Putnam
Dynamic Risk
Allocation Fund

Annual report
5 | 31 | 21

 

Message from the Trustees

July 14, 2021

Dear Fellow Shareholder:

This summer, the economy is in a much different condition than a year ago, or even six months ago. Most states have lifted the Covid-19 pandemic-related restrictions, and U.S. gross domestic product has returned nearly to pre-2020 levels. However, the global economy is a different story. Beyond our shores, many nations lag the United States in vaccination rates and business activity.

While there are reasons to feel some relief, it’s important to recognize what may be a new normal. Many changes hastened by the pandemic could be lasting. Dynamic, well-managed companies have adapted to seize new, more sustainable growth opportunities.

An active investment philosophy is well suited to this time. Putnam’s research teams are analyzing the fundamentals of what has stayed the same and what has changed to uncover valuable investment insights and potential risks.

Thank you for investing with Putnam.

Traditional balanced funds can be unbalanced in terms of risk. Instead of balancing stocks and bonds, Putnam Dynamic Risk Allocation Fund makes allocations across four different risk sources — equity, credit, inflation, and interest rates. We believe this flexible approach can produce better risk-adjusted returns for investors over time.

Diversification does not assure a profit or protect against loss. It is possible to lose money in a diversified portfolio.

The fund is not intended to outperform stocks and bonds during strong market rallies.

 

Illustrations are hypothetical and are not intended to represent the current allocation of any Putnam fund. A traditional balanced fund is represented by a 60%/40% split between equities and fixed income, as defined by Lipper. Risk contribution is from Putnam research, which uses the historical standard deviation for the respective asset classes multiplied by the appropriate asset weight. Leverage may be achieved either through short-term borrowing or through the use of derivatives. Asset weights may exceed 100% in funds that employ leverage due to borrowed capital and/or derivatives exposure. Risk, as measured by standard deviation, gauges how widely a set of values varies from the mean. It is a historical measure of the variability of return earned by an investment portfolio over a three-year period. Asset weight for Putnam Dynamic Risk Allocation Fund represents a baseline allocation selected by the fund’s portfolio managers and is subject to change. It is inclusive of leverage and represents a starting point for future active allocation.

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 10–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

Lipper peer group average provided by Lipper, a Refinitiv company.

* The Putnam Dynamic Risk Allocation Blended Index is an unmanaged index administered by Putnam Management. Effective September 1, 2020, the composition of the Putnam Dynamic Risk Allocation Blended Index is 60% MSCI World Index (ND) and 40% FTSE World Government Bond Index. Prior to September 1, 2020, the Putnam Dynamic Risk Allocation Blended Index was comprised as follows: 50% MSCI World Index (ND), 40% Bloomberg Barclays Global Aggregate Bond Index, and 10% S&P GSCI.

This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 5/31/21. See above and pages 10–12 for additional fund performance information. Index descriptions can be found on pages 16–17.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

 

How did markets perform during the period?

Global financial markets ended the period mostly higher. Key equity market indexes advanced, driven by progress on Covid-19 vaccinations, stimulus packages, loose monetary policy, and signs of economic recovery. Market momentum was periodically disrupted by concerns over a rising number of new Covid-19 variants, a global sell-off of technology stocks, and delays in the vaccine supply chain. For the 12-month reporting period, the S&P 500 Index — a broad measure of U.S. stock performance — rallied 40.32%. International stocks, as measured by the MSCI EAFE Index [ND], posted a return of 38.85% for the period.

We expect the U.S. economic recovery to support a stronger global comeback. President Biden’s $1.9 trillion pandemic relief package has added tailwinds to the U.S. economy, boosted by vaccine rollouts, in our view. The Federal Reserve has kept interest rates at record lows, and the European Central Bank has also pledged to hold rates at historic lows and up its bond-buying program. The rate-sensitive Bloomberg Barclays U.S. Aggregate Bond Index, a measure of investment-grade [IG] corporate bonds, fell 0.40% for the period. The yield on the

 

Allocations are shown as a percentage of the fund’s net assets as of 5/31/21. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

A negative percentage reflects the effect of fund strategies that are designed to enhance performance if certain securities decline in value.

benchmark 10-year U.S. Treasury note rose to 1.58% at the end of May 2021 from 0.66% at the beginning of the reporting period.

How did the fund perform in this environment?

For the 12-month reporting period, Putnam Dynamic Risk Allocation Fund’s class A shares rose 7.51%. The fund underperformed the custom benchmark, the Putnam Dynamic Risk Allocation Blended Index, which gained 24.23%.

What strategies helped and what detracted in the fund’s relative performance during this period?

Exposure to global equity markets was the primary driver of performance over the period. However, the fund lagged its custom benchmark due to a smaller allocation to equities.

Our dynamic allocation decisions added value to the portfolio. A tactical long position to commodity risk, implemented at the beginning of 2021, provided the largest boost to performance. Commodity markets have experienced recent gains due to the reopening of economies and easy monetary and fiscal policies. Positioning to equity risk also aided results. We began the period with a slightly underweight position relative to the policy portfolio. This weakened performance as equities rallied through the summer months of 2020 due to substantial U.S. stimulus and positive developments toward a Covid-19 vaccine. At the beginning of the third quarter of 2020, we moved our equity position to modestly overweight, and the position ranged from modestly overweight to overweight for the rest of the period. This more than offset earlier equity dynamic allocation losses, as major indexes soared to new highs driven by the election of President Biden, distribution of Covid-19

 

vaccines, and further fiscal stimulus. Positioning to interest-rate risk and credit risk was slightly additive over the year.

Active implementation decisions detracted from the fund’s relative performance over the period. Domestic equity selection weighed on the portfolio, specifically a strategy that targets U.S. low-beta (low-volatility) stocks. Selection within emerging-market equities and high-yield bonds weakened results. Our opportunistic fixed income and quantitative international equity strategies added to performance, helping to mitigate losses. Global macro positions also aided performance.

What is your outlook for the remainder of 2021?

Widespread vaccine distribution continues to aid the global economic recovery and a return to normal life. We are encouraged by the current tailwinds for financial assets, including an increase in consumer spending due to the economic reopening, the impact of U.S. stimulus, and dovish rhetoric on interest rates

This table shows the fund’s top 10 individual holdings and the percentage of the fund’s net assets that each represented as of 5/31/21. Short-term investments, TBA commitments, and derivatives, if any, are excluded. Holdings may vary over time.

 

from the Federal Reserve. Still, we anticipate some volatility in the months ahead as investors weigh the continued rollout of vaccines and the pace of reopening, with its implications for inflation and higher interest rates.

Given the current environment, we are bullish on equities in the second half of 2021 until the Fed is close to signaling a taper of its asset purchase program. The combination of pent-up demand and the Fed’s easy monetary policy makes a compelling case for equities, in our view. In fixed income, our outlook on credit is modestly bullish. Banks have begun easing credit conditions for large corporate commercial and industrial loans, and average total leverage for new high yield issues is back to the low levels seen in 2013.

Our view with regard to interest-rate risk is slightly bearish, as we believe risks are skewed to higher yields. This is based on expectations for continued economic momentum and the potential for an overreaction to some temporary inflation spikes. Upward pressure on yields could extend into the summer as an eventual taper and change in Federal Reserve policy slowly approaches. Against this backdrop, we continue to have conviction in our investment strategies based on their long-term results.

How did the fund use derivatives?

The fund used purchase and written options to hedge duration and convexity, against changes in values of securities it owns, owned, or expects to own and hedge prepayment risk. They were also used to isolate prepayment risk, to gain exposure to interest rates, to generate additional income, to enhance returns on securities owned, to gain exposure to securities, and to manage downside risks. The fund used futures to manage exposure to market risk, to hedge prepayment and interest-rate risks, to gain exposure to interest rates, and to equitize cash. Forward currency contracts were used to hedge foreign exchange risk and to gain exposure to currencies.

Total return swaps were used to hedge sector exposure, to manage exposure to specific sectors or industries, to manage exposure to specific securities, and to gain exposure to a basket of securities. They were also used to gain exposure to specific markets or countries and

Allocations are shown as a percentage of the fund’s net assets as of 5/31/21. Risk contribution is from Putnam research, which uses the historical standard deviation for the respective asset classes multiplied by the appropriate asset weight. Holdings and allocations may vary over time.

 

to specific sectors or industries, and to generate additional income. Credit default swaps were used to hedge credit and market risks, and to gain exposure to individual names and/or gain baskets of securities.

Thank you, Jason, for your time and insights today.

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. Statements in the Q&A concerning the fund’s performance or portfolio composition relative to those of the fund’s Lipper peer group may reference information produced by Lipper Inc. or through a third party.

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.

 

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2021, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 5/31/21

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 5.75% sales charge levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R6, and Y shares have no initial sales charge or CDSC. Performance for class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.

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

Class B and C share performance reflects conversion to class A shares after eight years.

 

 

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

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

Lipper peer group average provided by Lipper, a Refinitiv company.

^* The Putnam Dynamic Risk Allocation Blended Index is an unmanaged index administered by Putnam Management. Effective September 1, 2020, the composition of the Putnam Dynamic Risk Allocation Blended Index is 60% MSCI World Index (ND) and 40% FTSE World Government Bond Index. Prior to September 1, 2020, the Putnam Dynamic Risk Allocation Blended Index was comprised as follows: 50% MSCI World Index (ND), 40% Bloomberg Barclays Global Aggregate Bond Index, and 10% S&P GSCI.

^† Over the 1-year, 3-year, 5-year, and life-of-fund periods ended 5/31/21, there were 207, 194, 179, and 116 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would be valued at $13,073 and $13,079, respectively, and no contingent deferred sales charge would apply. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $13,553, $14,388, and $14,233, respectively.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

 

Fund price and distribution information For the 12-month period ended 5/31/21

 

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

The fund made no distributions during the period.

Fund performance as of most recent calendar quarter Total return for periods ended 6/30/21

 

See the discussion following the fund performance table on page 10 for information about the calculation of fund performance.

 

Your fund’s expenses

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

Expense ratios

 

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 9/30/21.

^† 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 each class of the fund from 12/1/20 to 5/31/21. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

 

^* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/21. The expense ratio may differ for each share class.

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

 

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 5/31/21, use the following calculation method. To find the value of your investment on 12/1/20, 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.

 

^* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/21. The expense ratio may differ for each share class.

^† 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.

 

Consider these risks before investing

Emerging-market securities carry illiquidity and volatility risks. The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk, which means 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. Allocation of assets among asset classes may hurt performance, and efforts to diversify risk through the use of leverage and allocation decisions may not be successful. If the quantitative models or data that are used in managing the fund prove to be incorrect or incomplete, investment decisions made in reliance on the models or data may not produce the desired results and the fund may realize losses. Derivatives carry additional risks, such as the inability to terminate or sell derivatives positions and the failure of the other party to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. 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). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Active trading strategies may lose money or not earn a return sufficient to cover trading and other costs. Use of leverage obtained through derivatives increases these risks by increasing investment exposure. Over-the-counter derivatives are also subject to the risk of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. REITs are subject to the risk of economic downturns that have an adverse impact on real estate markets. The use of short selling may result in losses if the securities appreciate in value. Commodities involve market, political, regulatory, and natural conditions risks. 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, asset class, geography, industry, or sector. International investing involves currency, economic, and political risks. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the 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.

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

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

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

Share classes

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

Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/or capital gains reinvestment. They are not subject to an initial sales charge and may be subject to a CDSC.

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

Class R shares are not subject to an initial sales charge or CDSC and are only available to employer-sponsored retirement plans.

Class R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.

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

Comparative indexes

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

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

ICE BofA (Intercontinental Exchange Bank of America) U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

FTSE World Government Bond Index measures the performance of fixed-rate, local-currency, investment-grade sovereign bonds.

MSCI ACWI (All Country World Index) (ND) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets.

MSCI EAFE Index (ND) is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia. Calculated with net dividends (ND),

 

this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.

MSCI World Index (ND) is an unmanaged index of equity securities from developed countries. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.

Putnam Dynamic Risk Allocation Blended Index is a benchmark administered by Putnam Management. As of September 1, 2020, the index comprises 60% the MSCI World Index (ND) and 40% the FTSE World Government Bond Index. Prior to September 1, 2020, the index was comprised of 50% the MSCI World Index (ND), 40% the Bloomberg Barclays Global Aggregate Bond Index, and 10% S&P GSCI.

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

S&P GSCI is a composite index of commodity sector returns that represents a broadly diversified, unleveraged, long-only position in commodity futures.

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.

BLOOMBERG^® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS^® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or limited, as to the results to be obtained therefrom, and to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

ICE Data Indices, LLC (“ICE BofA”), used with permission. ICE BofA permits use of the ICE BofA 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 BofA 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.

FTSE Russell is the source and owner of the trademarks, service marks, and copyrights related to the FTSE Indexes. FTSE^® is a trademark of FTSE Russell.

Lipper, a Refinitiv company, 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.

 

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, 2020, 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, 2021, Putnam employees had approximately $579,000,000 and the Trustees had approximately $81,000,000 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.

Liquidity risk management program

Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the most recent annual report on the program to the Trustees in April 2021. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from January 2020 through December 2020. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2020. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. The report also included a discussion of liquidity monitoring during the period, including during the market liquidity challenges caused by the Covid-19 pandemic, and the impact those challenges had on the liquidity of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.

 

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.

 

Audited 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 audited 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.

 

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Putnam Funds Trust and Shareholders of
Putnam Dynamic Risk Allocation Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam Dynamic Risk Allocation Fund (one of the funds constituting Putnam Funds Trust, referred to hereafter as the “Fund”) as of May 31, 2021, the related statement of operations and changes in net assets for the year ended May 31, 2021, including the related notes, and the financial highlights for the year ended May 31, 2021 (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, 2021, the results of its operations, changes in its net assets and the financial highlights for the year ended May 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Fund as of and for the year ended May 31, 2020 and the financial highlights for each of the periods ended on or prior to May 31, 2020 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated July 14, 2020 expressed an unqualified opinion on those financial statements and financial highlights.

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 audit. 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 audit 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 audit 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 audit 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, 2021 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 audit provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 14, 2021

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.

 

The fund’s portfolio 5/31/21

COMMON STOCKS (12.5%)*	Shares	Value
Basic materials (1.3%)
Anglo American PLC (United Kingdom)	2,799	$124,529
BHP Billiton, Ltd. (Australia)	438	16,157
BHP Group PLC (United Kingdom)	2,233	67,277
Compagnie De Saint-Gobain (France) †	1,874	125,277
Covestro AG (Germany)	1,509	105,441
CRH PLC (Ireland)	1,618	83,994
Eiffage SA (France)	465	51,227
Fortescue Metals Group, Ltd. (Australia)	4,677	80,871
Holcim, Ltd. (Switzerland)	1,449	86,118
ICL Group, Ltd. (Israel)	2,918	21,151
Nitto Denko Corp. (Japan)	1,000	77,298
Rio Tinto PLC (United Kingdom)	1,910	164,369
Shin-Etsu Chemical Co., Ltd. (Japan)	400	68,667
Stora Enso OYJ (Finland)	351	6,127
		1,078,503
Capital goods (0.6%)
Atlas Copco AB Class A (Sweden)	293	17,741
CNH Industrial NV (United Kingdom)	6,212	107,000
Daikin Industries, Ltd. (Japan)	400	78,682
Koito Manufacturing Co., Ltd. (Japan)	1,100	71,207
Legrand SA (France)	1,136	118,637
Sandvik AB (Sweden)	4,432	116,669
		509,936
Communication services (0.5%)
BT Group PLC (United Kingdom) †	14,190	35,211
Deutsche Telekom AG (Germany)	7,073	146,576
KDDI Corp. (Japan)	4,200	142,135
Koninklijke KPN NV (Netherlands)	17,972	59,568
Nippon Telegraph & Telephone Corp. (Japan)	2,400	64,056
		447,546
Consumer cyclicals (2.4%)
Adecco Group AG (Switzerland)	897	61,768
Aristocrat Leisure, Ltd. (Australia)	2,127	67,310
Berkeley Group Holdings PLC (The) (United Kingdom)	515	34,197
Bollore SA (France)	4,066	21,182
Brambles, Ltd. (Australia)	6,132	51,148
CK Hutchison Holdings, Ltd. (Hong Kong)	5,500	43,052
Compagnie Generale des Etablissements Michelin SCA (France)	234	35,897
Daito Trust Construction Co., Ltd. (Japan)	200	20,977
Daiwa House Industry Co., Ltd. (Japan)	2,200	64,216
Evolution Gaming Group LB (Sweden)	503	96,152
Genting Bhd (Singapore)	37,700	24,088
Hermes International (France)	100	140,542
Industria de Diseno Textil SA (Inditex) (Spain)	1,190	45,987
Knorr-Bremse AG (Germany)	499	61,885
La Francaise des Jeux SAEM (France)	409	23,217
LVMH Moet Hennessy Louis Vuitton SA (France)	58	46,115
Nintendo Co., Ltd. (Japan)	200	123,276

 

 

 

COMMON STOCKS (12.5%)* cont.	Shares	Value
Consumer cyclicals cont.
Nitori Holdings Co., Ltd. (Japan)	600	$103,601
Pandora A/S (Denmark)	478	64,557
Porsche Automobil Holding SE (Preference) (Germany)	742	83,697
Publicis Groupe SA (France)	512	34,652
Ryohin Keikaku Co., Ltd. (Japan)	900	17,036
SEB SA (France)	131	24,330
Sony Group Corp. (Japan)	1,600	157,108
Stellantis NV (Italy)	7,164	141,997
TABCORP Holdings, Ltd. (Australia)	7,887	31,069
Volkswagen AG (Preference) (Germany)	114	31,752
Volvo AB (Sweden)	4,638	121,254
Wesfarmers, Ltd. (Australia)	3,161	134,975
		1,907,037
Consumer staples (1.5%)
Auto Trader Group PLC (United Kingdom) †	3,445	27,456
Carlsberg A/S Class B (Denmark)	454	83,084
Coca-Cola Europacific Partners PLC (United Kingdom)	271	16,401
Coca-Cola HBC AG (Switzerland)	1,385	50,494
Coles Group, Ltd. (Australia)	2,433	31,079
Ferguson PLC (United Kingdom)	950	129,211
Imperial Brands PLC (United Kingdom)	5,357	121,638
ITOCHU Corp. (Japan)	4,100	121,281
Koninklijke Ahold Delhaize NV (Netherlands)	2,927	84,325
L’Oreal SA (France)	395	177,404
Nestle SA (Switzerland)	1,584	194,940
NH Foods, Ltd. (Japan)	700	27,883
Unilever PLC (United Kingdom)	444	26,631
WH Group, Ltd. (Hong Kong)	74,000	63,217
Woolworths Group, Ltd. (Australia)	4,061	130,297
		1,285,341
Energy (0.5%)
BP PLC (United Kingdom)	23,990	104,230
Equinor ASA (Norway)	5,378	115,534
Royal Dutch Shell PLC Class B (United Kingdom)	10,045	182,982
TOTAL SA (France)	623	28,797
		431,543
Financials (2.4%)
3i Group PLC (United Kingdom)	3,937	69,449
Allianz SE (Germany)	662	173,928
Aviva PLC (United Kingdom)	17,160	100,138
Banco Bilbao Vizcaya Argenta (Spain)	19,226	120,414
Bank Leumi Le-Israel BM (Israel) †	8,528	66,670
BOC Hong Kong Holdings, Ltd. (Hong Kong)	14,000	50,600
CK Asset Holdings, Ltd. (Hong Kong)	1,133	8,305
Commonwealth Bank of Australia (Australia)	1,379	106,009
DBS Group Holdings, Ltd. (Singapore)	6,100	138,513
Direct Line Insurance Group PLC (United Kingdom)	10,721	45,233
Gjensidige Forsikring ASA (Norway)	1,026	22,905
Goodman Group (Australia) R	8,086	121,117

 

 

 

COMMON STOCKS (12.5%)* cont.	Shares	Value
Financials cont.
Hargreaves Lansdown PLC (United Kingdom)	852	$20,035
Henderson Land Development Co., Ltd. (Hong Kong)	7,600	36,331
Israel Discount Bank, Ltd. Class A (Israel) †	8,098	40,228
Link REIT (The) (Hong Kong) R	1,000	9,522
NN Group NV (Netherlands)	216	10,939
Nomura Holdings, Inc. (Japan)	19,800	108,343
Partners Group Holding AG (Switzerland)	87	132,217
Persimmon PLC (United Kingdom)	778	34,890
RSA Insurance Group, Ltd. (United Kingdom)	7,847	76,193
Skandinaviska Enskilda Banken AB (Sweden)	5,166	65,974
Sumitomo Mitsui Financial Group, Inc. (Japan)	3,700	133,097
Sumitomo Mitsui Trust Holdings, Inc. (Japan)	1,400	48,067
Sumitomo Realty & Development Co., Ltd. (Japan)	500	16,566
Sun Hung Kai Properties, Ltd. (Hong Kong)	3,000	46,077
United Overseas Bank, Ltd. (Singapore)	3,100	61,109
Zurich Insurance Group AG (Switzerland)	86	35,911
		1,898,780
Government (—%)
Poste Italiane SpA (Italy)	2,042	28,798
		28,798
Health care (1.5%)
Eurofins Scientific (Luxembourg) †	461	49,622
Fisher & Paykel Healthcare Corp., Ltd. (New Zealand)	840	18,127
GlaxoSmithKline PLC (United Kingdom)	2,745	52,364
Hikma Pharmaceuticals PLC (United Kingdom)	1,427	49,494
Ipsen SA (France)	244	24,631
M3, Inc. (Japan)	500	33,719
Merck KGaA (Germany)	617	111,017
Novartis AG (Switzerland)	2,531	222,058
Novo Nordisk A/S Class B (Denmark)	2,228	175,845
Ono Pharmaceutical Co., Ltd. (Japan)	2,700	60,890
Roche Holding AG (Switzerland)	630	219,012
Sartorius Stedim Biotech (France)	139	60,072
Sonic Healthcare, Ltd. (Australia)	2,179	58,440
Sonova Holding AG (Switzerland)	290	103,104
		1,238,395
Technology (1.0%)
ASML Holding NV (Netherlands)	97	64,726
Brother Industries, Ltd. (Japan)	1,500	31,233
Capgemini SE (France)	497	92,516
Check Point Software Technologies, Ltd. (Israel) †	267	31,234
FUJIFILM Holdings Corp. (Japan)	200	13,886
Fujitsu, Ltd. (Japan)	600	97,155
Hoya Corp. (Japan)	1,000	130,651
Lasertec Corp. (Japan)	200	37,511
Logitech International SA (Switzerland)	466	57,713
Nomura Research Institute, Ltd. (Japan)	2,600	82,615
Omron Corp. (Japan)	600	47,089
Sage Group PLC (The) (United Kingdom)	5,482	51,082

 

 

 

COMMON STOCKS (12.5%)* cont.	Shares	Value
Technology cont.
SCSK Corp. (Japan)	400	$23,126
Thales SA (France)	110	11,249
Tokyo Electron, Ltd. (Japan)	200	88,606
		860,392
Transportation (0.4%)
A. P. Moeller-Maersck A/S Class B (Denmark)	15	41,397
Deutsche Post AG (Germany)	2,280	155,143
Nippon Express Co., Ltd. (Japan)	900	71,862
Nippon Yusen KK (Japan)	1,500	61,661
Yamato Holdings Co., Ltd. (Japan)	1,300	35,626
		365,689
Utilities and power (0.4%)
AGL Energy, Ltd. (Australia)	4,526	28,331
CLP Holdings, Ltd. (Hong Kong)	9,500	96,519
E.ON SE (Germany)	2,076	25,030
Electricite De France SA (France) †	4,365	60,814
Fortum OYJ (Finland)	3,341	94,969
Glow Energy PCL (Thailand) † F	400	—
Tokyo Gas Co., Ltd. (Japan)	1,600	31,560
		337,223
Total common stocks (cost $8,036,508)		$10,389,183

CORPORATE BONDS AND NOTES (5.1%)*		Principal  amount	Value
Basic materials (0.3%)
CF Industries, Inc. 144A company guaranty sr. notes 4.50%, 12/1/26		$43,000	$49,493
Freeport-McMoRan, Inc. company guaranty sr. unsec. notes 4.375%, 8/1/28 (Indonesia)		25,000	26,387
Glencore Funding, LLC 144A company guaranty sr. unsec. notes 2.50%, 9/1/30		36,000	35,275
Huntsman International, LLC sr. unsec. notes 4.50%, 5/1/29		40,000	45,151
International Flavors & Fragrances, Inc. sr. unsec. notes 4.45%, 9/26/28		9,000	10,280
International Flavors & Fragrances, Inc. 144A company guaranty sr. unsec. bonds 3.468%, 12/1/50		3,000	2,982
International Flavors & Fragrances, Inc. 144A sr. unsec. notes 2.30%, 11/1/30		8,000	7,839
Kraton Polymers, LLC 144A company guaranty sr. unsec. notes 4.25%, 12/15/25		45,000	45,573
Nutrien, Ltd. sr. unsec. notes 2.95%, 5/13/30 (Canada)		8,000	8,366
Nutrien, Ltd. sr. unsec. sub. bonds 4.20%, 4/1/29 (Canada)		14,000	16,004
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes 7.95%, 2/15/31		7,000	9,873
			257,223
Capital goods (0.1%)
American Axle & Manufacturing, Inc. company guaranty sr. unsec. unsub. notes 6.25%, 4/1/25		30,000	31,047
Berry Global Escrow Corp. 144A sr. notes 4.875%, 7/15/26		22,000	23,238
Boeing Co. (The) sr. unsec. bonds 5.93%, 5/1/60		10,000	13,040

 

 

 

CORPORATE BONDS AND NOTES (5.1%)* cont.		Principal  amount	Value
Capital goods cont.
Johnson Controls International PLC sr. unsec. unsub. bonds 4.50%, 2/15/47		$8,000	$9,519
L3Harris Technologies, Inc. sr. unsec. notes 3.85%, 12/15/26		10,000	11,185
L3Harris Technologies, Inc. sr. unsec. sub. notes 4.40%, 6/15/28		5,000	5,726
Oshkosh Corp. sr. unsec. sub. notes 4.60%, 5/15/28		21,000	23,985
Oshkosh Corp. sr. unsec. unsub. notes 3.10%, 3/1/30		3,000	3,132
			120,872
Communication services (0.4%)
American Tower Corp. sr. unsec. bonds 2.70%, 4/15/31 R		69,000	69,814
AT&T, Inc. sr. unsec. bonds 4.30%, 2/15/30		8,000	9,114
AT&T, Inc. 144A sr. unsec. bonds 3.55%, 9/15/55		48,000	45,553
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. company guaranty sr. notes 3.75%, 2/15/28		3,000	3,266
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. company guaranty sr. sub. bonds 6.484%, 10/23/45		9,000	11,876
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. company guaranty sr. sub. bonds 5.375%, 5/1/47		24,000	28,066
Cox Communications, Inc. 144A company guaranty sr. unsec. bonds 2.95%, 10/1/50		15,000	13,473
Equinix, Inc. sr. unsec. sub. notes 3.20%, 11/18/29 R		19,000	20,092
Quebecor Media, Inc. sr. unsec. unsub. notes 5.75%, 1/15/23 (Canada)		5,000	5,300
T-Mobile USA, Inc. company guaranty sr. notes 3.875%, 4/15/30		10,000	10,949
T-Mobile USA, Inc. company guaranty sr. notes 3.75%, 4/15/27		26,000	28,582
Verizon Communications, Inc. sr. unsec. bonds 3.70%, 3/22/61		23,000	23,256
Verizon Communications, Inc. sr. unsec. notes 2.55%, 3/21/31		12,000	12,078
Verizon Communications, Inc. sr. unsec. unsub. notes 4.329%, 9/21/28		19,000	21,852
Videotron, Ltd./Videotron Ltee. 144A sr. unsec. notes 5.125%, 4/15/27 (Canada)		45,000	47,025
			350,296
Consumer cyclicals (0.5%)
Amazon.com, Inc. sr. unsec. notes 2.50%, 11/29/22		24,000	24,677
Amazon.com, Inc. sr. unsec. unsub. notes 3.30%, 12/5/21		68,000	68,707
General Motors Co. sr. unsec. bonds 5.95%, 4/1/49		6,000	7,852
General Motors Financial Co., Inc. company guaranty sr. unsec. notes 4.00%, 10/6/26		6,000	6,641
Global Payments, Inc. sr. unsec. notes 2.90%, 5/15/30		21,000	21,548
IHS Markit, Ltd. sr. unsec. sub. bonds 4.75%, 8/1/28 (United Kingdom)		5,000	5,819
IHS Markit, Ltd. 144A company guaranty notes 4.75%, 2/15/25 (United Kingdom)		56,000	62,930
Interpublic Group of Cos., Inc. (The) sr. unsec. sub. bonds 4.65%, 10/1/28		42,000	48,793
Omnicom Group, Inc. company guaranty sr. unsec. unsub. notes 3.60%, 4/15/26		5,000	5,543
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes 5.50%, 3/1/26		2,000	2,340

 

 

 

CORPORATE BONDS AND NOTES (5.1%)* cont.		Principal  amount	Value
Consumer cyclicals cont.
S&P Global, Inc. company guaranty sr. unsec. unsub. notes 2.95%, 1/22/27		$9,000	$9,729
Sirius XM Radio, Inc. 144A sr. unsec. bonds 5.00%, 8/1/27		60,000	62,700
Square, Inc. 144A sr. unsec. bonds 3.50%, 6/1/31		25,000	25,005
ViacomCBS, Inc. company guaranty sr. unsec. bonds 4.20%, 6/1/29		16,000	17,896
ViacomCBS, Inc. company guaranty sr. unsec. unsub. bonds 2.90%, 1/15/27		13,000	13,731
			383,911
Consumer staples (0.3%)
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes 7.00%, 10/15/37		62,000	90,541
Keurig Dr Pepper, Inc. company guaranty sr. unsec. notes 2.25%, 3/15/31		20,000	19,790
Keurig Dr Pepper, Inc. company guaranty sr. unsec. unsub. notes 4.597%, 5/25/28		17,000	19,832
Kraft Heinz Foods Co. company guaranty sr. unsec. bonds 4.375%, 6/1/46		25,000	26,863
Kraft Heinz Foods Co. company guaranty sr. unsec. sub. notes 3.875%, 5/15/27		4,000	4,380
Lamb Weston Holdings, Inc. 144A company guaranty sr. unsec. unsub. notes 4.875%, 11/1/26		65,000	67,330
Netflix, Inc. sr. unsec. unsub. notes 4.375%, 11/15/26		40,000	45,112
			273,848
Energy (0.6%)
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes 5.125%, 6/30/27		40,000	46,441
Energy Transfer Partners LP/Regency Energy Finance Corp. company guaranty sr. unsec. unsub. notes 5.875%, 3/1/22		3,000	3,080
Holly Energy Partners LP/Holly Energy Finance Corp. 144A company guaranty sr. unsec. notes 5.00%, 2/1/28		27,000	27,675
Petrobras Global Finance BV company guaranty sr. unsec. unsub. notes 5.999%, 1/27/28 (Brazil)		45,000	51,356
Petrobras Global Finance BV company guaranty sr. unsec. unsub. notes 5.60%, 1/3/31 (Brazil)		45,000	49,635
Petrobras Global Finance BV company guaranty sr. unsec. unsub. notes 5.299%, 1/27/25 (Brazil)		5,000	5,581
Petroleos de Venezuela SA company guaranty sr. unsec. bonds Ser. REGS, 6.00%, 11/15/26 (Venezuela) (In default) †		110,000	4,950
Petroleos Mexicanos company guaranty sr. unsec. unsub. FRB 7.69%, 1/23/50 (Mexico)		10,000	9,600
Petroleos Mexicanos company guaranty sr. unsec. unsub. FRB 5.95%, 1/28/31 (Mexico)		82,000	79,745
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes 6.50%, 3/13/27 (Mexico)		24,000	25,538
Sabine Pass Liquefaction, LLC sr. bonds 4.20%, 3/15/28		9,000	10,045
Sabine Pass Liquefaction, LLC sr. notes 5.00%, 3/15/27		12,000	13,903
Spectra Energy Partners LP sr. unsec. notes 3.375%, 10/15/26		8,000	8,692
Total Capital International SA company guaranty sr. unsec. unsub. notes 2.75%, 6/19/21 (France)		117,000	117,144
Transcanada Trust company guaranty jr. unsec. sub. FRB 5.30%, 3/15/77 (Canada)		25,000	26,375
			479,760

 

 

 

CORPORATE BONDS AND NOTES (5.1%)* cont.		Principal  amount	Value
Financials (1.7%)
Air Lease Corp. sr. unsec. sub. bonds 4.625%, 10/1/28		$40,000	$44,612
Air Lease Corp. sr. unsec. sub. notes 3.25%, 10/1/29		13,000	13,233
American Express Co. sr. unsec. notes 2.65%, 12/2/22		35,000	36,272
American International Group, Inc. jr. unsec. sub. FRB 8.175%, 5/15/58		1,000	1,465
Ares Capital Corp. sr. unsec. sub. notes 3.875%, 1/15/26		40,000	42,857
Bank of America Corp. jr. unsec. sub. FRN Ser. AA, 6.10%, perpetual maturity		49,000	55,064
Bank of Montreal unsec. sub. FRN 3.803%, 12/15/32 (Canada)		4,000	4,425
Bank of Nova Scotia (The) sr. unsec. notes 2.00%, 11/15/22 (Canada)		40,000	41,041
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.70%, 3/7/22 (Canada)		8,000	8,150
Cantor Fitzgerald LP 144A unsec. notes 6.50%, 6/17/22		32,000	33,787
CIT Group, Inc. sr. unsec. unsub. notes 5.25%, 3/7/25		54,000	61,020
Citigroup, Inc. jr. unsec. sub. FRN 3.875%, 2/18/51		35,000	35,245
Citigroup, Inc. sr. unsec. FRB 3.668%, 7/24/28		1,000	1,105
Citigroup, Inc. sr. unsec. unsub. notes 4.50%, 1/14/22		35,000	35,922
Citigroup, Inc. unsec. sub. bonds 4.45%, 9/29/27		10,000	11,445
Digital Realty Trust LP company guaranty sr. unsec. bonds 4.45%, 7/15/28 R		33,000	37,875
Fairfax Financial Holdings, Ltd. sr. unsec. notes 4.85%, 4/17/28 (Canada)		30,000	33,925
Fairfax US, Inc. 144A company guaranty sr. unsec. notes 4.875%, 8/13/24		31,000	34,174
Fifth Third Bancorp jr. unsec. sub. FRB 5.10%, perpetual maturity		12,000	12,240
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes 5.75%, 1/24/22		45,000	46,606
Intercontinental Exchange, Inc. sr. unsec. bonds 2.65%, 9/15/40		14,000	13,093
Intercontinental Exchange, Inc. sr. unsec. bonds 1.85%, 9/15/32		8,000	7,460
JPMorgan Chase & Co. jr. unsec. bonds 6.10%, perpetual maturity		5,000	5,425
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. HH, 4.60%, perpetual maturity		25,000	25,500
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. W, (BBA LIBOR USD 3 Month + 1.00%), 1.156%, 5/15/47		20,000	16,850
JPMorgan Chase & Co. jr. unsec. sub. FRN 3.65%, perpetual maturity		5,000	4,968
JPMorgan Chase & Co. sr. unsec. unsub. FRB 3.964%, 11/15/48		14,000	15,703
JPMorgan Chase & Co. unsec. sub. FRB 2.956%, 5/13/31		11,000	11,403
JPMorgan Chase & Co. unsec. sub. notes 3.375%, 5/1/23		70,000	74,008
Mitsubishi UFJ Financial Group, Inc. sr. unsec. notes 3.535%, 7/26/21 (Japan)		76,000	76,355
Morgan Stanley sr. unsec. unsub. notes Ser. GMTN, 5.50%, 7/28/21		25,000	25,204
Morgan Stanley sr. unsec. unsub. notes Ser. GMTN, 3.125%, 1/23/23		125,000	130,772
Neuberger Berman Group, LLC/Neuberger Berman Finance Corp. 144A sr. unsec. notes 4.875%, 4/15/45		10,000	11,101
New York Life Global Funding 144A notes 1.10%, 5/5/23		110,000	111,692
PNC Financial Services Group, Inc. (The) sr. unsec. notes 3.30%, 3/8/22		11,000	11,230

 

 

 

CORPORATE BONDS AND NOTES (5.1%)* cont.		Principal  amount	Value
Financials cont.
Royal Bank of Canada sr. unsec. unsub. notes Ser. GMTN, 2.80%, 4/29/22 (Canada)		$2,000	$2,048
Toronto-Dominion Bank (The) unsec. sub. FRB 3.625%, 9/15/31 (Canada)		2,000	2,224
Truist Financial Corp. jr. unsec. sub. FRB Ser. N, 4.80%, 9/1/24		20,000	21,275
U.S. Bancorp sr. unsec. unsub. notes Ser. V, 2.625%, 1/24/22		4,000	4,055
U.S. Bancorp unsec. sub. notes unsec. sub. notes Ser. MTN, 2.95%, 7/15/22		18,000	18,510
UBS AG/London 144A sr. unsec. notes 1.75%, 4/21/22 (United Kingdom)		200,000	202,526
Wells Fargo & Co. jr. unsec. sub. FRB Ser. U, 5.875%, perpetual maturity		22,000	24,448
Wells Fargo & Co. jr. unsec. sub. FRN 3.90%, 3/15/26		15,000	15,376
Westpac Banking Corp. unsec. sub. bonds 4.421%, 7/24/39 (Australia)		6,000	6,940
Westpac Banking Corp. unsec. sub. bonds 2.963%, 11/16/40 (Australia)		15,000	14,265
			1,442,894
Health care (0.4%)
AbbVie, Inc. sr. unsec. notes 3.20%, 11/21/29		6,000	6,440
Becton Dickinson and Co. sr. unsec. notes 2.823%, 5/20/30		11,000	11,395
Bristol-Myers Squibb Co. sr. unsec. notes 3.25%, 2/20/23		67,000	70,256
Bristol-Myers Squibb Co. sr. unsec. notes 3.25%, 8/15/22		45,000	46,635
Bristol-Myers Squibb Co. sr. unsec. notes 2.25%, 8/15/21		35,000	35,148
HCA, Inc. company guaranty sr. notes 4.125%, 6/15/29		18,000	20,170
HCA, Inc. company guaranty sr. sub. bonds 5.50%, 6/15/47		10,000	12,588
HCA, Inc. company guaranty sr. unsec. unsub. notes 5.375%, 2/1/25		15,000	16,781
Service Corp. International sr. unsec. notes 4.625%, 12/15/27		10,000	10,550
Service Corp. International sr. unsec. notes 3.375%, 8/15/30		5,000	4,856
UnitedHealth Group, Inc. sr. unsec. unsub. notes 2.00%, 5/15/30		22,000	21,901
Viatris, Inc. 144A company guaranty sr. unsec. notes 2.30%, 6/22/27		8,000	8,158
Zoetis, Inc. sr. unsec. sub. notes 2.00%, 5/15/30		20,000	19,556
			284,434
Technology (0.5%)
Apple, Inc. sr. unsec. notes 0.75%, 5/11/23		40,000	40,416
Broadcom, Inc. company guaranty sr. unsec. bonds 4.15%, 11/15/30		50,000	54,768
Broadcom, Inc. 144A company guaranty sr. unsec. bonds 3.75%, 2/15/51		10,000	9,739
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. bonds 8.35%, 7/15/46		7,000	10,980
Microchip Technology, Inc. company guaranty sr. notes 4.333%, 6/1/23		16,000	17,139
Microsoft Corp. sr. unsec. unsub. notes 2.40%, 2/6/22		10,000	10,133
Microsoft Corp. sr. unsec. unsub. notes 1.55%, 8/8/21		82,000	82,115
Oracle Corp. sr. unsec. notes 2.50%, 5/15/22		51,000	51,929
Oracle Corp. sr. unsec. unsub. notes 3.625%, 7/15/23		40,000	42,691
Oracle Corp. sr. unsec. unsub. notes 2.50%, 10/15/22		22,000	22,659

 

 

 

CORPORATE BONDS AND NOTES (5.1%)* cont.		Principal  amount	Value
Technology cont.
Oracle Corp. sr. unsec. unsub. notes 1.90%, 9/15/21		$35,000	$35,125
Qorvo, Inc. 144A company guaranty sr. unsec. bonds 3.375%, 4/1/31		14,000	14,238
Salesforce.com, Inc. sr. unsec. unsub. notes 3.70%, 4/11/28		10,000	11,322
Sensata Technologies, Inc. 144A company guaranty sr. unsec. notes 3.75%, 2/15/31		30,000	29,288
			432,542
Utilities and power (0.3%)
AES Corp. (The) 144A sr. unsec. bonds 2.45%, 1/15/31		25,000	24,261
Duke Energy Progress, LLC sr. notes 3.375%, 9/1/23		15,000	16,022
Enbridge, Inc. sr. unsec. unsub. bonds 4.25%, 12/1/26 (Canada)		9,000	10,136
Energy Transfer LP jr. unsec. sub. FRN 6.625%, perpetual maturity		36,000	34,830
Energy Transfer Operating LP company guaranty sr. unsec. notes 5.875%, 1/15/24		24,000	26,714
Energy Transfer Operating LP company guaranty sr. unsec. notes 2.90%, 5/15/25		10,000	10,538
Energy Transfer Operating LP sr. unsec. unsub. bonds 6.125%, 12/15/45		7,000	8,436
IPALCO Enterprises, Inc. sr. notes 4.25%, 5/1/30		15,000	16,684
IPALCO Enterprises, Inc. sr. sub. notes 3.70%, 9/1/24		14,000	15,122
Kinder Morgan Energy Partners LP company guaranty sr. unsec. notes 5.40%, 9/1/44		14,000	16,874
NRG Energy, Inc. 144A company guaranty sr. notes 3.75%, 6/15/24		12,000	12,792
Vistra Operations Co., LLC 144A company guaranty sr. notes 4.30%, 7/15/29		9,000	9,553
Vistra Operations Co., LLC 144A company guaranty sr. notes 3.55%, 7/15/24		9,000	9,463
			211,425
Total corporate bonds and notes (cost $4,134,598)			$4,237,205

MORTGAGE-BACKED SECURITIES (4.2%)*		Principal  amount	Value
Agency collateralized mortgage obligations (0.1%)
Federal Home Loan Mortgage Corporation REMICs IFB Ser. 3829, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.95%), 6.849%, 3/15/41		$66,155	$13,574
Government National Mortgage Association
IFB Ser. 13-99, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 6/20/43		156,424	32,027
Ser. 17-162, Class QI, IO, 5.00%, 10/20/47		82,667	15,712
Ser. 16-123, Class LI, IO, 3.50%, 3/20/44		174,530	14,172
Ser. 17-H22, Class EI, IO, 2.536%, 10/20/67 W		245,844	19,218
Ser. 15-H26, Class DI, IO, 1.922%, 10/20/65 W		242,177	19,292
			113,995
Commercial mortgage-backed securities (2.3%)
BANK
FRB Ser. 17-BNK8, Class B, 3.926%, 11/15/50 W		25,000	27,698
Ser. 19-BN24, Class AS, 3.283%, 11/15/62 W		26,000	28,080
Barclays Commercial Mortgage Trust
Ser. 19-C3, Class B, 4.096%, 5/15/52		21,000	22,437
Ser. 19-C5, Class AS, 3.366%, 11/15/52 W		57,000	61,460

 

 

 

MORTGAGE-BACKED SECURITIES (4.2%)* cont.		Principal  amount	Value
Commercial mortgage-backed securities cont.
CD Commercial Mortgage Trust FRB Ser. 17-CD6, Class AM, 3.709%, 11/13/50 W		$18,000	$19,777
CFCRE Commercial Mortgage Trust FRB Ser. 17-C8, Class B, 4.199%, 6/15/50 W		35,000	38,124
Citigroup Commercial Mortgage Trust
FRB Ser. 13-GC17, Class C, 5.109%, 11/10/46 W		17,000	17,891
Ser. 13-GC11, Class B, 3.732%, 4/10/46 W		31,000	32,365
FRB Ser. 14-GC19, Class XA, IO, 1.134%, 3/10/47 W		946,561	24,523
Citigroup Commercial Mortgage Trust 144A
FRB Ser. 14-GC19, Class D, 5.092%, 3/10/47 W		13,000	13,975
FRB Ser. 12-GC8, Class XA, IO, 1.736%, 9/10/45 W		572,641	7,825
COMM Mortgage Trust
FRB Ser. 13-CR13, Class C, 4.883%, 11/10/46 W		43,000	46,870
Ser. 14-UBS2, Class B, 4.701%, 3/10/47		24,000	26,160
FRB Ser. 14-UBS6, Class C, 4.445%, 12/10/47 W		51,000	53,723
FRB Ser. 15-CR24, Class B, 4.379%, 8/10/48 W		40,000	44,088
Ser. 14-UBS3, Class B, 4.313%, 6/10/47		16,000	17,120
3.829%, 2/10/48 W		39,000	41,924
FRB Ser. 14-LC15, Class XA, IO, 1.069%, 4/10/47 W		1,186,961	29,555
FRB Ser. 13-CR11, Class XA, IO, 0.916%, 8/10/50 W		619,304	11,081
CSMC Trust FRB Ser. 16-NXSR, Class C, 4.356%, 12/15/49 W		125,000	108,660
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass-Through Certificates FRB Ser. K108, Class X1, IO, 1.69%, 3/25/30 W		126,989	16,481
Multifamily Structured Pass-Through Certificates FRB Ser. K105, Class X1, IO, 1.523%, 1/25/30 W		230,818	26,440
Multifamily Structured Pass-Through Certificates FRB Ser. K104, Class XAM, IO, 1.384%, 1/25/30 W		159,000	17,313
Multifamily Structured Pass-Through Certificates FRB Ser. K114, Class XAM, IO, 1.342%, 6/25/30 W		374,000	40,166
Multifamily Structured Pass-Through Certificates FRB Ser. K115, Class X1, IO, 1.328%, 6/25/30 W		309,827	30,806
Multifamily Structured Pass-Through Certificates FRB Ser. K121, Class X1, IO, 1.028%, 10/25/30 W		281,779	23,050
Multifamily Structured Pass-Through Certificates FRB Ser. KW01, Class X1, IO, 0.968%, 1/25/26 W		383,768	14,432
Multifamily Structured Pass-Through Certificates FRB Ser. K087, Class X1, IO, 0.362%, 12/25/28 W		801,097	21,221
GS Mortgage Securities Trust
Ser. 15-GC32, Class AS, 4.018%, 7/10/48 W		25,000	27,300
Ser. 13-GC12, Class B, 3.777%, 6/10/46 W		19,000	19,862
Ser. 19-GC40, Class AS, 3.412%, 7/10/52		29,000	31,353
Ser. 19-GC42, Class AS, 3.212%, 9/1/52		23,000	24,502
GS Mortgage Securities Trust 144A FRB Ser. 13-GC14, Class B, 4.742%, 8/10/46 W		23,000	24,605
JPMBB Commercial Mortgage Securities Trust
FRB Ser. 14-C22, Class C, 4.553%, 9/15/47 W		86,000	80,980
Ser. 14-C19, Class B, 4.394%, 4/15/47 W		16,000	17,363
Ser. 15-C29, Class B, 4.118%, 5/15/48 W		35,000	37,776

 

 

 

MORTGAGE-BACKED SECURITIES (4.2%)* cont.		Principal  amount	Value
Commercial mortgage-backed securities cont.
JPMBB Commercial Mortgage Securities Trust
FRB Ser. 13-C12, Class B, 4.099%, 7/15/45 W		$22,000	$22,774
FRB Ser. 14-C22, Class XA, IO, 0.828%, 9/15/47 W		3,005,362	69,090
JPMorgan Chase Commercial Mortgage Securities Trust Ser. 13-C16, Class AS, 4.517%, 12/15/46		18,000	19,385
LSTAR Commercial Mortgage Trust 144A FRB Ser. 15-3, Class B, 3.216%, 4/20/48 W		147,000	151,464
Morgan Stanley Bank of America Merrill Lynch Trust
FRB Ser. 14-C17, Class C, 4.479%, 8/15/47 W		44,000	44,078
FRB Ser. 15-C24, Class B, 4.344%, 5/15/48 W		18,000	19,715
Ser. 14-C16, Class AS, 4.094%, 6/15/47		18,000	19,124
Ser. 14-C15, Class A4, 4.051%, 4/15/47		19,000	20,555
Ser. 13-C8, Class B, 3.559%, 12/15/48 W		21,000	21,661
Ser. 12-C6, Class AS, 3.476%, 11/15/45		19,000	19,548
FRB Ser. 13-C12, Class XA, IO, 0.584%, 10/15/46 W		665,899	7,386
Morgan Stanley Bank of America Merrill Lynch Trust 144A FRB Ser. 12-C5, Class E, 4.663%, 8/15/45 W		28,000	28,419
Morgan Stanley Capital I Trust Ser. 16-BNK2, Class AS, 3.282%, 11/15/49		31,000	33,260
Morgan Stanley Capital I Trust 144A FRB Ser. 11-C3, Class B, 5.216%, 7/15/49 W		35,000	35,070
UBS-Barclays Commercial Mortgage Trust 144A FRB Ser. 12-C2, Class D, 4.887%, 5/10/63 W		48,000	33,023
Wells Fargo Commercial Mortgage Trust
Ser. 18-C48, Class B, 4.904%, 1/15/52 W		14,000	16,341
Ser. 18-C46, Class B, 4.633%, 8/15/51		16,000	18,386
Ser. 15-NXS3, Class AS, 3.972%, 9/15/57 W		15,000	16,405
WF-RBS Commercial Mortgage Trust
Ser. 13-UBS1, Class AS, 4.306%, 3/15/46 W		48,000	50,795
FRB Ser. 13-C11, Class C, 4.186%, 3/15/45 W		45,000	46,351
WF-RBS Commercial Mortgage Trust 144A
FRB Ser. 12-C6, Class D, 5.614%, 4/15/45 W		25,000	25,342
FRB Ser. 11-C3, Class D, 5.598%, 3/15/44 W		45,266	24,217
FRB Ser. 11-C5, Class XA, IO, 1.633%, 11/15/44 W		666,288	133
FRB Ser. 12-C10, Class XA, IO, 1.516%, 12/15/45 W		751,582	12,137
			1,881,645
Residential mortgage-backed securities (non-agency) (1.8%)
Citigroup Mortgage Loan Trust, Inc. FRB Ser. 05-2, Class 1A2A, 2.796%, 5/25/35 W		25,803	26,792
Countrywide Alternative Loan Trust
FRB Ser. 06-OA7, Class 1A2, (1 Month US LIBOR + 0.94%), 1.067%, 6/25/46		117,292	107,099
FRB Ser. 07-OH1, Class A1D, (1 Month US LIBOR + 0.21%), 0.302%, 4/25/47		19,542	14,554
Ellington Financial Mortgage Trust 144A Ser. 20-1, Class A1, 2.006%, 5/25/65 W		60,202	61,037
Federal Home Loan Mortgage Corporation
Structured Agency Credit Risk Debt FRN Ser. 16-DNA1, Class M3, (1 Month US LIBOR + 5.55%), 5.642%, 7/25/28		195,243	204,688
Structured Agency Credit Risk Debt FRN Ser. 16-DNA2, Class M3, (1 Month US LIBOR + 4.65%), 4.742%, 10/25/28		171,285	179,126

 

 

 

MORTGAGE-BACKED SECURITIES (4.2%)* cont.		Principal  amount	Value
Residential mortgage-backed securities (non-agency) cont.
Federal Home Loan Mortgage Corporation 144A
Structured Agency Credit Risk Trust FRB Ser. 18-HRP2, Class M3, (1 Month US LIBOR + 2.40%), 2.492%, 2/25/47		$38,000	$38,517
Structured Agency Credit Risk Trust FRB Ser. 19-HQA1, Class M2, (1 Month US LIBOR + 2.35%), 2.442%, 2/25/49		7,239	7,309
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA1, Class M2, (1 Month US LIBOR + 1.90%), 1.992%, 1/25/50		13,028	13,061
Federal National Mortgage Association
Connecticut Avenue Securities FRB Ser. 16-C01, Class 2M2, (1 Month US LIBOR + 6.95%), 7.042%, 8/25/28		19,100	20,329
Connecticut Avenue Securities FRB Ser. 16-C01, Class 1M2, (1 Month US LIBOR + 6.75%), 6.842%, 8/25/28		122,558	131,023
Connecticut Avenue Securities FRB Ser. 16-C02, Class 1M2, (1 Month US LIBOR + 6.00%), 6.092%, 9/25/28		77,424	81,759
Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2, (1 Month US LIBOR + 5.70%), 5.792%, 4/25/28		103,276	109,349
Connecticut Avenue Securities FRB Ser. 15-C03, Class 2M2, (1 Month US LIBOR + 5.00%), 5.092%, 7/25/25		9,787	9,898
Connecticut Avenue Securities FRB Ser. 14-C04, Class 1M2, (1 Month US LIBOR + 4.90%), 4.992%, 11/25/24		11,620	12,021
Connecticut Avenue Securities FRB Ser. 16-C05, Class 2M2, (1 Month US LIBOR + 4.45%), 4.542%, 1/25/29		19,374	20,213
Connecticut Avenue Securities FRB Ser. 16-C07, Class 2M2, (1 Month US LIBOR + 4.35%), 4.442%, 5/25/29		5,477	5,729
Connecticut Avenue Securities FRB Ser. 16-C04, Class 1M2, (1 Month US LIBOR + 4.25%), 4.342%, 1/25/29		45,147	47,000
Connecticut Avenue Securities FRB Ser. 17-C01, Class 1M2, (1 Month US LIBOR + 3.55%), 3.642%, 7/25/29		20,623	21,368
Connecticut Avenue Securities FRB Ser. 18-C01, Class 1M2, (1 Month US LIBOR + 2.25%), 2.342%, 7/25/30		7,184	7,247
Connecticut Avenue Securities FRB Ser. 18-C02, Class 2M2, (1 Month US LIBOR + 2.20%), 2.292%, 8/25/30		24,487	24,796
Connecticut Avenue Securities FRB Ser. 17-C05, Class 1M2A, (1 Month US LIBOR + 2.20%), 2.292%, 1/25/30		1,044	1,047
Connecticut Avenue Securities FRB Ser. 17-C01, Class 1EB1, (1 Month US LIBOR + 1.25%), 1.342%, 7/25/29		10,000	10,002
Federal National Mortgage Association 144A Connecticut Avenue Securities Trust FRB Ser. 19-HRP1, Class M2, (1 Month US LIBOR + 2.15%), 2.242%, 11/25/39		26,832	26,462
GSAA Trust FRB Ser. 07-6, Class 1A1, (1 Month US LIBOR + 0.12%), 0.332%, 5/25/47		20,200	15,146
Merrill Lynch Mortgage Investors Trust FRB Ser. 05-A2, Class A2, 2.798%, 2/25/35 W		12,724	13,429
Morgan Stanley Resecuritization Trust 144A Ser. 15-R4, Class CB1, 0.932%, 8/26/47 W		80,000	77,299
Structured Asset Mortgage Investments II Trust FRB Ser. 07-AR7, Class 1A1, (1 Month US LIBOR + 0.85%), 0.942%, 5/25/47		96,986	80,919
Towd Point Mortgage Trust 144A Ser. 14-1, Class A2, 3.25%, 10/25/53 W		35,509	35,635

 

 

 

MORTGAGE-BACKED SECURITIES (4.2%)* cont.		Principal  amount	Value
Residential mortgage-backed securities (non-agency) cont.
WaMu Mortgage Pass-Through Certificates Trust
FRB Ser. 05-AR10, Class 1A3, 3.095%, 9/25/35 W		$13,153	$13,266
FRB Ser. 05-AR12, Class 1A8, 2.903%, 10/25/35 W		57,764	57,358
			1,473,478
Total mortgage-backed securities (cost $3,560,960)			$3,469,118

COMMODITY LINKED NOTES (3.2%)*†††	Principal  amount	Value
Goldman Sachs International 144A notes zero %, 2022 (Indexed to the S&P GSCI Light Energy Excess Return Index multiplied by 3)	$1,656,000	$2,504,922
UBS AG/London 144A sr. notes zero %, 2022 (Indexed to the S&P GSCI Light Energy Index Official Close ER Index multiplied by 3)	116,000	154,170
Total commodity linked notes (cost $1,772,000)		$2,659,092

U.S. GOVERNMENT AND AGENCY  MORTGAGE OBLIGATIONS (3.0%)*	Principal  amount	Value
U.S. Government Agency Mortgage Obligations (3.0%)
Federal National Mortgage Association Pass-Through Certificates
4.00%, 1/1/57	$53,307	$59,395
4.00%, 5/1/49	373,709	399,921
Uniform Mortgage-Backed Securities 2.50%, TBA, 6/1/51	2,000,000	2,070,781
		2,530,097
Total U.S. government and agency mortgage obligations (cost $2,508,813)		$2,530,097

U.S. TREASURY OBLIGATIONS (0.1%)*	Principal  amount	Value
U.S. Treasury Notes 2.00%, 2/15/25 i	$117,000	$124,218
Total U.S. treasury obligations (cost $124,218)		$124,218

FOREIGN GOVERNMENT AND AGENCY  BONDS AND NOTES (0.8%)*		Principal  amount	Value
Dominican (Republic of) sr. unsec. unsub. notes Ser. REGS, 5.95%, 1/25/27 (Dominican Republic)		$117,000	$132,064
Indonesia (Republic of) sr. unsec. unsub. notes Ser. REGS, 4.75%, 1/8/26 (Indonesia)		200,000	228,994
Ivory Coast (Republic of) sr. unsec. unsub. bonds Ser. REGS, 5.25%, 3/22/30 (Ivory Coast)	EUR	100,000	128,373
Mexico (Government of) sr. unsec. bonds 5.55%, 1/21/45 (Mexico)		$83,000	98,775
Romania (Government of) 144A sr. unsec. bonds 3.00%, 2/14/31 (Romania)		30,000	30,808
Uruguay (Oriental Republic of) sr. unsec. unsub. bonds 7.625%, 3/21/36 (Uruguay)		20,000	30,308
Venezuela (Republic of) sr. unsec. notes 9.00%, 5/7/23 (Venezuela) (In default) †		51,000	5,228
Venezuela (Republic of) sr. unsec. unsub. notes 8.25%, 10/13/24 (Venezuela) (In default) †		82,000	8,405
Total foreign government and agency bonds and notes (cost $624,775)			$662,955

 

 

 

ASSET-BACKED SECURITIES (0.7%)*		Principal  amount	Value
1Sharpe Mortgage Trust 144A FRB Ser. 20-1, Class NOTE,   (BBA LIBOR USD 3 Month + 2.90%), 3.047%, 7/25/24		$34,000	$34,034
Mello Warehouse Securitization Trust 144A
FRB Ser. 20-1, Class A, (1 Month US LIBOR + 0.90%), 0.992%, 10/25/53		25,000	25,000
FRB Ser. 20-2, Class A, (1 Month US LIBOR + 0.80%), 0.892%, 11/25/53		25,000	25,000
FRB Ser. 21-2, Class A, (1 Month US LIBOR + 0.75%), 0.842%, 4/25/55		27,000	27,000
MRA Issuance Trust 144A
FRB Ser. 21-EBO1, Class A1X, (1 Month US LIBOR + 1.75%), 1.86%, 10/8/21		33,000	33,000
FRB Ser. 21-EBO4, Class A1X, (1 Month US LIBOR + 1.75%), 1.849%, 2/16/22		45,000	45,000
FRB Ser. 20-11, Class A1X, (1 Month US LIBOR + 1.70%), 1.801%, 4/22/22		38,000	38,000
NewRez Warehouse Securitization Trust 144A FRB Ser. 21-1, Class A, (1 Month US LIBOR + 0.75%), 0.842%, 5/25/55		25,000	25,055
Provident Funding Mortgage Warehouse Securitization Trust 144A FRB Ser. 21-1, Class A, (1 Month US LIBOR + 0.70%), 0.792%, 2/25/55		25,000	25,000
Station Place Securitization Trust 144A
FRB Ser. 20-6, Class A, (1 Month US LIBOR + 1.75%), 1.843%, 9/7/21		40,000	40,000
FRB Ser. 20-13, Class A, (1 Month US LIBOR + 1.50%), 1.593%, 10/10/21		38,000	38,000
FRB Ser. 20-15, Class A, (1 Month US LIBOR + 1.37%), 1.463%, 12/10/21		38,000	38,000
FRB Ser. 21-6, Class A, (1 Month US LIBOR + 0.80%), 0.893%, 4/25/22		46,000	46,000
FRB Ser. 21-WL2, Class A, (1 Month US LIBOR + 0.70%), 0.792%, 3/25/54		28,000	28,000
FRB Ser. 21-WL1, Class A, (1 Month US LIBOR + 0.65%), 0.742%, 1/26/54		28,000	28,000
Towd Point Asset Trust 144A FRB Ser. 18-SL1, Class A, (1 Month US LIBOR + 0.60%), 0.692%, 1/25/46		57,350	57,074
Total asset-backed securities (cost $552,119)			$552,163

COLLATERALIZED LOAN OBLIGATIONS (0.1%)*		Principal  amount	Value
Venture XXVII CLO, Ltd. 144A FRB Ser. 17-28A, Class A2, (BBA LIBOR USD 3 Month + 1.11%), 1.298%, 7/20/30		$100,000	$99,863
Total collateralized loan obligations (cost $100,000)			$99,863

SHORT-TERM INVESTMENTS (68.6%)*		Principal amount/  shares	Value
ABN AMRO Funding USA, LLC commercial paper 0.200%, 8/2/21		$500,000	$499,878
Atlantic Asset Securitization, LLC asset backed commercial paper 0.070%, 6/17/21		500,000	499,980
Australia & New Zealand Banking Group, Ltd. commercial paper 0.115%, 9/2/21		500,000	499,862
Barclays Bank PLC CCP asset backed commercial paper 0.160%, 6/14/21		500,000	499,985

 

 

 

SHORT-TERM INVESTMENTS (68.6%)* cont.		Principal amount/  shares	Value
BPCE SA commercial paper 0.140%, 8/3/21		$500,000	$499,915
Chariot Funding, LLC asset backed commercial paper 0.150%, 6/17/21		500,000	499,980
CRC Funding, LLC asset backed commercial paper 0.130%, 7/8/21		500,000	499,951
DNB Bank ASA commercial paper 0.165%, 6/24/21		500,000	499,985
Federal Farm Credit Banks Funding Corporation unsec. discount notes commercial paper 0.030%, 9/10/21		500,000	499,972
Federal Home Loan Banks discount notes commercial paper 0.020%, 8/18/21		1,000,000	999,979
Federal Home Loan Banks discount notes commercial paper 0.020%, 7/7/21		1,000,000	1,000,000
Federal Home Loan Banks discount notes commercial paper 0.090%, 6/18/21		500,000	500,000
FMS Wertmanagement commercial paper 0.150%, 6/28/21		500,000	499,979
ING (U.S.) Funding, LLC commercial paper 0.140%, 6/18/21		500,000	499,975
Lloyds Bank PLC commercial paper 0.140%, 7/1/21		500,000	499,965
Manhattan Asset Funding Co., LLC asset backed commercial paper 0.140%, 7/1/21		750,000	749,941
Mitsubishi UFJ Trust & Banking Corp./NY commercial paper 0.200%, 8/5/21		500,000	499,908
Mizuho Bank, Ltd./Singapore commercial paper 0.120%, 6/16/21		500,000	499,978
National Bank of Canada commercial paper 0.140%, 6/1/21		500,000	499,998
Prudential PLC commercial paper 0.040%, 6/28/21		500,000	499,969
Putnam Short Term Investment Fund Class P 0.08% L	Shares	19,944,551	19,944,551
Skandinaviska Enskilda Banken AB commercial paper 0.130%, 6/2/21		$500,000	499,996
Societe Generale SA commercial paper 0.155%, 8/2/21		500,000	499,915
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.03% P	Shares	841,000	841,000
Sumitomo Mitsui Trust Bank, Ltd. commercial paper 0.150%, 7/7/21		$500,000	499,960
Swedbank AB commercial paper 0.150%, 6/18/21		500,000	499,986
Thunder Bay Funding, LLC asset backed commercial paper 0.110%, 6/10/21		500,000	499,987
Toronto-Dominion Bank (The) commercial paper 0.050%, 6/18/21		500,000	499,984
Total Capital Canada, Ltd. commercial paper 0.130%, 7/7/21		500,000	499,963
U.S. Treasury Bills 0.089%, 6/8/21 #		1,200,000	1,199,998
U.S. Treasury Bills 0.053%, 7/13/21 §		1,000,000	999,995
U.S. Treasury Bills 0.048%, 6/10/21 §		1,000,000	1,000,000
U.S. Treasury Bills 0.035%, 10/7/21 # §		1,000,000	999,942
U.S. Treasury Bills 0.030%, 10/14/21 # ∆ §		1,000,000	999,934
U.S. Treasury Bills 0.030%, 9/30/21 ∆		1,000,000	999,941
U.S. Treasury Bills 0.030%, 9/23/21		1,000,000	999,953
U.S. Treasury Bills 0.030%, 9/16/21 # §		1,000,000	999,970
U.S. Treasury Bills 0.025%, 9/9/21		1,000,000	999,966
U.S. Treasury Bills 0.025%, 8/19/21		1,000,000	999,979
U.S. Treasury Bills 0.024%, 8/5/21		1,000,000	999,978
U.S. Treasury Bills 0.023%, 9/2/21		1,000,000	999,968
U.S. Treasury Bills 0.022%, 8/26/21		1,000,000	999,970
U.S. Treasury Bills 0.022%, 7/20/21		1,000,000	999,994

 

 

 

SHORT-TERM INVESTMENTS (68.6%)* cont.		Principal   amount	Value
U.S. Treasury Bills 0.020%, 8/12/21		$2,000,000	$1,999,945
U.S. Treasury Bills 0.015%, 7/27/21		1,000,000	999,981
U.S. Treasury Bills 0.014%, 7/1/21		1,000,000	999,992
U.S. Treasury Cash Management Bills 0.025%, 8/17/21		1,000,000	999,979
U.S. Treasury Cash Management Bills 0.022%, 8/10/21		1,000,000	999,971
U.S. Treasury Cash Management Bills 0.018%, 8/3/21		1,000,000	999,974
Westpac Banking Corp./NY commercial paper 0.140%, 9/1/21		500,000	499,848
Total short-term investments (cost $57,232,515)			$57,233,820

TOTAL INVESTMENTS
Total investments (cost $78,646,506)	$81,957,714

Key to holding’s currency abbreviations
EUR	Euro

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.
GMTN	Global Medium Term Notes
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
MTN	Medium Term Notes
OTC	Over-the-counter
REGS	Securities sold under Regulation S may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
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, 2020 through May 31, 2021 (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 $83,419,255.
†††	The value of the commodity linked notes, which are marked to market daily, may be based on a multiple of the performance of the index. The multiple (or leverage) will increase the volatility of the note’s value relative to the change in the underlying index.
†	This security is non-income-producing.
#	This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period. Collateral at period end totaled $1,895,912 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 certain derivative contracts at the close of the reporting period. Collateral at period end totaled $92,991 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 $878,977 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).
F	This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities are classified as Level 3 for ASC 820 based on the securities’ valuation inputs (Note 1).
i	This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts (Note 1).
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. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
R	Real Estate Investment Trust.
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 $10,263,707 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.
	Debt obligations are considered secured unless otherwise indicated.
	144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
	See Note 1 to the financial statements regarding TBA commitments.
	The dates shown on debt obligations are the original maturity dates.

DIVERSIFICATION BY COUNTRY
Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value):
United States	74.7%		Switzerland	1.4%
United Kingdom	4.4		Singapore	0.9
Japan	3.8		Norway	0.8
France	2.7		Hong Kong	0.4
Australia	2.3		Denmark	0.5
Canada	2.1		Other	2.6
Sweden	1.7		Total	100.0%
Germany	1.7