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, 2018
Date of reporting period : June 1, 2017 — May 31, 2018



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 | 18

 

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 (including, in the case of bonds, perceptions about the risk of default and expectations about monetary policy or interest rates), changes in government intervention in the financial markets, and factors related to a specific issuer or industry. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. You can lose money by investing in the fund.


Message from the Trustees

July 17, 2018

Dear Fellow Shareholder:

During the first half of 2018, conditions became more challenging for global financial markets. After an extended period of record advances and low volatility, a sharp downturn early in the year pushed the U.S. market into a brief correction. The market has since rallied, but both stocks and bonds have been more volatile, due in part to uncertainty surrounding trade policy and U.S. interest rates. Navigating a change in market trends is nothing new to Putnam’s experienced investment professionals, who continue to monitor risks and seek opportunities.

We would like to take this opportunity to extend our thanks to Jameson A. Baxter, who retired from her position as Chair of your Board of Trustees on June 30, 2018. It is hard to express in a few words the extent of Jamie’s commitment to protecting the interests of Putnam shareholders like you. In addition to her professional and directorship experience, Jamie brought intelligence, insight, and compassion to a board she served for decades. Jamie began as a Trustee in 1994, served as Vice Chair for six years, and became Chair in 2011. We are also pleased to announce the appointment of Kenneth R. Leibler as your new Board of Trustees Chair. Ken became a Trustee in 2006, has served as Vice Chair since 2016, and now leads the Board in overseeing your fund and protecting your interests.

Thank you for investing with Putnam.




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

The fund’s management team has experience in global allocation strategies over several market cycles.


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.

2 Dynamic Risk Allocation Fund 

 



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

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 10–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

* 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 15–16.


This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 5/31/18. See above and pages 10–12 for additional fund performance information. Index descriptions can be found on pages 15–16.

4 Dynamic Risk Allocation Fund 

 




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

Persistent and synchronous global economic acceleration — along with low volatility, low inflation, and accommodative monetary policies — provided a supportive backdrop for asset markets from the beginning of the period through January 2018. U.S. stocks reached a series of new historic highs, led by sectors that are more sensitive to economic growth, such as information technology. Fixed-income credit spreads tightened amid heightened demand for risk, boosting high-yield and emerging-market bonds. Steady longer-term interest rates kept high-quality bonds in the black, and all major asset classes, including commodity securities and inflation-protected debt, posted gains.

During the course of the first quarter, however, a number of crosscurrents catalyzed an abrupt return of volatility. Also, with the outlook for inflation and economic growth solidifying, and the Federal Reserve signaling the likelihood of a sustained tightening cycle, the 10-year U.S. Treasury yield rose to its highest level in four years.

Dynamic Risk Allocation Fund 5 

 



Allocations are shown as a percentage of the fund’s net assets as of 5/31/18. 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.


Following the first-quarter downturn, U.S. stocks rallied in April and May, led by small-cap shares. Fueled by their late-period leadership amid strengthening U.S. economic growth, domestically focused small-cap stocks outpaced large- and mid-cap stocks for the full 12-month period. Along with strong performance from the technology sector, energy stocks were propelled higher by rising oil prices, while financial shares gained on the back of higher interest rates and reduced government regulation. Overseas, foreign-market equities lagged in U.S.-dollar terms during the latter months of the period, as the greenback strengthened versus other major currencies.

Bond markets remained under pressure until mid May. At that point, market sentiment shifted abruptly when signals from the Fed of possibly slower interest rate hikes dovetailed with a “flight to quality,” causing a meaningful pullback in rates and an accompanying jump in bond prices. Most fixed-income sectors gained, although high-yield corporate credit was generally flat while world bonds posted losses.

Please describe the fund’s positioning and how it influenced relative performance during the 12-month reporting period.

The fund allocates assets across four different risk categories: stocks, interest-rate-sensitive bonds, credit-sensitive bonds, and inflation-sensitive assets. The risk allocations within the fund’s custom benchmark comprise roughly 50% in global equities and about 17% each in rate-sensitive bonds, high-yield bonds, and commodities/inflation-sensitive securities.

The fund’s positive return reflected strong investor appetite for risk during the period.

6 Dynamic Risk Allocation Fund 

 


A substantial portion of this gain resulted from the strong performance of U.S. stocks. International stocks, both in developed and emerging markets [EM], also performed well during much of the period. Within the fund’s allocation to inflation-sensitive risk, broad exposure to commodities also generated favorable results, fueled by rising oil prices during the period.

The fund lagged its benchmark but comfortably topped the average return of its Lipper peer group. What factors had the greatest impact on relative performance?

Fundamentally, we seek to add value in two ways: through asset allocation strategies and via active implementation decisions within those allocations. Our allocation strategies helped relative performance during the period. We emphasized stocks over rate-sensitive bonds, and this positioning proved beneficial since equities significantly outperformed. Within the equity allocation, exposure to small-cap stocks provided a nice boost to results. Elsewhere, we added value by having a tactical overweighting in commodities during the second half of 2017 and also early in 2018 — periods during which prices for oil and other commodities generally rallied. On the downside, tactical positioning


This table shows the fund’s top 10 individual holdings and the percentage of the fund’s net assets that each represented as of 5/31/18. Short-term investments, TBA commitments and derivatives, if any, are excluded. Holdings may vary over time.

Dynamic Risk Allocation Fund 7 

 


within high-yield corporate credit hampered relative performance this period.

Active implementation results were mixed, but detracted overall. On the positive side, U.S. stock selection added value above and beyond the general rally in stocks. Fixed-income selection, which focused on securitized mortgage debt, also contributed. Conversely, adverse picks among EM equities and implementation decisions within commodities detracted from relative performance.

Did you make any notable strategy shifts during the period?

We made minor shifts around benchmark allocations to favor U.S. large- and small-cap stocks, but otherwise maintained allocations close to our strategic benchmark weights. Within fixed income, we continued to favor securitized debt. We also made several tactical adjustments to the fund’s commodities exposure throughout the period.

What is your outlook for the months ahead?

We continue to have a constructive view for U.S. stocks, based on global economic growth trends, strong corporate earnings, and the potential for accelerated share buybacks as companies repatriate cash held overseas. The first-quarter stock market correction helped to remove some froth from stock valuations and is, in our view, more of a return to a normal market environment than a cause for serious concern.

We expect bond yields in the United States and globally to continue rising based on several factors. These factors include continued strength in global economic growth; positive momentum resulting from U.S. tax reform; a persistently heavy supply of new bonds entering the market; the gradual movement of the European Central Bank toward rate normalization; and growing uncertainty regarding inflation.

In corporate credit, we think positive overall momentum and a benign economic environment are offset by unattractive balance sheet fundamentals, such as high debt levels and declining interest-coverage ratios, which represent a corporation’s ability to manage its cost of debt. Spreads for investment-grade and high-yield corporate credit finished the period near their lows for the current market


Allocations are shown as a percentage of the fund’s net assets as of 5/31/18. 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.

8 Dynamic Risk Allocation Fund 

 


cycle — another factor that prevents us from being overly constructive. As a result, we have moved to a slight underweight allocation to credit.

We continue to have a positive outlook for commodities. Our view here has strengthened, based on numerous factors that we believe to be supportive. These include favorable readings from the Purchasing Managers Index, solid performance in emerging markets, and the potential for a weaker U.S. dollar in the months ahead.

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

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

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

ABOUT DERIVATIVES

Derivatives are an increasingly common type of investment instrument, the performance of which is derived from an underlying security, index, currency, or other area of the capital markets. Derivatives employed by the fund’s managers generally serve one of two main purposes: to implement a strategy that may be difficult or more expensive to invest in through traditional securities, or to hedge unwanted risk associated with a particular position.

For example, the fund’s managers might use currency forward contracts to capitalize on an anticipated change in exchange rates between two currencies. This approach would require a significantly smaller outlay of capital than purchasing traditional bonds denominated in the underlying currencies. In another example, the managers may identify a bond that they believe is undervalued relative to its risk of default, but may seek to reduce the interest-rate risk of that bond by using interest-rate swaps, a derivative through which two parties “swap” payments based on the movement of certain rates. In other examples, the managers may use options and futures contracts to hedge against a variety of risks by establishing a combination of long and short exposures to specific equity markets or sectors.

Like any other investment, derivatives may not appreciate in value and may lose money. Derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities. And because derivatives typically represent contractual agreements between two financial institutions, derivatives entail “counterparty risk,” which is the risk that the other party is unable or unwilling to pay. Putnam monitors the counterparty risks we assume. For example, Putnam often enters into collateral agreements that require the counterparties to post collateral on a regular basis to cover their obligations to the fund. Counterparty risk for exchange-traded futures and centrally cleared swaps is mitigated by the daily exchange of margin and other safeguards against default through their respective clearinghouses.

Dynamic Risk Allocation Fund 9 

 


Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2018, 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 5/31/18

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Class A (9/19/11)               
Before sales charge  39.14%  5.05%  24.20%  4.43%  12.74%  4.08%  8.86% 
After sales charge  31.14  4.13  17.06  3.20  6.25  2.04  2.60 
Class B (9/19/11)               
Before CDSC  32.23  4.26  19.51  3.63  10.15  3.27  7.97 
After CDSC  32.23  4.26  17.51  3.28  7.15  2.33  2.97 
Class C (9/19/11)               
Before CDSC  32.29  4.27  19.59  3.64  10.17  3.28  7.99 
After CDSC  32.29  4.27  19.59  3.64  10.17  3.28  6.99 
Class M (9/19/11)               
Before sales charge  34.55  4.53  21.04  3.89  11.01  3.54  8.29 
After sales charge  29.84  3.98  16.81  3.16  7.12  2.32  4.50 
Class R (9/19/11)               
Net asset value  36.74  4.78  22.57  4.15  11.81  3.79  8.51 
Class R6 (7/2/12)               
Net asset value  42.35  5.41  26.26  4.77  13.95  4.45  9.19 
Class Y (9/19/11)               
Net asset value  41.52  5.32  25.73  4.69  13.54  4.32  9.02 

 

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.

10 Dynamic Risk Allocation Fund 

 


Comparative index returns For periods ended 5/31/18       
 
    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Putnam Dynamic               
Risk Allocation  42.23%  5.40%  23.79%  4.36%  14.35%  4.57%  8.94% 
Blended Index*               
Lipper Alternative               
Global Macro               
Funds category  29.44  3.78  14.09  2.58  6.25  1.94  4.81 
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 15–16.

† Over the 1-year, 3-year, 5-year,and life-of-fund periods ended 5/31/18, there were 266, 242, 195, and 142 funds, respectively, in this Lipper category.


Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $13,223 and $13,229, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $12,984. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $13,674, $14,235, and $14,152, respectively.

Dynamic Risk Allocation Fund 11 

 


Fund price and distribution information For the 12-month period ended 5/31/18

Distributions  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Number  1  1  1  1  1  1  1 
Income  $0.315  $0.225  $0.218  $0.253  $0.296  $0.359  $0.345 
Capital gains  —  —  —  —  —  —  — 
Total  $0.315  $0.225  $0.218  $0.253  $0.296  $0.359  $0.345 
  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 
5/31/17  $10.96  $11.63  $10.76  $10.78  $10.94  $11.34  $10.93  $10.94  $10.99 
5/31/18  11.61  12.32  11.39  11.42  11.59  12.01  11.56  11.58  11.63 

 

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 6/30/18

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Class A (9/19/11)               
Before sales charge  38.30%  4.90%  27.41%  4.96%  14.74%  4.69%  9.09% 
After sales charge  30.35  3.99  20.08  3.73  8.15  2.64  2.82 
Class B (9/19/11)               
Before CDSC  31.42  4.11  22.73  4.18  12.24  3.92  8.32 
After CDSC  31.42  4.11  20.73  3.84  9.24  2.99  3.32 
Class C (9/19/11)               
Before CDSC  31.48  4.12  22.71  4.18  12.27  3.93  8.33 
After CDSC  31.48  4.12  22.71  4.18  12.27  3.93  7.33 
Class M (9/19/11)               
Before sales charge  33.74  4.38  24.28  4.44  13.08  4.18  8.63 
After sales charge  29.06  3.83  19.93  3.70  9.12  2.95  4.83 
Class R (9/19/11)               
Net asset value  35.91  4.63  25.74  4.69  13.82  4.41  8.75 
Class R6 (7/2/12)               
Net asset value  41.62  5.27  29.61  5.32  16.07  5.09  9.53 
Class Y (9/19/11)               
Net asset value  40.79  5.18  29.09  5.24  15.66  4.97  9.45 

 

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

12 Dynamic Risk Allocation Fund 

 


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 5/31/17*  1.14%  1.89%  1.89%  1.64%  1.39%  0.76%  0.89% 
Total annual operating expenses for the               
fiscal year ended 5/31/17  1.37%  2.12%  2.12%  1.87%  1.62%  0.99%  1.12% 
Annualized expense ratio for the               
six-month period ended 5/31/18†  1.13%  1.88%  1.88%  1.63%  1.38%  0.75%  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 9/30/18.

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

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 12/1/17 to 5/31/18. 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*†  $5.69  $9.44  $9.45  $8.20  $6.94  $3.78  $4.43 
Ending value (after expenses)  $1,019.70  $1,014.70  $1,015.80  $1,016.90  $1,018.10  $1,021.00  $1,020.60 

 

* 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 5/31/18. 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.

Dynamic Risk Allocation Fund 13 

 


Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 5/31/18, use the following calculation method. To find the value of your investment on 12/1/17, 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  $3.78  $4.43 
Ending value (after expenses)  $1,019.30  $1,015.56  $1,015.56  $1,016.80  $1,018.05  $1,021.19  $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 5/31/18. 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.

14 Dynamic Risk Allocation Fund 

 


Terms and definitions

Important terms

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

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

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares 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. Effective March 1, 2018, they are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.

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

Comparative indexes

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

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

ICE BofAML (Intercontinental Exchange Bank of America 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.

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),

Dynamic Risk Allocation Fund 15 

 


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.

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.

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

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.

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.

16 Dynamic Risk Allocation Fund 

 


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, 2017, 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, 2018, Putnam employees had approximately $514,000,000 and the Trustees had approximately $80,000,000 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.

Dynamic Risk Allocation Fund 17 

 


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.

18 Dynamic Risk Allocation Fund 

 


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.

Dynamic Risk Allocation Fund 19 

 


Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Putnam Funds Trust:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Putnam Dynamic Risk Allocation Fund (the “fund”), a series of the Putnam Funds Trust, including the fund’s portfolio, as of May 31, 2018, 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 related notes (collectively, the “financial statements”) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the fund as of May 31, 2018, and 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.

Basis for Opinion

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 are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures included confirmation of securities owned as of May 31, 2018, by correspondence with the custodians and brokers or by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.


We have served as the auditor of one or more Putnam investment companies since 1999.

Boston, Massachusetts
July 17, 2018

20 Dynamic Risk Allocation Fund 

 


The fund’s portfolio 5/31/18

COMMON STOCKS (46.8%)*  Shares  Value 
Banking (3.6%)     
ABN AMRO Group NV GDR (Netherlands)  6,055  $157,474 
Agricultural Bank of China, Ltd. (China)  268,000  137,692 
Banco Santander (Brasil) S.A. (Units) (Brazil)  11,800  107,035 
Bank Negara Indonesia Persero Tbk PT (Indonesia)  9,000  5,472 
Bank of China, Ltd. (China)  182,000  94,497 
Bank of Communications Co., Ltd. (China)  147,000  116,206 
BB&T Corp.  628  32,970 
BNP Paribas SA (France)  2,633  164,167 
China Construction Bank Corp. (China)  257,000  258,857 
Chongqing Rural Commercial Bank Co., Ltd. (China)  64,000  42,530 
DNB ASA (Norway)  5,178  92,537 
HSBC Holdings PLC (United Kingdom)  4,815  46,135 
Industrial & Commercial Bank of China, Ltd. (China)  263,000  216,364 
Industrial Bank of Korea (South Korea)  10,864  156,819 
Itau Unibanco Holding SA (Preference) (Brazil)  †   5,400  62,322 
Japan Post Bank Co., Ltd. (Japan)  900  11,219 
JPMorgan Chase & Co.  11,260  1,204,933 
Lloyds Banking Group PLC (United Kingdom)  52,464  44,093 
Mitsubishi UFJ Financial Group, Inc. (Japan)  36,700  219,284 
Mizuho Financial Group, Inc. (Japan)  118,700  206,384 
PNC Financial Services Group, Inc. (The)  5,196  745,158 
Public Bank Bhd (Malaysia)  14,400  86,188 
Resona Holdings, Inc. (Japan)  34,400  191,138 
Sberbank of Russia PJSC ADR (Russia)  4,602  65,983 
Shinhan Financial Group Co., Ltd. (South Korea)  1,426  57,737 
Sumitomo Mitsui Financial Group, Inc. (Japan)  5,700  235,412 
Sumitomo Mitsui Trust Holdings, Inc. (Japan)  1,400  58,240 
SunTrust Banks, Inc.  4,283  289,145 
Turkiye Garanti Bankasi AS (Turkey)  28,899  56,835 
Turkiye Is Bankasi AS Class C (Turkey)  28,629  37,658 
U.S. Bancorp  5,403  270,096 
United Overseas Bank, Ltd. (Singapore)  5,800  121,404 
    5,591,984 
Basic materials (1.8%)     
Anglo American PLC (United Kingdom)  7,259  173,494 
Anhui Conch Cement Co., Ltd. (China)  23,000  140,684 
ArcelorMittal SA (France)  †   5,704  183,653 
Arkema SA (France)  900  110,303 
BASF SE (Germany)  2,104  207,359 
BHP Billiton, Ltd. (Australia)  10,953  272,133 
Boliden AB (Sweden)  1,034  36,471 
Boliden AB (Sweden)  †   1,034  672 
CIMIC Group, Ltd. (Australia)  1,458  45,284 
Covestro AG (Germany)  2,124  193,707 
Evonik Industries AG (Germany)  3,207  112,252 
Formosa Chemicals & Fibre Corp. (Taiwan)  60,000  229,358 
Formosa Plastics Corp. (Taiwan)  4,000  14,305 
Freeport-McMoRan, Inc. (Indonesia)  2,000  33,800 

 

Dynamic Risk Allocation Fund 21 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Basic materials cont.     
Kumba Iron Ore, Ltd. (South Africa)  2,930  $66,606 
Lotte Chemical Corp. (South Korea)  353  120,505 
Mitsubishi Chemical Holdings Corp. (Japan)  9,900  91,260 
Mitsubishi Gas Chemical Co., Inc. (Japan)  1,900  48,296 
Mitsubishi Materials Corp. (Japan)  500  13,841 
MMC Norilsk Nickel PJSC ADR (Russia)  963  17,083 
PTT Global Chemical PCL (Thailand)  45,400  126,663 
Rio Tinto PLC (United Kingdom)  3,055  172,254 
Sherwin-Williams Co. (The)  626  237,411 
Sinopec Shanghai Petrochemical Co., Ltd. (China)  64,000  47,147 
Taisei Corp. (Japan)  1,600  87,561 
Toyo Suisan Kaisha, Ltd. (Japan)  400  14,249 
voestalpine AG (Austria)  878  46,848 
    2,843,199 
Capital goods (3.3%)     
ACS Actividades de Construccion y Servicios SA (Spain)  3,806  157,631 
Avery Dennison Corp.  2,028  213,001 
Berry Plastics Group, Inc.  †   1,890  91,268 
BWX Technologies, Inc.  1,905  127,140 
China Railway Group, Ltd. (China)  98,000  78,999 
Crown Holdings, Inc.  †   7,347  318,419 
Faurecia SA (France)  1,929  164,835 
General Dynamics Corp.  2,131  429,844 
Hitachi, Ltd. (Japan)  27,000  196,706 
Honeywell International, Inc.  4,258  629,801 
Huntington Ingalls Industries, Inc.  313  69,195 
JTEKT Corp (Japan)  2,600  37,704 
L3 Technologies, Inc.  1,534  304,238 
Mitsubishi Electric Corp. (Japan)  3,700  52,313 
Northrop Grumman Corp.  2,413  789,654 
Raytheon Co.  3,939  825,221 
United Tractors Tbk PT (Indonesia)  36,400  91,521 
Vinci SA (France)  2,117  206,821 
Waste Management, Inc.  4,153  343,495 
    5,127,806 
Communication services (1.3%)     
ARRIS International PLC  †   1,328  33,572 
BT Group PLC (United Kingdom)  61,415  167,300 
China Mobile, Ltd. (China)  3,000  26,894 
Equinix, Inc. R   291  115,483 
KDDI Corp. (Japan)  8,200  221,363 
LG Uplus Corp. (South Korea)  6,829  73,933 
Nippon Telegraph & Telephone Corp. (Japan)  4,200  196,676 
NTT DoCoMo, Inc. (Japan)  4,100  105,985 
SK Telecom Co., Ltd. (South Korea)  650  133,736 
Swisscom AG (Switzerland)  325  144,752 
Telstra Corp., Ltd. (Australia)  58,031  122,643 
TIM Participacoes SA (Brazil)  31,000  111,628 

 

22 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Communication services cont.     
Verizon Communications, Inc.  8,767  $417,923 
Zayo Group Holdings, Inc.  †   4,169  145,081 
    2,016,969 
Conglomerates (0.7%)     
Danaher Corp.  7,790  773,391 
Marubeni Corp. (Japan)  18,600  144,487 
Mitsui & Co., Ltd. (Japan)  9,500  166,786 
    1,084,664 
Consumer cyclicals (5.6%)     
Adecco Group AG (Switzerland)  1,776  106,316 
Amazon.com, Inc.  †   153  249,332 
Aramark  1,320  51,242 
Barloworld, Ltd. (South Africa)  5,673  59,132 
Berkeley Group Holdings PLC (The) (United Kingdom)  2,719  153,494 
Booking Holdings, Inc.  †   110  231,981 
Caesars Entertainment Corp.  †   1,093  13,280 
Dai Nippon Printing Co., Ltd. (Japan)  2,000  42,793 
Dongfeng Motor Group Co., Ltd. (China)  62,000  70,493 
Ecolab, Inc.  1,119  159,581 
Fiat Chrysler Automobiles NV (Italy)  †   8,777  198,890 
Ford Motor Co.  15,899  183,633 
Ford Otomotiv Sanayi AS (Turkey)  2,216  31,313 
Galaxy Entertainment Group, Ltd. (Hong Kong)  16,000  140,493 
Geely Automobile Holdings, Ltd. (China)  24,000  67,473 
Haier Electronics Group Co., Ltd. (China)  7,000  25,127 
Harvey Norman Holdings, Ltd. (Australia) S   17,864  48,477 
Hermes International (France)  39  27,835 
Home Depot, Inc. (The)  656  122,377 
Honda Motor Co., Ltd. (Japan)  1,600  50,847 
Host Hotels & Resorts, Inc. R   8,544  184,807 
Hyatt Hotels Corp. Class A  2,011  164,359 
Imperial Holdings, Ltd. (South Africa)  4,852  77,785 
Industrivarden AB Class A (Sweden)  2,790  60,982 
Itausa — Investimentos Itau SA (Preference) (Brazil)  2,000  6,031 
John Wiley & Sons, Inc. Class A  658  44,612 
Kimberly-Clark Corp.  5,207  525,126 
Kingfisher PLC (United Kingdom)  35,894  145,422 
KOC Holding AS (Turkey)  29,904  92,238 
Lagardere SCA (France)  795  21,508 
Lowe’s Cos., Inc.  7,116  676,091 
Marks & Spencer Group PLC (United Kingdom)  30,500  114,992 
Marriott International, Inc./MD Class A  286  38,713 
Michael Kors Holdings, Ltd.  †   2,761  158,454 
Mr Price Group, Ltd. (South Africa)  4,612  90,862 
Naspers, Ltd. Class N (South Africa)  153  36,409 
News Corp. Class A  6,369  95,726 
Next PLC (United Kingdom)  259  19,973 
Peugeot SA (France)  7,805  182,746 
Pou Chen Corp. (Taiwan)  7,000  8,551 

 

Dynamic Risk Allocation Fund 23 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Consumer cyclicals cont.     
PVH Corp.  1,796  $287,360 
Randstad Holding NV (Netherlands)  838  50,126 
Renault SA (France)  636  61,815 
Ross Stores, Inc.  4,588  361,901 
RTL Group SA (Belgium)  738  55,659 
Scotts Miracle-Gro Co. (The) Class A  723  61,549 
Smiles Fidelidade SA (Brazil)  5,500  86,058 
Suzuki Motor Corp. (Japan)  200  11,464 
Taylor Wimpey PLC (United Kingdom)  69,775  176,405 
Time Warner, Inc.  8,556  805,633 
TJX Cos., Inc. (The)  7,894  712,986 
Toppan Printing Co., Ltd. (Japan)  7,000  56,935 
Toyota Motor Corp. (Japan)  1,900  120,261 
TUI AG (Germany)  6,171  143,068 
Volvo AB (Sweden)  10,757  185,270 
Wal-Mart de Mexico SAB de CV (Mexico)  55,300  139,271 
Walt Disney Co. (The)  4,598  457,363 
Worldpay, Inc. Class A  †   3,562  283,072 
Zhongsheng Group Holdings, Ltd. (China)  14,500  46,339 
    8,882,031 
Consumer finance (0.5%)     
American Express Co.  7,966  783,058 
    783,058 
Consumer staples (3.6%)     
Altria Group, Inc.  3,183  177,420 
Asahi Group Holdings, Ltd. (Japan)  400  20,883 
Ashtead Group PLC (United Kingdom)  2,441  75,325 
Associated British Foods PLC (United Kingdom)  3,050  107,400 
Bright Horizons Family Solutions, Inc.  †   225  22,770 
British American Tobacco PLC (United Kingdom)  1,172  60,290 
Coca-Cola Amatil, Ltd. (Australia)  9,552  63,998 
Constellation Brands, Inc. Class A  3,376  753,118 
Gruma SAB de CV Class B (Mexico)  6,159  64,796 
Hershey Co. (The)  2,671  240,497 
Indofood Sukses Makmur Tbk PT (Indonesia)  55,400  28,161 
Ingredion, Inc.  953  106,155 
ITOCHU Corp. (Japan)  10,500  196,604 
J Sainsbury PLC (United Kingdom)  43,430  183,810 
Kao Corp. (Japan)  1,000  77,344 
Kirin Holdings Co., Ltd. (Japan)  3,300  93,395 
Koninklijke Ahold Delhaize NV (Netherlands)  4,063  93,457 
LG Corp. (South Korea)  411  27,931 
Liberty Expedia Holdings, Inc. Class A  †   790  34,294 
McDonald’s Corp.  5,213  834,132 
Metro Wholesale & Food Specialist AG (Germany)  5,988  80,638 
Monster Beverage Corp.  †   5,541  283,478 
Nestle SA (Switzerland)  1,416  106,724 
PepsiCo, Inc.  469  47,017 
Pinnacle Foods, Inc.  3,350  214,199 

 

24 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Consumer staples cont.     
Pola Orbis Holdings, Inc. (Japan)  1,600  $78,899 
Procter & Gamble Co. (The)  3,672  268,680 
Swedish Match AB (Sweden)  2,441  115,763 
Sysco Corp.  6,468  420,614 
Tesco PLC (United Kingdom)  17,916  58,528 
Turkiye Sise ve Cam Fabrikalari AS (Turkey)  14,566  12,797 
Uni-President Enterprises Corp. (Taiwan)  12,000  29,207 
US Foods Holding Corp.  †   6,972  248,761 
Want Want China Holdings, Ltd. (China)  93,000  91,924 
WH Group, Ltd. (Hong Kong)  169,500  173,673 
WM Morrison Supermarkets PLC (United Kingdom)  12,829  41,897 
Woolworths Group, Ltd. (Australia)  6,863  147,385 
    5,681,964 
Energy (2.7%)     
China Petroleum & Chemical Corp. (Sinopec) (China)  172,000  167,780 
Equinor ASA (Norway)  8,089  212,356 
Exxon Mobil Corp.  8,745  710,444 
Formosa Petrochemical Corp. (Taiwan)  8,000  32,318 
Halcon Resources Corp.  †   3,109  15,048 
Marathon Petroleum Corp.  6,625  523,574 
Nine Point Energy F  540  7,430 
Occidental Petroleum Corp.  9,689  815,814 
Phillips 66  2,000  232,980 
PTT PCL (Foreign depositary shares) (Thailand)  90,100  147,162 
Repsol SA (Spain)  10,427  198,348 
Royal Dutch Shell PLC Class B (United Kingdom)  8,999  320,351 
SandRidge Energy, Inc.  †   1,296  18,844 
SK Innovation Co., Ltd. (South Korea)  120  22,886 
Tervita Corp. Class A (Canada)  63  437 
Thai Oil PCL (Thailand)  9,700  27,896 
TOTAL SA (France)  5,508  334,745 
Valero Energy Corp.  3,337  404,444 
    4,192,857 
Financial (0.8%)     
3i Group PLC (United Kingdom)  9,949  126,084 
Broadridge Financial Solutions, Inc.  781  90,166 
CME Group, Inc.  2,054  334,597 
CoreLogic, Inc.  †   1,959  102,710 
DGB Financial Group, Inc. (South Korea)  2,424  23,205 
Hana Financial Group, Inc. (South Korea)  2,001  77,006 
Hong Kong Exchanges and Clearing, Ltd. (Hong Kong)  1,200  38,564 
Intercontinental Exchange, Inc.  822  58,272 
KB Financial Group, Inc. (South Korea)  1,396  67,150 
Macquarie Group, Ltd. (Australia)  1,209  104,163 
ORIX Corp. (Japan)  11,000  183,870 
Yuanta Financial Holding Co., Ltd. (Taiwan)  144,000  67,564 
    1,273,351 

 

Dynamic Risk Allocation Fund 25 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Health care (4.6%)     
AbbVie, Inc.  1,908  $188,778 
Akorn, Inc.  †   4,400  61,468 
Alfresa Holdings Corp. (Japan)  600  15,101 
Allergan PLC  430  64,844 
Amgen, Inc.  1,303  234,045 
Anthem, Inc.  607  134,402 
Astellas Pharma, Inc. (Japan)  14,100  215,195 
Baxter International, Inc.  7,783  551,348 
Biogen, Inc.  †   161  47,328 
Boston Scientific Corp.  †   2,485  75,519 
Bristol-Myers Squibb Co.  2,002  105,345 
Celgene Corp.  †   1,673  131,632 
Charles River Laboratories International, Inc.  †   581  62,469 
Eli Lilly & Co.  1,731  147,204 
Fresenius Medical Care AG & Co., KGaA (Germany)  719  71,828 
Gilead Sciences, Inc.  1,906  128,464 
GlaxoSmithKline PLC (United Kingdom)  7,551  152,982 
Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. (China)  6,000  31,231 
Hengan International Group Co., Ltd. (China)  4,500  42,801 
Humana, Inc.  2,648  770,515 
Hypermarcas SA (Brazil)  15,400  116,615 
Intuitive Surgical, Inc.  †   94  43,209 
Johnson & Johnson  4,383  524,294 
Medipal Holdings Corp. (Japan)  2,000  46,012 
Merck & Co., Inc.  5,570  331,582 
Mettler-Toledo International, Inc.  †   52  28,638 
Novartis AG (Switzerland)  4,793  355,610 
Omega Healthcare Investors, Inc. R S   3,481  106,693 
PerkinElmer, Inc.  817  60,728 
Pfizer, Inc.  18,291  657,196 
Recordati SpA (Italy)  3,987  147,840 
Roche Holding AG (Switzerland)  1,569  336,523 
Shionogi & Co., Ltd. (Japan)  2,700  141,278 
St Shine Optical Co., Ltd. (Taiwan)  2,000  53,122 
Thermo Fisher Scientific, Inc.  307  63,939 
UCB SA (Belgium)  1,718  135,281 
UnitedHealth Group, Inc.  1,388  335,216 
Ventas, Inc. R   985  53,840 
Vertex Pharmaceuticals, Inc.  †   472  72,688 
Zoetis, Inc.  3,894  325,928 
    7,168,731 
Insurance (1.8%)     
Aegon NV (Netherlands)  2,729  16,949 
Ageas (Belgium)  3,526  178,640 
Allianz SE (Germany)  1,237  255,233 
Allstate Corp. (The)  5,209  486,937 
AXA SA (France)  7,111  178,082 
Berkshire Hathaway, Inc. Class B  †   102  19,536 
Fosun International, Ltd. (China)  48,000  104,674 

 

26 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Insurance cont.     
Hyundai Marine & Fire Insurance Co., Ltd. (South Korea)  427  $13,473 
IRB Brasil Resseguros SA (Brazil)  4,100  53,088 
Loews Corp.  6,071  296,690 
Muenchener Rueckversicherungs-Gesellschaft     
AG in Muenchen (Germany)  877  180,793 
NN Group NV (Netherlands)  4,086  175,297 
Old Mutual PLC (South Africa)  24,443  77,942 
Old Republic International Corp.  7,519  157,749 
People’s Insurance Co. Group of China, Ltd. (China)  188,000  88,363 
Reinsurance Group of America, Inc.  842  125,828 
Swiss Re AG (Switzerland)  1,291  111,746 
Travelers Cos., Inc. (The)  2,366  304,078 
    2,825,098 
Investment banking/Brokerage (0.1%)     
China Cinda Asset Management Co., Ltd. (China)  235,000  84,949 
Daiwa Securities Group, Inc. (Japan)  4,000  23,141 
    108,090 
Real estate (5.1%)     
AGNC Investment Corp. R   13,479  253,675 
Agree Realty Corp. R   975  51,617 
Alexandria Real Estate Equities, Inc. R   1,009  126,044 
American Homes 4 Rent R   4,124  82,150 
Annaly Capital Management, Inc. R   24,304  253,491 
Apple Hospitality REIT, Inc. R   3,309  62,970 
AvalonBay Communities, Inc. R   1,229  203,449 
Barratt Developments PLC (United Kingdom)  5,430  39,391 
Boston Properties, Inc. R   1,530  186,308 
Brandywine Realty Trust R   4,306  70,016 
Camden Property Trust R   2,114  186,032 
Cheung Kong Property Holdings, Ltd. (Hong Kong)  21,000  175,114 
Chimera Investment Corp. R   6,070  111,749 
CoreSite Realty Corp. R   524  55,628 
Corporate Office Properties Trust R   2,367  66,039 
Country Garden Holdings co., Ltd. (China)  62,000  120,482 
Digital Realty Trust, Inc. R   559  60,081 
Douglas Emmett, Inc. R   2,848  109,620 
Duke Realty Corp. R   6,389  179,659 
Empire State Realty Trust, Inc. Class A R   1,797  30,477 
EPR Properties R   3,624  222,477 
Equity Commonwealth  † R   1,566  48,718 
Equity Lifestyle Properties, Inc. R   1,355  123,170 
Equity Residential Trust R   8,511  544,619 
Essex Property Trust, Inc. R   680  162,540 
Extra Space Storage, Inc. R   1,713  164,876 
Fonciere Des Regions (France) R   536  56,075 
Four Corners Property Trust, Inc. R   1,129  25,843 
Gaming and Leisure Properties, Inc. R   3,995  140,225 
Getty Realty Corp. R   1,409  36,789 
GGP, Inc. R   7,146  144,921 

 

Dynamic Risk Allocation Fund 27 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Real estate cont.     
Guangzhou R&F Properties Co., Ltd. (China)  34,800  $81,069 
HCP, Inc. R   2,491  59,709 
Highwoods Properties, Inc. R   1,759  84,133 
Hudson Pacific Properties, Inc. R   2,121  75,083 
iStar, Inc.  † R   6,689  72,442 
JBG SMITH Properties R   565  20,843 
Kerry Properties, Ltd. (Hong Kong)  6,500  34,732 
Liberty Property Trust R   4,570  202,040 
Macerich Co. (The) R   1,227  68,258 
Medical Properties Trust, Inc. R   7,938  107,719 
MFA Financial, Inc. R   7,759  60,365 
Monmouth Real Estate Investment Corp. R   830  12,824 
National Health Investors, Inc. R   1,161  85,705 
National Retail Properties, Inc.  2,650  109,790 
New Residential Investment Corp. R   11,203  200,310 
Nomura Real Estate Holdings, Inc. (Japan)  1,600  37,425 
Park Hotels & Resorts, Inc. R   4,960  159,812 
Persimmon PLC (United Kingdom)  5,026  189,249 
Piedmont Office Realty Trust, Inc. Class A R   3,196  61,427 
Prologis, Inc. R   4,295  276,383 
PS Business Parks, Inc. R   400  49,024 
Public Storage R   1,280  271,155 
Realty Income Corp. R   335  17,856 
Saul Centers, Inc. R   190  9,416 
Select Income REIT R   1,201  25,942 
Simon Property Group, Inc. R   2,305  369,307 
SL Green Realty Corp. R   1,375  134,090 
Spirit Realty Capital, Inc. R   11,760  103,018 
Starwood Property Trust, Inc. R   6,377  138,445 
Sun Hung Kai Properties, Ltd. (Hong Kong)  4,000  64,453 
Sunstone Hotel Investors, Inc. R   6,127  106,549 
Tier REIT, Inc. R   1,076  23,629 
Two Harbors Investment Corp. R   5,964  92,740 
UDR, Inc. R   3,968  144,713 
Washington Prime Group, Inc. R   10,100  73,427 
Welltower, Inc. R   3,185  183,615 
WP Carey, Inc. R   1,532  102,966 
    8,003,908 
Technology (8.8%)     
Acer, Inc. (Taiwan)  76,000  61,940 
Alibaba Group Holding, Ltd. ADR (China)  †   1,115  220,781 
Alphabet, Inc. Class A  †   961  1,057,100 
Amadeus IT Holding SA Class A (Spain)  1,785  141,459 
Amdocs, Ltd.  1,574  106,182 
Apple, Inc.  4,956  926,128 
Applied Materials, Inc.  7,550  383,389 
Avaya Holdings Corp.  †   1,791  39,527 
CDK Global, Inc.  2,876  185,071 
Cisco Systems, Inc.  599  25,583 

 

28 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Technology cont.     
Cognizant Technology Solutions Corp. Class A  9,558  $720,195 
Corning, Inc.  2,665  72,408 
Dell Technologies, Inc. Class V  †   2,206  177,936 
eBay, Inc.  †   19,017  717,321 
F5 Networks, Inc.  †   2,804  485,400 
Facebook, Inc. Class A  †   2,547  488,464 
Fidelity National Information Services, Inc.  4,538  463,874 
Fiserv, Inc.  †   4,534  329,168 
Fujitsu, Ltd. (Japan)  1,000  6,102 
Genpact, Ltd.  2,463  73,964 
Harris Corp.  2,422  364,438 
Hoya Corp. (Japan)  3,400  201,064 
HP, Inc.  20,201  445,028 
Intuit, Inc.  4,500  907,200 
Iron Mountain, Inc. R   3,417  113,752 
Keyence Corp. (Japan)  100  61,129 
LG Electronics, Inc. (South Korea)  884  75,652 
Maxim Integrated Products, Inc.  4,547  266,682 
Microsoft Corp.  5,221  516,044 
NetApp, Inc.  6,260  427,683 
Nexon Co., Ltd. (Japan)  †   1,800  29,704 
Otsuka Corp. (Japan)  2,000  82,257 
Radiant Opto-Electronics Corp. (Taiwan)  34,000  70,962 
Red Hat, Inc.  †   2,763  448,766 
Samsung Electronics Co., Ltd. (South Korea)  15,354  720,733 
SK Hynix, Inc. (South Korea)  3,596  310,009 
SMC Corp. (Japan)  100  37,857 
Synnex Technology International Corp. (Taiwan)  26,000  41,486 
Synopsys, Inc.  †   2,606  229,510 
Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)  23,000  171,620 
Taiwan Semiconductor Manufacturing Co., Ltd. ADR (Taiwan)  4,400  170,280 
TDK Corp. (Japan)  1,200  107,536 
Tencent Holdings, Ltd. (China)  6,600  332,691 
Texas Instruments, Inc.  7,472  836,192 
Tripod Technology Corp. (Taiwan)  13,000  36,707 
YY, Inc. ADR (China)  †   1,231  143,448 
    13,830,422 
Transportation (1.0%)     
AirAsia Bhd (Malaysia)  67,100  51,395 
ANA Holdings, Inc. (Japan)  1,900  76,295 
Central Japan Railway Co. (Japan)  1,000  206,460 
Deutsche Lufthansa AG (Germany)  1,892  51,452 
Deutsche Post AG (Germany)  3,325  126,242 
International Consolidated Airlines Group SA (Spain)  4,254  38,543 
Japan Airlines Co., Ltd. (Japan)  1,900  73,491 
Kansas City Southern  2,415  258,767 
MISC Bhd (Malaysia)  8,200  12,027 
Norfolk Southern Corp.  3,390  514,094 
Royal Mail PLC (United Kingdom)  18,472  124,996 

 

Dynamic Risk Allocation Fund 29 

 


COMMON STOCKS (46.8%)* cont.  Shares  Value 
Transportation cont.     
Singapore Airlines, Ltd. (Singapore)  4,100  $34,424 
Yangzijiang Shipbuilding Holdings, Ltd. (China)  20,500  14,677 
    1,582,863 
Utilities and power (1.5%)     
American Electric Power Co., Inc.  9,359  635,944 
Cia de Saneamento Basico do Estado de Sao Paulo (Brazil)  12,255  86,054 
Duke Energy Corp.  6,283  484,796 
Enel SpA (Italy)  36,080  198,148 
ENGIE SA (France)  3,645  57,988 
Eni SpA (Italy)  11,092  202,644 
Exelon Corp.  7,860  325,325 
Inter RAO UES PJSC (Russia)  479,951  31,418 
Kinder Morgan, Inc.  21,494  358,520 
PGE SA (Poland)  †   14,838  39,654 
Tenaga Nasional Bhd (Malaysia)  37,600  135,653 
    2,556,144 
Total common stocks (cost $63,949,351)    $73,553,139 
 
  Principal   
CORPORATE BONDS AND NOTES (22.9%)*  amount  Value 
Basic materials (2.1%)     
A Schulman, Inc. company guaranty sr. unsec. unsub. notes     
6.875%, 6/1/23  $20,000  $21,005 
Allegheny Technologies, Inc. sr. unsec. unsub. notes     
7.875%, 8/15/23  35,000  38,140 
Allegheny Technologies, Inc. sr. unsec. unsub. notes     
5.95%, 1/15/21  20,000  20,200 
American Woodmark Corp. 144A company guaranty sr. unsec.     
notes 4.875%, 3/15/26  55,000  52,525 
ArcelorMittal SA sr. unsec. unsub. bonds 6.125%, 6/1/25 (France)  15,000  16,088 
ArcelorMittal SA sr. unsec. unsub. notes 7.25%, 10/15/39 (France)  50,000  58,000 
Beacon Escrow Corp. 144A sr. unsec. notes 4.875%, 11/1/25  40,000  36,800 
Beacon Roofing Supply, Inc. company guaranty sr. unsec. unsub.     
notes 6.375%, 10/1/23  40,000  41,388 
Big River Steel, LLC/BRS Finance Corp. 144A company guaranty sr.     
notes 7.25%, 9/1/25  65,000  67,681 
BMC East, LLC 144A company guaranty sr. notes 5.50%, 10/1/24  75,000  72,656 
Boise Cascade Co. 144A company guaranty sr. unsec. notes     
5.625%, 9/1/24  70,000  70,263 
Builders FirstSource, Inc. 144A company guaranty sr. unsub. notes     
5.625%, 9/1/24  90,000  88,402 
BWAY Holding Co. 144A sr. notes 5.50%, 4/15/24  15,000  14,813 
BWAY Holding Co. 144A sr. unsec. notes 7.25%, 4/15/25  150,000  147,285 
Celanese US Holdings, LLC company guaranty sr. unsec. unsub.     
notes 4.625%, 11/15/22 (Germany)  47,000  48,334 
CF Industries, Inc. company guaranty sr. unsec. bonds     
4.95%, 6/1/43  45,000  37,350 
CF Industries, Inc. 144A company guaranty sr. notes     
4.50%, 12/1/26  85,000  84,251 
Chemours Co. (The) company guaranty sr. unsec. notes     
5.375%, 5/15/27  35,000  34,038 

 

30 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Basic materials cont.     
Chemours Co. (The) company guaranty sr. unsec. unsub. notes     
7.00%, 5/15/25  $35,000  $37,538 
Chemours Co. (The) company guaranty sr. unsec. unsub. notes     
6.625%, 5/15/23  5,000  5,251 
Compass Minerals International, Inc. 144A company guaranty sr.     
unsec. notes 4.875%, 7/15/24  80,000  75,800 
Cornerstone Chemical Co. 144A company guaranty sr. notes     
6.75%, 8/15/24  60,000  59,550 
CPG Merger Sub, LLC 144A company guaranty sr. unsec. notes     
8.00%, 10/1/21  30,000  30,638 
Crown Americas, LLC/Crown Americas Capital Corp. VI 144A     
company guaranty sr. unsec. notes 4.75%, 2/1/26  20,000  18,892 
Dow Chemical Co. (The) sr. unsec. unsub. bonds 3.50%, 10/1/24  52,000  51,049 
Eastman Chemical Co. sr. unsec. notes 3.80%, 3/15/25  26,000  26,011 
Flex Acquisition Co., Inc. 144A sr. unsec. notes 6.875%, 1/15/25  55,000  53,075 
Freeport-McMoRan, Inc. company guaranty sr. unsec. notes     
6.875%, 2/15/23 (Indonesia)  55,000  58,988 
GCP Applied Technologies, Inc. 144A sr. unsec. notes     
5.50%, 4/15/26  35,000  34,125 
Glencore Funding, LLC 144A company guaranty sr. unsec. unsub.     
notes 4.625%, 4/29/24  81,000  82,237 
Glencore Funding, LLC 144A company guaranty sr. unsec. unsub.     
notes 4.00%, 4/16/25  79,000  76,844 
HudBay Minerals, Inc. 144A company guaranty sr. unsec. notes     
7.625%, 1/15/25 (Canada)  35,000  36,750 
Huntsman International, LLC company guaranty sr. unsec. unsub.     
notes 4.875%, 11/15/20  50,000  51,063 
Ingevity Corp. 144A sr. unsec. notes 4.50%, 2/1/26  40,000  37,800 
International Paper Co. sr. unsec. unsub. notes 3.00%, 2/15/27  20,000  18,209 
Joseph T Ryerson & Son, Inc. 144A sr. notes 11.00%, 5/15/22  20,000  22,050 
Kraton Polymers, LLC/Kraton Polymers Capital Corp. 144A     
company guaranty sr. unsec. notes 10.50%, 4/15/23  60,000  66,306 
Kraton Polymers, LLC/Kraton Polymers Capital Corp. 144A     
company guaranty sr. unsec. notes 7.00%, 4/15/25  25,000  25,750 
Louisiana-Pacific Corp. company guaranty sr. unsec. unsub. notes     
4.875%, 9/15/24  65,000  63,700 
Mercer International, Inc. company guaranty sr. unsec. notes     
7.75%, 12/1/22 (Canada)  9,000  9,450 
Mercer International, Inc. sr. unsec. notes 6.50%, 2/1/24 (Canada)  55,000  56,513 
Mercer International, Inc. 144A sr. unsec. notes 5.50%,     
1/15/26 (Canada)  25,000  24,500 
Methanex Corp. sr. unsec. unsub. notes 5.65%, 12/1/44 (Canada)  22,000  21,669 
New Gold, Inc. 144A company guaranty sr. unsec. unsub. notes     
6.25%, 11/15/22 (Canada)  20,000  20,350 
New Gold, Inc. 144A sr. unsec. notes 6.375%, 5/15/25 (Canada)  15,000  14,906 
Northwest Acquisitions ULC/Dominion Finco, Inc. 144A notes     
7.125%, 11/1/22  20,000  20,250 
NOVA Chemicals Corp. 144A sr. unsec. bonds 5.25%,     
6/1/27 (Canada)  26,000  24,635 
Novelis Corp. 144A company guaranty sr. unsec. bonds     
5.875%, 9/30/26  115,000  112,712 

 

Dynamic Risk Allocation Fund 31 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Basic materials cont.     
Novelis Corp. 144A company guaranty sr. unsec. notes     
6.25%, 8/15/24  $5,000  $5,063 
Nutrien, Ltd. sr. unsec. bonds 5.25%, 1/15/45 (Canada)  10,000  10,685 
Pactiv, LLC sr. unsec. unsub. bonds 8.375%, 4/15/27  5,000  5,500 
Park-Ohio Industries, Inc. company guaranty sr. unsec. notes     
6.625%, 4/15/27  55,000  56,513 
Pisces Midco, Inc. 144A sr. notes 8.00%, 4/15/26  40,000  38,950 
Platform Specialty Products Corp. 144A company guaranty sr.     
unsec. notes 5.875%, 12/1/25  40,000  38,500 
Platform Specialty Products Corp. 144A sr. unsec. notes     
6.50%, 2/1/22  15,000  15,375 
Sherwin-Williams Co. (The) sr. unsec. unsub. bonds 3.45%, 6/1/27  22,000  20,888 
Sherwin-Williams Co. (The) sr. unsec. unsub. notes 2.75%, 6/1/22  15,000  14,612 
Smurfit Kappa Treasury Funding, Ltd. company guaranty sr. unsec.     
unsub. notes 7.50%, 11/20/25 (Ireland)  40,000  47,900 
Steel Dynamics, Inc. company guaranty sr. unsec. notes     
5.00%, 12/15/26  30,000  29,664 
Steel Dynamics, Inc. company guaranty sr. unsec. notes     
4.125%, 9/15/25  15,000  14,175 
Steel Dynamics, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 10/1/24  30,000  30,600 
Steel Dynamics, Inc. company guaranty sr. unsec. unsub. notes     
5.25%, 4/15/23  5,000  5,081 
Teck Resources, Ltd. company guaranty sr. unsec. unsub. notes     
4.75%, 1/15/22 (Canada)  5,000  5,052 
Teck Resources, Ltd. company guaranty sr. unsec. unsub. notes     
3.75%, 2/1/23 (Canada)  20,000  19,325 
Teck Resources, Ltd. 144A company guaranty sr. unsec. notes     
8.50%, 6/1/24 (Canada)  10,000  11,038 
TMS International Corp. 144A sr. unsec. notes 7.25%, 8/15/25  55,000  56,925 
TopBuild Corp. 144A company guaranty sr. unsec. notes     
5.625%, 5/1/26  55,000  54,175 
Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc.     
144A sr. unsec. notes 5.375%, 9/1/25 (Luxembourg)  30,000  29,625 
Tronox Finance PLC 144A company guaranty sr. unsec. notes     
5.75%, 10/1/25 (United Kingdom)  15,000  14,550 
Tronox, Inc. 144A company guaranty sr. unsec. notes     
6.50%, 4/15/26  35,000  34,519 
U.S. Concrete, Inc. company guaranty sr. unsec. unsub. notes     
6.375%, 6/1/24  75,000  76,219 
Univar USA, Inc. 144A company guaranty sr. unsec. notes     
6.75%, 7/15/23  30,000  31,013 
USG Corp. 144A company guaranty sr. unsec. bonds     
4.875%, 6/1/27  45,000  44,845 
USG Corp. 144A company guaranty sr. unsec. notes 5.50%, 3/1/25  35,000  36,356 
Weekley Homes, LLC/Weekley Finance Corp. sr. unsec. notes     
6.00%, 2/1/23  30,000  29,400 
Westlake Chemical Corp. company guaranty sr. unsec. unsub.     
bonds 4.375%, 11/15/47  49,000  46,223 
Westlake Chemical Corp. company guaranty sr. unsec. unsub.     
notes 3.60%, 8/15/26  90,000  86,258 

 

32 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Basic materials cont.     
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
8.20%, 1/15/30  $45,000  $60,485 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
7.95%, 2/15/31  22,000  29,601 
WR Grace & Co.- Conn. 144A company guaranty sr. unsec. notes     
5.625%, 10/1/24  30,000  31,050 
Zekelman Industries, Inc. 144A company guaranty sr. notes     
9.875%, 6/15/23  30,000  32,925 
    3,248,920 
Capital goods (1.1%)     
Advanced Disposal Services, Inc. 144A sr. unsec. notes     
5.625%, 11/15/24  35,000  35,000 
Allison Transmission, Inc. 144A company guaranty sr. unsec. notes     
5.00%, 10/1/24  25,000  24,781 
Allison Transmission, Inc. 144A company guaranty sr. unsec. notes     
4.75%, 10/1/27  10,000  9,363 
American Axle & Manufacturing, Inc. company guaranty sr. unsec.     
notes 7.75%, 11/15/19  5,000  5,256 
Apergy Corp. 144A sr. unsec. notes 6.375%, 5/1/26  15,000  15,263 
ATS Automation Tooling Systems, Inc. 144A sr. unsec. notes 6.50%,     
6/15/23 (Canada)  35,000  36,413 
Berry Global, Inc. company guaranty notes 5.50%, 5/15/22  20,000  20,350 
Berry Global, Inc. company guaranty unsub. notes 5.125%, 7/15/23  50,000  49,500 
Berry Global, Inc. 144A notes 4.50%, 2/15/26  15,000  14,025 
Bombardier, Inc. 144A sr. unsec. notes 8.75%, 12/1/21 (Canada)  65,000  72,150 
Bombardier, Inc. 144A sr. unsec. notes 7.50%, 12/1/24 (Canada)  40,000  41,600 
Briggs & Stratton Corp. company guaranty sr. unsec. notes     
6.875%, 12/15/20  55,000  58,575 
Cortes NP Acquisition Corp. 144A sr. unsec. notes 9.25%, 10/15/24  5,000  4,900 
Crown Cork & Seal Co., Inc. company guaranty sr. unsec. bonds     
7.375%, 12/15/26  35,000  37,975 
FXI Holdings, Inc. 144A sr. notes 7.875%, 11/1/24  35,000  34,650 
Gates Global, LLC/Gates Global Co. 144A company guaranty sr.     
unsec. notes 6.00%, 7/15/22  62,000  62,698 
GFL Environmental, Inc. 144A sr. unsec. notes 5.375%,     
3/1/23 (Canada)  20,000  18,775 
Great Lakes Dredge & Dock Corp. company guaranty sr. unsec.     
notes 8.00%, 5/15/22  70,000  71,225 
Honeywell International, Inc. sr. unsec. bonds 3.812%, 11/21/47  60,000  59,263 
Hulk Finance Corp. 144A sr. unsec. notes 7.00%, 6/1/26 (Canada)  65,000  63,050 
Johnson Controls International PLC sr. unsec. bonds 4.95%, 7/2/64  35,000  34,608 
Johnson Controls International PLC sr. unsec. unsub. bonds     
4.50%, 2/15/47  26,000  25,320 
L3 Technologies, Inc. company guaranty sr. unsec. bonds     
3.85%, 12/15/26  7,000  6,826 
MasTec, Inc. company guaranty sr. unsec. unsub. notes     
4.875%, 3/15/23  45,000  44,494 
Medtronic, Inc. company guaranty sr. unsec. sub. notes     
4.375%, 3/15/35  11,000  11,550 
Oshkosh Corp. company guaranty sr. unsec. sub. notes     
5.375%, 3/1/25  65,000  67,145 

 

Dynamic Risk Allocation Fund 33 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Capital goods cont.     
Oshkosh Corp. sr. unsec. sub. notes 4.60%, 5/15/28  $65,000  $64,919 
RBS Global, Inc./Rexnord, LLC 144A sr. unsec. notes     
4.875%, 12/15/25  35,000  33,688 
Republic Services, Inc. sr. unsec. notes 3.95%, 5/15/28  35,000  34,854 
Rockwell Collins, Inc. sr. unsec. bonds 4.35%, 4/15/47  34,000  32,986 
Tennant Co. company guaranty sr. unsec. unsub. notes     
5.625%, 5/1/25  35,000  35,088 
Tenneco, Inc. company guaranty sr. unsec. unsub. notes     
5.375%, 12/15/24  15,000  14,475 
Tenneco, Inc. company guaranty sr. unsec. unsub. notes     
5.00%, 7/15/26  10,000  9,122 
TI Group Automotive Systems, LLC 144A sr. unsec. notes 8.75%,     
7/15/23 (United Kingdom)  34,000  35,445 
Titan Acquisition, Ltd./Titan Co-Borrower, LLC. 144A sr. unsec.     
notes 7.75%, 4/15/26 (Canada)  65,000  61,750 
TransDigm, Inc. company guaranty sr. unsec. sub. notes     
6.50%, 5/15/25  20,000  20,288 
TransDigm, Inc. company guaranty sr. unsec. sub. notes     
6.375%, 6/15/26  85,000  85,425 
Trident Merger Sub, Inc. 144A sr. unsec. notes 6.625%, 11/1/25  40,000  39,400 
United Technologies Corp. sr. unsec. unsub. notes 1.90%, 5/4/20  217,000  213,128 
Vertiv Intermediate Holding Corp. 144A sr. unsec. notes 12.00%,     
2/15/22  ‡‡   15,000  14,213 
Wabash National Corp. 144A company guaranty sr. unsec. notes     
5.50%, 10/1/25  40,000  38,800 
Waste Management, Inc. company guaranty sr. unsec. unsub.     
notes 4.75%, 6/30/20  24,000  24,907 
Waste Pro USA, Inc. 144A sr. unsec. notes 5.50%, 2/15/26  30,000  28,950 
Wrangler Buyer Corp. 144A sr. unsec. notes 6.00%, 10/1/25  60,000  57,150 
    1,769,343 
Communication services (1.9%)     
American Tower Corp. sr. unsec. bonds 3.125%, 1/15/27 R   26,000  23,700 
American Tower Corp. sr. unsec. unsub. bonds 3.55%, 7/15/27 R   64,000  60,368 
AT&T, Inc. sr. unsec. unsub. notes 4.75%, 5/15/46  50,000  46,248 
AT&T, Inc. sr. unsec. unsub. notes 3.40%, 5/15/25  51,000  48,711 
AT&T, Inc. 144A sr. unsec. notes 4.10%, 2/15/28  75,000  73,169 
CCO Holdings, LLC/CCO Holdings Capital Corp. company guaranty     
sr. unsec. notes 5.25%, 9/30/22  85,000  85,744 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A company     
guaranty sr. unsec. bonds 5.50%, 5/1/26  35,000  33,786 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A company     
guaranty sr. unsec. notes 5.875%, 4/1/24  90,000  90,788 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
notes 5.75%, 2/15/26  15,000  14,696 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
unsub. notes 5.125%, 5/1/23  25,000  24,844 
CenturyLink, Inc. sr. unsec. unsub. notes 6.75%, 12/1/23  30,000  29,925 
CenturyLink, Inc. sr. unsec. unsub. notes 5.625%, 4/1/20  15,000  15,188 
Cequel Communications Holdings I, LLC/Cequel Capital Corp.     
144A sr. unsec. unsub. notes 5.125%, 12/15/21  65,000  64,683 

 

34 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* 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  $9,950 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. bonds 6.484%, 10/23/45  63,000  67,038 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. notes 4.908%, 7/23/25  31,000  31,606 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. bonds 5.375%, 5/1/47  50,000  46,635 
Comcast Corp. company guaranty sr. unsec. unsub. bonds     
3.969%, 11/1/47  31,000  27,390 
Comcast Corp. company guaranty sr. unsec. unsub. bonds     
2.35%, 1/15/27  5,000  4,400 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
6.50%, 11/15/35  64,000  77,573 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
3.375%, 2/15/25  34,000  33,013 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
3.15%, 3/1/26  5,000  4,718 
CommScope Technologies Finance, LLC 144A sr. unsec. notes     
6.00%, 6/15/25  85,000  85,213 
CommScope Technologies, LLC 144A company guaranty sr. unsec.     
unsub. notes 5.00%, 3/15/27  50,000  46,750 
Cox Communications, Inc. 144A sr. unsec. bonds 3.50%, 8/15/27  20,000  18,907 
Crown Castle International Corp. sr. unsec. bonds 3.80%, 2/15/28 R   20,000  19,009 
Crown Castle International Corp. sr. unsec. bonds 3.65%, 9/1/27 R   30,000  28,286 
Crown Castle International Corp. sr. unsec. notes 4.875%, 4/15/22 R   15,000  15,633 
Crown Castle International Corp. sr. unsec. unsub. bonds     
3.70%, 6/15/26 R   34,000  32,377 
CSC Holdings, LLC sr. unsec. unsub. bonds 5.25%, 6/1/24  180,000  170,136 
CSC Holdings, LLC sr. unsec. unsub. notes 6.75%, 11/15/21  55,000  58,025 
Deutsche Telekom International Finance BV company guaranty sr.     
unsec. unsub. bonds 8.75%, 6/15/30 (Netherlands)  12,000  16,599 
DISH DBS Corp. company guaranty sr. unsec. unsub. notes     
5.875%, 11/15/24  75,000  62,321 
Frontier Communications Corp. sr. unsec. notes 11.00%, 9/15/25  15,000  12,000 
Frontier Communications Corp. sr. unsec. notes 10.50%, 9/15/22  20,000  18,000 
Frontier Communications Corp. 144A company guaranty notes     
8.50%, 4/1/26  60,000  58,125 
Intelsat Jackson Holdings SA company guaranty sr. unsec. notes     
7.50%, 4/1/21 (Bermuda)  10,000  9,775 
Intelsat Jackson Holdings SA 144A company guaranty sr. notes     
8.00%, 2/15/24 (Bermuda)  2,000  2,115 
Intelsat Jackson Holdings SA 144A sr. unsec. notes 9.75%,     
7/15/25 (Bermuda)  110,000  114,125 
NBCUniversal Media, LLC company guaranty sr. unsec. unsub.     
notes 5.15%, 4/30/20  50,000  51,965 
NBCUniversal Media, LLC company guaranty sr. unsec. unsub.     
notes 4.375%, 4/1/21  160,000  165,235 

 

Dynamic Risk Allocation Fund 35 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Communication services cont.     
Quebecor Media, Inc. sr. unsec. unsub. notes 5.75%,     
1/15/23 (Canada)  $15,000  $15,244 
SFR Group SA 144A company guaranty sr. notes 6.00%,     
5/15/22 (France)  200,000  198,500 
Sprint Capital Corp. company guaranty sr. unsec. unsub. notes     
6.875%, 11/15/28  40,000  38,300 
Sprint Communications, Inc. sr. unsec. notes 7.00%, 8/15/20  145,000  150,800 
Sprint Corp. company guaranty sr. unsec. sub. notes     
7.25%, 9/15/21  185,000  191,475 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
6.375%, 3/1/25  30,000  31,347 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
6.00%, 3/1/23  20,000  20,700 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
5.375%, 4/15/27  120,000  117,750 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
4.00%, 4/15/22  15,000  14,925 
T-Mobile USA, Inc. company guaranty sr. unsec. unsub. bonds     
4.75%, 2/1/28  40,000  37,400 
T-Mobile USA, Inc. company guaranty sr. unsec. unsub. notes     
4.50%, 2/1/26  15,000  14,100 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.522%, 9/15/48  62,000  57,107 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.40%, 11/1/34  22,000  21,221 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.125%, 3/16/27  45,000  45,118 
Videotron, Ltd./Videotron Ltee. 144A sr. unsec. notes 5.125%,     
4/15/27 (Canada)  135,000  130,613 
Vodafone Group PLC sr. unsec. unsub. notes 4.375%, 5/30/28     
(United Kingdom)  50,000  49,887 
Windstream Services, LLC company guaranty sr. unsec. notes     
6.375%, 8/1/23  40,000  23,100 
    3,056,356 
Conglomerates (0.2%)     
Siemens Financieringsmaatschappij NV 144A company guaranty     
sr. unsec. notes 2.20%, 3/16/20 (Netherlands)  250,000  247,338 
    247,338 
Consumer cyclicals (3.5%)     
21st Century Fox America, Inc. company guaranty sr. unsec. unsub.     
notes 7.75%, 12/1/45  93,000  136,470 
Alimentation Couche-Tard, Inc. 144A company guaranty sr. unsec.     
notes 3.55%, 7/26/27 (Canada)  15,000  14,208 
Amazon.com, Inc. sr. unsec. unsub. notes 3.30%, 12/5/21  150,000  152,027 
Amazon.com, Inc. 144A sr. unsec. notes 3.15%, 8/22/27  70,000  67,624 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
notes 6.125%, 5/15/27  20,000  19,290 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.875%, 11/15/26  15,000  14,606 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.875%, 2/15/22  25,000  25,313 

 

36 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Consumer cyclicals cont.     
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.75%, 6/15/25  $35,000  $34,213 
American Builders & Contractors Supply Co., Inc. 144A company     
guaranty sr. unsec. notes 5.875%, 5/15/26  10,000  9,825 
American Builders & Contractors Supply Co., Inc. 144A sr. unsec.     
notes 5.75%, 12/15/23  50,000  50,875 
American Tire Distributors, Inc. 144A sr. unsec. sub. notes     
10.25%, 3/1/22  25,000  12,250 
Autonation, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 2/1/20  41,000  42,387 
BMW US Capital, LLC 144A company guaranty sr. unsec. notes     
2.00%, 4/11/21  80,000  77,351 
Boyd Gaming Corp. company guaranty sr. unsec. sub. notes     
6.875%, 5/15/23  20,000  21,000 
Boyd Gaming Corp. company guaranty sr. unsec. unsub. notes     
6.375%, 4/1/26  35,000  35,875 
Boyne USA, Inc. 144A company guaranty notes 7.25%, 5/1/25  15,000  15,600 
Brookfield Residential Properties, Inc./Brookfield Residential     
US Corp. 144A company guaranty sr. unsec. notes 6.125%,     
7/1/22 (Canada)  35,000  35,481 
Carriage Services, Inc. 144A sr. unsec. notes 6.625%, 6/1/26  35,000  35,306 
CBS Corp. company guaranty sr. unsec. unsub. bonds     
2.90%, 1/15/27  48,000  42,780 
CBS Corp. company guaranty sr. unsec. unsub. notes     
4.60%, 1/15/45  18,000  16,835 
CBS Corp. company guaranty sr. unsec. unsub. notes     
4.00%, 1/15/26  11,000  10,771 
CBS Radio, Inc. 144A company guaranty sr. unsec. notes     
7.25%, 11/1/24  70,000  67,200 
Cinemark USA, Inc. company guaranty sr. unsec. sub. notes     
4.875%, 6/1/23  50,000  48,310 
Clear Channel Worldwide Holdings, Inc. company guaranty sr.     
unsec. sub. notes 7.625%, 3/15/20  30,000  30,000 
Constellation Merger Sub, Inc. 144A sr. unsec. notes 8.50%, 9/15/25  110,000  106,013 
CRC Escrow Issuer, LLC/CRC Finco, Inc. 144A company guaranty sr.     
unsec. notes 5.25%, 10/15/25  65,000  62,075 
Diamond Resorts International, Inc. 144A sr. notes 7.75%, 9/1/23  80,000  85,600 
Diamond Resorts International, Inc. 144A sr. unsec. notes     
10.75%, 9/1/24  35,000  38,413 
Ecolab, Inc. sr. unsec. notes 4.35%, 12/8/21  85,000  88,455 
Ecolab, Inc. sr. unsec. unsub. bonds 2.70%, 11/1/26  71,000  66,171 
Eldorado Resorts, Inc. company guaranty sr. unsec. unsub. notes     
7.00%, 8/1/23  15,000  15,769 
Ford Motor Co. sr. unsec. unsub. notes 4.346%, 12/8/26  60,000  59,365 
Gartner, Inc. 144A company guaranty sr. unsec. notes     
5.125%, 4/1/25  30,000  29,775 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
notes 4.00%, 10/6/26  51,000  49,082 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.30%, 7/13/25  15,000  14,872 

 

Dynamic Risk Allocation Fund 37 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Consumer cyclicals cont.     
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.00%, 1/15/25  $7,000  $6,875 
GLP Capital LP/GLP Financing II, Inc. company guaranty sr. unsec.     
notes 5.25%, 6/1/25  30,000  30,000 
GLP Capital LP/GLP Financing II, Inc. company guaranty sr. unsec.     
unsub. notes 5.375%, 4/15/26  60,000  59,534 
Gray Television, Inc. 144A company guaranty sr. unsec. notes     
5.875%, 7/15/26  35,000  33,075 
GW Honos Security Corp. 144A company guaranty sr. unsec. notes     
8.75%, 5/15/25 (Canada)  40,000  40,700 
Hanesbrands, Inc. 144A company guaranty sr. unsec. unsub. notes     
4.625%, 5/15/24  30,000  29,288 
Hilton Worldwide Finance, LLC/Hilton Worldwide Finance Corp.     
company guaranty sr. unsec. notes 4.875%, 4/1/27  150,000  143,625 
Home Depot, Inc. (The) sr. unsec. unsub. notes 2.625%, 6/1/22  67,000  66,046 
Host Hotels & Resorts LP sr. unsec. unsub. notes 5.25%, 3/15/22 R   58,000  60,739 
Howard Hughes Corp. (The) 144A sr. unsec. notes 5.375%, 3/15/25  55,000  53,144 
Hyatt Hotels Corp. sr. unsec. unsub. notes 4.85%, 3/15/26  45,000  46,582 
iHeartCommunications, Inc. company guaranty sr. notes 9.00%,     
12/15/19 (In default)  †   265,000  207,363 
IHS Markit, Ltd. 144A company guaranty notes 4.75%, 2/15/25     
(United Kingdom)  140,000  139,125 
IHS Markit, Ltd. 144A company guaranty sr. unsec. notes 4.00%,     
3/1/26 (United Kingdom)  10,000  9,450 
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  75,000  77,250 
Jacobs Entertainment, Inc. 144A notes 7.875%, 2/1/24  20,000  20,900 
Jeld-Wen, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 12/15/27  25,000  23,250 
Jeld-Wen, Inc. 144A company guaranty sr. unsec. notes     
4.625%, 12/15/25  30,000  28,350 
Lear Corp. sr. unsec. unsub. bonds 3.80%, 9/15/27  96,000  91,783 
Lennar Corp. company guaranty sr. unsec. unsub. notes     
4.75%, 11/15/22  20,000  19,902 
Lennar Corp. 144A company guaranty sr. unsec. sub. notes     
5.875%, 11/15/24  15,000  15,413 
Live Nation Entertainment, Inc. 144A company guaranty sr. unsec.     
notes 4.875%, 11/1/24  25,000  24,313 
Live Nation Entertainment, Inc. 144A company guaranty sr. unsec.     
sub. notes 5.625%, 3/15/26  25,000  24,938 
Mattamy Group Corp. 144A sr. unsec. notes 6.875%,     
12/15/23 (Canada)  30,000  30,863 
Mattamy Group Corp. 144A sr. unsec. notes 6.50%,     
10/1/25 (Canada)  30,000  29,715 
Meredith Corp. 144A sr. unsec. notes 6.875%, 2/1/26  55,000  55,550 
MGM Resorts International company guaranty sr. unsec. notes     
6.75%, 10/1/20  40,000  42,202 
MGM Resorts International company guaranty sr. unsec. unsub.     
notes 8.625%, 2/1/19  60,000  62,045 

 

38 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Consumer cyclicals cont.     
MGM Resorts International company guaranty sr. unsec. unsub.     
notes 6.625%, 12/15/21  $5,000  $5,294 
Moody’s Corp. sr. unsec. notes 3.25%, 1/15/28  20,000  18,900 
Navistar International Corp. 144A sr. unsec. notes 6.625%, 11/1/25  75,000  77,438 
Neiman Marcus Group, LLC (The) company guaranty sr. notes     
7.125%, 6/1/28  65,000  52,325 
Neiman Marcus Group, Ltd. 144A company guaranty sr. unsec. sub.     
notes 8.75% (9.50%), 10/15/21  ‡‡   16,458  11,685 
Nexstar Broadcasting, Inc. 144A company guaranty sr. unsec.     
notes 5.625%, 8/1/24  75,000  73,361 
Nielsen Co. Luxembourg SARL (The) 144A company guaranty sr.     
unsec. notes 5.00%, 2/1/25 (Luxembourg)  60,000  57,900 
Nielsen Finance, LLC/Nielsen Finance Co. 144A company guaranty     
sr. unsec. sub. notes 5.00%, 4/15/22  10,000  9,920 
O’Reilly Automotive, Inc. company guaranty sr. unsec. sub. notes     
3.55%, 3/15/26  26,000  25,144 
Omnicom Group, Inc. company guaranty sr. unsec. unsub. notes     
3.60%, 4/15/26  52,000  50,023 
Outfront Media Capital, LLC/Outfront Media Capital Corp.     
company guaranty sr. unsec. sub. notes 5.875%, 3/15/25  40,000  40,400 
Penn National Gaming, Inc. 144A sr. unsec. notes 5.625%, 1/15/27  25,000  23,875 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.75%, 10/1/22  30,000  30,675 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.50%, 5/15/26  75,000  73,875 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.375%, 12/1/24  10,000  9,852 
PetSmart, Inc. 144A sr. unsec. notes 7.125%, 3/15/23  15,000  7,212 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
7.875%, 6/15/32  75,000  86,250 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 3/1/26  20,000  19,900 
QVC, Inc. company guaranty sr. sub. notes 4.45%, 2/15/25  36,000  34,898 
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp.     
144A sr. notes 6.125%, 8/15/21  65,000  64,675 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
4.40%, 2/15/26  26,000  27,094 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
2.95%, 1/22/27  24,000  22,464 
Sabre GLBL, Inc. 144A company guaranty sr. notes 5.375%, 4/15/23  55,000  55,561 
Scientific Games International, Inc. company guaranty sr. unsec.     
notes 10.00%, 12/1/22  145,000  155,514 
Sinclair Television Group, Inc. 144A company guaranty sr. unsec.     
sub. notes 5.625%, 8/1/24  85,000  84,656 
Sirius XM Radio, Inc. 144A company guaranty sr. unsec. sub. notes     
6.00%, 7/15/24  30,000  30,675 
Sirius XM Radio, Inc. 144A sr. unsec. bonds 5.00%, 8/1/27  155,000  147,250 
Six Flags Entertainment Corp. 144A company guaranty sr. unsec.     
bonds 5.50%, 4/15/27  95,000  92,122 
Six Flags Entertainment Corp. 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 7/31/24  35,000  33,775 

 

Dynamic Risk Allocation Fund 39 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Consumer cyclicals cont.     
Spectrum Brands, Inc. company guaranty sr. unsec. notes     
5.75%, 7/15/25  $35,000  $34,650 
Spectrum Brands, Inc. company guaranty sr. unsec. unsub. notes     
6.125%, 12/15/24  30,000  30,413 
Standard Industries, Inc. 144A sr. unsec. notes 5.375%, 11/15/24  50,000  49,125 
Standard Industries, Inc. 144A sr. unsec. notes 5.00%, 2/15/27  128,000  120,000 
Standard Industries, Inc. 144A sr. unsec. notes 4.75%, 1/15/28  5,000  4,588 
SugarHouse HSP Gaming Prop. Mezz LP/SugarHouse HSP     
Gaming Finance Corp. 144A company guaranty sr. unsub. notes     
5.875%, 5/15/25  35,000  33,381 
Time Warner, Inc. company guaranty sr. unsec. unsub. bonds     
3.80%, 2/15/27  62,000  59,886 
Time Warner, Inc. company guaranty sr. unsec. unsub. bonds     
2.95%, 7/15/26  27,000  24,542 
Townsquare Media, Inc. 144A company guaranty sr. unsec. notes     
6.50%, 4/1/23  15,000  13,500 
TRI Pointe Group, Inc./TRI Pointe Homes, Inc. company guaranty     
sr. unsec. unsub. notes 5.875%, 6/15/24  40,000  39,788 
Tribune Media Co. company guaranty sr. unsec. notes     
5.875%, 7/15/22  20,000  20,225 
Univision Communications, Inc. 144A company guaranty sr. sub.     
notes 5.125%, 2/15/25  55,000  50,650 
Werner FinCo LP/Werner FinCo, Inc. 144A company guaranty sr.     
unsec. notes 8.75%, 7/15/25  80,000  80,400 
WMG Acquisition Corp. 144A company guaranty sr. notes     
5.00%, 8/1/23  30,000  29,625 
WMG Acquisition Corp. 144A company guaranty sr. unsec. notes     
5.50%, 4/15/26  10,000  9,900 
Wolverine World Wide, Inc. 144A company guaranty sr. unsec.     
bonds 5.00%, 9/1/26  25,000  23,688 
Wyndham Hotels & Resorts, Inc. 144A company guaranty sr. unsec.     
notes 5.375%, 4/15/26  30,000  30,038 
Wyndham Worldwide Corp. sr. unsec. unsub. bonds 4.50%, 4/1/27  86,000  84,906 
Wyndham Worldwide Corp. sr. unsec. unsub. notes 5.625%, 3/1/21  22,000  22,946 
Wynn Las Vegas, LLC/Wynn Las Vegas Capital Corp. 144A company     
guaranty sr. unsec. sub. notes 5.25%, 5/15/27  80,000  76,500 
    5,467,984 
Consumer staples (1.4%)     
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty     
notes 5.00%, 10/15/25 (Canada)  50,000  47,625 
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty sr.     
notes 4.625%, 1/15/22 (Canada)  25,000  24,969 
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty sr.     
sub. notes 4.25%, 5/15/24 (Canada)  50,000  47,375 
Altria Group, Inc. company guaranty sr. unsec. unsub. notes     
2.625%, 1/14/20  145,000  144,564 
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. bonds 4.90%, 2/1/46  157,000  163,540 
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. bonds 3.65%, 2/1/26  49,000  48,306 

 

40 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Consumer staples cont.     
Anheuser-Busch InBev Finance, Inc. company guaranty sr. unsec.     
unsub. notes 2.65%, 2/1/21  $145,000  $143,647 
Ascend Learning, LLC 144A sr. unsec. notes 6.875%, 8/1/25  45,000  45,000 
BlueLine Rental Finance Corp./BlueLine Rental, LLC 144A     
company guaranty sub. notes 9.25%, 3/15/24  75,000  80,023 
Brand Energy & Infrastructure Services, Inc. 144A sr. unsec. notes     
8.50%, 7/15/25  85,000  86,913 
CEC Entertainment, Inc. company guaranty sr. unsec. sub. notes     
8.00%, 2/15/22  60,000  53,475 
Coca-Cola Co. (The) sr. unsec. unsub. bonds 2.25%, 9/1/26  22,000  20,024 
Dean Foods Co. 144A company guaranty sr. unsec. notes     
6.50%, 3/15/23  50,000  49,000 
Diageo Investment Corp. company guaranty sr. unsec. notes     
8.00%, 9/15/22  7,000  8,285 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. bonds     
4.50%, 2/15/45  37,000  35,454 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes     
7.00%, 10/15/37  132,000  166,004 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes     
5.625%, 3/15/42  42,000  46,714 
Fresh Market, Inc. (The) 144A company guaranty sr. notes     
9.75%, 5/1/23  35,000  22,050 
Golden Nugget, Inc. 144A company guaranty sr. unsec. sub. notes     
8.75%, 10/1/25  70,000  72,975 
Golden Nugget, Inc. 144A sr. unsec. notes 6.75%, 10/15/24  100,000  101,125 
Itron, Inc. 144A company guaranty sr. unsec. notes 5.00%, 1/15/26  40,000  38,400 
Kellogg Co. sr. unsec. unsub. notes 3.25%, 4/1/26  52,000  49,135 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 5.25%, 6/1/26  60,000  58,650 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 5.00%, 6/1/24  15,000  14,813 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 4.75%, 6/1/27  20,000  18,800 
Kraft Heinz Co. (The) company guaranty sr. unsec. notes Ser. 144A,     
6.875%, 1/26/39  71,000  84,798 
Lamb Weston Holdings, Inc. 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 11/1/26  145,000  143,732 
Maple Escrow Subsidiary, Inc. 144A company guaranty sr. unsec.     
notes 4.597%, 5/25/28  135,000  136,124 
Match Group, Inc. 144A sr. unsec. bonds 5.00%, 12/15/27  40,000  38,006 
Netflix, Inc. 144A sr. unsec. bonds 4.875%, 4/15/28  35,000  33,254 
Netflix, Inc. 144A sr. unsec. unsub. bonds 5.875%, 11/15/28  25,000  25,133 
Newell Brands, Inc. sr. unsec. unsub. notes 4.20%, 4/1/26  63,000  61,941 
PepsiCo, Inc. sr. unsec. unsub. bonds 3.45%, 10/6/46  34,000  30,831 
Revlon Consumer Products Corp. company guaranty sr. unsec.     
notes 6.25%, 8/1/24  85,000  48,663 
Rite Aid Corp. 144A company guaranty sr. unsec. unsub. notes     
6.125%, 4/1/23  60,000  61,500 
Walgreens Boots Alliance, Inc. sr. unsec. unsub. notes     
3.30%, 11/18/21  26,000  25,953 
    2,276,801 

 

Dynamic Risk Allocation Fund 41 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Energy (3.3%)     
Alta Mesa Holdings LP/Alta Mesa Finance Services Corp. company     
guaranty sr. unsec. notes 7.875%, 12/15/24  $80,000  $83,800 
Antero Resources Corp. company guaranty sr. unsec. notes     
5.625%, 6/1/23  25,000  25,375 
Antero Resources Corp. company guaranty sr. unsec. sub. notes     
5.375%, 11/1/21  20,000  20,210 
Antero Resources Corp. company guaranty sr. unsec. sub. notes     
5.125%, 12/1/22  15,000  15,075 
Ascent Resources Utica Holdings, LLC/ARU Finance Corp. 144A sr.     
unsec. notes 10.00%, 4/1/22  25,000  26,938 
BP Capital Markets PLC company guaranty sr. unsec. unsub. notes     
2.315%, 2/13/20 (United Kingdom)  82,000  81,312 
BP Capital Markets PLC company guaranty sr. unsec. unsub. notes     
1.768%, 9/19/19 (United Kingdom)  40,000  39,545 
Calfrac Holdings LP 144A company guaranty sr. unsec. unsub.     
notes 7.50%, 12/1/20  35,000  35,438 
California Resources Corp. company guaranty sr. unsec. sub. notes     
5.00%, 1/15/20  30,000  28,500 
California Resources Corp. 144A company guaranty notes     
8.00%, 12/15/22  11,000  9,708 
Canadian Natural Resources, Ltd. sr. unsec. unsub. bonds 3.85%,     
6/1/27 (Canada)  16,000  15,722 
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes     
5.875%, 3/31/25  110,000  114,813 
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes     
5.125%, 6/30/27  75,000  74,532 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
8.00%, 6/15/27  20,000  19,850 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
8.00%, 1/15/25  100,000  99,375 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
5.75%, 3/15/23  10,000  9,400 
Chesapeake Energy Corp. 144A company guaranty notes     
8.00%, 12/15/22  25,000  26,438 
Chevron Corp. sr. unsec. unsub. notes 1.561%, 5/16/19  30,000  29,726 
Concho Resources, Inc. company guaranty sr. unsec. notes     
3.75%, 10/1/27  115,000  111,418 
Continental Resources, Inc. company guaranty sr. unsec. bonds     
4.90%, 6/1/44  60,000  59,346 
Continental Resources, Inc. company guaranty sr. unsec. notes     
3.80%, 6/1/24  20,000  19,557 
Continental Resources, Inc. company guaranty sr. unsec. unsub.     
notes 4.50%, 4/15/23  45,000  45,912 
Covey Park Energy, LLC/Covey Park Finance Corp. 144A company     
guaranty sr. unsec. notes 7.50%, 5/15/25  60,000  59,400 
CrownRock LP/CrownRock Finance, Inc. 144A sr. unsec. notes     
5.625%, 10/15/25  45,000  43,763 
Denbury Resources, Inc. company guaranty sr. unsec. sub. notes     
6.375%, 8/15/21  35,000  32,550 
Denbury Resources, Inc. 144A company guaranty notes     
9.00%, 5/15/21  41,000  43,563 

 

42 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Energy cont.     
Diamondback Energy, Inc. company guaranty sr. unsec. unsub.     
notes 5.375%, 5/31/25  $50,000  $49,500 
Diamondback Energy, Inc. company guaranty sr. unsec. unsub.     
notes 4.75%, 11/1/24  20,000  19,300 
Endeavor Energy Resources LP/EER Finance, Inc. 144A sr. unsec.     
bonds 5.75%, 1/30/28  60,000  58,950 
Endeavor Energy Resources LP/EER Finance, Inc. 144A sr. unsec.     
notes 5.50%, 1/30/26  20,000  19,600 
Energy Transfer Partners LP jr. unsec. sub. FRB Ser. B, 6.625%,     
perpetual maturity  156,000  145,939 
Energy Transfer Partners LP sr. unsec. unsub. bonds     
6.125%, 12/15/45  13,000  13,237 
Ensco PLC sr. unsec. notes 7.75%, 2/1/26 (United Kingdom)  30,000  28,575 
EOG Resources, Inc. sr. unsec. unsub. notes 2.625%, 3/15/23  35,000  33,707 
EP Energy, LLC/Everest Acquisition Finance, Inc. company     
guaranty sr. unsec. sub. notes 9.375%, 5/1/20  29,000  28,420 
EP Energy, LLC/Everest Acquisition Finance, Inc. 144A company     
guaranty notes 9.375%, 5/1/24  46,000  36,124 
EP Energy, LLC/Everest Acquisition Finance, Inc. 144A company     
guaranty sr. notes 8.00%, 11/29/24  30,000  29,700 
EP Energy, LLC/Everest Acquisition Finance, Inc. 144A company     
guaranty sr. notes 7.75%, 5/15/26  35,000  35,613 
EQT Corp. sr. unsec. unsub. notes 3.90%, 10/1/27  60,000  57,122 
Extraction Oil & Gas, Inc. 144A sr. unsec. notes 5.625%, 2/1/26  40,000  38,300 
Exxon Mobil Corp. sr. unsec. unsub. notes 2.222%, 3/1/21  240,000  236,603 
Hess Infrastructure Partners LP/Hess Infrastructure Partners     
Finance Corp. 144A sr. unsec. notes 5.625%, 2/15/26  55,000  55,275 
Holly Energy Partners LP/Holly Energy Finance Corp. 144A     
company guaranty sr. unsec. notes 6.00%, 8/1/24  65,000  64,919 
Indigo Natural Resources, LLC 144A sr. unsec. notes     
6.875%, 2/15/26  40,000  38,200 
Jagged Peak Energy, LLC 144A company guaranty sr. unsec. notes     
5.875%, 5/1/26  35,000  34,563 
Jonah Energy, LLC/Jonah Energy Finance Corp. 144A company     
guaranty sr. unsec. notes 7.25%, 10/15/25  20,000  15,825 
MEG Energy Corp. 144A company guaranty sr. unsec. notes 7.00%,     
3/31/24 (Canada)  10,000  9,025 
MEG Energy Corp. 144A notes 6.50%, 1/15/25 (Canada)  50,000  50,110 
Motiva Enterprises, LLC 144A sr. unsec. notes 5.75%, 1/15/20  11,000  11,393 
Murray Energy Corp. 144A notes 11.25%, 4/15/21  45,000  19,125 
Nabors Industries, Inc. 144A company guaranty sr. unsec. notes     
5.75%, 2/1/25  55,000  52,113 
Newfield Exploration Co. sr. unsec. unsub. notes 5.75%, 1/30/22  25,000  26,188 
Newfield Exploration Co. sr. unsec. unsub. notes 5.375%, 1/1/26  75,000  77,156 
Noble Holding International, Ltd. company guaranty sr. unsec.     
unsub. notes 7.75%, 1/15/24  25,000  23,438 
Noble Holding International, Ltd. 144A company guaranty sr.     
unsec. notes 7.875%, 2/1/26  15,000  15,281 
Oasis Petroleum, Inc. company guaranty sr. unsec. unsub. notes     
6.875%, 3/15/22  81,000  82,215 
Oasis Petroleum, Inc. 144A sr. unsec. notes 6.25%, 5/1/26  35,000  35,263 

 

Dynamic Risk Allocation Fund 43 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Energy cont.     
Occidental Petroleum Corp. sr. unsec. unsub. bonds     
4.40%, 4/15/46  $41,000  $42,088 
Pertamina Persero PT 144A sr. unsec. unsub. notes 4.30%,     
5/20/23 (Indonesia)  200,000  199,364 
Petrobras Global Finance BV company guaranty sr. unsec. notes     
Ser. REGS, 5.299%, 1/27/25 (Brazil)  8,000  7,510 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
bonds 7.375%, 1/17/27 (Brazil)  48,000  48,713 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
bonds 7.25%, 3/17/44 (Brazil)  99,000  93,060 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
bonds 5.75%, 2/1/29 (Brazil)  21,000  18,743 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 8.75%, 5/23/26 (Brazil)  83,000  91,881 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 6.25%, 3/17/24 (Brazil)  281,000  283,810 
Petroleos de Venezuela SA 144A company guaranty sr. unsec.     
notes 6.00%, 11/15/26 (Venezuela) (In default)  †   110,000  24,893 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
6.875%, 8/4/26 (Mexico)  35,000  37,270 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
6.50%, 3/13/27 (Mexico)  159,000  161,931 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
4.50%, 1/23/26 (Mexico)  205,000  190,958 
Philips 66 Partners LP sr. unsec. bonds 3.75%, 3/1/28  20,000  19,047 
QEP Resources, Inc. sr. unsec. notes 5.625%, 3/1/26  35,000  33,425 
Range Resources Corp. company guaranty sr. unsec. notes     
5.00%, 3/15/23  15,000  14,550 
Range Resources Corp. company guaranty sr. unsec. sub. notes     
5.75%, 6/1/21  25,000  25,688 
Regency Energy Partners LP/Regency Energy Finance Corp.     
company guaranty sr. unsec. unsub. notes 5.875%, 3/1/22  10,000  10,631 
Regency Energy Partners LP/Regency Energy Finance Corp.     
company guaranty sr. unsec. unsub. notes 4.50%, 11/1/23  25,000  25,238 
Rose Rock Midstream LP/Rose Rock Finance Corp. company     
guaranty sr. unsec. sub. notes 5.625%, 11/15/23  5,000  4,663 
Sabine Pass Liquefaction, LLC sr. bonds 4.20%, 3/15/28  26,000  25,319 
Sabine Pass Liquefaction, LLC sr. notes 5.00%, 3/15/27  34,000  35,092 
SemGroup Corp. company guaranty sr. unsec. notes     
6.375%, 3/15/25  5,000  4,725 
SESI, LLC company guaranty sr. unsec. notes 7.75%, 9/15/24  30,000  31,125 
SESI, LLC company guaranty sr. unsec. unsub. notes     
7.125%, 12/15/21  20,000  20,375 
Seven Generations Energy, Ltd. 144A company guaranty sr. unsec.     
notes 5.375%, 9/30/25 (Canada)  30,000  28,913 
Seven Generations Energy, Ltd. 144A sr. unsec. bonds 6.75%,     
5/1/23 (Canada)  15,000  15,638 
Seventy Seven Energy, Inc. escrow sr. unsec. notes     
6.50%, 7/15/22 F   50,000  5 
Shell International Finance BV company guaranty sr. unsec. unsub.     
notes 2.875%, 5/10/26 (Netherlands)  55,000  52,437 

 

44 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Energy cont.     
SM Energy Co. sr. unsec. notes 6.50%, 11/15/21  $30,000  $30,525 
SM Energy Co. sr. unsec. sub. notes 5.00%, 1/15/24  25,000  23,438 
SM Energy Co. sr. unsec. unsub. notes 6.50%, 1/1/23  15,000  15,225 
SM Energy Co. sr. unsec. unsub. notes 6.125%, 11/15/22  45,000  45,675 
Spectra Energy Partners LP sr. unsec. notes 3.375%, 10/15/26  39,000  36,422 
Statoil ASA company guaranty sr. unsec. unsub. notes 2.90%,     
11/8/20 (Norway)  55,000  55,145 
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp. 144A     
company guaranty sr. unsec. bonds 5.50%, 1/15/28  30,000  28,988 
Targa Resources Partners LP/Targa Resources Partners Finance     
Corp. company guaranty sr. unsec. notes 5.375%, 2/1/27  30,000  29,063 
Targa Resources Partners LP/Targa Resources Partners     
Finance Corp. 144A company guaranty sr. unsec. unsub. bonds     
5.00%, 1/15/28  105,000  98,669 
Targa Resources Partners LP/Targa Resources Partners     
Finance Corp. 144A company guaranty sr. unsec. unsub. notes     
5.875%, 4/15/26  10,000  10,047 
Total Capital International SA company guaranty sr. unsec. unsub.     
notes 2.75%, 6/19/21 (France)  235,000  233,676 
Transcanada Trust company guaranty jr. unsec. sub. FRB 5.30%,     
3/15/77 (Canada)  46,000  43,729 
Trinidad Drilling, Ltd. 144A company guaranty sr. unsec. notes     
6.625%, 2/15/25 (Canada)  45,000  42,863 
USA Compression Partners LP/USA Compression Finance Corp.     
144A sr. unsec. notes 6.875%, 4/1/26  20,000  20,600 
Valero Energy Partners LP sr. unsec. unsub. notes     
4.375%, 12/15/26  9,000  8,983 
Vermilion Energy, Inc. 144A company guaranty sr. unsec. notes     
5.625%, 3/15/25 (Canada)  20,000  19,800 
Weatherford International, LLC 144A company guaranty sr. unsec.     
notes 9.875%, 3/1/25  20,000  19,500 
Weatherford International, Ltd. company guaranty sr. unsec. sub.     
notes 9.875%, 2/15/24  65,000  63,700 
Whiting Petroleum Corp. 144A sr. unsec. notes 6.625%, 1/15/26  25,000  25,594 
Williams Cos., Inc. (The) sr. unsec. unsub. notes 8.75%, 3/15/32  43,000  55,900 
Williams Partners LP sr. unsec. sub. notes 4.30%, 3/4/24  60,000  60,537 
WPX Energy, Inc. sr. unsec. notes 8.25%, 8/1/23  20,000  22,700 
WPX Energy, Inc. sr. unsec. notes 5.75%, 6/1/26  20,000  19,962 
WPX Energy, Inc. sr. unsec. unsub. notes 6.00%, 1/15/22  14,000  14,700 
    5,184,578 
Financials (4.9%)     
AIG Global Funding 144A sr. notes 2.15%, 7/2/20  50,000  49,134 
Air Lease Corp. sr. unsec. unsub. notes 3.625%, 4/1/27  41,000  38,431 
Alliance Data Systems Corp. 144A company guaranty sr. unsec.     
notes 5.375%, 8/1/22  40,000  40,200 
Alliant Holdings Intermediate, LLC 144A sr. unsec. notes     
8.25%, 8/1/23  30,000  30,975 
Ally Financial, Inc. company guaranty sr. unsec. notes     
8.00%, 11/1/31  100,000  120,000 
Ally Financial, Inc. sub. unsec. notes 5.75%, 11/20/25  80,000  81,560 
American Express Co. sr. unsec. bonds 8.125%, 5/20/19  75,000  78,800 

 

Dynamic Risk Allocation Fund 45 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Financials cont.     
American International Group, Inc. jr. unsec. sub. FRB     
8.175%, 5/15/58  $150,000  $189,375 
Bank of America Corp. jr. unsec. sub. FRN Ser. AA, 6.10%,     
perpetual maturity  49,000  50,348 
Bank of America Corp. jr. unsec. sub. FRN Ser. Z, 6.50%,     
perpetual maturity  15,000  15,919 
Bank of America Corp. sr. unsec. unsub. bonds Ser. MTN,     
3.248%, 10/21/27  56,000  52,485 
Bank of America Corp. sr. unsec. unsub. notes Ser. MTN,     
2.151%, 11/9/20  15,000  14,696 
Bank of America Corp. unsec. sub. notes 6.11%, 1/29/37  170,000  200,570 
Bank of Montreal sr. unsec. unsub. notes Ser. D, 3.10%,     
4/13/21 (Canada)  55,000  54,906 
Bank of Montreal unsec. sub. FRN 3.803%, 12/15/32 (Canada)  10,000  9,339 
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.70%,     
3/7/22 (Canada)  16,000  15,689 
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.35%,     
10/21/20 (Canada)  60,000  58,905 
Banque Federative du Credit Mutuel SA 144A sr. unsec. unsub.     
notes 2.20%, 7/20/20 (France)  245,000  240,334 
BGC Partners, Inc. sr. unsec. notes 5.125%, 5/27/21  7,000  7,296 
Cantor Fitzgerald LP 144A unsec. bonds 7.875%, 10/15/19  25,000  26,340 
Cantor Fitzgerald LP 144A unsec. notes 6.50%, 6/17/22  48,000  51,938 
CBRE Services, Inc. company guaranty sr. unsec. notes     
5.25%, 3/15/25  37,000  39,297 
CBRE Services, Inc. company guaranty sr. unsec. unsub. notes     
4.875%, 3/1/26  35,000  36,451 
CIT Group, Inc. sr. unsec. sub. notes 5.00%, 8/1/23  35,000  35,306 
CIT Group, Inc. sr. unsec. unsub. notes 5.25%, 3/7/25  57,000  57,855 
CIT Group, Inc. sr. unsec. unsub. notes 5.00%, 8/15/22  30,000  30,488 
Citigroup, Inc. sr. unsec. FRB 3.668%, 7/24/28  60,000  57,365 
Citigroup, Inc. sr. unsec. notes 2.65%, 10/26/20  118,000  116,433 
Citigroup, Inc. sr. unsec. unsub. FRB 3.887%, 1/10/28  97,000  94,669 
Citigroup, Inc. unsec. sub. bonds 4.45%, 9/29/27  60,000  59,440 
Citigroup, Inc. unsec. sub. notes 5.50%, 9/13/25  49,000  52,407 
CNG Holdings, Inc. 144A sr. notes 9.375%, 5/15/20  50,000  49,750 
CNO Financial Group, Inc. sr. unsec. unsub. notes 5.25%, 5/30/25  45,000  45,225 
Commonwealth Bank of Australia 144A sr. unsec. notes 3.15%,     
9/19/27 (Australia)  55,000  51,750 
Commonwealth Bank of Australia 144A unsec. notes 2.20%,     
11/9/20 (Australia)  330,000  322,635 
Cooperatieve Rabobank UA company guaranty sr. unsec. unsub.     
bonds Ser. MTN, 5.25%, 5/24/41 (Netherlands)  30,000  34,279 
Credit Acceptance Corp. company guaranty sr. unsec. notes     
7.375%, 3/15/23  35,000  36,313 
Credit Acceptance Corp. company guaranty sr. unsec. notes     
6.125%, 2/15/21  10,000  10,025 
Duke Realty LP company guaranty sr. unsec. unsub. notes     
4.375%, 6/15/22 R   16,000  16,530 
ESH Hospitality, Inc. 144A company guaranty sr. unsec. notes     
5.25%, 5/1/25 R   40,000  38,424 

 

46 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Financials cont.     
Fairfax Financial Holdings, Ltd. 144A sr. unsec. notes 4.85%,     
4/17/28 (Canada)  $85,000  $84,543 
Fairfax US, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 8/13/24  60,000  61,453 
Fifth Third Bancorp jr. unsec. sub. FRB 5.10%, perpetual maturity  25,000  24,563 
Freedom Mortgage Corp. 144A sr. unsec. notes 8.25%, 4/15/25  35,000  34,913 
Freedom Mortgage Corp. 144A sr. unsec. notes 8.125%, 11/15/24  50,000  49,735 
GE Capital International Funding Co. Unlimited Co. company     
guaranty sr. unsec. notes 3.373%, 11/15/25 (Ireland)  11,000  10,563 
goeasy, Ltd. 144A company guaranty sr. unsec. notes 7.875%,     
11/1/22 (Canada)  30,000  31,950 
Goldman Sachs Group, Inc. (The) sr. unsec. FRB 4.223%, 5/1/29  85,000  83,668 
Goldman Sachs Group, Inc. (The) sr. unsec. notes 7.50%, 2/15/19  33,000  34,074 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
3.85%, 1/26/27  120,000  116,437 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
2.60%, 12/27/20  238,000  234,627 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
2.30%, 12/13/19  136,000  134,821 
Hospitality Properties Trust sr. unsec. notes 4.375%, 2/15/30 R   57,000  52,891 
Hospitality Properties Trust sr. unsec. unsub. notes     
4.50%, 3/15/25 R   13,000  12,865 
HUB International, Ltd. 144A sr. unsec. notes 7.00%, 5/1/26  40,000  40,032 
Huntington Bancshares, Inc. unsec. notes 4.35%, 2/4/23  30,000  30,539 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.75%, 2/1/24  30,000  30,675 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.25%, 2/1/22  30,000  30,713 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.00%, 8/1/20  30,000  30,563 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 5.875%, 2/1/22  15,000  15,150 
Intelsat Connect Finance SA 144A company guaranty sr. unsec.     
sub. notes 12.50%, 4/1/22 (Luxembourg)  3,000  2,895 
iStar, Inc. sr. unsec. notes 6.00%, 4/1/22 R   20,000  20,000 
iStar, Inc. sr. unsec. unsub. notes 5.25%, 9/15/22 R   15,000  14,569 
JPMorgan Chase & Co. jr. unsec. bonds 6.10%, perpetual maturity  9,000  9,225 
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. Z, 5.30%,     
perpetual maturity  43,000  43,946 
JPMorgan Chase & Co. sr. unsec. unsub. FRB 3.964%, 11/15/48  196,000  181,696 
JPMorgan Chase & Co. unsec. sub. bonds 3.625%, 12/1/27  124,000  117,220 
KeyCorp sr. unsec. unsub. notes Ser. MTN, 2.30%, 12/13/18  84,000  83,885 
KKR Group Finance Co. III, LLC 144A company guaranty sr. unsec.     
unsub. bonds 5.125%, 6/1/44  19,000  19,409 
KKR Group Finance Co., LLC 144A company guaranty sr. unsec.     
unsub. notes 6.375%, 9/29/20  41,000  43,941 
Liberty Mutual Group, Inc. 144A company guaranty jr. unsec. sub.     
bonds 7.80%, 3/15/37  92,000  109,940 
Lions Gate Capital Holdings, LLC 144A company guaranty sr.     
unsec. notes 5.875%, 11/1/24  45,000  45,000 

 

Dynamic Risk Allocation Fund 47 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Financials cont.     
Lloyds Banking Group PLC jr. unsec. sub. FRB 7.50%, perpetual     
maturity (United Kingdom)  $200,000  $209,250 
LPL Holdings, Inc. 144A company guaranty sr. unsec. notes     
5.75%, 9/15/25  60,000  57,750 
Macquarie Bank, Ltd. 144A sr. unsec. notes 2.85%,     
7/29/20 (Australia)  49,000  48,583 
Macquarie Group Ltd. 144A sr. unsec. notes 7.625%,     
8/13/19 (Australia)  110,000  115,664 
MetLife, Inc. sr. unsec. unsub. notes 4.75%, 2/8/21  100,000  104,254 
MGM Growth Properties Operating Partnership LP/MGP Finance     
Co-Issuer, Inc. company guaranty sr. unsec. notes 5.625%, 5/1/24 R   25,000  25,250 
MGM Growth Properties Operating Partnership LP/MGP Finance     
Co-Issuer, Inc. company guaranty sr. unsec. notes 4.50%, 1/15/28 R   15,000  13,463 
Mid-America Apartments LP sr. unsec. notes 4.30%, 10/15/23 R   20,000  20,517 
Morgan Stanley sr. unsec. unsub. notes 4.375%, 1/22/47  55,000  53,921 
Morgan Stanley sr. unsec. unsub. notes 3.625%, 1/20/27  120,000  116,035 
Morgan Stanley sr. unsec. unsub. notes 2.65%, 1/27/20  80,000  79,539 
National Australia Bank, Ltd./New York sr. unsec. notes 2.50%,     
1/12/21 (Australia)  250,000  249,775 
Nationstar Mortgage, LLC/Nationstar Capital Corp. company     
guaranty sr. unsec. unsub. notes 6.50%, 7/1/21  55,000  55,550 
Neuberger Berman Group, LLC/Neuberger Berman Finance Corp.     
144A sr. unsec. notes 4.875%, 4/15/45  40,000  38,995 
Peachtree Corners Funding Trust 144A company guaranty sr.     
unsec. unsub. bonds 3.976%, 2/15/25  100,000  98,625 
Provident Funding Associates LP/PFG Finance Corp. 144A sr.     
unsec. notes 6.375%, 6/15/25  40,000  38,800 
Regions Financial Corp. sr. unsec. unsub. notes 2.75%, 8/14/22  35,000  33,924 
Royal Bank of Canada sr. unsec. notes Ser. GMTN, 2.125%,     
3/2/20 (Canada)  77,000  75,937 
Royal Bank of Canada sr. unsec. unsub. notes Ser. GMTN, 2.20%,     
7/27/18 (Canada)  145,000  144,958 
Royal Bank of Canada unsec. sub. notes Ser. GMTN, 4.65%,     
1/27/26 (Canada)  30,000  30,728 
Skandinaviska Enskilda Banken AB 144A sr. unsec. unsub. notes     
2.625%, 11/17/20 (Sweden)  270,000  266,606 
Springleaf Finance Corp. company guaranty sr. unsec. unsub.     
notes 6.875%, 3/15/25  35,000  34,825 
Springleaf Finance Corp. company guaranty sr. unsec. unsub.     
notes 6.125%, 5/15/22  30,000  30,600 
Starwood Property Trust, Inc. 144A sr. unsec. notes     
4.75%, 3/15/25 R   45,000  43,313 
Swiss Re Treasury US Corp. 144A company guaranty sr. unsec.     
notes 4.25%, 12/6/42  60,000  61,066 
TMX Finance, LLC/TitleMax Finance Corp. 144A sr. notes     
11.125%, 4/1/23  35,000  35,044 
Toronto-Dominion Bank (The) unsec. sub. FRB 3.625%,     
9/15/31 (Canada)  43,000  41,224 
Travelport Corporate Finance PLC 144A company guaranty sr.     
notes 6.00%, 3/15/26 (United Kingdom)  25,000  25,125 

 

48 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Financials cont.     
UBS AG/London 144A sr. unsec. notes 2.20%, 6/8/20     
(United Kingdom)  $200,000  $196,435 
UBS Group Funding Jersey, Ltd. 144A company guaranty sr. unsec.     
notes 3.00%, 4/15/21 (Switzerland)  200,000  197,317 
USIS Merger Sub, Inc. 144A sr. unsec. notes 6.875%, 5/1/25  55,000  55,413 
VEREIT Operating Partnership LP company guaranty sr. unsec.     
notes 4.60%, 2/6/24 R   40,000  40,071 
Wells Fargo & Co. jr. unsec. sub. FRB Ser. U, 5.875%,     
perpetual maturity  46,000  46,863 
Wells Fargo & Co. sr. unsec. notes Ser. GMTN, 2.60%, 7/22/20  115,000  113,738 
Westpac Banking Corp. sr. unsec. unsub. notes 2.15%,     
3/6/20 (Australia)  286,000  282,086 
Westpac Banking Corp. sr. unsec. unsub. notes 2.00%,     
8/19/21 (Australia)  45,000  43,278 
WeWork Cos, Inc. 144A company guaranty sr. unsec. notes     
7.875%, 5/1/25  70,000  65,897 
    7,638,802 
Health care (1.7%)     
AbbVie, Inc. sr. unsec. notes 3.60%, 5/14/25  19,000  18,523 
AbbVie, Inc. sr. unsec. notes 2.90%, 11/6/22  13,000  12,702 
Air Medical Merger Sub Corp. 144A sr. unsec. notes 6.375%, 5/15/23  70,000  65,975 
Allergan Funding SCS company guaranty sr. unsec. notes 3.45%,     
3/15/22 (Luxembourg)  16,000  15,803 
Allergan Funding SCS company guaranty sr. unsec. unsub. notes     
3.80%, 3/15/25 (Luxembourg)  15,000  14,594 
Amgen, Inc. sr. unsec. bonds 4.663%, 6/15/51  47,000  47,166 
Amgen, Inc. sr. unsec. unsub. notes 2.60%, 8/19/26  69,000  62,590 
ASP AMC Merger Sub, Inc. 144A sr. unsec. notes 8.00%, 5/15/25  65,000  55,799 
AstraZeneca PLC sr. unsec. unsub. notes 6.45%, 9/15/37     
(United Kingdom)  12,000  15,257 
Becton Dickinson and Co. sr. unsec. unsub. bonds 4.669%, 6/6/47  69,000  68,213 
Becton Dickinson and Co. sr. unsec. unsub. bonds 3.70%, 6/6/27  59,000  56,106 
Biogen, Inc. sr. unsec. sub. notes 3.625%, 9/15/22  56,000  56,229 
BioScrip, Inc. company guaranty sr. unsec. notes 8.875%, 2/15/21  20,000  19,200 
Centene Corp. sr. unsec. unsub. notes 6.125%, 2/15/24  60,000  63,075 
Centene Corp. sr. unsec. unsub. notes 4.75%, 5/15/22  15,000  15,150 
Centene Escrow I Corp. 144A sr. unsec. notes 5.375%, 6/1/26  20,000  20,214 
CHS/Community Health Systems, Inc. company guaranty sr. notes     
6.25%, 3/31/23  45,000  41,963 
CHS/Community Health Systems, Inc. company guaranty sr.     
unsec. notes 6.875%, 2/1/22  120,000  63,000 
CHS/Community Health Systems, Inc. company guaranty sr.     
unsec. unsub. notes 7.125%, 7/15/20  30,000  25,200 
Concordia International Corp. 144A company guaranty sr. unsec.     
notes 7.00%, 4/15/23 (Canada) (In default)  †   60,000  3,600 
CVS Health Corp. sr. unsec. notes 4.75%, 12/1/22  60,000  62,374 
CVS Health Corp. sr. unsec. unsub. bonds 5.05%, 3/25/48  31,000  31,793 
CVS Health Corp. sr. unsec. unsub. notes 4.78%, 3/25/38  94,000  93,773 
CVS Health Corp. sr. unsec. unsub. notes 2.25%, 12/5/18  145,000  144,736 
Endo Finance, LLC/Endo Finco, Inc. 144A company guaranty sr.     
unsec. unsub. notes 5.375%, 1/15/23  130,000  96,525 

 

Dynamic Risk Allocation Fund 49 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Health care cont.     
GlaxoSmithKline Capital, Inc. company guaranty sr. unsec. unsub.     
notes 3.875%, 5/15/28  $20,000  $20,318 
HCA, Inc. company guaranty sr. bonds 5.25%, 6/15/26  50,000  49,813 
HCA, Inc. company guaranty sr. notes 6.50%, 2/15/20  85,000  88,825 
HCA, Inc. company guaranty sr. sub. bonds 5.50%, 6/15/47  80,000  74,600 
HCA, Inc. company guaranty sr. sub. notes 3.75%, 3/15/19  50,000  50,125 
Jaguar Holding Co. II/Pharmaceutical Product Development, LLC     
144A company guaranty sr. unsec. notes 6.375%, 8/1/23  30,000  30,158 
Kinetic Concepts, Inc./KCI USA, Inc. 144A company guaranty sub.     
notes 12.50%, 11/1/21  25,000  27,688 
Mallinckrodt International Finance SA/Mallinckrodt CB,     
LLC 144A company guaranty sr. unsec. unsub. notes 5.50%,     
4/15/25 (Luxembourg)  30,000  24,038 
Merck & Co., Inc. sr. unsec. unsub. notes 3.70%, 2/10/45  35,000  33,591 
Molina Healthcare, Inc. company guaranty sr. unsec. notes     
5.375%, 11/15/22  25,000  24,998 
Molina Healthcare, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 6/15/25  20,000  19,000 
Novartis Capital Corp. company guaranty sr. unsec. unsub. bonds     
4.00%, 11/20/45  60,000  61,348 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
notes 4.50%, 4/1/27 R   45,000  42,750 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
unsub. notes 4.95%, 4/1/24 R   72,000  73,295 
Ortho-Clinical Diagnostics, Inc./Ortho-Clinical Diagnostics     
SA 144A sr. unsec. notes 6.625%, 5/15/22  45,000  44,468 
Pfizer, Inc. sr. unsec. unsub. notes 3.00%, 12/15/26  30,000  28,961 
Pfizer, Inc. sr. unsec. unsub. notes 1.70%, 12/15/19  105,000  103,573 
Service Corp. International sr. unsec. notes 4.625%, 12/15/27  30,000  28,606 
Service Corp. International sr. unsec. unsub. notes 5.375%, 5/15/24  225,000  226,969 
Shire Acquisitions Investments Ireland DAC company guaranty sr.     
unsec. unsub. notes 3.20%, 9/23/26 (Ireland)  36,000  33,091 
Shire Acquisitions Investments Ireland DAC company guaranty sr.     
unsec. unsub. notes 2.875%, 9/23/23 (Ireland)  26,000  24,555 
Sotera Health Holdings, LLC 144A sr. unsec. notes 6.50%, 5/15/23  40,000  40,500 
Tenet Healthcare Corp. sr. unsec. notes 8.125%, 4/1/22  25,000  26,156 
UnitedHealth Group, Inc. sr. unsec. unsub. notes 4.70%, 2/15/21  43,000  44,740 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. notes 5.50%, 11/1/25  15,000  14,719 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 9.25%, 4/1/26  40,000  41,985 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 9.00%, 12/15/25  35,000  36,619 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 6.125%, 4/15/25  135,000  124,875 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsec. notes 5.625%, 12/1/21  5,000  4,955 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsub. notes 7.00%, 3/15/24  55,000  57,613 
Valeant Pharmaceuticals International, Inc. 144A company     
guaranty sr. unsub. notes 6.50%, 3/15/22  20,000  20,784 

 

50 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Health care cont.     
Valeant Pharmaceuticals International, Inc. 144A sr. unsec. notes     
8.50%, 1/31/27  $35,000  $35,613 
WellCare Health Plans, Inc. sr. unsec. notes 5.25%, 4/1/25  20,000  19,950 
    2,748,839 
Technology (1.7%)     
Alphabet, Inc. sr. unsec. notes 1.998%, 8/15/26  30,000  27,070 
Analog Devices, Inc. sr. unsec. unsub. notes 2.85%, 3/12/20  45,000  44,909 
Apple, Inc. sr. unsec. bonds 4.25%, 2/9/47  19,000  19,598 
Apple, Inc. sr. unsec. notes 2.85%, 5/6/21  50,000  50,105 
Apple, Inc. sr. unsec. notes 2.10%, 5/6/19  250,000  249,179 
Apple, Inc. sr. unsec. unsub. notes 4.375%, 5/13/45  28,000  29,299 
Apple, Inc. sr. unsec. unsub. notes 3.85%, 5/4/43  75,000  72,452 
Apple, Inc. sr. unsec. unsub. notes 2.00%, 5/6/20  35,000  34,578 
Avaya, Inc. 144A escrow notes 7.00%, 4/1/19  300,000  — 
Broadcom Corp./Broadcom Cayman Finance, Ltd. company     
guaranty sr. unsec. unsub. notes 3.875%, 1/15/27  57,000  54,418 
Broadcom Corp./Broadcom Cayman Finance, Ltd. company     
guaranty sr. unsec. unsub. notes 3.50%, 1/15/28  70,000  64,561 
Cisco Systems, Inc. sr. unsec. unsub. notes 2.50%, 9/20/26  30,000  27,889 
Cisco Systems, Inc. sr. unsec. unsub. notes 2.20%, 2/28/21  150,000  147,325 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A     
company guaranty sr. unsec. notes 7.125%, 6/15/24  110,000  118,191 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. bonds     
8.35%, 7/15/46  15,000  18,240 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. notes     
5.45%, 6/15/23  138,000  144,932 
Fidelity National Information Services, Inc. sr. unsec. sub. notes     
Ser. 10Y, 4.25%, 5/15/28  20,000  20,141 
Fidelity National Information Services, Inc. sr. unsec. unsub. notes     
5.00%, 10/15/25  6,000  6,356 
First Data Corp. 144A company guaranty sr. unsec. unsub. notes     
7.00%, 12/1/23  50,000  52,385 
First Data Corp. 144A notes 5.75%, 1/15/24  95,000  95,356 
Inception Merger Sub, Inc./Rackspace Hosting, Inc. 144A sr. unsec.     
notes 8.625%, 11/15/24  85,000  86,488 
Infor Software Parent, LLC/Infor Software Parent, Inc. 144A     
company guaranty sr. unsec. notes 7.125%, 5/1/21  ‡‡   140,000  140,700 
Infor US, Inc. company guaranty sr. unsec. notes 6.50%, 5/15/22  15,000  15,244 
Iron Mountain, Inc. 144A company guaranty sr. unsec. bonds     
5.25%, 3/15/28 R   20,000  18,825 
Iron Mountain, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 9/15/27 R   60,000  55,125 
Legrand France SA sr. unsec. unsub. notes 8.50%, 2/15/25 (France)  10,000  12,459 
Microchip Technology, Inc. 144A company guaranty sr. notes     
4.333%, 6/1/23  15,000  15,101 
Microsoft Corp. sr. unsec. unsub. bonds 3.30%, 2/6/27  45,000  44,580 
Microsoft Corp. sr. unsec. unsub. bonds 2.40%, 8/8/26  67,000  62,193 
Microsoft Corp. sr. unsec. unsub. notes 1.55%, 8/8/21  180,000  173,123 
Oracle Corp. sr. unsec. unsub. notes 3.25%, 11/15/27  40,000  38,879 
Oracle Corp. sr. unsec. unsub. notes 2.65%, 7/15/26  50,000  46,646 

 

Dynamic Risk Allocation Fund 51 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Technology cont.     
Oracle Corp. sr. unsec. unsub. notes 2.25%, 10/8/19  $212,000  $211,251 
Plantronics, Inc. 144A company guaranty sr. unsec. notes     
5.50%, 5/31/23  45,000  44,775 
salesforce.com, Inc. sr. unsec. unsub. notes 3.70%, 4/11/28  65,000  64,649 
Solera, LLC /Solera Finance, Inc. 144A sr. unsec. notes     
10.50%, 3/1/24  90,000  99,873 
Tempo Acquisition, LLC/Tempo Acquisition Finance Corp. 144A sr.     
unsec. notes 6.75%, 6/1/25  60,000  58,143 
TTM Technologies, Inc. 144A company guaranty sr. unsec. notes     
5.625%, 10/1/25  70,000  68,425 
VMware, Inc. sr. unsec. notes 3.90%, 8/21/27  10,000  9,369 
Western Digital Corp. company guaranty sr. unsec. notes     
4.75%, 2/15/26  115,000  113,132 
    2,655,964 
Transportation (0.1%)     
Penske Truck Leasing Co. LP/PTL Finance Corp. 144A sr. unsec.     
bonds 3.40%, 11/15/26  16,000  15,024 
Penske Truck Leasing Co. LP/PTL Finance Corp. 144A sr. unsec.     
notes 3.90%, 2/1/24  15,000  15,029 
United Airlines, Inc. Pass-Through Trust pass-through certificates     
Ser. 14-2, Class A, 3.75%, 9/3/26  21,432  21,283 
Watco Cos., LLC/Watco Finance Corp. 144A company guaranty sr.     
unsec. notes 6.375%, 4/1/23  60,000  61,425 
    112,761 
Utilities and power (1.0%)     
AES Corp./Virginia (The) sr. unsec. notes 5.50%, 4/15/25  140,000  141,400 
AES Corp./Virginia (The) sr. unsec. notes 4.875%, 5/15/23  25,000  25,125 
AES Corp./Virginia (The) sr. unsec. notes 4.50%, 3/15/23  20,000  20,000 
AES Corp./Virginia (The) sr. unsec. unsub. bonds 5.125%, 9/1/27  55,000  54,175 
American Transmission Systems, Inc. 144A sr. unsec. unsub. bonds     
5.00%, 9/1/44  49,000  54,083 
Berkshire Hathaway Energy Co. sr. unsec. bonds 3.80%, 7/15/48  30,000  28,182 
Berkshire Hathaway Energy Co. sr. unsec. unsub. bonds     
6.125%, 4/1/36  7,000  8,823 
Calpine Corp. sr. unsec. sub. notes 5.75%, 1/15/25  85,000  77,350 
Calpine Corp. 144A company guaranty sr. notes 5.25%, 6/1/26  25,000  23,625 
Calpine Corp. 144A company guaranty sr. sub. notes     
5.875%, 1/15/24  15,000  14,925 
Consolidated Edison Co. of New York, Inc. sr. unsec. notes     
7.125%, 12/1/18  96,000  98,173 
Consolidated Edison, Inc. sr. unsec. unsub. notes Ser. A,     
2.00%, 3/15/20  10,000  9,827 
Duke Energy Corp. sr. unsec. notes 3.15%, 8/15/27  40,000  37,344 
Dynegy, Inc. company guaranty sr. unsec. unsub. notes     
7.625%, 11/1/24  90,000  96,638 
Dynegy, Inc. 144A company guaranty sr. unsec. notes     
8.125%, 1/30/26  25,000  27,438 
El Paso Natural Gas Co., LLC company guaranty sr. unsec. unsub.     
notes 8.375%, 6/15/32  20,000  25,248 
Emera US Finance LP company guaranty sr. unsec. notes     
3.55%, 6/15/26  11,000  10,452 

 

52 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (22.9%)* cont.  amount  Value 
Utilities and power cont.     
Enbridge, Inc. sr. unsec. unsub. bonds 4.25%, 12/1/26 (Canada)  $42,000  $42,169 
Energy Transfer Equity LP sr. sub. notes 5.875%, 1/15/24  166,000  172,225 
Energy Transfer Equity LP sr. sub. notes 5.50%, 6/1/27  15,000  15,206 
Enterprise Products Operating, LLC company guaranty sr. unsec.     
unsub. bonds 4.25%, 2/15/48  65,000  61,530 
FirstEnergy Transmission, LLC 144A sr. unsec. unsub. notes     
5.45%, 7/15/44  80,000  90,452 
GenOn Americas Generation, LLC sr. unsec. notes 9.125%, 5/1/31     
(In default)  †   100,000  52,500 
IPALCO Enterprises, Inc. sr. sub. notes 3.70%, 9/1/24  25,000  24,255 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
notes 5.40%, 9/1/44  29,000  29,211 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
unsub. notes 3.45%, 2/15/23  45,000  44,223 
Kinder Morgan, Inc. company guaranty sr. unsec. unsub. notes     
3.15%, 1/15/23  60,000  58,221 
MidAmerican Funding, LLC sr. bonds 6.927%, 3/1/29  15,000  18,677 
NextEra Energy Capital Holdings, Inc. company guaranty jr. unsec.     
sub. FRB 4.80%, 12/1/77  35,000  32,725 
NRG Energy, Inc. company guaranty sr. unsec. notes     
7.25%, 5/15/26  5,000  5,363 
NRG Energy, Inc. company guaranty sr. unsec. notes     
6.625%, 1/15/27  85,000  87,763 
NRG Energy, Inc. 144A company guaranty sr. unsec. bonds     
5.75%, 1/15/28  15,000  14,850 
Oncor Electric Delivery Co., LLC sr. notes 3.75%, 4/1/45  64,000  61,965 
    1,564,143 
Total corporate bonds and notes (cost $36,632,552)    $35,971,829 
 
U.S. GOVERNMENT AND AGENCY  Principal   
MORTGAGE OBLIGATIONS (11.2%)*  amount  Value 
U.S. Government Guaranteed Mortgage Obligations (1.9%)     
Government National Mortgage Association Pass-Through Certificates     
3.50%, TBA, 6/1/48  $3,000,000  $3,018,047 
    3,018,047 
U.S. Government Agency Mortgage Obligations (9.3%)     
Federal Home Loan Mortgage Corporation Pass-Through Certificates     
3.00%, 3/1/43 i   529,897  519,085 
Federal National Mortgage Association Pass-Through Certificates     
6.00%, TBA, 6/1/48  1,000,000  1,099,922 
4.00%, TBA, 7/1/48  3,000,000  3,063,281 
4.00%, TBA, 6/1/48  3,000,000  3,067,500 
3.00%, TBA, 7/1/48  3,000,000  2,909,180 
3.00%, TBA, 6/1/48  3,000,000  2,912,344 
3.00%, TBA, 6/1/33  1,000,000  995,156 
    14,566,468 
Total U.S. government and agency mortgage obligations (cost $17,489,203)    $17,584,515 

 

Dynamic Risk Allocation Fund 53 

 


  Principal   
COMMODITY LINKED NOTES (9.3%)*†††  amount  Value 
Citigroup Global Markets Holdings, Inc. sr. unsec. Notes Ser. N, 1-month     
USD LIBOR less 0.16%, 2018 (Indexed to the S&P GSCI 3-Month Forward     
Index Total Return Index multiplied by 3)  $3,250,000  $5,522,182 
Goldman Sachs International 144A notes zero %, 2019 (Indexed to the     
S&P GSCI Excess Return Index multiplied by 3)  1,380,000  1,734,472 
UBS AG/London 144A sr. notes 1-month LIBOR less 0.25%, 2018 (Indexed     
to the S&P GSCI Total Return Index multiplied by 3) (United Kingdom)  1,260,000  2,307,487 
Deutsche Bank AG/London 144A sr. notes 1-month LIBOR less     
0.16%, 2018 (Indexed to the S&P GSCI Total Return multiplied by 3)     
(United Kingdom)  421,000  704,605 
UBS AG/London 144A sr. notes 1-month LIBOR less 0.25%, 2018 (Indexed     
to the S&P GSCI Total Return Index multiplied by 3) (United Kingdom)  2,004,000  3,216,971 
Bank of America Corp. sr. unsec. notes Ser. A, 1-month LIBOR less 0.11%,     
2018 (Indexed to the S&P GSCI Index Total Return multiplied by 3)  712,000  1,193,123 
Total commodity Linked Notes (cost $9,027,000)    $14,678,840 
 
  Principal   
MORTGAGE-BACKED SECURITIES (2.8%)*  amount  Value 
Agency collateralized mortgage obligations (0.3%)     
Federal Home Loan Mortgage Corporation     
IFB Ser. 3829, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.95%),     
5.031%, 3/15/41  $181,379  $30,640 
Structured Agency Credit Risk Debt FRN Ser. 16-DNA3, Class M1,     
(1 Month US LIBOR + 1.10%), 3.06%, 12/25/28  3,667  3,668 
Federal National Mortgage Association     
Connecticut Avenue Securities FRB Ser. 14-C04, Class 1M2,     
(1 Month US LIBOR + 4.90%), 6.86%, 11/25/24  25,779  29,484 
Connecticut Avenue Securities FRB Ser. 14-C03, Class 2M2,     
(1 Month US LIBOR + 2.90%), 4.86%, 7/25/24  26,561  28,251 
Government National Mortgage Association     
Ser. 17-162, Class QI, IO, 5.00%, 10/20/47  179,702  41,107 
IFB Ser. 13-99, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%),     
4.102%, 6/20/43  303,817  55,990 
Ser. 16-135, Class PI, IO, 4.00%, 5/20/46  477,385  102,442 
Ser. 16-123, Class LI, IO, 3.50%, 3/20/44  316,996  43,064 
Ser. 17-H22, Class EI, IO, 2.437%, 10/20/67 W   315,550  36,288 
Ser. 15-H26, Class DI, IO, 1.608%, 10/20/65 W   298,662  30,659 
    401,593 
Commercial mortgage-backed securities (1.4%)     
CFCRE Commercial Mortgage Trust 144A FRB Ser. 11-C2, Class D,     
5.754%, 12/15/47 W   100,000  99,232 
Citigroup Commercial Mortgage Trust     
FRB Ser. 14-GC19, Class C, 4.901%, 3/10/47 W   44,000  44,954 
Ser. 14-GC21, Class C, 4.78%, 5/10/47 W   61,000  60,733 
Ser. 14-GC21, Class AS, 4.026%, 5/10/47  47,000  47,850 
FRB Ser. 14-GC19, Class XA, IO, 1.185%, 3/10/47 W   1,451,910  69,111 
Citigroup Commercial Mortgage Trust 144A FRB Ser. 12-GC8,     
Class XA, IO, 1.808%, 9/10/45 W   702,478  41,397 
COMM Mortgage Trust     
FRB Ser. 14-UBS6, Class C, 4.464%, 12/10/47 W   113,000  110,541 
FRB Ser. 14-LC15, Class XA, IO, 1.304%, 4/10/47 W   1,847,750  82,027 
FRB Ser. 14-CR16, Class XA, IO, 1.154%, 4/10/47 W   311,446  12,630 

 

54 Dynamic Risk Allocation Fund 

 


  Principal   
MORTGAGE-BACKED SECURITIES (2.8%)* cont.  amount  Value 
Commercial mortgage-backed securities cont.     
COMM Mortgage Trust     
FRB Ser. 13-CR11, Class XA, IO, 1.114%, 8/10/50 W   $717,746  $28,683 
FRB Ser. 14-CR17, Class XA, IO, 1.085%, 5/10/47 W   1,105,261  46,296 
FRB Ser. 14-UBS6, Class XA, IO, 1.005%, 12/10/47 W   1,407,866  61,037 
CSMC Trust FRB Ser. 16-NXSR, Class C, 4.363%, 12/15/49 W   125,000  123,615 
GS Mortgage Securities Trust     
FRB Ser. 14-GC22, Class C, 4.645%, 6/10/47 W   96,000  94,898 
FRB Ser. 14-GC22, Class XA, IO, 1.008%, 6/10/47 W   2,040,455  86,268 
GS Mortgage Securities Trust 144A FRB Ser. 10-C1, Class D,     
6.051%, 8/10/43 W   158,403  163,192 
JPMBB Commercial Mortgage Securities Trust     
FRB Ser. 13-C14, Class C, 4.565%, 8/15/46 W   56,000  56,146 
FRB Ser. 14-C22, Class C, 4.558%, 9/15/47 W   118,000  114,977 
FRB Ser. 14-C22, Class XA, IO, 0.897%, 9/15/47 W   3,415,150  147,338 
JPMorgan Chase Commercial Mortgage Securities Trust     
FRB Ser. 05-LDP5, Class F, 5.704%, 12/15/44 W   30,574  30,255 
Ser. 12-C6, Class AS, 4.117%, 5/15/45  41,000  41,786 
LSTAR Commercial Mortgage Trust 144A FRB Ser. 15-3, Class B,     
3.111%, 4/20/48 W   123,000  113,984 
Morgan Stanley Bank of America Merrill Lynch Trust     
Ser. 14-C18, Class C, 4.489%, 10/15/47 W   45,000  43,759 
Ser. 12-C5, Class AS, 3.792%, 8/15/45  41,000  41,340 
FRB Ser. 14-C17, Class XA, IO, 1.201%, 8/15/47 W   718,289  30,181 
FRB Ser. 13-C12, Class XA, IO, 0.836%, 10/15/46 W   984,859  22,720 
UBS-Barclays Commercial Mortgage Trust 144A     
FRB Ser. 12-C3, Class C, 5.042%, 8/10/49 W   50,000  51,176 
FRB Ser. 12-C2, Class D, 4.893%, 5/10/63 W   48,000  44,644 
Wachovia Bank Commercial Mortgage Trust FRB Ser. 05-C21,     
Class D, 5.287%, 10/15/44 W   56,000  55,607 
Wells Fargo Commercial Mortgage Trust FRB Ser. 13-LC12, Class C,     
4.29%, 7/15/46 W   45,000  42,343 
Wells Fargo Commercial Mortgage Trust 144A FRB Ser. 12-LC5,     
Class XA, IO, 1.791%, 10/15/45 W   453,964  28,379 
WF-RBS Commercial Mortgage Trust     
FRB Ser. 13-C15, Class C, 4.48%, 8/15/46 W   38,000  38,025 
Ser. 13-UBS1, Class AS, 4.306%, 3/15/46 W   48,000  48,798 
FRB Ser. 14-C22, Class XA, IO, 0.893%, 9/15/57 W   2,495,567  100,050 
WF-RBS Commercial Mortgage Trust 144A     
FRB Ser. 11-C3, Class D, 5.674%, 3/15/44 W   47,000  45,395 
FRB Ser. 11-C5, Class XA, IO, 1.748%, 11/15/44 W   1,001,492  45,136 
FRB Ser. 12-C10, Class XA, IO, 1.574%, 12/15/45 W   857,257  48,899 
    2,363,402 
Residential mortgage-backed securities (non-agency) (1.1%)     
Citigroup Mortgage Loan Trust, Inc. FRB Ser. 05-2, Class 1A2A,     
3.799%, 5/25/35 W   73,487  75,189 
Countrywide Alternative Loan Trust     
FRB Ser. 06-OA7, Class 1A2, (1 Month US LIBOR + 0.94%),     
2.498%, 6/25/46  226,768  202,665 
FRB Ser. 07-OH1, Class A1D, (1 Month US LIBOR + 0.21%),     
2.17%, 4/25/47  33,411  30,336 

 

Dynamic Risk Allocation Fund 55 

 


  Principal   
MORTGAGE-BACKED SECURITIES (2.8%)* cont.  amount  Value 
Residential mortgage-backed securities (non-agency) cont.     
Federal National Mortgage Association     
Connecticut Avenue Securities FRB Ser. 16-C03, Class 2M2,     
(1 Month US LIBOR + 5.90%), 7.86%, 10/25/28  $260,800  $306,357 
Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2,     
(1 Month US LIBOR + 5.70%), 7.66%, 4/25/28  181,458  210,624 
Connecticut Avenue Securities FRB Ser. 15-C04, Class 2M2,     
(1 Month US LIBOR + 5.55%), 7.51%, 4/25/28  177,403  201,020 
Connecticut Avenue Securities FRB Ser. 15-C03, Class 2M2,     
(1 Month US LIBOR + 5.00%), 6.96%, 7/25/25  23,988  26,654 
Connecticut Avenue Securities FRB Ser. 15-C01, Class 1M2,     
(1 Month US LIBOR + 4.30%), 6.26%, 2/25/25  77,594  85,790 
Connecticut Avenue Securities FRB Ser. 16-C06, Class 1M2,     
(1 Month US LIBOR + 4.25%), 6.21%, 4/25/29  10,000  11,383 
Connecticut Avenue Securities FRB Ser. 15-C02, Class 1M2,     
(1 Month US LIBOR + 4.00%), 5.96%, 5/25/25  21,979  24,037 
Connecticut Avenue Securities FRB Ser. 14-C02, Class 1M2,     
(1 Month US LIBOR + 2.60%), 4.56%, 5/25/24  34,000  36,091 
GSAA Trust FRB Ser. 07-6, Class 1A1, (1 Month US LIBOR + 0.12%),     
2.08%, 5/25/47  34,161  27,327 
Merrill Lynch Mortgage Investors Trust FRB Ser. 05-A2, Class A2,     
3.541%, 2/25/35 W   26,895  27,517 
Morgan Stanley Resecuritization Trust 144A Ser. 15-R4, Class CB1,     
0.598%, 8/26/47  80,000  77,023 
Structured Asset Investment Loan Trust FRB Ser. 04-10, Class A10,     
(1 Month US LIBOR + 0.90%), 2.86%, 11/25/34  65,976  65,870 
Structured Asset Mortgage Investments II Trust FRB Ser. 07-AR7,     
Class 1A1, (1 Month US LIBOR + 0.85%), 2.81%, 5/25/47  66,181  60,393 
Structured Asset Securities Corp. Mortgage Loan Trust FRB     
Ser. 06-AM1, Class A4, (1 Month US LIBOR + 0.16%), 2.12%, 4/25/36  45,386  45,225 
WaMu Mortgage Pass-Through Certificates Trust     
FRB Ser. 05-AR10, Class 1A3, 3.338%, 9/25/35 W   32,351  32,415 
FRB Ser. 05-AR12, Class 1A8, 3.272%, 10/25/35 W   126,752  126,616 
FRB Ser. 05-AR19, Class A1B3, (1 Month US LIBOR + 0.35%),     
2.31%, 12/25/45  42,034  41,000 
    1,713,532 
Total mortgage-backed securities (cost $4,463,271)    $4,478,527 
 
  Principal   
ASSET-BACKED SECURITIES (0.7%)*  amount  Value 
loanDepot Station Place Agency Securitization Trust 144A FRB     
Ser. 17-LD1, Class A, (1 Month US LIBOR + 0.80%), 2.697%, 11/25/50  $121,000  $121,000 
Station Place Securitization Trust 144A     
FRB Ser. 18-3, Class A, (1 Month US LIBOR + 0.70%),     
2.665%, 7/24/19  242,000  242,000 
FRB Ser. 17-6, Class A, (1 Month US LIBOR + 0.70%),     
2.665%, 11/24/18  221,000  221,000 
FRB Ser. 18-1, Class A, (1 Month US LIBOR + 0.90%),     
2.475%, 4/24/19  308,000  308,000 
Towd Point Asset Trust 144A FRB Ser. 18-SL1, Class A,     
(1 Month US LIBOR + 0.60%), 2.52%, 1/25/46  150,000  149,397 
Total asset-backed securities (cost $1,041,412)    $1,041,397 

 

56 Dynamic Risk Allocation Fund 

 


PURCHASED OPTIONS  Expiration       
OUTSTANDING (0.6%)*  date/strike  Notional  Contract   
Counterparty  price  amount  amount  Value 
Bank of America N.A.         
SPDR S&P 500 ETF Trust (Put)  May-19/$240.00  $7,321,341  $27,022  $197,039 
SPDR S&P 500 ETF Trust (Put)  Apr-19/235.00  7,125,451  26,299  159,524 
Citibank, N.A.         
SPDR S&P 500 ETF Trust (Put)  Jan-19/250.00  7,371,194  27,206  175,072 
SPDR S&P 500 ETF Trust (Put)  Feb-19/240.00  7,348,706  27,123  143,539 
HSBC Bank USA, National         
Association         
EUR/SEK (Put)  Aug-18/SEK 10.00  1,831,843  1,566,950  4,975 
JPMorgan Chase Bank N.A.         
SPDR S&P 500 ETF Trust (Put)  Mar-19/$245.00  7,109,195  26,239  172,045 
SPDR S&P 500 ETF Trust (Put)  Dec-18/235.00  7,412,918  27,360  99,733 
Total purchased options outstanding (cost $1,188,253)      $951,927 
 
      Principal   
SENIOR LOANS (0.5%)*c      amount  Value 
Avaya, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD 3 Month       
+ 4.75%), 6.684%, 12/15/24      $54,800  $55,084 
Brand Industrial Services, Inc. bank term loan FRN (BBA LIBOR       
USD 3 Month + 4.25%), 6.611%, 6/21/24      74,438  74,828 
California Resources Corp. bank term loan FRN (BBA LIBOR USD     
3 Month + 4.75%), 6.698%, 11/17/22      50,000  51,031 
CPG International, Inc. bank term loan FRN (BBA LIBOR USD       
3 Month + 3.75%), 5.593%, 5/5/24      9,743  9,747 
Eagleclaw Midstream Ventures, LLC bank term loan FRN (BBA       
LIBOR USD 3 Month + 4.25%), 6.306%, 6/30/24    40,000  38,925 
Forterra Finance, LLC bank term loan FRN (BBA LIBOR USD       
3 Month + 3.00%), 4.901%, 10/25/23      29,811  27,892 
FTS International, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD     
3 Month + 4.75%), 6.651%, 4/16/21      35,004  35,222 
Getty Images, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD       
3 Month + 3.50%), 5.802%, 10/18/19      8,460  8,185 
Jo-Ann Stores, LLC bank term loan FRN (BBA LIBOR USD 3 Month     
+ 9.25%), 11.604%, 5/2/24      45,000  44,438 
Jo-Ann Stores, LLC bank term loan FRN (BBA LIBOR USD 3 Month     
+ 5.00%), 7.509%, 10/16/23      20,000  19,850 
KCA Deutag Alpha, Ltd. bank term loan FRN Ser. B, (BBA LIBOR USD     
3 Month + 6.75%), 9.021%, 3/21/23 (United Kingdom)    25,000  25,000 
KCA Deutag US Finance, LLC bank term loan FRN (BBA LIBOR USD     
3 Month + 5.25%), 7.806%, 5/16/20      17,966  17,966 
Navistar, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD 3 Month     
+ 3.50%), 5.43%, 11/6/24      104,738  105,348 
Neiman Marcus Group, Ltd., Inc. bank term loan FRN (BBA LIBOR     
USD 3 Month + 3.25%), 5.173%, 10/25/20    56,890  50,295 
Ortho-Clinical Diagnostics, Inc. bank term loan FRN Ser. B, (BBA     
LIBOR USD 3 Month + 3.75%), 5.65%, 6/30/21    54,301  54,292 
Rackspace Hosting, Inc. bank term loan FRN (BBA LIBOR USD       
3 Month + 3.00%), 5.363%, 11/3/23      25,000  24,844 
Revlon Consumer Products Corp. bank term loan FRN Ser. B, (BBA     
LIBOR USD 3 Month + 3.50%), 5.401%, 9/7/23    73,975  57,441 

 

Dynamic Risk Allocation Fund 57 

 


      Principal   
SENIOR LOANS (0.5%)*c cont.      amount  Value 
Robertshaw Holdings Corp. bank term loan FRN (BBA LIBOR USD       
3 Month + 8.00%), 9.873%, 2/15/26      $30,000  $29,850 
Robertshaw Holdings Corp. bank term loan FRN (BBA LIBOR USD       
3 Month + 3.50%), 5.373%, 2/15/25      30,000  30,075 
Titan Acquisition, Ltd. (United Kingdom) bank term loan FRN       
Ser. B, (BBA LIBOR USD 3 Month + 3.00%), 5.202%, 3/28/25    75,000  74,422 
Total senior loans (cost $847,604)        $834,735 
 
FOREIGN GOVERNMENT AND AGENCY    Principal amount/   
BONDS AND NOTES (0.5%)*      units  Value 
Argentina (Republic of) sr. unsec. unsub. notes 7.50%,       
4/22/26 (Argentina)      $255,000  $250,795 
Argentina (Republic of) sr. unsec. unsub. notes 6.875%,       
1/26/27 (Argentina)      150,000  141,300 
Argentina (Republic of) 144A sr. unsec. notes 7.125%,       
8/1/27 (Argentina)      160,000  143,800 
Russia (Federation of) 144A sr. unsec. notes 4.375%,       
3/21/29 (Russia)      200,000  194,000 
Total foreign government and agency bonds and notes (cost $780,134)    $729,895 
 
INVESTMENT COMPANIES (0.5%)*      Shares  Value 
iShares MSCI India ETF (India)      21,350  $718,428 
Total investment companies (cost $612,663)        $718,428 
 
CONVERTIBLE PREFERRED STOCKS (—%)*      Shares  Value 
EPR Properties Ser. C, $1.438 cv. pfd. R       1,550  $40,610 
Nine Point Energy 6.75% cv. pfd.      11  12,138 
Total convertible preferred stocks (cost $45,286)      $52,748 
 
  Expiration  Strike     
WARRANTS (—%)* †   date  price  Warrants  Value 
Halcon Resources Corp.  9/9/20  $14.04  844  $552 
Total warrants (cost $—)        $552 

 

  Principal amount/   
SHORT-TERM INVESTMENTS (15.7%)*    shares  Value 
Putnam Cash Collateral Pool, LLC 2.06% d   Shares   144,050  $144,050 
Putnam Short Term Investment Fund 1.94% L   Shares   19,395,321  19,395,321 
State Street Institutional U.S. Government Money Market Fund,       
Premier Class 1.67% P   Shares   360,000  360,000 
U.S. Treasury Bills 1.552%, 6/7/18    $11,000  10,997 
U.S. Treasury Bills 1.633%, 6/14/18 §     573,001  572,673 
U.S. Treasury Bills 1.640%, 7/5/18 ∆ §    376,001  375,377 
U.S. Treasury Bills 1.809%, 7/19/18 # ∆ §    3,052,000  3,044,746 
U.S. Treasury Bills 1.829%, 7/26/18 # §     496,001  494,646 
U.S. Treasury Bills 1.832%, 8/2/18 ∆     37,999  37,879 
U.S. Treasury Bills 1.851%, 8/9/18 # §     181,001  180,358 
Total short-term investments (cost $24,616,130)      $24,616,047 
 
TOTAL INVESTMENTS       
Total investments (cost $160,692,859)      $175,212,579 

 

58 Dynamic Risk Allocation Fund 

 


Key to holding’s currency abbreviations 
 
EUR  Euro 
SEK  Swedish Krona 
 
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. Rates may 
  be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the 
  close of the reporting period. 
FRN  Floating Rate Notes: the rate shown is the current interest rate or yield at the close of the reporting period. 
  Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in 
  place at the close of the reporting period. 
GDR  Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank 
GMTN  Global Medium Term Notes 
IFB  Inverse Floating Rate Bonds, which are securities that pay interest rates that vary inversely to changes in the 
  market interest rates. As interest rates rise, inverse floaters produce less current income. The rate shown is 
  the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. 
IO  Interest Only 
MTN  Medium Term Notes 
PJSC  Public Joint Stock Company 
REGS  Securities sold under Regulation S may not be offered, sold or delivered within the United States except 
  pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 
  Securities Act of 1933. 
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, 2017 through May 31, 2018 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.

* Percentages indicated are based on net assets of $157,246,756.

††† 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.

‡‡ Income may be received in cash or additional securities at the discretion of the issuer. The rate shown in parenthesis is the rate paid in kind, if applicable.

# This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period. Collateral at period end totaled $647,263 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 9).

∆ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period. Collateral at period end totaled $459,881 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 9).

§ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on the initial margin on certain centrally cleared derivative contracts at the close of the reporting period. Collateral at period end totaled $2,665,971 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 9).

Dynamic Risk Allocation Fund 59 

 


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 7).

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 are classified as Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).

i This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts (Note 1).

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

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

W The rate shown represents the weighted average coupon associated with the underlying mortgage pools. Rates may be subject to a cap or floor.

At the close of the reporting period, the fund maintained liquid assets totaling $13,577,593 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  77.6%  South Korea  1.1% 
United Kingdom  3.9  Canada  1.0 
Japan  2.6  Brazil  0.7 
Switzerland  2.1  Taiwan  0.6 
China  1.7  Netherlands  0.5 
France  1.4  Other  4.5 
Germany  1.2  Total  100.0% 
Australia  1.1     

 

60 Dynamic Risk Allocation Fund 

 


FORWARD CURRENCY CONTRACTS at 5/31/18 (aggregate face value $74,278,663)   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
Bank of America N.A.           
  Australian Dollar  Buy  7/18/18  $994,756  $1,008,049  $(13,293) 
  British Pound  Buy  6/20/18  358,538  387,565  (29,027) 
  Euro  Buy  6/20/18  1,015,954  1,012,957  2,997 
  Euro  Sell  6/20/18  1,015,954  1,064,014  48,060 
  Hong Kong Dollar  Sell  8/16/18  427,451  427,362  (89) 
  Japanese Yen  Sell  8/16/18  218,686  218,393  (293) 
  New Taiwan Dollar  Sell  8/16/18  234,135  234,439  304 
  Norwegian Krone  Buy  6/20/18  230,762  234,577  (3,815) 
  Russian Ruble  Buy  6/20/18  212,063  233,971  (21,908) 
  Russian Ruble  Sell  6/20/18  212,063  230,103  18,040 
  Swedish Krona  Sell  6/20/18  434,422  466,851  32,429 
Barclays Bank PLC             
  Australian Dollar  Buy  7/18/18  620,910  630,262  (9,352) 
  British Pound  Sell  6/20/18  133,836  134,240  404 
  Canadian Dollar  Buy  7/18/18  202,310  206,239  (3,929) 
  Euro  Sell  6/20/18  49,159  3,946  (45,213) 
  Japanese Yen  Buy  8/16/18  232,604  232,058  546 
  Norwegian Krone  Buy  6/20/18  347,030  350,749  (3,719) 
  Swedish Krona  Sell  6/20/18  292,181  321,664  29,483 
Citibank, N.A.             
  Australian Dollar  Buy  7/18/18  578,169  589,552  (11,383) 
  Brazilian Real  Buy  7/3/18  204,242  232,828  (28,586) 
  Brazilian Real  Sell  7/3/18  204,242  232,623  28,381 
  British Pound  Buy  6/20/18  223,904  237,090  (13,186) 
  British Pound  Sell  6/20/18  223,904  226,961  3,057 
  Canadian Dollar  Buy  7/18/18  77,758  77,681  77 
  Danish Krone  Buy  6/20/18  239,652  254,446  (14,794) 
  Euro  Buy  6/20/18  875,499  929,021  (53,522) 
  Japanese Yen  Buy  8/16/18  112,234  112,190  44 
  New Zealand Dollar  Sell  7/18/18  126,667  157,133  30,466 
  Norwegian Krone  Buy  6/20/18  115,754  116,832  (1,078) 
  Swedish Krona  Sell  6/20/18  647,450  691,746  44,296 
Credit Suisse International           
  Australian Dollar  Buy  7/18/18  1,579,734  1,601,603  (21,869) 
  British Pound  Sell  6/20/18  224,036  224,275  239 
  Canadian Dollar  Buy  7/18/18  4,556  1,158  3,398 
  Euro  Buy  6/20/18  220,630  231,837  (11,207) 
  Euro  Sell  6/20/18  220,630  223,533  2,903 
  New Zealand Dollar  Sell  7/18/18  234,859  232,132  (2,727) 
  Swedish Krona  Sell  6/20/18  322,391  346,501  24,110 
Goldman Sachs International           
  Australian Dollar  Buy  7/18/18  2,071,968  2,097,170  (25,202) 
  Australian Dollar  Sell  7/18/18  1,976,048  1,976,842  794 
  Brazilian Real  Buy  7/3/18  204,242  232,736  (28,494) 

 

Dynamic Risk Allocation Fund 61 

 


FORWARD CURRENCY CONTRACTS at 5/31/18 (aggregate face value $74,278,663) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
Goldman Sachs International cont.           
  Brazilian Real  Sell  7/3/18  $204,242  $230,089  $25,847 
  British Pound  Buy  6/20/18  217,651  230,526  (12,875) 
  British Pound  Sell  6/20/18  463,905  480,819  16,914 
  Canadian Dollar  Buy  7/18/18  308,020  309,775  (1,755) 
  Canadian Dollar  Sell  7/18/18  228,409  231,175  2,766 
  Chinese Yuan  Buy  8/16/18  231,171  234,342  (3,171) 
  Euro  Buy  6/20/18  2,655,174  2,770,889  (115,715) 
  Euro  Sell  6/20/18  2,655,174  2,724,318  69,144 
  Japanese Yen  Buy  8/16/18  108,991  108,205  786 
  Japanese Yen  Sell  8/16/18  966,153  959,187  (6,966) 
  New Taiwan Dollar  Sell  8/16/18  234,299  232,540  (1,759) 
  New Zealand Dollar  Buy  7/18/18  682,602  694,832  (12,230) 
  New Zealand Dollar  Sell  7/18/18  1,226,641  1,236,681  10,040 
  Norwegian Krone  Buy  6/20/18  2,324,952  2,387,599  (62,647) 
  South African Rand  Buy  7/18/18  226,866  234,559  (7,693) 
  South African Rand  Sell  7/18/18  227,951  230,419  2,468 
  Swedish Krona  Buy  6/20/18  1,010,996  1,061,296  (50,300) 
  Swedish Krona  Sell  6/20/18  1,684,013  1,765,456  81,443 
HSBC Bank USA, National Association           
  Australian Dollar  Buy  7/18/18  454,562  461,669  (7,107) 
  British Pound  Buy  6/20/18  224,436  224,118  318 
  British Pound  Sell  6/20/18  224,436  232,699  8,263 
  Chinese Yuan  Buy  8/16/18  231,186  234,203  (3,017) 
  Euro  Buy  6/20/18  658,614  692,295  (33,681) 
  Euro  Sell  6/20/18  658,614  661,851  3,237 
  Japanese Yen  Sell  8/16/18  622,291  617,049  (5,242) 
  New Zealand Dollar  Sell  7/18/18  468,388  463,367  (5,021) 
  Swedish Krona  Sell  6/20/18  568,047  601,928  33,881 
JPMorgan Chase Bank N.A.           
  Australian Dollar  Buy  7/18/18  534,445  545,419  (10,974) 
  British Pound  Sell  6/20/18  222,307  249,701  27,394 
  Canadian Dollar  Buy  7/18/18  176,905  176,705  200 
  Euro  Buy  6/20/18  6,452,474  6,764,921  (312,447) 
  Japanese Yen  Buy  8/16/18  5,108,161  5,077,507  30,654 
  New Zealand Dollar  Sell  7/18/18  17,146  17,722  576 
  Norwegian Krone  Buy  6/20/18  664,871  685,641  (20,770) 
  Russian Ruble  Buy  6/20/18  212,062  234,182  (22,120) 
  Russian Ruble  Sell  6/20/18  212,062  229,475  17,413 
  Russian Ruble  Buy  9/19/18  230,099  232,368  (2,269) 
  Russian Ruble  Sell  9/19/18  230,099  231,177  1,078 
  Singapore Dollar  Sell  8/16/18  75,853  76,124  271 
  Swedish Krona  Sell  6/20/18  509,057  543,545  34,488 
  Swiss Franc  Sell  6/20/18  807,019  852,782  45,763 

 

62 Dynamic Risk Allocation Fund 

 


FORWARD CURRENCY CONTRACTS at 5/31/18 (aggregate face value $74,278,663) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
NatWest Markets PLC           
  Euro  Sell  6/20/18  $117,514  $129,334  $11,820 
  Swedish Krona  Sell  6/20/18  568,967  604,008  35,041 
State Street Bank and Trust Co.           
  Australian Dollar  Buy  7/18/18  871,528  883,589  (12,061) 
  Australian Dollar  Sell  7/18/18  577,413  578,875  1,462 
  British Pound  Buy  6/20/18  353,749  353,237  512 
  British Pound  Sell  6/20/18  456,588  473,167  16,579 
  Canadian Dollar  Buy  7/18/18  1,156,638  1,168,291  (11,653) 
  Canadian Dollar  Sell  7/18/18  1,267,985  1,283,317  15,332 
  Euro  Buy  6/20/18  1,832,110  1,931,998  (99,888) 
  Euro  Sell  6/20/18  1,772,183  1,834,867  62,684 
  Israeli Shekel  Buy  7/18/18  7,373  7,496  (123) 
  Japanese Yen  Buy  8/16/18  117,998  117,173  825 
  Japanese Yen  Sell  8/16/18  118,960  116,876  (2,084) 
  New Zealand Dollar  Sell  7/18/18  779,597  774,594  (5,003) 
  Norwegian Krone  Buy  6/20/18  670,080  697,673  (27,593) 
  Swedish Krona  Buy  6/20/18  461,250  466,628  (5,378) 
  Swedish Krona  Sell  6/20/18  1,501,093  1,557,567  56,474 
  Turkish Lira  Sell  6/20/18  636  738  102 
UBS AG             
  Australian Dollar  Buy  7/18/18  218,241  220,469  (2,228) 
  Canadian Dollar  Sell  7/18/18  229,104  232,676  3,572 
  Euro  Buy  6/20/18  1,217,622  1,269,673  (52,051) 
  Euro  Sell  6/20/18  1,217,622  1,243,600  25,978 
  Japanese Yen  Sell  8/16/18  119,613  117,951  (1,662) 
  New Zealand Dollar  Sell  7/18/18  592,256  612,129  19,873 
  Norwegian Krone  Buy  6/20/18  452,415  469,104  (16,689) 
  Swedish Krona  Sell  6/20/18  89,337  84,400  (4,937) 
WestPac Banking Corp.           
  Australian Dollar  Buy  7/18/18  452,822  459,542  (6,720) 
  British Pound  Buy  6/20/18  220,977  231,920  (10,943) 
  British Pound  Sell  6/20/18  220,977  220,647  (330) 
  Canadian Dollar  Buy  7/18/18  239,682  241,617  (1,935) 
  Euro  Sell  6/20/18  394,559  445,430  50,871 
  Japanese Yen  Sell  8/16/18  803,459  797,593  (5,866) 
Unrealized appreciation          984,097 
Unrealized depreciation          (1,307,589) 
Total            $(323,492) 

 

* The exchange currency for all contracts listed is the United States Dollar.

Dynamic Risk Allocation Fund 63 

 


FUTURES CONTRACTS OUTSTANDING at 5/31/18         
          Unrealized 
  Number of  Notional    Expiration  appreciation/ 
  contracts  amount  Value  date  (depreciation) 
Euro-Bobl 5 yr (Long)  35  $5,422,697  $5,422,699  Jun-18  $96,322 
Euro-Bund 10 yr (Long)  31  5,876,043  5,876,046  Jun-18  202,775 
Euro-Buxl 30 yr (Long)  19  3,792,913  3,792,914  Jun-18  240,489 
Euro-Schatz 2 yr (Long)  21  2,754,147  2,754,149  Jun-18  9,392 
Japanese Government Bond           
10 yr (Long)  13  18,041,182  18,041,182  Jun-18  19,525 
Russell 2000 Index E-Mini (Long)  32  2,613,775  2,614,720  Jun-18  52,582 
S&P 500 Index E-Mini (Long)  47  6,357,385  6,357,925  Jun-18  39,198 
S&P 500 Index E-Mini (Short)  52  7,033,702  7,034,300  Jun-18  216,755 
Tokyo Price Index (Long)  19  3,052,034  3,046,881  Jun-18  61,051 
U.K. Gilt 10 yr (Long)  30  4,923,647  4,923,649  Sep-18  76,100 
U.S. Treasury Bond 30 yr (Long)  6  870,750  870,750  Sep-18  18,551 
U.S. Treasury Bond Ultra 30 yr (Long)  14  2,233,000  2,233,000  Sep-18  55,097 
U.S. Treasury Note 2 yr (Long)  20  4,244,688  4,244,688  Sep-18  10,632 
U.S. Treasury Note 5 yr (Long)  44  5,011,188  5,011,188  Sep-18  32,225 
U.S. Treasury Note 10 yr (Long)  49  5,901,438  5,901,438  Sep-18  56,941 
U.S. Treasury Note 10 yr (Short)  143  17,222,563  17,222,563  Sep-18  (165,606) 
Unrealized appreciation          1,187,635 
Unrealized depreciation          (165,606) 
Total          $1,022,029 

 

WRITTEN OPTIONS OUTSTANDING at 5/31/18 (premiums $20,021)     
  Expiration  Notional  Contract   
Counterparty  date/strike price  amount  amount  Value 
Deutsche Bank AG         
SPDR S&P 500 ETF Trust (Call)  Jun-18/$277.00  $8,939,394  $32,994  $6 
UBS AG         
SPDR S&P 500 ETF Trust (Call)  Jun-18/280.00  8,820,723  32,556  2,055 
Total        $2,061 

 

TBA SALE COMMITMENTS OUTSTANDING at 5/31/18 (proceeds receivable $5,946,992)   
  Principal  Settlement   
Agency  amount  date  Value 
Federal National Mortgage Association, 4.00%, 6/1/48  $3,000,000  6/13/18  $3,067,500 
Federal National Mortgage Association, 3.00%, 6/1/48  3,000,000  6/13/18  2,912,344 
Total      $5,979,844 

 

64 Dynamic Risk Allocation Fund 

 


CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/18   
    Upfront         
    premium        Unrealized 
    received  Termination  Payments  Payments  appreciation/ 
Notional amount  Value  (paid)  date  made by fund  received by fund (depreciation)
$39,649,000  $78,307 E  $(320,317)  6/20/28  3 month USD-  2.90% —  $(242,001) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
7,286,000  14,390 E  53,654  6/20/28  2.90% —  3 month USD-  39,264 
        Semiannually  LIBOR-BBA —   
          Quarterly   
17,000  128   —  4/3/28  3 month USD-  2.7845% —  (117) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
5,302,500  8,935 E  (4,969)  6/20/20  2.605% —  3 month USD-  3,965 
        Semiannually  LIBOR-BBA —   
          Quarterly   
4,942,800  8,329 E  3,694  6/20/20  3 month USD-  2.605% —  (4,634) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
314,400  3,445 E  72  6/20/48  2.85% —  3 month USD-  3,518 
        Semiannually  LIBOR-BBA —   
          Quarterly   
1,529,200  16,757 E  235  6/20/48  3 month USD-  2.85% —  (16,523) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
3,359,400  8,100 E  1,371  6/20/23  2.75% —  3 month USD-  9,470 
        Semiannually  LIBOR-BBA —   
          Quarterly   
6,623,100  15,968 E  (4,002)  6/20/23  3 month USD-  2.75% —  (19,971) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
41,000  408  (1)  4/4/48  3 month USD-  2.854% —  (377) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
213,000  254   —  4/10/20  2.59634% —  3 month USD-  190 
        Semiannually  LIBOR-BBA —   
          Quarterly   
106,500  126   —  4/10/20  2.59696% —  3 month USD-  93 
        Semiannually  LIBOR-BBA —   
          Quarterly   
106,500  125   —  4/10/20  2.59727% —  3 month USD-  93 
        Semiannually  LIBOR-BBA —   
          Quarterly   
54,200  138   —  4/10/23  2.7375% —  3 month USD-  110 
        Semiannually  LIBOR-BBA —   
          Quarterly   
54,200  131   —  4/10/23  2.74007% —  3 month USD-  104 
        Semiannually  LIBOR-BBA —   
          Quarterly   
54,200  121   —  4/10/23  2.74421% —  3 month USD-  93 
        Semiannually  LIBOR-BBA —   
          Quarterly   

 

Dynamic Risk Allocation Fund 65 

 


CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/18 cont.   
    Upfront         
    premium        Unrealized 
    received  Termination  Payments  Payments  appreciation/ 
Notional amount  Value  (paid)  date  made by fund  received by fund (depreciation)
$335,000  $509  $(2)  4/12/21  2.6915% —  3 month USD-  $367 
        Semiannually  LIBOR-BBA —   
          Quarterly   
155,000  69  (1)  4/17/21  2.764% —  3 month USD-  (138) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
490,500  503  (4)  4/18/23  2.81623% —  3 month USD-  (745) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
837,500  333  (3)  4/18/20  3 month USD-  2.6865% —  607 
        LIBOR-BBA —  Semiannually   
        Quarterly     
29,000  4  (1)  4/18/48  3 month USD-  2.902% —  20 
        LIBOR-BBA —  Semiannually   
        Quarterly     
21,000  17   —  4/19/28  2.863% —  3 month USD-  6 
        Semiannually  LIBOR-BBA —   
          Quarterly   
42,000  32  (1)  4/19/28  3 month USD-  2.86365% —  (10) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
19,000  18   —  4/20/28  3 month USD-  2.8615% —  (9) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
11,300  51   —  4/23/28  2.92406% —  3 month USD-  (57) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
504,000  453  (13)  4/24/20  3 month USD-  2.715% —  590 
        LIBOR-BBA —  Semiannually   
        Quarterly     
108,000  656  (8)  4/24/28  2.942% —  3 month USD-  (721) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
31,600  388   —  4/25/28  3.013% —  3 month USD-  (407) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
31,600  353   —  4/25/28  3.00026% —  3 month USD-  (372) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
16,000  178   —  4/25/28  3.00% —  3 month USD-  (188) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
54,000  708  (1)  4/26/28  3 month USD-  3.0225% —  738 
        LIBOR-BBA —  Semiannually   
        Quarterly     
3,000  22   —  4/27/23  3 month USD-  2.9505% —  23 
        LIBOR-BBA —  Semiannually   
        Quarterly     

 

66 Dynamic Risk Allocation Fund 

 


CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/18 cont.   
    Upfront         
    premium        Unrealized 
    received  Termination  Payments  Payments  appreciation/ 
Notional amount  Value  (paid)  date  made by fund  received by fund (depreciation)
$10,000  $161  $—  4/27/28  3.0565% —  3 month USD-  $(167) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
20,000  124   —  4/30/23  3 month USD-  2.9275% —  132 
        LIBOR-BBA —  Semiannually   
        Quarterly     
110,000  1,437  (1)  4/30/28  3 month USD-  3.021% —  1,491 
        LIBOR-BBA —  Semiannually   
        Quarterly     
110,000  1,466  (51)  4/30/28  3.024% —  3 month USD-  (1,573) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
2,000  8   —  5/9/23  3 month USD-  2.881% —  8 
        LIBOR-BBA —  Semiannually   
        Quarterly     
2,000  8   —  5/9/23  3 month USD-  2.88505% —  9 
        LIBOR-BBA —  Semiannually   
        Quarterly     
2,039,000  3,585  (8)  5/9/20  2.766% —  3 month USD-  (3,953) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
29,000  296   —  5/10/28  2.9895% —  3 month USD-  (305) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
31,000  57   —  5/10/20  3 month USD-  2.769% —  63 
        LIBOR-BBA —  Semiannually   
        Quarterly     
155,000  319  (1)  5/11/20  3 month USD-  2.7805% —  345 
        LIBOR-BBA —  Semiannually   
        Quarterly     
230,000  427  (1)  5/14/20  3 month USD-  2.77% —  456 
        LIBOR-BBA —  Semiannually   
        Quarterly     
115,000  1,301  (2)  5/14/28  3.002% —  3 month USD-  (1,330) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
29,000  501   —  5/17/28  3.06911% —  3 month USD-  (508) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
5,000  96   —  5/18/28  3.09134% —  3 month USD-  (97) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
5,000  99   —  5/18/28  3.09716% —  3 month USD-  (100) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
82,000  1,925  (1)  5/21/28  3.1395% —  3 month USD-  (1,939) 
        Semiannually  LIBOR-BBA —   
          Quarterly   

 

Dynamic Risk Allocation Fund 67 

 


CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/18 cont.   
    Upfront         
    premium        Unrealized 
    received  Termination  Payments  Payments  appreciation/ 
Notional amount  Value  (paid)  date  made by fund  received by fund (depreciation)
$13,000  $271   $—  5/23/28  3 month USD-  3.11% —  $273 
        LIBOR-BBA —  Semiannually   
        Quarterly     
4,000  83   —  5/24/28  3 month USD-  3.1087% —  83 
        LIBOR-BBA —  Semiannually   
        Quarterly     
64,000  253  (1)  5/31/28  3 month USD-  2.918% —  252 
        LIBOR-BBA —  Semiannually   
        Quarterly     
36,000  22   —  6/1/28  3 month USD-  2.8663% —  (23) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
36,000  28   —  6/1/28  3 month USD-  2.8645% —  (28) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
36,000  24   —  6/1/28  3 month USD-  2.86582% —  (24) 
        LIBOR-BBA —  Semiannually   
        Quarterly     
89,000  345  (1)  6/4/28  2.9165% —  3 month USD-  (346) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
39,000  31  (1)  6/4/28  3 month USD-  2.8815% —  30 
        LIBOR-BBA —  Semiannually   
        Quarterly     
Total    $(270,365)        $(234,270) 

 

E Extended effective date.

OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/18     
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
Swap counterparty/    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
Bank of America N.A.             
$2,000,000  $107,020  $—  7/8/26  (1.76) — At  USA Non Revised  $107,020 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
25,865,145  25,869,916   —  11/16/18  3 month USD-  Russell 1000 Total  19,485 
        LIBOR-BBA minus  Return Index —   
        0.07% — Quarterly  Quarterly   
25,674,854  25,674,854   —  11/16/18  (3 month USD-  A basket (Merrill  12,680 
        LIBOR-BBA plus  Lynch MLFCF13) of   
        0.10%)— Quarterly  common stocks—   
          Quarterly*   

 

68 Dynamic Risk Allocation Fund 

 


OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/18 cont.     
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
Swap counterparty/    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
Barclays Bank PLC             
$358,627  $349,631   $—  1/12/41  4.00% (1 month  Synthetic TRS  $(6,093) 
        USD-LIBOR) —  Index 4.00% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
11,997  11,583   —  1/12/43  3.50% (1 month  Synthetic TRS  (327) 
        USD-LIBOR) —  Index 3.50% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
Citibank, N.A.             
6,492,003  6,530,925   —  11/27/18  3 month USD-  Russell 1000 Total  (38,441) 
        LIBOR-BBA plus  Return Index —   
        0.35% — Quarterly  Quarterly   
7,884,620  7,930,079   —  11/27/18  (3 month USD-  A basket  47,308 
        LIBOR-BBA  (CGPUTQL2) of   
        plus 0.37%) —  common stocks —   
        Quarterly  Quarterly *   
Credit Suisse International           
31,999  30,763   —  1/12/45  3.50% (1 month  Synthetic TRS  (1,009) 
        USD-LIBOR) —  Index 3.50% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
JPMorgan Securities LLC           
358,627  349,631   —  1/12/41  (4.00%) 1 month  Synthetic TRS  6,093 
        USD-LIBOR —  Index 4.00% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
Upfront premium received   —    Unrealized appreciation  192,586 
Upfront premium (paid)   —    Unrealized depreciation  (45,870) 
Total    $—    Total    $146,716 

 

* The 50 largest components, and any individual component greater than 1% of basket value, are shown below.

A BASKET (MERRILL LYNCH MLFCF13) OF COMMON STOCKS       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Microsoft Corp.  Information Technology  11,762  $1,162,559  4.53% 
Alphabet, Inc. Class A  Information Technology  939  1,033,305  4.02% 
JPMorgan Chase & Co.  Financials  7,229  773,543  3.01% 
Apple, Inc.  Information Technology  3,848  718,986  2.80% 
UnitedHealth Group, Inc.  Health Care  2,611  630,584  2.46% 
Verizon Communications, Inc.  Telecommunication  11,241  535,845  2.09% 
  Services       
Boeing Co. (The)  Industrials  1,493  525,814  2.05% 
Citigroup, Inc.  Financials  7,789  519,471  2.02% 
Exxon Mobil Corp.  Energy  5,512  447,810  1.74% 
Home Depot, Inc. (The)  Consumer Discretionary  2,257  421,030  1.64% 
Amazon.com, Inc.  Consumer Discretionary  241  392,727  1.53% 

 

Dynamic Risk Allocation Fund 69 

 


A BASKET (MERRILL LYNCH MLFCF13) OF COMMON STOCKS cont.       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Texas Instruments, Inc.  Information Technology  3,487  $390,199  1.52% 
Valero Energy Corp.  Energy  3,109  376,823  1.47% 
Union Pacific Corp.  Industrials  2,603  371,639  1.45% 
Johnson & Johnson  Health Care  3,082  368,702  1.44% 
Chevron Corp.  Energy  2,632  327,105  1.27% 
Lowe’s Cos., Inc.  Consumer Discretionary  3,412  324,187  1.26% 
NXP Semiconductor NV  Information Technology  2,604  296,909  1.16% 
PepsiCo, Inc.  Consumer Staples  2,953  296,069  1.15% 
Ralph Lauren Corp.  Consumer Discretionary  2,109  283,810  1.11% 
Facebook, Inc. Class A  Information Technology  1,240  237,752  0.93% 
Anthem, Inc.  Health Care  1,071  237,214  0.92% 
Northrop Grumman Corp.  Industrials  713  233,402  0.91% 
McDonald’s Corp.  Consumer Discretionary  1,452  232,388  0.91% 
Electronic Arts, Inc.  Information Technology  1,775  232,328  0.90% 
Merck & Co., Inc.  Health Care  3,783  225,225  0.88% 
HP, Inc.  Information Technology  9,964  219,499  0.85% 
Humana, Inc.  Health Care  743  216,074  0.84% 
Intuit, Inc.  Information Technology  1,071  215,944  0.84% 
IBM Corp.  Information Technology  1,485  209,909  0.82% 
Eli Lilly & Co.  Health Care  2,424  206,120  0.80% 
E*Trade Financial Corp.  Financials  3,226  204,365  0.80% 
Entergy Corp.  Utilities  2,504  202,605  0.79% 
L3 Technologies, Inc.  Industrials  1,011  200,512  0.78% 
Marathon Petroleum Corp.  Energy  2,466  194,879  0.76% 
McKesson Corp.  Health Care  1,365  193,751  0.75% 
Tyson Foods, Inc. Class A  Consumer Staples  2,594  174,987  0.68% 
Sysco Corp.  Consumer Staples  2,607  169,526  0.66% 
Southwest Airlines Co.  Industrials  3,290  168,062  0.65% 
Cigna Corp.  Health Care  975  165,096  0.64% 
S&P Global, Inc.  Financials  818  161,458  0.63% 
Walgreens Boots Alliance, Inc.  Consumer Staples  2,570  160,351  0.62% 
AbbVie, Inc.  Health Care  1,604  158,713  0.62% 
Celgene Corp.  Health Care  1,995  156,994  0.61% 
VMware, Inc. Class A  Information Technology  1,134  155,923  0.61% 
Kimberly-Clark Corp.  Consumer Staples  1,544  155,672  0.61% 
Sherwin-Williams Co. (The)  Materials  401  152,057  0.59% 
Ross Stores, Inc.  Consumer Discretionary  1,927  152,027  0.59% 
Williams Cos., Inc. (The)  Energy  5,633  151,301  0.59% 
Discovery Communications, Inc.  Consumer Discretionary  7,150  150,802  0.59% 
Class A         
 
A BASKET (CGPUTQL2) OF COMMON STOCKS       
        Percentage 
Common stocks  Sector  Shares  Value  value 
JPMorgan Chase & Co.  Financials  2,032  $217,480  2.74% 
Alphabet, Inc. Class A  Information Technology  172  189,260  2.39% 

 

70 Dynamic Risk Allocation Fund 

 


A BASKET (CGPUTQL2) OF COMMON STOCKS cont.       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Apple, Inc.  Information Technology  895  $167,164  2.11% 
Intuit, Inc.  Information Technology  795  160,181  2.02% 
Texas Instruments, Inc.  Information Technology  1,340  149,915  1.89% 
McDonald’s Corp.  Consumer Discretionary  929  148,606  1.87% 
Raytheon Co.  Industrials  704  147,483  1.86% 
Occidental Petroleum Corp.  Energy  1,738  146,305  1.84% 
Time Warner, Inc.  Consumer Discretionary  1,533  144,303  1.82% 
American Express Co.  Financials  1,459  143,428  1.81% 
Northrop Grumman Corp.  Industrials  432  141,241  1.78% 
Humana, Inc.  Health Care  477  138,819  1.75% 
Danaher Corp.  Health Care  1,389  137,946  1.74% 
Constellation Brands, Inc. Class A  Consumer Staples  604  134,706  1.70% 
PNC Financial Services Group, Inc.  Financials  926  132,798  1.67% 
(The)         
eBay, Inc.  Information Technology  3,451  130,183  1.64% 
Cognizant Technology Solutions  Information Technology  1,708  128,676  1.62% 
Corp. Class A         
Exxon Mobil Corp.  Energy  1,579  128,262  1.62% 
TJX Cos., Inc. (The)  Consumer Discretionary  1,388  125,374  1.58% 
Pfizer, Inc.  Health Care  3,308  118,842  1.50% 
Lowe’s Cos., Inc.  Consumer Discretionary  1,236  117,474  1.48% 
American Electric Power Co., Inc.  Utilities  1,685  114,499  1.44% 
Honeywell International, Inc.  Industrials  763  112,872  1.42% 
Baxter International, Inc.  Health Care  1,381  97,808  1.23% 
Kimberly-Clark Corp.  Consumer Staples  935  94,257  1.19% 
Marathon Petroleum Corp.  Energy  1,188  93,888  1.18% 
Johnson & Johnson  Health Care  785  93,859  1.18% 
Norfolk Southern Corp.  Industrials  619  93,805  1.18% 
Microsoft Corp.  Information Technology  943  93,221  1.18% 
Allstate Corp. (The)  Financials  941  87,984  1.11% 
Duke Energy Corp.  Utilities  1,139  87,872  1.11% 
Facebook, Inc. Class A  Information Technology  456  87,416  1.10% 
F5 Networks, Inc.  Information Technology  503  87,141  1.10% 
Fidelity National Information  Information Technology  809  82,667  1.04% 
Services, Inc.         
Walt Disney Co. (The)  Consumer Discretionary  826  82,177  1.04% 
Red Hat, Inc.  Information Technology  494  80,295  1.01% 
HP, Inc.  Information Technology  3,572  78,689  0.99% 
NetApp, Inc.  Information Technology  1,129  77,152  0.97% 
General Dynamics Corp.  Industrials  381  76,936  0.97% 
Verizon Communications, Inc.  Telecommunication  1,571  74,901  0.94% 
  Services       
Sysco Corp.  Consumer Staples  1,142  74,269  0.94% 
Valero Energy Corp.  Energy  593  71,926  0.91% 
Applied Materials, Inc.  Information Technology  1,362  69,188  0.87% 
Harris Corp.  Industrials  434  65,340  0.82% 

 

Dynamic Risk Allocation Fund 71 

 


A BASKET (CGPUTQL2) OF COMMON STOCKS cont.       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Kinder Morgan, Inc.  Energy  3,864  $64,446  0.81% 
Ross Stores, Inc.  Consumer Discretionary  808  63,701  0.80% 
Waste Management, Inc.  Industrials  745  61,595  0.78% 
UnitedHealth Group, Inc.  Health Care  248  60,002  0.76% 
Equity Residential Trust R  Real Estate  935  59,827  0.75% 
Exelon Corp.  Utilities  1,441  59,652  0.75% 

 

CENTRALLY CLEARED TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/18   
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
$2,600,000  $274,141  $—  1/9/23  (2.76%) — At  USA Non Revised  $(274,141) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
13,000,000  1,030,107   —  8/7/22  (2.515%) — At  USA Non Revised  (1,030,107) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,600,000  129,773   —  8/8/22  (2.5325%) — At  USA Non Revised  (129,773) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
700,000  58,842   —  9/10/22  (2.5925%) — At  USA Non Revised  (58,842) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
3,300,000  353,466   —  2/8/23  (2.81%) — At  USA Non Revised  (353,466) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
6,900,000  511,525   —  7/19/23  (2.57%) — At  USA Non Revised  (511,525) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,400,000  32,224   —  8/7/25  (1.92%) — At  USA Non Revised  32,224 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,500,000  63,957   —  4/7/26  (1.858%) — At  USA Non Revised  63,957 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   

 

72 Dynamic Risk Allocation Fund 

 


CENTRALLY CLEARED TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/18 cont.   
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
$4,800,000  $2,146  $—  12/5/26  (2.308%) — At  USA Non Revised  $(2,146) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
3,600,000  39,089   —  5/5/27  (2.17%) — At  USA Non Revised  39,089 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,200,000  30,006   —  8/7/27  (2.085%) — At  USA Non Revised  30,006 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
3,500,000  69,846  (38)  11/7/27  (2.1438%) — At  USA Non Revised  69,808 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
4,000,000  4,964  (67)  3/7/28  (2.335%) — At  USA Non Revised  (5,031) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,400,000  493  (23)  4/6/28  (2.3075%) — At  USA Non Revised  (516) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
Total    $(128)        $(2,130,463) 

 

OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/18   
    Upfront           
    premium      Termi-  Payments  Unrealized 
Swap counterparty/    received  Notional    nation  received  appreciation/ 
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  (depreciation) 
Barclays Bank PLC               
EM Series 29  BBB–/P  $5,080  $200,000  $6,550  6/20/23  100 bp —  $(1,314) 
Index            Quarterly   
EM Series 29  BBB–/P  4,920  300,000  9,825  6/20/23  100 bp —  (4,430) 
Index            Quarterly   
EM Series 29  BBB–/P  201,160  9,400,000  307,850  6/20/23  100 bp —  (88,412) 
Index            Quarterly   
Citigroup Global Markets, Inc.             
CMBX NA A.6  A/P  59  6,000  65  5/11/63  200 bp —  (5) 
Index            Monthly   
CMBX NA A.7  A-/P   —  1,000  1  1/17/47  200 bp —  1 
Index            Monthly   

 

Dynamic Risk Allocation Fund 73 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/18 cont.   
    Upfront           
    premium      Termi-  Payments  Unrealized 
Swap counterparty/    received  Notional    nation  received appreciation/
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  (depreciation) 
Citigroup Global Markets, Inc. cont.           
CMBX NA BB.6  BB/P  $4,923  $20,000  $3,880  5/11/63  500 bp —  $1,062 
Index            Monthly   
CMBX NA BBB–.7  BBB–/P  280  3,000  233  1/17/47  300 bp —  49 
Index            Monthly   
Credit Suisse International             
CMBX NA A.6  A/P  997  20,000  218  5/11/63  200 bp —  787 
Index            Monthly   
CMBX NA A.6  A/P  11,317  223,000  2,431  5/11/63  200 bp —  8,973 
Index            Monthly   
CMBX NA A.7  A-/P  1,288  35,000  35  1/17/47  200 bp —  1,337 
Index            Monthly   
CMBX NA A.7  A-/P  1,040  25,000  25  1/17/47  200 bp —  1,075 
Index            Monthly   
CMBX NA A.7  A-/P  943  24,000  24  1/17/47  200 bp —  976 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  109  1,000  112  5/11/63  300 bp —  (3) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  886  7,000  786  5/11/63  300 bp —  104 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  2,090  18,000  2,021  5/11/63  300 bp —  79 
Index            Monthly   
Goldman Sachs International             
CMBX NA A.6  A/P  759  15,000  164  5/11/63  200 bp —  602 
Index            Monthly   
CMBX NA A.6  A/P  759  15,000  164  5/11/63  200 bp —  602 
Index            Monthly   
CMBX NA A.6  A/P  781  15,000  164  5/11/63  200 bp —  623 
Index            Monthly   
CMBX NA A.6  A/P  1,248  19,000  207  5/11/63  200 bp —  1,048 
Index            Monthly   
CMBX NA A.6  A/P  1,133  22,000  240  5/11/63  200 bp —  902 
Index            Monthly   
CMBX NA A.6  A/P  1,186  24,000  262  5/11/63  200 bp —  933 
Index            Monthly   
CMBX NA A.6  A/P  1,988  31,000  338  5/11/63  200 bp —  1,663 
Index            Monthly   
CMBX NA A.6  A/P  1,083  35,000  382  5/11/63  200 bp —  715 
Index            Monthly   
CMBX NA A.6  A/P  1,820  58,000  632  5/11/63  200 bp —  1,210 
Index            Monthly   
CMBX NA A.6  A/P  3,736  62,000  676  5/11/63  200 bp —  3,085 
Index            Monthly   
CMBX NA A.6  A/P  3,359  66,000  719  5/11/63  200 bp —  2,665 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  52  1,000  112  5/11/63  300 bp —  (60) 
Index            Monthly   

 

74 Dynamic Risk Allocation Fund 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/18 cont.   
    Upfront           
    premium      Termi-  Payments  Unrealized 
Swap counterparty/    received  Notional    nation  received appreciation/
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  (depreciation) 
Goldman Sachs International cont.           
CMBX NA BBB–.6  BBB–/P  $317  $4,000  $449  5/11/63  300 bp —  $(130) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  613  9,000  1,011  5/11/63  300 bp —  (392) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,056  9,000  1,011  5/11/63  300 bp —  51 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,303  12,000  1,348  5/11/63  300 bp —  (37) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,298  12,000  1,348  5/11/63  300 bp —  (42) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,266  15,000  1,685  5/11/63  300 bp —  (410) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,941  23,000  2,583  5/11/63  300 bp —  (629) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  4,261  35,000  3,931  5/11/63  300 bp —  351 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  8,253  88,000  9,882  5/11/63  300 bp —  (1,578) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  8,194  109,000  12,241  5/11/63  300 bp —  (3,983) 
Index            Monthly   
JPMorgan Securities LLC             
CMBX NA BB.6  BB/P  1,059  5,000  970  5/11/63  500 bp —  94 
Index            Monthly   
CMBX NA BB.6  BB/P  1,270  6,000  1,164  5/11/63  500 bp —  112 
Index            Monthly   
CMBX NA A.6  A/P  717  14,000  153  5/11/63  200 bp —  570 
Index            Monthly   
CMBX NA A.6  A/P  1,114  22,000  240  5/11/63  200 bp —  883 
Index            Monthly   
CMBX NA A.6  A/P  1,155  35,000  382  5/11/63  200 bp —  787 
Index            Monthly   
CMBX NA A.6  A/P  2,118  36,000  392  5/11/63  200 bp —  1,740 
Index            Monthly   
CMBX NA A.6  A/P  2,538  41,000  447  5/11/63  200 bp —  2,107 
Index            Monthly   
CMBX NA A.6  A/P  1,205  42,000  458  5/11/63  200 bp —  763 
Index            Monthly   
CMBX NA A.6  A/P  1,613  49,000  534  5/11/63  200 bp —  1,097 
Index            Monthly   
CMBX NA A.6  A/P  1,900  58,000  632  5/11/63  200 bp —  1,290 
Index            Monthly   
CMBX NA A.6  A/P  1,773  63,000  687  5/11/63  200 bp —  1,111 
Index            Monthly   
CMBX NA A.6  A/P  3,188  72,000  785  5/11/63  200 bp —  2,431 
Index            Monthly   
CMBX NA A.6  A/P  12,776  212,000  2,311  5/11/63  200 bp —  10,547 
Index            Monthly   

 

Dynamic Risk Allocation Fund 75 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/18 cont.   
    Upfront           
    premium      Termi-  Payments  Unrealized 
Swap counterparty/    received  Notional    nation  received appreciation/ 
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  (depreciation) 
JPMorgan Securities LLC cont.             
CMBX NA A.6  A/P  $21,201  $701,000  $7,641  5/11/63  200 bp —  $13,833 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  794  7,000  786  5/11/63  300 bp —  12 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,125  9,000  1,011  5/11/63  300 bp —  120 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  2,008  18,000  2,021  5/11/63  300 bp —  (3) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  2,112  19,000  2,134  5/11/63  300 bp —  (11) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  4,812  45,000  5,054  5/11/63  300 bp —  (215) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  12,574  105,000  11,792  5/11/63  300 bp —  844 
Index            Monthly   
Morgan Stanley & Co. International PLC           
CMBX NA A.6  A/P  310  6,000  65  5/11/63  200 bp —  247 
Index            Monthly   
CMBX NA A.6  A/P  726  12,000  131  5/11/63  200 bp —  599 
Index            Monthly   
CMBX NA BB.6  BB/P  1,473  6,000  1,164  5/11/63  500 bp —  315 
Index            Monthly   
CMBX NA BB.6  BB/P  3,203  13,000  2,522  5/11/63  500 bp —  694 
Index            Monthly   
Upfront premium received  364,262    Unrealized appreciation  69,089 
Upfront premium (paid)   —    Unrealized depreciation  (101,654) 
Total    $364,262    Total      $(32,565) 

 

* Payments related to the referenced debt are made upon a credit default event.

** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.

*** Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody’s, Standard & Poor’s or Fitch ratings are believed to be the most recent ratings available at May 31, 2018. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.

OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/18   
  Upfront           
  premium      Termi-  Payments  Unrealized 
Swap counterparty/  received  Notional    nation  (paid)  appreciation/ 
Referenced debt*  (paid)**  amount  Value  date  by fund  (depreciation) 
Citigroup Global Markets, Inc.             
CMBX NA BB.7 Index  $(4,036)  $20,000  $2,930  1/17/47  (500 bp) —  $(1,126) 
          Monthly   
CMBX NA BB.7 Index  (1,143)  7,000  1,026  1/17/47  (500 bp) —  (124) 
          Monthly   
CMBX NA BB.7 Index  (1,099)  7,000  1,026  1/17/47  (500 bp) —  (81) 
          Monthly   

 

76 Dynamic Risk Allocation Fund 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/18 cont. 
  Upfront           
  premium      Termi-  Payments  Unrealized 
Swap counterparty/  received  Notional    nation  (paid)  appreciation/ 
Referenced debt*  (paid)**  amount  Value  date  by fund  (depreciation) 
Credit Suisse International             
CMBX NA BB.7 Index  $(2,630)  $149,000  $28,906  5/11/63  (500 bp) —  $26,131 
          Monthly   
CMBX NA BB.7 Index  (5,099)  31,000  4,542  1/17/47  (500 bp) —  (588) 
          Monthly   
CMBX NA BBB–.7 Index  (78)  1,000  78  1/17/47  (300 bp) —  (1) 
          Monthly   
Goldman Sachs International             
CMBX NA BB.6 Index  (2,557)  25,000  4,850  5/11/63  (500 bp) —  2,268 
          Monthly   
CMBX NA BB.7 Index  (303)  2,000  293  1/17/47  (500 bp) —  (12) 
          Monthly   
CMBX NA BB.7 Index  (6,904)  34,000  4,981  1/17/47  (500 bp) —  (1,956) 
          Monthly   
CMBX NA BB.7 Index  (2,130)  13,000  1,905  1/17/47  (500 bp) —  (238) 
          Monthly   
JPMorgan Securities LLC             
CMBX NA BB.7 Index  (958)  6,000  879  1/17/47  (500 bp) —  (85) 
          Monthly   
CMBX NA BB.7 Index  (799)  5,000  733  1/17/47  (500 bp) —  (72) 
          Monthly   
CMBX NA A.6 Index  (56)  6,000  65  5/11/63  (200 bp) —  7 
          Monthly   
CMBX NA A.7 Index  (1,138)  54,000  54  1/17/47  (200 bp) —  (1,213) 
          Monthly   
CMBX NA BB.6 Index  (399)  3,000  582  5/11/63  (500 bp) —  180 
          Monthly   
CMBX NA BB.6 Index  (281)  2,000  388  5/11/63  (500 bp) —  105 
          Monthly   
CMBX NA BB.7 Index  (8,388)  49,000  7,179  1/17/47  (500 bp) —  (1,258) 
          Monthly   
CMBX NA BB.7 Index  (2,192)  14,000  2,051  1/17/47  (500 bp) —  (154) 
          Monthly   
CMBX NA BB.7 Index  (1,786)  11,000  1,612  1/17/47  (500 bp) —  (186) 
          Monthly   
CMBX NA BB.7 Index  (1,620)  9,000  1,319  1/17/47  (500 bp) —  (310) 
          Monthly   
CMBX NA BB.7 Index  (1,099)  7,000  1,026  1/17/47  (500 bp) —  (81) 
          Monthly   
CMBX NA BB.7 Index  (973)  5,000  733  1/17/47  (500 bp) —  (245) 
          Monthly   
Merrill Lynch International             
CMBX NA BB.7 Index  (4,337)  25,000  3,663  1/17/47  (500 bp) —  (699) 
          Monthly   
Morgan Stanley & Co. International PLC           
CMBX NA BB.7 Index  (2,614)  13,000  1,905  1/17/47  (500 bp) —  (723) 
          Monthly   

 

Dynamic Risk Allocation Fund 77 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/18 cont. 
  Upfront           
  premium      Termi-  Payments  Unrealized 
Swap counterparty/  received  Notional    nation  (paid)  appreciation/ 
Referenced debt*  (paid)**  amount  Value  date  by fund  (depreciation) 
Morgan Stanley & Co. International PLC cont.           
CMBX NA BB.7 Index  $(2,121)  $11,000  $1,612  1/17/47  (500 bp) —  $(520) 
          Monthly   
CMBX NA BB.7 Index  (1,214)  6,000  879  1/17/47  (500 bp) —  (336) 
          Monthly   
Upfront premium received   —    Unrealized appreciation  28,691 
Upfront premium (paid)  (55,954)    Unrealized depreciation  (10,008) 
Total  $(55,954)    Total      $18,683 

 

* 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.

CENTRALLY CLEARED CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/18 
    Upfront           
    premium      Termi-  Payments   
    received  Notional    nation  received  Unrealized 
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  appreciation 
NA HY Series 30  B+/P  $(184,947)  $3,107,000  $193,181  6/20/23  500 bp —  $36,282 
Index            Quarterly   
NA Investment  BBB+/P  (63,261)  3,900,000  60,005  6/20/23  100 bp —  4,220 
Grade Index            Quarterly   
Total    $(248,208)          $40,502 

 

* 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, 2018. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.

CENTRALLY CLEARED CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/18 
  Upfront           
  premium      Termi-  Payments   
Referenced  received  Notional    nation  (paid)  Unrealized 
debt*  (paid)**  amount  Value  date  by fund  depreciation 
NA HY Series 30  $1,488,091  $23,848,000  $1,482,773  6/20/23  (500 bp) —  $(209,932) 
Index          Quarterly   
Total  $1,488,091          $(209,932) 

 

* 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.

78 Dynamic Risk Allocation Fund 

 


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

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

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

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

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

    Valuation inputs
Investments in securities:  Level 1  Level 2  Level 3 
Common stocks:       
Basic materials  $398,546  $2,444,653  $—­ 
Capital goods  4,141,276  986,530  —­ 
Communication services  823,687  1,193,282  —­ 
Conglomerates  773,391  311,273  —­ 
Consumer cyclicals  6,100,538  2,781,493  —­ 
Consumer staples  3,715,931  1,966,033  —­ 
Energy  2,896,206  1,289,221  7,430 
Financials  12,730,286  5,855,203  —­ 
Health care  5,423,927  1,744,804  —­ 
Technology  11,341,514  2,488,908  —­ 
Transportation  772,861  810,002  —­ 
Utilities and power  1,922,057  634,087  —­ 
Total common stocks  51,040,220  22,505,489  7,430 
 
Asset-backed securities  —­  1,041,397  —­ 
Commodity linked notes  —­  14,678,840  —­ 
Convertible preferred stocks  —­  52,748  — 
Corporate bonds and notes  —­  35,971,824  5 
Foreign government and agency bonds and notes  —­  729,895  —­ 
Investment companies  718,428  —­  —­ 
Mortgage-backed securities  —­  4,478,527  —­ 
Purchased options outstanding  —­  951,927  —­ 
Senior loans  —­  834,735  —­ 
U.S. government and agency mortgage obligations  —­  17,584,515  —­ 
Warrants  552  —­  —­ 
Short-term investments  19,755,321  4,860,726  —­ 
Totals by level  $71,514,521  $103,690,623  $7,435 

 

Dynamic Risk Allocation Fund 79 

 


    Valuation inputs
Other financial instruments:  Level 1  Level 2  Level 3 
Forward currency contracts  $—­  $(323,492)  $—­ 
Futures contracts  1,022,029  —­  —­ 
Written options outstanding  —­  (2,061)  —­ 
TBA sale commitments  —­  (5,979,844)  —­ 
Interest rate swap contracts  —­  36,095  —­ 
Total return swap contracts  —­  (1,983,619)  —­ 
Credit default contracts  —­  (1,731,503)  —­ 
Totals by level  $1,022,029  $(9,984,424)  $—­ 

 

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.

80 Dynamic Risk Allocation Fund 

 


Statement of assets and liabilities 5/31/18

ASSETS   
Investment in securities, at value, including $138,535 of securities on loan (Notes 1 and 9):   
Unaffiliated issuers (identified cost $141,153,488)  $155,673,208 
Affiliated issuers (identified cost $19,539,371) (Notes 1 and 5)  19,539,371 
Cash  136,634 
Foreign currency (cost $3,625) (Note 1)  4,529 
Dividends, interest and other receivables  634,891 
Receivable for shares of the fund sold  70,273 
Receivable for investments sold  49,735 
Receivable for sales of delayed delivery securities (Note 1)  5,953,992 
Receivable for variation margin on futures contracts (Note 1)  389,101 
Receivable for variation margin on centrally cleared swap contracts (Note 1)  112,838 
Unrealized appreciation on forward currency contracts (Note 1)  984,097 
Unrealized appreciation on OTC swap contracts (Note 1)  290,366 
Premium paid on OTC swap contracts (Note 1)  55,954 
Prepaid assets  34,182 
Total assets  183,929,171 
 
LIABILITIES   
Payable for investments purchased  274,530 
Payable for purchases of delayed delivery securities (Note 1)  16,992,492 
Payable for shares of the fund repurchased  281,565 
Payable for compensation of Manager (Note 2)  12,007 
Payable for custodian fees (Note 2)  28,721 
Payable for investor servicing fees (Note 2)  29,929 
Payable for Trustee compensation and expenses (Note 2)  20,036 
Payable for administrative services (Note 2)  580 
Payable for distribution fees (Note 2)  15,622 
Payable for variation margin on futures contracts (Note 1)  97,964 
Payable for variation margin on centrally cleared swap contracts (Note 1)  5,156 
Unrealized depreciation on OTC swap contracts (Note 1)  157,532 
Premium received on OTC swap contracts (Note 1)  364,262 
Unrealized depreciation on forward currency contracts (Note 1)  1,307,589 
Written options outstanding, at value (premiums $20,021) (Note 1)  2,061 
TBA sale commitments, at value (proceeds receivable $5,946,992) (Note 1)  5,979,844 
Collateral on securities loaned, at value (Note 1)  144,050 
Collateral on certain derivative contracts, at value (Notes 1 and 9)  879,085 
Other accrued expenses  89,390 
Total liabilities  26,682,415 
 
Net assets  $157,246,756 

 

(Continued on next page)

Dynamic Risk Allocation Fund 81 

 


Statement of assets and liabilities cont.

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $144,791,325 
Undistributed net investment income (Note 1)  2,829,088 
Accumulated net realized loss on investments and foreign currency transactions (Note 1)  (3,175,357) 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  12,801,700 
Total — Representing net assets applicable to capital shares outstanding  $157,246,756 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($18,905,560 divided by 1,629,087 shares)  $11.61 
Offering price per class A share (100/94.25 of $11.61)*  $12.32 
Net asset value and offering price per class B share ($2,315,311 divided by 203,230 shares)**  $11.39 
Net asset value and offering price per class C share ($5,811,952 divided by 509,028 shares)**  $11.42 
Net asset value and redemption price per class M share ($297,214 divided by 25,647 shares)  $11.59 
Offering price per class M share (100/96.50 of $11.59)*  $12.01 
Net asset value, offering price and redemption price per class R share   
($102,797 divided by 8,891 shares)  $11.56 
Net asset value, offering price and redemption price per class R6 share   
($81,403,248 divided by 7,028,107 shares)  $11.58 
Net asset value, offering price and redemption price per class Y share   
($48,410,674 divided by 4,162,094 shares)  $11.63 

 

* 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.

82 Dynamic Risk Allocation Fund 

 


Statement of operations Year ended 5/31/18

INVESTMENT INCOME   
Interest (including interest income of $305,391 from investments in affiliated issuers) (Note 5)  $2,661,709 
Dividends (net of foreign tax of $84,920)  2,187,504 
Securities lending (net of expenses) (Notes 1 and 5)  2,223 
Total investment income  4,851,436 
 
EXPENSES   
Compensation of Manager (Note 2)  1,146,035 
Investor servicing fees (Note 2)  181,388 
Custodian fees (Note 2)  98,891 
Trustee compensation and expenses (Note 2)  8,136 
Distribution fees (Note 2)  141,082 
Administrative services (Note 2)  4,768 
Blue sky expense  95,959 
Other  143,781 
Fees waived and reimbursed by Manager (Note 2)  (385,271) 
Total expenses  1,434,769 
 
Expense reduction (Note 2)  (2,249) 
Net expenses  1,432,520 
 
Net investment income  3,418,916 
 
REALIZED AND UNREALIZED GAIN (LOSS)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (Notes 1 and 3)  6,345,010 
Net increase from payments by affiliates (Note 2)  2,227 
Foreign currency transactions (Note 1)  24,459 
Forward currency contracts (Note (1)  653,512 
Futures contracts (Note 1)  105,916 
Swap contracts (Note 1)  (172,513) 
Written options (Note 1)  (215,555) 
Total net realized gain  6,743,056 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers and TBA sale commitments  4,171,436 
Assets and liabilities in foreign currencies  (3,793) 
Forward currency contracts  (822,765) 
Futures contracts  880,951 
Swap contracts  (723,438) 
Written options  21,261 
Total change in net unrealized appreciation  3,523,652 
 
Net gain on investments  10,266,708 
 
Net increase in net assets resulting from operations  $13,685,624 

 

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

Dynamic Risk Allocation Fund 83 

 


Statement of changes in net assets

DECREASE IN NET ASSETS  Year ended 5/31/18  Year ended 5/31/17 
Operations     
Net investment income  $3,418,916  $3,290,951 
Net realized gain on investments     
and foreign currency transactions  6,743,056  5,533,515 
Net unrealized appreciation of investments and assets     
and liabilities in foreign currencies  3,523,652  6,985,684 
Net increase in net assets resulting from operations  13,685,624  15,810,150 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (505,565)  (454,645) 
Class B  (49,532)  (40,778) 
Class C  (130,069)  (121,685) 
Class M  (5,868)  (5,263) 
Class R  (3,083)  (1,236) 
Class R6  (2,453,358)  (2,656,399) 
Class Y  (1,444,735)  (1,214,828) 
Increase in capital from payments from Affiliate (Note 2)  96,972  — 
Decrease from capital share transactions (Note 4)  (28,513,638)  (11,669,627) 
Total decrease in net assets  (19,323,252)  (354,311) 
 
NET ASSETS     
Beginning of year  176,570,008  176,924,319 
End of year (including undistributed net investment     
income of $2,829,088 and $2,611,074, respectively)  $157,246,756  $176,570,008 

 

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

84 Dynamic Risk Allocation Fund 

 


This page left blank intentionally. 

 

Dynamic Risk Allocation Fund 85 

 


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

  INVESTMENT OPERATIONS      LESS DISTRIBUTIONS          RATIOS AND SUPPLEMENTAL DATA   
                        Ratio of  Ratio of net   
  Net asset    Net realized      From            expenses  investment   
  value,    and unrealized  Total from  From net  net realized    Non-recurring  Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss) on  investment  investment  gain on  Total  reimburse­  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)a  investments­  operations­  income­  investments­  distributions  ments­  of period­  value (%) b  (in thousands)  (%)c,d  net assets (%)d  (%) 
Class A­                             
May 31, 2018­  $10.96­  .22­  .74­  .96­  (.32)  —­  (.32)  $0.01­g  $11.61­  8.86­  $18,906­  1.14­  1.93­  312­e 
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 
Class B­                             
May 31, 2018­  $10.76­  .13­  .72­  .85­  (.23)  —­  (.23)  $0.01­g  $11.39­  7.97  $2,315­  1.89­  1.18­  312­e 
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 
Class C­                             
May 31, 2018­  $10.78­  .13­  .72­  .85­  (.22)  —­  (.22)  $0.01­g  $11.42­  7.99­  $5,812­  1.89­  1.18­  312­e 
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 
Class M­                             
May 31, 2018­  $10.94­  .16­  .73­  .89­  (.25)  —­  (.25)  $0.01­g  $11.59­  8.29­  $297­  1.64­  1.43­  312­e 
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 
Class R­                             
May 31, 2018­  $10.93­  .19­  .73­  .92­  (.30)  —­  (.30)  $0.01­g  $11.56­  8.51­  $103­  1.39­  1.67­  312­e 
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 
Class R6­                             
May 31, 2018­  $10.94­  .26­  .73­  0.99­  (.36)  —­  (.36)  $0.01­g  $11.58­  9.19  $81,403­  .75­  2.31­  312­e 
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 

 

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

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

86 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 87 

 


Financial highlights cont.

  INVESTMENT OPERATIONS      LESS DISTRIBUTIONS          RATIOS AND SUPPLEMENTAL DATA   
                        Ratio of  Ratio of net   
  Net asset    Net realized      From            expenses  investment   
  value,    and unrealized  Total from  From net  net realized    Non-recurring  Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss) on  investment  investment  gain on  Total  reimburse­  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)a  investments­  operations­  income­  investments­  distributions  ments­  of period­  value (%)b  (in thousands)  (%)c,d  net assets (%)d  (%) 
Class Y­                             
May 31, 2018­  $10.99­  .25­  .73­  .98­  (.35)  —­  (.35)  $0.01­g  $11.63­  9.02­  $48,411­  .89­  2.17­  312­e 
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 

 

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):

  5/31/18  5/31/17  5/31/16  5/31/15  5/31/14 
Class A  0.24%  0.23%  0.17%  0.10%  0.10% 
Class B  0.24  0.23  0.17  0.10  0.10 
Class C  0.24  0.23  0.17  0.10  0.10 
Class M  0.24  0.23  0.17  0.10  0.10 
Class R  0.24  0.23  0.17  0.10  0.10 
Class R6  0.24  0.23  0.20  N/A  N/A 
Class Y  0.24  0.23  0.17  0.10  0.10 

 

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% 

 

g Reflects a non-recurring reimbursement from Putnam Management which amounted to $0.01 per share outstanding on May 31, 2018.

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

88 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 89 

 


Notes to financial statements 5/31/18

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, 2017 through May 31, 2018.

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 asset classes in a manner intended to diversify the fund’s exposure to these different types of risk. Putnam Management typically using leverage to adjust or to increase the fund’s exposure to certain 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. Putnam Management believes that better risk diversification creates the potential for the fund to perform well in a variety of market environments. Because the potential risks and returns of asset classes, the costs of leverage, and the benefits of diversification vary over time and with market conditions, Putnam Management makes dynamic adjustments to the fund’s asset allocations as the market environment changes. Putnam Management uses qualitative analysis, which includes evaluation of the business cycle environment and its impact on different asset classes, and quantitative techniques, which incorporate individual valuation and relative valuation measures, to establish asset class allocations that it believes will enable the fund to perform well in a variety of environments. Putnam Management also uses active trading strategies, such as active security selection, tactical asset allocation, currency transactions and options transactions. Certain of these strategies may introduce additional investment leverage. When making particular investments within an asset class, Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell equity investments, and among other factors, credit, interest rate and prepayment risks when deciding whether to buy or sell fixed-income investments. Putnam Management may also take into account general market conditions when making investment decisions. 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. 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 generally convert to class A shares after approximately ten years. Prior to April 1, 2018, class C shares did 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.

90 Dynamic Risk Allocation Fund 

 


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 Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Note 1: Significant accounting policies

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

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

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

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

Dynamic Risk Allocation Fund 91 

 


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. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

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

To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. 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

92 Dynamic Risk Allocation 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 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 assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.

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

Dynamic Risk Allocation Fund 93 

 


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

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

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

Total return swap contracts The fund entered into OTC and/or centrally cleared total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, to hedge sector exposure, 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 and/or centrally cleared total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market maker. Any change is recorded as an unrealized gain or loss on OTC total return swaps. Daily fluctuations in the value of centrally cleared total return swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC and/or centrally cleared total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC total return swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared total return swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared total return swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.

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

94 Dynamic Risk Allocation Fund 

 


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 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

Dynamic Risk Allocation Fund 95 

 


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 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 $549,264 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $459,881 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 $144,050 and the value of securities loaned amounted to $138,535.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit 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.

96 Dynamic Risk Allocation Fund 

 


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

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

The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At May 31, 2018, 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 
$1,885,381  $—  $1,885,381 

 

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 unrealized gains and losses on certain futures contracts, from realized gains and losses on certain futures contracts, from unrealized gains and losses on passive foreign investment companies, 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 $1,391,308 to increase undistributed net investment income, $13 to decrease paid-in capital and $1,391,295 to increase accumulated net realized loss.

Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:

Unrealized appreciation  $20,369,911 
Unrealized depreciation  (8,406,191) 
Net unrealized appreciation  11,963,720 
Undistributed ordinary income  2,409,844 
Capital loss carryforward  (1,885,381) 
Cost for federal income tax purposes  $154,286,464 

 

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.

Dynamic Risk Allocation Fund 97 

 


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. 

 

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.723% 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, 2019, 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 $353,516 as a result of this limit.

Putnam Management has also contractually agreed, through September 30, 2019, 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 reduced by $31,755 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 $2,227 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.

Putnam Management has also reimbursed the fund $96,972 for a pricing error which occurred during the period.

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%.

98 Dynamic Risk Allocation Fund 

 


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

Class A  $34,450  Class R  204 
Class B  4,644  Class R6  40,840 
Class C  12,227  Class Y  88,509 
Class M  514  Total  $181,388 

 

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 $1,844 under the expense offset arrangements and by $405 under the brokerage/service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $117, 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%  $46,775 
Class B  1.00%  1.00%  25,233 
Class C  1.00%  1.00%  66,427 
Class M  1.00%  0.75%  2,095 
Class R  1.00%  0.50%  552 
Total      $141,082 

 

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $3,647 and $16 from the sale of class A and class M shares, respectively, and received $435 and $117 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.

Dynamic Risk Allocation Fund 99 

 


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)  $438,117,219  $459,043,229 
U.S. government securities (Long-term)  —  — 
Total  $438,117,219  $459,043,229 

 

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

Note 4: Capital shares

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

  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class A  Shares  Amount  Shares  Amount 
Shares sold  198,902  $2,251,499  258,228  $2,736,926 
Shares issued in connection with         
reinvestment of distributions  43,227  493,216  42,224  435,747 
  242,129  2,744,715  300,452  3,172,673 
Shares repurchased  (308,230)  (3,505,305)  (573,823)  (6,060,105) 
Net decrease  (66,101)  $(760,590)  (273,371)  $(2,887,432) 
 
  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class B  Shares  Amount  Shares  Amount 
Shares sold  1,921  $21,299  10,886  $112,780 
Shares issued in connection with         
reinvestment of distributions  4,228  47,524  3,843  39,087 
  6,149  68,823  14,729  151,867 
Shares repurchased  (50,898)  (566,737)  (84,726)  (883,609) 
Net decrease  (44,749)  $(497,914)  (69,997)  $(731,742) 
 
  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class C  Shares  Amount  Shares  Amount 
Shares sold  40,373  $449,972  93,863  $982,467 
Shares issued in connection with         
reinvestment of distributions  10,870  122,399  10,882  110,885 
  51,243  572,371  104,745  1,093,352 
Shares repurchased  (224,662)  (2,491,797)  (379,296)  (3,965,432) 
Net decrease  (173,419)  $(1,919,426)  (274,551)  $(2,872,080) 

 

100 Dynamic Risk Allocation Fund 

 


  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class M  Shares  Amount  Shares  Amount 
Shares sold  3,687  $41,556  3,323  $35,302 
Shares issued in connection with         
reinvestment of distributions  514  5,868  509  5,263 
  4,201  47,424  3,832  40,565 
Shares repurchased  (4,978)  (56,342)  (1,735)  (18,164) 
Net increase (decrease)  (777)  $(8,918)  2,097  $22,401 
 
  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class R  Shares  Amount  Shares  Amount 
Shares sold  1,469  $16,466  3,531  $37,463 
Shares issued in connection with         
reinvestment of distributions  141  1,601  93  957 
  1,610  18,067  3,624  38,420 
Shares repurchased  (2,739)  (31,554)  (6,815)  (71,573) 
Net decrease  (1,129)  $(13,487)  (3,191)  $(33,153) 
 
  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class R6  Shares  Amount  Shares  Amount 
Shares sold  3,496,720  $38,241,197  662,523  $7,012,621 
Shares issued in connection with         
reinvestment of distributions  215,775  2,453,358  258,405  2,656,399 
  3,712,495  40,694,555  920,928  9,669,020 
Shares repurchased  (6,017,580)  (66,293,580)  (954,414)  (10,065,791) 
Net decrease  (2,305,085)  $(25,599,025)  (33,486)  $(396,771) 
 
  YEAR ENDED 5/31/18  YEAR ENDED 5/31/17 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  548,443  $6,252,757  578,921  $6,130,295 
Shares issued in connection with         
reinvestment of distributions  125,093  1,428,565  115,333  1,191,390 
  673,536  7,681,322  694,254  7,321,685 
Shares repurchased  (650,061)  (7,395,600)  (1,148,165)  (12,092,535) 
Net increase (decrease)  23,475  $285,722  (453,911)  $(4,770,850) 

 

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  5,549  62.4%  $64,146 
Class R6  1,148  <0.1  13,294 

 

At the close of the reporting period, two shareholders of record owned 20.1% and 30.9% respectively, of the outstanding shares of the fund.

Dynamic Risk Allocation Fund 101 

 


Note 5: Affiliated transactions

Transactions during the reporting period with any company which is under common ownership or control were as follows:

          Shares 
          outstanding 
          and fair 
  Fair value as  Purchase  Sale  Investment  value as 
Name of affiliate  of 5/31/17  cost  proceeds  income  of 5/31/18 
Short-term investments           
Putnam Cash Collateral           
Pool, LLC*  $226,725  $8,321,627  $8,404,302  $5,944  $144,050 
Putnam Short Term           
Investment Fund**  30,538,557  90,218,990  101,362,226  305,391  19,395,321 
Total Short-term           
investments  $30,765,282  $98,540,617  $109,766,528  $311,335  $19,539,371 

 

* 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. There were no realized or unrealized gains or losses during the period.

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

There were no realized or unrealized gains or losses during the period.

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. 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.

102 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)  $160,000 
Purchased currency options (contract amount)  $5,000,000 
Written equity option contracts (contract amount)  $71,000 
Written currency options (contract amount)  $3,700,000 
Futures contracts (number of contracts)  600 
Forward currency contracts (contract amount)  $90,300,000 
Centrally cleared interest rate swap contracts (notional)  $75,500,000 
OTC total return swap contracts (notional)  $84,400,000 
Centrally cleared total return swap contracts (notional)  $31,800,000 
OTC credit default contracts (notional)  $13,800,000 
Centrally cleared credit default contracts (notional)  $20,500,000 
Warrants (number of warrants)  59,000 

 

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  $363,540*  Unrealized depreciation  $2,095,043* 
Foreign exchange         
contracts  Investments, Receivables  989,072  Payables  1,307,589 
  Investments,       
  Receivables, Net       
  assets — Unrealized       
Equity contracts  appreciation  1,396,563*  Payables  40,502 
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Interest rate contracts  appreciation  1,271,280*  Unrealized depreciation  2,607,393* 
Total    $4,020,455    $6,050,527 

 

* 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 103 

 


The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments   
Derivatives not             
accounted for as             
hedging        Forward     
instruments under        currency     
ASC 815  Warrants  Options  Futures  contracts  Swaps  Total 
Credit contracts  $—  $—  $—  $—  $533,546  $533,546 
Foreign exchange             
contracts  —  7,104  —  653,512  —  $660,616 
Equity contracts  17,491  (1,765,941)  536,970  —  326,668  $(884,812) 
Interest rate             
contracts  —  —  (431,054)  —  (1,032,727)  $(1,463,781) 
Total  $17,491  $(1,758,837)  $105,916  $653,512  $(172,513)  $(1,154,431) 
 
 
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) 
on investments             
Derivatives not             
accounted for as             
hedging        Forward     
instruments under        currency     
ASC 815  Warrants  Options  Futures  contracts  Swaps  Total 
Credit contracts  $—  $—  $—  $—  $(591,360)  $(591,360) 
Foreign exchange             
contracts  —  1,568  —  (822,765)  —  $(821,197) 
Equity contracts  (24,449)  290,099  432,482  —  (197,882)  $500,250 
Interest rate             
contracts  —  —  448,469  —  65,804  $514,273 
Total  $(24,449)  $291,667  $880,951  $(822,765)  $(723,438)  $(398,034) 

 

104 Dynamic Risk Allocation Fund 

 


This page left blank intentionally. 

 

Dynamic Risk Allocation Fund 105 

 


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.		 Citigroup
Global
Markets,
 Inc.		 Credit
Suisse International		 Deutsche
Bank AG		 Goldman
Sachs
International		 HSBC
Bank
 USA,
 National Association		 JPMorgan
Chase
Bank N.A.		 JPMorgan
Securities
LLC		 Merrill
Lynch International		 Merrill
 Lynch,
Pierce,
Fenner &
Smith, Inc.		 Morgan
Stanley &
Co.
 International
PLC		 NatWest
Markets
PLC		 State
Street
Bank
and
Trust
Co.		 UBS AG West
Pac
Banking
Corp.		 Total
Assets:                                       
Centrally cleared interest rate                                       
swap contracts§  $—  $—  $27,409  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $27,409 
OTC Total return                                       
swap contracts*#  139,185  —  —  47,308  —  —  —  —  —  —  6,093  —  —  —  —  —  —  —  192,586 
Centrally cleared total return                                       
swap contracts§  —  —  68,168  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  68,168 
OTC Credit default                                       
contracts — protection sold*#  —  —  —  —  1  117  —  —  —  —  —  —  —  —  —  —  —  —  118 
OTC Credit default                                       
contracts — protection                                       
purchased*#  —  —  —  —  4,947  33,349  —  11,956  —  —  16,452  3,638  —  4,370  —  —  —  —  74,712 
Centrally cleared credit                                       
default contracts§  —  —  17,261  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  17,261 
Futures contracts§  —  —  —  —  —  —  —  —  —  —  —  —  389,101  —  —  —  —  —  389,101 
Forward currency contracts#  101,830  30,433  —  106,321  —  30,650  —  210,202  45,699  157,837  —  —  —  —  46,861  153,970  49,423  50,871  984,097 
Purchased options**#  356,563  —  —  318,611  —  —  —  —  4,975  271,778  —  —  —  —  —  —  —  —  951,927 
Total Assets  $597,578  $30,433  $112,838  $472,240  $4,948  $64,116  $—  $222,158  $50,674  $429,615  $22,545  $3,638  $389,101  $4,370  $46,861  $153,970  $49,423  $50,871  $2,705,379 
Liabilities:                                       
Centrally cleared interest rate                                       
swap contracts§  —  —  2,121  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  2,121 
OTC Total return                                       
swap contracts*#  —  6,420  —  38,441  —  1,009  —  —  —  —  —  —  —  —  —  —  —  —  45,870 
Centrally cleared total return                                       
swap contracts§  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  — 
OTC Credit default                                       
contracts — protection sold*#  —  305,316  —  —  4,156  5,459  —  39,217  —  —  38,940  —  —  3,857  —  —  —  —  396,945 
OTC Credit default                                       
contracts — protection                                       
purchased*#  —  —  —  —  —  —  —  —  —  —  75  —  —  —  —  —  —  —  75 
Centrally cleared credit                                       
default contracts§  —  —  3,035  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  3,035 
Futures contracts§  —  —  —  —  —  —  —  —  —  —  —  —  97,964  —  —  —  —  —  97,964 
Forward currency contracts#  68,425  62,213  —  122,549  —  35,803  —  328,807  54,068  368,580  —  —  —  —  —  163,783  77,567  25,794  1,307,589 
Written options#  —  —  —  —  —  —  6  —  —  —  —  —  —  —  —  —  2,055  —  2,061 
Total Liabilities  $68,425  $373,949  $5,156  $160,990  $4,156  $42,271  $6  $368,024  $54,068  $368,580  $39,015  $—  $97,964  $3,857  $—  $163,783  $79,622  $25,794  $1,855,660 

 

106 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 107 

 


  Bank of America
N.A.		 Barclays
Bank
 PLC		 Barclays
Capital,
Inc.
(clearing
broker)		 Citibank,
N.A.		 Citigroup
Global
Markets,
Inc.		 Credit
Suisse International		 Deutsche
Bank AG		 Goldman
Sachs
International		 HSBC
Bank
USA,
National Association		 JPMorgan
Chase
Bank
N.A.		 JPMorgan
Securities
 LLC		 Merrill
Lynch International		 Merrill
Lynch,
Pierce,
Fenner &
Smith,
 Inc.		 Morgan
Stanley &
 Co. International
PLC		 NatWest
Markets
 PLC		 State
Street
Bank
and
Trust
Co. 		 UBS AG WestPac
Banking
 Corp.		 Total
Total Financial and                                       
Derivative Net Assets  $529,153  $(343,516)  $107,682  $311,250  $792  $21,845  $(6)  $(145,866)  $(3,394)  $61,035  $(16,470)  $3,638  $291,137  $513  $46,861  $(9,813)  $(30,199)  $25,077  $849,719 
Total collateral received                                       
(pledged)†##  $519,085  $(233,438)  $—  $311,250  $—  $—  $—  $(114,712)  $—  $—  $(16,470)  $—  $—  $—  $—  $—  $—  $—   
Net amount  $10,068  $(110,078)  $107,682  $—  $792  $21,845  $(6)  $(31,154)  $(3,394)  $61,035  $—  $3,638  $291,137  $513  $46,861  $(9,813)  $(30,199)  $25,077   
Controlled collateral                                       
received (including                                       
TBA commitments)**  $519,085  $—  $—  $360,000  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $879,085 
Uncontrolled collateral received  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Collateral (pledged) (including                                       
TBA commitments)**  $—  $(233,438)  $—  $—  $—  $—  $—  $(114,712)  $—  $—  $(111,731)  $—  $—  $—  $—  $—  $—  $—  $(459,881) 

 

* Excludes premiums, if any. Included in unrealized appreciation and depreciation on OTC swap contracts on the Statement of assets and liabilities.

** Included with Investments in securities on the Statement of assets and liabilities.

† Additional collateral may be required from certain brokers based on individual agreements.

# Covered by master netting agreement (Note 1).

## Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.

§ Includes current day’s variation margin only as reported on the Statement of assets and liabilities, which is not collateralized. Cumulative appreciation/(depreciation) for futures contracts and centrally cleared swap contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts and centrally cleared swap contracts, which is not included in the table above, amounted to $647,263 and $2,665,971, respectively.

Note 10: New accounting pronouncements

In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017–08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310–20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities held at a premium, to be amortized to the earliest call date. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

108 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 109 

 


Federal tax information (Unaudited)

The fund designated 26.83% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For the reporting period, the fund hereby designates 50.53%, 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 2019 will show the tax status of all distributions paid to your account in calendar 2018.

110 Dynamic Risk Allocation Fund 

 



Dynamic Risk Allocation Fund 111 

 



* 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, 2018, there were 103 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.

112 Dynamic Risk Allocation Fund 

 


Officers

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

Jonathan S. Horwitz (Born 1955)  Susan G. Malloy (Born 1957) 
Executive Vice President, Principal Executive Officer,  Vice President and Assistant Treasurer 
and Compliance Liaison  Since 2007 
Since 2004  Head of Accounting, Middle Office, & Control Services, 
  Putnam Investments and Putnam Management
Robert T. Burns (Born 1961) 
Vice President and Chief Legal Officer  Mark C. Trenchard (Born 1962) 
Since 2011  Vice President and BSA Compliance Officer 
General Counsel, Putnam Investments,  Since 2002 
Putnam Management, and Putnam Retail Management  Director of Operational Compliance, Putnam 
  Investments and Putnam Retail Management
James F. Clark (Born 1974) 
Vice President and Chief Compliance Officer  Nancy E. Florek (Born 1957) 
Since 2016  Vice President, Director of Proxy Voting and Corporate 
Chief Compliance Officer, Putnam Investments  Governance, Assistant Clerk, and Assistant Treasurer 
and Putnam Management  Since 2000 
   
Michael J. Higgins (Born 1976)  Denere P. Poulack (Born 1968) 
Vice President, Treasurer, and Clerk  Assistant Vice President, Assistant Clerk, 
Since 2010  and Assistant Treasurer 
  Since 2004 
Janet C. Smith (Born 1965)   
Vice President, Principal Financial Officer, Principal   
Accounting Officer, and Assistant Treasurer   
Since 2007   
Head of Fund Administration Services,   
Putnam Investments and Putnam Management   

 

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

Dynamic Risk Allocation Fund 113 

 


Putnam family of funds

The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial advisor or call Putnam Investor Services at 1-800-225-1581. Please read the prospectus carefully before investing.

Blend  Value 
Capital Opportunities Fund  Convertible Securities Fund 
Capital Spectrum Fund  Equity Income Fund 
Emerging Markets Equity Fund  International Value Fund 
Equity Spectrum Fund  Small Cap Value Fund 
Europe Equity Fund  
Global Equity Fund Income 
International Capital Opportunities Fund Diversified Income Trust 
International Equity Fund Emerging Markets Income Fund 
Investors Fund Floating Rate Income Fund 
Low Volatility Equity Fund Global Income Trust 
Multi-Cap Core Fund Government Money Market Fund* 
  High Yield Fund 
Global Sector Income Fund 
Global Consumer Fund Money Market Fund† 
Global Financials Fund Mortgage Securities Fund 
Global Health Care Fund Short Duration Income Fund 
Global Industrials Fund  
Global Natural Resources Fund Tax-free Income 
Global Sector Fund AMT-Free Municipal Fund 
Global Technology Fund Intermediate-Term Municipal Income Fund 
Global Telecommunications Fund Short-Term Municipal Income Fund 
Global Utilities Fund Tax Exempt Income Fund 
  Tax-Free High Yield Fund 
Growth  
Growth Opportunities Fund State tax-free income funds‡: 
International Growth Fund California, Massachusetts, Minnesota, 
Small Cap Growth Fund New Jersey, New York, Ohio, and Pennsylvania. 
Sustainable Future Fund  
Sustainable Leaders Fund   

 

114 Dynamic Risk Allocation Fund 

 


Absolute Return  Asset Allocation 
Absolute Return 100 Fund®  Dynamic Risk Allocation Fund 
Fixed Income Absolute Return Fund  George Putnam Balanced Fund 
Multi-Asset Absolute Return Fund   
  Dynamic Asset Allocation Balanced Fund
Putnam PanAgora**  Dynamic Asset Allocation Conservative Fund 
Putnam PanAgora Managed Futures Strategy  Dynamic Asset Allocation Growth Fund 
Putnam PanAgora Market Neutral Fund   
Putnam PanAgora Risk Parity Fund  Retirement Income Fund Lifestyle 1
 
  RetirementReady® 2060 Fund 
  RetirementReady® 2055 Fund 
  RetirementReady® 2050 Fund 
  RetirementReady® 2045 Fund 
  RetirementReady® 2040 Fund 
  RetirementReady® 2035 Fund 
  RetirementReady® 2030 Fund 
  RetirementReady® 2025 Fund 
  RetirementReady® 2020 Fund 

 

* You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

† You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

‡ Not available in all states.

** Sub-advised by PanAgora Asset Management.

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

Dynamic Risk Allocation Fund 115 

 


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.

116 Dynamic Risk Allocation Fund 

 


Fund information

Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.

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

 

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.



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, 2018 $76,478 $ — $5,288 $ —
May 31, 2017 $80,256 $ — $5,150 $ —

For the fiscal years ended May 31, 2018 and May 31, 2017, the fund's independent auditor billed aggregate non-audit fees in the amounts of $5,288 and $5,150 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, 2018 $ — $ — $ — $ —
May 31, 2017 $ — $ — $ — $ —


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, except as discussed in the following statement, 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. Management of the Fund did not have appropriate financial reporting controls to identify the mispricing of a commodity linked note due to an incorrect security set up by the Fund’s pricing vendor. The mispricing of the commodity linked note was discovered prior to the issuance of the report for the period ended May 31, 2018. Management has enhanced its procedures related to the valuation of commodity linked notes.
(b) Changes in internal control over financial reporting: Subsequent to the reporting period, Management of the Fund has designed additional financial reporting controls to enhance the detection of mispriced securities.

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 27, 2018
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 27, 2018
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: July 27, 2018