N-CSR 1 a_dynamicriskallocation.htm PUTNAM FUNDS TRUST a_dynamicriskallocation.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: One Post Office Square, Boston, Massachusetts 02109
Name and address of agent for service: Robert T. Burns, Vice President
One Post Office Square
Boston, Massachusetts 02109
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant's telephone number, including area code: (617) 292-1000
Date of fiscal year end: May 31, 2017
Date of reporting period : June 1, 2016 — May 31, 2017



Item 1. Report to Stockholders:

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



Putnam
Dynamic Risk
Allocation Fund

Annual report
5 | 31 | 17

 

Consider these risks before investing: International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk and the risk that they may increase in value less when interest rates decline and decline in value more when interest rates rise. Allocation of assets among asset classes may hurt performance, and efforts to diversify risk through the use of leverage and allocation decisions may not be successful. Derivatives carry additional risks, such as the inability to terminate or sell derivatives positions and the failure of the other party to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Active trading strategies may lose money or not earn a return sufficient to cover trading and other costs. Use of leverage obtained through derivatives increases these risks by increasing investment exposure. Over-the-counter derivatives are also subject to the risk of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. REITs are subject to the risk of economic downturns that have an adverse impact on real estate markets. The use of short selling may result in losses if the securities appreciate in value. Commodities involve market, political, regulatory, and natural conditions risks. Stock and bond prices may fall or fail to rise over time for several reasons, including general financial market conditions, changing market perceptions of the risk of default, changes in government intervention in the financial markets, and factors related to a specific issuer or industry. These factors may also lead to increased volatility and reduced liquidity in the bond markets. You can lose money by investing in the fund.


Message from the Trustees

July 11, 2017

Dear Fellow Shareholder:

An impressive level of investor optimism has helped to fuel financial markets through the first half of 2017, and global stock and bond markets have generally fared well. At the same time, however, a number of macroeconomic and political risks around the world could disrupt the positive momentum.

While calm markets are generally welcome, we believe investors should continue to remember time-tested strategies: maintain a well-diversified portfolio, keep a long-term view, and speak regularly with your financial advisor. In the following pages, you will find an overview of your fund’s performance for the reporting period as well as an outlook for the coming months.

We would like to take this opportunity to announce some changes to your fund’s Board of Trustees. First, we are pleased to welcome the arrival of Catharine Bond Hill and Manoj P. Singh, who bring extensive professional and directorship experience to their new roles as Putnam Trustees. In addition, we would like to extend our appreciation and best wishes to Robert J. Darretta, John A. Hill, and W. Thomas Stephens, who retired from the Board, effective June 30, 2017. We are grateful for their years of work on behalf of you and your fellow shareholders, and we wish them well in their future endeavors.

Thank you for investing with Putnam.



About the fund


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


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

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

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Illustrations are hypothetical and are not intended to represent the current allocation of any Putnam fund. A traditional balanced fund is represented by a 60%/40% split between equities and fixed income, as defined by Lipper. Risk contribution is from Putnam research, which uses the historical standard deviation for the respective asset classes multiplied by the appropriate asset weight. Leverage may be achieved either through short-term borrowing or through the use of derivatives. Asset weights may exceed 100% in funds that employ leverage due to borrowed capital and/or derivatives exposure. Risk, as measured by standard deviation, gauges how widely a set of values varies from the mean. It is a historical measure of the variability of return earned by an investment portfolio over a 3-year period. Asset weight for Putnam Dynamic Risk Allocation Fund represents a baseline allocation selected by the fund’s portfolio managers and is subject to change. It is inclusive of leverage and represents a starting point for future active allocation.

Dynamic Risk Allocation Fund   3 

 



Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 11–13 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

* The Putnam Dynamic Risk Allocation Blended Index is an unmanaged index administered by Putnam Management, 50% of which is the MSCI World Index (ND), 40% of which is the Bloomberg Barclays Global Aggregate Bond Index, and 10% of which is the S&P GSCI. See index descriptions on pages 16–17.


This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 5/31/17. See above and pages 11–13 for additional fund performance information. Index descriptions can be found on pages 16–17.

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Robert J. Kea, CFA
Portfolio Manager

Bob is Co-Head of Global Asset Allocation at Putnam. He has an M.B.A. from Bentley University and a B.A. from the University of Massachusetts, Amherst. Bob joined Putnam in 1989 and has been in the investment industry since 1988.

In addition to Bob, your fund’s portfolio managers are James A. Fetch; Robert J. Schoen; and Jason R. Vaillancourt, CFA.

Bob, what was the investment environment like during the 12-month reporting period ended May 31, 2017?

The period included some surprising geopolitical events and unusual market rallies as investors shrugged off occasional uncertainty while the overall global economy continued to produce stable growth. Near the beginning of the period, U.K. voters provided the first surprise by endorsing the “Brexit” referendum on withdrawal from the European Union and causing a temporary selloff in global stock markets. As concern over the immediate impacts of Brexit moderated, investors turned their attention to the November 2016 U.S. elections. Indicators suggested skittishness about a Trump victory in the months leading up to the election, but on news of the outcome, investors appeared to embrace expectations that the new Republican administration and Congress would usher in fiscal stimulus in the form of tax reform, infrastructure spending, and business deregulation. The second half of the reporting period saw ongoing support for risk assets as U.S. stocks continued to perform strongly, breaching historical highs.

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Allocations are shown as a percentage of the fund’s net assets as of 5/31/17. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

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

For the 12-month period as a whole, the S&P 500 Index, a broad measure of the U.S. stock market results, returned 17.47% during the period, and U.S. small-cap stocks, as measured by the Russell 2000 Index, gained 20.36% as investors viewed Trump’s potential business-friendly policies as a possible boon to smaller companies. International stocks were more muted during the first half of the reporting period, partly in response to concerns about the impact of potential populist-driven trade protectionism in the United States and Europe. Overseas markets later rallied, lifting the MSCI EAFE Index [ND], which tracks stocks in international developed markets, 16.44% during the period.

How were the other risk allocations affected by the overall investment environment?

Credit markets benefited as investors maintained an appetite for risk. High-yield bonds performed especially well during the period, reflected by a rise of 14.96% for the annual period as measured by the JPMorgan Global High Yield Index. In contrast, interest-rate-sensitive fixed-income markets saw prices fall. U.S. rates increased substantially after the November election amid rising inflation expectations and anticipated interest-rate hikes by the Federal Reserve. Since, however, they have retraced much of their initial spike. The Fed raised the overnight rate a quarter of a percentage point in December 2016 and again in March 2017. The Bloomberg Barclays U.S. Aggregate Bond Index, a measure of the broad investment-grade and rate-sensitive

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fixed-income market, returned a muted 1.58% for the 12-month period.

Early in the 12-month period, commodity prices fell on lower demand. They then traded in a narrow range during the 12 months as energy prices stabilized, before ending down for the period as measured by the S&P GSCI Index, which represents the global commodities market.

How did the fund perform during the 12-month reporting period ended May 31, 2017?

Putnam Dynamic Risk Allocation Fund’s class A shares returned 9.18% excluding sales charges. This result compares with a return of 7.64% for the fund’s custom benchmark, the Putnam Dynamic Risk Allocation Blended Index, which represents a diverse exposure to stocks, bonds, and commodities. The fund allocates its assets across four different risk categories: equities, interest-rate-sensitive fixed-income, credit-sensitive fixed-income, and inflation-sensitive assets. The custom benchmark’s risk allocations comprise roughly 50% in global equities and about 17% each in interest-rate-sensitive fixed-income securities, credit-sensitive high-yield bonds, and commodities and other inflation-sensitive instruments.

The fund’s positive return reflected the strong appetite for risk assets during the period, with a substantial portion of this gain supported by the solid performance of U.S. stocks and high-yield bonds. Within the fund’s inflation-sensitive risk allocation, which includes commodities exposure, results were more mixed. The fund also invests in U.S. TIPS, which are bonds issued by the Treasury that have a feature for adjusting


This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 5/31/17. Short-term investments, TBA commitments, and derivatives, if any, are excluded. Holdings may vary over time.

Dynamic Risk Allocation Fund   7 

 


their coupons with the level of inflation. With inflation in the United States stable during the period, TIPS contributed to returns as well.

What helped and what hurt the fund’s performance relative to its composite benchmark?

We seek to add value in two basic ways — through asset allocation strategies and through active security selection within those allocations. Our asset allocation strategies during the 12-month reporting period benefited the fund. In particular, our preference for equities over rate-sensitive fixed-income securities was beneficial given the strength seen in equity markets. Within equity allocation, we also had exposure to small-cap stocks, which, given their relative strength, was a positive as well. The fund also benefited from an underweight allocation to commodities during the period.

Security selection was also positive for the 12-month period. Strategic global macro positions helped boost portfolio returns, as did specific security selection within international equities and commodities.

In fixed income, we diversified our holdings by maintaining exposure to residential mortgage-backed securities [RMBS] and commercial mortgage-backed securities [CMBS] in addition to issues that are defined strictly by their duration, or sensitivity to changes in interest rates. This selection decision was helpful to the fund’s relative performance, as was an active currency strategy in which we moved into and out of various world currencies during the period, depending on their relative attractiveness.

Did you make any major strategy shifts during the period?

We became somewhat more optimistic in our view of stocks during the period, based more on fundamentals than election results. Within the United States it has become increasingly evident, in our view, that it will likely take some time for political leaders to work out an economic stimulus program, and we believe this could dampen what have been strong recent returns from risk assets. With that in mind, we will keep a close eye on our allocations to those areas. How the


Allocations are shown as a percentage of the fund’s net assets as of 5/31/17. Risk contribution is from Putnam research, which uses the historical standard deviation for the respective asset classes multiplied by the appropriate asset weight. Holdings and allocations may vary over time.

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markets digest ongoing divergence in global interest-rate policy will help determine our fixed-income selections and future portfolio positioning decisions, in our view.


How were derivatives used during the reporting period?

We can use a variety of derivatives to implement certain strategies or positions within the portfolio; however, evaluating performance of derivatives alone does not provide meaningful insight into the performance of strategies or positions. The fund’s performance was positively affected by the use of futures contracts to manage exposure to market risk, hedge prepayment and interest-rate risks, gain exposure to interest rates, and equitize cash. Total return swaps also provided positive results being used to hedge sector exposure; generate additional income for the portfolio; and manage and gain exposure to specific sectors, securities, baskets of securities, markets, countries, and industries.

Detractors from performance included options written and purchased to hedge duration and convexity, hedge and isolate prepayment risk, and gain exposure to interest rates. In addition, options strategies — implemented to hedge against changes in the values of securities that the fund owned or expected to own, generate additional income for the portfolio, enhance returns on securities owned, gain exposure to securities, and manage downside risks — also had negative results. In addition, interest-rate swaps used to help hedge against interest-rate and prepayment risks, as well as to gain exposure to interest rates, detracted from performance.

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.

Dynamic Risk Allocation Fund   9 

 


What is your outlook over the next several months of 2017?

The 12-month period showed that the global economy is strong enough to perform well against an evolving backdrop of political uncertainties, suggesting that the environment may remain favorable for risk assets in the near term, in our view. With tax reform and trade policy legislation slow to develop in the United States, investor hopes for quick legislative stimulus appeared to be waning at the end of the reporting period. At the same time, in our view, global growth looks solid, if not accelerating; consumer confidence remains high; and markets are behaving much as we would expect. In Europe, populist candidates that advocate disrupting trade relationships have mostly failed to gain traction, including most recently in France. We will continue to monitor ongoing elections there, as well as the “Brexit” negotiations between the United Kingdom and the European Union.

In the United States, the Fed has shifted its focus and indicated that it may begin to sell off bonds it purchased during years of quantitative easing. This process would likely push interest rates higher, in our view. How markets may react to this and how much the Fed raises rates directly going forward remains to be seen, but we believe interest-sensitive fixed-income securities would remain under pressure in this scenario. After a strong period of U.S. stock returns, we believe markets outside the United States may provide relative opportunity.

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

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

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk. Statements in the Q&A concerning the fund’s performance or portfolio composition relative to those of the fund’s Lipper peer group may reference information produced by Lipper Inc. or through a third party.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2017, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 5/31/17

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Class A (9/19/11)               
Before sales charge  27.82%  4.40%  23.19%  4.26%  4.12%  1.35%  9.18% 
After sales charge  20.47  3.32  16.10  3.03  –1.87  –0.63  2.90 
Class B (9/19/11)               
Before CDSC  22.46  3.62  18.67  3.48  1.74  0.58  8.41 
After CDSC  21.46  3.47  16.67  3.13  –1.08  –0.36  3.41 
Class C (9/19/11)               
Before CDSC  22.50  3.63  18.69  3.49  1.74  0.58  8.42 
After CDSC  22.50  3.63  18.69  3.49  1.74  0.58  7.42 
Class M (9/19/11)               
Before sales charge  24.25  3.88  20.18  3.74  2.52  0.83  8.63 
After sales charge  19.91  3.24  15.97  3.01  –1.06  –0.36  4.83 
Class R (9/19/11)               
Net asset value  26.01  4.14  21.64  4.00  3.30  1.09  8.92 
Class R6 (7/2/12)               
Net asset value  30.37  4.76  25.33  4.62  5.18  1.70  9.65 
Class Y (9/19/11)               
Net asset value  29.81  4.69  24.80  4.53  4.97  1.63  9.56 

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R6, and Y shares have no initial sales charge or CDSC. Performance for class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.

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

Dynamic Risk Allocation Fund   11 

 


Comparative index returns For periods ended 5/31/17

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Putnam Dynamic               
Risk Allocation  30.56%  4.79%  28.75%  5.18%  1.11%  0.37%  7.64% 
Blended Index*               
Lipper Alternative               
Global Macro               
Funds category  21.46  3.30  19.65  3.50  2.10  0.59  6.66 
average†               

 

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

* The Putnam Dynamic Risk Allocation Blended Index is an unmanaged index administered by Putnam Management, 50% of which is the MSCI World Index (ND), 40% of which is the Bloomberg Barclays Global Aggregate Bond Index, and 10% of which is the S&P GSCI. See index descriptions on pages 16–17.

† Over the 1-year, 3-year, 5-year, and life-of-fund periods ended 5/31/17 , there were 305, 264, 193, and 172 funds, respectively, in this Lipper category.


Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B shares would have been valued at $12,246 ($12,146 after contingent deferred sales charge). A $10,000 investment in the fund’s class C shares would be valued at $12,250, and no contingent deferred sales charge would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $11,991. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $12,601, $13,037, and $12,981, respectively.

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Fund price and distribution information For the 12-month period ended 5/31/17

Distributions  Class A  Class B  Class C  Class M  Class R  ClassR6  Class Y 
Number  1  1  1  1  1  1  1 
Income  $0.248  $0.159  $0.151  $0.204  $0.180  $0.291  $0.277 
Capital gains  —  —  —  —  —  —  — 
Total  $0.248  $0.159  $0.151  $0.204  $0.180  $0.291  $0.277 
  Before  After  Net  Net  Before  After  Net  Net  Net 
  sales  sales  asset  asset  sales  sales  asset  asset  asset 
Share value  charge  charge  value  value  charge  charge  value  value  value 
5/31/16  $10.28  $10.91  $10.08  $10.09  $10.27  $10.64  $10.21  $10.26  $10.30 
5/31/17  10.96  11.63  10.76  10.78  10.94  11.34  10.93  10.94  10.99 

 

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

Fund performance as of most recent calendar quarter Total return for periods ended 6/30/17

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Class A (9/19/11)               
Before sales charge  26.77%  4.19%  19.26%  3.59%  2.20%  0.73%  6.42% 
After sales charge  19.48  3.13  12.40  2.37  –3.68  –1.24  0.30 
Class B (9/19/11)               
Before CDSC  21.33  3.40  14.87  2.81  –0.16  –0.05  5.63 
After CDSC  20.33  3.25  12.87  2.45  –2.93  –0.99  0.63 
Class C (9/19/11)               
Before CDSC  21.37  3.41  14.89  2.81  –0.16  –0.05  5.64 
After CDSC  21.37  3.41  14.89  2.81  –0.16  –0.05  4.64 
Class M (9/19/11)               
Before sales charge  23.12  3.66  16.24  3.05  0.55  0.18  5.88 
After sales charge  18.81  3.03  12.17  2.32  –2.97  –1.00  2.18 
Class R (9/19/11)               
Net asset value  24.97  3.93  17.87  3.34  1.39  0.46  6.15 
Class R6 (7/2/12)               
Net asset value  29.30  4.55  21.34  3.94  3.25  1.07  6.87 
Class Y (9/19/11)               
Net asset value  28.63  4.45  20.72  3.84  2.86  0.94  6.60 

 

See the discussion following the fund performance table on page 11 for information about the calculation of fund performance.

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Your fund’s expenses

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

Expense ratios

  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Net expenses for the fiscal year               
ended 5/31/16*‡  1.14%  1.89%  1.89%  1.64%  1.39%  0.76%  0.89% 
Total annual operating expenses for the               
fiscal year ended 5/31/16‡  1.35%  2.10%  2.10%  1.85%  1.60%  0.97%  1.10% 
Annualized expense ratio for the               
six-month period ended 5/31/17†  1.13%  1.88%  1.88%  1.63%  1.38%  0.76%  0.88% 

 

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.

Prospectus expense information also includes the impact of acquired fund fees and expenses of 0.01%, which is not included in the financial highlights or annualized expense ratios. Expenses are shown as a percentage of average net assets.

* Reflects Putnam Management’s contractual obligation to limit certain fund expenses through 9/30/17.

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

‡ Restated to reflect current fees resulting from a change to the fund’s investor servicing arrangements effective 9/1/16.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 12/1/16 to 5/31/17. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Expenses paid per $1,000 *†  $5.83  $9.68  $9.69  $8.40  $7.12  $3.93  $4.55 
Ending value (after expenses)  $1,070.90  $1,066.20  $1,066.30  $1,067.60  $1,069.30  $1,072.40  $1,072.70 

 

* 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 5/31/17. 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.

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Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 5/31/17, use the following calculation method. To find the value of your investment on 12/1/16, call Putnam at 1-800-225-1581.


Compare expenses using the SEC’s method

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

  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Expenses paid per $1,000 *†  $5.69  $9.45  $9.45  $8.20  $6.94  $3.83  $4.43 
Ending value (after expenses)  $1,019.30  $1,015.56  $1,015.56  $1,016.80  $1,018.05  $1,021.14  $1,020.54 

 

* 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 5/31/17. 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.

Dynamic Risk Allocation Fund   15 

 


Terms and definitions

Important terms

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

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

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

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

Share classes

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

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

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

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

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

Class R6 shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are only available to employer-sponsored retirement plans.

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

Comparative indexes

Bloomberg Barclays Global Aggregate

Bond Index is an unmanaged index of global investment-grade fixed-income securities.

Bloomberg Barclays U.S. Aggregate

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

BofA Merrill Lynch U.S. 3-Month Treasury

Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

JPMorgan Global High Yield Index is an unmanaged index of global high-yield fixed-income securities.

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

MSCI World Index (ND) is an unmanaged index of equity securities from developed countries. Calculated with net dividends (ND),

16   Dynamic Risk Allocation Fund 

 


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

Putnam Dynamic Risk Allocation Blended Index is a benchmark administered by Putnam Management, comprising 50% the MSCI World Index (ND), 40% the Bloomberg Barclays Global Aggregate Bond Index, and 10% the S&P Goldman Sachs Commodity Index.

Russell 2000 Index is an unmanaged index of 2,000 small companies in the Russell 3000 Index.

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

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

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

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

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofAML”), used with permission. BofAML permits use of the BofAML indices and related data on an “as is” basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

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

Dynamic Risk Allocation Fund   17 

 


Other information for shareholders

Proxy voting

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

Fund portfolio holdings

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

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of May 31, 2017, Putnam employees had approximately $497,000,000 and the Trustees had approximately $140,000,000 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.

18   Dynamic Risk Allocation Fund 

 


Important notice regarding Putnam’s privacy policy

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

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

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

Dynamic Risk Allocation Fund   19 

 


Financial statements

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

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

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

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

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

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

20   Dynamic Risk Allocation Fund 

 


Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Putnam Funds Trust:

We have audited the accompanying statement of assets and liabilities of Putnam Dynamic Risk Allocation Fund (the fund), a series of Putnam Funds Trust, including the fund’s portfolio, as of May 31, 2017, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Dynamic Risk Allocation Fund as of May 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.


Boston, Massachusetts
July 11, 2017

Dynamic Risk Allocation Fund   21 

 


The fund’s portfolio 5/31/17

COMMON STOCKS (43.8%)*  Shares  Value 
Basic materials (2.0%)     
Anhui Conch Cement Co., Ltd. (China)  25,500  $84,590 
Asahi Kasei Corp. (Japan)  9,000  86,506 
BASF SE (Germany)  3,119  293,752 
Boliden AB (Sweden)  5,338  146,111 
China Lesso Group Holdings, Ltd. (China)  92,000  70,365 
China Railway Construction Corp., Ltd. (China)  83,000  113,968 
CIMIC Group, Ltd. (Australia)  5,293  159,285 
Covestro AG (Germany)  908  67,912 
Evonik Industries AG (Germany)  4,952  170,528 
Fortescue Metals Group, Ltd. (Australia)  8,671  31,249 
Hitachi Chemical Co., Ltd. (Japan)  2,200  60,686 
Hitachi Metals, Ltd. (Japan)  1,100  14,650 
HOCHTIEF AG (Germany) †  197  36,238 
Kajima Corp. (Japan)  5,000  38,420 
Kuraray Co., Ltd. (Japan)  3,900  70,112 
Lotte Chemical Corp. (South Korea)  420  135,236 
Mitsubishi Chemical Holdings Corp. (Japan)  11,700  88,582 
Mitsubishi Gas Chemical Co., Inc. (Japan)  1,900  39,184 
Mitsubishi Materials Corp. (Japan)  600  16,930 
PTT Global Chemical PCL (Thailand)  71,500  149,046 
Rio Tinto PLC (United Kingdom)  1,727  69,035 
Rio Tinto, Ltd. (Australia)  389  18,155 
Sappi, Ltd. (South Africa)  13,970  102,908 
Sherwin-Williams Co. (The)  1,783  591,546 
Shin-Etsu Chemical Co., Ltd. (Japan)  600  53,808 
Siam Cement PCL (The) (Thailand)  9,500  146,154 
Sinopec Shanghai Petrochemical Co., Ltd. (China)  186,000  109,320 
Skanska AB (Sweden)  7,359  175,182 
Sonoco Products Co.  1,582  80,223 
Taisei Corp. (Japan)  10,000  85,418 
UPM-Kymmene OYJ (Finland)  3,830  107,991 
voestalpine AG (Austria)  1,016  46,001 
    3,459,091 
Capital goods (2.7%)     
ACS Actividades de Construccion y Servicios SA (Spain)  4,749  189,732 
Atlas Copco AB Class A (Sweden)  1,295  47,918 
Avery Dennison Corp.  2,316  195,146 
Berry Plastics Group, Inc. †  1,938  112,385 
BWX Technologies, Inc.  2,136  103,810 
China Railway Group, Ltd. (China)  138,000  114,402 
Daikin Industries, Ltd. (Japan)  100  9,801 
General Dynamics Corp.  2,432  494,304 
HEICO Corp.  508  37,699 
Honeywell International, Inc.  5,509  732,642 
Huntington Ingalls Industries, Inc.  348  68,142 
JTEKT Corp (Japan)  3,000  45,047 
L3 Technologies, Inc.  1,739  293,178 
Mitsubishi Electric Corp. (Japan)  5,600  77,212 

 

22   Dynamic Risk Allocation Fund 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Capital goods cont.     
Northrop Grumman Corp.  2,772  $718,558 
NSK, Ltd. (Japan)  3,900  46,483 
Raytheon Co.  4,794  786,264 
Republic Services, Inc.  2,789  177,408 
Sumitomo Heavy Industries, Ltd. (Japan)  4,000  26,077 
United Tractors Tbk PT (Indonesia)  51,400  107,180 
Waste Management, Inc.  4,722  344,281 
    4,727,669 
Communication services (1.7%)     
AT&T, Inc.  7,141  275,143 
BT Group PLC (United Kingdom)  14,889  59,383 
China Mobile, Ltd. (China)  3,500  38,829 
Equinix, Inc. R   250  110,253 
Eutelsat Communications SA (France)  732  18,830 
Juniper Networks, Inc.  19,545  573,255 
KDDI Corp. (Japan)  2,900  80,284 
LG Uplus Corp. (South Korea)  12,118  175,341 
Nippon Telegraph & Telephone Corp. (Japan)  5,000  239,639 
NTT DoCoMo, Inc. (Japan)  3,600  88,318 
Orange SA (France)  4,759  83,612 
PCCW, Ltd. (Hong Kong)  11,000  6,409 
SK Telecom Co., Ltd. (South Korea)  657  148,758 
Sky PLC (United Kingdom)  12,264  156,593 
Telekomunikasi Indonesia Persero Tbk PT (Indonesia)  518,000  169,167 
Telkom SA SOC, Ltd. (South Africa)  25,251  141,995 
Telstra Corp., Ltd. (Australia)  55,471  181,358 
Verizon Communications, Inc.  9,940  463,602 
    3,010,769 
Conglomerates (0.4%)     
Danaher Corp.  9,223  783,402 
    783,402 
Consumer cyclicals (5.8%)     
Adecco Group AG (Switzerland)  2,660  198,288 
Alfa SAB de CV (Mexico)  19,500  28,122 
Amazon.com, Inc. †  39  38,790 
Aramark  1,432  53,356 
Aristocrat Leisure, Ltd. (Australia)  6,024  97,580 
Asahi Glass Co., Ltd. (Japan)  3,000  24,488 
Automatic Data Processing, Inc.  6,014  615,653 
Berkeley Group Holdings PLC (The) (United Kingdom)  261  10,949 
Carnival PLC (United Kingdom)  3,240  207,477 
CBS Corp. Class B (non-voting shares)  10,961  669,827 
CDK Global, Inc.  3,300  202,818 
China Dongxiang Group Co., Ltd. (China)  119,000  21,227 
Dai Nippon Printing Co., Ltd. (Japan)  7,000  77,806 
Dixons Carphone PLC (United Kingdom)  2,878  12,185 
Ecolab, Inc.  1,296  172,161 
Electrolux AB Ser. B (Sweden)  2,581  82,882 
Euronet Worldwide, Inc. †  1,059  92,377 

 

Dynamic Risk Allocation Fund   23 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Consumer cyclicals cont.     
Fiat Chrysler Automobiles NV (Italy) †  8,040  $84,402 
Fuji Heavy Industries, Ltd. (Japan)  1,700  57,485 
Genting Bhd (Malaysia)  41,100  95,740 
Great Wall Motor Co., Ltd. (China)  54,500  58,259 
Hakuhodo DY Holdings, Inc. (Japan)  1,700  22,488 
Hankook Tire Co., Ltd. (South Korea)  873  47,486 
Harvey Norman Holdings, Ltd. (Australia)  25,615  71,755 
Hasbro, Inc.  1,328  139,785 
Hino Motors, Ltd. (Japan)  1,900  23,074 
Home Depot, Inc. (The)  754  115,747 
Host Hotels & Resorts, Inc. R   10,750  193,393 
Imperial Holdings, Ltd. (South Africa)  2,951  37,352 
Industrivarden AB Class A (Sweden)  3,495  87,904 
ISS A/S (Denmark)  1,546  64,091 
Itausa — Investimentos Itau SA (Preference) (Brazil)  2,700  7,468 
John Wiley & Sons, Inc. Class A  403  20,432 
Kimberly-Clark Corp.  5,942  770,856 
Kimberly-Clark de Mexico SAB de CV Class A (Mexico)  20,200  40,084 
Kingfisher PLC (United Kingdom)  40,256  168,622 
Lagardere SCA (France)  889  27,942 
Lear Corp.  1,340  199,714 
Lowe’s Cos., Inc.  8,130  640,400 
Marks & Spencer Group PLC (United Kingdom)  19,013  93,702 
Marriott International, Inc./MD Class A  350  37,678 
Mazda Motor Corp. (Japan)  3,600  49,084 
Namco Bandai Holdings, Inc. (Japan)  1,300  46,424 
Naspers, Ltd. Class N (South Africa)  89  18,428 
News Corp. Class B  1,666  22,824 
NVR, Inc. †  100  228,238 
Peugeot SA (France)  4,974  98,061 
Priceline Group, Inc. (The) †  95  178,324 
Qualicorp SA (Brazil)  11,700  101,310 
Randstad Holding NV (Netherlands)  941  54,439 
RELX PLC (United Kingdom)  2,893  61,988 
Renault SA (France) †  931  86,899 
Ross Stores, Inc.  6,933  443,157 
RTL Group SA (Belgium)  844  65,685 
Scotts Miracle-Gro Co. (The) Class A  857  74,225 
ServiceMaster Global Holdings, Inc. †  3,986  150,671 
Smiles SA (Brazil)  8,100  157,697 
Suzuki Motor Corp. (Japan)  300  14,126 
TABCORP Holdings, Ltd. (Australia)  33,384  113,611 
Taylor Wimpey PLC (United Kingdom)  30,705  80,350 
TJX Cos., Inc. (The)  9,003  677,116 
Toppan Printing Co., Ltd. (Japan)  8,000  88,126 
TUI AG (Germany)  1,835  28,324 
Twenty-First Century Fox, Inc.  4,035  109,429 
Valeo SA (France)  1,565  108,946 
Vantiv, Inc. Class A †  4,071  255,333 

 

24   Dynamic Risk Allocation Fund 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Consumer cyclicals cont.     
Walt Disney Co. (The)  6,851  $739,497 
William Hill PLC (United Kingdom)  27,779  102,830 
Wolters Kluwer NV (Netherlands)  1,937  84,970 
World Fuel Services Corp.  1,718  60,714 
WPP PLC (United Kingdom)  5,192  116,667 
Yue Yuen Industrial Holdings, Ltd. (Hong Kong)  9,500  37,853 
    10,167,191 
Consumer staples (4.1%)     
Altria Group, Inc.  13,305  1,003,729 
Ashtead Group PLC (United Kingdom)  4,644  93,703 
Beiersdorf AG (Germany)  226  24,271 
British American Tobacco PLC (United Kingdom)  3,389  241,471 
Coca-Cola Amatil, Ltd. (Australia)  24,438  169,602 
Colgate-Palmolive Co.  302  23,061 
ConAgra Foods, Inc.  3,934  151,616 
CVS Health Corp.  6,679  513,148 
Graham Holdings Co. Class B  67  40,120 
Gruma SAB de CV Class B (Mexico)  10,179  132,448 
Hanwha Corp. (South Korea)  2,530  108,128 
Hershey Co. (The)  3,050  351,574 
Indofood Sukses Makmur Tbk PT (Indonesia)  74,100  48,677 
ITOCHU Corp. (Japan)  14,700  208,786 
J Sainsbury PLC (United Kingdom)  27,964  101,245 
J.M. Smucker Co. (The)  2,821  360,665 
Kao Corp. (Japan)  4,100  258,513 
Koninklijke Ahold Delhaize NV (Netherlands)  8,458  186,510 
Liberty Expedia Holdings, Inc. Class A †  550  28,694 
Marine Harvest ASA (Norway)  5,317  93,134 
McDonald’s Corp.  6,297  950,154 
METRO AG (Germany)  5,812  194,561 
Nestle SA (Switzerland)  1,878  160,257 
PepsiCo, Inc.  546  63,811 
Pinnacle Foods, Inc.  3,252  202,632 
Pool Corp.  660  78,626 
Procter & Gamble Co. (The)  2,718  239,429 
Recruit Holdings Co., Ltd. (Japan)  300  15,901 
Sao Martinho SA (Brazil)  5,700  31,706 
Sysco Corp.  7,328  399,816 
Tate & Lyle PLC (United Kingdom)  12,627  120,067 
Toyota Tsusho Corp. (Japan)  4,100  125,684 
Ulta Salon, Cosmetics & Fragrance, Inc. †  345  105,170 
Unilever PLC (United Kingdom)  175  9,767 
US Foods Holding Corp. †  853  25,556 
Walgreens Boots Alliance, Inc.  1,224  99,168 
WH Group, Ltd. (Hong Kong)  121,000  113,352 
Wilmar International, Ltd. (Singapore)  16,400  41,959 
WM Morrison Supermarkets PLC (United Kingdom)  24,771  78,578 
Wolseley PLC (United Kingdom)  341  22,451 
    7,217,740 

 

Dynamic Risk Allocation Fund   25 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Energy (1.8%)     
Baker Hughes, Inc.  8,552  $471,643 
Exxon Mobil Corp.  9,997  804,759 
Halcon Resources Corp. †  3,109  18,903 
Innogy SE (Germany)  1,003  41,159 
Marathon Petroleum Corp.  7,633  397,221 
OMV AG (Austria)  5,278  275,137 
Phillips 66  2,300  175,053 
Repsol SA (Spain)  12,951  216,991 
Royal Dutch Shell PLC Class B (United Kingdom)  4,208  116,216 
SandRidge Energy, Inc. †  1,296  25,648 
SK Innovation Co., Ltd. (South Korea)  654  98,719 
Surgutneftegas OJSC ADR (Russia)  25,346  131,799 
Tervita Corp. Class A (Canada)  63  396 
Total SA (France)  6,395  339,579 
Triangle USA Petroleum Corp. F   448  6,164 
Vestas Wind Systems A/S (Denmark)  988  87,811 
    3,207,198 
Financials (11.6%)     
3i Group PLC (United Kingdom)  25,083  289,248 
AerCap Holdings NV (Ireland) †  600  26,412 
Aflac, Inc.  6,491  489,292 
AGNC Investment Corp. R   15,324  318,586 
Agree Realty Corp. R   1,053  47,943 
Agricultural Bank of China, Ltd. (China)  360,000  174,628 
Alexandria Real Estate Equities, Inc. R   865  100,928 
Allianz SE (Germany)  1,580  303,329 
Allstate Corp. (The)  5,974  515,795 
American Homes 4 Rent R   4,862  109,249 
Annaly Capital Management, Inc. R   22,252  266,579 
Apple Hospitality REIT, Inc. R   2,745  51,386 
Aspen Insurance Holdings, Ltd.  1,021  51,867 
Assured Guaranty, Ltd.  1,500  58,590 
AvalonBay Communities, Inc. R   1,518  290,302 
AXA SA (France)  6,024  160,650 
Banco do Brasil SA (Brazil)  9,100  79,697 
Banco Santander SA (Spain)  18,302  118,855 
Bank Negara Indonesia Persero Tbk PT (Indonesia)  209,000  102,774 
Bank of China, Ltd. (China)  235,000  117,612 
Bank of Communications Co., Ltd. (China)  162,000  125,566 
Barratt Developments PLC (United Kingdom)  10,433  82,335 
Berkshire Hathaway, Inc. Class B †  2,637  435,843 
BNP Paribas SA (France)  2,692  189,971 
Boston Properties, Inc. R   1,791  217,284 
Brandywine Realty Trust R   2,726  47,514 
Broadridge Financial Solutions, Inc.  898  68,149 
Camden Property Trust R   1,878  156,456 
Chimera Investment Corp. R   7,072  131,539 
China Cinda Asset Management Co., Ltd. (China)  267,000  101,077 
China Construction Bank Corp. (China)  274,000  226,442 

 

26   Dynamic Risk Allocation Fund 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Financials cont.     
China Huarong Asset Management Co., Ltd. (China) †  42,000  $17,086 
Chongqing Rural Commercial Bank Co., Ltd. (China)  100,000  68,399 
CIFI Holdings Group Co., Ltd. (China)  54,000  21,136 
CME Group, Inc.  3,569  418,608 
CoreLogic, Inc. †  2,238  96,905 
Corporate Office Properties Trust R   2,607  87,934 
Credit Agricole SA (France)  6,800  104,193 
Daiwa Securities Group, Inc. (Japan)  5,000  30,406 
DGB Financial Group, Inc. (South Korea)  5,534  56,843 
Digital Realty Trust, Inc. R   2,024  239,217 
DNB ASA (Norway)  6,056  102,566 
DuPont Fabros Technology, Inc. R   2,560  139,853 
Easterly Government Properties, Inc. R   1,393  27,665 
EastGroup Properties, Inc. R   1,125  91,620 
Emlak Konut Gayrimenkul Yatirim Ortakligi AS (Turkey) † R   64,863  56,076 
Empire State Realty Trust, Inc. Class A R   2,066  42,973 
EPR Properties R   3,093  219,325 
Equity Commonwealth † R   1,572  48,921 
Equity Lifestyle Properties, Inc. R   1,135  95,794 
Equity Residential Trust R   9,967  648,752 
Essex Property Trust, Inc. R   886  227,631 
Extra Space Storage, Inc. R   1,463  113,339 
Forest City Realty Trust, Inc. Class A R   2,341  53,305 
Four Corners Property Trust, Inc. R   2,689  66,203 
Fubon Financial Holding Co., Ltd. (Taiwan)  101,000  153,956 
Fukuoka Financial Group, Inc. (Japan)  11,000  49,463 
Gaming and Leisure Properties, Inc. R   4,551  167,067 
Getty Realty Corp. R   922  23,188 
GGP, Inc. R   7,264  161,842 
Guangzhou R&F Properties Co., Ltd. (China)  83,200  134,528 
HCP, Inc. R   5,851  183,370 
Hersha Hospitality Trust R   1,906  35,471 
Highwealth Construction Corp. (Taiwan)  11,000  18,157 
Highwoods Properties, Inc. R   4,203  211,831 
HSBC Holdings PLC (United Kingdom)  5,429  47,258 
Hyundai Marine & Fire Insurance Co., Ltd. (South Korea)  1,320  44,507 
Industrial & Commercial Bank of China, Ltd. (China)  366,000  244,703 
Industrial Bank of Korea (South Korea)  20,775  239,369 
Intercontinental Exchange, Inc.  870  52,365 
Investor AB Class B (Sweden)  5,133  237,297 
Itau Unibanco Holding SA ADR (Preference) (Brazil)  6,976  76,108 
JPMorgan Chase & Co.  12,873  1,057,517 
KB Financial Group, Inc. (South Korea)  252  12,064 
Kerry Properties, Ltd. (Hong Kong)  20,000  70,709 
Kimco Realty Corp. R   6,069  106,450 
Lamar Advertising Co. Class A R   1,993  139,530 
Liberty Property Trust R   5,104  209,723 
Macerich Co. (The) R   2,026  116,313 
Macquarie Mexico Real Estate Management SA de CV (Mexico) R   28,400  29,411 

 

Dynamic Risk Allocation Fund   27 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Financials cont.     
Mapfre SA (Spain)  15,308  $54,443 
MFA Financial, Inc. R   8,985  74,755 
Mid-America Apartment Communities, Inc. R   1,475  150,362 
Mitsubishi UFJ Financial Group, Inc. (Japan)  34,100  212,729 
Mitsubishi UFJ Lease & Finance Co., Ltd. (Japan)  16,100  82,135 
Mizuho Financial Group, Inc. (Japan)  129,800  225,963 
Monmouth Real Estate Investment Corp. R   1,594  23,272 
MRV Engenharia e Participacoes SA (Brazil)  19,600  78,438 
Muenchener Rueckversicherungs-Gesellschaft     
AG in Muenchen (Germany)  853  168,407 
New World Development Co., Ltd. (Hong Kong)  81,000  100,827 
NN Group NV (Netherlands)  4,862  174,775 
Nomura Real Estate Holdings, Inc. (Japan)  2,000  43,088 
Old Mutual PLC (South Africa)  55,489  134,553 
ORIX Corp. (Japan)  10,700  168,881 
Park Hotels & Resorts, Inc. R   1,418  36,499 
Partners Group Holding AG (Switzerland)  133  81,499 
People’s Insurance Co. Group of China, Ltd. (China)  218,000  93,997 
Persimmon PLC (United Kingdom)  2,546  80,534 
PNC Financial Services Group, Inc. (The)  6,432  763,478 
Popular, Inc. (Puerto Rico)  1,660  61,752 
Prologis, Inc. R   5,599  310,968 
PS Business Parks, Inc. R   630  79,556 
Public Storage R   1,492  321,302 
Quality Care Properties, Inc. † R   3,285  55,582 
Realty Income Corp. R   463  25,433 
Reinsurance Group of America, Inc.  975  121,397 
Resona Holdings, Inc. (Japan)  27,400  140,204 
Retail Properties of America, Inc. Class A R   6,791  83,529 
Sberbank of Russia PJSC ADR (Russia)  8,180  91,207 
Sekisui Chemical Co., Ltd. (Japan)  3,500  61,499 
Shinhan Financial Group Co., Ltd. (South Korea)  1,647  72,744 
Simon Property Group, Inc. R   2,701  416,629 
Societe Generale SA (France)  3,657  191,725 
Spirit Realty Capital, Inc. R   13,594  98,285 
Starwood Property Trust, Inc. R   6,532  143,835 
Sumitomo Mitsui Financial Group, Inc. (Japan)  6,700  240,414 
Sumitomo Mitsui Trust Holdings, Inc. (Japan)  1,600  54,176 
Summit Hotel Properties, Inc. R   3,810  68,199 
Sun Hung Kai Properties, Ltd. (Hong Kong)  5,000  73,981 
SunTrust Banks, Inc.  4,867  259,752 
Swiss Life Holding AG (Switzerland)  580  193,483 
Swiss Re AG (Switzerland)  2,516  229,377 
Tanger Factory Outlet Centers, Inc. R   3,031  78,988 
Travelers Cos., Inc. (The)  2,627  327,981 
Two Harbors Investment Corp. R   8,769  87,515 
U.S. Bancorp  6,155  313,228 
Vornado Realty Trust R   2,144  197,677 
Voya Financial, Inc.  5,303  181,257 

 

28   Dynamic Risk Allocation Fund 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Financials cont.     
Weingarten Realty Investors R   3,004  $90,390 
Welltower, Inc. R   3,815  276,740 
Wharf Holdings, Ltd. (The) (Hong Kong)  5,000  42,541 
Wheelock and Co., Ltd. (Hong Kong)  17,000  127,186 
Woori Bank (South Korea)  4,008  54,772 
WP Carey, Inc. R   2,061  134,439 
    20,409,223 
Health care (4.6%)     
Alfresa Holdings Corp. (Japan)  800  15,429 
Astellas Pharma, Inc. (Japan)  6,800  85,867 
AstraZeneca PLC (United Kingdom)  1,501  101,224 
Baxter International, Inc.  1,327  78,704 
Bayer AG (Germany)  2,243  297,573 
Bio-Rad Laboratories, Inc. Class A †  595  132,971 
Charles River Laboratories International, Inc. †  683  62,870 
DaVita Inc. †  331  21,932 
Fresenius SE & Co. KGaA (Germany)  438  37,497 
GlaxoSmithKline PLC (United Kingdom)  15,423  338,516 
Humana, Inc.  3,218  747,413 
Intuitive Surgical, Inc. †  37  33,843 
Johnson & Johnson  10,821  1,387,793 
Medipal Holdings Corp. (Japan)  3,700  68,087 
Merck & Co., Inc.  6,335  412,472 
Mitsubishi Tanabe Pharma Corp. (Japan)  4,800  106,749 
Novartis AG (Switzerland)  2,035  166,616 
Omega Healthcare Investors, Inc. R S   3,890  121,835 
Pfizer, Inc.  31,881  1,040,915 
Richter Gedeon Nyrt (Hungary)  5,963  152,423 
Roche Holding AG (Switzerland)  1,644  451,164 
Sanofi (France)  3,541  350,721 
Taro Pharmaceutical Industries, Ltd. (Israel) †  181  19,296 
Thermo Fisher Scientific, Inc.  362  62,550 
UnitedHealth Group, Inc.  4,514  790,763 
Ventas, Inc. R   2,677  177,994 
WellCare Health Plans, Inc. †  1,104  189,667 
Zoetis, Inc.  10,144  631,768 
    8,084,652 
Technology (6.3%)     
Adobe Systems, Inc. †  2,523  357,913 
Alibaba Group Holding, Ltd. ADR (China) † S   1,021  125,032 
Alphabet, Inc. Class A †  547  539,938 
Amadeus IT Holding SA Class A (Spain)  4,214  245,447 
Amdocs, Ltd.  1,496  96,911 
Apple, Inc.  6,189  945,432 
Applied Materials, Inc.  18,195  834,787 
AtoS SE (France)  1,645  235,978 
AU Optronics Corp. (Taiwan)  30,000  11,719 
Cisco Systems, Inc.  630  19,864 
CommerceHub, Inc. Ser. C †  2,488  42,744 

 

Dynamic Risk Allocation Fund   29 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Technology cont.     
Corning, Inc.  5,243  $152,571 
Dell Technologies, Inc. Class V †  1,609  111,649 
eBay, Inc. †  22,073  757,104 
F5 Networks, Inc. †  3,850  493,301 
Fidelity National Information Services, Inc.  5,140  441,372 
Fiserv, Inc. †  2,605  326,354 
Foxconn Technology Co., Ltd. (Taiwan)  47,000  133,129 
Fujitsu, Ltd. (Japan)  1,000  7,294 
Genpact, Ltd.  2,842  77,643 
Harris Corp.  2,738  307,094 
Hon Hai Precision Industry Co., Ltd. (Taiwan)  79,000  270,521 
Hoya Corp. (Japan)  1,500  73,869 
Intuit, Inc.  5,812  817,400 
Microsoft Corp.  5,066  353,809 
Mixi, Inc. (Japan)  700  43,928 
NetApp, Inc.  7,164  290,070 
NetEase, Inc. ADR (China)  439  125,018 
Otsuka Corp. (Japan)  800  49,192 
Paychex, Inc.  4,888  289,516 
Samsung Electronics Co., Ltd. (South Korea)  402  802,492 
SK Hynix, Inc. (South Korea)  1,914  97,444 
Synopsys, Inc. †  2,998  224,460 
Taiwan Semiconductor Manufacturing Co., Ltd. ADR (Taiwan)  5,600  198,016 
Tencent Holdings, Ltd. (China)  6,800  233,515 
Texas Instruments, Inc.  10,412  858,886 
Tripod Technology Corp. (Taiwan)  15,000  44,632 
Yahoo!, Inc. †  3,190  160,521 
    11,196,565 
Transportation (1.0%)     
Aena SA (Spain)  120  24,224 
AirAsia Bhd (Malaysia)  78,900  54,935 
ANA Holdings, Inc. (Japan)  33,000  108,133 
Central Japan Railway Co. (Japan)  1,200  196,497 
Deutsche Lufthansa AG (Germany)  857  16,650 
Deutsche Post AG (Germany)  6,325  231,025 
easyJet PLC (United Kingdom)  809  14,739 
Eva Airways Corp. (Taiwan)  81,000  39,586 
International Consolidated Airlines Group SA (Spain)  4,796  37,384 
Japan Airlines Co., Ltd. (Japan)  700  20,510 
Landstar System, Inc.  922  77,033 
MISC Bhd (Malaysia)  35,800  62,734 
Norfolk Southern Corp.  6,002  744,428 
Qantas Airways, Ltd. (Australia)  29,678  110,482 
Royal Mail PLC (United Kingdom)  21,011  119,494 
    1,857,854 
Utilities and power (1.8%)     
American Electric Power Co., Inc.  4,341  311,597 
Centrica PLC (United Kingdom)  75,041  196,564 
Cia de Saneamento Basico do Estado de Sao Paulo (Brazil)  5,800  51,979 

 

30   Dynamic Risk Allocation Fund 

 


COMMON STOCKS (43.8%)* cont.  Shares  Value 
Utilities and power cont.     
CPFL Energia SA (Brazil)  3,800  $30,873 
E.ON SE (Germany)  12,285  107,477 
Edison International  4,774  389,415 
Endesa SA (Spain)  4,123  102,890 
Enel SpA (Italy)  47,899  256,015 
Gas Natural SDG SA (Spain)  679  17,101 
Great Plains Energy, Inc.  12,126  348,380 
Iberdrola SA (Spain)  4,620  36,838 
Kinder Morgan, Inc.  24,518  459,958 
Korea Electric Power Corp. (South Korea)  1,114  42,486 
PG&E Corp.  6,773  463,138 
Southern Co. (The)  2,719  137,609 
Tenaga Nasional Bhd (Malaysia)  50,700  163,235 
Tohoku Electric Power Co., Inc. (Japan)  4,100  60,861 
    3,176,416 
Total common stocks (cost $67,267,922)    $77,297,770 
  Principal   
CORPORATE BONDS AND NOTES (25.7%)*  amount  Value 
Basic materials (2.3%)     
A Schulman, Inc. company guaranty sr. unsec. unsub. notes     
6.875%, 6/1/23  $50,000  $53,125 
Agrium, Inc. sr. unsec. unsub. notes 5.25%, 1/15/45 (Canada)  10,000  11,267 
Allegheny Technologies, Inc. sr. unsec. unsub. notes     
9.375%, 6/1/19  55,000  59,847 
Allegheny Technologies, Inc. sr. unsec. unsub. notes     
5.95%, 1/15/21  10,000  9,950 
ArcelorMittal SA sr. unsec. unsub. bonds 6.125%, 6/1/25 (France)  25,000  28,000 
Archer-Daniels-Midland Co. sr. unsec. notes 5.45%, 3/15/18  114,000  117,599 
Beacon Roofing Supply, Inc. company guaranty sr. unsec. unsub.     
notes 6.375%, 10/1/23  80,000  86,400 
Blue Cube Spinco, Inc. company guaranty sr. unsec. unsub. notes     
9.75%, 10/15/23  65,000  79,300 
BMC East, LLC 144A company guaranty sr. notes 5.50%, 10/1/24  65,000  67,925 
Boise Cascade Co. 144A company guaranty sr. unsec. notes     
5.625%, 9/1/24  85,000  88,188 
Builders FirstSource, Inc. 144A company guaranty sr. unsec. notes     
10.75%, 8/15/23  70,000  81,200 
Builders FirstSource, Inc. 144A company guaranty sr. unsub. notes     
5.625%, 9/1/24  45,000  46,688 
BWAY Holding Co. 144A sr. notes 5.50%, 4/15/24  55,000  56,238 
BWAY Holding Co. 144A sr. unsec. notes 7.25%, 4/15/25  70,000  71,225 
Celanese US Holdings, LLC company guaranty sr. unsec. unsub.     
notes 4.625%, 11/15/22 (Germany)  69,000  74,865 
Chemours Co. (The) company guaranty sr. unsec. notes     
5.375%, 5/15/27  30,000  31,200 
Chemours Co. (The) company guaranty sr. unsec. unsub. notes     
7.00%, 5/15/25  50,000  55,375 
Chemours Co. (The) company guaranty sr. unsec. unsub. notes     
6.625%, 5/15/23  40,000  42,696 

 

Dynamic Risk Allocation Fund   31 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Basic materials cont.     
Compass Minerals International, Inc. 144A company guaranty sr.     
unsec. notes 4.875%, 7/15/24  $80,000  $78,600 
CPG Merger Sub, LLC 144A company guaranty sr. unsec. notes     
8.00%, 10/1/21  30,000  31,350 
Dow Chemical Co. (The) sr. unsec. unsub. bonds 3.50%, 10/1/24  70,000  72,421 
E. I. du Pont de Nemours & Co. sr. unsec. unsub. FRN 1.70%, 5/1/20  50,000  50,249 
Eastman Chemical Co. sr. unsec. notes 3.80%, 3/15/25  20,000  20,698 
First Quantum Minerals, Ltd. 144A company guaranty sr. unsec.     
notes 7.00%, 2/15/21 (Canada)  15,000  15,713 
Flex Acquisition Co., Inc. 144A sr. unsec. notes 6.875%, 1/15/25  60,000  62,850 
Freeport-McMoRan, Inc. company guaranty sr. unsec. notes     
3.55%, 3/1/22 (Indonesia)  5,000  4,675 
Freeport-McMoRan, Inc. 144A company guaranty sr. unsec. notes     
6.75%, 2/1/22 (Indonesia)  30,000  31,050 
Freeport-McMoRan, Inc. 144A company guaranty sr. unsec. unsub.     
notes 6.875%, 2/15/23 (Indonesia)  55,000  57,613 
GCP Applied Technologies, Inc. 144A company guaranty sr. unsec.     
notes 9.50%, 2/1/23  115,000  131,100 
Glencore Funding, LLC 144A company guaranty sr. unsec. unsub.     
notes 4.625%, 4/29/24  116,000  121,157 
Glencore Funding, LLC 144A company guaranty sr. unsec. unsub.     
notes 4.00%, 4/16/25  79,000  79,251 
Grinding Media, Inc./MC Grinding Media Canada, Inc. 144A sr. sub.     
notes 7.375%, 12/15/23  15,000  16,181 
HudBay Minerals, Inc. 144A company guaranty sr. unsec. notes     
7.625%, 1/15/25 (Canada)  25,000  26,860 
Huntsman International, LLC company guaranty sr. unsec. unsub.     
notes 4.875%, 11/15/20  112,000  118,720 
INVISTA Finance, LLC 144A company guaranty sr. notes     
4.25%, 10/15/19  37,000  37,879 
Joseph T Ryerson & Son, Inc. 144A sr. notes 11.00%, 5/15/22  50,000  56,750 
Kraton Polymers, LLC/Kraton Polymers Capital Corp. 144A     
company guaranty sr. unsec. notes 10.50%, 4/15/23  60,000  69,450 
Kraton Polymers, LLC/Kraton Polymers Capital Corp. 144A     
company guaranty sr. unsec. notes 7.00%, 4/15/25  30,000  31,575 
Louisiana-Pacific Corp. company guaranty sr. unsec. unsub. notes     
4.875%, 9/15/24  45,000  45,563 
Mercer International, Inc. company guaranty sr. unsec. notes     
7.75%, 12/1/22 (Canada)  55,000  58,988 
Mercer International, Inc. 144A sr. unsec. notes 6.50%,     
2/1/24 (Canada)  15,000  15,600 
Methanex Corp. sr. unsec. unsub. notes 5.65%, 12/1/44 (Canada)  30,000  28,907 
Monsanto Company sr. unsec. sub. notes 5.50%, 8/15/25  60,000  68,408 
New Gold, Inc. 144A company guaranty sr. unsec. unsub. notes     
6.25%, 11/15/22 (Canada)  35,000  35,788 
New Gold, Inc. 144A sr. unsec. notes 6.375%, 5/15/25 (Canada)  15,000  15,375 
Norbord, Inc. 144A company guaranty sr. notes 6.25%,     
4/15/23 (Canada)  95,000  101,707 
NOVA Chemicals Corp. 144A sr. unsec. bonds 5.25%,     
6/1/27 (Canada)  56,000  56,070 

 

32   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Basic materials cont.     
NOVA Chemicals Corp. 144A sr. unsec. notes 4.875%,     
6/1/24 (Canada)  $34,000  $34,085 
Novelis Corp. 144A company guaranty sr. unsec. bonds     
5.875%, 9/30/26  70,000  72,450 
Novelis Corp. 144A company guaranty sr. unsec. notes     
6.25%, 8/15/24  40,000  42,100 
Pactiv, LLC sr. unsec. unsub. bonds 8.375%, 4/15/27  5,000  5,575 
Park-Ohio Industries, Inc. 144A company guaranty sr. unsec. notes     
6.625%, 4/15/27  55,000  57,406 
Platform Specialty Products Corp. 144A sr. unsec. notes     
10.375%, 5/1/21  10,000  11,088 
Sealed Air Corp. 144A company guaranty sr. unsec. notes     
6.875%, 7/15/33  40,000  44,000 
Sealed Air Corp. 144A company guaranty sr. unsec. notes     
5.125%, 12/1/24  20,000  21,050 
Sealed Air Corp. 144A sr. unsec. bonds 5.50%, 9/15/25  15,000  16,163 
Sherwin-Williams Co. (The) sr. unsec. unsub. bonds 3.45%, 6/1/27  30,000  30,330 
Smurfit Kappa Treasury Funding, Ltd. company guaranty sr. unsec.     
unsub. notes 7.50%, 11/20/25 (Ireland)  55,000  64,625 
Steel Dynamics, Inc. company guaranty sr. unsec. notes     
5.00%, 12/15/26  20,000  20,350 
Steel Dynamics, Inc. company guaranty sr. unsec. unsub. notes     
6.375%, 8/15/22  120,000  124,380 
Steel Dynamics, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 10/1/24  30,000  31,763 
Steel Dynamics, Inc. company guaranty sr. unsec. unsub. notes     
5.25%, 4/15/23  33,000  34,114 
Teck Resources, Ltd. company guaranty sr. unsec. unsub. notes     
4.75%, 1/15/22 (Canada)  20,000  20,900 
Teck Resources, Ltd. company guaranty sr. unsec. unsub. notes     
3.75%, 2/1/23 (Canada)  20,000  19,675 
Teck Resources, Ltd. 144A company guaranty sr. unsec. notes     
8.50%, 6/1/24 (Canada)  10,000  11,538 
TMS International Corp. 144A company guaranty sr. unsec. sub.     
notes 7.625%, 10/15/21  60,000  60,750 
Tronox Finance, LLC company guaranty sr. unsec. notes     
6.375%, 8/15/20  10,000  10,100 
Tronox Finance, LLC 144A company guaranty sr. unsec. notes     
7.50%, 3/15/22  40,000  41,550 
U.S. Concrete, Inc. company guaranty sr. unsec. unsub. notes     
6.375%, 6/1/24  60,000  62,700 
U.S. Concrete, Inc. 144A company guaranty sr. unsec. unsub. notes     
6.375%, 6/1/24  25,000  26,125 
Univar USA, Inc. 144A company guaranty sr. unsec. notes     
6.75%, 7/15/23  50,000  52,375 
USG Corp. 144A company guaranty sr. unsec. bonds     
4.875%, 6/1/27  40,000  40,400 
USG Corp. 144A company guaranty sr. unsec. notes 5.50%, 3/1/25  50,000  53,000 
Weekley Homes, LLC/Weekley Finance Corp. sr. unsec. notes     
6.00%, 2/1/23  40,000  38,800 

 

Dynamic Risk Allocation Fund   33 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Basic materials cont.     
Westlake Chemical Corp. company guaranty sr. unsec. unsub.     
notes 3.60%, 8/15/26  $150,000  $149,666 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
8.20%, 1/15/30  60,000  82,963 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
7.95%, 2/15/31  32,000  44,406 
WR Grace & Co.- Conn. 144A company guaranty sr. unsec. notes     
5.625%, 10/1/24  85,000  91,694 
Zekelman Industries, Inc. 144A company guaranty sr. notes     
9.875%, 6/15/23  45,000  50,850 
    4,068,607 
Capital goods (1.4%)     
Advanced Disposal Services, Inc. 144A sr. unsec. notes     
5.625%, 11/15/24  95,000  97,494 
American Axle & Manufacturing, Inc. company guaranty sr. unsec.     
notes 7.75%, 11/15/19  10,000  11,025 
ATS Automation Tooling Systems, Inc. 144A sr. unsec. notes 6.50%,     
6/15/23 (Canada)  35,000  36,435 
Belden, Inc. 144A company guaranty sr. unsec. sub. notes     
5.50%, 9/1/22  25,000  25,750 
Belden, Inc. 144A company guaranty sr. unsec. sub. notes     
5.25%, 7/15/24  30,000  30,600 
Berry Plastics Corp. company guaranty notes 6.00%, 10/15/22  25,000  26,656 
Berry Plastics Corp. company guaranty notes 5.50%, 5/15/22  20,000  20,850 
Berry Plastics Corp. company guaranty unsub. notes     
5.125%, 7/15/23  50,000  52,400 
Bombardier, Inc. 144A sr. unsec. notes 8.75%, 12/1/21 (Canada)  70,000  77,788 
Briggs & Stratton Corp. company guaranty sr. unsec. notes     
6.875%, 12/15/20  80,000  88,000 
Covidien International Finance SA company guaranty sr. unsec.     
unsub. notes 6.00%, 10/15/17 (Luxembourg)  145,000  147,409 
Crown Cork & Seal Co., Inc. company guaranty sr. unsec. bonds     
7.375%, 12/15/26  35,000  40,600 
Gates Global, LLC/Gates Global Co. 144A company guaranty sr.     
unsec. notes 6.00%, 7/15/22  155,000  157,713 
Great Lakes Dredge & Dock Corp. 144A company guaranty sr.     
unsec. notes 8.00%, 5/15/22  65,000  65,975 
Honeywell International, Inc. sr. unsec. unsub. notes     
5.375%, 3/1/41  80,000  98,863 
Johnson Controls International PLC sr. unsec. bonds 4.95%, 7/2/64  35,000  37,272 
Johnson Controls International PLC sr. unsec. unsub. bonds     
4.50%, 2/15/47  40,000  42,099 
KLX, Inc. 144A company guaranty sr. unsec. notes 5.875%, 12/1/22  80,000  84,406 
L3 Technologies, Inc. company guaranty sr. unsec. bonds     
3.85%, 12/15/26  10,000  10,309 
Legrand France SA sr. unsec. unsub. notes 8.50%, 2/15/25 (France)  15,000  19,726 
Manitowoc Foodservice, Inc. sr. unsec. notes 9.50%, 2/15/24  115,000  133,400 
MasTec, Inc. company guaranty sr. unsec. unsub. notes     
4.875%, 3/15/23  100,000  100,750 
Medtronic, Inc. company guaranty sr. unsec. sub. notes     
4.375%, 3/15/35  15,000  16,229 

 

34   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Capital goods cont.     
Medtronic, Inc. company guaranty sr. unsec. sub. notes     
3.50%, 3/15/25  $15,000  $15,652 
Moog, Inc. 144A company guaranty sr. unsec. notes 5.25%, 12/1/22  55,000  57,338 
Oshkosh Corp. company guaranty sr. unsec. sub. notes     
5.375%, 3/1/25  65,000  67,925 
Oshkosh Corp. company guaranty sr. unsec. sub. notes     
5.375%, 3/1/22  135,000  140,569 
Reynolds Group Issuer, Inc./Reynolds Group Issuer, LLC/Reynolds     
Group Issuer Lu 144A company guaranty sr. FRN 4.658%, 7/15/21  55,000  56,100 
Reynolds Group Issuer, Inc./Reynolds Group Issuer, LLC/Reynolds     
Group Issuer Lu 144A company guaranty sr. unsec. unsub. notes     
7.00%, 7/15/24  55,000  59,193 
Rockwell Collins, Inc. sr. unsec. bonds 4.35%, 4/15/47  46,000  47,816 
Tennant Co. 144A company guaranty sr. unsec. notes     
5.625%, 5/1/25  10,000  10,425 
Tenneco, Inc. company guaranty sr. unsec. unsub. notes     
5.375%, 12/15/24  55,000  57,475 
Tenneco, Inc. company guaranty sr. unsec. unsub. notes     
5.00%, 7/15/26  25,000  25,281 
TI Group Automotive Systems, LLC 144A sr. unsec. notes 8.75%,     
7/15/23 (United Kingdom)  135,000  143,438 
TransDigm, Inc. company guaranty sr. unsec. sub. notes     
6.375%, 6/15/26  35,000  35,875 
TransDigm, Inc. company guaranty sr. unsec. unsub. notes     
6.50%, 7/15/24  25,000  26,000 
TransDigm, Inc. 144A company guaranty sr. unsec. sub. notes     
6.50%, 5/15/25  20,000  20,700 
United Technologies Corp. sr. unsec. unsub. notes 1.90%, 5/4/20  205,000  205,513 
    2,391,049 
Communication services (2.4%)     
Altice SA 144A company guaranty sr. unsec. notes 7.75%,     
5/15/22 (Luxembourg)  200,000  212,750 
American Tower Corp. sr. unsec. bonds 3.125%, 1/15/27 R   40,000  38,390 
American Tower Corp. sr. unsec. notes 4.00%, 6/1/25 R   85,000  88,234 
AT&T, Inc. sr. unsec. unsub. notes 4.75%, 5/15/46  67,000  64,539 
AT&T, Inc. sr. unsec. unsub. notes 3.40%, 5/15/25  68,000  66,888 
AT&T, Inc. sr. unsec. unsub. notes 1.70%, 6/1/17  145,000  145,000 
CCO Holdings, LLC/CCO Holdings Capital Corp. company guaranty     
sr. unsec. notes 5.25%, 9/30/22  195,000  201,825 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A company     
guaranty sr. unsec. bonds 5.50%, 5/1/26  35,000  36,996 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A company     
guaranty sr. unsec. notes 5.875%, 4/1/24  85,000  91,163 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
notes 5.75%, 2/15/26  15,000  16,031 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
unsub. notes 5.125%, 5/1/23  25,000  26,297 
CenturyLink, Inc. sr. unsec. unsub. notes 6.75%, 12/1/23  80,000  85,500 
CenturyLink, Inc. sr. unsec. unsub. notes 5.625%, 4/1/20  15,000  15,900 
Cequel Communications Holdings I, LLC/Cequel Capital Corp.     
144A sr. unsec. unsub. notes 5.125%, 12/15/21  60,000  61,200 

 

Dynamic Risk Allocation Fund   35 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Communication services cont.     
Cequel Communications Holdings I, LLC/Cequel Capital Corp.     
144A sr. unsec. unsub. notes 5.125%, 12/15/21  $10,000  $10,206 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. bonds 6.484%, 10/23/45  87,000  104,128 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. notes 4.908%, 7/23/25  43,000  46,671 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital 144A company guaranty sr.     
bonds 5.375%, 5/1/47  76,000  79,648 
Comcast Corp. company guaranty sr. unsec. unsub. bonds     
2.35%, 1/15/27  5,000  4,710 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
6.95%, 8/15/37  30,000  41,762 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
6.50%, 11/15/35  85,000  111,475 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
3.375%, 2/15/25  45,000  46,564 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
3.15%, 3/1/26  5,000  5,038 
CommScope Technologies Finance, LLC 144A sr. unsec. notes     
6.00%, 6/15/25  40,000  42,508 
Crown Castle International Corp. sr. unsec. notes 4.875%, 4/15/22 R   25,000  27,357 
Crown Castle International Corp. sr. unsec. unsub. bonds     
3.70%, 6/15/26 R   45,000  45,424 
CSC Holdings, LLC sr. unsec. unsub. bonds 5.25%, 6/1/24  135,000  137,869 
CSC Holdings, LLC sr. unsec. unsub. notes 6.75%, 11/15/21  160,000  176,800 
Deutsche Telekom International Finance BV company guaranty sr.     
unsec. unsub. bonds 8.75%, 6/15/30 (Netherlands)  16,000  23,835 
DISH DBS Corp. company guaranty sr. unsec. unsub. notes     
5.875%, 11/15/24  40,000  42,600 
Frontier Communications Corp. sr. unsec. notes 11.00%, 9/15/25  25,000  23,375 
Frontier Communications Corp. sr. unsec. notes 10.50%, 9/15/22  65,000  63,944 
Frontier Communications Corp. sr. unsec. notes 8.875%, 9/15/20  20,000  21,275 
Frontier Communications Corp. sr. unsec. unsub. notes     
7.625%, 4/15/24  15,000  12,619 
Intelsat Jackson Holdings SA company guaranty sr. unsec. notes     
7.50%, 4/1/21 (Bermuda)  265,000  236,513 
Intelsat Jackson Holdings SA 144A company guaranty sr. notes     
8.00%, 2/15/24 (Bermuda)  2,000  2,159 
Intelsat Luxembourg SA company guaranty sr. unsec. bonds     
7.75%, 6/1/21 (Luxembourg)  33,000  18,398 
Intelsat Luxembourg SA company guaranty sr. unsec. sub. bonds     
8.125%, 6/1/23 (Luxembourg)  80,000  42,750 
NBCUniversal Media, LLC company guaranty sr. unsec. unsub.     
notes 4.375%, 4/1/21  125,000  135,496 
Quebecor Media, Inc. sr. unsec. unsub. notes 5.75%,     
1/15/23 (Canada)  35,000  37,100 
SFR Group SA 144A company guaranty sr. notes 6.00%,     
5/15/22 (France)  200,000  208,750 

 

36   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Communication services cont.     
Sprint Communications, Inc. sr. unsec. notes 7.00%, 8/15/20  $290,000  $320,813 
Sprint Corp. company guaranty sr. unsec. sub. notes     
7.25%, 9/15/21  195,000  221,385 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
6.625%, 4/1/23  50,000  53,250 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
6.375%, 3/1/25  30,000  32,513 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
6.00%, 3/1/23  20,000  21,274 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
5.375%, 4/15/27  25,000  26,625 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
4.00%, 4/15/22  15,000  15,545 
T-Mobile USA, Inc. company guaranty sr. unsec. unsub. notes     
6.836%, 4/28/23  5,000  5,344 
T-Mobile USA, Inc. company guaranty sr. unsec. unsub. notes     
6.125%, 1/15/22  25,000  26,313 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.522%, 9/15/48  84,000  78,979 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.50%, 9/15/20  30,000  32,141 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.40%, 11/1/34  30,000  29,288 
Videotron Ltd./Videotron Ltee. 144A sr. unsec. bonds 5.125%,     
4/15/27 (Canada)  60,000  62,100 
Vodafone Group PLC sr. unsec. unsub. notes 1.25%, 9/26/17     
(United Kingdom)  251,000  250,876 
West Corp. 144A company guaranty sr. unsec. sub. notes     
5.375%, 7/15/22  45,000  45,731 
WideOpenWest Finance, LLC/WideOpenWest Capital Corp.     
company guaranty sr. unsec. sub. notes 10.25%, 7/15/19  57,000  59,063 
Windstream Services, LLC company guaranty sr. unsec. notes     
6.375%, 8/1/23  55,000  46,649 
    4,227,576 
Conglomerates (—%)     
General Electric Co. sr. unsec. bonds 4.50%, 3/11/44  15,000  16,513 
    16,513 
Consumer cyclicals (4.0%)     
21st Century Fox America, Inc. company guaranty sr. unsec. unsub.     
notes 7.75%, 12/1/45  124,000  175,922 
Amazon.com, Inc. sr. unsec. notes 1.20%, 11/29/17  143,000  142,995 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.875%, 2/15/22  25,000  26,150 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.75%, 6/15/25  35,000  36,334 
AMC Entertainment Holdings, Inc. 144A company guaranty sr.     
unsec. sub. bonds 6.125%, 5/15/27  20,000  20,675 
AMC Entertainment Holdings, Inc. 144A sr. unsec. sub. bonds     
5.875%, 11/15/26  35,000  36,050 
American Builders & Contractors Supply Co., Inc. 144A sr. unsec.     
notes 5.75%, 12/15/23  60,000  63,975 

 

Dynamic Risk Allocation Fund   37 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Consumer cyclicals cont.     
American Tire Distributors, Inc. 144A sr. unsec. sub. notes     
10.25%, 3/1/22  $85,000  $88,825 
Autonation, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 2/1/20  55,000  59,007 
Bon-Ton Department Stores, Inc. (The) company guaranty notes     
8.00%, 6/15/21  50,000  18,500 
Boyd Gaming Corp. company guaranty sr. unsec. sub. notes     
6.875%, 5/15/23  40,000  43,300 
Boyd Gaming Corp. company guaranty sr. unsec. unsub. notes     
6.375%, 4/1/26  20,000  21,822 
Brookfield Residential Properties, Inc. 144A company guaranty sr.     
unsec. notes 6.50%, 12/15/20 (Canada)  160,000  165,200 
Brookfield Residential Properties, Inc./Brookfield Residential     
US Corp. 144A company guaranty sr. unsec. notes 6.125%,     
7/1/22 (Canada)  35,000  36,050 
Caesars Growth Properties Holdings, LLC/Caesars Growth     
Properties Finance, Inc. company guaranty notes 9.375%, 5/1/22  75,000  81,375 
CalAtlantic Group, Inc. company guaranty sr. unsec. sub. notes     
6.25%, 12/15/21  40,000  44,450 
CalAtlantic Group, Inc. company guaranty sr. unsec. sub. notes     
5.875%, 11/15/24  25,000  26,938 
CBS Corp. company guaranty sr. unsec. debs. 7.875%, 7/30/30  74,000  102,259 
CBS Corp. company guaranty sr. unsec. unsub. bonds     
2.90%, 1/15/27  39,000  36,838 
CBS Corp. company guaranty sr. unsec. unsub. notes     
3.50%, 1/15/25  49,000  49,336 
CBS Radio, Inc. 144A company guaranty sr. unsec. notes     
7.25%, 11/1/24  15,000  15,825 
CCM Merger, Inc. 144A sr. unsec. notes 6.00%, 3/15/22  20,000  20,650 
Cinemark USA, Inc. company guaranty sr. unsec. notes     
5.125%, 12/15/22  15,000  15,413 
Cinemark USA, Inc. company guaranty sr. unsec. sub. notes     
4.875%, 6/1/23  25,000  25,437 
Clear Channel Worldwide Holdings, Inc. company guaranty sr.     
unsec. sub. notes 7.625%, 3/15/20  30,000  30,113 
Clear Channel Worldwide Holdings, Inc. company guaranty sr.     
unsec. unsub. notes 6.50%, 11/15/22  95,000  98,206 
Diamond Resorts International, Inc. 144A sr. notes 7.75%, 9/1/23  85,000  89,463 
Diamond Resorts International, Inc. 144A sr. unsec. notes     
10.75%, 9/1/24  35,000  37,100 
Ecolab, Inc. sr. unsec. unsub. bonds 2.70%, 11/1/26  95,000  92,188 
Eldorado Resorts, Inc. company guaranty sr. unsec. unsub. notes     
7.00%, 8/1/23  65,000  70,525 
Eldorado Resorts, Inc. 144A sr. unsec. unsub. notes 6.00%, 4/1/25  15,000  15,769 
EW Scripps Co. (The) 144A company guaranty sr. unsec. notes     
5.125%, 5/15/25  30,000  30,713 
Expedia, Inc. company guaranty sr. unsec. unsub. notes     
5.00%, 2/15/26  140,000  152,251 
Ford Motor Co. sr. unsec. unsub. notes 9.98%, 2/15/47  115,000  178,469 
Ford Motor Co. sr. unsec. unsub. notes 7.45%, 7/16/31  192,000  242,310 
Gartner, Inc. 144A company guaranty sr. unsec. notes     
5.125%, 4/1/25  30,000  31,350 

 

38   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Consumer cyclicals cont.     
General Motors Financial Co., Inc. company guaranty sr. unsec.     
notes 4.00%, 10/6/26  $25,000  $24,710 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.30%, 7/13/25  20,000  20,263 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.00%, 1/15/25  10,000  10,065 
GLP Capital LP/GLP Financing II, Inc. company guaranty sr. unsec.     
sub. notes 4.875%, 11/1/20  60,000  63,600 
GLP Capital LP/GLP Financing II, Inc. company guaranty sr. unsec.     
unsub. notes 5.375%, 4/15/26  25,000  27,063 
Gray Television, Inc. 144A company guaranty sr. unsec. notes     
5.875%, 7/15/26  50,000  50,750 
GW Honos Security Corp. 144A company guaranty sr. unsec. notes     
8.75%, 5/15/25 (Canada)  60,000  61,950 
Hanesbrands, Inc. 144A company guaranty sr. unsec. unsub. notes     
4.625%, 5/15/24  35,000  35,000 
Hilton Worldwide Finance, LLC/Hilton Worldwide Finance Corp.     
144A sr. unsec. bonds 4.875%, 4/1/27  170,000  175,950 
Home Depot, Inc. (The) sr. unsec. unsub. notes 2.625%, 6/1/22  90,000  91,849 
Host Hotels & Resorts LP sr. unsec. unsub. notes 5.25%, 3/15/22 R   77,000  84,051 
Howard Hughes Corp. (The) 144A sr. unsec. notes 5.375%, 3/15/25  50,000  51,563 
Hyatt Hotels Corp. sr. unsec. unsub. notes 4.85%, 3/15/26  60,000  65,705 
iHeartCommunications, Inc. company guaranty sr. notes     
9.00%, 12/15/19  265,000  209,846 
IHS Markit Ltd. 144A company guaranty notes 4.75%, 2/15/25     
(United Kingdom)  35,000  36,750 
Jack Ohio Finance, LLC/Jack Ohio Finance 1 Corp. 144A company     
guaranty notes 10.25%, 11/15/22  95,000  103,313 
Jack Ohio Finance, LLC/Jack Ohio Finance 1 Corp. 144A company     
guaranty sr. notes 6.75%, 11/15/21  90,000  93,263 
Jacobs Entertainment, Inc. 144A notes 7.875%, 2/1/24  20,000  21,100 
JC Penney Corp., Inc. company guaranty sr. unsec. unsub. notes     
5.65%, 6/1/20  5,000  4,963 
Jo-Ann Stores Holdings, Inc. 144A sr. unsec. notes 9.75%,     
10/15/19 ‡‡  40,000  39,800 
Lamar Media Corp. company guaranty sr. unsec. sub. notes     
5.875%, 2/1/22  50,000  51,875 
Lamar Media Corp. company guaranty sr. unsec. sub. notes     
5.375%, 1/15/24  20,000  21,010 
Lear Corp. company guaranty sr. unsec. unsub. notes     
5.375%, 3/15/24  25,000  26,565 
Lennar Corp. company guaranty sr. unsec. unsub. notes     
4.75%, 11/15/22  75,000  78,293 
Lions Gate Entertainment Corp. 144A sr. unsec. unsub. notes     
5.875%, 11/1/24  55,000  57,544 
Live Nation Entertainment, Inc. 144A company guaranty sr. unsec.     
notes 4.875%, 11/1/24  25,000  25,313 
Masonite International Corp. 144A company guaranty sr. unsec.     
notes 5.625%, 3/15/23  65,000  68,250 

 

Dynamic Risk Allocation Fund   39 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Consumer cyclicals cont.     
Mattamy Group Corp. 144A sr. unsec. notes 6.875%,     
12/15/23 (Canada)  $15,000  $15,188 
Mattamy Group Corp. 144A sr. unsec. notes 6.50%,     
11/15/20 (Canada)  65,000  66,989 
MGM Resorts International company guaranty sr. unsec. notes     
6.75%, 10/1/20  40,000  44,450 
MGM Resorts International company guaranty sr. unsec. notes     
5.25%, 3/31/20  10,000  10,643 
MGM Resorts International company guaranty sr. unsec. unsub.     
notes 8.625%, 2/1/19  120,000  132,600 
MGM Resorts International company guaranty sr. unsec. unsub.     
notes 6.625%, 12/15/21  5,000  5,613 
Navistar International Corp. company guaranty sr. unsec. notes     
8.25%, 11/1/21  95,000  96,306 
Neiman Marcus Group, LLC (The) company guaranty sr. notes     
7.125%, 6/1/28  65,000  46,881 
Neiman Marcus Group, Ltd. 144A company guaranty sr. unsec. sub.     
notes 8.75%, 10/15/21 ‡‡  15,000  7,275 
Neiman Marcus Group, Ltd. 144A company guaranty sr. unsec. sub.     
notes 8.00%, 10/15/21  30,000  15,525 
Nexstar Broadcasting, Inc. 144A company guaranty sr. unsec.     
notes 5.625%, 8/1/24  55,000  55,413 
Nielsen Co. Luxembourg Sarl (The) 144A company guaranty sr.     
unsec. notes 5.00%, 2/1/25 (Luxembourg)  30,000  30,600 
Nielsen Co. Luxembourg Sarl (The) 144A company guaranty sr.     
unsec. sub. notes 5.50%, 10/1/21 (Luxembourg)  30,000  31,088 
Nielsen Finance, LLC/Nielsen Finance Co. 144A company guaranty     
sr. unsec. sub. notes 5.00%, 4/15/22  40,000  41,150 
O’Reilly Automotive, Inc. company guaranty sr. unsec. sub. notes     
3.55%, 3/15/26  35,000  35,392 
Omnicom Group, Inc. company guaranty sr. unsec. unsub. notes     
3.60%, 4/15/26  72,000  73,305 
Outfront Media Capital, LLC/Outfront Media Capital Corp.     
company guaranty sr. unsec. sub. notes 5.875%, 3/15/25  30,000  31,500 
Outfront Media Capital, LLC/Outfront Media Capital Corp.     
company guaranty sr. unsec. sub. notes 5.625%, 2/15/24  45,000  47,025 
Penn National Gaming, Inc. 144A sr. unsec. notes 5.625%, 1/15/27  35,000  35,394 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.75%, 10/1/22  30,000  31,050 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.50%, 5/15/26  35,000  34,913 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.375%, 12/1/24  45,000  45,338 
PetSmart, Inc. 144A sr. unsec. notes 7.125%, 3/15/23  20,000  18,650 
Priceline Group, Inc. (The) sr. unsec. notes 3.65%, 3/15/25  61,000  62,902 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
7.875%, 6/15/32  70,000  80,619 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 3/1/26  70,000  73,981 
QVC, Inc. company guaranty sr. sub. notes 4.45%, 2/15/25  55,000  54,476 
Regal Entertainment Group sr. unsec. sub. notes 5.75%, 6/15/23  80,000  83,500 

 

40   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Consumer cyclicals cont.     
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp.     
144A sr. notes 6.125%, 8/15/21  $70,000  $70,875 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
4.40%, 2/15/26  35,000  37,689 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
2.95%, 1/22/27  37,000  35,795 
Sabre GLBL, Inc. 144A company guaranty sr. notes 5.375%, 4/15/23  50,000  52,438 
Scientific Games International, Inc. company guaranty sr. unsec.     
notes 10.00%, 12/1/22  185,000  201,419 
Scientific Games International, Inc. company guaranty sr. unsec.     
sub. notes 6.25%, 9/1/20  15,000  14,794 
Scientific Games International, Inc. 144A company guaranty sr.     
notes 7.00%, 1/1/22  80,000  85,400 
Sinclair Television Group, Inc. 144A company guaranty sr. unsec.     
sub. notes 5.625%, 8/1/24  115,000  118,306 
Sirius XM Radio, Inc. 144A company guaranty sr. unsec. sub. notes     
6.00%, 7/15/24  40,000  42,600 
Six Flags Entertainment Corp. 144A company guaranty sr. unsec.     
bonds 5.50%, 4/15/27  65,000  66,950 
Six Flags Entertainment Corp. 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 7/31/24  80,000  80,500 
Spectrum Brands, Inc. company guaranty sr. unsec. notes     
5.75%, 7/15/25  35,000  37,191 
Spectrum Brands, Inc. company guaranty sr. unsec. unsub. notes     
6.125%, 12/15/24  30,000  31,800 
Standard Industries, Inc. 144A sr. unsec. notes 5.375%, 11/15/24  90,000  94,613 
Standard Industries, Inc. 144A sr. unsec. notes 5.00%, 2/15/27  85,000  87,019 
SugarHouse HSP Gaming Prop. Mezz LP/SugarHouse HSP     
Gaming Finance Corp. 144A company guaranty sr. unsub. notes     
5.875%, 5/15/25  40,000  39,450 
Time Warner, Inc. company guaranty sr. unsec. unsub. bonds     
3.80%, 2/15/27  90,000  89,849 
Time Warner, Inc. company guaranty sr. unsec. unsub. bonds     
2.95%, 7/15/26  36,000  33,948 
Townsquare Media, Inc. 144A company guaranty sr. unsec. notes     
6.50%, 4/1/23  15,000  15,113 
Toyota Motor Credit Corp. sr. unsec. unsub. bonds Ser. GMTN,     
1.55%, 7/13/18  145,000  145,165 
Tribune Media Co. company guaranty sr. unsec. notes     
5.875%, 7/15/22  45,000  47,419 
TRW Automotive, Inc. 144A company guaranty sr. unsec. notes     
4.50%, 3/1/21  15,000  15,750 
Univision Communications, Inc. 144A company guaranty sr. sub.     
notes 5.125%, 2/15/25  55,000  54,313 
Wal-Mart Stores, Inc. sr. unsec. unsub. notes 6.50%, 8/15/37  34,000  47,045 
WMG Acquisition Corp. 144A company guaranty sr. notes     
5.00%, 8/1/23  45,000  46,069 
Wolverine World Wide, Inc. 144A company guaranty sr. unsec.     
bonds 5.00%, 9/1/26  35,000  34,475 
Wyndham Worldwide Corp. sr. unsec. unsub. bonds 4.50%, 4/1/27  40,000  41,281 

 

Dynamic Risk Allocation Fund   41 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Consumer cyclicals cont.     
Wyndham Worldwide Corp. sr. unsec. unsub. notes 5.625%, 3/1/21  $30,000  $32,867 
Wynn Las Vegas, LLC/Wynn Las Vegas Capital Corp. 144A company     
guaranty sr. unsec. sub. notes 5.25%, 5/15/27  45,000  46,238 
    7,076,324 
Consumer staples (1.8%)     
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty     
notes 6.00%, 4/1/22 (Canada)  70,000  72,867 
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty sr.     
notes 4.625%, 1/15/22 (Canada)  25,000  25,719 
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty sr.     
sub. notes 4.25%, 5/15/24 (Canada)  40,000  40,000 
Altria Group, Inc. company guaranty sr. unsec. unsub. notes     
2.85%, 8/9/22  96,000  97,589 
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. bonds 4.90%, 2/1/46  180,000  198,505 
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. bonds 3.65%, 2/1/26  70,000  72,047 
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. notes 2.65%, 2/1/21  145,000  147,242 
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. notes 1.25%, 1/17/18  53,000  52,924 
Anheuser-Busch InBev Worldwide, Inc. company guaranty sr.     
unsec. unsub. notes 8.20%, 1/15/39  106,000  163,265 
BlueLine Rental Finance Corp./BlueLine Rental, LLC 144A     
company guaranty sub. notes 9.25%, 3/15/24  90,000  94,050 
CEC Entertainment, Inc. company guaranty sr. unsec. sub. notes     
8.00%, 2/15/22  65,000  68,250 
Ceridian HCM Holding, Inc. 144A sr. unsec. notes 11.00%, 3/15/21  35,000  36,838 
Coca-Cola Co. (The) sr. unsec. unsub. bonds 2.25%, 9/1/26  30,000  28,593 
Constellation Brands, Inc. company guaranty sr. unsec. unsub.     
bonds 3.70%, 12/6/26  20,000  20,402 
CVS Health Corp. sr. unsec. notes 4.75%, 12/1/22  80,000  88,089 
CVS Health Corp. sr. unsec. unsub. notes 2.25%, 12/5/18  145,000  146,005 
Dean Foods Co. 144A company guaranty sr. unsec. notes     
6.50%, 3/15/23  45,000  47,588 
Diageo Investment Corp. company guaranty sr. unsec. notes     
8.00%, 9/15/22  9,000  11,245 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. bonds     
4.50%, 2/15/45  50,000  47,935 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes     
7.00%, 10/15/37  200,000  253,956 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes     
5.625%, 3/15/42  56,000  62,737 
Fresh Market, Inc. (The) 144A company guaranty sr. notes     
9.75%, 5/1/23  40,000  33,750 
High Ridge Brands Co. 144A company guaranty sr. unsec. notes     
8.875%, 3/15/25  50,000  49,250 
Kellogg Co. sr. unsec. unsub. notes 3.25%, 4/1/26  70,000  70,428 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 5.25%, 6/1/26  45,000  47,216 

 

42   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Consumer staples cont.     
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 5.00%, 6/1/24  $45,000  $46,814 
Kraft Heinz Co. (The) company guaranty sr. unsec. notes Ser. 144A,     
6.875%, 1/26/39  95,000  121,418 
Kroger Co. (The) company guaranty sr. unsec. unsub. notes     
6.90%, 4/15/38  45,000  59,605 
Lamb Weston Holdings, Inc. 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 11/1/26  140,000  143,500 
Lamb Weston Holdings, Inc. 144A company guaranty sr. unsec.     
unsub. notes 4.625%, 11/1/24  10,000  10,250 
Landry’s, Inc. 144A sr. unsec. notes 6.75%, 10/15/24  30,000  30,975 
Molson Coors Brewing Co. 144A company guaranty sr. unsec.     
unsub. notes 1.90%, 3/15/19  125,000  125,029 
Newell Brands, Inc. sr. unsec. unsub. notes 4.20%, 4/1/26  90,000  95,576 
PepsiCo, Inc. sr. unsec. unsub. bonds 3.45%, 10/6/46  45,000  41,707 
PepsiCo, Inc. sr. unsec. unsub. notes 1.25%, 8/13/17  144,000  143,873 
Pilgrim’s Pride Corp. 144A company guaranty sr. unsec. notes     
5.75%, 3/15/25  30,000  30,750 
Prestige Brands, Inc. 144A company guaranty sr. unsec. notes     
5.375%, 12/15/21  35,000  35,700 
Revlon Consumer Products Corp. company guaranty sr. unsec.     
notes 6.25%, 8/1/24  30,000  26,625 
Revlon Consumer Products Corp. company guaranty sr. unsec.     
sub. notes 5.75%, 2/15/21  75,000  70,171 
Rite Aid Corp. 144A company guaranty sr. unsec. unsub. notes     
6.125%, 4/1/23  90,000  89,397 
Tyson Foods, Inc. company guaranty sr. unsec. bonds     
4.875%, 8/15/34  23,000  24,538 
Tyson Foods, Inc. company guaranty sr. unsec. unsub. bonds     
5.15%, 8/15/44  32,000  35,415 
Walgreens Boots Alliance, Inc. sr. unsec. unsub. notes     
3.30%, 11/18/21  35,000  36,222 
    3,144,055 
Energy (3.5%)     
Alliance Resource Operating Partners LP/Alliance Resource     
Finance Corp. 144A sr. unsec. notes 7.50%, 5/1/25  25,000  25,938 
Alta Mesa Holdings LP/Alta Mesa Finance Services Corp. 144A     
company guaranty sr. unsec. notes 7.875%, 12/15/24  90,000  94,275 
Anadarko Petroleum Corp. sr. unsec. notes 6.45%, 9/15/36  130,000  154,758 
Antero Resources Corp. company guaranty sr. unsec. notes     
5.625%, 6/1/23  15,000  15,375 
Antero Resources Corp. company guaranty sr. unsec. sub. notes     
5.125%, 12/1/22  15,000  15,169 
Antero Resources Finance Corp. company guaranty sr. unsec. sub.     
notes 5.375%, 11/1/21  45,000  46,294 
Ascent Resources Utica Holdings, LLC/ARU Finance Corp. 144A sr.     
unsec. notes 10.00%, 4/1/22  35,000  35,875 
Baytex Energy Corp. 144A company guaranty sr. unsec. sub. notes     
5.125%, 6/1/21 (Canada)  5,000  4,656 
BP Capital Markets PLC company guaranty sr. unsec. unsub. notes     
2.315%, 2/13/20 (United Kingdom)  110,000  111,258 

 

Dynamic Risk Allocation Fund   43 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Energy cont.     
Calfrac Holdings LP 144A company guaranty sr. unsec. unsub.     
notes 7.50%, 12/1/20  $30,000  $26,700 
California Resources Corp. company guaranty sr. unsec. sub. notes     
5.00%, 1/15/20  30,000  23,700 
California Resources Corp. 144A company guaranty notes     
8.00%, 12/15/22  101,000  75,624 
Canadian Natural Resources, Ltd. sr. unsec. unsub. bonds 3.85%,     
6/1/27 (Canada)  25,000  25,149 
Cenovus Energy, Inc. sr. unsec. bonds 6.75%, 11/15/39 (Canada)  197,000  219,655 
Cenovus Energy, Inc. 144A sr. unsec. notes 4.25%,     
4/15/27 (Canada)  50,000  49,809 
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes     
5.875%, 3/31/25  110,000  118,113 
Cheniere Corpus Christi Holdings, LLC 144A company guaranty sr.     
bonds 5.125%, 6/30/27  85,000  86,169 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
5.75%, 3/15/23  10,000  9,375 
Chesapeake Energy Corp. 144A company guaranty notes     
8.00%, 12/15/22  82,000  88,663 
Chesapeake Energy Corp. 144A company guaranty sr. unsec.     
bonds 8.00%, 6/15/27  25,000  24,500 
Chesapeake Energy Corp. 144A company guaranty sr. unsec. notes     
8.00%, 1/15/25  20,000  19,900 
Chevron Corp. sr. unsec. unsub. notes 1.561%, 5/16/19  30,000  29,947 
Chevron Corp. sr. unsec. unsub. notes 1.104%, 12/5/17  143,000  142,852 
Concho Resources, Inc. company guaranty sr. unsec. notes     
5.50%, 4/1/23  60,000  61,950 
Concho Resources, Inc. company guaranty sr. unsec. notes     
4.375%, 1/15/25  125,000  127,500 
Concho Resources, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 10/1/22  25,000  25,781 
ConocoPhillips Co. company guaranty sr. unsec. unsub. notes     
1.05%, 12/15/17  145,000  144,735 
Continental Resources, Inc. company guaranty sr. unsec. bonds     
4.90%, 6/1/44  40,000  34,225 
Continental Resources, Inc. company guaranty sr. unsec. notes     
3.80%, 6/1/24  20,000  18,688 
Continental Resources, Inc. company guaranty sr. unsec. sub.     
notes 5.00%, 9/15/22  75,000  75,094 
Continental Resources, Inc. company guaranty sr. unsec. unsub.     
notes 4.50%, 4/15/23  45,000  43,988 
Covey Park Energy, LLC/Covey Park Finance Corp. 144A company     
guaranty sr. unsec. notes 7.50%, 5/15/25  75,000  76,875 
DCP Midstream Operating LP company guaranty sr. unsec. notes     
3.875%, 3/15/23  15,000  14,655 
DCP Midstream Operating LP company guaranty sr. unsec. notes     
2.70%, 4/1/19  40,000  39,800 
Denbury Resources, Inc. company guaranty sr. unsec. sub. notes     
6.375%, 8/15/21  45,000  34,369 
Denbury Resources, Inc. 144A company guaranty notes     
9.00%, 5/15/21  66,000  67,650 

 

44   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Energy cont.     
Devon Financing Company, LLC company guaranty sr. unsec.     
unsub. bonds 7.875%, 9/30/31  $50,000  $66,452 
Diamondback Energy, Inc. 144A company guaranty sr. unsec.     
notes 5.375%, 5/31/25  80,000  82,400 
Diamondback Energy, Inc. 144A company guaranty sr. unsec.     
notes 4.75%, 11/1/24  20,000  20,050 
Endeavor Energy Resources LP/EER Finance, Inc. 144A sr. unsec.     
notes 8.125%, 9/15/23  60,000  63,750 
EP Energy, LLC/Everest Acquisition Finance, Inc. company     
guaranty sr. unsec. sub. notes 9.375%, 5/1/20  135,000  123,525 
EP Energy, LLC/Everest Acquisition Finance, Inc. 144A company     
guaranty notes 8.00%, 2/15/25  55,000  47,025 
EP Energy, LLC/Everest Acquisition Finance, Inc. 144A company     
guaranty sr. notes 8.00%, 11/29/24  15,000  15,488 
EQT Midstream Partners LP company guaranty sr. unsec. sub.     
notes 4.00%, 8/1/24  5,000  5,138 
FTS International, Inc. 144A company guaranty sr. sub. FRN     
8.631%, 6/15/20  15,000  15,263 
Halcon Resources Corp. 144A company guaranty notes     
12.00%, 2/15/22  10,000  11,550 
Hess Corp. sr. unsec. unsub. notes 7.30%, 8/15/31  35,000  42,395 
Holly Energy Partners LP/Holly Energy Finance Corp. 144A     
company guaranty sr. unsec. notes 6.00%, 8/1/24  55,000  58,025 
Laredo Petroleum, Inc. company guaranty sr. unsec. notes     
7.375%, 5/1/22  90,000  92,700 
Laredo Petroleum, Inc. company guaranty sr. unsec. sub. notes     
5.625%, 1/15/22  15,000  14,719 
MEG Energy Corp. 144A company guaranty sr. unsec. notes 7.00%,     
3/31/24 (Canada)  35,000  30,275 
MEG Energy Corp. 144A company guaranty sr. unsec. notes     
6.375%, 1/30/23 (Canada)  15,000  12,863 
MEG Energy Corp. 144A notes 6.50%, 1/15/25 (Canada)  15,000  14,663 
Motiva Enterprises, LLC 144A sr. unsec. notes 5.75%, 1/15/20  50,000  53,993 
MPLX LP sr. unsec. unsub. notes 4.125%, 3/1/27  40,000  40,649 
Murphy Oil Corp. sr. unsec. unsub. notes 6.875%, 8/15/24  60,000  62,850 
Murray Energy Corp. 144A notes 11.25%, 4/15/21  40,000  30,600 
Nabors Industries, Inc. company guaranty sr. unsec. unsub. notes     
4.625%, 9/15/21  40,000  40,300 
Newfield Exploration Co. sr. unsec. unsub. notes 5.75%, 1/30/22  50,000  53,000 
Newfield Exploration Co. sr. unsec. unsub. notes 5.375%, 1/1/26  30,000  31,350 
Noble Holding International, Ltd. company guaranty sr. unsec.     
unsub. notes 7.75%, 1/15/24  55,000  48,520 
Noble Holding International, Ltd. company guaranty sr. unsec.     
unsub. notes 6.05%, 3/1/41  19,000  13,300 
Oasis Petroleum, Inc. company guaranty sr. unsec. unsub. notes     
6.875%, 3/15/22  85,000  85,956 
Occidental Petroleum Corp. sr. unsec. unsub. bonds     
4.40%, 4/15/46  55,000  57,276 
Parsley Energy LLC/Parsley Finance Corp. 144A company guaranty     
sr. unsec. sub. notes 5.375%, 1/15/25  20,000  20,250 

 

Dynamic Risk Allocation Fund   45 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Energy cont.     
Pertamina Persero PT 144A sr. unsec. unsub. notes 4.30%,     
5/20/23 (Indonesia)  $200,000  $207,480 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
bonds 7.375%, 1/17/27 (Brazil)  70,000  75,026 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
bonds 7.25%, 3/17/44 (Brazil)  212,000  210,092 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 8.75%, 5/23/26 (Brazil)  58,000  67,498 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 6.25%, 3/17/24 (Brazil)  135,000  139,388 
Petroleos de Venezuela SA 144A company guaranty sr. unsec.     
notes 6.00%, 11/15/26 (Venezuela)  110,000  42,240 
Petroleos Mexicanos company guaranty sr. unsec. unsub. bonds     
5.625%, 1/23/46 (Mexico)  95,000  85,690 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
4.50%, 1/23/26 (Mexico)  295,000  289,543 
Precision Drilling Corp. 144A company guaranty sr. unsec. notes     
7.75%, 12/15/23 (Canada)  50,000  51,625 
Range Resources Corp. 144A company guaranty sr. unsec. sub.     
notes 5.75%, 6/1/21  90,000  93,375 
Rose Rock Midstream LP/Rose Rock Finance Corp. company     
guaranty sr. unsec. sub. notes 5.625%, 11/15/23  30,000  29,869 
Rose Rock Midstream LP/Rose Rock Finance Corp. company     
guaranty sr. unsec. sub. notes 5.625%, 7/15/22  20,000  20,100 
Sabine Pass Liquefaction, LLC sr. notes 5.875%, 6/30/26  30,000  33,848 
Sabine Pass Liquefaction, LLC sr. notes 5.00%, 3/15/27  61,000  65,256 
Sabine Pass Liquefaction, LLC 144A sr. bonds 4.20%, 3/15/28  40,000  40,538 
SemGroup Corp. 144A company guaranty sr. unsec. notes     
6.375%, 3/15/25  35,000  34,563 
Seven Generations Energy, Ltd. 144A sr. unsec. bonds 6.75%,     
5/1/23 (Canada)  35,000  36,838 
Seven Generations Energy, Ltd. 144A sr. unsec. sub. notes 8.25%,     
5/15/20 (Canada)  60,000  62,700 
Seventy Seven Energy, Inc. escrow sr. unsec. notes     
6.50%, 7/15/22 F   50,000  5 
Shelf Drilling Holdings, Ltd. 144A company guaranty notes     
9.50%, 11/2/20  40,000  39,900 
SM Energy Co. sr. unsec. notes 6.50%, 11/15/21  45,000  45,450 
SM Energy Co. sr. unsec. sub. notes 5.00%, 1/15/24  30,000  27,750 
SM Energy Co. sr. unsec. unsub. notes 6.75%, 9/15/26  30,000  29,400 
SM Energy Co. sr. unsec. unsub. notes 6.50%, 1/1/23  20,000  19,700 
SM Energy Co. sr. unsec. unsub. notes 6.125%, 11/15/22  80,000  79,150 
Spectra Energy Partners LP sr. unsec. notes 3.375%, 10/15/26  55,000  54,167 
Targa Resources Partners LP/Targa Resources Partners Finance     
Corp. 144A company guaranty sr. unsec. bonds 5.375%, 2/1/27  30,000  31,275 
Targa Resources Partners LP/Targa Resources Partners Finance     
Corp. 144A company guaranty sr. unsec. notes 5.125%, 2/1/25  15,000  15,525 
Tesoro Logistics LP/Tesoro Logistics Finance Corp. company     
guaranty sr. unsec. notes 5.25%, 1/15/25  20,000  21,150 
Total Capital International SA company guaranty sr. unsec. unsub.     
notes 1.55%, 6/28/17 (France)  143,000  143,035 

 

46   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Energy cont.     
Transcanada Trust company guaranty jr. unsec. sub. FRB 5.30%,     
3/15/77 (Canada)  $70,000  $71,750 
Valero Energy Partners LP sr. unsec. unsub. notes     
4.375%, 12/15/26  14,000  14,489 
Weatherford International, Ltd. company guaranty sr. unsec.     
unsub. notes 8.25%, 6/15/23  10,000  10,600 
Weatherford International, Ltd. 144A company guaranty sr. unsec.     
sub. notes 9.875%, 2/15/24  20,000  22,500 
Whiting Petroleum Corp. company guaranty sr. unsec. unsub.     
notes 5.75%, 3/15/21  16,000  15,720 
Whiting Petroleum Corp. company guaranty sr. unsec. unsub.     
notes 5.00%, 3/15/19  50,000  49,875 
Williams Cos., Inc. (The) sr. unsec. unsub. notes 8.75%, 3/15/32  43,000  55,470 
Williams Partners LP sr. unsec. sub. notes 4.30%, 3/4/24  55,000  57,866 
Williams Partners LP/ACMP Finance Corp. sr. unsec. sub. notes     
4.875%, 3/15/24  65,000  67,356 
WPX Energy, Inc. sr. unsec. notes 8.25%, 8/1/23  15,000  16,425 
WPX Energy, Inc. sr. unsec. notes 7.50%, 8/1/20  60,000  63,300 
WPX Energy, Inc. sr. unsec. unsub. notes 6.00%, 1/15/22  110,000  111,100 
    6,112,016 
Financials (5.8%)     
Air Lease Corp. sr. unsec. unsub. notes 3.375%, 6/1/21  55,000  56,729 
Alliance Data Systems Corp. 144A company guaranty sr. unsec.     
notes 5.375%, 8/1/22  55,000  55,688 
Alliant Holdings Intermediate, LLC 144A sr. unsec. notes     
8.25%, 8/1/23  40,000  42,300 
Ally Financial, Inc. company guaranty sr. unsec. notes     
8.00%, 11/1/31  100,000  120,750 
Ally Financial, Inc. company guaranty sr. unsec. unsub. notes     
6.25%, 12/1/17  230,000  234,945 
Ally Financial, Inc. sub. unsec. notes 5.75%, 11/20/25  110,000  114,263 
American Express Co. sr. unsec. notes 7.00%, 3/19/18  94,000  97,933 
American Express Co. sr. unsec. notes 6.15%, 8/28/17  107,000  108,196 
American International Group, Inc. jr. unsec. sub. FRB     
8.175%, 5/15/58  290,000  385,700 
ASP AMC Merger Sub, Inc. 144A sr. unsec. notes 8.00%, 5/15/25  40,000  39,200 
Bank of America Corp. jr. unsec. sub. FRN Ser. AA, 6.10%,     
perpetual maturity  75,000  80,250 
Bank of America Corp. jr. unsec. sub. FRN Ser. Z, 6.50%,     
perpetual maturity  25,000  27,656 
Bank of America Corp. sr. unsec. unsub. bonds Ser. MTN,     
3.248%, 10/21/27  75,000  72,741 
Bank of America Corp. sr. unsec. unsub. notes 2.00%, 1/11/18  149,000  149,369 
Bank of America Corp. sr. unsec. unsub. notes Ser. MTN,     
2.151%, 11/9/20  20,000  19,952 
Bank of America Corp. sr. unsec. unsub. notes Ser. MTN,     
1.70%, 8/25/17  95,000  95,058 
Bank of America Corp. unsec. sub. notes 6.11%, 1/29/37  170,000  203,446 
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.70%,     
3/7/22 (Canada)  25,000  25,289 

 

Dynamic Risk Allocation Fund   47 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Financials cont.     
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.35%,     
10/21/20 (Canada)  $80,000  $80,415 
Bank of Nova Scotia (The) sr. unsec. unsub. notes 1.375%,     
12/18/17 (Canada)  145,000  145,071 
Barclays Bank PLC 144A unsec. sub. notes 10.179%, 6/12/21     
(United Kingdom)  160,000  202,169 
BGC Partners, Inc. sr. unsec. notes 5.125%, 5/27/21  10,000  10,517 
BPCE SA 144A unsec. sub. notes 5.15%, 7/21/24 (France)  200,000  212,887 
Cantor Fitzgerald LP 144A unsec. bonds 7.875%, 10/15/19  25,000  27,477 
Cantor Fitzgerald LP 144A unsec. notes 6.50%, 6/17/22  90,000  101,048 
CBRE Services, Inc. company guaranty sr. unsec. notes     
5.25%, 3/15/25  47,000  51,414 
CBRE Services, Inc. company guaranty sr. unsec. unsub. notes     
5.00%, 3/15/23  40,000  41,700 
CBRE Services, Inc. company guaranty sr. unsec. unsub. notes     
4.875%, 3/1/26  53,000  56,827 
CIT Group, Inc. sr. unsec. notes 3.875%, 2/19/19  20,000  20,525 
CIT Group, Inc. sr. unsec. sub. notes 5.00%, 8/1/23  35,000  37,625 
CIT Group, Inc. sr. unsec. unsub. notes 5.00%, 8/15/22  115,000  124,453 
CIT Group, Inc. 144A sr. unsec. notes 5.50%, 2/15/19  52,000  54,860 
Citigroup, Inc. jr. unsec. sub. FRB Ser. B, 5.90%, perpetual maturity  3,000  3,184 
Citigroup, Inc. jr. unsec. sub. FRB Ser. P, 5.95%, perpetual maturity  48,000  50,580 
Citigroup, Inc. jr. unsec. sub. FRN 5.875%, perpetual maturity  6,000  6,248 
Citigroup, Inc. jr. unsec. sub. FRN Ser. T, 6.25%, perpetual maturity  63,000  68,749 
Citigroup, Inc. sr. unsec. notes 2.65%, 10/26/20  50,000  50,492 
Citigroup, Inc. sr. unsec. unsub. FRB 3.887%, 1/10/28  130,000  132,514 
Citigroup, Inc. unsec. sub. notes 5.50%, 9/13/25  65,000  72,645 
CNO Financial Group, Inc. sr. unsec. unsub. notes 5.25%, 5/30/25  95,000  99,631 
Commonwealth Bank of Australia/New York, NY sr. unsec. bonds     
Ser. GMTN, 1.625%, 3/12/18  330,000  330,318 
Credit Acceptance Corp. company guaranty sr. unsec. notes     
7.375%, 3/15/23  25,000  25,313 
Credit Acceptance Corp. company guaranty sr. unsec. notes     
6.125%, 2/15/21  55,000  55,413 
Credit Suisse Group AG 144A jr. unsec. sub. FRN 6.25%, perpetual     
maturity (Switzerland)  200,000  209,500 
DFC Finance Corp. 144A company guaranty sr. notes     
10.50%, 6/15/20  45,000  26,550 
Dresdner Funding Trust I 144A jr. unsec. sub. notes 8.151%, 6/30/31  180,000  223,259 
Duke Realty LP company guaranty sr. unsec. unsub. notes     
4.375%, 6/15/22 R   21,000  22,451 
ESH Hospitality, Inc. 144A company guaranty sr. unsec. notes     
5.25%, 5/1/25 R   55,000  56,201 
Fairfax US, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 8/13/24  60,000  61,970 
Fifth Third Bancorp jr. unsec. sub. FRB 5.10%, perpetual maturity  38,000  38,048 
GE Capital International Funding Co. Unlimited Co. company     
guaranty sr. unsec. bonds 4.418%, 11/15/35 (Ireland)  202,000  217,598 
Goldman Sachs Group, Inc. (The) sr. unsec. notes 7.50%, 2/15/19  44,000  47,914 

 

48   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Financials cont.     
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
3.85%, 1/26/27  $160,000  $163,140 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
2.60%, 12/27/20  360,000  362,575 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
Ser. GLOB, 2.375%, 1/22/18  2,000  2,009 
Healthcare Realty Trust, Inc. sr. unsec. unsub. notes     
3.875%, 5/1/25 R   25,000  25,111 
Hospitality Properties Trust sr. unsec. unsub. notes     
4.50%, 3/15/25 R   20,000  20,592 
HSBC Finance Corp. unsec. sub. notes 6.676%, 1/15/21  122,000  138,781 
Hub Holdings, LLC/Hub Holdings Finance, Inc. 144A sr. unsec. sub.     
notes 8.125%, 7/15/19 ‡‡  10,000  10,025 
HUB International, Ltd. 144A sr. unsec. notes 7.875%, 10/1/21  80,000  83,600 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.75%, 2/1/24  30,000  31,350 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.25%, 2/1/22  30,000  31,238 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.00%, 8/1/20  42,000  43,103 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 5.875%, 2/1/22  60,000  61,425 
ING Bank NV 144A unsec. sub. notes 5.80%, 9/25/23 (Netherlands)  220,000  249,238 
Intelsat Connect Finance SA 144A company guaranty sr. unsec.     
sub. notes 12.50%, 4/1/22 (Luxembourg)  3,000  2,610 
iStar, Inc. sr. unsec. notes 6.00%, 4/1/22 R   20,000  20,350 
iStar, Inc. sr. unsec. notes 5.00%, 7/1/19 R   20,000  20,225 
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. Z, 5.30%,     
perpetual maturity  79,000  82,211 
JPMorgan Chase & Co. sr. unsec. notes Ser. MTN, 2.295%, 8/15/21  75,000  74,701 
JPMorgan Chase & Co. sr. unsec. unsub. notes 2.00%, 8/15/17  144,000  144,172 
JPMorgan Chase & Co. unsec. sub. bonds 3.625%, 12/1/27  165,000  163,960 
JPMorgan Chase & Co. unsec. sub. notes 4.125%, 12/15/26  60,000  62,519 
KeyCorp sr. unsec. unsub. notes Ser. MTN, 2.30%, 12/13/18  4,000  4,025 
KKR Group Finance Co. III, LLC 144A company guaranty sr. unsec.     
unsub. bonds 5.125%, 6/1/44  25,000  26,446 
KKR Group Finance Co., LLC 144A company guaranty sr. unsec.     
unsub. notes 6.375%, 9/29/20  55,000  62,046 
Liberty Mutual Group, Inc. 144A company guaranty jr. unsec. sub.     
bonds 7.80%, 3/15/37  240,000  290,400 
Lloyds Banking Group PLC jr. unsec. sub. FRB 7.50%, perpetual     
maturity (United Kingdom)  200,000  220,000 
Lloyds Banking Group PLC 144A jr. unsec. sub. FRN 6.657%,     
perpetual maturity (United Kingdom)  30,000  33,450 
LPL Holdings, Inc. 144A company guaranty sr. unsec. notes     
5.75%, 9/15/25  55,000  56,788 
Macquarie Bank, Ltd. 144A sr. unsec. notes 2.85%,     
7/29/20 (Australia)  65,000  65,947 
Macquarie Group Ltd. 144A sr. unsec. notes 7.625%,     
8/13/19 (Australia)  110,000  121,900 
MetLife, Inc. sr. unsec. unsub. notes 4.75%, 2/8/21  100,000  109,088 

 

Dynamic Risk Allocation Fund   49 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Financials cont.     
MGM Growth Properties Operating Partnership LP/MGP Finance     
Co-Issuer, Inc. company guaranty sr. unsec. notes 5.625%, 5/1/24 R   $25,000  $26,969 
Mid-America Apartments LP sr. unsec. notes 4.30%, 10/15/23 R   30,000  31,980 
Morgan Stanley sr. unsec. unsub. notes 3.625%, 1/20/27  160,000  161,461 
Nationstar Mortgage, LLC/Nationstar Capital Corp. company     
guaranty sr. unsec. unsub. notes 6.50%, 7/1/21  80,000  81,700 
Neuberger Berman Group, LLC/Neuberger Berman Finance Corp.     
144A sr. unsec. notes 4.875%, 4/15/45  40,000  38,100 
OneMain Financial Holdings, LLC 144A company guaranty sr.     
unsec. sub. notes 6.75%, 12/15/19  25,000  26,188 
OneMain Financial Holdings, LLC 144A company guaranty sr.     
unsec. unsub. notes 7.25%, 12/15/21  30,000  31,575 
Peachtree Corners Funding Trust 144A company guaranty sr.     
unsec. unsub. bonds 3.976%, 2/15/25  100,000  101,843 
Progressive Corp. (The) jr. unsec. sub. FRN 6.70%, 6/15/37  116,000  116,145 
Provident Funding Associates LP/PFG Finance Corp. 144A sr.     
unsec. notes 6.375%, 6/15/25  60,000  61,200 
Royal Bank of Canada sr. unsec. notes Ser. GMTN, 2.125%,     
3/2/20 (Canada)  70,000  70,237 
Royal Bank of Canada sr. unsec. unsub. notes Ser. GMTN, 2.20%,     
7/27/18 (Canada)  145,000  145,907 
Royal Bank of Canada unsec. sub. notes Ser. GMTN, 4.65%,     
1/27/26 (Canada)  40,000  42,795 
Select Income REIT sr. unsec. unsub. notes 3.60%, 2/1/20 R   10,000  10,158 
Select Income REIT sr. unsec. unsub. notes 2.85%, 2/1/18 R   10,000  10,054 
Simon Property Group LP 144A sr. unsec. unsub. notes     
1.50%, 2/1/18 R   131,000  130,891 
Societe Generale SA company guaranty sr. unsec. notes 2.75%,     
10/12/17 (France)  250,000  251,151 
Springleaf Finance Corp. company guaranty sr. unsec. unsub.     
notes 8.25%, 12/15/20  20,000  22,050 
Springleaf Finance Corp. sr. unsec. unsub. notes 5.25%, 12/15/19  20,000  20,550 
State Street Corp. jr. unsec. sub. FRB 2.131%, 6/15/37  36,000  33,480 
Swiss Re Treasury US Corp. 144A company guaranty sr. unsec.     
notes 4.25%, 12/6/42  80,000  81,506 
Taylor Morrison Communities, Inc./Monarch Communities, Inc.     
144A company guaranty sr. unsec. notes 5.25%, 4/15/21  30,000  30,713 
Taylor Morrison Communities, Inc./Monarch Communities, Inc.     
144A company guaranty sr. unsec. sub. notes 5.625%, 3/1/24  20,000  20,900 
Tempo Acquisition, LLC/Tempo Acquisition Finance Corp. 144A sr.     
unsec. notes 6.75%, 6/1/25  45,000  46,013 
TIERS Trust/United States 144A sr. bonds stepped-coupon zero %     
(8.125%, 9/15/17), 3/15/46 ††  100,000  112,500 
TMX Finance, LLC/TitleMax Finance Corp. 144A company guaranty     
sr. notes 8.50%, 9/15/18  20,000  19,000 
Toronto-Dominion Bank (The) unsec. sub. FRB 3.625%,     
9/15/31 (Canada)  59,000  57,917 
Travelers Property Casualty Corp. company guaranty sr. unsec.     
unsub. bonds 7.75%, 4/15/26  9,000  12,117 
TRI Pointe Group, Inc./TRI Pointe Homes, Inc. company guaranty     
sr. unsec. unsub. notes 5.875%, 6/15/24  55,000  57,613 

 

50   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Financials cont.     
UBS Group Funding Jersey, Ltd. 144A company guaranty sr. unsec.     
notes 3.00%, 4/15/21 (Switzerland)  $200,000  $203,162 
USIS Merger Sub, Inc. 144A sr. unsec. notes 6.875%, 5/1/25  55,000  55,688 
VEREIT Operating Partnership LP company guaranty sr. unsec.     
notes 4.60%, 2/6/24 R   60,000  62,568 
Wells Fargo & Co. jr. unsec. sub. FRB Ser. U, 5.875%,     
perpetual maturity  70,000  76,563 
Westpac Banking Corp. sr. unsec. unsub. notes 2.15%,     
3/6/20 (Australia)  275,000  276,089 
Westpac Banking Corp. sr. unsec. unsub. notes 2.00%,     
8/19/21 (Australia)  60,000  59,194 
    10,264,033 
Health care (1.8%)     
AbbVie, Inc. sr. unsec. notes 3.60%, 5/14/25  12,000  12,283 
AbbVie, Inc. sr. unsec. notes 2.90%, 11/6/22  18,000  18,138 
Allergan Funding SCS company guaranty sr. unsec. notes 4.75%,     
3/15/45 (Luxembourg)  43,000  45,458 
Allergan Funding SCS company guaranty sr. unsec. notes 3.45%,     
3/15/22 (Luxembourg)  21,000  21,777 
AMAG Pharmaceuticals, Inc. 144A company guaranty sr. unsec.     
notes 7.875%, 9/1/23  50,000  48,375 
AstraZeneca PLC sr. unsec. unsub. notes 6.45%, 9/15/37     
(United Kingdom)  16,000  21,363 
AstraZeneca PLC sr. unsec. unsub. notes 5.90%, 9/15/17     
(United Kingdom)  145,000  146,803 
Becton Dickinson and Co. sr. unsec. unsub. bonds 4.669%, 6/6/47  101,000  101,773 
Becton Dickinson and Co. sr. unsec. unsub. bonds 3.70%, 6/6/27  86,000  86,164 
Biogen, Inc. sr. unsec. sub. notes 3.625%, 9/15/22  75,000  78,775 
Centene Corp. sr. unsec. unsub. notes 6.125%, 2/15/24  60,000  65,194 
Centene Corp. sr. unsec. unsub. notes 4.75%, 1/15/25  15,000  15,488 
Centene Corp. sr. unsec. unsub. notes 4.75%, 5/15/22  55,000  57,365 
CHS/Community Health Systems, Inc. company guaranty sr. notes     
6.25%, 3/31/23  25,000  25,919 
CHS/Community Health Systems, Inc. company guaranty sr.     
unsec. notes 6.875%, 2/1/22  120,000  106,650 
CHS/Community Health Systems, Inc. company guaranty sr.     
unsec. unsub. notes 8.00%, 11/15/19  5,000  5,025 
CHS/Community Health Systems, Inc. company guaranty sr.     
unsec. unsub. notes 7.125%, 7/15/20  20,000  19,700 
Concordia International Corp. 144A company guaranty sr. unsec.     
notes 7.00%, 4/15/23 (Canada)  60,000  12,150 
Concordia International Corp. 144A sr. notes 9.00%,     
4/1/22 (Canada)  10,000  7,450 
Eagle Holding Co II, LLC 144A sr. unsec. unsub. notes     
7.625%, 5/15/22 #  20,000  20,631 
Endo Finance, LLC/Endo Finco, Inc. 144A company guaranty sr.     
unsec. unsub. notes 5.375%, 1/15/23  40,000  36,300 
Halyard Health, Inc. company guaranty sr. unsec. unsub. notes     
6.25%, 10/15/22  45,000  46,688 
HCA, Inc. company guaranty sr. bonds 5.25%, 6/15/26  60,000  65,178 
HCA, Inc. company guaranty sr. notes 6.50%, 2/15/20  170,000  186,788 

 

Dynamic Risk Allocation Fund   51 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Health care cont.     
HCA, Inc. company guaranty sr. sub. notes 5.00%, 3/15/24  $40,000  $42,856 
HCA, Inc. company guaranty sr. sub. notes 3.75%, 3/15/19  50,000  51,125 
Jaguar Holding Co. II/Pharmaceutical Product Development, LLC     
144A company guaranty sr. unsec. notes 6.375%, 8/1/23  55,000  58,163 
Johnson & Johnson sr. unsec. notes 5.15%, 7/15/18  91,000  94,781 
Kinetic Concepts, Inc./KCI USA, Inc. 144A company guaranty sub.     
notes 12.50%, 11/1/21  25,000  28,063 
Mallinckrodt International Finance SA/Mallinckrodt CB,     
LLC 144A company guaranty sr. unsec. unsub. notes 5.50%,     
4/15/25 (Luxembourg)  40,000  36,800 
Merck & Co., Inc. sr. unsec. unsub. notes 1.30%, 5/18/18  125,000  124,931 
Molina Healthcare, Inc. company guaranty sr. unsec. notes     
5.375%, 11/15/22  40,000  42,450 
Molina Healthcare, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 6/15/25  10,000  10,075 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
notes 4.50%, 4/1/27 R   60,000  59,850 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
unsub. notes 4.95%, 4/1/24 R   109,000  114,052 
Ortho-Clinical Diagnostics, Inc./Ortho-Clinical Diagnostics     
SA 144A sr. unsec. notes 6.625%, 5/15/22  65,000  61,913 
Patheon Holdings I BV 144A sr. unsec. sub. notes 7.50%,     
2/1/22 (Netherlands)  65,000  69,469 
Service Corp. International/US sr. unsec. notes 5.375%, 1/15/22  50,000  51,500 
Service Corp. International/US sr. unsec. unsub. notes     
5.375%, 5/15/24  275,000  289,754 
Shire Acquisitions Investments Ireland DAC company guaranty sr.     
unsec. unsub. notes 3.20%, 9/23/26 (Ireland)  50,000  48,930 
Shire Acquisitions Investments Ireland DAC company guaranty sr.     
unsec. unsub. notes 2.875%, 9/23/23 (Ireland)  35,000  34,674 
Sterigenics-Nordion Holdings, LLC 144A sr. unsec. notes     
6.50%, 5/15/23  40,000  41,200 
Tenet Healthcare Corp. company guaranty sr. FRN 4.631%, 6/15/20  60,000  60,450 
Tenet Healthcare Corp. company guaranty sr. notes     
6.25%, 11/1/18  100,000  105,500 
Tenet Healthcare Corp. company guaranty sr. notes 4.75%, 6/1/20  10,000  10,338 
Tenet Healthcare Corp. company guaranty sr. sub. notes     
6.00%, 10/1/20  55,000  58,919 
Teva Pharmaceutical Finance Netherlands III BV company     
guaranty sr. unsec. unsub. bonds 3.15%, 10/1/26 (Netherlands)  34,000  31,931 
UnitedHealth Group, Inc. sr. unsec. notes 6.00%, 2/15/18  65,000  67,010 
UnitedHealth Group, Inc. sr. unsec. unsub. notes 4.70%, 2/15/21  58,000  62,795 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 6.125%, 4/15/25  90,000  72,450 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 5.875%, 5/15/23  65,000  52,934 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 5.625%, 12/1/21  5,000  4,288 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 5.50%, 3/1/23  25,000  20,193 

 

52   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Health care cont.     
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 5.375%, 3/15/20  $70,000  $65,191 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsub. notes 7.00%, 3/15/24  55,000  58,163 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsub. notes 6.50%, 3/15/22  20,000  20,996 
WellCare Health Plans, Inc. sr. unsec. notes 5.25%, 4/1/25  25,000  26,344 
    3,229,523 
Technology (1.5%)     
Apple, Inc. sr. unsec. bonds 4.25%, 2/9/47  25,000  26,229 
Apple, Inc. sr. unsec. notes 2.10%, 5/6/19  250,000  252,787 
Apple, Inc. sr. unsec. unsub. notes 4.375%, 5/13/45  38,000  40,737 
Apple, Inc. sr. unsec. unsub. notes 3.85%, 5/4/43  100,000  99,182 
Avaya, Inc. 144A company guaranty sr. notes 7.00%, 4/1/19     
(In default) †  300,000  245,250 
Broadcom Corp./Broadcom Cayman Finance, Ltd. 144A company     
guaranty sr. unsec. unsub. notes 3.875%, 1/15/27  87,000  88,446 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A     
company guaranty sr. unsec. notes 7.125%, 6/15/24  204,000  227,349 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. bonds     
8.35%, 7/15/46  22,000  28,256 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. notes     
5.45%, 6/15/23  173,000  187,901 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. unsec.     
notes 5.875%, 6/15/21  10,000  10,569 
eBay, Inc. sr. unsec. unsub. notes 1.35%, 7/15/17  145,000  144,983 
Fidelity National Information Services, Inc. sr. unsec. unsub. notes     
5.00%, 10/15/25  25,000  27,886 
First Data Corp. 144A company guaranty sr. unsec. unsub. notes     
7.00%, 12/1/23  75,000  81,000 
First Data Corp. 144A notes 5.75%, 1/15/24  65,000  68,656 
First Data Corp. 144A sr. notes 5.375%, 8/15/23  55,000  57,750 
Inception Merger Sub, Inc./Rackspace Hosting, Inc. 144A sr. unsec.     
notes 8.625%, 11/15/24  60,000  63,956 
Infor Software Parent LLC/Infor Software Parent, Inc. 144A     
company guaranty sr. unsec. notes 7.125%, 5/1/21 ‡‡  105,000  108,413 
Infor US, Inc. company guaranty sr. unsec. notes 6.50%, 5/15/22  75,000  78,094 
Infor US, Inc. 144A company guaranty sr. notes 5.75%, 8/15/20  10,000  10,375 
Intel Corp. sr. unsec. unsub. notes 1.35%, 12/15/17  145,000  145,033 
Iron Mountain, Inc. company guaranty sr. unsec. notes     
6.00%, 8/15/23 R   60,000  63,600 
Iron Mountain, Inc. 144A company guaranty sr. unsec. notes     
6.00%, 10/1/20 R   25,000  26,063 
Jabil Circuit, Inc. sr. unsec. sub. notes 8.25%, 3/15/18  14,000  14,630 
Micron Technology, Inc. company guaranty sr. unsec. unsub. notes     
5.875%, 2/15/22  55,000  57,475 
Microsoft Corp. sr. unsec. unsub. bonds 3.30%, 2/6/27  60,000  62,085 
Microsoft Corp. sr. unsec. unsub. bonds 2.40%, 8/8/26  90,000  86,775 
Microsoft Corp. sr. unsec. unsub. notes 1.55%, 8/8/21  180,000  177,212 

 

Dynamic Risk Allocation Fund   53 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Technology cont.     
Oracle Corp. sr. unsec. unsub. notes 2.65%, 7/15/26  $120,000  $116,491 
Plantronics, Inc. 144A company guaranty sr. unsec. notes     
5.50%, 5/31/23  60,000  62,250 
    2,659,433 
Transportation (0.1%)     
Air Medical Merger Sub Corp. 144A sr. unsec. notes 6.375%, 5/15/23  70,000  67,025 
Burlington Northern Santa Fe, LLC sr. unsec. unsub. notes     
5.75%, 5/1/40  15,000  18,886 
Penske Truck Leasing Co. Lp/PTL Finance Corp. 144A sr. unsec.     
bonds 3.40%, 11/15/26  16,000  15,710 
United Airlines, Inc. Pass-Through Trust pass-through certificates     
Ser. 14-2, Class A, 3.75%, 9/3/26  22,845  23,444 
Watco Cos., LLC/Watco Finance Corp. 144A company guaranty sr.     
unsec. notes 6.375%, 4/1/23  100,000  103,750 
    228,815 
Utilities and power (1.1%)     
AES Corp./Virginia (The) sr. unsec. notes 8.00%, 6/1/20  240,000  275,400 
AES Corp./Virginia (The) sr. unsec. notes 5.50%, 4/15/25  140,000  145,250 
AES Corp./Virginia (The) sr. unsec. notes 4.875%, 5/15/23  25,000  25,375 
American Transmission Systems, Inc. 144A sr. unsec. unsub. bonds     
5.00%, 9/1/44  65,000  72,489 
Berkshire Hathaway Energy Co. sr. unsec. unsub. bonds     
6.125%, 4/1/36  10,000  12,780 
Boardwalk Pipelines LP company guaranty sr. unsec. unsub. FRB     
4.45%, 7/15/27  20,000  20,631 
Calpine Corp. sr. unsec. sub. notes 5.75%, 1/15/25  110,000  104,363 
Calpine Corp. 144A company guaranty sr. notes 6.00%, 1/15/22  50,000  52,000 
Calpine Corp. 144A company guaranty sr. sub. notes     
5.875%, 1/15/24  15,000  15,488 
Consolidated Edison Co. of New York, Inc. sr. unsec. notes     
7.125%, 12/1/18  96,000  103,495 
Consolidated Edison, Inc. sr. unsec. unsub. notes Ser. A,     
2.00%, 3/15/20  10,000  10,013 
Dynegy, Inc. company guaranty sr. unsec. notes 7.375%, 11/1/22  45,000  44,325 
Dynegy, Inc. company guaranty sr. unsec. notes 6.75%, 11/1/19  25,000  25,719 
Dynegy, Inc. company guaranty sr. unsec. unsub. notes     
7.625%, 11/1/24  20,000  19,400 
El Paso Natural Gas Co., LLC company guaranty sr. unsec. unsub.     
notes 8.375%, 6/15/32  20,000  25,906 
Emera US Finance LP company guaranty sr. unsec. notes     
3.55%, 6/15/26  17,000  17,002 
Enbridge, Inc. sr. unsec. unsub. bonds 4.25%, 12/1/26 (Canada)  60,000  63,300 
Energy Transfer Equity LP sr. sub. notes 5.875%, 1/15/24  105,000  112,088 
Energy Transfer Partners LP sr. unsec. unsub. bonds     
6.125%, 12/15/45  20,000  22,300 
Energy Transfer Partners LP sr. unsec. unsub. bonds     
4.20%, 4/15/27  55,000  56,057 

 

54   Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (25.7%)* cont.  amount  Value 
Utilities and power cont.     
GenOn Americas Generation, LLC sr. unsec. notes 9.125%, 5/1/31  $100,000  $90,500 
Great Plains Energy, Inc. sr. unsec. unsub. bonds 4.85%, 4/1/47  60,000  61,791 
Hiland Partners Holdings, LLC/Hiland Partners Finance Corp. 144A     
company guaranty sr. unsec. sub. notes 5.50%, 5/15/22  10,000  10,400 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
notes 5.40%, 9/1/44  44,000  45,196 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
unsub. notes 3.45%, 2/15/23  60,000  60,748 
MidAmerican Funding, LLC sr. bonds 6.927%, 3/1/29  20,000  26,388 
NRG Energy, Inc. company guaranty sr. unsec. notes     
7.25%, 5/15/26  45,000  45,900 
NRG Energy, Inc. company guaranty sr. unsec. notes     
6.625%, 1/15/27  65,000  63,863 
NRG Energy, Inc. company guaranty sr. unsec. sub. notes     
7.875%, 5/15/21  27,000  27,945 
Oncor Electric Delivery Co., LLC sr. notes 3.75%, 4/1/45  85,000  82,452 
Puget Sound Energy, Inc. jr. unsec. sub. FRN Ser. A, 6.974%, 6/1/67  90,000  84,600 
Regency Energy Partners LP/Regency Energy Finance Corp.     
company guaranty sr. unsec. unsub. notes 5.875%, 3/1/22  25,000  27,999 
Regency Energy Partners LP/Regency Energy Finance Corp.     
company guaranty sr. unsec. unsub. notes 4.50%, 11/1/23  35,000  36,949 
Remote Escrow Finance Vehicle, LLC 144A sr. notes 10.50%, 6/1/22  15,000  15,600 
Southern Star Central Corp. 144A sr. unsec. notes 5.125%, 7/15/22  65,000  65,975 
Texas Gas Transmission, LLC 144A sr. unsec. notes 4.50%, 2/1/21  46,000  48,364 
    2,018,051 
Total corporate bonds and notes (cost $44,464,867)    $45,435,995 
 
U.S. GOVERNMENT AND AGENCY  Principal   
MORTGAGE OBLIGATIONS (11.1%)*  amount  Value 
U.S. Government Guaranteed Mortgage Obligations (3.0%)     
Government National Mortgage Association Pass-Through Certificates     
3.50%, TBA, 6/1/47  $5,000,000  $5,216,797 
    5,216,797 
U.S. Government Agency Mortgage Obligations (8.1%)     
Federal National Mortgage Association Pass-Through Certificates     
6.00%, TBA, 6/1/47  1,000,000  1,132,656 
4.00%, TBA, 6/1/47  3,000,000  3,169,453 
3.00%, TBA, 7/1/47  3,000,000  3,011,367 
3.00%, TBA, 6/1/47  4,000,000  4,021,562 
3.00%, TBA, 6/1/32  2,000,000  2,063,125 
2.50%, TBA, 6/1/47  1,000,000  970,469 
    14,368,632 
Total U.S. government and agency mortgage obligations (cost $19,462,073)  $19,585,429 

 

Dynamic Risk Allocation Fund   55 

 


  Principal   
COMMODITY LINKED NOTES (4.5%)*†††  amount  Value 
Citigroup Global Markets Holdings Inc. sr. notes Ser. N, 1-month USD     
LIBOR less 0.10%, 2017 (Indexed to the S&P GSCI™ 3 Month Forward Total     
Return Index multiplied by 3)  $3,340,000  $2,902,306 
UBS AG/London 144A sr. notes 1-month LIBOR less 0.25%, 2018     
(Indexed to the S&P GSCI Total Return Commodity Index multiplied by 3)     
(United Kingdom)  1,900,000  1,770,999 
UBS AG/London 144A sr. notes 1-month LIBOR less 0.25%, 2018     
(Indexed to the S&P GSCI Total Return Commodity Index multiplied by 3)     
(United Kingdom)  575,000  434,105 
UBS AG/London 144A sr. notes 1-month LIBOR less 0.10%, 2017 (Indexed     
to the S&P GSCI Total Return Index multiplied by 3) (United Kingdom)  2,551,000  2,800,111 
Total commodity Linked Notes (cost $8,366,000)    $7,907,521 
 
  Principal   
MORTGAGE-BACKED SECURITIES (3.1%)*  amount  Value 
Agency collateralized mortgage obligations (0.3%)     
Federal Home Loan Mortgage Corporation     
IFB Ser. 3829, Class AS, IO, 5.961%, 3/15/41  $242,126  $45,484 
Structured Agency Credit Risk Debt FRN Ser. 16-DNA3, Class M1,     
2.124%, 12/25/28  156,384  156,889 
Federal National Mortgage Association     
IFB Ser. 12-58, Class SM, IO, 5.476%, 6/25/42  290,341  49,998 
Ser. 12-147, Class AI, IO, 3.00%, 10/25/27  747,519  68,211 
Connecticut Avenue Securities FRB Ser. 14-C03, Class 2M1,     
2.224%, 7/25/24  7,740  7,755 
Government National Mortgage Association     
IFB Ser. 13-99, Class AS, IO, 5.04%, 6/20/43  347,854  67,235 
Ser. 16-135, Class PI, IO, 4.00%, 5/20/46  518,055  107,254 
Ser. 15-H26, Class DI, IO, 2.232%, 10/20/65  357,995  38,699 
    541,525 
Commercial mortgage-backed securities (2.0%)     
Banc of America Merrill Lynch Commercial Mortgage, Inc. FRB     
Ser. 05-1, Class AJ, 5.378%, 11/10/42  12,435  12,429 
CFCRE Commercial Mortgage Trust 144A FRB Ser. 11-C2, Class D,     
5.753%, 12/15/47  100,000  100,330 
Citigroup Commercial Mortgage Trust     
FRB Ser. 13-GC17, Class C, 5.104%, 11/10/46  34,000  36,043 
Ser. 14-GC21, Class AS, 4.026%, 5/10/47  74,000  77,465 
FRB Ser. 14-GC19, Class XA, IO, 1.222%, 3/10/47  1,478,623  84,296 
Citigroup Commercial Mortgage Trust 144A FRB Ser. 12-GC8,     
Class XA, IO, 2.053%, 9/10/45  867,028  62,547 
COBALT CMBS Commercial Mortgage Trust FRB Ser. 07-C3,     
Class AJ, 5.868%, 5/15/46  72,000  71,907 
COMM Mortgage Trust     
FRB Ser. 14-UBS6, Class C, 4.465%, 12/10/47  129,000  128,268 
FRB Ser. 14-LC15, Class XA, IO, 1.347%, 4/10/47  1,753,312  98,676 
FRB Ser. 14-CR16, Class XA, IO, 1.194%, 4/10/47  316,907  16,226 
FRB Ser. 14-CR17, Class XA, IO, 1.149%, 5/10/47  1,138,031  58,836 
FRB Ser. 13-CR11, Class XA, IO, 1.142%, 8/10/50  725,206  38,423 
FRB Ser. 14-UBS6, Class XA, IO, 1.044%, 12/10/47  1,455,102  75,956 
CSMC Trust FRB Ser. 16-NXSR, Class C, 4.365%, 12/15/49  125,000  128,312 

 

56   Dynamic Risk Allocation Fund 

 


  Principal   
MORTGAGE-BACKED SECURITIES (3.1%)* cont.  amount  Value 
Commercial mortgage-backed securities cont.     
GS Mortgage Securities Trust     
FRB Ser. 13-GC12, Class C, 4.179%, 6/10/46  $172,000  $168,887 
FRB Ser. 14-GC22, Class XA, IO, 1.037%, 6/10/47  2,066,700  107,247 
GS Mortgage Securities Trust 144A FRB Ser. 10-C1, Class D,     
6.058%, 8/10/43  158,403  166,672 
JPMBB Commercial Mortgage Securities Trust     
FRB Ser. 14-C19, Class C, 4.666%, 4/15/47  60,000  61,083 
FRB Ser. 13-C14, Class C, 4.579%, 8/15/46  56,000  58,062 
FRB Ser. 14-C25, Class C, 4.448%, 11/15/47  182,000  181,606 
FRB Ser. 14-C26, Class C, 4.425%, 1/15/48  38,000  37,634 
JPMorgan Chase Commercial Mortgage Securities Trust     
FRB Ser. 06-LDP7, Class B, 5.943%, 4/17/45  118,000  20,060 
FRB Ser. 05-LDP5, Class F, 5.632%, 12/15/44  71,607  71,256 
Ser. 04-LN2, Class A2, 5.115%, 7/15/41  1,706  1,708 
JPMorgan Chase Commercial Mortgage Securities Trust 144A     
FRB Ser. 10-C1, Class D, 6.194%, 6/15/43  142,000  82,893 
FRB Ser. 11-C3, Class E, 5.614%, 2/15/46  240,000  236,472 
FRB Ser. 13-C13, Class D, 4.053%, 1/15/46  60,000  54,176 
LB-UBS Commercial Mortgage Trust     
Ser. 07-C6, Class A4, 5.858%, 7/15/40  4,783  4,783 
Ser. 06-C6, Class D, 5.502%, 9/15/39 (In default) †  125,000  6,740 
LSTAR Commercial Mortgage Trust 144A FRB Ser. 15-3, Class B,     
3.211%, 4/20/48  123,000  108,506 
Morgan Stanley Bank of America Merrill Lynch Trust     
Ser. 12-C5, Class AS, 3.792%, 8/15/45  41,000  42,952 
FRB Ser. 14-C17, Class XA, IO, 1.246%, 8/15/47  737,685  39,060 
FRB Ser. 13-C12, Class XA, IO, 0.906%, 10/15/46  826,280  26,111 
Morgan Stanley Capital I Trust     
Ser. 06-HQ9, Class C, 5.842%, 7/12/44  117,000  116,790 
Ser. 07-HQ11, Class AJ, 5.508%, 2/12/44  27,063  26,969 
FRB Ser. 06-HQ8, Class D, 5.45%, 3/12/44  125,000  50,706 
Morgan Stanley Capital I Trust 144A FRB Ser. 11-C3, Class D,     
5.155%, 7/15/49  90,000  92,880 
UBS-Barclays Commercial Mortgage Trust 144A     
FRB Ser. 12-C3, Class C, 4.958%, 8/10/49  50,000  53,045 
FRB Ser. 12-C2, Class D, 4.91%, 5/10/63  48,000  47,611 
Wachovia Bank Commercial Mortgage Trust FRB Ser. 05-C21,     
Class D, 5.292%, 10/15/44  56,000  55,699 
Wells Fargo Commercial Mortgage Trust FRB Ser. 13-LC12, Class C,     
4.295%, 7/15/46  45,000  46,323 
WF-RBS Commercial Mortgage Trust     
Ser. 14-C19, Class C, 4.646%, 3/15/47  23,000  23,653 
FRB Ser. 13-C15, Class C, 4.479%, 8/15/46  38,000  38,905 
Ser. 13-C18, Class AS, 4.387%, 12/15/46  108,000  116,015 
Ser. 13-UBS1, Class AS, 4.306%, 3/15/46  48,000  51,562 
FRB Ser. 14-C22, Class XA, IO, 0.925%, 9/15/57  2,534,683  118,598 
WF-RBS Commercial Mortgage Trust 144A     
FRB Ser. 11-C3, Class D, 5.64%, 3/15/44  47,000  48,170 
FRB Ser. 11-C2, Class D, 5.602%, 2/15/44  45,000  46,719 

 

Dynamic Risk Allocation Fund   57 

 


    Principal   
MORTGAGE-BACKED SECURITIES (3.1%)* cont.    amount  Value 
Commercial mortgage-backed securities cont.       
WF-RBS Commercial Mortgage Trust 144A       
FRB Ser. 12-C9, Class XA, IO, 2.076%, 11/15/45    $714,282  $54,507 
FRB Ser. 11-C5, Class XA, IO, 1.764%, 11/15/44    1,039,986  64,053 
FRB Ser. 12-C10, Class XA, IO, 1.648%, 12/15/45    937,750  63,223 
FRB Ser. 13-C12, Class XA, IO, 1.373%, 3/15/48    150,677  7,774 
      3,588,824 
Residential mortgage-backed securities (non-agency) (0.8%)       
Citigroup Mortgage Loan Trust, Inc. FRB Ser. 05-2, Class 1A2A,       
3.145%, 5/25/35    101,207  103,231 
Countrywide Alternative Loan Trust       
FRB Ser. 06-OA7, Class 1A2, 1.631%, 6/25/46    292,984  273,486 
FRB Ser. 07-OH1, Class A1D, 1.234%, 4/25/47    38,342  32,184 
Federal National Mortgage Association       
Connecticut Avenue Securities FRB Ser. 16-C03, Class 2M2,       
6.924%, 10/25/28    260,800  304,573 
Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2,       
6.724%, 4/25/28    100,000  114,183 
Connecticut Avenue Securities FRB Ser. 15-C04, Class 2M2,       
6.574%, 4/25/28    10,000  11,278 
Connecticut Avenue Securities FRB Ser. 16-C06, Class 1M2,       
5.274%, 4/25/29    10,000  11,052 
GSAA Trust FRB Ser. 07-6, Class 1A1, 1.144%, 5/25/47    42,830  34,533 
Merrill Lynch Mortgage Investors Trust FRB Ser. 05-A2, Class A2,       
2.976%, 2/25/35    32,358  32,662 
Morgan Stanley Resecuritization Trust 144A Ser. 15-R4, Class CB1,       
0.598%, 8/26/47    80,000  65,600 
Structured Asset Securities Corp. Mortgage Loan Trust FRB       
Ser. 06-AM1, Class A4, 1.184%, 4/25/36    71,800  70,567 
WaMu Mortgage Pass-Through Certificates Trust       
FRB Ser. 05-AR10, Class 1A3, 2.798%, 9/25/35    41,703  42,549 
FRB Ser. 04-AR12, Class A2B, 1.484%, 10/25/44    285,658  269,571 
      1,365,469 
Total mortgage-backed securities (cost $5,592,744)      $5,495,818 
 
FOREIGN GOVERNMENT AND AGENCY    Principal amount/   
BONDS AND NOTES (0.7%)*    units  Value 
Argentina (Republic of) sr. unsec. unsub. bonds 7.625%,       
4/22/46 (Argentina)    $150,000  $159,450 
Argentina (Republic of) sr. unsec. unsub. notes 6.875%,       
1/26/27 (Argentina)    150,000  159,375 
Buenos Aires (Province of) 144A sr. unsec. unsub. notes 9.125%,       
3/16/24 (Argentina)    150,000  170,680 
Russia (Federation of) 144A sr. unsec. unsub. bonds 5.625%,       
4/4/42 (Russia)    600,000  675,750 
Turkey (Republic of) unsec. notes 11.00%, 3/2/22 (Turkey)  TRY  83,000  24,056 
Total foreign government and agency bonds and notes (cost $1,083,080)  $1,189,311 

 

58   Dynamic Risk Allocation Fund 

 


INVESTMENT COMPANIES (0.6%)*  Shares  Value 
iShares MSCI India ETF (India)  34,450  $1,121,348 
Total investment companies (cost $999,060)    $1,121,348 

 

  Expiration     
  date/strike  Contract   
PURCHASED OPTIONS OUTSTANDING (0.3%)*  price  amount  Value 
SPDR S&P 500 ETF Trust (Put)  May-18/$210.00  $29,847  $159,608 
SPDR S&P 500 ETF Trust (Put)  Apr-18/205.00  31,278  127,178 
SPDR S&P 500 ETF Trust (Put)  Mar-18/205.00  29,994  106,697 
SPDR S&P 500 ETF Trust (Put)  Feb-18/200.00  29,926  73,808 
SPDR S&P 500 ETF Trust (Put)  Jan-18/195.00  32,352  55,896 
SPDR S&P 500 ETF Trust (Put)  Dec-17/195.00  32,059  43,288 
Total purchased options outstanding (cost $1,073,207)      $566,475 

 

  Principal   
SENIOR LOANS (0.3%)*c  amount  Value 
Caesars Entertainment Operating Co., Inc. bank term loan FRN     
Ser. B6, 11.75%, 3/1/18 (In default) †  $140,187  $164,866 
Caesars Growth Properties Holdings, LLC bank term loan FRN     
Ser. L, 3.795%, 5/8/21  133,967  134,804 
CPG International, Inc. bank term loan FRN 4.897%, 5/3/24  9,827  9,839 
Getty Images, Inc. bank term loan FRN Ser. B, 4.75%, 10/18/19  73,733  67,620 
Neiman Marcus Group, Ltd., Inc. bank term loan FRN     
4.25%, 10/25/20  72,563  56,803 
Revlon Consumer Products Corp. bank term loan FRN Ser. B,     
4.544%, 9/7/23  64,675  61,684 
Total senior loans (cost $485,287)    $495,616 

 

  Expiration  Strike     
WARRANTS (0.2%)* †  date  price  Warrants  Value 
China State Construction Engineering Corp.,         
Ltd. 144A (China)  1/22/18  $0.00  77,700  $107,534 
Halcon Resources Corp.  9/9/20  14.04  844  717 
Shanghai Automotive Co. 144A (China)  2/2/18  0.00  34,500  152,091 
Zhengzhou Yutong Bus Co., Ltd. 144A (China)  7/24/17  0.00  8,100  24,213 
Total warrants (cost $259,554)        $284,555 

 

  Principal   
ASSET-BACKED SECURITIES (—%)*  amount  Value 
Station Place Securitization Trust 144A FRB Ser. 17-1, Class A,     
1.924%, 2/25/49  $81,000  $81,000 
Total asset-backed securities (cost $81,000)    $81,000 
 
CONVERTIBLE PREFERRED STOCKS (—%)*  Shares  Value 
EPR Properties Ser. C, $1.438 cv. pfd. R   1,550  $43,957 
Triangle USA Petroleum Corp. 6.75% cv. pfd. F   11  11,000 
Total convertible preferred stocks (cost $45,286)    $54,957 

 

Dynamic Risk Allocation Fund   59 

 


  Principal amount/   
SHORT-TERM INVESTMENTS (22.2%)*    shares  Value 
Putnam Cash Collateral Pool, LLC 1.12% d   Shares   226,725  $226,725 
Putnam Short Term Investment Fund 0.89% L   Shares   30,538,557  30,538,557 
State Street Institutional U.S. Government Money Market Fund,       
Premier Class 0.72% P   Shares   311,000  311,000 

U.S. Treasury Bills 0.811%, 7/20/17 # Δ §  

   $4,662,000  4,656,513 

U.S. Treasury Bills 0.783%, 7/13/17 Δ §  

   368,000  367,645 

U.S. Treasury Bills 0.800%, 7/6/17 # Δ §  

   3,066,000  3,063,780 
Total short-term investments (cost $39,164,542)      $39,164,220 
 
TOTAL INVESTMENTS       
Total investments (cost $188,344,622)      $198,680,015 

 

Key to holding’s currency abbreviations 
 
TRY  Turkish Lira 
 
Key to holding’s abbreviations 
 
ADR  American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank 
bp  Basis Points 
DAC  Designated Activity Company 
ETF  Exchange Traded Fund 
FRB  Floating Rate Bonds: the rate shown is the current interest rate 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 
GMTN  Global Medium Term Notes 
IFB  Inverse Floating Rate Bonds, which are securities that pay interest rates that vary inversely to changes in the 
  market interest rates. As interest rates rise, inverse floaters produce less current income. The rate shown is 
  the current interest rate at the close of the reporting period. 
IO  Interest Only 
MTN  Medium Term Notes 
OJSC  Open Joint Stock Company 
PJSC  Public Joint Stock Company 
SPDR  S&P Depository Receipts 
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, 2016 through May 31, 2017 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures,references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $176,570,008.

††† The value of the commodity linked notes, which are marked to market daily, may be based on a multiple of the performance of the index. The multiple (or leverage) will increase the volatility of the note’s value
       relative to the change in the underlying index.

† This security is non-income-producing.

†† The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate.

‡‡ Income may be received in cash or additional securities at the discretion of the issuer.

# 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.

60   Dynamic Risk Allocation Fund 

 


Δ 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.

§ 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.

c Senior loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for senior loans are the current interest rates at the close of the reporting period. Senior loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown (Notes 1 and 6).

d Affiliated company. See Notes 1 and 5 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

F This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs (Note 1).

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

P This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period (Note 1).

R Real Estate Investment Trust.

S Security on loan, in part or in entirety, at the close of the reporting period (Note 1).

At the close of the reporting period, the fund maintained liquid assets totaling $121,823,377 to cover certain derivative contracts and delayed delivery securities.

Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.

Debt obligations are considered secured unless otherwise indicated.

144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

See Note 1 to the financial statements regarding TBA commitments.

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

DIVERSIFICATION BY COUNTRY 

 

Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any
(as a percentage of Portfolio Value):

United States  78.7%  Switzerland  1.0% 
United Kingdom  4.7  Australia  0.7 
Japan  2.2  India  0.6 
France  1.4  Brazil  0.6 
China  1.4  Spain  0.5 
Canada  1.2  Russia  0.5 
South Korea  1.1  Other  4.3 
Germany  1.1 Total  100.0%

 

Dynamic Risk Allocation Fund   61 

 


FORWARD CURRENCY CONTRACTS at 5/31/17 (aggregate face value $58,471,000)   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type  date  Value  face value  (depreciation) 
Bank of America N.A.           
  Australian Dollar  Buy  7/19/17  $131,722  $134,579  $(2,857) 
  Brazilian Real  Buy  7/3/17  503,545  516,046  (12,501) 
  Brazilian Real  Sell  7/3/17  505,326  500,575  (4,751) 
  British Pound  Buy  6/21/17  271,250  271,037  213 
  British Pound  Sell  6/21/17  271,250  271,536  286 
  Chilean Peso  Buy  7/19/17  511,227  518,960  (7,733) 
  Chilean Peso  Sell  7/19/17  508,611  524,050  15,439 
  Euro  Buy  6/21/17  903,961  860,970  42,991 
  Hong Kong Dollar  Sell  8/16/17  430,346  431,083  737 
  Indian Rupee  Buy  8/16/17  268,510  269,658  (1,148) 
  Japanese Yen  Buy  8/16/17  29,090  28,720  370 
  Mexican Peso  Buy  7/19/17  261,476  256,481  4,995 
  Mexican Peso  Sell  7/19/17  261,694  253,690  (8,004) 
  New Zealand Dollar  Sell  7/19/17  257,790  254,332  (3,458) 
  Norwegian Krone  Buy  6/21/17  12,739  12,744  (5) 
  Norwegian Krone  Sell  6/21/17  267,699  262,334  (5,365) 
  Singapore Dollar  Buy  8/16/17  264,975  265,223  (248) 
  Singapore Dollar  Sell  8/16/17  267,868  265,581  (2,287) 
  Swedish Krona  Buy  6/21/17  530,292  511,453  18,839 
  Swedish Krona  Sell  6/21/17  389,357  386,263  (3,094) 
Barclays Bank PLC             
  Australian Dollar  Buy  7/19/17  378,980  388,489  (9,509) 
  British Pound  Buy  6/21/17  272,410  257,954  14,456 
  British Pound  Sell  6/21/17  272,410  262,768  (9,642) 
  Canadian Dollar  Sell  7/19/17  10,002  5,943  (4,059) 
  Euro  Buy  6/21/17  401,436  380,445  20,991 
  Japanese Yen  Sell  8/16/17  266,245  262,901  (3,344) 
  New Zealand Dollar  Buy  7/19/17  136,398  129,166  7,232 
  Swedish Krona  Buy  6/21/17  268,486  258,872  9,614 
  Swedish Krona  Sell  6/21/17  268,486  266,960  (1,526) 
  Swiss Franc  Buy  6/21/17  270,329  263,840  6,489 
Citibank, N.A.             
  Australian Dollar  Buy  7/19/17  116,575  119,135  (2,560) 
  Australian Dollar  Sell  7/19/17  392,939  392,509  (430) 
  Brazilian Real  Buy  7/3/17  250,714  258,563  (7,849) 
  Brazilian Real  Sell  7/3/17  257,405  244,740  (12,665) 
  British Pound  Buy  6/21/17  269,316  265,186  4,130 
  British Pound  Sell  6/21/17  316,630  303,267  (13,363) 
  Canadian Dollar  Buy  7/19/17  356,819  361,054  (4,235) 
  Danish Krone  Sell  6/21/17  200,921  189,025  (11,896) 
  Euro  Buy  6/21/17  1,410,871  1,358,757  52,114 
  Euro  Sell  6/21/17  515,681  496,590  (19,091) 
  Japanese Yen  Buy  8/16/17  389,193  384,343  4,850 
  Japanese Yen  Sell  8/16/17  267,424  263,878  (3,546) 

 

62   Dynamic Risk Allocation Fund 

 


FORWARD CURRENCY CONTRACTS at 5/31/17 (aggregate face value $58,471,000) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type  date  Value  face value  (depreciation) 
Citibank, N.A. cont.           
 
  New Taiwan Dollar  Sell  8/16/17  $265,011  $264,217  $(794) 
  New Zealand Dollar  Sell  7/19/17  305,639  301,310  (4,329) 
  Norwegian Krone  Buy  6/21/17  259,483  259,592  (109) 
  Norwegian Krone  Sell  6/21/17  259,483  261,046  1,563 
  South African Rand  Buy  7/19/17  269,740  274,864  (5,124) 
  South African Rand  Sell  7/19/17  252,552  246,247  (6,305) 
  Swedish Krona  Buy  6/21/17  947,235  916,400  30,835 
  Swedish Krona  Sell  6/21/17  809,260  793,306  (15,954) 
Credit Suisse International           
  Australian Dollar  Buy  7/19/17  145,830  150,827  (4,997) 
  Canadian Dollar  Buy  7/19/17  262,132  262,598  (466) 
  Euro  Buy  6/21/17  391,091  371,389  19,702 
  Japanese Yen  Sell  8/16/17  267,578  262,954  (4,624) 
  New Zealand Dollar  Sell  7/19/17  117,783  120,084  2,301 
  Norwegian Krone  Buy  6/21/17  259,625  259,738  (113) 
  Norwegian Krone  Sell  6/21/17  259,625  258,356  (1,269) 
  Swedish Krona  Sell  6/21/17  264,720  271,607  6,887 
  Swedish Krona  Sell  9/20/17  267,778  268,276  498 
Goldman Sachs International           
  Australian Dollar  Buy  7/19/17  6,163  5,349  814 
  British Pound  Buy  6/21/17  269,316  269,078  238 
  British Pound  Sell  6/21/17  269,316  270,346  1,030 
  Canadian Dollar  Buy  7/19/17  2,741  2,920  (179) 
  Euro  Buy  6/21/17  130,438  122,177  8,261 
  Indian Rupee  Buy  8/16/17  527,467  530,973  (3,506) 
  Japanese Yen  Buy  8/16/17  3,164  3,124  40 
  New Zealand Dollar  Sell  7/19/17  205,906  205,796  (110) 
  Norwegian Krone  Sell  6/21/17  539,933  523,479  (16,454) 
  South African Rand  Buy  7/19/17  20,817  22,019  (1,202) 
  Swedish Krona  Buy  6/21/17  944,724  917,236  27,488 
  Swedish Krona  Sell  6/21/17  944,724  933,011  (11,713) 
  Swiss Franc  Buy  6/21/17  270,432  264,024  6,408 
HSBC Bank USA, National Association           
  British Pound  Buy  6/21/17  69,102  68,976  126 
  British Pound  Sell  6/21/17  262,999  264,650  1,651 
  Canadian Dollar  Buy  7/19/17  260,205  262,205  (2,000) 
  Canadian Dollar  Sell  7/19/17  264,280  261,476  (2,804) 
  Euro  Buy  6/21/17  555,825  528,788  27,037 
  Euro  Sell  6/21/17  141,458  133,570  (7,888) 
  New Zealand Dollar  Buy  7/19/17  265,647  264,258  1,389 
JPMorgan Chase Bank N.A.           
  Australian Dollar  Buy  7/19/17  477,288  490,522  (13,234) 
  Brazilian Real  Sell  7/3/17  92  95  3 
  British Pound  Sell  6/21/17  493,638  494,585  947 

 

Dynamic Risk Allocation Fund   63 

 


FORWARD CURRENCY CONTRACTS at 5/31/17 (aggregate face value $58,471,000) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type  date  Value  face value  (depreciation) 
JPMorgan Chase Bank N.A. cont.           
  Canadian Dollar  Buy  7/19/17  $561,160  $566,352  $(5,192) 
  Czech Koruna  Buy  7/19/17  281,296  264,945  16,351 
  Czech Koruna  Sell  7/19/17  281,296  261,134  (20,162) 
  Euro  Buy  6/21/17  7,657,521  7,270,076  387,445 
  Euro  Buy  7/19/17  274,219  260,395  13,824 
  Euro  Sell  7/19/17  274,219  262,799  (11,420) 
  Japanese Yen  Buy  8/16/17  4,673,445  4,615,161  58,284 
  New Zealand Dollar  Sell  7/19/17  646,528  639,222  (7,306) 
  Norwegian Krone  Sell  6/21/17  9,140  7,041  (2,099) 
  Singapore Dollar  Sell  8/16/17  73,351  72,756  (595) 
  Swedish Krona  Buy  6/21/17  461,218  445,874  15,344 
  Swiss Franc  Sell  6/21/17  421,258  404,798  (16,460) 
Royal Bank of Scotland PLC (The)           
  Australian Dollar  Buy  7/19/17  742,812  759,228  (16,416) 
  British Pound  Buy  6/21/17  272,281  257,865  14,416 
  British Pound  Sell  6/21/17  272,281  271,763  (518) 
  Czech Koruna  Buy  7/19/17  281,296  264,836  16,460 
  Czech Koruna  Sell  7/19/17  281,296  261,394  (19,902) 
  Euro  Buy  6/21/17  403,122  388,482  14,640 
  Euro  Buy  7/19/17  274,332  260,496  13,836 
  Euro  Sell  7/19/17  274,332  262,357  (11,975) 
  Euro  Buy  9/20/17  267,550  267,815  (265) 
  Japanese Yen  Sell  8/16/17  266,696  263,361  (3,335) 
  New Zealand Dollar  Buy  7/19/17  779  215  564 
  Norwegian Krone  Sell  6/21/17  533,516  526,020  (7,496) 
  Swedish Krona  Buy  6/21/17  806,495  789,759  16,736 
  Swedish Krona  Sell  6/21/17  806,495  796,067  (10,428) 
  Turkish Lira  Sell  6/21/17  14,034  20,843  6,809 
State Street Bank and Trust Co.           
  Australian Dollar  Buy  7/19/17  114,942  118,796  (3,854) 
  British Pound  Sell  6/21/17  107,778  96,135  (11,643) 
  Euro  Sell  6/21/17  712,688  661,886  (50,802) 
  Israeli Shekel  Buy  7/19/17  7,412  7,232  180 
  Japanese Yen  Buy  8/16/17  238,252  235,258  2,994 
  New Zealand Dollar  Sell  7/19/17  122,100  119,166  (2,934) 
  Norwegian Krone  Buy  6/21/17  267,036  260,348  6,688 
  Norwegian Krone  Sell  6/21/17  267,036  267,125  89 
  Singapore Dollar  Sell  8/16/17  267,724  265,488  (2,236) 
  Swedish Krona  Buy  6/21/17  289,852  280,525  9,327 
UBS AG             
  Australian Dollar  Buy  7/19/17  260,400  265,010  (4,610) 
  Australian Dollar  Sell  7/19/17  917,229  922,430  5,201 
  British Pound  Buy  6/21/17  264,030  263,546  484 
  British Pound  Sell  6/21/17  264,030  262,020  (2,010) 

 

64   Dynamic Risk Allocation Fund 

 


FORWARD CURRENCY CONTRACTS at 5/31/17 (aggregate face value $58,471,000) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type  date  Value  face value  (depreciation) 
UBS AG cont.             
  Canadian Dollar  Buy  7/19/17  $265,762  $264,907  $855 
  Canadian Dollar  Sell  7/19/17  265,021  263,471  (1,550) 
  Euro  Buy  6/21/17  1,243,775  1,179,754  64,021 
  Euro  Sell  6/21/17  1,051,941  1,008,968  (42,973) 
  Japanese Yen  Buy  8/16/17  259,986  256,781  3,205 
  Japanese Yen  Sell  8/16/17  266,084  266,480  396 
  New Zealand Dollar  Buy  7/19/17  534,479  526,032  8,447 
  New Zealand Dollar  Sell  7/19/17  402,116  396,542  (5,574) 
  Norwegian Krone  Sell  6/21/17  533,942  525,171  (8,771) 
  Swedish Krona  Buy  6/21/17  810,031  789,678  20,353 
  Swedish Krona  Sell  6/21/17  810,031  795,921  (14,110) 
  Turkish Lira  Buy  6/21/17  271,076  257,344  13,732 
  Turkish Lira  Sell  6/21/17  265,101  261,694  (3,407) 
WestPac Banking Corp.           
  Australian Dollar  Sell  7/19/17  117,392  116,852  (540) 
  Canadian Dollar  Buy  7/19/17  265,688  263,752  1,936 
  Euro  Buy  6/21/17  261,326  265,127  (3,801) 
  New Zealand Dollar  Sell  7/19/17  258,923  255,339  (3,584) 
Total            $499,273 

 

FUTURES CONTRACTS OUTSTANDING at 5/31/17       
      Unrealized 
  Number of    Expiration  appreciation/ 
  contracts  Value  date  (depreciation) 
Euro-Bobl 5 yr (Long)  38  $5,642,831  Jun-17  $14,407 
Euro-Bund 10 yr (Long)  38  6,928,999  Jun-17  61,363 
Euro-Buxl 30 yr (Long)  18  3,403,075  Jun-17  34,728 
Euro-Schatz 2 yr (Long)  25  3,152,961  Jun-17  (913) 
Japanese Government Bond         
10 yr (Long)  16  21,767,223  Jun-17  96,640 
Russell 2000 Index Mini (Long)  92  6,297,860  Jun-17  10,065 
Russell 2000 Index Mini (Short)  56  3,833,480  Jun-17  (6,325) 
S&P 500 Index E-Mini (Short)  71  8,559,405  Jun-17  (125,048) 
Tokyo Price Index (Long)  22  3,118,736  Jun-17  58,412 
U.K. Gilt 10 yr (Long)  33  5,439,864  Sep-17  (11,123) 
U.S. Treasury Bond 30 yr (Long)  8  1,230,500  Sep-17  9,859 
U.S. Treasury Bond Ultra 30 yr (Long)  12  1,981,500  Sep-17  22,476 
U.S. Treasury Note 2 yr (Long)  26  5,628,594  Sep-17  1,167 
U.S. Treasury Note 5 yr (Long)  53  6,270,563  Sep-17  10,246 
U.S. Treasury Note 10 yr (Long)  53  6,693,734  Sep-17  21,840 
U.S. Treasury Note 10 yr (Short)  132  16,671,188  Sep-17  (56,716) 
Total        $141,078 

 

Dynamic Risk Allocation Fund   65 

 


WRITTEN OPTIONS OUTSTANDING at 5/31/17 (premiums $3,731)     
  Expiration  Contract   
  date/strike price  amount  Value 
SPDR S&P 500 ETF Trust (Call)  Jun-17/$245.00  $37,309  $7,032 
Total      $7,032 
 

 

TBA SALE COMMITMENTS OUTSTANDING at 5/31/17 (proceeds receivable $5,034,414)   
  Principal  Settlement   
Agency  amount  date  Value 
Federal National Mortgage Association, 3.50%, 6/1/47  $1,000,000  6/13/17  $1,032,813 
Federal National Mortgage Association, 3.00%, 6/1/47  4,000,000  6/13/17  4,021,562 
Total      $5,054,375 

 

CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/17   
  Upfront    Payments  Payments  Unrealized 
  premium  Termination  made by  received by  appreciation/ 
Notional amount  received (paid)  date  fund per annum  fund per annum  (depreciation) 
$3,502,200 E  $(708)  6/21/19  3 month USD-  1.75%  $14,421 
      LIBOR-BBA     
8,136,200 E  (188)  6/21/19  1.75%  3 month USD-  (35,336) 
        LIBOR-BBA   
7,570,900 E  (24,184)  6/21/22  3 month USD-  2.20%  108,814 
      LIBOR-BBA     
2,691,200 E  1,867  6/21/22  2.20%  3 month USD-  (45,410) 
        LIBOR-BBA   
45,661,000 E  (71,209)  6/21/27  3 month USD-  2.50%  1,405,148 
      LIBOR-BBA     
11,807,700 E  8,104  6/21/27  2.50%  3 month USD-  (373,675) 
        LIBOR-BBA   
1,291,500 E  9,191  6/21/47  3 month USD-  2.70%  89,693 
      LIBOR-BBA     
922,000 E  9,568  6/21/47  2.70%  3 month USD-  (47,902) 
        LIBOR-BBA   
129,500  (2)  4/21/27  2.16803%  3 month USD-  (567) 
        LIBOR-BBA   
69,000  (1)  4/24/27  2.20876%  3 month USD-  (552) 
        LIBOR-BBA   
233,000  (3)  4/28/27  2.3095%  3 month USD-  (3,958) 
        LIBOR-BBA   
51,000  (1)  5/2/27  3 month USD-  2.2855%  747 
      LIBOR-BBA     
32,000  —  5/3/27  2.2765%  3 month USD-  (442) 
        LIBOR-BBA   
144,700  (2)  5/9/27  2.31%  3 month USD-  (2,409) 
        LIBOR-BBA   
79,000  (1)  5/19/27  3 month USD-  2.1365%  29 
      LIBOR-BBA     
79,000  (1)  5/19/27  3 month USD-  2.13618%  27 
      LIBOR-BBA     
638,000  (8)  5/30/27  2.213%  3 month USD-  (4,445) 
        LIBOR-BBA   
Total  $(67,578)        $1,104,183 

 

E Extended effective date.

66   Dynamic Risk Allocation Fund 

 


OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/17     
    Upfront    Payments  Total return  Unrealized 
Swap counterparty/  premium  Termination  received (paid) by  received by  appreciation/ 
Notional amount  received (paid)  date  fund per annum  or paid by fund  (depreciation) 
Bank of America N.A.           
  $3,800,000  $—  9/21/21  (2.305%)  USA Non Revised  $(285,038) 
          Consumer Price   
          Index-Urban (CPI-U)   
  4,000,000  —  6/10/24  (2.50%)  USA Non Revised  (334,240) 
          Consumer Price   
          Index-Urban (CPI-U)   
  2,100,000  —  5/6/26  (1.88%)  USA Non Revised  44,831 
          Consumer Price   
          Index-Urban (CPI-U)   
  2,000,000  —  7/8/26  (1.76)  USA Non Revised  65,520 
          Consumer Price   
          Index-Urban (CPI-U)   
baskets  160,159  —  3/7/18  (3 month USD-  A basket (MLFCF11) of  455,222 
        LIBOR-BBA plus  common stocks   
        0.10%)     
units  3,884  —  8/2/17  3 month USD-  Russell 1000 Total  (256,291) 
        LIBOR-BBA  Return Index   
        minus 0.07%     
Barclays Bank PLC           
  $1,837,313  —  1/12/41  4.00% (1 month  Synthetic TRS Index  (13,566) 
        USD-LIBOR)  4.00% 30 year Fannie   
          Mae pools   
  62,416  —  1/12/43  3.50% (1 month  Synthetic TRS Index  (516) 
        USD-LIBOR)  3.50% 30 year Fannie   
          Mae pools   
  4,800,000  —  12/5/26  (2.308%)  USA Non Revised  (104,640) 
          Consumer Price   
          Index-Urban (CPI-U)   
  3,600,000  —  5/5/27  (2.17%)  USA Non Revised  (35,597) 
          Consumer Price   
          Index-Urban (CPI-U)   
Citibank, N.A.           
  1,300,000  —  8/7/22  2.515%  USA Non Revised  125,047 
          Consumer Price   
          Index-Urban (CPI-U)   
  1,500,000  —  4/7/26  (1.858%)  USA Non Revised  31,590 
          Consumer Price   
          Index-Urban (CPI-U)   
baskets  50  —  12/1/17  (3 month USD-  A basket (CGPUTQL2)  80,856 
        LIBOR-BBA plus  of common stocks   
        0.37%)     
units  992  —  11/27/17  3 month USD-  Russell 1000 Total  (40,873) 
        LIBOR-BBA plus  Return Index   
        0.09%     

 

Dynamic Risk Allocation Fund   67 

 


OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/17 cont.     
  Upfront    Payments  Total return  Unrealized 
Swap counterparty/  premium  Termination  received (paid) by  received by  appreciation/ 
Notional amount  received (paid)  date  fund per annum  or paid by fund  (depreciation) 
Credit Suisse International         
$2,600,000  $—  1/9/23  (2.76%)  USA Non Revised  $(320,910) 
        Consumer Price   
        Index-Urban (CPI-U)   
3,400,000  —  8/7/22  (2.515%)  USA Non Revised  (325,805) 
        Consumer Price   
        Index-Urban (CPI-U)   
1,600,000  —  8/8/22  (2.5325%)  USA Non Revised  (156,333) 
        Consumer Price   
        Index-Urban (CPI-U)   
700,000  —  9/10/22  (2.5925%)  USA Non Revised  (70,641) 
        Consumer Price   
        Index-Urban (CPI-U)   
3,300,000  —  2/8/23  (2.81%)  USA Non Revised  (414,176) 
        Consumer Price   
        Index-Urban (CPI-U)   
6,900,000  —  7/19/23  (2.57%)  USA Non Revised  (641,797) 
        Consumer Price   
        Index-Urban (CPI-U)   
165,798  —  1/12/45  3.50% (1 month  Synthetic TRS Index  (1,526) 
      USD-LIBOR)  3.50% 30 year Fannie   
        Mae pools   
Goldman Sachs International         
7,000,000  —  11/3/26  (2.0413%)  USA Non Revised  41,020 
        Consumer Price   
        Index-Urban (CPI-U)   
JPMorgan Chase Bank N.A.         
10,900,000  —  8/7/22  (2.515%)  USA Non Revised  (1,048,470) 
        Consumer Price   
        Index-Urban (CPI-U)   
1,400,000  —  8/7/25  (1.92%)  USA Non Revised  2,646 
        Consumer Price   
        Index-Urban (CPI-U)   
JPMorgan Securities LLC         
1,837,313  —  1/12/41  (4.00%) 1 month  Synthetic TRS Index  13,565 
      USD-LIBOR  4.00% 30 year Fannie   
        Mae pools   
Total  $—        $(3,190,122) 

 

OTC CREDIT DEFAULT CONTRACTS OUTSTANDING at 5/31/17       
    Upfront      Payments   
    premium    Termi-  received  Unrealized 
Swap counterparty/    received  Notional  nation  (paid) by fund  appreciation/ 
Referenced debt *   Rating***  (paid)**  amount  date  per annum  (depreciation) 
Barclays Bank PLC             
EM Series 27 Index  BBB–/P  $644,100  $11,300,000  6/20/22  100 bp  $168,307 
Credit Suisse International             
CMBX NA A Index  A/P  2,157  41,000  5/11/63  200 bp  828 
CMBX NA A Index  A/P  943  24,000  1/17/47  200 bp  455 
CMBX NA A Index  A/P  1,040  25,000  1/17/47  200 bp  532 

 

68  Dynamic Risk Allocation Fund 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING at 5/31/17 cont.       
    Upfront      Payments   
    premium    Termi-  received  Unrealized 
Swap counterparty/    received  Notional nation  (paid) by fund appreciation/
Referenced debt *   Rating***  (paid)**  amount  date per annum  (depreciation) 
Credit Suisse International cont.           
CMBX NA A Index  A/P  $1,288  $35,000  1/17/47  200 bp  $577 
CMBX NA BB Index  —  (3,530)  200,000  5/11/63  (500 bp)  34,015 
CMBX NA BB Index  —  (5,880)  31,000  1/17/47  (500 bp)  (916) 
CMBX NA BBB– Index  BBB–/P  2,090  18,000  5/11/63  300 bp  111 
CMBX NA BBB– Index  BBB–/P  2,279  18,000  5/11/63  300 bp  301 
CMBX NA BBB– Index  BBB–/P  48,114  450,000  5/11/63  300 bp  (1,348) 
CMBX NA BBB– Index  BBB–/P  2,167  33,000  1/17/47  300 bp  (374) 
CMBX NA BBB– Index  BBB–/P  8,616  109,000  1/17/47  300 bp  221 
CMBX NA BBB– Index  BBB–/P  11,605  157,000  1/17/47  300 bp  (487) 
Goldman Sachs International           
CMBX NA BB Index  —  (4,603)  45,000  5/11/63  (500 bp)  3,844 
CMBX NA BB Index  —  (303)  2,000  1/17/47  (500 bp)  18 
CMBX NA A Index  A/P  781  15,000  5/11/63  200 bp  294 
CMBX NA A Index  A/P  759  15,000  5/11/63  200 bp  273 
CMBX NA A Index  A/P  759  15,000  5/11/63  200 bp  273 
CMBX NA A Index  A/P  3,736  62,000  5/11/63  200 bp  1,727 
CMBX NA A Index  A/P  3,918  77,000  5/11/63  200 bp  1,423 
CMBX NA BB Index  —  (6,904)  34,000  1/17/47  (500 bp)  (1,459) 
CMBX NA BB Index  —  (2,130)  13,000  1/17/47  (500 bp)  (48) 
CMBX NA BBB– Index  BBB–/P  317  4,000  5/11/63  300 bp  (123) 
CMBX NA BBB– Index  BBB–/P  1,056  9,000  5/11/63  300 bp  67 
CMBX NA BBB– Index  BBB–/P  613  9,000  5/11/63  300 bp  (376) 
CMBX NA BBB– Index  BBB–/P  469  9,000  5/11/63  300 bp  (520) 
CMBX NA BBB– Index  BBB–/P  1,303  12,000  5/11/63  300 bp  (16) 
CMBX NA BBB– Index  BBB–/P  1,298  12,000  5/11/63  300 bp  (21) 
CMBX NA BBB– Index  BBB–/P  1,266  15,000  5/11/63  300 bp  (383) 
CMBX NA BBB– Index  BBB–/P  1,382  16,000  5/11/63  300 bp  (377) 
CMBX NA BBB– Index  BBB–/P  1,941  23,000  5/11/63  300 bp  (587) 
CMBX NA BBB– Index  BBB–/P  4,261  35,000  5/11/63  300 bp  414 
CMBX NA BBB– Index  BBB–/P  8,253  $88,000  5/11/63  300 bp  (1,419) 
CMBX NA BBB– Index  BBB–/P  8,194  109,000  5/11/63  300 bp  (3,787) 
CMBX NA BBB– Index  BBB–/P  222  3,000  1/17/47  300 bp  (9) 
CMBX NA BBB– Index  BBB–/P  315  4,000  1/17/47  300 bp  7 
CMBX NA BBB– Index  BBB–/P  684  8,000  1/17/47  300 bp  68 
CMBX NA BBB– Index  BBB–/P  732  9,000  1/17/47  300 bp  39 
CMBX NA BBB– Index  BBB–/P  1,874  22,000  1/17/47  300 bp  180 
JPMorgan Securities LLC             
CMBX NA A Index  A/P  3,354  57,000  5/11/63  200 bp  1,507 
CMBX NA A Index  A/P  14,343  238,000  5/11/63  200 bp  6,629 
CMBX NA A Index  —  (1,159)  55,000  1/17/47  (200 bp)  (39) 
CMBX NA BB Index  —  (1,595)  12,000  5/11/63  (500 bp)  657 
CMBX NA BB Index  —  (719)  5,000  5/11/63  (500 bp)  220 
CMBX NA BB Index  —  (281)  2,000  5/11/63  (500 bp)  94 
CMBX NA BB Index  —  (8,388)  49,000  1/17/47  (500 bp)  (542) 

 

Dynamic Risk Allocation Fund   69 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING at 5/31/17 cont.       
    Upfront      Payments   
    premium    Termi-  received  Unrealized 
Swap counterparty/    received  Notional nation  (paid) by fund appreciation/ 
Referenced debt *   Rating***  (paid)**  amount   date  per annum  (depreciation) 
JPMorgan Securities LLC cont.           
CMBX NA BB Index  —  $(1,786)  $11,000  1/17/47  (500 bp)  $(25) 
CMBX NA BBB– Index  BBB–/P  438  3,000  5/11/63  300 bp  108 
CMBX NA BBB– Index  BBB–/P  276  4,000  5/11/63  300 bp  (163) 
CMBX NA BBB– Index  BBB–/P  247  4,000  5/11/63  300 bp  (193) 
CMBX NA BBB– Index  BBB–/P  794  7,000  5/11/63  300 bp  25 
CMBX NA BBB– Index  BBB–/P  796  7,000  5/11/63  300 bp  27 
CMBX NA BBB– Index  BBB–/P  448  7,000  5/11/63  300 bp  (321) 
CMBX NA BBB– Index  BBB–/P  373  7,000  5/11/63  300 bp  (396) 
CMBX NA BBB– Index  BBB–/P  357  7,000  5/11/63  300 bp  (413) 
CMBX NA BBB– Index  BBB–/P  1,125  9,000  5/11/63  300 bp  136 
CMBX NA BBB– Index  BBB–/P  1,064  13,000  5/11/63  300 bp  (365) 
CMBX NA BBB– Index  BBB–/P  2,008  18,000  5/11/63  300 bp  29 
CMBX NA BBB– Index  BBB–/P  795  18,000  5/11/63  300 bp  (1,183) 
CMBX NA BBB– Index  BBB–/P  1,706  20,000  5/11/63  300 bp  (493) 
CMBX NA BBB– Index  BBB–/P  4,001  36,000  5/11/63  300 bp  44 
CMBX NA BBB– Index  BBB–/P  4,812  45,000  5/11/63  300 bp  (134) 
CMBX NA BBB– Index  BBB–/P  2,600  47,000  5/11/63  300 bp  (2,566) 
CMBX NA BBB– Index  BBB–/P  2,864  54,000  5/11/63  300 bp  (3,072) 
CMBX NA BBB– Index  BBB–/P  4,862  62,000  5/11/63  300 bp  (1,953) 
CMBX NA BBB– Index  BBB–/P  29,536  350,000  5/11/63  300 bp  (8,935) 
CMBX NA BBB– Index  BBB–/P  221  4,000  1/17/47  300 bp  (87) 
CMBX NA BBB– Index  BBB–/P  338  13,000  1/17/47  300 bp  (664) 
Total    $808,612        $189,656 

 

* 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 are presented for credit default contracts in which the fund has sold protection on the underlying referenced debt. 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, 2017. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.

70   Dynamic Risk Allocation Fund 

 


CENTRALLY CLEARED CREDIT DEFAULT CONTRACTS OUTSTANDING at 5/31/17     
    Upfront      Payments   
    premium    Termi-  received  Unrealized 
    received  Notional  nation  (paid) by fund  appreciation/ 
Referenced debt *   Rating***  (paid)**  amount  date  per annum  (depreciation) 
NA HY Series 28  B+/P  $(952,603)  $13,814,000  6/20/22  500 bp  $206,265 
Index             
NA HY Series 28  B+/P  45,609  618,000  6/20/22  500 bp  (5,664) 
Index             
NA IG Series 28  BBB+/P  (67,752)  4,250,000  6/20/22  100 bp  17,791 
Index             
Total    $(974,746)        $218,392 

 

* 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 are presented for credit default contracts in which the fund has sold protection on the underlying referenced debt. 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, 2017. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.

Dynamic Risk Allocation Fund   71 

 


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

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

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

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

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

    Valuation inputs
Investments in securities:  Level 1  Level 2  Level 3 
Common stocks:       
Basic materials  $3,459,091  $—­  $—­ 
Capital goods  4,727,669  —­  —­ 
Communication services  3,010,769  —­  —­ 
Conglomerates  783,402  —­  —­ 
Consumer cyclicals  10,167,191  —­  —­ 
Consumer staples  7,217,740  —­  —­ 
Energy  3,200,638  6,560  —­ 
Financials  20,409,223  —­  —­ 
Health care  8,084,652  —­  —­ 
Technology  11,196,565  —­  —­ 
Transportation  1,857,854  —­  —­ 
Utilities and power  3,176,416  —­  —­ 
Total common stocks  77,291,210  6,560  —­ 
 
Asset-backed securities  —­  81,000  —­ 
Commodity linked notes  —­  7,907,521  —­ 
Convertible preferred stocks  —­  54,957  —­ 
Corporate bonds and notes  —­  45,323,490  112,505 
Foreign government and agency bonds and notes  —­  1,189,311  —­ 
Investment companies  1,121,348  —­  —­ 
Mortgage-backed securities  —­  5,495,818  —­ 
Purchased options outstanding  —­  566,475  —­ 
Senior loans  —­  495,616  —­ 
U.S. government and agency mortgage obligations  —­  19,585,429  —­ 
Warrants  717  283,838  —­ 
Short-term investments  30,849,557  8,314,663  —­ 
Totals by level  $109,262,832  $89,304,678  $112,505 

 

72   Dynamic Risk Allocation Fund 

 


    Valuation inputs
Other financial instruments:  Level 1  Level 2  Level 3 
Forward currency contracts  $—­  $499,273  $—­ 
Futures contracts  141,078  —­  —­ 
Written options outstanding  —­  (7,032)  —­ 
TBA sale commitments  —­  (5,054,375)  —­ 
Interest rate swap contracts  —­  1,171,761  —­ 
Total return swap contracts  —­  (3,190,122)  —­ 
Credit default contracts  —­  574,182  —­ 
Totals by level  $141,078  $(6,006,313)  $—­ 

 

During the reporting period, transfers within the fair value hierarchy, if any (other than certain transfers involving non-U.S. equity securities as described in Note 1), did not represent, in the aggregate, more than 1% of the fund’s net assets measured as of the end of the period. Transfers are accounted for using the end of period pricing valuation method.

At the start and close of the reporting period, Level 3 investments in securities represented less than 1% of the fund’s net assets and were not considered a significant portion of the fund’s portfolio.

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

Dynamic Risk Allocation Fund   73 

 


Statement of assets and liabilities 5/31/17

ASSETS   
Investment in securities, at value, including $219,834 of securities on loan (Note 1):   
Unaffiliated issuers (identified cost $157,579,340)  $167,914,733 
Affiliated issuers (identified cost $30,765,282) (Notes 1 and 5)  30,765,282 
Cash  15,486 
Foreign currency (cost $233,918) (Note 1)  237,623 
Dividends, interest and other receivables  1,046,818 
Foreign tax reclaim  55,392 
Receivable for shares of the fund sold  436,741 
Receivable for investments sold  357,636 
Receivable for sales of delayed delivery securities (Note 1)  2,052,284 
Receivable for variation margin (Note 1)  101,137 
Unrealized appreciation on forward currency contracts (Note 1)  1,053,581 
Unrealized appreciation on OTC swap contracts (Note 1)  1,083,747 
Premium paid on OTC swap contracts (Note 1)  37,278 
Prepaid assets  31,471 
Total assets  205,189,209 
 
LIABILITIES   
Payable for investments purchased  556,445 
Payable for purchases of delayed delivery securities (Note 1)  16,501,329 
Payable for shares of the fund repurchased  180,074 
Payable for compensation of Manager (Note 2)  17,782 
Payable for custodian fees (Note 2)  48,523 
Payable for investor servicing fees (Note 2)  46,300 
Payable for Trustee compensation and expenses (Note 2)  20,197 
Payable for administrative services (Note 2)  650 
Payable for distribution fees (Note 2)  16,738 
Payable for variation margin (Note 1)  58,710 
Unrealized depreciation on OTC swap contracts (Note 1)  4,084,213 
Premium received on OTC swap contracts (Note 1)  845,890 
Unrealized depreciation on forward currency contracts (Note 1)  554,308 
Written options outstanding, at value (premiums $3,731) (Notes 1 and 3)  7,032 
TBA sale commitments, at value (proceeds receivable $5,034,414) (Note 1)  5,054,375 
Collateral on securities loaned, at value (Note 1)  226,725 
Collateral on certain derivative contracts, at value (Note 1)  311,000 
Other accrued expenses  88,910 
Total liabilities  28,619,201 
 
Net assets  $176,570,008 

 

(Continued on next page)

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

74   Dynamic Risk Allocation Fund 

 


Statement of assets and liabilities cont.

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $173,208,004 
Undistributed net investment income (Note 1)  2,611,074 
Accumulated net realized loss on investments and foreign currency transactions (Note 1)  (8,527,118) 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  9,278,048 
Total — Representing net assets applicable to capital shares outstanding  $176,570,008 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($18,581,901 divided by 1,695,188 shares)  $10.96 
Offering price per class A share (100/94.25 of $10.96)*  $11.63 
Net asset value and offering price per class B share ($2,668,802 divided by 247,979 shares)**  $10.76 
Net asset value and offering price per class C share ($7,356,206 divided by 682,447 shares)**  $10.78 
Net asset value and redemption price per class M share ($289,156 divided by 26,424 shares)  $10.94 
Offering price per class M share (100/96.50 of $10.94)*  $11.34 
Net asset value, offering price and redemption price per class R share   
($109,525 divided by 10,020 shares)  $10.93 
Net asset value, offering price and redemption price per class R6 share   
($102,097,458 divided by 9,333,192 shares)  $10.94 
Net asset value, offering price and redemption price per class Y share   
($45,466,960 divided by 4,138,619 shares)  $10.99 

 

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

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

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

Dynamic Risk Allocation Fund   75 

 


Statement of operations Year ended 5/31/17

INVESTMENT INCOME   
Interest (including interest income of $195,099 from investments in affiliated issuers) (Note 5)  $2,904,867 
Dividends (net of foreign taxes paid and refunded of $62,460)  1,965,053 
Securities lending (net of expenses) (Notes 1 and 5)  5,377 
Total investment income  4,875,297 
 
EXPENSES   
Compensation of Manager (Note 2)  1,271,883 
Investor servicing fees (Note 2)  190,167 
Custodian fees (Note 2)  94,751 
Trustee compensation and expenses (Note 2)  10,601 
Distribution fees (Note 2)  165,664 
Administrative services (Note 2)  5,090 
Other  241,083 
Fees waived and reimbursed by Manager (Note 2)  (394,460) 
Total expenses  1,584,779 
 
Expense reduction (Note 2)  (433) 
Net expenses  1,584,346 
 
Net investment income  3,290,951 
Net realized gain on investments (Notes 1 and 3)  6,416,010 
Net increase from payments by affiliates (Note 2)  1,227 
Net realized loss on swap contracts (Note 1)  (2,335,601) 
Net realized gain on futures contracts (Note 1)  1,989,974 
Net realized loss on foreign currency transactions (Note 1)  (306,419) 
Net realized loss on written options (Notes 1 and 3)  (231,676) 
Net unrealized appreciation of assets and liabilities in foreign currencies during the year  718,051 
Net unrealized appreciation of investments, futures contracts, swap contracts, written options,   
and TBA sale commitments during the year  6,267,633 
Net gain on investments  12,519,199 
 
Net increase in net assets resulting from operations  $15,810,150 

 

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

76   Dynamic Risk Allocation Fund 

 


Statement of changes in net assets

DECREASE IN NET ASSETS  Year ended 5/31/17  Year ended 5/31/16 
Operations     
Net investment income  $3,290,951  $3,206,666 
Net realized gain (loss) on investments     
and foreign currency transactions  5,533,515  (12,490,899) 
Net unrealized appreciation (depreciation) of investments     
and assets and liabilities in foreign currencies  6,985,684  (2,173,716) 
Net increase (decrease) in net assets resulting     
from operations  15,810,150  (11,457,949) 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (454,645)  (74,916) 
Class B  (40,778)  — 
Class C  (121,685)  — 
Class M  (5,263)  — 
Class R  (1,236)  — 
Class R5  —  (74) 
Class R6  (2,656,399)  (795,984) 
Class Y  (1,214,828)  (179,166) 
From net realized long-term gain on investments     
Class A  —  (465,387) 
Class B  —  (66,529) 
Class C  —  (240,843) 
Class M  —  (4,874) 
Class R  —  (2,787) 
Class R5  —  (215) 
Class R6  —  (1,919,727) 
Class Y  —  (1,049,399) 
Decrease from capital share transactions (Note 4)  (11,669,627)  (19,667,807) 
Total decrease in net assets  (354,311)  (35,925,657) 
 
NET ASSETS     
Beginning of year  176,924,319  212,849,976 
End of year (including undistributed net investment     
income of $2,611,074 and $3,525,943, respectively)  $176,570,008  $176,924,319 

 

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

Dynamic Risk Allocation Fund   77 

 


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

  INVESTMENT OPERATIONS      LESS DISTRIBUTIONS          RATIOS AND SUPPLEMENTAL DATA   
 
                      Ratio  Ratio of net   
  Net asset    Net realized                of expenses  investment   
  value,    and unrealized  Total from    From net    Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss)  investment  From net  realized gain  Total  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss) a  on investments­  operations­  investment income­  on investments­  distributions  of period­  value (%) b  (in thousands)  (%) c,d  net assets (%) d  (%) 
Class A­                           
May 31, 2017­  $10.28­  .17­  .76­  .93­  (.25)  —­  (.25)  $10.96­  9.18­  $18,582­  1.13­  1.64­  299­e 
May 31, 2016­  11.10­  .15­  (.73)  (.58)  (.03)  (.21)  (.24)  10.28­  (5.14)  20,236­  1.25­  1.49­  300­e 
May 31, 2015­  11.58­  .10­  (.05)  .05­  (.27)  (.26)  (.53)  11.10­  .53­  28,223­  1.41­  .91­  245­e 
May 31, 2014­  10.63­  .04­  .98­  1.02­  (.07)  —­  (.07)  11.58­  9.59­  33,884­  1.40­  .33­  117­f 
May 31, 2013­  10.24­  .01­  .81­  .82­  (.20)  (.23)  (.43)  10.63­  7.97­  68,440­  1.40­  .06­  130­f,g 
Class B­                           
May 31, 2017­  $10.08­  .09­  .75­  .84­  (.16)  —­  (.16)  $10.76­  8.41­  $2,669­  1.88­  .89­  299­e 
May 31, 2016­  10.94­  .08­  (.73)  (.65)  —­  (.21)  (.21)  10.08­  (5.91)  3,207­  2.00­  .75­  300­e 
May 31, 2015­  11.44­  .02­  (.06)  (.04)  (.20)  (.26)  (.46)  10.94­  (.26)  3,829­  2.16­  .17­  245­e 
May 31, 2014­  10.53­  (.03)  .95­  .92­  (.01)  —­  (.01)  11.44­  8.78­  3,705­  2.15­  (.32)  117­f 
May 31, 2013­  10.20­  (.07)  .81­  .74­  (.18)  (.23)  (.41)  10.53­  7.22­  2,852­  2.15­  (.61)  130­f,g 
Class C­                           
May 31, 2017­  $10.09­  .09­  .75­  .84­  (.15)  —­  (.15)  $10.78­  8.42­  $7,356­  1.88­  .88­  299­e 
May 31, 2016­  10.95­  .08­  (.73)  (.65)  —­  (.21)  (.21)  10.09­  (5.90)  9,659­  2.00­  .74­  300­e 
May 31, 2015­  11.44­  .02­  (.06)  (.04)  (.19)  (.26)  (.45)  10.95­  (.27)  15,125­  2.16­  .16­  245­e 
May 31, 2014­  10.51­  (.04)  .97­  .93­  —­  —­  —­  11.44­  8.85­  16,325­  2.15­  (.38)  117­f 
May 31, 2013­  10.19­  (.06)  .80­  .74­  (.19)  (.23)  (.42)  10.51­  7.18­  21,015­  2.15­  (.57)  130­f,g 
Class M­                           
May 31, 2017­  $10.27­  .12­  .75­  .87­  (.20)  —­  (.20)  $10.94­  8.63­  $289­  1.63­  1.15­  299­e 
May 31, 2016­  11.11­  .11­  (.74)  (.63)  —­  (.21)  (.21)  10.27­  (5.63)  250­  1.75­  1.02­  300­e 
May 31, 2015­  11.60­  .05­  (.06)  (.01)  (.22)  (.26)  (.48)  11.11­  .01­  336­  1.91­  .42­  245­e 
May 31, 2014­  10.66­  (.01)  .97­  .96­  (.02)  —­  (.02)  11.60­  9.03­  339­  1.90­  (.09)  117­f 
May 31, 2013­  10.21­  (.05)  .82­  .77­  (.09)  (.23)  (.32)  10.66­  7.52­  358­  1.90­  (.47)  130­f,g 
Class R­                           
May 31, 2017­  $10.21­  .15­  .75­  .90­  (.18)  —­  (.18)  $10.93­  8.92­  $110­  1.38­  1.40­  299­e 
May 31, 2016­  11.02­  .12­  (.72)  (.60)  —­  (.21)  (.21)  10.21­  (5.40)  135­  1.50­  1.17­  300­e 
May 31, 2015­  11.52­  .07­  (.05)  .02­  (.26)  (.26)  (.52)  11.02­  .25­  261­  1.66­  .66­  245­e 
May 31, 2014­  10.59­  .02­  .97­  .99­  (.06)  —­  (.06)  11.52­  9.34­  484­  1.65­  .17­  117­f 
May 31, 2013­  10.23­  (.01)  .80­  .79­  (.20)  (.23)  (.43)  10.59­  7.70­  458­  1.65­  (.11)  130­f,g 
Class R6­                           
May 31, 2017­  $10.26­  .22­  .75­  .97­  (.29)  —­  (.29)  $10.94­  9.65­  $102,097­  .75­  2.04­  299­e 
May 31, 2016­  11.10­  .22­  (.76)  (.54)  (.09)  (.21)  (.30)  10.26­  (4.83)  96,118­  .81­  2.17­  300­e 
May 31, 2015­  11.61­  .14­  (.07)  .07­  (.32)  (.26)  (.58)  11.10­  .79­  30,007­  1.11­  1.23­  245­e 
May 31, 2014­  10.68­  .07­  .98­  1.05­  (.12)  —­  (.12)  11.61­  9.93­  2,055­  1.11­  .68­  117­f 
May 31, 2013†  10.56­  .08­  .49­  .57­  (.22)  (.23)  (.45)  10.68­  5.31*  2,713­  1.05*  .63*  130­f,g 

 

See notes to financial highlights at the end of this section.

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

78  Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund   79 

 


Financial highlights cont.

  INVESTMENT OPERATIONS      LESS DISTRIBUTIONS          RATIOS AND SUPPLEMENTAL DATA   
 
                      Ratio  Ratio of net   
  Net asset    Net realized                of expenses  investment   
  value,    and unrealized  Total from    From net    Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss)  investment  From net  realized gain  Total  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss) a  on investments­  operations­  investment income­  on investments­  distributions  of period­  value (%) b  (in thousands)  (%) c,d  net assets (%) d  (%) 
Class Y­                           
May 31, 2017­  $10.30­  .20­  .77­  .97­  (.28)  —­  (.28)  $10.99­  9.56­  $45,467­  .88­  1.90­  299­e 
May 31, 2016­  11.10­  .17­  (.72)  (.55)  (.04)  (.21)  (.25)  10.30­  (4.94)  47,321­  1.00­  1.62­  300­e 
May 31, 2015­  11.59­  .13­  (.06)  .07­  (.30)  (.26)  (.56)  11.10­  .79­  135,058­  1.16­  1.17­  245­e 
May 31, 2014­  10.65­  .07­  .98­  1.05­  (.11)  —­  (.11)  11.59­  9.87­  133,332­  1.15­  .64­  117­f 
May 31, 2013­  10.26­  .03­  .82­  .85­  (.23)  (.23)  (.46)  10.65­  8.21­  153,051­  1.15­  .32­  130­f,g 

 

* Not annualized

† For the period July 3, 2012 (commencement of operations) to May 31, 2013.

a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

c Includes amounts paid through expense offset arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

d Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts as a percentage of average net assets (Note 2):

      Percentage of average net assets 
  5/31/17  5/31/16  5/31/15  5/31/14  5/31/13 
Class A  0.23%  0.17%  0.10%  0.10%  0.16% 
Class B  0.23  0.17  0.10  0.10  0.16 
Class C  0.23  0.17  0.10  0.10  0.16 
Class M  0.23  0.17  0.10  0.10  0.16 
Class R  0.23  0.17  0.10  0.10  0.16 
Class R6  0.23  0.20  N/A  N/A  N/A 
Class Y  0.23  0.17  0.10  0.10  0.16 

 

e Portfolio turnover includes TBA purchase and sale commitments.

f Portfolio turnover excludes TBA purchase and sale commitments. Including TBA purchase and sale commitments to conform with current year presentation, the portfolio turnover would have been following:

  Portfolio turnover % 
May 31, 2014  212% 
May 31, 2013  230 

 

g Reflects revision of portfolio turnover rate presented in the fund’s May 31, 2013 audited financial statements.

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

80   Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund   81 

 


Notes to financial statements 5/31/17

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, 2016 through May 31, 2017.

Putnam Dynamic Risk Allocation Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek total return. Total return is composed of capital appreciation and income. The fund invests in a diversified set of asset classes. By investing in a broader set of asset classes than a traditional balanced fund, and by using leverage to increase the fund’s exposures to asset classes, Putnam Management believes the fund may achieve a higher total return than a traditional balanced fund with approximately the same amount of risk as a traditional balanced fund. Risk is measured by the volatility of the fund’s investment portfolio. The fund may invest without limit in U.S., international, and emerging markets equity securities (growth or value stocks or both) of companies of any size and fixed-income securities (including in below-investment-grade securities, which are sometimes referred to as “junk bonds”); mortgage- and asset-backed securities; inflation-protected securities; commodities; and real estate investment trusts (REITs). These asset classes offer different return potential and exposure to different investment risks. Putnam Management allocates the fund’s assets among classes in a manner intended to diversify the fund’s exposure to these different risk types, typically using leverage to adjust or increase the fund’s exposure to asset classes in order to diversify or balance risk exposure. Putnam Management expects that, on average, net notional investment exposure of approximately 150% of the net assets of the fund will result from the fund’s allocation strategy under normal market conditions, although the amounts of leverage may be significantly higher or lower at any given time. In managing the fund’s assets, Putnam Management uses quantitative analysis, qualitative techniques and active trading strategies, which may introduce additional leverage. Putnam Management typically uses derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, to a significant extent for hedging purposes, to obtain leverage, and to adjust the return and volatility characteristics of the fund’s investments. The fund may also engage in short sales of securities.

The fund offers class A, class B, class C, class M, class R, class R6 and class Y shares. The fund registered class T shares in February 2017, however, as of the date of this report, class T shares had not commenced operations and are not available for purchase. Effective April 1, 2017, purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively. Class A shares generally are not subject to a contingent deferred sales charge, and class M, class R, class R6 and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee and in the case of class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. 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 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.

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Note 1: Significant accounting policies

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

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

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

Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.

Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.

Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.

Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.

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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.

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.

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

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

The fund earned certain fees in connection with its senior loan purchasing activities. These fees are treated as market discount and are amortized into income in the Statement of operations.

Securities purchased or sold on a delayed delivery basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.

Stripped securities The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The fair value of these securities is highly sensitive to changes in interest rates.

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.

84   Dynamic Risk Allocation Fund 

 


Options contracts The fund uses options contracts to hedge duration and convexity, to isolate prepayment risk, to gain exposure to interest rates, to hedge against changes in values of securities it owns, owned or expects to own, to hedge prepayment risk, to generate additional income for the portfolio, to enhance returns on securities owned, to enhance the return on a security owned, to gain exposure to securities, 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 to manage exposure to market risk, to hedge prepayment risk, to hedge interest rate risk, to gain exposure to interest rates, and to equitize cash.

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.

Forward currency contracts The fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to hedge foreign exchange risk and to gain exposure to currencies.

The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. 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 when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.

Forward currency 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, to hedge interest rate risk, to gain exposure on interest rates, and to hedge prepayment risk.

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

Dynamic Risk Allocation Fund   85 

 


books. An upfront payment made by the fund is recorded as an asset on the fund’s books. OTC and centrally cleared interest rate swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change is recorded as an unrealized gain or loss on OTC interest rate swaps. Daily fluctuations in the value of centrally cleared interest rate swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments, including upfront premiums, received or made are recorded as realized gains or losses at the reset date or the closing of the contract. Certain OTC and centrally cleared interest rate swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract.

The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults, in the case of OTC interest rate contracts, or the central clearing agency or a clearing member defaults, in the case of centrally cleared interest rate swap contracts, on its respective obligation to perform under the contract. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC interest rate swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared interest rate swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared interest rate swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.

OTC and centrally cleared interest rate swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.

Total return swap contracts The fund entered into OTC total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, to hedge sector exposure, to manage exposure to specific sectors or industries, to manage exposure to specific securities, to gain exposure to a basket of securities, to gain exposure to specific markets or countries, to gain exposure to specific sectors or industries, and to generate additional income for the portfolio.

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 total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC 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 is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between the fund and the counterparty. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.

OTC total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.

Credit default contracts The fund entered into OTC and/or centrally cleared credit default contracts to hedge credit risk, to hedge market risk, and to gain exposure on individual names and/or baskets of securities.

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

86   Dynamic Risk Allocation Fund 

 


in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Upon the occurrence of a credit event, the difference between the par value and fair value of the reference obligation, net of any proportional amount of the upfront payment, is recorded as a realized gain or loss.

In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index or the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased the underlying reference obligations. In certain circumstances, the fund may enter into offsetting OTC and centrally cleared credit default contracts which would mitigate its risk of loss. Risks of loss may exceed amounts recognized on the Statement of assets and liabilities. The fund’s maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the contract. This risk may be mitigated for OTC credit default contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared credit default contracts through the daily exchange of variation margin. Counterparty risk is further mitigated with respect to centrally cleared credit default swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Where the fund is a seller of protection, the maximum potential amount of future payments the fund may be required to make is equal to the notional amount.

OTC and centrally cleared credit default contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.

TBA commitments The fund may enter into TBA (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price and par amount have been established, the actual securities have not been specified. However, it is anticipated that the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date.

The fund may also enter into TBA sale commitments to hedge its portfolio positions, to sell mortgage-backed securities it owns under delayed delivery arrangements or to take a short position in mortgage-backed securities. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, either equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date are held as “cover” for the transaction, or other liquid assets in an amount equal to the notional value of the TBA sale commitment are segregated. If the TBA sale commitment is closed through the acquisition of an offsetting TBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.

TBA commitments, which are accounted for as purchase and sale transactions, may be considered securities themselves, and involve a risk of loss due to changes in the value of the security prior to the settlement date as well as the risk that the counterparty to the transaction will not perform its obligations. Counterparty risk is mitigated by having a master agreement between the fund and the counterparty.

Unsettled TBA commitments are valued at their fair value according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in fair value is recorded by the fund as an unrealized gain or loss. Based on market circumstances, Putnam Management will determine whether to take delivery of the underlying securities or to dispose of the TBA commitments prior to settlement.

TBA purchase commitments outstanding at period end, if any, are listed within the fund’s portfolio and TBA sale commitments outstanding at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements that govern OTC derivative and foreign exchange contracts and Master Securities Forward Transaction Agreements that govern transactions involving mortgage-backed and other asset-backed securities that may result in delayed delivery (Master Agreements) with certain counterparties entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio. Collateral posted to the fund which cannot be sold or repledged totaled $45,190 at the close of the reporting period.

Dynamic Risk Allocation Fund   87 

 


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 $3,211,948 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $3,110,692 and may include amounts related to unsettled agreements.

Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The remaining maturities of the securities lending transactions are considered overnight and continuous. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund received cash collateral of $226,725 and the value of securities loaned amounted to $219,834.

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 the higher of (1) the Federal Funds rate and (2) the overnight LIBOR plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit plus a $25,000 flat fee and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

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

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

The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In

88   Dynamic Risk Allocation Fund 

 


some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At May 31, 2017, 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 
$5,719,266  $—  $5,719,266 

 

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer certain capital losses of $2,442,708 recognized during the period between November 1, 2016 and May 31, 2017 to its fiscal year ending May 31, 2018.

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and/or permanent differences from losses on wash sale transactions, from foreign currency gains and losses, from late year loss deferrals, from nontaxable dividends, from realized gains and losses on certain futures contracts, from unrealized gains and losses on passive foreign investment companies, from security impairments, and from income on swap contracts. 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 $289,014 to increase undistributed net investment income, $144 to increase paid-in capital and $289,158 to increase accumulated net realized loss.

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  $13,428,344 
Unrealized depreciation  (3,473,427) 
Net unrealized appreciation  9,954,917 
Undistributed ordinary income  3,772,318 
Capital loss carryforward  (5,719,266) 
Post-October capital loss deferral  (2,442,708) 
Cost of federal income tax purposes  $188,725,098 

 

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

Note 2: Management fee, administrative services and other transactions

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

0.880%  of the first $5 billion,  0.680%  of the next $50 billion, 
0.830%  of the next $5 billion,  0.660%  of the next $50 billion, 
0.780%  of the next $10 billion,  0.650%  of the next $100 billion and 
0.730%  of the next $10 billion,  0.645%  of any excess thereafter. 

 

Dynamic Risk Allocation Fund   89 

 


For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.726% of the fund’s average net assets.

Putnam Management has contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through September 30, 2018, 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 0.70% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $394,460 as a result of this limit.

Putnam Management has also contractually agreed, through September 30, 2018, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

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

Putnam Management voluntarily reimbursed the fund $1,227 for a trading error which occurred during the reporting period. The effect of the loss incurred and the reimbursement by Putnam Management of such amounts had no material impact on total return.

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

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

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R, 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 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  $35,515  Class R  185 
Class B  5,140  Class R6  48,997 
Class C  15,858  Class Y  83,971 
Class M  501  Total  $190,167 

 

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. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $215 under the expense offset arrangements and by $218 under the brokerage/ service arrangements.

90   Dynamic Risk Allocation Fund 

 


Each Independent Trustee of the fund receives an annual Trustee fee, of which $132, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

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

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

The fund has adopted distribution plans (the Plans) with respect to 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%  $48,476 
Class B  1.00%  1.00%  28,051 
Class C  1.00%  1.00%  86,583 
Class M  1.00%  0.75%  2,051 
Class R  1.00%  0.50%  503 
Total      $165,664 

 

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $6,212 and $80 from the sale of class A and class M shares, respectively, and received $993 and $203 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

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)  $452,923,929  $459,673,030 
 
U.S. government securities (Long-term)  —  — 
Total  $452,923,929  $459,673,030 

 

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.

Dynamic Risk Allocation Fund   91 

 


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

  Written option  Written option 
  contract amounts  premiums 
Written options outstanding at the beginning of the reporting period  $123,879  $33,865 
Options opened  901,924  262,241 
Options exercised  —  — 
Options expired  (719,922)  (199,973) 
Options closed  (268,572)  (92,402) 
Written options outstanding at the end of the reporting period  $37,309  $3,731 

 

Note 4: Capital shares

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

  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class A  Shares  Amount  Shares  Amount 
Shares sold  258,228  $2,736,926  180,818  $1,879,181 
Shares issued in connection with         
reinvestment of distributions  42,224  435,747  52,060  510,706 
  300,452  3,172,673  232,878  2,389,887 
Shares repurchased  (573,823)  (6,060,105)  (806,504)  (8,199,938) 
Net decrease  (273,371)  $(2,887,432)  (573,626)  $(5,810,051) 
 
  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class B  Shares  Amount  Shares  Amount 
Shares sold  10,886  $112,780  23,542  $236,972 
Shares issued in connection with         
reinvestment of distributions  3,843  39,087  5,678  54,850 
  14,729  151,867  29,220  291,822 
Shares repurchased  (84,726)  (883,609)  (61,259)  (610,669) 
Net decrease  (69,997)  $(731,742)  (32,039)  $(318,847) 
 
  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class C  Shares  Amount  Shares  Amount 
Shares sold  93,863  $982,467  74,427  $769,260 
Shares issued in connection with         
reinvestment of distributions  10,882  110,885  22,934  221,770 
  104,745  1,093,352  97,361  991,030 
Shares repurchased  (379,296)  (3,965,432)  (521,578)  (5,243,599) 
Net decrease  (274,551)  $(2,872,080)  (424,217)  $(4,252,569) 

 

92   Dynamic Risk Allocation Fund 

 


  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class M  Shares  Amount  Shares  Amount 
Shares sold  3,323  $35,302  1,239  $12,540 
Shares issued in connection with         
reinvestment of distributions  509  5,263  496  4,874 
  3,832  40,565  1,735  17,414 
Shares repurchased  (1,735)  (18,164)  (7,637)  (82,260) 
Net increase (decrease)  2,097  $22,401  (5,902)  $(64,846) 
 
  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class R  Shares  Amount  Shares  Amount 
Shares sold  3,531  $37,463  1,608  $16,154 
Shares issued in connection with         
reinvestment of distributions  93  957  262  2,561 
  3,624  38,420  1,870  18,715 
Shares repurchased  (6,815)  (71,573)  (12,328)  (126,837) 
Net decrease  (3,191)  $(33,153)  (10,458)  $(108,122) 

 

                                       PERIOD ENDED 5/31/16* 
Class R5      Shares  Amount 
Shares sold      —  $— 
Shares issued in connection with reinvestment of distributions    29  289 
      29  289 
Shares repurchased      (1,077)  (10,335) 
Net decrease      (1,048)  $(10,046) 
 
  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class R6  Shares  Amount  Shares  Amount 
Shares sold  662,523  $7,012,621  7,119,700  $71,592,034 
Shares issued in connection with         
reinvestment of distributions  258,405  2,656,399  277,680  2,715,711 
  920,928  9,669,020  7,397,380  74,307,745 
Shares repurchased  (954,414)  (10,065,791)  (733,872)  (7,150,026) 
Net increase (decrease)  (33,486)  $(396,771)  6,663,508  $67,157,719 
 
  YEAR ENDED 5/31/17  YEAR ENDED 5/31/16 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  578,921  $6,130,295  1,429,206  $14,870,635 
Shares issued in connection with         
reinvestment of distributions  115,333  1,191,390  118,797  1,167,773 
  694,254  7,321,685  1,548,003  16,038,408 
Shares repurchased  (1,148,165)  (12,092,535)  (9,121,084)  (92,299,453) 
Net decrease  (453,911)  $(4,770,850)  (7,573,081)  $(76,261,045) 

 

* Effective February 1, 2016, the fund terminated its class R5 shares.

Dynamic Risk Allocation Fund   93 

 


At the close of the reporting period, Putnam Investments, LLC owned the following shares of the fund:

  Shares owned  Percentage of ownership  Value 
Class R  5,408  54.0%  $59,109 
Class R6  1,113  <0.1  12,176 

 

At the close of the reporting period, two shareholders of record owned 16.4% and 40.3% 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:

  Fair value at the        Fair value at the 
  beginning of the      Investment  end of the 
Name of affiliate  reporting period  Purchase cost  Sale proceeds  income  reporting period 
Putnam Cash Collateral           
Pool, LLC*  $538,794  $9,836,629  $10,148,698  $4,773  $226,725 
Putnam Money Market           
Liquidity Fund**  —  4,699,077  4,699,077  276  — 
Putnam Short Term           
Investment Fund***  35,007,773  56,944,018  61,413,234  194,823  30,538,557 
Totals  $35,546,567  $71,479,724  $76,261,009  $199,872  $30,765,282 

 

* No management fees are charged to Putnam Cash Collateral Pool, LLC (Note 1). Investment income shown is included in securities lending income on the Statement of operations.

** Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.

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

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations. 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.

Note 7: Senior loan commitments

Senior loans are purchased or sold on a when-issued or delayed delivery basis and may be settled a month or more after the trade date, which from time to time can delay the actual investment of available cash balances; interest income is accrued based on the terms of the securities. Senior loans can be acquired through an agent, by assignment from another holder of the loan, or as a participation interest in another holder’s portion of the loan. When the fund invests in a loan or participation, the fund is subject to the risk that an intermediate participant between the fund and the borrower will fail to meet its obligations to the fund, in addition to the risk that the borrower under the loan may default on its obligations.

94   Dynamic Risk Allocation Fund 

 


Note 8: Summary of derivative activity

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

Purchased equity option contracts (contract amount)  $190,000 
Purchased currency options (contract amount)  $950,000 
Written equity option contracts (contract amount) (Note 3)  $54,000 
Written currency options (contract amount) (Note 3)  $950,000 
Futures contracts (number of contracts)  700 
Forward currency contracts (contract amount)  $76,700,000 
Centrally cleared interest rate swap contracts (notional)  $87,800,000 
OTC total return swap contracts (notional)  $139,300,000 
OTC credit default contracts (notional)  $14,600,000 
Centrally cleared credit default contracts (notional)  $13,900,000 
Warrants (number of warrants)  86,000 

 

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

Fair value of derivative instruments as of the close of the reporting period   
  ASSET DERIVATIVES    LIABILITY DERIVATIVES 
Derivatives not         
accounted for as  Statement of    Statement of   
hedging instruments  assets and    assets and   
under ASC 815  liabilities location  Fair value  liabilities location  Fair value 
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Credit contracts  appreciation  $1,317,508*  Unrealized depreciation  $743,326* 
Foreign         
exchange contracts  Receivables  1,053,581  Payables  554,308 
  Investments,       
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Equity contracts  appreciation  1,455,585*  Unrealized depreciation  435,569* 
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Interest rate contracts  appreciation  2,302,737*  Unrealized depreciation  4,356,038* 
Total    $6,129,411    $6,089,241 

 

* 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.

Dynamic Risk Allocation Fund   95 

 


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        Forward     
hedging instruments        currency     
under ASC 815  Warrants  Options  Futures  contracts  Swaps  Total 
Credit contracts  $—  $—  $—  $—  $675,750  $675,750 
Foreign exchange             
contracts  —  39,195  —  (254,308)  —  $(215,113) 
Equity contracts  67,237  (2,161,726)  1,559,395  —  445,713  $(89,381) 
Interest rate contracts  —  —  430,579  —  (3,457,064)  $(3,026,485) 
Total  $67,237  $(2,122,531)  $1,989,974  $(254,308)  $(2,335,601)  $(2,655,229) 

 

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) 
on investments             
Derivatives not             
accounted for as        Forward     
hedging instruments        currency     
under ASC 815  Warrants  Options  Futures  contracts  Swaps  Total 
Credit contracts  $—  $—  $—  $—  $325,859  $325,859 
Foreign exchange             
contracts  —  —  —  714,340  —  $714,340 
Equity contracts  25,001  199,014  33,587  —  664,478  $922,080 
Interest rate contracts  —  —  (41,228)  —  3,741,637  $3,700,409 
Total  $25,001  $199,014  $(7,641)  $714,340  $4,731,974  $5,662,688 

 

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Dynamic Risk Allocation Fund   97 

 


Note 9: 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.

  Bank of America N.A. Barclays Bank PLC Barclays
Capital Inc. (clearing
broker)		 Citibank, N.A. Credit Suisse International Goldman
Sachs
International 		 HSBC Bank USA, National Association JPMorgan
Chase Bank N.A.		 JPMorgan
Securities LLC		 Merrill Lynch, Pierce, Fenner & Smith, Inc. Royal Bank of Scotland PLC (The) State Street Bank and Trust Co. UBS AG WestPac
Banking Corp.		 Total
Assets:                               
Centrally cleared interest rate                               
swap contracts§  $—  $—  $72,200  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $72,200 
OTC Total return swap contracts*#  565,573  —  —  237,493  —  41,020  —  2,646  13,565  —  —  —  —  —  860,297 
OTC Credit default contracts*#  —  —  —  —  42,509  16,295  —  —  14,293  —  —  —  —  —  73,097 
Centrally cleared credit                               
default contracts§  —  —  1,797  —  —  —  —  —  —  —  —  —  —  —  1,797 
Futures contracts§  —  —  —  —  —  —  —  —  —  27,140  —  —  —  —  27,140 
Forward currency contracts #  83,870  58,782  —  93,492  29,388  44,279  30,203  492,198  —  —  83,461  19,278  116,694  1,936  1,053,581 
Purchased options**#  —  —  —  200,986  —  —  —  365,489  —  —  —  —  —  —  566,475 
Total Assets  $649,443  $58,782  $73,997  $531,971  $71,897  $101,594  $30,203  $860,333  $27,858  $27,140  $83,461  $19,278  $116,694  $1,936  $2,654,587 
Liabilities:                               
Centrally cleared interest rate                               
swap contracts§  —  —  4,641  —  —  —  —  —  —  —  —  —  —  —  4,641 
OTC Total return swap contracts*#  875,569  154,319  —  40,873  1,931,188  —  —  1,048,470  —  —  —  —  —  —  4,050,419 
OTC Credit default contracts*#  —  475,793  —  —  79,483  46,986  —  —  89,791  —  —  —  —  —  692,053 
Centrally cleared credit                               
default contracts§  —  —  —  —  —  —  —  —  —  —  —  —  —  —  — 
Futures contracts§  —  —  —  —  —  —  —  —  —  54,069  —  —  —  —  54,069 
Forward currency contracts #  51,451  28,080  —  108,250  11,469  33,164  12,692  76,468  —  —  70,335  71,469  83,005  7,925  554,308 
Written options #  —  —  —  7,032  —  —  —  —  —  —  —  —  —  —  7,032 
Total Liabilities  $927,020  $658,192  $4,641  $156,155  $2,022,140  $80,150  $12,692  $1,124,938  $89,791  $54,069  $70,335  $71,469  $83,005  $7,925  $5,362,522 
Total Financial and Derivative                               
Net Assets  $(277,577)  $(599,410)  $69,356  $375,816  $(1,950,243)  $21,444  $17,511  $(264,605)  $(61,933)  $(26,929)  $13,126  $(52,191)  $33,689  $(5,989)  $(2,707,935) 
Total collateral received (pledged)†##  $(234,742)  $(574,372)  $—  $311,000  $(1,927,919)  $21,444  $—  $(264,605)  $—  $—  $—  $—  $—  $—   
Net amount  $(42,835)  $(25,038)  $69,356  $64,816  $(22,324)  $—  $17,511  $—  $(61,933)  $(26,929)  $13,126  $(52,191)  $33,689  $(5,989)   

 

* 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.

98   Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund   99 

 


Note 10: New pronouncements

In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Putnam Management has evaluated the amendments and its adoption will have no effect on the fund’s net assets or results of operations.

 

 

 

 

 

100   Dynamic Risk Allocation Fund 

 


Federal tax information (Unaudited)

The fund designated 15.57% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For the reporting period, the fund hereby designates 27.94%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

The Form 1099 that will be mailed to you in January 2018 will show the tax status of all distributions paid to your account in calendar 2017.

Dynamic Risk Allocation Fund   101 

 


 

102   Dynamic Risk Allocation Fund 

 



* 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 One Post Office Square, Boston, MA 02109.

As of May 31, 2017, there were 107 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.

Dynamic Risk Allocation Fund   103 

 


Officers

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

Jonathan S. Horwitz (Born 1955)  Janet C. Smith (Born 1965) 
Executive Vice President, Principal Executive Officer,  Vice President, Principal Financial Officer, Principal 
and Compliance Liaison  Accounting Officer, and Assistant Treasurer 
Since 2004  Since 2007 
  Director of Fund Administration Services, 
Robert T. Burns (Born 1961)  Putnam Investments and Putnam Management 
Vice President and Chief Legal Officer   
Since 2011  Susan G. Malloy (Born 1957) 
General Counsel, Putnam Investments,  Vice President and Assistant Treasurer 
Putnam Management, and Putnam Retail Management  Since 2007 
  Director of Accounting & Control Services, 
James F. Clark (Born 1974)  Putnam Investments and Putnam Management 
Vice President and Chief Compliance Officer   
Since 2016  Mark C. Trenchard (Born 1962) 
Chief Compliance Officer, Putnam Investments  Vice President and BSA Compliance Officer 
and Putnam Management  Since 2002 
  Director of Operational Compliance, Putnam 
Michael J. Higgins (Born 1976)  Investments and Putnam Retail Management 
Vice President, Treasurer, and Clerk   
Since 2010  Nancy E. Florek (Born 1957) 
  Vice President, Director of Proxy Voting and Corporate 
  Governance, Assistant Clerk, and Associate Treasurer 
  Since 2000 

 

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

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Services for shareholders

Investor services

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

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

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

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

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

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

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

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

For more information

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

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

Dynamic Risk Allocation Fund   105 

 


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.

Growth  Income 
Growth Opportunities Fund  American Government Income Fund 
International Growth Fund  Diversified Income Trust 
Multi-Cap Growth Fund  Emerging Markets Income Fund 
Small Cap Growth Fund  Floating Rate Income Fund 
  Global Income Trust
Blend  Government Money Market Fund*
Capital Opportunities Fund  High Yield Fund
Capital Spectrum Fund  Income Fund
Emerging Markets Equity Fund  Money Market Fund†
Equity Spectrum Fund  Short Duration Income Fund
Europe Equity Fund  U.S. Government Income Trust
Global Equity Fund   
International Capital Opportunities Fund  Tax-free Income 
International Equity Fund  AMT-Free Municipal Fund 
Investors Fund  Intermediate-Term Municipal Income Fund 
Low Volatility Equity Fund  Short-Term Municipal Income Fund 
Multi-Cap Core Fund  Tax Exempt Income Fund 
Research Fund  Tax-Free High Yield Fund 
   
Value  State tax-free income funds‡: 
Convertible Securities Fund  California, Massachusetts, Minnesota, 
Equity Income Fund  New Jersey, New York, Ohio, and Pennsylvania. 
International Value Fund   
Multi-Cap Value Fund   
Small Cap Value Fund   

 

106   Dynamic Risk Allocation Fund 

 


Absolute Return  Retirement Income Fund Lifestyle 1 — a portfolio 
Absolute Return 100 Fund®  with managed allocations to stocks, bonds, 
Absolute Return 300 Fund®  and money market investments to generate 
Absolute Return 500 Fund®  retirement income. 
Absolute Return 700 Fund®
RetirementReady® Funds — portfolios with
Global Sector  adjusting allocations to stocks, bonds, and 
Global Consumer Fund  money market instruments, becoming more 
Global Financials Fund  conservative over time. 
Global Health Care Fund  
Global Industrials Fund RetirementReady® 2060 Fund 
Global Natural Resources Fund RetirementReady® 2055 Fund 
Global Sector Fund RetirementReady® 2050 Fund 
Global Technology Fund RetirementReady® 2045 Fund 
Global Telecommunications Fund RetirementReady® 2040 Fund 
Global Utilities Fund RetirementReady® 2035 Fund 
  RetirementReady® 2030 Fund 
Asset Allocation  RetirementReady® 2025 Fund 
George Putnam Balanced Fund  RetirementReady® 2020 Fund 
 
Global Asset Allocation Funds — four   
investment portfolios that spread your money   
across a variety of stocks, bonds, and money   
market instruments.   
 
Dynamic Asset Allocation Balanced Fund   
Dynamic Asset Allocation Conservative Fund   
Dynamic Asset Allocation Growth Fund   
Dynamic Risk Allocation 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.

Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.

Dynamic Risk Allocation Fund   107 

 


Fund information

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

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

 

This report is for the information of shareholders of Putnam Dynamic Risk Allocation 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.

108   Dynamic Risk Allocation Fund 

 




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.

Item 3. Audit Committee Financial Expert:
The Funds' Audit, Compliance and Distributions Committee is comprised solely of Trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Trustees believe that each of the members of the Audit, Compliance and Distributions Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that each of Mr. Patterson, Ms. Baumann and Mr. Singh qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on their review of his or her pertinent experience and education. The SEC has stated, and the funds' amended and restated agreement and Declaration of Trust provides, that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit, Compliance and Distribution Committee and the Board of Trustees in the absence of such designation or identification.

Item 4. Principal Accountant Fees and Services:
The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor:


Fiscal year ended Audit Fees Audit-Related Fees Tax Fees All Other Fees
May 31, 2017 $80,256 $ — $5,150 $ —
May 31, 2016 $70,901 $ — $5,000 $ —

For the fiscal years ended May 31, 2017 and May 31, 2016, the fund's independent auditor billed aggregate non-audit fees in the amounts of $5,150 and $5,000 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 Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.

The Audit, Compliance and Distributions Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds' independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm.

The following table presents fees billed by the fund's independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.


Fiscal year ended Audit-Related Fees Tax Fees All Other Fees Total Non-Audit Fees
May 31, 2017 $ — $ — $ — $ —
May 31, 2016 $ — $ — $ — $ —

Item 5. Audit Committee of Listed Registrants
Not applicable
Item 6. Schedule of Investments:
The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:
Not applicable
Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Not applicable
Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable
Item 11. Controls and Procedures:
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting: Not applicable
Item 12. 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, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title):
/s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer

Date: July 28, 2017
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: July 28, 2017