000 | 25,949 | 9/17/58 | (500 bp) — Monthly | (559) |
| Morgan Stanley & Co. International PLC | ||||||
| CMBX NA BB.10 Index | (14,053) | 134,000 | 15,758 | 11/17/59 | (500 bp) — Monthly | 1,575 |
| CMBX NA BB.7 Index | (93,373) | 499,000 | 61,577 | 1/17/47 | (500 bp) — Monthly | (32,277) |
| CMBX NA BB.7 Index | (80,602) | 418,000 | 51,581 | 1/17/47 | (500 bp) — Monthly | (29,428) |
| CMBX NA BB.9 Index | (71,437) | 475,000 | 61,323 | 9/17/58 | (500 bp) — Monthly | (10,576) |
| CMBX NA BB.9 Index | (62,827) | 472,000 | 60,935 | 9/17/58 | (500 bp) — Monthly | (2,351) |
| CMBX NA BB.9 Index | (63,845) | 470,000 | 60,677 | 9/17/58 | (500 bp) — Monthly | (3,625) |
| CMBX NA BB.9 Index | (61,252) | 448,000 | 57,837 | 9/17/58 | (500 bp) — Monthly | (3,851) |
| CMBX NA BB.9 Index | (62,380) | 433,000 | 55,900 | 9/17/58 | (500 bp) — Monthly | (6,900) |
| CMBX NA BB.9 Index | (63,975) | 424,000 | 54,738 | 9/17/58 | (500 bp) — Monthly | (9,649) |
| CMBX NA BB.9 Index | (56,493) | 363,000 | 46,863 | 9/17/58 | (500 bp) — Monthly | (9,983) |
| CMBX NA BB.9 Index | (32,543) | 215,000 | 27,757 | 9/17/58 | (500 bp) — Monthly | (4,996) |
| CMBX NA BB.9 Index | (32,543) | 215,000 | 27,757 | 9/17/58 | (500 bp) — Monthly | (4,996) |
| Upfront premium received | — | Unrealized appreciation | 7,723 | |||
| Upfront premium (paid) | (2,126,344) | Unrealized (depreciation) | (242,884) | |||
| Total | $(2,126,344) | Total | $(235,161) | |||
* Payments related to the referenced debt are made upon a credit default event.
** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.
| 32 Mortgage Opportunities Fund |
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 | ||
| Asset-backed securities | $— | $5,540,187 | $— | ||
| Mortgage-backed securities | — | 130,801,952 | — | ||
| Purchased options outstanding | — | 301,237 | — | ||
| Purchased swap options outstanding | — | 457,234 | — | ||
| U.S. government and agency mortgage obligations | — | 67,726,069 | — | ||
| Short-term investments | 44,649,078 | 47,210,596 | — | ||
| Totals by level | $44,649,078 | $252,037,275 | $— | ||
| Valuation inputs | |||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | ||
| Written options outstanding | $— | $(55,926) | $— | ||
| Written swap options outstanding | — | (402,016) | — | ||
| Forward premium swap option contracts | — | 186,420 | — | ||
| TBA sale commitments | — | (14,448,281) | — | ||
| Interest rate swap contracts | — | (2,851,246) | — | ||
| Total return swap contracts | — | (2,220) | — | ||
| Credit default contracts | — | (8,140,606) | — | ||
| Totals by level | $— | (25,713,875) | $— | ||
The accompanying notes are an integral part of these financial statements.
| Mortgage Opportunities Fund 33 |
Statement of assets and liabilities 5/31/19
| ASSETS | |
| Investment in securities, at value (Notes 1 and 8): | |
| Unaffiliated issuers (identified cost $213,898,766) | $216,235,275 |
| Affiliated issuers (identified cost $44,234,078) (Notes 1 and 5) | 44,234,078 |
| Repurchase agreements (identified cost $36,217,000) | 36,217,000 |
| Cash | 3,128 |
| Interest and other receivables | 1,429,207 |
| Receivable for shares of the fund sold | 1,189,055 |
| Receivable for investments sold | 402,044 |
| Receivable for sales of TBA securities (Note 1) | 14,397,495 |
| Receivable from Manager (Note 2) | 27,201 |
| Receivable for variation margin on centrally cleared swap contracts (Note 1) | 1,534,805 |
| Unrealized appreciation on forward premium swap option contracts (Note 1) | 228,946 |
| Unrealized appreciation on OTC swap contracts (Note 1) | 2,221,655 |
| Premium paid on OTC swap contracts (Note 1) | 2,126,344 |
| Prepaid assets | 17,849 |
| Total assets | 320,264,082 |
| LIABILITIES | |
| Payable for investments purchased | 2,236,366 |
| Payable for purchases of TBA securities (Note 1) | 65,622,072 |
| Payable for custodian fees (Note 2) | 62,513 |
| Payable for investor servicing fees (Note 2) | 3,315 |
| Payable for Trustee compensation and expenses (Note 2) | 4,364 |
| Payable for administrative services (Note 2) | 1,079 |
| Payable for variation margin on centrally cleared swap contracts (Note 1) | 2,070,524 |
| Payable to broker | 182,818 |
| Unrealized depreciation on OTC swap contracts (Note 1) | 279,647 |
| Premium received on OTC swap contracts (Note 1) | 12,211,178 |
| Unrealized depreciation on forward premium swap option contracts (Note 1) | 42,526 |
| Written options outstanding, at value (premiums $356,058) (Note 1) | 457,942 |
| TBA sale commitments, at value (proceeds receivable $14,378,828) (Note 1) | 14,448,281 |
| Collateral on certain derivative contracts and TBA commitments, at value (Notes 1 and 8) | 415,000 |
| Other accrued expenses | 153,004 |
| Total liabilities | 98,190,629 |
| Net assets | $222,073,453 |
| REPRESENTED BY | |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $218,097,081 |
| Total distributable earnings (Note 1) | 3,976,372 |
| Total — Representing net assets applicable to capital shares outstanding | $222,073,453 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
| Net asset value and offering price per class I share | |
| ($222,073,453 divided by 21,224,255 shares) | $10.46 |
The accompanying notes are an integral part of these financial statements.
| 34 Mortgage Opportunities Fund |
Statement of operations Year ended 5/31/19
| INVESTMENT INCOME | |
| Interest (including interest income of $1,306,332 from investments in affiliated issuers) (Note 5) | $12,900,229 |
| Total investment income | 12,900,229 |
| EXPENSES | |
| Compensation of Manager (Note 2) | 1,453,886 |
| Investor servicing fees (Note 2) | 26,432 |
| Custodian fees (Note 2) | 81,240 |
| Trustee compensation and expenses (Note 2) | 13,384 |
| Administrative services (Note 2) | 8,465 |
| Auditing and tax fees | 145,756 |
| Other | 73,395 |
| Fees waived and reimbursed by Manager (Note 2) | (556,975) |
| Total expenses | 1,245,583 |
| Expense reduction (Note 2) | (2,277) |
| Net expenses | 1,243,306 |
| Net investment income | 11,656,923 |
| REALIZED AND UNREALIZED GAIN (LOSS) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (Notes 1 and 3) | (1,431,232) |
| Redemptions in kind (Note 3) | (268,720) |
| Swap contracts (Note 1) | (1,217,293) |
| Written options (Note 1) | 2,697,684 |
| Total net realized loss | (219,561) |
| Change in net unrealized appreciation (depreciation) on: | |
| Securities from unaffiliated issuers and TBA sale commitments | (2,286,434) |
| Swap contracts | (1,987,401) |
| Written options | (430,243) |
| Total change in net unrealized depreciation | (4,704,078) |
| Net loss on investments | (4,923,639) |
| Net increase in net assets resulting from operations | $6,733,284 |
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Year ended 5/31/19 | Year ended 5/31/18 |
| Operations | ||
| Net investment income | $11,656,923 | $5,375,955 |
| Net realized loss on investments | (219,561) | (689,747) |
| Change in net unrealized appreciation (depreciation) of investments | (4,704,078) | 7,451,964 |
| Net increase in net assets resulting from operations | 6,733,284 | 12,138,172 |
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | (13,960,214) | (1,487,746) |
| Increase (decrease) from capital share transactions (Note 4) | (45,179,756) | 232,720,935 |
| Total increase (decrease) in net assets | (52,406,686) | 243,371,361 |
| NET ASSETS | ||
| Beginning of year | 274,480,139 | 31,108,778 |
| End of year (Note 1) | $222,073,453 | $274,480,139 |
The accompanying notes are an integral part of these financial statements.
| Mortgage Opportunities Fund 35 |
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS | LESS DISTRIBUTIONS | RATIOS AND SUPPLEMENTAL DATA | ||||||||||
| Net realized and | Total from | Ratio of expenses to average | Ratio of net investment | |||||||||
| Net asset value, | Net investment | unrealized gain (loss) | investment | From net | Total | Net asset value, | Total return at net asset | Net assets, end of period | net assets excluding interest | income (loss) to average | ||
| Period ended | beginning of period | income (loss)a | on investments | operations | investment income | distributions | end of period | value (%)b | (in thousands) | expense (%)c,d | net assets (%)d | Portfolio turnover (%) e |
| Class I | ||||||||||||
| May 31, 2019 | $10.73 | .47 | (.14) | .33 | (.60) | (0.60) | $10.46 | 3.25 | $222,073 | .47 | 4.41 | 1,012 |
| May 31, 2018 | 10.08 | .42 | .31 | .73 | (.08) | (0.08) | 10.73 | 7.27 | 274,480 | .47 | 4.07 | 1,372 |
| May 31, 2017 | 9.46 | .46 | .45 | .91 | (.29) | (0.29) | 10.08 | 9.67 | 31,109 | .56 | 4.62 | 1,065 |
| May 31, 2016 | 10.04 | .24 | (.49) | (.25) | (.33) | (0.33) | 9.46 | (2.60) | 9,774 | .60 | 2.44 | 1,074 |
| May 31, 2015† | 10.00 | .02 | .02 | .04 | — | — | 10.04 | .40* | 10,036 | .09* | .17* | 244* |
* Not annualized.
† For the period April 7, 2015 (commencement of operations) to May 31, 2015.
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 involuntary contractual expense limitations in effect during the period. As a result of such limitations, the expenses of class I reflect a reduction of the following amount (Note 2):
| Percentage of average net assets | |
| May 31, 2019 | 0.21% |
| May 31, 2018 | 0.32 |
| May 31, 2017 | 1.21 |
| May 31, 2016 | 2.33 |
| May 31, 2015 | 1.26 |
e Portfolio turnover includes TBA roll transactions.
The accompanying notes are an integral part of these financial statements.
| 36 Mortgage Opportunities Fund | Mortgage Opportunities Fund 37 |
Notes to financial statements 5/31/19
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 June 1, 2018 through May 31, 2019.
Putnam Mortgage Opportunities 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 maximize total return consistent with what Putnam Management believes to be prudent risk. Total return is composed of capital appreciation and income. The fund invests mainly in mortgage-related fixed income securities and related derivatives that are either investment-grade or below-investment-grade in quality (sometimes referred to as “junk bonds”). Under normal circumstances, the fund invests at least 80% of its net assets in mortgages, mortgage-related fixed income securities and related derivatives (i.e., derivatives used to acquire exposure to, or whose underlying securities are, mortgages or mortgage-related securities). The fund generally uses the net unrealized gain or loss, or market value, of mortgage-related derivatives for purposes of this policy, but may use the notional value of a derivative if that is determined to be a more appropriate measure of the fund’s investment exposure. This policy may be changed only after 60 days’ notice to shareholders. Putnam Management expects to invest in lower-rated, higher-yielding mortgage-backed securities, including non-agency residential mortgage-backed securities (which may be backed by non-qualified or “sub-prime” mortgages), commercial mortgage-backed securities, collateralized mortgage obligations (including interest only, principal only, and other prepayment derivatives), and agency mortgage-backed securities. Nonagency (i.e., privately issued) securities typically are lower-rated and higher yielding than securities issued or backed by agencies such as Ginnie Mae, Fannie Mae or Freddie Mac. While Putnam Management’s emphasis will be on mortgage-backed securities, Putnam Management may also invest to a lesser extent in other types of asset-backed securities. Putnam Management may consider, among other factors, credit, interest rate, prepayment and liquidity risks, as well as general market conditions, when deciding whether to buy or sell investments. Putnam Management typically uses to a significant extent derivatives, including interest rate swaps, forward delivery contracts and total return swaps, options and swaptions on mortgage-backed securities and indices, for both hedging and non-hedging purposes, including to obtain or adjust exposure to mortgage-backed investments.
The fund offers class I shares, which are sold without a front-end sales charge and are not subject to a contingent deferred sales charge. Class I shares are intended for institutional and other investors who meet the $5,000,000 minimum investment and who are not purchasing through an intermediary. Shares of the fund are sold at net asset value. Effective July 1, 2019, the fund began offering class A, C and Y shares.
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 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 Amended and Restated Agreement and 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.
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.
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. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.
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.
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. Certain securities may be valued on the basis of a price provided by a single source. The fair value of securities is generally determined as the amount that
| 38 Mortgage Opportunities Fund |
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.
Joint trading account Pursuant to an exemptive order from the SEC, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in issues of short-term investments having maturities of up to 90 days.
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, which totaled $36,941,340 at the end of the reporting period, 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.
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.
All premiums/discounts are amortized/accreted on a yield-to-maturity basis.
Securities purchased or sold on a delayed delivery basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.
Stripped securities The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The fair value of these securities is highly sensitive to changes in interest rates.
Options contracts The fund uses options contracts to hedge duration and convexity, to isolate prepayment risk 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.
Interest rate swap contracts The fund entered into OTC and/or centrally cleared interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, for hedging term structure risk and for yield curve positioning.
An OTC and centrally cleared interest rate swap can be purchased or sold with an upfront premium. For OTC interest rate swap contracts, an upfront payment received by the fund is recorded as a liability on the fund’s books. An upfront payment made by the fund is recorded as an asset on the fund’s books. OTC and centrally cleared interest rate swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change is recorded as an unrealized gain or loss on OTC interest rate swaps. Daily fluctuations in the value of centrally cleared interest rate swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments, including upfront premiums, received or made are recorded as realized gains or losses at the reset date or the closing of the contract. Certain OTC and centrally cleared interest rate swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract.
The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults, in the case of OTC interest rate contracts, or the central clearing agency or a clearing member defaults, in the case of centrally cleared interest rate swap contracts, on its respective obligation to perform under the contract. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC interest rate swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared interest rate swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared interest rate swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.
OTC and centrally cleared interest rate swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
Total return swap contracts The fund entered into OTC and/or centrally cleared total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, to hedge sector exposure and for gaining exposure to specific sectors.
To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC and/or centrally cleared total return swap contracts are
| Mortgage Opportunities Fund 39 |
marked to market daily based upon quotations from an independent pricing service or market maker. Any change is recorded as an unrealized gain or loss on OTC total return swaps. Daily fluctuations in the value of centrally cleared total return swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC and/or centrally cleared total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC total return swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared total return swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared total return swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.
OTC and/or centrally cleared total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
Credit default contracts The fund entered into OTC and/or centrally cleared credit default contracts to hedge credit risk, to hedge market risk and for gaining exposure to specific sectors.
In OTC and centrally cleared credit default contracts, the protection buyer typically makes a periodic stream of payments to a counterparty, the protection seller, in exchange for the right to receive a contingent payment upon the occurrence of a credit event on the reference obligation or all other equally ranked obligations of the reference entity. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. For OTC credit default contracts, an upfront payment received by the fund is recorded as a liability on the fund’s books. An upfront payment made by the fund is recorded as an asset on the fund’s books. Centrally cleared credit default contracts provide the same rights to the protection buyer and seller except the payments between parties, including upfront premiums, are settled through a central clearing agent through variation margin payments. Upfront and periodic payments received or paid by the fund for OTC and centrally cleared credit default contracts are recorded as realized gains or losses at the reset date or close of the contract. The OTC and centrally cleared credit default contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change in value of OTC credit default contracts is recorded as an unrealized gain or loss. Daily fluctuations in the value of centrally cleared credit default contracts are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Upon the occurrence of a credit event, the difference between the par value and fair value of the reference obligation, net of any proportional amount of the upfront payment, is recorded as a realized gain or loss.
In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index or the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased the underlying reference obligations. In certain circumstances, the fund may enter into offsetting OTC and centrally cleared credit default contracts which would mitigate its risk of loss. Risks of loss may exceed amounts recognized on the Statement of assets and liabilities. The fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the contract. This risk may be mitigated for OTC credit default contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared credit default contracts through the daily exchange of variation margin. Counterparty risk is further mitigated with respect to centrally cleared credit default swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Where the fund is a seller of protection, the maximum potential amount of future payments the fund may be required to make is equal to the notional amount.
OTC and centrally cleared credit default contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
TBA commitments The fund may enter into TBA (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price and par amount have been established, the actual securities have not been specified. However, it is anticipated that the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date.
The fund may also enter into TBA sale commitments to hedge its portfolio positions, to sell mortgage-backed securities it owns under delayed delivery arrangements or to take a short position in mortgage-backed securities. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, either equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date are held as “cover” for the transaction, or other liquid assets in an amount equal to the notional value of the TBA sale commitment are segregated. If the TBA sale commitment is closed through the acquisition of an offsetting TBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.
TBA commitments, which are accounted for as purchase and sale transactions, may be considered securities themselves, and involve a risk of loss due to changes in the value of the security prior to the settlement date as well as the risk that the counterparty to the transaction will not perform its obligations. Counterparty risk is mitigated by having a master agreement between the fund and the counterparty.
Unsettled TBA commitments are valued at their fair value according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in fair value is recorded by the fund as an unrealized gain or loss. Based on market circumstances, Putnam Management will determine whether to take delivery of the underlying securities or to dispose of the TBA commitments prior to settlement.
TBA purchase commitments outstanding at period end, if any, are listed within the fund’s portfolio and TBA sale commitments 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 that govern OTC derivative and foreign exchange contracts and Master Securities Forward Transaction Agreements that govern transactions involving mortgage-backed and other asset-backed securities that may result in delayed delivery (Master Agreements) with certain counterparties entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.
| 40 Mortgage Opportunities Fund |
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.
With respect to ISDA Master Agreements, 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 or short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund had a net liability position of $8,101,473 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $8,012,255 and may include amounts related to unsettled agreements.
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 $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both 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 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR 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 0.21% 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.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At May 31, 2019, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:
| Loss carryover | ||
| Short-term | Long-term | Total |
| $4,209,447 | $— | $4,209,447 |
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 income on swap contracts, from real estate mortgage investment conduits and from transfers in kind gain adjustment. 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 $2,401,728 to increase undistributed net investment income, $294,171 to decrease paid-in capital and $2,107,557 to increase accumulated net realized loss.
Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. 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 | $11,691,355 |
| Unrealized depreciation | (10,943,927) |
| Net unrealized appreciation | 747,428 |
| Undistributed ordinary income | 7,438,377 |
| Capital loss carryforward | (4,209,447) |
| Cost for federal income tax purposes | $270,225,050 |
For the fiscal year ended May 31, 2018, the fund had undistributed net investment income of $5,409,360.
| Mortgage Opportunities Fund 41 |
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 for management and investment advisory services monthly based on the average net assets of the fund. Such fee is based on the following annual rates.
| 0.550% | of the first $500 million of average net assets, | |||
| 0.500% | of the next $500 million of average net assets | |||
| 0.450% | 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 0.550% of the fund’s average net assets.
Prior to June 1, 2019, Putnam Management contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund, 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 0.47% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $343,320 as a result of this limit.
Prior to June 1, 2019, Putnam Management also contractually agreed 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 investment management contract, but including payments under the fund’s investor servicing contract, to an annual rate of 0.05% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $213,655 as a result of this limit.
Effective June 1, 2019, Putnam Management has contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through September 30, 2020, to the extent that total expenses of the fund (excluding brokerage, interest, taxes, investor servicing fees, investment-related expenses, payments under distribution plans, extraordinary expenses and acquired fund fees and expenses) would exceed an annual rate of 0.46% of the fund’s average net assets.
Effective June 1, 2019, Putnam Management has also contractually agreed, through September 30, 2020, to waive fees and/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.
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 0.40% 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. was paid a monthly fee for investor servicing at an annual rate of 0.01% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations.
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 $2,277 under the expense offset arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $201, 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 not adopted a distribution plan pursuant to Rule 12b–1 under the Investment Company Act of 1940.
| 42 Mortgage Opportunities Fund |
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, including TBA commitments (Long-term) | $2,398,995,481 | $2,364,610,915 |
| U.S. government securities (Long-term) | — | — |
| Total | $2,398,995,481 | $2,364,610,915 |
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.
For the reporting period the fund had redemptions in kind which resulted in redemptions out of the fund totaling $100,000,000, which includes cash redemptions of $44,200,083.
Note 4: Capital shares
At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. In certain circumstances shares may be purchased or redeemed through the delivery to the fund or receipt by the shareholders, respectively, of securities, the fair value of which is used to determine the number of shares issued or redeemed. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:
| YEAR ENDED 5/31/19 | YEAR ENDED 5/31/18 | |||
| Class I | Shares | Amount | Shares | Amount |
| Shares sold | 9,408,118 | $98,345,434 | 25,815,879 | $267,023,618* |
| Shares issued in connection with reinvestment of distributions | 967,551 | 9,752,912 | 112,154 | 1,149,582 |
| 10,375,669 | 108,098,346 | 25,928,033 | 268,173,200 | |
| Shares repurchased | (4,985,669) | (53,278,102) | (3,424,235) | (35,452,265) |
| Redemptions in kind | (9,756,098) | (100,000,000) | — | — |
| Net increase (decrease) | (4,366,098) | $(45,179,756) | 22,503,798 | $232,720,935 |
* Includes $149,464,534 received on November 28, 2017 from a subscription in kind (i.e. transfer of assets) by an institutional investor.
At the close of the reporting period, four shareholders of record owned 7.2%, 14.4%, 21.3% and 55.0%, respectively, of the outstanding shares of the fund.
Note 5: Affiliated transactions
Transactions during the reporting period with any company which is under common ownership or control were as follows:
| Shares | |||||
| outstanding | |||||
| and fair | |||||
| Fair value as | Purchase | Sale | Investment | value as | |
| Name of affiliate | of 5/31/18 | cost | proceeds | income | of 5/31/19 |
| Short-term investments | |||||
| Putnam Short Term Investment Fund* | $54,532,124 | $35,000,525 | $45,298,571 | $1,306,332 | $44,234,078 |
| Total Short-term investments | $54,532,124 | $35,000,525 | $45,298,571 | $1,306,332 | $44,234,078 |
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.
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 invest in higher-yielding, lower-rated bonds that may have a higher rate of default. 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. The fund may invest a significant portion of its assets in securitized debt instruments, including mortgage-backed and asset-backed investments. The yields and values of these investments are sensitive to changes in interest rates, the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market for these investments may be volatile and limited, which may make them difficult to buy or sell.
| Mortgage Opportunities Fund 43 |
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 TBA commitment option contracts (contract amount) | $130,400,000 |
| Purchased swap option contracts (contract amount) | $210,800,000 |
| Written TBA commitment option contracts (contract amount) | $191,300,000 |
| Written swap option contracts (contract amount) | $115,300,000 |
| Centrally cleared interest rate swap contracts (notional) | $935,800,000 |
| OTC total return swap contracts (notional) | $810,000 |
| OTC credit default contracts (notional) | $147,600,000 |
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 | ||||
| hedging instruments under | Statement of assets and | Statement of assets and | ||
| ASC 815 | liabilities location | Fair value | liabilities location | Fair value |
| Credit contracts | Receivables | $1,891,265 | Payables | $10,031,871 |
| Investments, Receivables, Net | Payables, Net assets — Unrealized | |||
| Interest rate contracts | assets — Unrealized appreciation | 7,333,024* | depreciation | 9,699,541* |
| Total | $9,224,289 | $19,731,412 | ||
* Includes cumulative appreciation/depreciation of centrally cleared swaps as reported in the fund’s portfolio. Only current day’s variation margin is reported within the Statement of assets and liabilities.
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 (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 | Swaps | Total |
| Credit contracts | $— | $2,971,297 | $2,971,297 |
| Interest rate contracts | (1,341,604) | (4,188,590) | $(5,530,194) |
| Total | $(1,341,604) | $(1,217,293) | $(2,558,897) |
| 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 | Swaps | Total |
| Credit contracts | $— | $(1,165,896) | $(1,165,896) |
| Interest rate contracts | (34,563) | (821,505) | $(856,068) |
| Total | $(34,563) | $(1,987,401) | $(2,021,964) |
| 44 Mortgage Opportunities Fund |
| This page left blank intentionally. |
| Mortgage Opportunities Fund 45 |
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.
| Barclays Bank PLC |
Barclays Capital, Inc. (clearing broker) |
Citigroup Global Markets, Inc. |
Credit Suisse International |
Goldman Sachs International |
JPMorgan Chase Bank N.A. |
JPMorgan Securities LLC |
Merrill Lynch International |
Morgan Stanley & Co. International PLC |
UBS AG | Total | |
| Assets: | |||||||||||
| Centrally cleared interest rate swap contracts§ | $— | $1,534,805 | $— | $— | $— | $— | $— | $— | $— | $— | $1,534,805 |
| OTC Total return swap contracts*# | 9,752 | — | — | — | 5,720 | — | 1,703 | — | — | — | 17,175 |
| OTC Credit default contracts — protection sold*# | — | — | — | 41 | — | — | — | — | — | — | 41 |
| OTC Credit default contracts — protection purchased*# | — | — | 399,862 | 104,030 | 144,486 | — | 599,756 | 64,824 | 578,266 | — | 1,891,224 |
| Forward premium swap option contracts# | — | — | — | — | — | — | — | — | — | 228,946 | 228,946 |
| Purchased swap options**# | — | — | — | — | 384,101 | 73,133 | — | — | — | — | 457,234 |
| Purchased options**# | — | — | — | — | — | 301,237 | — | — | — | — | 301,237 |
| Repurchase agreements** | — | — | 36,217,000 | — | — | — | — | — | — | — | 36,217,000 |
| Total Assets | $9,752 | $1,534,805 | $36,616,862 | $104,071 | $534,307 | $374,370 | $601,459 | $64,824 | $578,266 | $228,946 | $40,647,662 |
| Liabilities: | |||||||||||
| Centrally cleared interest rate swap contracts§ | — | 2,070,524 | — | — | — | — | — | — | — | — | 2,070,524 |
| OTC Total return swap contracts*# | — | — | — | 17,404 | 1,302 | — | 689 | — | — | — | 19,395 |
| OTC Credit default contracts — protection sold*# | 281 | — | 882,670 | 311,291 | 315,860 | — | 7,504,045 | 257,124 | 760,559 | — | 10,031,830 |
| OTC Credit default contracts — protection purchased*# | — | — | 41 | — | — | — | — | — | — | — | 41 |
| Forward premium swap option contracts# | — | — | — | — | — | — | — | — | — | 42,526 | 42,526 |
| Written swap options# | — | — | — | — | 333,277 | 68,739 | — | — | — | — | 402,016 |
| Written options# | — | — | — | — | — | 55,926 | — | — | — | — | 55,926 |
| Total Liabilities | $281 | $2,070,524 | $882,711 | $328,695 | $650,439 | $124,665 | $7,504,734 | $257,124 | $760,559 | $42,526 | $12,622,258 |
| Total Financial and Derivative Net Assets | $9,471 | $(535,719) | $35,734,151 | $(224,624) | $(116,132) | $249,705 | $(6,903,275) | $(192,300) | $(182,293) | $186,420 | $28,025,404 |
| Total collateral received (pledged)†## | $— | $— | $35,734,151 | $(224,624) | $(116,132) | $190,000 | $(6,828,500) | $(192,300) | $— | $110,000 | |
| Net amount | $9,471 | $(535,719) | $— | $— | $— | $59,705 | $(74,775) | $— | $(182,293) | $76,420 | |
| Controlled collateral received (including TBA commitments)** | $— | $— | $— | $— | $— | $190,000 | $115,000 | $— | $— | $110,000 | $415,000 |
| Uncontrolled collateral received | $— | $— | $36,941,340 | $— | $— | $— | $— | $— | $— | $— | $36,941,340 |
| Collateral (pledged) (including TBA commitments)** | $— | $— | $(453,362) | $(289,984) | $(226,183) | $— | $(6,828,500) | $(214,226) | $— | $— | $(8,012,255) |
* Excludes premiums, if any. Included in unrealized appreciation and depreciation on OTC swap contracts on the Statement of assets and liabilities.
** 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.
§ Includes current day’s variation margin only as reported on the Statement of assets and liabilities, which is not collateralized. Cumulative appreciation/(depreciation) for centrally cleared swap contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on centrally cleared swap contracts, which is not included in the table above, amounted to $2,260,810.
Note 9: New accounting pronouncements
In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017–08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310–20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities held at a premium, to be amortized to the earliest call date. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
| 46 Mortgage Opportunities Fund | Mortgage Opportunities Fund 47 |
Federal tax information (Unaudited)
The Form 1099 that will be mailed to you in January 2020 will show the tax status of all distributions paid to your account in calendar 2019.
| 48 Mortgage Opportunities Fund |
| Mortgage Opportunities Fund 49 |
* Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.
The address of each Trustee is 100 Federal Street, Boston, MA 02110.
As of May 31, 2019, there were 99 Putnam funds. All Trustees serve as Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.
In addition to Robert L. Reynolds, the other officers of the fund are shown below:
| Jonathan S. Horwitz (Born 1955) | Susan G. Malloy (Born 1957) |
| Executive Vice President, Principal Executive Officer, | Vice President and Assistant Treasurer |
| and Compliance Liaison | Since 2007 |
| Since 2004 | Head of Accounting, Middle Office, & Control Services, |
| Putnam Investments and Putnam Management | |
| Robert T. Burns (Born 1961) | |
| Vice President and Chief Legal Officer | Mark C. Trenchard (Born 1962) |
| Since 2011 | Vice President and BSA Compliance Officer |
| General Counsel, Putnam Investments, | Since 2002 |
| Putnam Management, and Putnam Retail Management | Director of Operational Compliance, Putnam |
| Investments and Putnam Retail Management | |
| James F. Clark (Born 1974) | |
| Vice President and Chief Compliance Officer | Nancy E. Florek (Born 1957) |
| Since 2016 | Vice President, Director of Proxy Voting and Corporate Governance, Assistant |
| Chief Compliance Officer, Putnam Investments | Clerk, and Assistant Treasurer |
| and Putnam Management | Since 2000 |
| Michael J. Higgins (Born 1976) | Denere P. Poulack (Born 1968) |
| Vice President, Treasurer, and Clerk | Assistant Vice President, Assistant Clerk, |
| Since 2010 | and Assistant Treasurer |
| Since 2004 | |
| Janet C. Smith (Born 1965) | |
| Vice President, Principal Financial Officer, Principal Accounting Officer, | |
| and Assistant Treasurer | |
| Since 2007 | |
| Head of Fund Administration Services, Putnam Investments and Putnam | |
| Management |
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 100 Federal Street, Boston, MA 02110.
| 50 Mortgage Opportunities Fund |
Putnam family of funds
The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial advisor or call Putnam Investor Services at 1-800-225-1581. Please read the prospectus carefully before investing.
| Blend | Income |
| Capital Spectrum Fund | Diversified Income Trust |
| Emerging Markets Equity Fund | Floating Rate Income Fund |
| Equity Spectrum Fund | Global Income Trust |
| Focused Equity Fund | Government Money Market Fund* |
| Global Equity Fund | High Yield Fund |
| International Capital Opportunities Fund | Income Fund |
| International Equity Fund | Money Market Fund† |
| Multi-Cap Core Fund | Mortgage Opportunities Fund |
| Research Fund | Mortgage Securities Fund |
| Short Duration Bond Fund | |
| Global Sector | Ultra Short Duration Income Fund |
| Global Health Care Fund | |
| Global Technology Fund | Tax-free Income |
| AMT-Free Municipal Fund | |
| Growth | Intermediate-Term Municipal Income Fund |
| Growth Opportunities Fund | Short-Term Municipal Income Fund |
| International Growth Fund | Tax Exempt Income Fund |
| Small Cap Growth Fund | Tax-Free High Yield Fund |
| Sustainable Future Fund | |
| Sustainable Leaders Fund | State tax-free income funds‡: |
| California, Massachusetts, Minnesota, | |
| Value | New Jersey, New York, Ohio, and Pennsylvania. |
| Convertible Securities Fund | |
| Equity Income Fund | |
| International Value Fund | |
| Small Cap Value Fund |
| Mortgage Opportunities Fund 51 |
| Absolute Return | Asset Allocation |
| Fixed Income Absolute Return Fund | Dynamic Risk Allocation Fund |
| Multi-Asset Absolute Return Fund | George Putnam Balanced Fund |
| Putnam PanAgora** | Dynamic Asset Allocation Balanced Fund |
| Putnam PanAgora Managed Futures Strategy | Dynamic Asset Allocation Conservative Fund |
| Putnam PanAgora Market Neutral Fund | Dynamic Asset Allocation Growth Fund |
| Putnam PanAgora Risk Parity Fund | |
| Retirement Income Fund Lifestyle 1 | |
| RetirementReady® 2060 Fund | |
| RetirementReady® 2055 Fund | |
| RetirementReady® 2050 Fund | |
| RetirementReady® 2045 Fund | |
| RetirementReady® 2040 Fund | |
| RetirementReady® 2035 Fund | |
| RetirementReady® 2030 Fund | |
| RetirementReady® 2025 Fund | |
| RetirementReady® 2020 Fund |
* You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
† You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
‡ Not available in all states.
** Sub-advised by PanAgora Asset Management.
Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.
| 52 Mortgage Opportunities Fund |
Fund information
Founded over 80 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 funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.
| Investment Manager | Trustees | James F. Clark |
| Putnam Investment | Kenneth R. Leibler, Chair | Vice President and |
| Management, LLC | Liaquat Ahamed | Chief Compliance Officer |
| 100 Federal Street | Ravi Akhoury | |
| Boston, MA 02110 | Barbara M. Baumann | Michael J. Higgins |
| Katinka Domotorffy | Vice President, Treasurer, | |
| Investment Sub-Advisor | Catharine Bond Hill | and Clerk |
| Putnam Investments Limited | Paul L. Joskow | |
| 16 St James’s Street | Robert E. Patterson | Janet C. Smith |
| London, England SW1A 1ER | George Putnam, III | Vice President, Principal Financial Officer, |
| Robert L. Reynolds | Principal Accounting Officer, and Assistant Treasurer | |
| Marketing Services | Manoj P. Singh | |
| Putnam Retail Management | Susan G. Malloy | |
| 100 Federal Street | Officers | Vice President and |
| Boston, MA 02110 | Robert L. Reynolds | Assistant Treasurer |
| President | ||
| Custodian | Mark C. Trenchard | |
| State Street Bank | Jonathan S. Horwitz | Vice President and |
| and Trust Company | Executive Vice President, | BSA Compliance Officer |
| Principal Executive Officer, | ||
| Legal Counsel | and Compliance Liaison | Nancy E. Florek |
| Ropes & Gray LLP | Vice President, Director of | |
| Robert T. Burns | Proxy Voting and Corporate | |
| Independent Registered | Vice President and | Governance, Assistant Clerk, |
| Public Accounting Firm | Chief Legal Officer | and Assistant Treasurer |
| PriceWaterhouseCoopers LLP | ||
| Denere P. Poulack | ||
| Assistant Vice President, Assistant | ||
| Clerk, and Assistant Treasurer |
This report is for the information of shareholders of Putnam Mortgage Opportunities 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.
| Item 2. Code of Ethics: |
| (a) The fund's principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers. |
| (c) In February 2018, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Prohibition of investing in public coin offerings or token offerings, (ii) Removal of monetary fines as available sanctions for violations of the Code of Ethics, and (iii) Expanded definition of “Immediate Family Member”. |
| Item 3. Audit Committee Financial Expert: |
| The Funds' Audit, Compliance and Distributions Committee is comprised solely of Trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Trustees believe that each of the members of the Audit, Compliance and Distributions Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that each of Mr. Patterson, Ms. Baumann and Mr. Singh qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on their review of his or her pertinent experience and education. The SEC has stated, and the funds' amended and restated agreement and Declaration of Trust provides, that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit, Compliance and Distribution Committee and the Board of Trustees in the absence of such designation or identification. |
| Item 4. Principal Accountant Fees and Services: |
| 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: |
| Fiscal year ended | Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees | |
| May 31, 2019 | $131,799 | $ — | $14,174 | $ — | |
| May 31, 2018 | $102,937 | $ — | $15,174 | $273 | |
| For the fiscal years ended May 31, 2019 and May 31, 2018, the fund's independent auditor billed aggregate non-audit fees in the amounts of $561,158 and $613,785 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. |
| 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. |
| All Other Fees represent fees billed for services relating to an analysis of fund profitability |
| 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 Audit, Compliance and Distributions Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds' independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm. |
| The following table presents fees billed by the fund's independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2–01 of Regulation S-X. |
| Fiscal year ended | Audit-Related Fees | Tax Fees | All Other Fees | Total Non-Audit Fees | |
| May 31, 2019 | $ — | $546,984 | $ — | $ — | |
| May 31, 2018 | $ — | $600,294 | $ — | $ — | |
| Item 5. Audit Committee of Listed Registrants |
| Not applicable |
| Item 6. Schedule of Investments: |
| 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: |
| Not applicable |
| Item 8. Portfolio Managers of Closed-End Investment Companies |
| Not Applicable |
| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
| Not applicable |
| Item 10. Submission of Matters to a Vote of Security Holders: |
| Not applicable |
| Item 11. 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 12. Disclosures of Securities Lending Activities for Closed-End Management Investment Companies: |
| Not Applicable |
| Item 13. Exhibits: |
| (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. |
| 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: July 26, 2019 |
| 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: July 26, 2019 |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Financial Officer |
| Date: July 26, 2019 |