N-CSR 1 a_mortgageopps.htm PUTNAM FUNDS TRUST a_mortgageopps.htm


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: Stephen Tate, 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, 2021
Date of reporting period: June 1, 2020 — May 31, 2021



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:


 

 

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.


 


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 4.00%; had they, returns would have been lower. Performance for class A shares before their inception (7/1/19) is derived from the historical performance of class I shares and has been adjusted for the higher operating expenses for class A shares. See below and pages 7–9 for additional performance information. For 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.


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 7–9 for additional fund performance information. Index descriptions can be found on page 12.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

2 Mortgage Opportunities Fund 

 

 



Brett, what was the fund’s investment environment like during the period?

The first half of the period was a continuation of the recovery from the unprecedented market volatility we saw as the Covid-19 pandemic unfolded. As 2020 came to a close, news of multiple vaccines fueled hopes of returning to more normalcy in the economy, markets, and society in 2021. Early in the new year, widespread vaccine distribution bolstered investor optimism about the strength of the economic recovery. A $1.9 trillion aid package signed into law by President Biden in early March provided a further boost to market sentiment. Reflecting the country’s emergence from the Covid-induced recession, the Commerce Department announced in April that U.S. gross domestic product [GDP] grew at a 6.4% seasonally adjusted annual rate in the first quarter of 2021. Forecasts for second-quarter GDP growth are even stronger. Meanwhile, corporate earnings growth for 2021’s first quarter topped consensus forecasts by a sizable margin.

Within this environment, the market sectors that the fund focuses on, including agency credit-risk transfer securities [CRTs] and commercial mortgage-backed securities [CMBS], generally performed well.

Would you remind us of the fund’s investment process?

The fund focuses on securitized mortgage sectors, seeking to capitalize on the different risk-adjusted return opportunities that we believe are available in those areas of the market. We emphasize agency collateralized mortgage obligations [CMOs], CMBS, and residential mortgage-backed securities [RMBS]. Exposure to these sectors allows us to diversify the fund’s risk across mortgage prepayment, commercial mortgage, and residential

Mortgage Opportunities Fund 3 

 

 


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 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 5/31/21. 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 

 

 


credit dynamics. 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 period?

Mortgage credit holdings added the most value for the period, led by the fund’s positions in agency CRTs, which are part of the fund’s RMBS allocation. Agency CRTs generated exceptionally strong performance in June 2020, boosted by improving market sentiment and reduced uncertainty about the effect that a government-mandated mortgage-forbearance program would have on CRT cash flows. CRT spreads tightened throughout most of the period, fueled by housing-related Covid-19 government policy measures, housing market strength, and optimism about the reopening of the economy.

Within CMBS, the fund’s cash bonds, as well as synthetic exposure via CMBX, also contributed, aided by the lifting of broad restrictions on public gatherings across the country. [CMBX is a group of tradeable indexes that each reference a basket of 25 CMBS issued in a particular year.] Although certain property types, such as hotels and malls, continue to face greater economic risk, we have seen substantial improvement in these market segments recently.

Strategies targeting prepayment risk provided a further lift to fund performance, driven by the fund’s mortgage-basis positioning. This strategy reflects our view on the yield differential between prevailing mortgage rates and U.S. Treasuries. It added value as spreads on agency pass-throughs tightened.

On the downside, negative results from positions in agency interest-only [IO] CMOs, inverse IOs, and home-equity conversion mortgage [HECM] IOs partially offset the contribution from the fund’s mortgage-basis positioning. Spreads on IO CMOs and inverse IOs widened meaningfully in April and May, as mortgage providers stepped up efforts to attract borrowers who had not refinanced their loans. Meanwhile, prepayments of the reverse mortgages underlying HECM IOs rose amid increased refinancing activity late last year.

How did you use derivatives during the period?

We used CMBX credit default swaps to hedge the fund’s CMBS credit and market risks, and to gain access to specific areas of the market. We used interest-rate swaps and options to hedge the risks inherent in the fund’s duration and yield-curve positioning, to isolate the prepayment risk associated with the fund’s CMO holdings, and to help manage overall downside 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.

What are your current views on the various sectors in which the fund invests?

Overall, we believe the environment for risk assets remains generally supportive. Our optimism is grounded in the rapidly growing percentage of Americans receiving Covid-19 vaccines, along with continued government stimulus.

In the CMBS market, we believe there are attractive risk-adjusted investment opportunities available amid an improving fundamental backdrop. In our view, borrowers with access to capital will continue to make investments in properties that were performing well before the pandemic hampered their revenue streams.

Near-term inflation expectations are significantly higher than they were prior to the pandemic. We think commercial properties can better absorb inflation pressures compared with other market sectors, such as corporate credit. Consequently, if inflation rises, we believe areas of the CMBS market may offer compelling relative-value opportunities.

Within residential mortgage credit, given low mortgage rates, high demand, and a declining inventory of available homes, we think home prices are likely to continue rising. Even with tighter spreads, we have continued to find value in investment-grade securities

Mortgage Opportunities Fund 5 

 

 

backed by non-agency residential loans, along with legacy RMBS and lower-quality segments of the agency CRT market.

We believe prepayment-sensitive areas of the market serve as important sources of diversification for the fund. To us, the prepayment sector offers potential benefits in the event of an economic slowdown, changes in fiscal policy, and/or rising interest rates. In our view, many prepayment-sensitive investments offer attractive risk-adjusted return potential at current price levels. In terms of investment selection, we are focused on securities backed by reverse mortgages, jumbo loans, and more seasoned collateral.

Thanks for your time and for bringing us up to date, Brett.

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.

Of special interest

While fund assets and the number of shares outstanding declined during the period, income earned by the portfolio remained relatively consistent. As a result, the fund’s monthly dividend per class A share was increased from $0.025 to $0.033 effective February 2021. Similar increases were made to other share classes.

6 Mortgage Opportunities Fund 

 

 

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 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 (class I), Individual Investors section at putnam.com (classes A, C, R6, and Y), or call Putnam at 1-800-487-0024. Class R6 and I shares are not available to all investors. See the Terms and definitions section in this report for the definition of the share classes offered by your fund.

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

  Life of fund  Annual average  5 years  Annual average  3 years  Annual average  1 year 
Class A (7/1/19)               
Before sales charge  16.39%  2.50%  19.53%  3.63%  2.42%  0.80%  8.19% 
After sales charge  11.73  1.82  14.75  2.79  –1.68  –0.56  3.86 
Class C (7/1/19)               
Before CDSC  11.26  1.75  15.32  2.89  0.34  0.11  7.48 
After CDSC  11.26  1.75  15.32  2.89  0.34  0.11  6.48 
Class I (4/7/15)               
Net asset value  19.20  2.90  21.90  4.04  3.62  1.19  8.58 
Class R6 (6/1/20)               
Net asset value  18.93  2.86  21.74  4.01  3.49  1.15  8.56 
Class Y (7/1/19)               
Net asset value  18.25  2.76  21.13  3.91  3.21  1.06  8.46 

 

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. After-sales-charge returns for class A shares reflect the deduction of the maximum 4.00% sales charge, levied at the time of purchase. Class C share returns after CDSC reflect a 1% CDSC the first year that is eliminated thereafter. Class I, R6, and Y shares have no initial sales charge or CDSC. Performance for class A, C, R6, and Y shares before their inception is derived from the historical performance of class I shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares.

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

Comparative index returns For periods ended 5/31/21

  Life of fund  Annual average  5 years  Annual average  3 years  Annual average  1 year 
ICE BofA U.S. Treasury               
Bill Index  6.38%  1.01%  6.17%  1.20%  4.42%  1.45%  0.12% 
Bloomberg Barclays               
U.S. MBS Index  15.75  2.41  12.82  2.44  11.87  3.81  –0.47 
Lipper Absolute Return               
Funds category average*  18.85  2.68  23.85  4.12  12.78  3.83  12.06 

 

Index and Lipper results should be compared with fund performance at net asset value.

All Bloomberg Barclays indices provided by Bloomberg Index Services Limited.

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

* Over the 1-year, 3-year, 5-year, and life-of-fund periods ended 5/31/21, there were 149, 136, 117, and 104 funds, respectively, in this Lipper category.

Mortgage Opportunities Fund 7 

 

 


Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s Class C shares would have been valued at $11,126, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s I, R6, and Y shares would have been valued at $11,920, $11,893, and $11,825, 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

Distributions  Class A  Class C  Class I  Class R6  Class Y 
Number  12  12  12  12  12 
Income  $0.326088  $0.255370  $0.350643  $0.348678  $0.349661 
Capital gains  —  —  —  —  — 
Return of capital*  0.005912  0.004630  0.006357  0.006322  0.006339 
Total  $0.332000  $0.260000  $0.357000  $0.355000  $0.356000 
  Before  After  Net  Net  Net  Net 
  sales  sales  asset  asset  asset  asset 
Share value  charge  charge  value  value  value  value 
5/31/20  $9.01  $9.39  $9.01  $9.02  —  $9.02 
6/1/20†  —  —  —  —  $9.02  — 
5/31/21  9.41  9.80  9.42  9.43  9.43  9.42 
  Before  After  Net  Net  Net  Net 
Current rate  sales  sales  asset  asset  asset  asset 
(end of period)  charge  charge  value  value  value  value 
Current dividend rate1  4.21%  4.04%  3.44%  4.58%  4.45%  4.46% 
Current 30-day SEC yield             
(with expense limitation)2,3  N/A  4.19  3.43  4.48  4.44  4.44 
Current 30-day             
SEC yield (without             
expense limitation)3  N/A  3.91  3.16  4.21  4.17  4.16 

 

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

* See page 52.

† Inception date of R6 shares.

1 Most recent distribution, including any return of capital and excluding capital gains, annualized and divided by share price before or after sales charge at period-end.

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

3 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.

8 Mortgage Opportunities Fund 

 

 

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

  Life of fund  Annual average  5 years  Annual average  3 years  Annual average  1 year 
Class A (7/1/19)               
Before sales charge  15.43%  2.33%  19.04%  3.55%  0.92%  0.31%  4.01% 
After sales charge  10.81  1.66  14.28  2.71  –3.12  –1.05  –0.15 
Class C (7/1/19)               
Before CDSC  10.27  1.58  14.77  2.79  –1.27  –0.43  3.34 
After CDSC  10.27  1.58  14.77  2.79  –1.27  –0.43  2.34 
Class I (4/7/15)               
Net asset value  18.12  2.71  21.18  3.92  1.92  0.63  4.28 
Class R6 (6/1/20)               
Net asset value  17.86  2.67  21.02  3.89  1.80  0.60  4.27 
Class Y (7/1/19)               
Net asset value  17.30  2.59  20.54  3.81  1.63  0.54  4.27 

 

See the discussion following the fund performance table on page 7 for information about the calculation of fund performance.


Your fund’s expenses

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

Expense ratios

  Class A  Class C  Class I  Class R6  Class Y 
Net expenses for the fiscal year           
ended 5/31/20*  0.79%**  1.54%**  0.48%  0.52%‡  0.54%** 
Total annual operating expenses for the fiscal           
year ended 5/31/20  1.01%**  1.76%**  0.70%  0.74%‡  0.76%** 
Annualized expense ratio for the six-month           
period ended 5/31/21†  0.76%  1.51%  0.47%  0.51%  0.50% 

 

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, except for those that started up during the six-month period, are for the fund’s most recent fiscal half year. For a new class, the ratio is for the period from the inception date of the class to 5/31/21. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

‡ Other expenses are based on expenses of class Y shares, restated to reflect the lower investor servicing fees applicable to class R6 shares.

** Other expenses shown have been annualized.

Mortgage Opportunities Fund 9 

 

 

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class from 12/1/20 to 5/31/21. For a new class, the expenses shown are for the period from the inception date of the class to 5/31/21. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section. The table also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class C  Class I  Class R6  Class Y 
Expenses paid per $1,000*†  $3.84  $7.62  $2.38  $2.57  $2.53 
Ending value (after expenses)  $1,025.70  $1,022.80  $1,028.20  $1,028.10  $1,027.00 

 

* 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, or in the case of a new class, the average net assets of the class from the inception date for the class to 5/31/21. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section. 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.

  Class A  Class C  Class I  Class R6  Class Y 
Expenses paid per $1,000*†  $3.83  $7.59  $2.37  $2.57  $2.52 
Ending value (after expenses)  $1,021.14  $1,017.40  $1,022.59  $1,022.39  $1,022.44 

 

* 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, or in the case of a new class, the average net assets of the class from the inception date for the class to 5/31/21. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section. 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.

10 Mortgage Opportunities Fund 

 

 

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 residential and commercial 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 and the servicing of mortgage loans secured by real estate properties. The fund currently has significant investment exposure to commercial mortgage-backed securities, which, during periods of difficult economic conditions, may experience an increase in delinquencies and losses as a result of the effects of those conditions on commercial real estate markets, the ability of commercial tenants to make loan payments, and the ability of a property to attract and retain commercial tenants. 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. 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.

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Terms and definitions

Important terms

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

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.

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 4.00% 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 C shares and assumes redemption at the end of the period. 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 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 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.

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 approved 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.

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 is an unmanaged index that 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 BofA (Intercontinental Exchange Bank of America) 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.

12 Mortgage Opportunities Fund 

 

 

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.

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.

Mortgage Opportunities Fund 13 

 

 

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.

14 Mortgage Opportunities Fund 

 

 

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.

Mortgage Opportunities Fund 15 

 

 

Report of Independent Registered Public Accounting Firm

To the Board of 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, 2021, the related statement of operations for the year ended May 31, 2021, the statement of changes in net assets for each of the two years in the period ended May 31, 2021, including the related notes, and the financial highlights for each of the periods indicated therein (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 for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2021 and the financial highlights for each of the periods indicated therein 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, 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 audits provide 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.

16 Mortgage Opportunities Fund 

 


The fund’s portfolio 5/31/21      
 
 MORTGAGE-BACKED SECURITIES (73.5%)*  Principal 
amount 		 Value 
Agency collateralized mortgage obligations (35.0%) 
Federal Home Loan Mortgage Corporation          
REMICs Ser. 4451, Class CI, IO, 7.00%, 3/15/45     $805,006  $178,420 
REMICs IFB Ser. 3829, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.95%), 6.849%, 3/15/41     55,006  11,286 
REMICs IFB Ser. 4074, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.70%), 6.599%, 2/15/41     28,185  2,975 
REMICs IFB Ser. 4076, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.70%), 6.599%, 7/15/40     227,702  17,916 
REMICs IFB Ser. 3852, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.65%), 6.549%, 4/15/40     185,703  18,526 
REMICs IFB Ser. 3981, Class WS, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 6.449%, 5/15/41     677,110  82,545 
REMICs IFB Ser. 4033, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 6.449%, 10/15/36     229,809  3,639 
REMICs IFB Ser. 3346, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.55%), 6.449%, 10/15/33     2,051,479  404,371 
REMICs IFB Ser. 4808, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.099%, 7/15/48     2,736,999  476,576 
REMICs IFB Ser. 4789, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.099%, 5/15/48     2,197,204  291,130 
REMICs IFB Ser. 4752, Class PS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.099%, 11/15/47     5,069,277  861,777 
REMICs IFB Ser. 4990, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 7/25/50     2,592,621  521,004 
Strips Ser. 324, Class C21, IO, 6.00%, 6/15/39     623,190  156,484 
REMICs IFB Ser. 5057, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.999%, 12/15/48     4,502,890  770,805 
REMICs IFB Ser. 4267, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.949%, 5/15/39     52,442  137 
REMICs IFB Ser. 4933, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 12/25/49     2,714,606  536,354 
REMICs IFB Ser. 4926, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 8/25/49     2,215,017  388,270 
REMICs IFB Ser. 3984, Class DS, IO, ((-1 x 1 Month US LIBOR) + 5.95%), 5.849%, 1/15/42     360,635  67,013 
REMICs Ser. 4560, IO, 5.836%, 5/15/39     1,191,029  215,956 
REMICs Ser. 5115, Class IK, IO, 4.50%, 12/25/50     4,471,000  815,614 
REMICs Ser. 4127, Class PI, IO, 4.50%, 7/15/42     708,523  68,907 
REMICs Ser. 4024, Class PI, IO, 4.50%, 12/15/41     199,453  20,265 
REMICs Ser. 3714, Class KI, IO, 4.50%, 11/15/39     98,238  1,567 
REMICs Ser. 4707, Class AI, IO, 4.00%, 7/15/47     766,852  91,061 
REMICs Ser. 4635, Class PI, IO, 4.00%, 12/15/46     633,181  58,534 
REMICs Ser. 4500, Class GI, IO, 4.00%, 8/15/45     34,077  4,451 
REMICs Ser. 4425, IO, 4.00%, 1/15/45     234,059  28,087 
REMICs Ser. 4452, Class QI, IO, 4.00%, 11/15/44     40,504  5,988 
REMICs Ser. 4403, Class CI, IO, 4.00%, 10/15/44     132,627  17,771 
REMICs Ser. 4355, Class DI, IO, 4.00%, 3/15/44     11,238  418 
REMICs Ser. 4386, Class IL, IO, 4.00%, 12/15/43     372,498  33,301 
REMICs Ser. 4299, Class JI, IO, 4.00%, 7/15/43     98,457  6,271 
REMICs Ser. 4193, Class PI, IO, 4.00%, 3/15/43     263,273  36,688 
REMICs Ser. 4425, Class WI, IO, 4.00%, 3/15/43     244,879  20,594 
REMICs Ser. 4386, Class LI, IO, 4.00%, 2/15/43     181,349  10,627 
REMICs Ser. 4694, Class GI, IO, 4.00%, 2/15/43     217,740  13,086 
REMICs Ser. 4000, Class LI, IO, 4.00%, 2/15/42     26,091  2,581 
REMICs Ser. 4015, Class GI, IO, 4.00%, 3/15/27     88,408  7,374 
REMICs Ser. 4604, Class QI, IO, 3.50%, 7/15/46     424,491  40,327 
REMICs Ser. 4580, Class ID, IO, 3.50%, 8/15/45     47,557  2,660 
REMICs Ser. 4560, Class PI, IO, 3.50%, 5/15/45     98,022  7,597 
REMICs Ser. 4475, Class CI, IO, 3.50%, 1/15/44     461,276  16,177 
REMICs Ser. 4501, Class BI, IO, 3.50%, 10/15/43     14,213  339 
REMICs Ser. 4663, Class KI, IO, 3.50%, 11/15/42     22,161  69 
REMICs Ser. 4413, Class HI, IO, 3.50%, 3/15/40     89,895  472 
REMICs Ser. 3904, Class NI, IO, 3.50%, 8/15/26     266,496  11,470 
REMICs Ser. 5023, Class YI, IO, 3.00%, 10/25/50     4,675,469  568,925 
REMICs Ser. 4801, Class IG, IO, 3.00%, 6/15/48     363,000  33,537 
REMICs Ser. 4134, Class PI, IO, 3.00%, 11/15/42     703,143  70,584 
REMICs Ser. 4182, Class PI, IO, 3.00%, 12/15/41     190,604  7,461 
REMICs Ser. 4206, Class IP, IO, 3.00%, 12/15/41     44,666  3,139 
REMICs Ser. 4550, Class AI, IO, 3.00%, 10/15/40     386,780  13,769 
Federal National Mortgage Association          
REMICs IFB Ser. 11-4, Class CS, ((-2 x 1 Month US LIBOR) + 12.90%), 12.717%, 5/25/40     11,169  13,626 
REMICs IFB Ser. 13-90, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.60%), 6.508%, 9/25/43     445,065  93,240 
REMICs IFB Ser. 12-36, Class SN, IO, ((-1 x 1 Month US LIBOR) + 6.45%), 6.358%, 4/25/42     107,267  16,902 
REMICs IFB Ser. 10-35, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.40%), 6.308%, 4/25/40     106,082  21,567 

 

Mortgage Opportunities Fund 17 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Agency collateralized mortgage obligations cont. 
Federal National Mortgage Association          
REMICs IFB Ser. 18-36, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 6.158%, 6/25/48     $2,121,716  $424,395 
REMICs IFB Ser. 13-41, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.108%, 6/25/40     22,380  769 
REMICs IFB Ser. 19-18, Class SH, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 6.058%, 5/25/49     4,135,448  754,719 
REMICs IFB Ser. 19-18, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 5/25/49     4,485,247  728,853 
REMICs IFB Ser. 19-17, Class JS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 4/25/49     2,503,835  582,074 
REMICs IFB Ser. 16-83, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 11/25/46     1,373,363  277,593 
REMICs IFB Ser. 16-85, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 11/25/46     3,529,698  697,115 
REMICs IFB Ser. 16-65, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 9/25/46     996,604  192,521 
REMICs IFB Ser. 16-78, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.008%, 5/25/39     2,869,222  540,372 
REMICs Ser. 17-8, IO, 6.00%, 2/25/47     628,476  153,757 
REMICs Ser. 16-3, Class NI, IO, 6.00%, 2/25/46     72,903  15,765 
REMICs Ser. 15-69, IO, 6.00%, 9/25/45     331,072  78,539 
REMICs Ser. 10-99, Class NI, IO, 6.00%, 9/25/40     1,492,312  299,347 
REMICs IFB Ser. 19-60, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.958%, 10/25/49     1,878,734  169,086 
REMICs IFB Ser. 19-26, Class SM, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.958%, 6/25/49     3,720,404  648,347 
REMICs IFB Ser. 12-103, Class SD, ((-1 x 1 Month US LIBOR) + 6.05%), 5.958%, 9/25/42     212,013  45,089 
REMICs IFB Ser. 19-66, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 11/25/49     5,237,603  810,399 
REMICs IFB Ser. 19-75, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 11/25/49     6,958,937  1,209,861 
REMICs IFB Ser. 16-54, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 8/25/46     5,162,806  1,084,189 
REMICs IFB Ser. 11-126, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 12/25/41     5,176,313  1,108,931 
REMICs IFB Ser. 11-134, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 2/25/41     1,094,408  117,079 
REMICs IFB Ser. 10-140, Class GS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.908%, 7/25/39     144,619  3,832 
REMICs IFB Ser. 11-101, Class SA, IO, ((-1 x 1 Month US LIBOR) + 5.90%), 5.808%, 10/25/41     293,853  51,118 
REMICs Ser. 10-109, Class IM, IO, 5.50%, 9/25/40     1,124,209  202,454 
Interest Strip Ser. 397, Class 2, IO, 5.00%, 9/25/39     308,175  55,664 
REMICs Ser. 18-1, Class JI, IO, 5.00%, 2/25/48     846,315  159,358 
REMICs Ser. 12-132, Class PI, IO, 5.00%, 10/25/42     1,031,326  150,172 
Interest Strip Ser. 404, Class 2, IO, 4.50%, 5/25/40     223,785  36,260 
REMICs Ser. 21-15, Class JI, IO, 4.50%, 4/25/51     4,101,568  753,048 
REMICs Ser. 21-18, Class IY, IO, 4.50%, 8/25/49     2,941,993  528,271 
REMICs Ser. 12-49, Class QI, IO, 4.50%, 12/25/40     702,335  27,056 
REMICs Ser. 20-76, Class GI, IO, 4.00%, 11/25/50     10,846,548  1,616,740 
REMICs Ser. 18-15, Class PI, IO, 4.00%, 10/25/47     696,237  48,150 
REMICs Ser. 17-7, Class JI, IO, 4.00%, 2/25/47     247,969  31,707 
REMICs Ser. 17-15, Class LI, IO, 4.00%, 6/25/46     77,559  3,763 
REMICs Ser. 16-24, Class CI, IO, 4.00%, 2/25/46     141,351  14,574 
REMICs Ser. 12-90, Class DI, IO, 4.00%, 3/25/42     673,080  71,898 
REMICs Ser. 14-95, Class TI, IO, 4.00%, 5/25/39     3,376  11 
REMICs Ser. 21-25, Class IJ, IO, 3.50%, 5/25/51     7,383,625  875,507 
REMICs Ser. 21-5, Class PI, IO, 3.50%, 2/25/51     6,140,051  845,309 
REMICs Ser. 17-78, Class KI, IO, 3.50%, 10/25/47     150,836  14,290 
REMICs Ser. 16-70, Class QI, IO, 3.50%, 10/25/46     76,824  8,067 
REMICs Ser. 13-40, Class YI, IO, 3.50%, 6/25/42     59,352  4,650 
REMICs Ser. 20-24, Class IB, IO, 3.00%, 4/25/50     4,454,992  552,882 
REMICs Ser. 13-6, Class JI, IO, 3.00%, 2/25/43     35,562  3,201 
REMICs Ser. 13-35, Class PI, IO, 3.00%, 2/25/42     87,045  3,403 
REMICs Ser. 13-27, Class PI, IO, 3.00%, 12/25/41     188,899  7,616 
REMICs Ser. 13-57, Class IQ, IO, 3.00%, 6/25/41     156,330  7,161 
REMICs Ser. 16-97, Class KI, IO, 3.00%, 6/25/40     177,676  876 
Government National Mortgage Association          
IFB Ser. 13-9, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.75%), 6.651%, 1/20/43     2,241,312  520,194 
IFB Ser. 13-182, Class SP, IO, ((-1 x 1 Month US LIBOR) + 6.70%), 6.601%, 12/20/43     1,021,092  206,771 
IFB Ser. 11-148, Class SN, IO, ((-1 x 1 Month US LIBOR) + 6.69%), 6.589%, 11/16/41     770,498  172,468 
IFB Ser. 10-125, Class SD, ((-1 x 1 Month US LIBOR) + 6.68%), 6.579%, 1/16/40     1,913,685  293,516 
IFB Ser. 11-156, Class SK, IO, ((-1 x 1 Month US LIBOR) + 6.60%), 6.501%, 4/20/38     42,940  10,094 
Ser. 16-164, IO, 6.50%, 12/20/46     847,417  161,185 
FRB Ser. 20-112, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.30%), 6.201%, 8/20/50     2,093,076  460,477 
IFB Ser. 21-59, Class SU, IO, ((-1 x 1 Month US LIBOR) + 6.30%), 6.201%, 4/20/51     4,991,548  705,056 

 

18 Mortgage Opportunities Fund 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Agency collateralized mortgage obligations cont. 
Government National Mortgage Association          
IFB Ser. 21-49, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.30%), 6.201%, 3/20/51     $5,740,858  $786,411 
IFB Ser. 21-57, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.30%), 6.201%, 3/20/51     7,828,813  1,114,488 
IFB Ser. 18-91, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 6.151%, 7/20/48     907,458  144,578 
IFB Ser. 20-98, Class ES, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.101%, 7/20/50     3,251,368  715,240 
IFB Ser. 18-89, Class LS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.101%, 6/20/48     979,560  150,404 
IFB Ser. 17-156, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.101%, 10/20/47     2,526,243  472,092 
IFB Ser. 14-131, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 6.099%, 9/16/44     2,967,505  812,867 
IFB Ser. 13-167, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 6.051%, 11/20/43     1,495,727  292,222 
IFB Ser. 16-77, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 6.051%, 3/20/43     249,397  25,356 
IFB Ser. 19-35, Class SE, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 6.049%, 1/16/44     2,492,820  452,641 
IFB Ser. 19-158, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 6.049%, 9/16/43     6,162,052  1,145,358 
IFB Ser. 19-83, Class JS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 7/20/49     6,735,992  943,039 
IFB Ser. 19-78, Class SM, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 6/20/49     5,271,477  815,413 
IFB Ser. 16-77, Class SC, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 10/20/45     45,522  9,543 
IFB Ser. 14-58, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 4/20/44     557,937  110,996 
IFB Ser. 14-60, Class SE, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 4/20/44     31,031  5,282 
IFB Ser. 14-27, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 2/20/44     2,949,114  564,033 
IFB Ser. 14-3, Class SM, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 1/20/44     3,193,064  636,090 
IFB Ser. 13-182, Class SY, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 6.001%, 12/20/43     27,214  5,419 
Ser. 16-75, Class LI, IO, 6.00%, 1/20/40     48,438  10,071 
IFB Ser. 20-15, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 2/20/50     738,872  91,705 
IFB Ser. 20-7, Class SK, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 1/20/50     7,481,630  1,267,387 
IFB Ser. 19-143, Class HS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 9/20/49     3,652,887  474,875 
IFB Ser. 19-99, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 8/20/49     194,110  28,813 
IFB Ser. 19-78, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 6/20/49     255,683  33,339 
IFB Ser. 13-99, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.951%, 6/20/43     1,145,150  234,461 
IFB Ser. 19-121, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.901%, 10/20/49     3,995,525  1,416,585 
IFB Ser. 11-22, Class PS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.901%, 7/20/40     34,288  1,720 
Ser. 16-149, Class MI, IO, 5.50%, 5/20/39     91,212  10,111 
Ser. 20-4, IO, 5.00%, 1/20/50     3,654,145  695,530 
Ser. 18-77, IO, 5.00%, 6/20/48     697,296  101,108 
Ser. 17-38, Class DI, IO, 5.00%, 3/16/47     114,731  20,078 
Ser. 16-150, Class I, IO, 5.00%, 11/20/46     1,322,706  233,299 
Ser. 16-42, IO, 5.00%, 2/20/46     264,557  47,428 
Ser. 18-127, Class ID, IO, 5.00%, 7/20/45     312,604  46,106 
Ser. 17-136, Class IY, IO, 5.00%, 3/20/45     443,247  80,893 
Ser. 15-35, Class AI, IO, 5.00%, 3/16/45     1,113,672  220,530 
Ser. 15-89, Class LI, IO, 5.00%, 12/20/44     631,239  123,092 
Ser. 14-132, IO, 5.00%, 9/20/44     1,081,684  211,101 
Ser. 14-133, Class IP, IO, 5.00%, 9/16/44     29,675  5,193 
Ser. 13-3, Class IT, IO, 5.00%, 1/20/43     164,882  29,267 
Ser. 11-135, Class DI, IO, 5.00%, 4/16/40     414,029  83,551 
Ser. 10-35, Class UI, IO, 5.00%, 3/20/40     12,187  2,320 
Ser. 17-26, Class EI, IO, 5.00%, 2/20/40     550,363  62,570 
Ser. 10-9, Class UI, IO, 5.00%, 1/20/40     57,812  11,238 
Ser. 09-121, Class UI, IO, 5.00%, 12/20/39     12,730  2,419 
Ser. 15-105, Class LI, IO, 5.00%, 10/20/39     711,560  135,196 
Ser. 15-79, Class GI, IO, 5.00%, 10/20/39     74,506  13,750 
Ser. 17-132, Class IA, IO, 4.50%, 9/20/47     1,083,456  198,301 
Ser. 16-104, Class GI, IO, 4.50%, 1/20/46     25,098  3,702 
Ser. 15-182, Class IC, IO, 4.50%, 12/20/45     3,864,005  744,999 
Ser. 16-49, IO, 4.50%, 11/16/45     356,845  61,920 
Ser. 16-84, Class IB, IO, 4.50%, 11/16/45     3,861,669  724,063 
Ser. 15-80, Class IA, IO, 4.50%, 6/20/45     48,169  8,325 
Ser. 18-127, Class IB, IO, 4.50%, 6/20/45     352,226  36,966 
Ser. 15-167, Class BI, IO, 4.50%, 4/16/45     67,045  13,241 
Ser. 16-17, Class IA, IO, 4.50%, 3/20/45     235,037  43,578 
Ser. 14-161, Class HI, IO, 4.50%, 6/20/44     322,247  36,949 

 

Mortgage Opportunities Fund 19 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Agency collateralized mortgage obligations cont. 
Government National Mortgage Association          
Ser. 14-100, Class LI, IO, 4.50%, 10/16/43     $34,023  $3,232 
Ser. 13-34, Class HI, IO, 4.50%, 3/20/43     150,267  23,634 
Ser. 12-129, IO, 4.50%, 11/16/42     82,078  15,390 
Ser. 12-91, Class IN, IO, 4.50%, 5/20/42     60,177  10,336 
Ser. 12-98, Class AI, IO, 4.50%, 4/16/42     544,656  80,473 
Ser. 14-98, Class AI, IO, 4.50%, 10/20/41     187,111  4,502 
Ser. 10-35, Class DI, IO, 4.50%, 3/20/40     34,481  5,862 
Ser. 10-35, Class QI, IO, 4.50%, 3/20/40     25,035  4,226 
Ser. 10-9, Class QI, IO, 4.50%, 1/20/40     17,345  2,668 
Ser. 14-95, Class JI, IO, 4.50%, 12/16/39     1,021,114  183,800 
Ser. 19-137, Class GI, IO, 4.00%, 11/20/49     6,293,223  889,879 
Ser. 17-130, Class IB, IO, 4.00%, 8/20/47     590,254  89,512 
Ser. 17-11, Class PI, IO, 4.00%, 12/20/46     261,503  21,124 
Ser. 16-138, Class DI, IO, 4.00%, 10/20/46     367,388  54,190 
Ser. 16-29, IO, 4.00%, 2/16/46     239,112  40,245 
Ser. 15-186, Class AI, IO, 4.00%, 12/20/45     63,133  9,628 
Ser. 15-149, Class KI, IO, 4.00%, 10/20/45     46,615  7,109 
Ser. 16-47, Class CI, IO, 4.00%, 9/20/45     214,591  20,923 
Ser. 15-106, Class CI, IO, 4.00%, 5/20/45     145,905  17,736 
Ser. 18-72, Class IC, IO, 4.00%, 5/20/45     2,536,237  386,776 
Ser. 15-53, Class MI, IO, 4.00%, 4/16/45     105,002  18,900 
Ser. 15-187, Class JI, IO, 4.00%, 3/20/45     41,145  5,676 
Ser. 15-89, Class IP, IO, 4.00%, 2/20/45     40,697  4,879 
Ser. 14-188, Class IB, IO, 4.00%, 12/20/44     3,970,566  426,836 
Ser. 17-45, Class IM, IO, 4.00%, 10/20/44     979,974  73,607 
Ser. 17-17, Class EI, IO, 4.00%, 9/20/44     250,336  6,148 
Ser. 15-40, Class KI, IO, 4.00%, 7/20/44     913,428  101,853 
Ser. 17-63, Class PI, IO, 4.00%, 12/20/43     194,643  11,679 
Ser. 13-67, Class IP, IO, 4.00%, 4/16/43     1,198,072  196,184 
Ser. 15-144, Class IA, IO, 4.00%, 1/16/43     139,514  11,592 
Ser. 12-47, Class CI, IO, 4.00%, 3/20/42     104,171  15,559 
Ser. 15-162, Class BI, IO, 4.00%, 11/20/40     144,889  9,771 
Ser. 20-167, Class PI, IO, 3.50%, 11/20/50     4,459,273  544,764 
Ser. 16-156, Class PI, IO, 3.50%, 11/20/46     18,566  442 
Ser. 18-127, Class IE, IO, 3.50%, 1/20/46     24,567  2,468 
Ser. 16-75, Class EI, IO, 3.50%, 8/20/45     623,529  49,505 
Ser. 16-83, Class PI, IO, 3.50%, 6/20/45     98,266  13,638 
Ser. 15-52, Class IK, IO, 3.50%, 4/20/45     143,641  16,486 
Ser. 15-20, Class PI, IO, 3.50%, 2/20/45     33,579  4,365 
Ser. 15-168, Class IG, IO, 3.50%, 3/20/43     35,168  3,265 
Ser. 13-100, Class MI, IO, 3.50%, 2/20/43     20,703  1,345 
Ser. 13-14, IO, 3.50%, 12/20/42     43,144  4,153 
Ser. 18-127, Class IA, IO, 3.50%, 4/20/42     31,907  2,369 
Ser. 15-165, Class IC, IO, 3.50%, 7/16/41     1,886,646  99,463 
Ser. 13-6, Class AI, IO, 3.50%, 8/20/39     1,249,692  100,803 
Ser. 15-134, Class LI, IO, 3.50%, 5/20/39     124,178  3,116 
Ser. 15-96, Class NI, IO, 3.50%, 1/20/39     289,996  5,528 
Ser. 15-87, Class AI, IO, 3.50%, 12/20/38     60,988  256 
Ser. 15-69, Class IK, IO, 3.50%, 3/20/38     328,719  13,971 
Ser. 14-139, Class NI, IO, 3.50%, 8/20/28     162,530  5,845 
Ser. 14-44, Class IA, IO, 3.50%, 5/20/28     573,516  36,298 
Ser. 16-H18, Class QI, IO, 3.001%, 6/20/66 W     1,799,889  158,037 
Ser. 21-59, Class IM, IO, 3.00%, 4/20/51     6,487,298  656,617 
Ser. 21-42, Class IG, IO, 3.00%, 3/20/51     4,624,405  391,610 
Ser. 13-23, Class IK, IO, 3.00%, 9/20/37     376,739  19,779 
Ser. 17-H03, Class DI, IO, 2.634%, 12/20/66 W     2,524,767  231,100 
Ser. 17-H08, Class DI, IO, 2.571%, 2/20/67 W     4,355,128  577,952 
Ser. 17-H22, Class EI, IO, 2.536%, 10/20/67 W     1,124,298  87,888 

 

20 Mortgage Opportunities Fund 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Agency collateralized mortgage obligations cont. 
Government National Mortgage Association          
Ser. 17-H03, Class AI, IO, 2.511%, 12/20/66 W     $1,136,390  $97,709 
Ser. 17-H04, Class BI, IO, 2.469%, 2/20/67 W     4,235,216  403,760 
Ser. 17-H03, Class EI, IO, 2.463%, 1/20/67 W     535,057  60,426 
Ser. 16-H27, Class BI, IO, 2.45%, 12/20/66 W     656,864  57,458 
Ser. 17-H02, Class BI, IO, 2.448%, 1/20/67 W     2,531,844  231,104 
Ser. 17-H08, Class EI, IO, 2.433%, 2/20/67 W     2,250,063  211,868 
Ser. 18-H05, Class BI, IO, 2.395%, 2/20/68 W     1,734,128  172,329 
Ser. 16-H21, Class AI, IO, 2.394%, 9/20/66 W     2,781,841  238,434 
Ser. 18-H07, Class IE, IO, 2.391%, 2/20/68 W     6,256,045  396,796 
FRB Ser. 15-H16, Class XI, IO, 2.386%, 7/20/65 W     70,057  6,039 
Ser. 16-H23, Class NI, IO, 2.383%, 10/20/66 W     217,061  18,103 
Ser. 17-H22, Class DI, IO, 2.382%, 11/20/67 W     3,011,839  329,161 
Ser. 10-H22, Class CI, IO, 2.376%, 10/20/60 W     173,971  8,542 
Ser. 17-H06, Class BI, IO, 2.371%, 2/20/67 W     1,023,133  79,717 
Ser. 18-H01, Class AI, IO, 2.351%, 1/20/68 W     7,465,286  756,980 
Ser. 18-H02, Class HI, IO, 2.34%, 1/20/68 W     4,150,883  412,494 
Ser. 18-H02, Class IM, IO, 2.331%, 2/20/68 W     2,254,012  247,423 
Ser. 17-H21, Class AI, IO, 2.321%, 10/20/67 W     5,593,826  464,668 
Ser. 17-H18, Class DI, IO, 2.318%, 9/20/67 W     1,306,876  129,379 
Ser. 20-H04, Class AI, IO, 2.301%, 2/20/70 W     13,338,662  1,201,013 
Ser. 17-H16, Class JI, IO, 2.30%, 8/20/67 W     494,122  49,415 
Ser. 17-H20, Class GI, IO, 2.292%, 9/20/67 W     4,720,247  389,637 
Ser. 17-H08, Class NI, IO, 2.272%, 3/20/67 W     433,105  36,208 
Ser. 17-H14, Class JI, IO, 2.262%, 6/20/67 W     1,945,474  223,035 
Ser. 19-H03, Class AI, IO, 2.257%, 11/20/68 W     10,411,842  902,072 
Ser. 16-H17, Class DI, IO, 2.255%, 7/20/66 W     1,963,517  150,739 
Ser. 15-H13, Class AI, IO, 2.247%, 6/20/65 W     269,433  19,433 
Ser. 19-H09, Class EI, IO, 2.246%, 4/20/69 W     3,110,896  277,234 
Ser. 17-H20, Class AI, IO, 2.234%, 10/20/67 W     2,995,751  288,341 
Ser. 17-H05, Class CI, IO, 2.231%, 2/20/67 W     6,081,153  608,632 
Ser. 17-H06, Class MI, IO, 2.23%, 2/20/67 W     1,500,292  128,554 
Ser. 19-H14, Class IB, IO, 2.222%, 8/20/69 W     340,461  30,478 
Ser. 15-H20, Class CI, IO, 2.213%, 8/20/65 W     132,302  10,836 
Ser. 17-H20, Class DI, IO, 2.206%, 10/20/67 W     1,229,092  132,413 
Ser. 17-H20, Class HI, IO, 2.185%, 10/20/67 W     954,846  97,266 
Ser. 18-H11, Class JI, IO, 2.167%, 7/20/68 W     2,986,750  265,223 
Ser. 17-H13, Class QI, IO, 2.166%, 6/20/67 W     1,689,640  145,774 
Ser. 18-H11, Class AI, IO, 2.143%, 2/20/68 W     2,807,387  244,085 
Ser. 16-H24, IO, 2.143%, 9/20/66 W     288,380  27,336 
Ser. 15-H29, Class HI, IO, 2.107%, 9/20/65 W     2,159,601  119,426 
Ser. 17-H19, Class MI, IO, 2.063%, 4/20/67 W     952,749  83,080 
Ser. 15-H24, Class HI, IO, 2.05%, 9/20/65 W     127,051  5,701 
Ser. 15-H25, Class BI, IO, 1.967%, 10/20/65 W     106,973  8,472 
Ser. 15-H15, Class JI, IO, 1.965%, 6/20/65 W     151,313  12,211 
Ser. 16-H27, Class EI, IO, 1.954%, 12/20/66 W     3,280,025  243,647 
Ser. 15-H25, Class CI, IO, 1.943%, 10/20/65 W     101,332  7,306 
Ser. 15-H26, Class DI, IO, 1.922%, 10/20/65 W     107,561  8,569 
Ser. 17-H09, Class DI, IO, 1.907%, 3/20/67 W     1,511,996  112,403 
Ser. 16-H22, IO, 1.874%, 10/20/66 W     3,652,219  245,411 
Ser. 15-H25, Class EI, IO, 1.867%, 10/20/65 W     120,314  8,675 
Ser. 15-H23, Class DI, IO, 1.862%, 9/20/65 W     134,915  9,822 
Ser. 17-H10, Class MI, IO, 1.856%, 4/20/67 W     4,755,838  335,762 
Ser. 15-H18, Class IA, IO, 1.834%, 6/20/65 W     90,018  4,609 
Ser. 15-H20, Class AI, IO, 1.827%, 8/20/65 W     121,399  8,826 
Ser. 17-H09, IO, 1.824%, 4/20/67 W     433,970  31,705 
Ser. 15-H10, Class CI, IO, 1.811%, 4/20/65 W     138,466  9,305 
Ser. 15-H26, Class GI, IO, 1.807%, 10/20/65 W     70,520  4,809 
Ser. 17-H06, Class DI, IO, 1.79%, 2/20/67 W     669,997  45,024 

 

Mortgage Opportunities Fund 21 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Agency collateralized mortgage obligations cont. 
Government National Mortgage Association          
Ser. 15-H23, Class BI, IO, 1.76%, 9/20/65 W     $87,634  $5,810 
Ser. 15-H10, Class HI, IO, 1.752%, 4/20/65 W     147,890  10,530 
Ser. 16-H26, Class KI, IO, 1.746%, 11/20/66 W     3,312,693  193,958 
Ser. 13-H15, Class CI, IO, 1.731%, 7/20/63 W     1,508,924  44,104 
Ser. 15-H26, Class EI, IO, 1.727%, 10/20/65 W     164,480  10,741 
Ser. 17-H14, Class DI, IO, 1.714%, 6/20/67 W     470,455  24,276 
Ser. 16-H24, Class CI, IO, 1.706%, 10/20/66 W     4,063,079  250,286 
Ser. 17-H16, Class HI, IO, 1.695%, 8/20/67 W     2,833,526  199,866 
Ser. 14-H25, Class BI, IO, 1.695%, 12/20/64 W     1,528,560  93,556 
Ser. 15-H09, Class BI, IO, 1.69%, 3/20/65 W     52,958  3,354 
Ser. 15-H03, Class DI, IO, 1.676%, 1/20/65 W     223,943  15,967 
Ser. 14-H21, Class AI, IO, 1.67%, 10/20/64 W     1,188,359  83,773 
Ser. 17-H16, Class CI, IO, 1.665%, 7/20/67 W     4,755,918  233,758 
Ser. 17-H11, Class DI, IO, 1.659%, 5/20/67 W     307,727  26,629 
Ser. 16-H06, Class AI, IO, 1.624%, 2/20/66 W     1,272,111  97,744 
Ser. 15-H25, Class AI, IO, 1.623%, 9/20/65 W     197,557  12,545 
Ser. 13-H14, Class XI, IO, 1.618%, 3/20/63 W     148,977  5,304 
Ser. 18-H01, Class IB, IO, 1.614%, 1/20/68 W     6,065,886  260,833 
Ser. 15-H22, Class EI, IO, 1.61%, 8/20/65 W     133,339  5,227 
Ser. 15-H04, Class AI, IO, 1.609%, 12/20/64 W     3,183,769  198,492 
Ser. 15-H24, Class BI, IO, 1.605%, 8/20/65 W     233,124  7,712 
Ser. 17-H06, Class EI, IO, 1.60%, 2/20/67 W     108,419  5,757 
Ser. 17-H14, Class EI, IO, 1.578%, 6/20/67 W     2,321,339  152,071 
Ser. 17-H03, Class HI, IO, 1.576%, 1/20/67 W     389,620  20,514 
Ser. 15-H01, Class BI, IO, 1.57%, 1/20/65 W     4,377,142  246,319 
Ser. 14-H23, Class BI, IO, 1.57%, 11/20/64 W     4,690,823  314,534 
Ser. 15-H14, Class BI, IO, 1.555%, 5/20/65 W     251,332  9,017 
Ser. 16-H02, Class HI, IO, 1.55%, 1/20/66 W     199,272  12,016 
Ser. 14-H13, Class BI, IO, 1.544%, 5/20/64 W     148,023  5,373 
Ser. 11-H15, Class AI, IO, 1.537%, 6/20/61 W     1,130,829  51,702 
Ser. 16-H04, Class KI, IO, 1.532%, 2/20/66 W     88,399  4,904 
Ser. 18-H08, Class FI, IO, 1.496%, 6/20/68 W     2,253,277  198,899 
Ser. 14-H08, Class CI, IO, 1.476%, 3/20/64 W     7,648,087  324,134 
Ser. 17-H16, Class KI, IO, 1.474%, 8/20/67 W     2,958,593  173,942 
Ser. 14-H06, Class BI, IO, 1.469%, 2/20/64 W     5,168,664  203,268 
Ser. 10-H19, Class BI, IO, 1.46%, 8/20/60 W     195,197  10,295 
Ser. 10-H20, Class IF, IO, 1.449%, 10/20/60 W     1,763,672  77,013 
Ser. 16-H08, Class GI, IO, 1.434%, 4/20/66 W     126,558  5,840 
Ser. 13-H24, Class AI, IO, 1.431%, 9/20/63 W     300,670  9,652 
Ser. 14-H09, Class AI, IO, 1.418%, 1/20/64 W     118,834  3,632 
Ser. 12-H29, Class CI, IO, 1.415%, 2/20/62 W     3,066,282  122,271 
Ser. 12-H29, Class AI, IO, 1.40%, 10/20/62 W     810,340  22,047 
Ser. 12-H29, Class FI, IO, 1.40%, 10/20/62 W     810,340  21,977 
Ser. 12-H06, Class AI, IO, 1.339%, 1/20/62 W     401,488  14,050 
FRB Ser. 11-H07, Class FI, IO, 1.244%, 2/20/61 W     192,500  4,947 
Ser. 12-H11, Class FI, IO, 1.215%, 2/20/62 W     4,694,500  136,530 
Ser. 12-H10, Class AI, IO, 1.203%, 12/20/61 W     2,768,340  73,721 
Ser. 19-H15, Class CI, IO, 1.106%, 7/20/69 W     9,535,425  565,317 
Ser. 11-H16, Class FI, IO, 1.043%, 7/20/61 W     1,118,053  34,698 
      63,731,855 
Commercial mortgage-backed securities (17.9%) 
Banc of America Commercial Mortgage Trust Ser. 08-1, Class AJ, 6.567%, 2/10/51 W     9,423  9,571 
Banc of America Commercial Mortgage Trust 144A Ser. 16-UB10, Class D, 3.00%, 7/15/49     540,000  490,691 
BANK 144A          
Ser. 17-BNK9, Class D, 2.80%, 11/15/54     464,000  414,774 
Ser. 18-BN10, Class D, 2.60%, 2/15/61     400,000  355,691 
Barclays Commercial Mortgage Trust 144A          
Ser. 19-C4, Class D, 3.25%, 8/15/52     367,000  343,394 
Ser. 19-C4, Class E, 3.25%, 8/15/52     446,000  382,745 

 

22 Mortgage Opportunities Fund 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Commercial mortgage-backed securities cont. 
Bear Stearns Commercial Mortgage Securities Trust 144A FRB Ser. 07-T28, Class D, 5.534%, 9/11/42 W     $213,000  $8,520 
Benchmark Mortgage Trust 144A          
Ser. 19-B11, Class D, 3.00%, 5/15/52     263,000  241,228 
Ser. 19-B13, Class D, 2.50%, 8/15/57     298,000  271,180 
CFCRE Commercial Mortgage Trust 144A FRB Ser. 11-C2, Class F, 5.25%, 12/15/47 W     100,000  94,538 
Citigroup Commercial Mortgage Trust FRB Ser. 17-P7, Class C, 4.345%, 4/14/50 W     223,000  231,943 
Citigroup Commercial Mortgage Trust 144A          
FRB Ser. 12-GC8, Class C, 4.876%, 9/10/45 W     549,000  544,536 
Ser. 14-GC25, Class D, 3.548%, 10/10/47     239,000  240,081 
COMM Mortgage Trust          
FRB Ser. 14-CR16, Class C, 4.926%, 4/10/47 W     548,000  581,427 
FRB Ser. 14-UBS3, Class C, 4.738%, 6/10/47 W     301,000  315,539 
FRB Ser. 14-UBS4, Class C, 4.649%, 8/10/47 W     324,000  337,378 
FRB Ser. 14-UBS6, Class C, 4.445%, 12/10/47 W     193,000  203,306 
FRB Ser. 15-CR26, Class D, 3.479%, 10/10/48 W     724,000  722,178 
COMM Mortgage Trust 144A          
FRB Ser. 14-CR17, Class D, 4.848%, 5/10/47 W     467,000  440,299 
FRB Ser. 14-CR17, Class E, 4.848%, 5/10/47 W     917,000  715,260 
FRB Ser. 14-UBS3, Class D, 4.768%, 6/10/47 W     449,000  455,371 
FRB Ser. 12-CR3, Class E, 4.75%, 10/15/45 W     298,000  127,698 
FRB Ser. 14-CR19, Class D, 4.708%, 8/10/47 W     721,000  713,666 
Ser. 12-CR4, Class B, 3.703%, 10/15/45     921,000  747,546 
Ser. 13-LC6, Class E, 3.50%, 1/10/46     706,000  585,792 
Ser. 15-LC19, Class D, 2.867%, 2/10/48     548,000  534,218 
Credit Suisse Commercial Mortgage Trust 144A          
FRB Ser. 08-C1, Class AJ, 5.803%, 2/15/41 W     63,742  31,087 
FRB Ser. 07-C4, Class C, 5.719%, 9/15/39 W     9,091  9,085 
CSAIL Commercial Mortgage Trust 144A          
FRB Ser. 18-C14, Class D, 4.89%, 11/15/51 W     401,000  418,275 
Ser. 20-C19, Class D, 2.50%, 3/15/53     382,000  337,814 
DBUBS Mortgage Trust 144A FRB Ser. 11-LC2A, Class D, 5.389%, 7/10/44 W     529,000  527,625 
GS Mortgage Securities Corp., II 144A          
FRB Ser. 13-GC10, Class D, 4.402%, 2/10/46 W     471,000  427,398 
Ser. 13-GC10, Class C, 4.285%, 2/10/46 W     349,000  360,971 
GS Mortgage Securities Trust FRB Ser. 14-GC20, Class C, 4.956%, 4/10/47 W     310,000  305,836 
GS Mortgage Securities Trust 144A          
FRB Ser. 10-C1, Class D, 6.154%, 8/10/43 W     497,000  246,311 
Ser. 11-GC3, Class E, 5.00%, 3/10/44 W     290,000  283,684 
FRB Ser. 14-GC24, Class D, 4.536%, 9/10/47 W     1,094,000  678,280 
FRB Ser. 13-GC13, Class D, 4.084%, 7/10/46 W     739,000  379,379 
Ser. 19-GC38, Class D, 3.00%, 2/10/52     532,000  501,534 
JPMBB Commercial Mortgage Securities Trust          
FRB Ser. 14-C22, Class B, 4.553%, 9/15/47 W     399,000  416,125 
FRB Ser. 14-C22, Class C, 4.553%, 9/15/47 W     354,000  333,337 
FRB Ser. 13-C12, Class C, 4.099%, 7/15/45 W     453,000  467,343 
JPMBB Commercial Mortgage Securities Trust 144A          
FRB Ser. 14-C18, Class D, 4.80%, 2/15/47 W     1,270,000  620,798 
FRB Ser. 13-C12, Class E, 4.099%, 7/15/45 W     625,000  479,874 
Ser. 13-C14, Class F, 3.598%, 8/15/46 W     402,000  120,640 
Ser. 14-C25, Class E, 3.332%, 11/15/47 W     100,000  51,209 
JPMDB Commercial Mortgage Securities Trust Ser. 17-C5, Class C, 4.512%, 3/15/50 W     566,000  549,548 
JPMorgan Chase Commercial Mortgage Securities Trust          
Ser. 06-LDP9, Class AMS, 5.337%, 5/15/47     883,540  742,155 
FRB Ser. 12-CBX, Class B, 4.845%, 6/15/45 W     656,000  667,581 
FRB Ser. 13-LC11, Class D, 4.167%, 4/15/46 W     740,000  592,773 
JPMorgan Chase Commercial Mortgage Securities Trust 144A          
FRB Ser. 07-CB20, Class E, 6.169%, 2/12/51 W     933,000  139,950 
FRB Ser. 11-C3, Class D, 5.523%, 2/15/46 W     641,000  386,085 
FRB Ser. 11-C3, Class E, 5.523%, 2/15/46 W     242,000  100,579 

 

Mortgage Opportunities Fund 23 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Commercial mortgage-backed securities cont. 
JPMorgan Chase Commercial Mortgage Securities Trust 144A          
FRB Ser. 11-C5, Class D, 5.422%, 8/15/46 W     $312,000  $275,038 
FRB Ser. 11-C4, Class C, 5.384%, 7/15/46 W     270,420  270,120 
FRB Ser. 12-C6, Class E, 5.141%, 5/15/45 W     224,000  124,912 
FRB Ser. 13-LC11, Class E, 3.25%, 4/15/46 W     643,000  432,016 
Ser. 12-C6, Class G, 2.972%, 5/15/45 W     100,000  35,848 
ML-CFC Commercial Mortgage Trust FRB Ser. 06-4, Class C, 5.324%, 12/12/49 W     38,064  38,089 
Morgan Stanley Bank of America Merrill Lynch Trust FRB Ser. 16-C29, Class C, 4.745%, 5/15/49 W     651,000  689,299 
Morgan Stanley Bank of America Merrill Lynch Trust 144A          
FRB Ser. 14-C14, Class D, 5.05%, 2/15/47 W     347,000  364,466 
FRB Ser. 13-C12, Class E, 4.763%, 10/15/46 W     763,000  419,650 
FRB Ser. 12-C6, Class G, 4.50%, 11/15/45 W     1,150,000  724,500 
FRB Ser. 13-C11, Class D, 4.351%, 8/15/46 W     932,000  83,787 
FRB Ser. 15-C23, Class D, 4.144%, 7/15/50 W     474,000  481,096 
FRB Ser. 13-C10, Class E, 4.081%, 7/15/46 W     482,000  374,358 
FRB Ser. 13-C10, Class F, 4.081%, 7/15/46 W     1,286,000  411,649 
Ser. 17-C34, Class D, 2.70%, 11/15/52     315,000  277,949 
Morgan Stanley Capital I Trust Ser. 06-HQ10, Class B, 5.448%, 11/12/41 W     55,817  55,009 
Morgan Stanley Capital I Trust 144A          
FRB Ser. 12-C4, Class D, 5.418%, 3/15/45 W     332,000  294,093 
FRB Ser. 12-C4, Class E, 5.418%, 3/15/45 W     392,000  199,920 
FRB Ser. 11-C3, Class G, 5.216%, 7/15/49 W     753,000  276,014 
Multifamily Connecticut Avenue Securities Trust 144A FRB Ser. 20-01, Class M10, 3.842%, 3/25/50     1,097,000  1,134,752 
UBS Commercial Mortgage Trust 144A          
FRB Ser. 12-C1, Class D, 5.569%, 5/10/45 W     541,000  493,360 
FRB Ser. 12-C1, Class E, 5.00%, 5/10/45 W     671,000  244,656 
UBS-Barclays Commercial Mortgage Trust 144A          
Ser. 12-C2, Class F, 5.00%, 5/10/63 W     37,000  11,463 
FRB Ser. 12-C2, Class E, 4.887%, 5/10/63 W     24,000  8,287 
FRB Ser. 12-C4, Class D, 4.467%, 12/10/45 W     522,000  322,571 
Ser. 13-C6, Class B, 3.875%, 4/10/46 W     645,000  657,489 
Wells Fargo Commercial Mortgage Trust Ser. 16-BNK1, Class C, 3.071%, 8/15/49 W     459,000  444,336 
Wells Fargo Commercial Mortgage Trust 144A          
Ser. 12-LC5, Class D, 4.758%, 10/15/45 W     375,000  383,021 
FRB Ser. 13-LC12, Class D, 4.309%, 7/15/46 W     482,000  241,000 
Ser. 14-LC16, Class D, 3.938%, 8/15/50     777,000  209,427 
WF-RBS Commercial Mortgage Trust 144A          
FRB Ser. 12-C9, Class E, 4.809%, 11/15/45 W     628,000  514,187 
FRB Ser. 12-C7, Class D, 4.803%, 6/15/45 W     228,000  85,131 
FRB Ser. 12-C7, Class E, 4.803%, 6/15/45 W     653,000  326,500 
FRB Ser. 14-LC14, Class D, 4.586%, 3/15/47 W     220,000  227,248 
FRB Ser. 13-C15, Class D, 4.479%, 8/15/46 W     1,324,000  671,298 
FRB Ser. 12-C10, Class D, 4.426%, 12/15/45 W     674,000  386,880 
      32,473,265 
Residential mortgage-backed securities (non-agency) (20.6%) 
American Home Mortgage Investment Trust FRB Ser. 07-1, Class GA1C, (1 Month US LIBOR + 0.19%), 0.282%, 5/25/47     1,804,528  997,900 
Arroyo Mortgage Trust 144A Ser. 20-1, Class M1, 4.277%, 3/25/55     442,000  467,117 
Bear Stearns Alt-A Trust          
FRB Ser. 05-7, Class 21A1, 2.876%, 9/25/35 W     248,352  230,931 
FRB Ser. 05-8, Class 21A1, 2.553%, 10/25/35 W     484,315  428,658 
FRB Ser. 05-10, Class 11A1, (1 Month US LIBOR + 0.50%), 0.592%, 1/25/36     154,378  198,305 
FRB Ser. 06-6, Class 1A1, (1 Month US LIBOR + 0.32%), 0.412%, 11/25/36     425,456  400,202 
Bear Stearns Mortgage Funding Trust FRB Ser. 06-AR2, Class 2A1, (1 Month US LIBOR + 0.23%), 0.322%, 9/25/46     76,316  69,113 
Bellemeade Re, Ltd. 144A FRB Ser. 17-1, Class B1, (1 Month US LIBOR + 4.75%), 4.842%, 10/25/27 (Bermuda)     633,000  657,361 
Chevy Chase Funding, LLC Mortgage-Backed Certificates 144A FRB Ser. 06-4A, Class A2, (1 Month US LIBOR  
+ 0.18%), 0.272%, 11/25/47 		    1,326,618  1,051,506 
Citigroup Mortgage Loan Trust, Inc.          
FRB Ser. 07-AR5, Class 1A1A, 2.88%, 4/25/37 W     323,540  324,114 
FRB Ser. 07-AMC3, Class A2D, (1 Month US LIBOR + 0.35%), 0.442%, 3/25/37     218,821  202,361 

 

24 Mortgage Opportunities Fund 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Residential mortgage-backed securities (non-agency) cont. 
Countrywide Alternative Loan Trust          
FRB Ser. 06-OA7, Class 1A2, (1 Month US LIBOR + 0.94%), 1.067%, 6/25/46     $25,134  $22,950 
FRB Ser. 05-51, Class 3A3A, (1 Month US LIBOR + 0.64%), 0.739%, 11/20/35     144,850  127,391 
FRB Ser. 06-OA10, Class 2A1, (1 Month US LIBOR + 0.38%), 0.472%, 8/25/46     97,893  86,559 
FRB Ser. 06-OA10, Class 3A1, (1 Month US LIBOR + 0.38%), 0.472%, 8/25/46     269,051  247,516 
FRB Ser. 06-OA10, Class 4A1, (1 Month US LIBOR + 0.38%), 0.472%, 8/25/46     281,885  254,738 
FRB Ser. 06-OA19, Class A1, (1 Month US LIBOR + 0.18%), 0.279%, 2/20/47     328,132  256,179 
Countrywide Home Loans Mortgage Pass-Through Trust FRB Ser. 06-OA5, Class 2A1, (1 Month US LIBOR  
+ 0.40%), 0.492%, 4/25/46 		    42,854  36,943 
Credit Suisse Mortgage Capital Certificates 144A FRB Ser. 20-SPT1, Class M1, 3.388%, 4/25/65 W     392,000  406,040 
Eagle Re, Ltd. 144A FRB Ser. 20-1, Class B1, (1 Month US LIBOR + 2.85%), 2.942%, 1/25/30     404,000  380,328 
Federal Home Loan Mortgage Corporation          
Structured Agency Credit Risk Debt FRN Ser. 15-HQA2, Class B, (1 Month US LIBOR + 10.50%), 10.592%, 5/25/28     248,600  276,935 
Structured Agency Credit Risk Debt FRN Ser. 16-DNA1, Class B, (1 Month US LIBOR + 10.00%), 10.092%, 7/25/28     246,871  279,864 
Structured Agency Credit Risk Debt Notes FRB Ser. 15-HQA1, Class B, (1 Month US LIBOR + 8.80%), 8.892%, 3/25/28     369,764  400,428 
Structured Agency Credit Risk Debt FRN Ser. 15-DNA2, Class B, (1 Month US LIBOR + 7.55%), 7.642%, 12/25/27     1,398,888  1,526,206 
Structured Agency Credit Risk Debt FRN Ser. 17-DNA1, Class B1, (1 Month US LIBOR + 4.95%), 5.042%, 7/25/29     773,000  829,692 
Structured Agency Credit Risk Debt FRN Ser. 17-DNA3, Class B1, (1 Month US LIBOR + 4.45%), 4.542%, 3/25/30     250,000  261,286 
Federal Home Loan Mortgage Corporation 144A          
Structured Agency Credit Risk Trust FRB Ser. 19-HQA1, Class B2, (1 Month US LIBOR + 12.25%), 12.342%, 2/25/49     260,000  299,676 
Structured Agency Credit Risk Trust FRB Ser. 19-HQA2, Class B2, (1 Month US LIBOR + 11.25%), 11.342%, 4/25/49     2,150,000  2,464,651 
Structured Agency Credit Risk Trust FRB Ser. 18-HQA2, Class B2, (1 Month US LIBOR + 11.00%), 11.092%, 10/25/48     565,000  656,827 
Structured Agency Credit Risk Trust FRB Ser. 19-DNA1, Class B2, (1 Month US LIBOR + 10.75%), 10.842%, 1/25/49     439,000  498,338 
Structured Agency Credit Risk Trust FRB Ser. 19-DNA2, Class B2, (1 Month US LIBOR + 10.50%), 10.592%, 3/25/49     755,000  850,706 
Structured Agency Credit Risk Debt FRN Ser. 20-DNA3, Class B2, (1 Month US LIBOR + 9.35%), 9.442%, 6/25/50     750,000  907,500 
Structured Agency Credit Risk Trust FRB Ser. 19-DNA3, Class B2, (1 Month US LIBOR + 8.15%), 8.242%, 7/25/49     624,000  670,669 
Structured Agency Credit Risk Trust FRB Ser. 18-DNA3, Class B2, (1 Month US LIBOR + 7.75%), 7.842%, 9/25/48     818,000  861,642 
Seasoned Credit Risk Transfer Trust Ser. 19-2, Class M, 4.75%, 8/25/58 W     244,000  256,347 
Seasoned Credit Risk Transfer Trust Ser. 17-3, Class M2, 4.75%, 7/25/56 W     400,000  406,708 
Seasoned Credit Risk Transfer Trust Ser. 19-4, Class M, 4.50%, 2/25/59 W     370,000  384,616 
Structured Agency Credit Risk Trust FRB Ser. 18-HQA2, Class B1, (1 Month US LIBOR + 4.25%), 4.342%, 10/25/48     1,000,000  1,041,250 
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA2, Class B1, (1 Month US LIBOR + 4.10%), 4.192%, 3/25/50     1,000,000  1,021,912 
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-DNA4, Class M2, (1 Month US LIBOR + 3.75%), 3.842%, 8/25/50     243,516  245,695 
Structured Agency Credit Risk Trust FRB Ser. 19-DNA1, Class M2, (1 Month US LIBOR + 2.65%), 2.742%, 1/25/49     517,829  527,135 
Structured Agency Credit Risk Trust FRB Ser. 19-DNA2, Class M2, (1 Month US LIBOR + 2.45%), 2.542%, 3/25/49     171,276  173,952 
Structured Agency Credit Risk Trust FRB Ser. 18-HQA2, Class M2, (1 Month US LIBOR + 2.30%), 2.392%, 10/25/48     68,800  69,504 
Federal National Mortgage Association          
Connecticut Avenue Securities FRB Ser. 16-C03, Class 2B, (1 Month US LIBOR + 12.75%), 12.842%, 10/25/28     815,897  963,497 
Connecticut Avenue Securities FRB Ser. 16-C03, Class 1B, (1 Month US LIBOR + 11.75%), 11.842%, 10/25/28     86,447  106,550 
Connecticut Avenue Securities FRB Ser. 16-C01, Class 1B, (1 Month US LIBOR + 11.75%), 11.842%, 8/25/28     26,659  32,569 
Connecticut Avenue Securities FRB Ser. 16-C06, Class 1B, (1 Month US LIBOR + 9.25%), 9.342%, 4/25/29     248,353  284,877 
Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2, (1 Month US LIBOR + 5.70%), 5.792%, 4/25/28     999,548  1,058,329 
Connecticut Avenue Securities FRB Ser. 17-C04, Class 2B1, (1 Month US LIBOR + 5.05%), 5.142%, 11/25/29     964,000  1,052,726 
Connecticut Avenue Securities FRB Ser. 17-C07, Class 2B1, (1 Month US LIBOR + 4.45%), 4.542%, 5/25/30     284,000  294,301 
Connecticut Avenue Securities FRB Ser. 17-C06, Class 2B1, (1 Month US LIBOR + 4.45%), 4.542%, 2/25/30     761,000  789,538 
Connecticut Avenue Securities FRB Ser. 16-C05, Class 2M2, (1 Month US LIBOR + 4.45%), 4.542%, 1/25/29     28,093  29,309 
Connecticut Avenue Securities FRB Ser. 17-C03, Class 1M2, (1 Month US LIBOR + 3.00%), 3.092%, 10/25/29     525,010  538,801 
Connecticut Avenue Securities FRB Ser. 17-C06, Class 2M2, (1 Month US LIBOR + 2.80%), 2.892%, 2/25/30     527,723  538,501 
Connecticut Avenue Securities FRB Ser. 17-C06, Class 1M2, (1 Month US LIBOR + 2.65%), 2.742%, 2/25/30     460,157  468,052 
Connecticut Avenue Securities FRB Ser. 17-C07, Class 2M2, (1 Month US LIBOR + 2.50%), 2.592%, 5/25/30     1,236,514  1,254,432 

 

Mortgage Opportunities Fund 25 

 

 

 MORTGAGE-BACKED SECURITIES (73.5%)* cont.  Principal 
amount 		 Value 
Residential mortgage-backed securities (non-agency) cont. 
Federal National Mortgage Association          
Connecticut Avenue Securities FRB Ser. 18-C01, Class 1M2, (1 Month US LIBOR + 2.25%), 2.342%, 7/25/30     $140,086  $141,319 
Connecticut Avenue Securities FRB Ser. 17-C05, Class 1M2C, (1 Month US LIBOR + 2.20%), 2.292%, 1/25/30     1,000,000  1,012,611 
Federal National Mortgage Association 144A          
Connecticut Avenue Securities Trust FRB Ser. 19-R03, Class 1B1, (1 Month US LIBOR + 4.10%), 4.192%, 9/25/31     1,291,000  1,326,304 
Connecticut Avenue Securities Trust FRB Ser. 19-R05, Class 1M2, (1 Month US LIBOR + 2.00%), 2.092%, 7/25/39     110,565  110,905 
GSAA Home Equity Trust          
FRB Ser. 05-15, Class 2A2, (1 Month US LIBOR + 0.50%), 0.592%, 1/25/36     375,245  194,270 
FRB Ser. 06-8, Class 2A2, (1 Month US LIBOR + 0.36%), 0.452%, 5/25/36     81,411  27,921 
FRB Ser. 06-1, Class A1, (1 Month US LIBOR + 0.18%), 0.272%, 1/25/36     1,202,551  499,059 
GSR Mortgage Loan Trust FRB Ser. 07-OA1, Class 2A3A, (1 Month US LIBOR + 0.31%), 0.402%, 5/25/37     446,282  371,937 
HarborView Mortgage Loan Trust FRB Ser. 04-11, Class 1A, (1 Month US LIBOR + 0.70%), 0.798%, 1/19/35     308,097  162,958 
IndyMac INDX Mortgage Loan Trust FRB Ser. 06-AR11, Class 2A1, 2.998%, 6/25/36 W     31,847  31,378 
JPMorgan Alternative Loan Trust FRB Ser. 07-A2, Class 12A1, IO, (1 Month US LIBOR + 0.20%), 0.292%, 6/25/37     181,724  94,054 
Morgan Stanley Re-REMIC Trust 144A FRB Ser. 10-R4, Class 4B, (1 Month US LIBOR + 0.23%), 0.648%, 2/26/37     333,454  317,767 
MortgageIT Trust FRB Ser. 05-3, Class M4, (1 Month US LIBOR + 0.95%), 1.037%, 8/25/35     14,883  14,488 
Oaktown Re III, Ltd. 144A          
FRB Ser. 19-1A, Class B1B, (1 Month US LIBOR + 4.35%), 4.442%, 7/25/29 (Bermuda)     191,000  191,910 
FRB Ser. 19-1A, Class B1A, (1 Month US LIBOR + 3.50%), 3.592%, 7/25/29 (Bermuda)     159,000  159,712 
Oaktown Re, Ltd. 144A FRB Ser. 17-1A, Class B1, (1 Month US LIBOR + 6.00%), 5.842%, 4/25/27 (Bermuda)     160,000  162,274 
Radnor Re, Ltd. 144A          
Mortgage Insurance-Linked FRN Ser. 20-1, Class B1, (1 Month US LIBOR + 3.00%), 3.092%, 1/25/30     1,020,000  1,020,100 
FRB Ser. 18-1, Class M2, (1 Month US LIBOR + 2.70%), 2.792%, 3/25/28 (Bermuda)     964,000  966,801 
Structured Asset Mortgage Investments II Trust          
FRB Ser. 06-AR7, Class A1A, (1 Month US LIBOR + 0.21%), 0.512%, 8/25/36     97,804  93,892 
FRB Ser. 07-AR1, Class 2A1, (1 Month US LIBOR + 0.18%), 0.272%, 1/25/37     35,256  33,610 
FRB Ser. 06-AR7, Class A1BG, (1 Month US LIBOR + 0.12%), 0.212%, 8/25/36     293,508  278,570 
Triangle Re, Ltd. 144A Mortgage Insurance-Linked FRN Ser. 19-1, Class B1, (1 Month US LIBOR + 4.15%), 4.242%, 11/26/29     879,000  861,298 
WaMu Mortgage Pass-Through Certificates Trust          
FRB Ser. 04-AR12, Class A2B, (1 Month US LIBOR + 0.92%), 1.012%, 10/25/44     102,481  100,767 
FRB Ser. 05-AR13, Class A1C4, (1 Month US LIBOR + 0.86%), 0.952%, 10/25/45     70,407  69,692 
      37,412,830 
Total mortgage-backed securities (cost $145,561,479)  $133,617,950 
 
 U.S. GOVERNMENT AND AGENCY 
MORTGAGE OBLIGATIONS (25.5%)* 		 Principal 
amount 		 Value 
U.S. Government Guaranteed Mortgage Obligations (2.3%)     
Government National Mortgage Association Pass-Through Certificates       
5.50%, 5/20/49  $70,851  $81,268 
5.00%, 5/20/49  194,656  217,359 
4.50%, with due dates from 10/20/49 to 1/20/50  134,285  149,045 
4.00%, TBA, 6/1/51  2,000,000  2,122,812 
4.00%, with due dates from 8/20/49 to 1/20/50  330,087  361,499 
3.50%, with due dates from 8/20/49 to 11/20/49  1,189,918  1,288,591 
    4,220,574 
U.S. Government Agency Mortgage Obligations (23.2%)     
Federal National Mortgage Association Pass-Through Certificates       
5.00%, with due dates from 1/1/49 to 8/1/49  117,205  129,964 
4.50%, 5/1/49  28,433  31,025 
Uniform Mortgage-Backed Securities       
5.00%, TBA, 6/1/51  1,000,000  1,099,698 
4.00%, TBA, 6/1/51  3,000,000  3,205,781 
3.50%, TBA, 6/1/51  9,000,000  9,500,625 
3.50%, TBA, 5/1/51  1,000,000  1,057,500 
3.00%, TBA, 7/1/51  6,000,000  6,262,031 
3.00%, TBA, 6/1/51  19,000,000  19,844,609 
2.50%, TBA, 6/1/51  1,000,000  1,035,391 
    42,166,624 
Total U.S. government and agency mortgage obligations (cost $46,430,155)  $46,387,198 
 

 

26 Mortgage Opportunities Fund 

 

 

 ASSET-BACKED SECURITIES (4.8%)*  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     $1,089,000  $1,090,089 
LHOME Mortgage Trust 144A Ser. 21-RTL1, Class A1, 2.09%, 9/25/26 W     280,000  280,896 
Mello Warehouse Securitization Trust 144A          
FRB Ser. 20-1, Class A, (1 Month US LIBOR + 0.90%), 0.992%, 10/25/53     186,000  186,000 
FRB Ser. 20-2, Class A, (1 Month US LIBOR + 0.80%), 0.892%, 11/25/53     112,000  112,000 
Mortgage Repurchase Agreement Financing Trust FRB Ser. 20-4, Class A1, (1 Month US LIBOR + 1.35%), 1.445%, 4/23/23     320,000  320,053 
Mortgage Repurchase Agreement Financing Trust 144A FRB Ser. 20-5, Class A1, (1 Month US LIBOR + 1.00%), 1.095%, 8/10/23     269,000  269,604 
MRA Issuance Trust 144A          
FRB Ser. 20-2, Class A2, (1 Month US LIBOR + 1.45%), 1.95%, 7/21/21     783,000  783,000 
FRB Ser. 21-EBO1, Class A1X, (1 Month US LIBOR + 1.75%), 1.86%, 10/8/21     376,000  376,000 
FRB Ser. 21-EBO4, Class A1X, (1 Month US LIBOR + 1.75%), 1.849%, 2/16/22     557,000  557,000 
FRB Ser. 20-11, Class A1X, (1 Month US LIBOR + 1.70%), 1.801%, 4/22/22     428,000  428,000 
FRB Ser. 20-12, Class A1X, (1 Month US LIBOR + 1.35%), 1.451%, 7/15/21     769,000  768,758 
FRB Ser. 21-8, Class A1X, (1 Month US LIBOR + 1.15%), 1.26%, 10/15/21     777,000  776,573 
Station Place Securitization Trust 144A          
FRB Ser. 20-6, Class A, (1 Month US LIBOR + 1.75%), 1.843%, 9/7/21     690,000  690,000 
FRB Ser. 20-13, Class A, (1 Month US LIBOR + 1.50%), 1.593%, 10/10/21     625,000  625,000 
FRB Ser. 20-15, Class A, (1 Month US LIBOR + 1.37%), 1.463%, 12/10/21     620,000  620,000 
FRB Ser. 21-6, Class A, (1 Month US LIBOR + 0.80%), 0.893%, 4/25/22     854,000  854,000 
Total asset-backed securities (cost $8,734,994)  $8,736,973 
 
 PURCHASED SWAP OPTIONS OUTSTANDING (—%)* 
Counterparty 
Fixed right % to receive or (pay)/ 
Floating rate index/Maturity 
date 		 Expiration 
date/strike 		   Notional/ 
Contract amount 		 Value 
Citibank, N.A. 
0.915/3 month USD-LIBOR-BBA/Jul-31  Jul-21/0.915    $7,254,400  $73 
JPMorgan Chase Bank N.A. 
(1.81)/3 month USD-LIBOR-BBA/Jun-31  Jun-21/1.81    87,028,200  78,325 
Total purchased swap options outstanding (cost $1,470,429)  $78,398 
 
 PURCHASED OPTIONS OUTSTANDING (0.3%)* 
Counterparty 		 Expiration 
date/strike price 		 Notional 
amount 		   Contract 
amount 		 Value 
JPMorgan Chase Bank N.A. 
Uniform Mortgage-Backed Securities 30 yr 2.50% TBA commitments (Call)  Jul-21/$103.38  $115,000,000    $115,000,000  $420,555 
Uniform Mortgage-Backed Securities 30 yr 3.00% TBA commitments (Call)  Jul-21/104.42  79,000,000    79,000,000  155,156 
Uniform Mortgage-Backed Securities 30 yr 3.50% TBA commitments (Call)  Jun-21/106.22  18,000,000    18,000,000  18 
Total purchased options outstanding (cost $681,563)  $575,729 
 
SHORT-TERM INVESTMENTS (34.7%)*   Principal amount/ 
shares 		 Value 
Putnam Short Term Investment Fund Class P 0.08% L  Shares  33,381,437  $33,381,437 
U.S. Treasury Bills 0.040%, 6/1/21 ∆    $3,000,000  3,000,000 
U.S. Treasury Bills 0.036%, 6/3/21 # ∆    4,700,000  4,699,999 
U.S. Treasury Bills 0.011%, 6/29/21 ∆    1,200,000  1,200,000 
U.S. Treasury Bills 0.035%, 6/10/21 ∆    3,700,000  3,700,000 
U.S. Treasury Bills 0.008%, 7/6/21 ∆ §    2,200,000  2,199,995 
U.S. Treasury Bills 0.023%, 7/20/21 ∆ §    2,600,000  2,599,982 
U.S. Treasury Bills 0.018%, 7/13/21 ∆    100,000  99,999 
U.S. Treasury Cash Management Bills 0.020%, 8/3/21 ∆ §    3,000,000  2,999,922 
U.S. Treasury Cash Management Bills 0.017%, 8/24/21 ∆ §    400,000  399,991 
U.S. Treasury Cash Management Bills 0.018%, 9/28/21    3,100,000  3,099,846 
U.S. Treasury Cash Management Bills 0.016%, 9/7/21 ∆ §    4,300,000  4,299,824 
U.S. Treasury Cash Management Bills 0.012%, 9/21/21 ∆    1,400,000  1,399,956 
Total short-term investments (cost $63,080,750)  $63,080,951 
 
 TOTAL INVESTMENTS 
Total investments (cost $265,959,370)  $252,477,199 
 

 

Mortgage Opportunities Fund 27 

 

 

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 
OTC  Over-the-counter 
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 $181,819,565. 
#  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 $870,000 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 $23,637,000 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 $1,662,000 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. 
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 $168,181,052 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. 
 
 FUTURES CONTRACTS OUTSTANDING at 5/31/21 
  Number of 
contracts 		 Notional 
amount 		 Value  Expiration 
date 		 Unrealized 
depreciation 
U.S. Treasury Note 2 yr (Short)  1,904  $420,278,252  $420,278,252  Sep-21  $(64,592) 
Unrealized appreciation        — 
Unrealized (depreciation)        (64,592) 
Total  $(64,592) 
 
 WRITTEN SWAP OPTIONS OUTSTANDING at 5/31/21 (premiums $1,476,595) 
Counterparty 
Fixed Obligation % to receive or (pay)/ 
Floating rate index/Maturity date 		 Expiration 
date/strike 		   Notional/contract 
amount 		 Value 
Citibank, N.A. 
1.415/3 month USD-LIBOR-BBA/Jul-31  Jul-21/1.415    $7,254,400  $137,689 
JPMorgan Chase Bank N.A. 
(1.81)/3 month USD-LIBOR-BBA/Jun-31  Jun-21/1.81    87,028,200  2,054,735 
Total  $2,192,424 
 
 WRITTEN OPTIONS OUTSTANDING at 5/31/21 (premiums $681,563) 
Counterparty  Expiration 
date/strike price 		 Notional 
amount 		   Contract 
amount 		 Value 
JPMorgan Chase Bank N.A. 
Uniform Mortgage-Backed Securities 30 yr 2.50% TBA commitments (Put)  Jul-21/$103.38  $115,000,000     $115,000,000  $488,060 
Uniform Mortgage-Backed Securities 30 yr 3.00% TBA commitments (Put)  Jul-21/104.42  79,000,000     79,000,000  186,045 
Uniform Mortgage-Backed Securities 30 yr 3.50% TBA commitments (Put)  Jun-21/106.22  18,000,000     18,000,000  115,308 
Total          ||6|| 
 

 

28 Mortgage Opportunities Fund 

 

 

 FORWARD PREMIUM SWAP OPTION CONTRACTS OUTSTANDING at 5/31/21 
Counterparty 
Fixed right or obligation % to receive or (pay)/Floating rate index/ 
Maturity date 		 Expiration 
date/strike 		   Notional/ 
contract 
amount 		 Premium 
receivable/ 
(payable) 		 Unrealized 
appreciation/ 
(depreciation) 
Citibank, N.A. 
1.657/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.657     $7,254,500  $(62,389)  $15,742 
1.629/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.629     5,026,000  (39,957)  7,438 
(0.884)/3 month USD-LIBOR-BBA/Jun-26 (Purchased)  Jun-21/0.884     10,300,400  (34,506)  2,884 
0.884/3 month USD-LIBOR-BBA/Jun-26 (Purchased)  Jun-21/0.884     10,300,400  (34,506)  (7,004) 
1.568/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.568     5,150,200  (40,172)  (15,760) 
(1.568)/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.568     5,150,200  (40,172)  (16,429) 
(1.629)/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.629     5,026,000  (39,957)  (20,104) 
(1.657)/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.657     7,254,500  (62,389)  (46,065) 
Goldman Sachs International 
1.58/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.58     7,254,450  (61,242)  (27,785) 
(1.58)/3 month USD-LIBOR-BBA/Jun-31 (Purchased)  Jun-21/1.58     7,254,450  (61,242)  (39,537) 
Unrealized appreciation  26,064 
Unrealized (depreciation)  (172,684) 
Total  $(146,620) 
 
 TBA SALE COMMITMENTS OUTSTANDING at 5/31/21 (proceeds receivable $42,538,828) 
Agency  Principal 
amount 		 Settlement 
date 		 Value 
Government National Mortgage Association, 3.50%, 6/1/51  $1,000,000  6/21/21  $1,051,875 
Uniform Mortgage-Backed Securities, 3.50%, 5/1/51  1,000,000  5/13/21  1,057,499 
Uniform Mortgage-Backed Securities, 3.00%, 6/1/51  6,000,000  6/14/21  6,266,719 
Uniform Mortgage-Backed Securities, 2.00%, 6/1/51  34,000,000  6/14/21  34,347,970 
Total  $42,724,063 
 
 CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/21 
Notional amount  Value  Upfront 
premium 
received (paid) 		 Termination 
date 		 Payments 
made by fund 		 Payments 
received by fund 		 Unrealized 
appreciation/ 
(depreciation) 
   $12,413,400  $164,366  $(100)  7/6/25  3 month USD-LIBOR-BBA — Quarterly  0.35% — Semiannually  $(150,718) 
   15,053,100  233,805  (122)  7/14/25  3 month USD-LIBOR-BBA — Quarterly  0.30% — Semiannually  (220,469) 
   6,947,600  503,576  (92)  7/15/30  3 month USD-LIBOR-BBA — Quarterly  0.645% — Semiannually  (488,406) 
   24,827,000  2,017,665  (329)  8/5/30  3 month USD-LIBOR-BBA — Quarterly  0.556% — Semiannually  (1,976,800) 
   24,827,000  2,037,428  (151,774)  9/8/30  0.564% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  1,863,658 
   10,710,800  187,867  (87)  8/12/25  3 month USD-LIBOR-BBA — Quarterly  0.277% — Semiannually  (179,968) 
   13,692,500  232,526  (129)  10/13/25  0.344% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  229,611 
   23,171,900  1,614,317  (307)  10/7/30  0.717% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  1,596,160 
   24,827,000  1,743,228  (133,154)  11/4/30  0.724% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  1,599,984 
   14,474,100  204,316  (117)  10/13/25  0.41% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  199,981 
   14,474,100  182,359  (117)  11/16/25  0.471% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  180,531 
   14,799,100  229,460  (120)  12/16/25  3 month USD-LIBOR-BBA — Quarterly  0.428% — Semiannually  (206,547) 
   9,330,000  496,524  (124)  1/6/31  3 month USD-LIBOR-BBA — Quarterly  0.937% — Semiannually  (464,255) 
   13,928,500  145,567  (113)  1/13/26  0.5615% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  119,029 
   2,698,700  95,148  (38)  4/15/31  1.165% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  91,740 
   2,611,600  102,578 E  (37)  7/15/31  1.165% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  102,541 
   7,254,400  50,643  21,667  4/15/31  3 month USD-LIBOR-BBA — Quarterly  1.465% — Semiannually  (17,136) 
   14,508,900  151,168  (33,125)  3/9/26  0.5996% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  104,503 
   2,930,800  30,325  (24)  2/10/26  0.584% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  25,314 
   2,396,900  70,047  (32)  2/16/31  1.212% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  61,698 
   335,404,000  472,920 E  11,270  6/16/23  3 month USD-LIBOR-BBA — Quarterly  0.30% — Semiannually  484,190 
   103,370,000  339,984 E  (539,373)  6/16/26  0.95% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (879,357) 
   46,811,000  404,026 E  579,266  6/16/31  3 month USD-LIBOR-BBA — Quarterly  1.65% — Semiannually  983,296 
   12,444,000  46,254 E  546,978  6/16/51  3 month USD-LIBOR-BBA — Quarterly  2.00% — Semiannually  593,232 
   7,254,500  4,512  (96)  3/15/31  1.525% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (16,049) 
   5,006,000  92,381  (49,501)  4/21/31  3 month USD-LIBOR-BBA — Quarterly  1.736% — Semiannually  51,476 

 

Mortgage Opportunities Fund 29 

 

 

 CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/21 cont. 
Notional amount  Value  Upfront 
premium 
received (paid) 		 Termination 
date 		 Payments 
made by fund 		 Payments 
received by fund 		 Unrealized 
appreciation/ 
(depreciation) 
   $11,807,100  $61,881  $(111)  4/1/26  0.94375% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  $(76,530) 
   4,752,000  85,679  (63)  3/31/31  1.7275% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (97,766) 
   5,173,000  111,292  (69)  4/1/31  3 month USD-LIBOR-BBA — Quarterly  1.765% — Semiannually  124,673 
   42,817,000  56,775  (161)  4/1/23  0.279% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (62,218) 
   5,757,000  124,668  (76)  4/1/31  1.7665% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (139,727) 
   5,883,000  108,806  (78)  4/7/31  3 month USD-LIBOR-BBA — Quarterly  1.734% — Semiannually  122,234 
   5,772,000  49,299  (47)  4/8/26  3 month USD-LIBOR-BBA — Quarterly  1.0161% — Semiannually  56,178 
   5,772,000  51,515  (47)  4/8/26  3 month USD-LIBOR-BBA — Quarterly  1.0241% — Semiannually  58,462 
   14,508,900  141,926  (137)  4/15/26  1.045% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (157,956) 
   2,921,000  39,904  (39)  4/12/31  3 month USD-LIBOR-BBA — Quarterly  1.684% — Semiannually  45,799 
   6,147,000  8,858  (23)  4/13/23  0.2875% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (9,669) 
   3,027,000  47,482  (40)  4/13/31  3 month USD-LIBOR-BBA — Quarterly  1.7055% — Semiannually  53,552 
   5,215,000  7,025  (20)  4/13/23  0.2825% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (7,678) 
   9,465,000  121,256  (126)  4/13/31  1.675% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (140,105) 
   21,691,000  28,480  (82)  4/13/23  3 month USD-LIBOR-BBA — Quarterly  0.2807% — Semiannually  30,981 
   7,254,500  110,595  (96)  4/21/31  1.702% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (122,873) 
   29,378,000  41,864  (111)  4/15/23  0.2875% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (45,719) 
   4,898,000  42,353  (65)  4/16/31  3 month USD-LIBOR-BBA — Quarterly  1.631% — Semiannually  51,125 
   3,244,000  14,085  (43)  4/19/31  1.5865% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (19,398) 
   1,925,000  2,146  (66)  4/20/51  3 month USD-LIBOR-BBA — Quarterly  1.9765% — Semiannually  1,698 
   1,224,000  4,443  (42)  4/21/51  1.9965% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (6,941) 
   1,507,000  9,056  (51)  4/22/51  2.0065% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (12,075) 
   2,035,000  8,150  (69)  4/26/51  3 month USD-LIBOR-BBA — Quarterly  1.998% — Semiannually  11,676 
   33,500  21  —   4/27/31  3 month USD-LIBOR-BBA — Quarterly  1.5355% — Semiannually  21 
   3,032,000  7,283  (40)  4/28/31  1.5675% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (11,153) 
   5,130,300  22,855  (68)  5/5/31  3 month USD-LIBOR-BBA — Quarterly  1.591% — Semiannually  28,004 
   1,698,000  2,160  (6)  4/28/23  3 month USD-LIBOR-BBA — Quarterly  0.2825% — Semiannually  2,298 
   5,176,000  9,985  (69)  4/28/31  3 month USD-LIBOR-BBA — Quarterly  1.5625% — Semiannually  16,430 
   1,698,000  2,143  (6)  4/28/23  3 month USD-LIBOR-BBA — Quarterly  0.282% — Semiannually  2,280 
   5,176,000  9,446  (69)  4/28/31  3 month USD-LIBOR-BBA — Quarterly  1.5614% — Semiannually  15,886 
   4,368,000  10,234  (58)  4/29/31  1.5665% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (15,665) 
   2,813,000  22,608  (37)  4/30/31  1.627% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (26,123) 
   2,760,000  25,113  (37)  5/4/31  3 month USD-LIBOR-BBA — Quarterly  1.64% — Semiannually  28,094 
   2,897,000  25,398  (38)  5/5/31  3 month USD-LIBOR-BBA — Quarterly  1.6365% — Semiannually  28,400 
   17,860,000  86,996  (144)  5/5/26  3 month USD-LIBOR-BBA — Quarterly  0.954% — Semiannually  96,795 
   4,390,000  69,085  (150)  5/5/51  2.0475% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (75,146) 
   4,929,000  36,440  (65)  5/5/31  3 month USD-LIBOR-BBA — Quarterly  1.622% — Semiannually  41,497 
   38,314,000  48,735  (144)  5/5/23  0.284% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (51,670) 
   1,590,000  20,115  (54)  5/5/51  3 month USD-LIBOR-BBA — Quarterly  2.0345% — Semiannually  22,187 
   3,101,000  9,855  (41)  5/6/31  1.5775% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (12,900) 
   2,468,000  4,452  (33)  5/6/31  3 month USD-LIBOR-BBA — Quarterly  1.563% — Semiannually  6,786 
   1,899,000  20,448  (65)  5/7/51  2.0265% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (22,855) 
   7,254,450  18,267  (96)  5/17/31  3 month USD-LIBOR-BBA — Quarterly  1.573% — Semiannually  22,137 
   4,084,000  19,448  (54)  5/14/31  1.5955% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (22,264) 
   7,254,500  67,053  (96)  5/21/31  3 month USD-LIBOR-BBA — Quarterly  1.644% — Semiannually  69,939 
   777,000  20,308  (26)  5/17/51  2.091% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (20,916) 
   6,399,000  46,924  (85)  5/17/31  3 month USD-LIBOR-BBA — Quarterly  1.62364% — Semiannually  50,464 
   6,399,000  44,160  (85)  5/17/31  3 month USD-LIBOR-BBA — Quarterly  1.6191% — Semiannually  47,688 
   12,143,000  55,591  (161)  5/18/31  1.5890% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (61,987) 
   98,285,000  65,556  (371)  5/18/23  3 month USD-LIBOR-BBA — Quarterly  0.2545% — Semiannually  68,289 
   10,569,000  18,274  (86)  5/18/26  3 month USD-LIBOR-BBA — Quarterly  0.896% — Semiannually  20,970 
   27,152,500  19,903  (102)  5/18/23  0.2578% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (20,895) 
   27,152,500  20,120  (102)  5/18/23  0.2582% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (21,116) 
   2,923,500  17,860  (39)  5/27/31  1.612% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (18,366) 
   3,201,000  13,489  (42)  5/20/31  1.5910% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (14,928) 

 

30 Mortgage Opportunities Fund 

 

 

 CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/21 cont. 
Notional amount  Value  Upfront 
premium 
received (paid) 		 Termination 
date 		 Payments 
made by fund 		 Payments 
received by fund 		 Unrealized 
appreciation/ 
(depreciation) 
   $3,130,000  $22,680  $(42)  5/21/31  3 month USD-LIBOR-BBA — Quarterly  1.623% — Semiannually  $23,907 
   4,271,000  65,517  (146)  5/24/51  3 month USD-LIBOR-BBA — Quarterly  2.0455% — Semiannually  66,928 
   17,704,000  45,517  (143)  5/24/26  0.9175% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (48,228) 
   3,626,000  27,529  (48)  5/24/31  1.628% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (28,604) 
   10,260,600  7,501 E  (97)  6/4/23  3 month USD-LIBOR-BBA — Quarterly  0.857% — Semiannually  (7,597) 
   36,980,000  3,735  (139)  6/1/23  0.228% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (3,874) 
   4,348,000  7,957  (58)  6/2/31  1.578% — Semiannually  3 month USD-LIBOR-BBA — Quarterly  (8,015) 
   41,742,000  3,757  (157)  6/2/23  3 month USD-LIBOR-BBA — Quarterly  0.233% — Semiannually  3,599 
Total  $245,309  $3,515,259 
E Extended effective date. 
 
 OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/21 
Swap counterparty/ 
Notional amount 		 Value  Upfront 
premium 
received (paid) 		 Termination 
date 		 Payments 
received (paid) 
by fund 		 Total return 
received by 
or paid by fund 		 Unrealized 
appreciation/ 
(depreciation) 
Barclays Bank PLC 
   $48,581  $48,486  $—   1/12/43  (3.50%) 1 month USD-LIBOR — Monthly  Synthetic TRS Index 3.50% 30 year Fannie Mae pools — Monthly  $(463) 
   16,187  16,050  —   1/12/41  (4.00%) 1 month USD-LIBOR — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  (68) 
   20,345  20,173  —   1/12/41  (4.00%) 1 month USD-LIBOR — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  (85) 
Credit Suisse International 
   100,841  100,644  —   1/12/41  3.50% ( 1 month USD-LIBOR) — Monthly  Synthetic TRS Index 3.50% 30 year Fannie Mae pools — Monthly  962 
   36,532  36,223  —   1/12/41  4.00% ( 1 month USD-LIBOR) — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  153 
   8,045  7,994  —   1/12/44  4.00% (1 month USD-LIBOR) — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  47 
   7,758  7,704  —   1/12/45  4.00% (1 month USD-LIBOR) — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  49 
Goldman Sachs International 
   3,323  3,293  —   1/12/44  (3.00%) 1 month USD-LIBOR — Monthly  Synthetic TRS Index 3.00% 30 year Fannie Mae pools — Monthly  (8) 
   52,260  52,158  —   1/12/43  (3.50%) 1 month USD-LIBOR — Monthly  Synthetic TRS Index 3.50% 30 year Fannie Mae pools — Monthly  (499) 
   8,466  8,408  —   1/12/45  4.00% (1 month USD-LIBOR) — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  54 
JPMorgan Securities LLC 
   5,467  5,432  —   1/12/44  4.00% (1 month USD-LIBOR) — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  32 
   13,512  13,426  —   1/12/44  (4.00%) 1 month USD-LIBOR — Monthly  Synthetic TRS Index 4.00% 30 year Fannie Mae pools — Monthly  (79) 
Upfront premium received  —     Unrealized appreciation  1,297 
Upfront premium (paid)  —     Unrealized (depreciation)  (1,202) 
Total  $—     Total  $95 
 
 OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/21 
Swap counterparty/ 
Referenced debt* 		 Rating***  Upfront 
premium 
received 
(paid)** 		   Notional 
amount 		 Value  Termi- 
nation 
date 		 Payments 
received by fund 		 Unrealized 
appreciation/ 
(depreciation) 
Barclays Bank PLC 
CMBX NA BBB−.7 Index  BB/P  $34     $6,000  $1,205  1/17/47  300 bp — Monthly  $(1,168) 
Citigroup Global Markets, Inc. 
CMBX NA A.6 Index  A-/P  22,323     187,000  16,512  5/11/63  200 bp — Monthly  5,884 
CMBX NA BB.11 Index  BB−/P  365,555     647,000  81,069  11/18/54  500 bp — Monthly  285,115 

 

Mortgage Opportunities Fund 31 

 

 

 OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/21 cont. 
Swap counterparty/ 
Referenced debt* 		 Rating***  Upfront 
premium 
received 
(paid)** 		   Notional 
amount 		 Value  Termi- 
nation 
date 		 Payments 
received by fund 		 Unrealized 
appreciation/ 
(depreciation) 
Citigroup Global Markets, Inc. cont. 
CMBX NA BB.13 Index  BB−/P  $25,194     $252,000  $26,057  12/16/72  500 bp — Monthly  $(618) 
CMBX NA BB.13 Index  BB−/P  30,616     336,000  34,742  12/16/72  500 bp — Monthly  (3,800) 
CMBX NA BB.13 Index  BB−/P  52,944     561,000  58,007  12/16/72  500 bp — Monthly  (4,518) 
CMBX NA BB.13 Index  BB−/P  182,893     2,006,000  207,420  12/16/72  500 bp — Monthly  (22,577) 
CMBX NA BB.6 Index  B-/P  71,327     426,829  202,872  5/11/63  500 bp — Monthly  (131,130) 
CMBX NA BB.6 Index  B-/P  154,784     1,049,085  498,630  5/11/63  500 bp — Monthly  (342,826) 
CMBX NA BB.6 Index  B-/P  754,500     1,467,164  697,343  5/11/63  500 bp — Monthly  58,583 
CMBX NA BB.7 Index  B/P  60,373     1,183,000  432,505  1/17/47  500 bp — Monthly  (370,982) 
CMBX NA BBB− .13 Index  BBB−/P  37,457     398,000  27,144  12/16/72  300 bp — Monthly  10,545 
CMBX NA BBB− .13 Index  BBB−/P  47,970     547,000  37,305  12/16/72  300 bp — Monthly  10,984 
CMBX NA BBB− .14 Index  BBB−/P  460     15,000  738  12/16/72  300 bp — Monthly  (269) 
CMBX NA BBB− .14 Index  BBB−/P  1,278     41,000  2,017  12/16/72  300 bp — Monthly  (716) 
CMBX NA BBB− .14 Index  BBB−/P  16,632     509,000  25,043  12/16/72  300 bp — Monthly  (8,114) 
CMBX NA BBB− .6 Index  BB−/P  16,660     68,000  19,128  5/11/63  300 bp — Monthly  (2,429) 
CMBX NA BBB−.12 Index  BBB−/P  5,127     87,000  5,368  8/17/61  300 bp — Monthly  (190) 
CMBX NA BBB−.14 Index  BBB−/P  677     16,000  787  12/16/72  300 bp — Monthly  (101) 
CMBX NA BBB−.14 Index  BBB−/P  11,401     228,000  11,218  12/16/72  300 bp — Monthly  316 
Credit Suisse International 
CMBX NA A.7 Index  BBB+/P  110     3,000  192  1/17/47  200 bp — Monthly  (80) 
CMBX NA BB.7 Index  B/P  44,810     335,000  122,476  1/17/47  500 bp — Monthly  (77,340) 
CMBX NA BBB−.6 Index  BB−/P  1,768     16,000  4,501  5/11/63  300 bp — Monthly  (2,724) 
CMBX NA BBB−.6 Index  BB−/P  4,088     37,000  10,408  5/11/63  300 bp — Monthly  (6,298) 
CMBX NA BBB−.7 Index  BB/P  1,379     21,000  4,219  1/17/47  300 bp — Monthly  (2,827) 
Goldman Sachs International 
CMBX NA BB.13 Index  BB−/P  23,560     245,000  25,333  12/16/72  500 bp — Monthly  (1,535) 
CMBX NA BB.6 Index  B-/P  34,230     234,318  111,372  5/11/63  500 bp — Monthly  (76,914) 
CMBX NA BB.9 Index  B+/P  264,866     655,000  175,213  9/17/58  500 bp — Monthly  90,290 
CMBX NA BBB−.6 Index  BB−/P  68     1,000  281  5/11/63  300 bp — Monthly  (213) 
CMBX NA BBB−.6 Index  BB−/P  833     6,000  1,688  5/11/63  300 bp — Monthly  (851) 
CMBX NA BBB−.6 Index  BB−/P  520     6,000  1,688  5/11/63  300 bp — Monthly  (1,164) 
CMBX NA BBB−.6 Index  BB−/P  758     7,000  1,969  5/11/63  300 bp — Monthly  (1,207) 
CMBX NA BBB−.6 Index  BB−/P  580     7,000  1,969  5/11/63  300 bp — Monthly  (1,385) 
CMBX NA BBB−.6 Index  BB−/P  780     7,000  1,969  5/11/63  300 bp — Monthly  (1,185) 
CMBX NA BBB−.6 Index  BB−/P  2,196     19,000  5,345  5/11/63  300 bp — Monthly  (3,138) 
CMBX NA BBB−.6 Index  BB−/P  4,985     35,000  9,846  5/11/63  300 bp — Monthly  (4,840) 
CMBX NA BBB−.6 Index  BB−/P  2,932     39,000  10,971  5/11/63  300 bp — Monthly  (8,016) 
CMBX NA BBB−.6 Index  BB−/P  4,589     41,000  11,533  5/11/63  300 bp — Monthly  (6,921) 
CMBX NA BBB−.6 Index  BB−/P  6,102     52,000  14,628  5/11/63  300 bp — Monthly  (8,496) 
CMBX NA BBB−.6 Index  BB−/P  6,807     61,000  17,159  5/11/63  300 bp — Monthly  (10,317) 
CMBX NA BBB−.6 Index  BB−/P  6,807     61,000  17,159  5/11/63  300 bp — Monthly  (10,317) 
CMBX NA BBB−.6 Index  BB−/P  8,944     80,000  22,504  5/11/63  300 bp — Monthly  (13,514) 
CMBX NA BBB−.6 Index  BB−/P  18,576     121,000  34,037  5/11/63  300 bp — Monthly  (15,390) 
CMBX NA BBB−.6 Index  BB−/P  19,769     166,000  46,696  5/11/63  300 bp — Monthly  (26,830) 
CMBX NA BBB−.6 Index  BB−/P  28,389     179,000  50,353  5/11/63  300 bp — Monthly  (21,859) 
CMBX NA BBB−.6 Index  BB−/P  22,689     192,000  54,010  5/11/63  300 bp — Monthly  (31,209) 
CMBX NA BBB−.6 Index  BB−/P  22,767     192,000  54,010  5/11/63  300 bp — Monthly  (31,130) 
CMBX NA BBB−.6 Index  BB−/P  31,086     196,000  55,135  5/11/63  300 bp — Monthly  (23,935) 
CMBX NA BBB−.6 Index  BB−/P  15,110     199,000  55,979  5/11/63  300 bp — Monthly  (40,753) 
CMBX NA BBB−.6 Index  BB−/P  23,894     270,000  75,951  5/11/63  300 bp — Monthly  (51,899) 
CMBX NA BBB−.6 Index  BB−/P  42,824     274,000  77,076  5/11/63  300 bp — Monthly  (34,092) 
CMBX NA BBB−.6 Index  BB−/P  21,083     286,000  80,452  5/11/63  300 bp — Monthly  (59,202) 
CMBX NA BBB−.6 Index  BB−/P  20,957     286,000  80,452  5/11/63  300 bp — Monthly  (59,328) 
CMBX NA BBB−.6 Index  BB−/P  22,360     295,000  82,984  5/11/63  300 bp — Monthly  (60,452) 

 

32 Mortgage Opportunities Fund 

 

 

 OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/21 cont. 
Swap counterparty/ 
Referenced debt* 		 Rating***  Upfront 
premium 
received 
(paid)** 		   Notional 
amount 		 Value  Termi- 
nation 
date 		 Payments 
received by fund 		 Unrealized 
appreciation/ 
(depreciation) 
Goldman Sachs International cont. 
CMBX NA BBB−.6 Index  BB−/P  $37,025     $300,000  $84,390  5/11/63  300 bp — Monthly  $(47,190) 
CMBX NA BBB−.6 Index  BB−/P  34,253     310,000  87,203  5/11/63  300 bp — Monthly  (52,770) 
CMBX NA BBB−.6 Index  BB−/P  29,179     364,000  102,393  5/11/63  300 bp — Monthly  (73,002) 
CMBX NA BBB−.6 Index  BB−/P  36,144     430,000  120,959  5/11/63  300 bp — Monthly  (84,564) 
CMBX NA BBB−.6 Index  BB−/P  37,588     592,000  166,530  5/11/63  300 bp — Monthly  (128,597) 
CMBX NA BBB−.7 Index  BB/P  370     5,000  1,005  1/17/47  300 bp — Monthly  (632) 
CMBX NA BBB−.7 Index  BB/P  3,816     37,000  7,433  1/17/47  300 bp — Monthly  (3,596) 
CMBX NA BBB−.7 Index  BB/P  4,227     52,000  10,447  1/17/47  300 bp — Monthly  (6,189) 
CMBX NA BBB−.7 Index  BB/P  4,856     57,000  11,451  1/17/47  300 bp — Monthly  (6,563) 
CMBX NA BBB−.7 Index  BB/P  23,196     206,000  41,385  1/17/47  300 bp — Monthly  (18,070) 
JPMorgan Securities LLC 
CMBX NA A.6 Index  A-/P  560     4,000  353  5/11/63  200 bp — Monthly  208 
CMBX NA BB.10 Index  B+/P  23,189     289,000  87,047  5/11/63  500 bp — Monthly  (63,577) 
CMBX NA BB.6 Index  B-/P  974,000     1,839,545  874,336  5/11/63  500 bp — Monthly  101,452 
CMBX NA BBB−.6 Index  BB−/P  11,650,589     36,442,000  10,251,135  5/11/63  300 bp — Monthly  1,442,913 
CMBX NA BBB−.7 Index  BB/P  21,129     90,000  18,081  1/17/47  300 bp — Monthly  3,100 
Merrill Lynch International 
CMBX NA BB.6 Index  B-/P  41,596     361,686  171,910  5/11/63  500 bp — Monthly  (129,962) 
CMBX NA BB.7 Index  B/P  16,216     134,000  48,990  1/17/47  500 bp — Monthly  (32,644) 
CMBX NA BB.7 Index  B/P  27,163     287,000  104,927  1/17/47  500 bp — Monthly  (77,485) 
CMBX NA BBB− .6 Index  BB−/P  2,563,258     9,513,000  2,676,007  5/11/63  300 bp — Monthly  (107,199) 
Morgan Stanley & Co. International PLC 
CMBX NA BB.13 Index  BB−/P  29,856     321,000  33,191  12/16/72  500 bp — Monthly  (3,023) 
CMBX NA BB.13 Index  BB−/P  31,276     341,000  35,259  12/16/72  500 bp — Monthly  (3,652) 
CMBX NA BB.13 Index  BB−/P  38,127     404,000  41,774  12/16/72  500 bp — Monthly  (3,254) 
CMBX NA BB.13 Index  BB−/P  53,032     582,000  60,179  12/16/72  500 bp — Monthly  (6,581) 
CMBX NA BB.13 Index  BB−/P  54,405     589,000  60,903  12/16/72  500 bp — Monthly  (5,925) 
CMBX NA BB.13 Index  BB−/P  101,068     1,051,000  108,673  12/16/72  500 bp — Monthly  (6,584) 
CMBX NA BB.13 Index  BB−/P  117,062     1,275,000  131,835  12/16/72  500 bp — Monthly  (13,533) 
CMBX NA BB.6 Index  B-/P  68,880     159,453  75,788  5/11/63  500 bp — Monthly  (6,753) 
CMBX NA BB.6 Index  B-/P  29,053     232,374  110,447  5/11/63  500 bp — Monthly  (81,168) 
CMBX NA BB.9 Index  B+/P  40,857     102,000  27,285  9/17/58  500 bp — Monthly  13,671 
CMBX NA BBB−.14 Index  BBB−/P  729     24,000  1,181  12/16/72  300 bp — Monthly  (437) 
CMBX NA BBB−.14 Index  BBB−/P  4,369     155,000  7,626  12/16/72  300 bp — Monthly  (3,167) 
CMBX NA BBB−.12 Index  BBB−/P  2,122     36,000  2,221  8/17/61  300 bp — Monthly  (79) 
CMBX NA BBB−.6 Index  BB−/P  41,903     571,000  160,622  5/11/63  300 bp — Monthly  (118,386) 
CMBX NA BBB−.6 Index  BB−/P  59,391     711,000  200,004  5/11/63  300 bp — Monthly  (140,199) 
CMBX NA BBB−.6 Index  BB−/P  316,365     917,000  257,952  5/11/63  300 bp — Monthly  58,948 
CMBX NA BBB−.6 Index  BB−/P  69,002     1,051,000  295,646  5/11/63  300 bp — Monthly  (226,031) 
CMBX NA BBB−.6 Index  BB−/P  69,717     1,056,000  297,053  5/11/63  300 bp — Monthly  (226,720) 
CMBX NA BBB−.6 Index  BB−/P  87,617     1,093,000  307,461  5/11/63  300 bp — Monthly  (219,207) 
CMBX NA BBB−.6 Index  BB−/P  110,571     1,476,000  415,199  5/11/63  300 bp — Monthly  (303,766) 
CMBX NA BBB−.6 Index  BB−/P  1,392,867     21,024,500  5,914,192  5/11/63  300 bp — Monthly  (4,509,060) 
Upfront premium received  20,816,044      Unrealized appreciation  2,082,009 
Upfront premium (paid)  —       Unrealized (depreciation)  (8,294,364) 
Total  $20,816,044      Total  $(6,212,355) 
* 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, 2021. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications. 
 

 

Mortgage Opportunities Fund 33 

 

 

 OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/21 
Swap counterparty/ 
Referenced debt* 		   Upfront 
premium 
received 
(paid)** 		   Notional 
amount 		 Value  Termi- 
nation 
date 		 Payments 
(paid) 
by fund 		 Unrealized 
appreciation/ 
(depreciation) 
Citigroup Global Markets, Inc. 
CMBX NA A.6 Index     $(11,103)     $110,000  $9,713  5/11/63  (200 bp) — Monthly  $(1,433) 
CMBX NA A.7 Index     (22)     3,000  192  1/17/47  (200 bp) — Monthly  168 
CMBX NA BB.10 Index     (13,985)     134,000  40,361  11/17/59  (500 bp) — Monthly  26,246 
CMBX NA BB.10 Index     (12,061)     110,000  33,132  11/17/59  (500 bp) — Monthly  20,964 
CMBX NA BB.11 Index     (53,073)     735,000  92,096  11/18/54  (500 bp) — Monthly  38,308 
CMBX NA BB.11 Index     (78,125)     603,000  75,556  11/18/54  (500 bp) — Monthly  (3,155) 
CMBX NA BB.11 Index     (25,963)     509,000  63,778  11/18/54  (500 bp) — Monthly  37,320 
CMBX NA BB.11 Index     (26,404)     509,000  63,778  11/18/54  (500 bp) — Monthly  36,879 
CMBX NA BB.11 Index     (17,530)     255,000  31,952  11/18/54  (500 bp) — Monthly  14,174 
CMBX NA BB.11 Index     (13,102)     139,000  17,417  11/18/54  (500 bp) — Monthly  4,179 
CMBX NA BB.12 Index     (36,732)     428,000  57,352  8/17/61  (500 bp) — Monthly  20,204 
CMBX NA BB.8 Index     (38,367)     298,276  114,448  10/17/57  (500 bp) — Monthly  75,792 
CMBX NA BB.9 Index     (7,104)     181,000  48,418  9/17/58  (500 bp) — Monthly  41,137 
CMBX NA BB.9 Index     (3,698)     102,000  27,285  9/17/58  (500 bp) — Monthly  23,488 
CMBX NA BB.9 Index     (1,355)     21,000  5,618  9/17/58  (500 bp) — Monthly  4,242 
CMBX NA BBB− .10 Index     (479,876)     2,791,000  315,383  11/17/59  (300 bp) — Monthly  (166,121) 
CMBX NA BBB− .12 Index     (8,468)     123,000  7,589  8/17/61  (300 bp) — Monthly  (950) 
CMBX NA BBB− .6 Index     (648,050)     1,994,000  560,912  5/11/63  (300 bp) — Monthly  (88,301) 
CMBX NA BBB−.10 Index     (262,173)     880,000  99,440  11/17/59  (300 bp) — Monthly  (163,246) 
CMBX NA BBB−.10 Index     (41,106)     336,000  37,968  11/17/59  (300 bp) — Monthly  (3,334) 
CMBX NA BBB−.10 Index     (3,824)     30,000  3,390  11/17/59  (300 bp) — Monthly  (452) 
CMBX NA BBB−.13 Index     (42,511)     561,000  38,260  12/16/72  (300 bp) — Monthly  (4,578) 
CMBX NA BBB−.7 Index     (60,813)     278,000  55,850  1/17/47  (300 bp) — Monthly  (5,124) 
CMBX NA BBB−.7 Index     (989)     196,000  39,376  1/17/47  (300 bp) — Monthly  38,273 
CMBX NA BBB−.8 Index     (13,594)     87,000  13,276  10/17/57  (300 bp) — Monthly  (368) 
CMBX NA BBB−.9 Index     (56,545)     239,000  23,613  9/17/58  (300 bp) — Monthly  (33,071) 
Credit Suisse International 
CMBX NA BB.10 Index     (50,421)     424,000  127,709  11/17/59  (500 bp) — Monthly  76,876 
CMBX NA BB.10 Index     (27,719)     223,000  67,168  11/17/59  (500 bp) — Monthly  39,232 
Goldman Sachs International 
CMBX NA A .6 Index     (1,060)     16,000  1,413  5/11/63  (200 bp) — Monthly  347 
CMBX NA BB.7 Index     (43,198)     227,000  82,991  1/17/47  (500 bp) — Monthly  39,572 
CMBX NA BB.8 Index     (11,330)     96,529  37,038  10/17/57  (500 bp) — Monthly  25,615 
CMBX NA BB.9 Index     (16,195)     417,000  111,548  9/17/58  (500 bp) — Monthly  94,947 
CMBX NA BB.9 Index     (62,086)     390,000  104,325  9/17/58  (500 bp) — Monthly  41,860 
CMBX NA BB.9 Index     (26,089)     250,000  66,875  9/17/58  (500 bp) — Monthly  40,543 
CMBX NA BB.9 Index     (31,123)     197,000  52,698  9/17/58  (500 bp) — Monthly  21,383 
CMBX NA BB.9 Index     (30,349)     190,000  50,825  9/17/58  (500 bp) — Monthly  20,292 
CMBX NA BB.9 Index     (6,035)     56,000  14,980  9/17/58  (500 bp) — Monthly  8,890 
CMBX NA BB.9 Index     (6,188)     52,000  13,910  9/17/58  (500 bp) — Monthly  7,671 
CMBX NA BB.9 Index     (6,258)     52,000  13,910  9/17/58  (500 bp) — Monthly  7,601 
CMBX NA BBB−.13 Index     (18,566)     245,000  16,709  12/16/72  (300 bp) — Monthly  (2,000) 
CMBX NA BBB−.13 Index     (366)     6,000  409  12/16/72  (300 bp) — Monthly  40 
CMBX NA BBB−.6 Index     (32,934)     601,000  169,061  5/11/63  (300 bp) — Monthly  135,776 
JPMorgan Securities LLC 
CMBX NA BB.11 Index     (2,338,617)     4,288,000  537,286  11/18/54  (500 bp) — Monthly  (1,805,501) 
CMBX NA BB.12 Index     (60,963)     111,000  14,874  8/17/61  (500 bp) — Monthly  (46,197) 
CMBX NA BB.17 Index     (1,282,407)     2,619,000  957,506  1/17/47  (500 bp) — Monthly  (327,447) 
CMBX NA BBB− .10 Index     (21,935)     133,000  15,029  11/17/59  (300 bp) — Monthly  (6,983) 
CMBX NA BBB−.10 Index     (85,802)     288,000  32,544  11/17/59  (300 bp) — Monthly  (53,426) 
CMBX NA BBB−.10 Index     (48,454)     172,000  19,436  11/17/59  (300 bp) — Monthly  (29,118) 

 

34 Mortgage Opportunities Fund 

 

 

 OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/21 cont. 
Swap counterparty/ 
Referenced debt* 		   Upfront 
premium 
received 
(paid)** 		   Notional 
amount 		 Value  Termi- 
nation 
date 		 Payments 
(paid) 
by fund 		 Unrealized 
appreciation/ 
(depreciation) 
Merrill Lynch International 
CMBX NA BB.10 Index     $(19,061)     $335,000  $100,902  11/17/59  (500 bp) — Monthly  $81,515 
CMBX NA BB.11 Index     (125,536)     254,000  31,826  11/18/54  (500 bp) — Monthly  (93,956) 
Morgan Stanley & Co. International PLC 
CMBX NA BB.10 Index     (14,053)     134,000  40,361  11/17/59  (500 bp) — Monthly  26,177 
CMBX NA BB.11 Index     (42,033)     428,000  53,628  11/18/54  (500 bp) — Monthly  11,180 
CMBX NA BB.11 Index     (11,420)     117,000  14,660  11/18/54  (500 bp) — Monthly  3,126 
CMBX NA BB.12 Index     (55,505)     1,051,000  140,834  8/17/61  (500 bp) — Monthly  84,307 
CMBX NA BB.12 Index     (28,670)     401,000  53,734  8/17/61  (500 bp) — Monthly  24,674 
CMBX NA BB.12 Index     (20,225)     277,000  37,118  8/17/61  (500 bp) — Monthly  16,623 
CMBX NA BB.7 Index     (63,621)     340,000  124,304  1/17/47  (500 bp) — Monthly  60,352 
CMBX NA BB.7 Index     (34,709)     180,000  65,808  1/17/47  (500 bp) — Monthly  30,924 
CMBX NA BB.9 Index     (37,254)     1,056,000  282,480  9/17/58  (500 bp) — Monthly  244,199 
CMBX NA BB.9 Index     (6,646)     170,000  45,475  9/17/58  (500 bp) — Monthly  38,664 
CMBX NA BB.9 Index     (12,489)     103,000  27,553  9/17/58  (500 bp) — Monthly  14,964 
CMBX NA BB.9 Index     (12,822)     89,000  23,808  9/17/58  (500 bp) — Monthly  10,899 
CMBX NA BB.9 Index     (9,990)     66,000  17,655  9/17/58  (500 bp) — Monthly  7,601 
CMBX NA BB.9 Index     (5,559)     65,000  17,388  9/17/58  (500 bp) — Monthly  11,765 
CMBX NA BB.9 Index     (3,447)     56,000  14,980  9/17/58  (500 bp) — Monthly  11,479 
CMBX NA BB.9 Index     (6,305)     52,000  13,910  9/17/58  (500 bp) — Monthly  7,554 
CMBX NA BB.9 Index     (1,358)     10,000  2,675  9/17/58  (500 bp) — Monthly  1,307 
CMBX NA BBB−.8 Index     (210,480)     1,353,000  206,468  10/17/57  (300 bp) — Monthly  (4,802) 
CMBX NA BBB−.8 Index     (107,262)     684,000  104,378  10/17/57  (300 bp) — Monthly  (3,282) 
CMBX NA BBB−.10 Index     (12,576)     58,000  6,554  11/17/59  (300 bp) — Monthly  (6,056) 
CMBX NA BBB−.10 Index     (11,028)     51,000  5,763  11/17/59  (300 bp) — Monthly  (5,295) 
CMBX NA BBB−.10 Index     (6,722)     53,000  5,989  11/17/59  (300 bp) — Monthly  (764) 
CMBX NA BBB−.13 Index     (123)     2,000  136  12/16/72  (300 bp) — Monthly  12 
CMBX NA BBB−.8 Index     (5,625)     36,000  5,494  10/17/57  (300 bp) — Monthly  (152) 
Upfront premium received  —       Unrealized appreciation  1,629,341 
Upfront premium (paid)  (7,029,187)      Unrealized (depreciation)  (2,855,112) 
Total  $(7,029,187)      Total  $(1,225,771) 
* 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. 
 

 

Mortgage Opportunities Fund 35 

 

 

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  $—  $8,736,973  $— 
Mortgage-backed securities  —  133,617,950  — 
Purchased options outstanding  —  575,729  — 
Purchased swap options outstanding  —  78,398  — 
U.S. government and agency mortgage obligations  —  46,387,198  — 
Short-term investments  —  63,080,951  — 
Totals by level  $—  $252,477,199  $— 
 
    Valuation inputs
Other financial instruments:  Level 1  Level 2  Level 3 
Futures contracts  $(64,592)  $—  $— 
Written options outstanding  —  (789,413)  — 
Written swap options outstanding  —  (2,192,424)  — 
Forward premium swap option contracts  —  (146,620)  — 
TBA sale commitments  —  (42,724,063)  — 
Interest rate swap contracts  —  3,269,950  — 
Total return swap contracts  —  95  — 
Credit default contracts  —  (21,224,983)  — 
Totals by level  $(64,592)  $(63,807,458)  $— 


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

 

36 Mortgage Opportunities Fund 

 

 
 

Statement of assets and liabilities 5/31/21

ASSETS   
Investment in securities, at value (Note 1):   
Unaffiliated issuers (identified cost $232,577,933)  $219,095,762 
Affiliated issuers (identified cost $33,381,437) (Notes 1 and 5)  33,381,437 
Interest and other receivables  1,290,968 
Receivable for shares of the fund sold  46,310 
Receivable for investments sold  410 
Receivable for sales of TBA securities (Note 1)  36,298,527 
Receivable from Manager (Note 2)  40,897 
Receivable for variation margin on centrally cleared swap contracts (Note 1)  535,368 
Unrealized appreciation on forward premium swap option contracts (Note 1)  26,064 
Unrealized appreciation on OTC swap contracts (Note 1)  3,712,647 
Premium paid on OTC swap contracts (Note 1)  7,029,187 
Prepaid assets  46,202 
Total assets  301,503,779 
 
LIABILITIES   
Payable for investments purchased  3,100,009 
Payable for purchases of TBA securities (Note 1)  38,028,478 
Payable for shares of the fund repurchased  6 
Payable for custodian fees (Note 2)  37,253 
Payable for investor servicing fees (Note 2)  6,425 
Payable for Trustee compensation and expenses (Note 2)  6,997 
Payable for administrative services (Note 2)  526 
Payable for distribution fees (Note 2)  967 
Payable for variation margin on futures contracts (Note 1)  14,706 
Payable for variation margin on centrally cleared swap contracts (Note 1)  502,355 
Unrealized depreciation on OTC swap contracts (Note 1)  11,150,678 
Premium received on OTC swap contracts (Note 1)  20,816,044 
Unrealized depreciation on forward premium swap option contracts (Note 1)  172,684 
Written options outstanding, at value (premiums $2,158,158) (Note 1)  2,981,837 
TBA sale commitments, at value (proceeds receivable $42,538,828) (Note 1)  42,724,063 
Other accrued expenses  141,186 
Total liabilities  119,684,214 
 
Net assets  $181,819,565 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $213,715,049 
Total distributable earnings (Note 1)  (31,895,484) 
Total — Representing net assets applicable to capital shares outstanding  $181,819,565 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($1,660,353 divided by 176,373 shares)  $9.41 
Offering price per class A share (100/96.00 of $9.41)*  $9.80 
Net asset value and offering price per class C share ($260,332 divided by 27,625 shares)  $9.42 
Net asset value and offering price per class I share ($135,398,937 divided by 14,364,368 shares)  $9.43 
Net asset value, offering price and redemption price per class R6 share ($1,016,806 divided by 107,849 shares)  $9.43 
Net asset value, offering price and redemption price per class Y share ($43,483,137 divided by 4,613,965 shares)  $9.42 

 

*On single retail sales of less than $100,000. On sales of $100,000 or more the offering price is reduced.

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

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

Mortgage Opportunities Fund 37 

 

 

Statement of operations Year ended 5/31/21

INVESTMENT INCOME   
Interest (including interest income of $89,212 from investments in affiliated issuers) (Note 5)  $8,580,917 
Total investment income  8,580,917 
 
EXPENSES   
Compensation of Manager (Note 2)  1,066,447 
Investor servicing fees (Note 2)  36,623 
Custodian fees (Note 2)  69,217 
Trustee compensation and expenses (Note 2)  8,913 
Distribution fees (Note 2)  8,402 
Administrative services (Note 2)  4,539 
Auditing and tax fees  143,183 
Blue sky expense  83,954 
Other  48,531 
Fees waived and reimbursed by Manager (Note 2)  (528,462) 
Total expenses  941,347 
Expense reduction (Note 2)  (2,240) 
Net expenses  939,107 
 
Net investment income  7,641,810 
 
REALIZED AND UNREALIZED GAIN (LOSS)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (Notes 1 and 3)  3,939,206 
Futures contracts (Note 1)  (129,495) 
Swap contracts (Note 1)  (23,226,851) 
Written options (Note 1)  4,348,380 
Total net realized loss  (15,068,760) 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers and TBA sale commitments  5,804,975 
Futures contracts  36,629 
Swap contracts  19,051,382 
Written options  (1,173,563) 
Total change in net unrealized appreciation  23,719,423 
 
Net gain on investments  8,650,663 
 
Net increase in net assets resulting from operations  $16,292,473 

 

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

38 Mortgage Opportunities Fund 

 

 

Statement of changes in net assets

INCREASE (DECREASE) IN NET ASSETS  Year ended 5/31/21  Year ended 5/31/20 
Operations     
Net investment income  $7,641,810  $10,537,077 
Net realized gain (loss) on investments  (15,068,760)  4,646,798 
Change in net unrealized appreciation (depreciation) of investments  23,719,423  (45,208,804) 
Net increase (decrease) in net assets resulting from operations  16,292,473  (30,024,929) 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (71,679)  (202,543) 
Class C  (8,515)  (9,740) 
Class I  (5,219,114)  (19,146,660) 
Class R6  (32,418)  — 
Class Y  (1,834,798)  (1,900,746) 
From return of capital     
Class A  (1,300)  (3,995) 
Class C  (154)  (192) 
Class I  (94,624)  (377,635) 
Class R6  (588)  — 
Class Y  (33,265)  (37,489) 
Increase (decrease) from capital share transactions (Note 4)  (81,832,884)  84,286,907 
Total increase (decrease) in net assets  (72,836,866)  32,582,978 
 
NET ASSETS     
Beginning of year  254,656,431  222,073,453 
End of year  $181,819,565  $254,656,431 

 

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

Mortgage Opportunities Fund 39 

 

 

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  From return  Total  Net asset value,  Total return at  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  of capital­  distributions  end of period­  net asset value (%)b  (in thousands)  expense (%)c,d  net assets (%)d  Portfolio turnover (%)e 
Class A­                           
May 31, 2021  $9.01­  .34­  .39­  .73­  (.32)  (.01)  (0.33)  $9.41­  8.19­  $1,660­  .75­  3.64­  1,058­ 
May 31, 2020†­  10.51­  .31­  (1.11)  (.80)  (.69)  (.01)  (0.70)  9.01­  (8.32)*  2,805­  .71*  3.11*  1,311­ 
Class C                           
May 31, 2021­  $9.01­  .28­  .39­  .67­  (.26)  —f  (0.26)  $9.42­  7.48­  $260­  1.50­  2.93­  1,058­ 
May 31, 2020†­  10.51­  .24­  (1.11)  (.87)  (.62)  (.01)  (0.63)  9.01­  (8.91)*  337­  1.40*  2.46*  1,311­ 
Class I                           
May 31, 2021­  $9.02­  .37­  .40  .77  (.35)  (.01)  (0.36)  $9.43­  8.58­  $135,399­  .47­  3.94­  1,058­ 
May 31, 2020  10.46­  .36­  (1.08)  (.72)  (.71)  (.01)  (0.72)  9.02­  (7.40)  196,765­  .47­  3.50­  1,311­ 
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 
Class R6                           
May 31, 2021­#  $9.02­  .38­  .39  .77  (.35)  (.01)  (0.36)  $9.43­  8.56­  $1,017­  .51  4.01  1,058­ 
Class Y                           
May 31, 2021­  $9.02­  .37­  .39  .76  (.35)  (.01)  (0.36)  $9.42­  8.46­  $43,483­  .50­  3.93­  1,058­ 
May 31, 2020†­  10.51­  .33­  (1.11)  (.78)  (.70)  (.01)  (0.71)  9.02­  (8.10)*  54,750­  .48*  3.40*  1,311­ 

 

* Not annualized.

# For the period June 1, 2020 (commencement of operations) to May 31, 2021.

† For the period July 1, 2019 (commencement of operations) to May 31, 2020.

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 each class reflect a reduction of the following amount (Note 2):

      Percentage of average net assets 
  5/31/21  5/31/20  5/31/19  5/31/18  5/31/17 
Class A  0.27%  0.20%  N/A  N/A  N/A 
Class C  0.27  0.20  N/A  N/A  N/A 
Class I  0.27  0.22  0.21%  0.32%  1.21% 
Class R6  0.27  N/A  N/A  N/A  N/A 
Class Y  0.27  0.20  N/A  N/A  N/A 

 

e Portfolio turnover includes TBA roll transactions.

f Represents less than $0.01 per share.

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

40 Mortgage Opportunities Fund  Mortgage Opportunities Fund 41 

 

 

Notes to financial statements 5/31/21

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, 2020 through May 31, 2021.

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 nonagency 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. The fund currently has significant investment exposure to commercial mortgage-backed securities. Non-agency (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 A, class C, class I, class R6 and class Y shares. The fund began offering class R6 shares on June 1, 2020. Class A shares are sold with a maximum front-end sales charge of 4.00%. Class A shares generally are not subject to a contingent deferred sales charge. Class I, class R6 and class Y shares are not subject to a contingent deferred sales charge. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and generally convert to class A shares after approximately eight years. Prior to March 1, 2021, class C shares generally converted to class A shares after approximately ten years. The expenses for class A and class C shares may differ based on the distribution fee of each class, which is identified in Note 2. Class I, class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A and class C shares, but do not bear a distribution fee, and in the case of class I shares, has a lower investor servicing fee. 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. Class R6 and class Y shares are not available to all investors.

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

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

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

Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.

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.

42 Mortgage Opportunities Fund 

 

 

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 the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

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

Interest income, net of any applicable withholding taxes, if any, and including amortization and accretion of premiums and discounts on debt securities, is recorded on the accrual basis.

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 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.

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.

Futures contracts The fund uses futures contracts for hedging treasury term structure risk and for yield curve positioning.

The potential risk to the fund is that the change in value of futures 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. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”

Futures 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.

Mortgage Opportunities Fund 43 

 

 

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, for hedging 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 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 for hedging credit risk, for hedging 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.

44 Mortgage Opportunities Fund 

 

 

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 pledged 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.

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 $23,753,253 on open derivative contracts subject to the Master Agreements. Collateral pledged by the fund at period end for these agreements totaled $23,637,000 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 Bank Funding Rate for the committed line of credit and 1.30% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate 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.

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, 2021, 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 
$13,164,534  $3,667,141  $16,831,675 

 

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 realized built-in losses, from income on swap contracts, and from interest-only securities. 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 $8,188,069 to decrease distributions in excess of net investment income, $6,286,813 to decrease paid-in-capital and $1,901,256 to increase accumulated net realized loss.

 

Mortgage Opportunities Fund 45 

 

 

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  $22,873,878 
Unrealized depreciation  (37,937,684) 
Net unrealized depreciation  (15,063,806) 
Capital loss carryforward  (16,831,675) 
Cost for federal income tax purposes  $203,668,955 

 

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.

Putnam Management has contractually agreed, through September 30, 2022, 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. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Putnam Management has also contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through September 30, 2022, to the extent that total expenses of the fund (excluding brokerage, interest, taxes, investment-related expenses, payments under distribution plans, extraordinary expenses, payments under the fund’s investor servicing contract and acquired fund fees and expenses, but including payments under the fund’s investment management contract) would exceed an annual rate of 0.46% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $528,462 as a result of this limit.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.40% 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. received fees for investor servicing for class A, class C and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

Class I shares paid a monthly fee based on the average net assets of class I shares at an annual rate of 0.01%.

Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.

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

Class A  $879  Class R6  417 
Class C  135  Class Y  21,081 
Class I  14,111  Total  $36,623 

 

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 $2,240 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $123, 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.

46 Mortgage Opportunities Fund 

 

 

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

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

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

  Maximum %  Approved %  Amount 
Class A  0.35%  0.25%  $5,211 
Class C  1.00%  1.00%  3,191 
Total      $8,402 

 

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $92 from the sale of class A shares and received $1 in contingent deferred sales charges from redemptions of class C shares.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A redemptions.

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)  $1,724,454,750  $1,781,556,836 
U.S. government securities (Long-term)  —  — 
Total  $1,724,454,750  $1,781,556,836 

 

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.

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:

      FOR THE PERIOD 7/1/19 (COMMENCEMENT 
  YEAR ENDED 5/31/21  OF OPERATIONS) TO 5/31/20 
Class A  Shares  Amount  Shares  Amount 
Shares sold  89,274  $861,092  659,834  $6,927,603 
Shares issued in connection with reinvestment of distributions  7,782  72,916  19,970  204,401 
  97,056  934,008  679,804  7,132,004 
Shares repurchased  (232,077)  (2,161,209)  (368,410)  (3,639,701) 
Net increase (decrease)  (135,021)  $(1,227,201)  311,394  $3,492,303 
 
      FOR THE PERIOD 7/1/19 (COMMENCEMENT 
  YEAR ENDED 5/31/21  OF OPERATIONS) TO 5/31/20 
Class C  Shares  Amount  Shares  Amount 
Shares sold  13,230  $123,814  59,026  $612,586 
Shares issued in connection with reinvestment of distributions  925  8,669  998  9,932 
  14,155  132,483  60,024  622,518 
Shares repurchased  (23,864)  (220,953)  (22,690)  (206,253) 
Net increase (decrease)  (9,709)  $(88,470)  37,334  $416,265 

 

Mortgage Opportunities Fund 47 

 

 

  YEAR ENDED 5/31/21  YEAR ENDED 5/31/20 
Class I  Shares  Amount  Shares  Amount 
Shares sold  2,225,314  $21,327,905  8,782,146  $92,091,867 
Shares issued in connection with reinvestment of distributions  384,317  3,615,327  915,875  9,461,123 
  2,609,631  24,943,232  9,698,021  101,552,990 
Shares repurchased  (10,061,925)  (93,001,505)  (9,105,614)  (88,009,684) 
Net increase (decrease)  (7,452,294)  $(68,058,273)  592,407  $13,543,306 
 
  YEAR ENDED 5/31/21     
Class R6  Shares  Amount     
Shares sold  144,035  $1,344,684     
Shares issued in connection with reinvestment of distributions  3,507  33,006     
  147,542  1,377,690     
Shares repurchased  (39,693)  (375,672)     
Net increase  107,849  $1,002,018     
 
      FOR THE PERIOD 7/1/19 (COMMENCEMENT 
  YEAR ENDED 5/31/21  OF OPERATIONS) TO 5/31/20 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  305,913  $2,953,784  10,147,130  $105,703,074 
Shares issued in connection with reinvestment of distributions  192,378  1,806,821  185,909  1,861,402 
  498,291  4,760,605  10,333,039  107,564,476 
Shares repurchased  (1,955,184)  (18,221,563)  (4,262,181)  (40,729,443) 
Net increase (decrease)  (1,456,893)  $(13,460,958)  6,070,858  $66,835,033 

 

At the close of the reporting period, four shareholders of record owned 9.5%, 11.2%, 26.1% and 27.5%, 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 5/31/20  cost  proceeds  income  of 5/31/21 
Short-term investments           
Putnam Short Term Investment Fund*  $47,503,886  $130,405,790  $144,528,239  $89,212  $33,381,437 
Total Short-term investments  $47,503,886  $130,405,790  $144,528,239  $89,212  $33,381,437 

 

* 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 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 in higher-yielding, lower-rated bonds that may have a higher rate of 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.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. On March 5, 2021, the FCA and LIBOR’s administrator, ICE Benchmark Administration, announced that most LIBOR settings will no longer be published after the end of 2021 and a majority of U.S. dollar LIBOR settings will no longer be published after June 30, 2023. LIBOR has historically been a common benchmark interest rate index used to make adjustments to variable-rate loans. It is used throughout global banking and financial industries to determine interest rates for a variety of financial instruments and borrowing arrangements. The transition process might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based investments. While some LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate-setting methodology, not all may have such provisions and there may be significant uncertainty regarding the effectiveness of any such alternative methodologies. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the date on which the applicable rate ceases to be published.

48 Mortgage Opportunities Fund 

 

 

Beginning in January 2020, global financial markets have experienced, and may continue to experience, significant volatility resulting from the spread of a virus known as Covid–19. The outbreak of Covid–19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand, and general market uncertainty. The effects of Covid–19 have adversely affected, and may continue to adversely affect, the global economy, the economies of certain nations, and individual issuers, all of which may negatively impact the fund’s performance.

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)  $359,100,000 
Purchased swap option contracts (contract amount)  $138,600,000 
Written TBA commitment option contracts (contract amount)  $364,600,000 
Written swap option contracts (contract amount)  $74,600,000 
Futures contracts (number of contracts)  2,000 
Centrally cleared interest rate swap contracts (notional)  $1,211,200,000 
OTC total return swap contracts (notional)  $350,000 
OTC credit default contracts (notional)  $144,900,000 

 

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  $5,803,416  Payables  $27,028,399 
  Investments, Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Interest rate contracts  appreciation  9,420,718*  Unrealized depreciation  8,689,595* 
Total    $15,224,134    $35,717,994 

 

* Includes cumulative appreciation/depreciation of futures contracts and/or 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  Futures  Swaps  Total 
Credit contracts  $—  $—  $(14,580,137)  $(14,580,137) 
Interest rate contracts  12,947,787  (129,495)  (8,646,714)  $4,171,578 
Total  $12,947,787  $(129,495)  $(23,226,851)  $(10,408,559) 

 

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  Futures  Swaps  Total 
Credit contracts  $—  $—  $14,676,958  $14,676,958 
Interest rate contracts  (1,362,418)  36,629  4,374,424  $3,048,635 
Total  $(1,362,418)  $36,629  $19,051,382  $17,725,593 

 

Mortgage Opportunities Fund 49 

 

 

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)		 Citibank, N.A. 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		 Total
Assets:                       
Centrally cleared interest rate swap contracts§  $—  $535,368  $—  $—  $—  $—  $—  $—  $—  $—  $535,368 
OTC Total return swap contracts*#  —  —  —  —  1,211  54  —  32  —  —  1,297 
OTC Credit default contracts - protection sold*#  —  —  —  —  —  —  —  —  —  —  — 
OTC Credit default contracts - protection purchased*#  —  —  —  1,867,814  194,248  734,314  —  1,569,506  132,156  1,305,378  5,803,416 
Futures contracts§  —  —  —  —  —  —  —  —  —  —  — 
Forward premium swap option contracts#  —  —  26,064  —  —  —  —  —  —  —  26,064 
Purchased swap options**#  —  —  73  —  —  —  78,325  —  —  —  78,398 
Purchased options**#  —  —  —  —  —  —  575,729  —  —  —  575,729 
Total Assets  $—  $535,368  $26,137  $1,867,814  $195,459  $734,368  $654,054  $1,569,538  $132,156  $1,305,378  $7,020,272 
Liabilities:                       
Centrally cleared interest rate swap contracts§  —  502,355  —  —  —  —  —  —  —  —  502,355 
OTC Total return swap contracts*#  616  —  —  —  —  507  —  79  —  —  1,202 
OTC Credit default contracts - protection sold*#  1,202  —  —  2,375,014  141,424  1,806,690  —  11,185,371  2,995,523  8,523,175  27,028,399 
OTC Credit default contracts - protection purchased*#  —  —  —  —  —  —  —  —  —  —  — 
Futures contracts§  —  —  —  —  —  —  —  14,706  —  —  14,706 
Forward premium swap option contracts#  —  —  105,362  —  —  67,322  —  —  —  —  172,684 
Written swap options#  —  —  137,689  —  —  —  2,054,735  —  —  —  2,192,424 
Written options#  —  —  —  —  —  —  789,413  —  —  —  789,413 
Total Liabilities  $1,818  $502,355  $243,051  $2,375,014  $141,424  $1,874,519  $2,844,148  $11,200,156  $2,995,523  $8,523,175  $30,701,183 
Total Financial and Derivative Net Assets  $(1,818)  $33,013  $(216,914)  $(507,200)  $54,035  $(1,140,151)  $(2,190,094)  $(9,630,618)  $(2,863,367)  $(7,217,797)  $(23,680,911) 
Total collateral received (pledged)†##  $—  $—  $(201,000)  $(507,200)  $—  $(1,094,000)  $(1,697,000)  $(9,630,618)  $(2,863,367)  $(7,217,797)   
Net amount  $(1,818)  $33,013  $(15,914)  $—  $54,035  $(46,151)  $(493,094)  $—  $—  $—   
Controlled collateral received (including TBA commitments)**  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Uncontrolled collateral received  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Collateral (pledged) (including TBA commitments)**  $—  $—  $(201,000)  $(604,000)  $—  $(1,094,000)  $(1,697,000)  $(9,726,000)  $(2,964,000)  $(7,351,000)  $(23,637,000) 

 

* 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 futures contracts and centrally cleared swap contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts and centrally cleared swap contracts, which is not included in the table above, amounted to $870,000 and $1,662,000, respectively.

Note 9: New accounting pronouncements

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020–04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in ASU 2020–04 provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of LIBOR and other interbank-offered based reference rates as of the end of 2021. The discontinuation of LIBOR was subsequently extended to June 30, 2023. ASU 2020–04 is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying this provision.

50 Mortgage Opportunities Fund  Mortgage Opportunities Fund 51 

 

 

Federal tax information (Unaudited)

For the reporting period, a portion of the fund’s distribution represents a return of capital and is therefore not taxable to shareholders.

The Form 1099 that will be mailed to you in January 2022 will show the tax status of all distributions paid to your account in calendar 2021.

52 Mortgage Opportunities Fund 

 

 

 

Mortgage Opportunities Fund 53 

 

 


* 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, 2021, there were 100 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.


Officers

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

James F. Clark (Born 1974)  Susan G. Malloy (Born 1957) 
Vice President and Chief Compliance Officer  Vice President and Assistant Treasurer 
Since 2016  Since 2007 
Chief Compliance Officer and Chief Risk Officer,  Head of Accounting and Middle Office Services, 
Putnam Investments and Chief Compliance Officer, Putnam Management  Putnam Investments and Putnam Management 
   
Nancy E. Florek (Born 1957)  Denere P. Poulack (Born 1968) 
Vice President, Director of Proxy Voting and Corporate Governance,  Assistant Vice President, Assistant Clerk, 
Assistant Clerk, and Assistant Treasurer  and Assistant Treasurer 
Since 2000  Since 2004 
   
Michael J. Higgins (Born 1976)  Janet C. Smith (Born 1965) 
Vice President, Treasurer, and Clerk  Vice President, Principal Financial Officer, 
Since 2010  Principal Accounting Officer, and Assistant Treasurer 
  Since 2007 
Jonathan S. Horwitz (Born 1955)  Head of Fund Administration Services, 
Executive Vice President, Principal Executive Officer,  Putnam Investments and Putnam Management 
and Compliance Liaison   
Since 2004  Stephen J. Tate (Born 1974) 
  Vice President and Chief Legal Officer 
Richard T. Kircher (Born 1962)  Since 2021 
Vice President and BSA Compliance Officer  General Counsel, Putnam Investments, 
Since 2019  Putnam Management, and Putnam Retail Management 
Assistant Director, Operational Compliance,   
Putnam Investments and Putnam Retail Management  Mark C. Trenchard (Born 1962) 
  Vice President 
  Since 2002 
  Director of Operational Compliance, 
  Putnam Investments and Putnam Retail 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.

 

54 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 
Emerging Markets Equity Fund  Convertible Securities Fund 
Focused Equity Fund  Diversified Income Trust 
Focused International Equity Fund  Floating Rate Income Fund 
International Capital Opportunities Fund  Global Income Trust 
International Equity Fund  Government Money Market Fund* 
Multi-Cap Core Fund  High Yield Fund 
Research Fund  Income Fund 
  Money Market Fund† 
Global Sector  Mortgage Opportunities Fund 
Global Health Care Fund  Mortgage Securities Fund 
Global Technology Fund  Short Duration Bond Fund 
  Ultra Short Duration Income Fund 
Growth   
Growth Opportunities Fund  Tax-free Income 
Small Cap Growth Fund  Intermediate-Term Municipal Income Fund 
Sustainable Future Fund  Short-Term Municipal Income Fund 
Sustainable Leaders Fund  Strategic Intermediate Municipal Fund 
  Tax Exempt Income Fund 
Value  Tax-Free High Yield Fund 
International Value Fund   
Large Cap Value Fund  State tax-free income funds‡: 
Small Cap Value Fund  California, Massachusetts, Minnesota, 
  New Jersey, New York, Ohio, and Pennsylvania. 

 

Mortgage Opportunities Fund 55 

 

 

Absolute Return  Asset Allocation (cont.) 
Fixed Income Absolute Return Fund  Putnam Retirement Advantage Maturity Fund 
Multi-Asset Absolute Return Fund  Putnam Retirement Advantage 2065 Fund  
  Putnam Retirement Advantage 2060 Fund 
Putnam PanAgora§  Putnam Retirement Advantage 2055 Fund 
Putnam PanAgora Risk Parity Fund  Putnam Retirement Advantage 2050 Fund 
  Putnam Retirement Advantage 2045 Fund 
Asset Allocation  Putnam Retirement Advantage 2040 Fund 
Dynamic Risk Allocation Fund  Putnam Retirement Advantage 2035 Fund 
George Putnam Balanced Fund  Putnam Retirement Advantage 2030 Fund 
  Putnam Retirement Advantage 2025 Fund 
Dynamic Asset Allocation Balanced Fund   
Dynamic Asset Allocation Conservative Fund  RetirementReady® Maturity Fund 
Dynamic Asset Allocation Growth Fund  RetirementReady® 2065 Fund  
RetirementReady® 2060 Fund 
  RetirementReady® 2055 Fund 
  RetirementReady® 2050 Fund 
  RetirementReady® 2045 Fund 
  RetirementReady® 2040 Fund 
  RetirementReady® 2035 Fund 
  RetirementReady® 2030 Fund 
  RetirementReady® 2025 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.

56 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  Jonathan S. Horwitz 
Putnam Investment  Kenneth R. Leibler, Chair  Executive Vice President, 
Management, LLC  Liaquat Ahamed  Principal Executive Officer, 
100 Federal Street  Ravi Akhoury  and Compliance Liaison 
Boston, MA 02110  Barbara M. Baumann   
  Katinka Domotorffy  Richard T. Kircher 
Investment Sub-Advisor  Catharine Bond Hill  Vice President and BSA 
Putnam Investments Limited  Paul L. Joskow  Compliance Officer 
16 St James’s Street  George Putnam, III   
London, England SW1A 1ER  Robert L. Reynolds  Susan G. Malloy 
  Manoj P. Singh  Vice President and 
Marketing Services  Mona K. Sutphen  Assistant Treasurer 
Putnam Retail Management     
100 Federal Street  Officers  Denere P. Poulack 
Boston, MA 02110  Robert L. Reynolds  Assistant Vice President, Assistant 
  President  Clerk, and Assistant Treasurer 
Custodian     
State Street Bank  James F. Clark  Janet C. Smith 
and Trust Company  Vice President, Chief Compliance  Vice President, 
  Officer, and Chief Risk Officer  Principal Financial Officer, 
Legal Counsel    Principal Accounting Officer, 
Ropes & Gray LLP  Nancy E. Florek  and Assistant Treasurer 
  Vice President, Director of   
Independent Registered  Proxy Voting and Corporate  Stephen J. Tate 
Public Accounting Firm  Governance, Assistant Clerk,  Vice President and 
PricewaterhouseCoopers LLP  and Assistant Treasurer  Chief Legal Officer 
     
  Michael J. Higgins  Mark C. Trenchard 
  Vice President, Treasurer,  Vice President 
  and Clerk   
     

 

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 April 2021, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Employees may invest in the Putnam Exchange Traded Funds (ETFs) with preclearing requirements for certain individuals (ii) All employees must hold Putnam ETFs in an approved Putnam broker (iii) All access persons must report Putnam ETF trades or holdings in the quarterly transaction report or annual holdings report.

Item 3. Audit Committee Financial Expert:
The Funds' Audit, Compliance and Risk 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 member of the Audit, Compliance and Risk Committee also possesses a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualifies him or her for service on the Committee. In addition, the Trustees have determined that each of Dr. Hill, Dr. Joskow, 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; in the case of Dr. Joskow, including his experience serving on the audit committees of several public companies and institutions and his education and experience as an economist who studies companies and industries, routinely using public company financial statements in his research. 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 Risk 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:


tr>
Fiscal year ended Audit Fees Audit-Related Fees Tax Fees All Other Fees
May 31, 2021 $132,419 $ — $12,265 $ —
May 31, 2020 $128,653 $ — $23,329 $ —

For the fiscal years ended May 31, 2021 and May 31, 2020, the fund's independent auditor billed aggregate non-audit fees in the amounts of $321,565 and $307,045 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.

Pre-Approval Policies of the Audit, Compliance and Risk Committee. The Audit, Compliance and Risk 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 Risk 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, 2021 $ — $309,300 $ — $ —
May 31, 2020 $ — $283,716 $ — $ —

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 180 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 28, 2021
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 28, 2021
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: July 28, 2021