N-CSRS 1 a_dynamicaaequity.htm PUTNAM FUNDS TRUST a_dynamicaaequity.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES



Investment Company Act file number: (811-07513)
Exact name of registrant as specified in charter: Putnam Funds Trust
Address of principal executive offices: 100 Federal Street, Boston, Massachusetts 02110
Name and address of agent for service: Robert T. Burns, Vice President
100 Federal Street
Boston, Massachusetts 02110
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant’s telephone number, including area code: (617) 292-1000
Date of fiscal year end: May 31, 2019
Date of reporting period: June 1, 2018 — November 30, 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
Asset Allocation
Equity Fund

Semiannual report
11 | 30 | 18

 

IMPORTANT NOTICE: Delivery of paper fund reports

In accordance with regulations adopted by the Securities and Exchange Commission, beginning on January 1, 2021, reports like this one will no longer be sent by mail unless you specifically request it. Instead, they will be on Putnam’s website, and you will be notified by mail whenever a new one is available, and provided with a website link to access the report.

If you wish to stop receiving paper reports sooner, or if you wish to continue to receive paper reports after January 1, 2021 free of charge, please see the back cover or insert for instructions. If you invest through a bank or broker, your choice will apply to all funds held in your account. If you invest directly with Putnam, your choice will apply to all Putnam funds in your account.

If you already receive these reports electronically, no action is required.


Message from the Trustees

January 9, 2019

Dear Fellow Shareholder:

Global financial markets dealt with some challenges as we entered the final months of 2018. After rising to record highs in the summer, U.S. stocks experienced increased turbulence with concerns mounting over rising interest rates and the escalating U.S.–China trade conflict. International stock markets, which have lagged U.S. markets all year, took another leg down during a selloff in October. Fixed-income markets, while generally less volatile than stocks, have also encountered headwinds as the Federal Reserve has continued its path of normalizing monetary policy. Against this backdrop, the U.S. economy continues to grow, but markets may remain choppy.

Although no one can predict the direction of the markets in the months ahead, Putnam’s experienced investment professionals actively seek to position their fund portfolios for all types of conditions. They take a research-intensive approach to investing that includes risk management strategies designed to serve investors through changing markets. In all environments, we believe investors should remain focused on time-tested strategies: maintain a well-diversified portfolio, think about long-term goals, and speak regularly with your financial advisor.

Thank you for investing with Putnam.




Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 7–8 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.

* Putnam Equity Blended Index is an unmanaged index administered by Putnam Management and comprises 75% the Russell 3000 Index, 19% the MSCI EAFE Index (ND), and 6% the MSCI Emerging Markets Index (GD).

† Returns for the six-month period are not annualized, but cumulative.


This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 11/30/18. See above and pages 7–8 for additional fund performance information. Index descriptions can be found on page 11.

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Jason is Co-Head of Global Asset Allocation. He has an M.B.A. from the University of Chicago Booth School of Business and a B.S. from Northeastern University. Jason joined Putnam in 2000 and has been in the investment industry since 1993.

In addition to Jason, James A. Fetch and Robert J. Schoen are Portfolio Managers of the fund.

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

The period was marked by a strengthening U.S. economy, robust corporate-profit growth, rising interest rates, and increased global trade tensions.

As the period progressed, trade tensions eased between the United States and most of its major trading partners, except for China. Beginning in July, both governments moved beyond rhetorical threats and imposed tariffs on hundreds of billions of dollars of each other’s products. Shortly after the period ended, the United States and China agreed to a 90-day ceasefire in their trade battle. The United States postponed plans to increase tariffs on $200 billion in Chinese goods, and the two sides entered negotiations on other contentious issues.

During October and November, investor sentiment became sharply averse and market volatility spiked. In addition to the ongoing U.S.–China trade dispute, other factors leading to a sharp downturn in risk assets included: concern that the U.S. Federal Reserve would raise policy rates too fast and choke off economic growth; uncertainty about the

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This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 11/30/18. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time.


This chart shows how the fund’s top weightings have changed over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period 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.

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ultimate resolution of the United Kingdom’s exit from the European Union [Brexit]; flagging economic growth in Europe and China, leading to concern about a slowdown in growth globally; and a precipitous decline in oil prices.

For the six-month reporting period, the Russell 3000 Index, a broad barometer of U.S.-based stocks, gained 1.89%, led by the value-oriented equities within the index. Meanwhile, U.S. small-cap stocks, as measured by the Russell 2000 Index, declined 5.53%, pulled down by the flight from riskier areas of the market during October and the first half of November. International markets were broadly negative, hampered by concerns about global growth and Brexit. The MSCI EAFE Index [ND], which tracks foreign developed-market stocks, returned –7.97%, and the MSCI Emerging Markets Index fell –9.89%, both in U.S.-dollar terms. Within this environment, the fund’s globally diversified benchmark notably lagged the Russell 3000 Index.

The fund trailed its blended benchmark and the average return of its Lipper peer group for the period. What factors had the greatest impact on relative performance?

We seek to add value through asset allocation strategies and active security selection. We kept the fund’s allocation positioning close to its benchmark weights during the period. A modest underweighting in international developed-market stocks provided a slight boost to relative performance.

As for stock selection, we use quantitative models to pick stocks in the United States and in international developed markets. We seek to keep the fund’s selection strategies sector-neutral, meaning that sector weightings will normally be roughly in line with appropriate U.S. and international indexes. Our models screen for stocks of companies that meet our criteria across a variety of metrics, including valuation, momentum, company quality, and historical volatility that is lower than the broad market. Unfortunately, both our U.S. and international strategies underperformed their respective benchmarks during the period.


Security selection among emerging-market [EM] equities also hampered relative performance. Here, we use a bottom-up, fundamental process to identify what we believe are attractive EM companies.

What is your outlook for the months ahead?

We think global economic growth remains reasonably strong, led by the United States, but it appears to us that momentum overseas is slowing. Stock market action during the latter months of the period suggest that investors believe global growth has peaked.

As expected, the Federal Reserve raised its target for short-term interest rates to a range of 2% to 2.25% at its September 2018 policy meeting, and is widely expected to implement another increase at its December meeting. Recent market turbulence does not appear to have altered the Fed’s view that the U.S. economy is on solid footing, with growth strong and unemployment low. But inflation has softened in recent months, and falling oil prices may portend further declines, which, in our view, may reduce the Fed’s sense of urgency about raising rates to prevent the economy from overheating. That said, if growth or inflation heats up unexpectedly, we believe the Fed could decide to step up the pace of rate hikes in 2019.

Volatility returned to the stock market in 2018, after being largely absent in 2017. In our view, various uncertainties related to U.S.–China trade policy, the Fed, and global growth will likely keep volatility elevated in the months ahead.

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Against this backdrop, we continue to have conviction in our stock-selection strategies, based on their strong long-term results. As for asset allocation, we will continue to take a tactical approach, adjusting the fund’s exposure across various markets as conditions warrant.

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.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended November 30, 2018, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information 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 P 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 11/30/18

  Life of  Annual    Annual    Annual     
  fund  average  5 years  average  3 years  average  1 year  6 months 
Class A (1/23/09)                 
Before sales charge  244.71%  13.38%  45.15%  7.74%  25.88%  7.97%  –0.87%  –2.79% 
After sales charge  224.89  12.70  36.81  6.47  18.64  5.86  –6.57  –8.38 
Class P (8/31/16)                 
Net asset value  246.38  13.44  45.86  7.84  26.51  8.15  –0.72  –2.71 

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 5.75% sales charge, levied at the time of purchase. Class P shares have no initial sales charge or CDSC. Performance for class P shares prior to their inception is derived from the historical performance of class A shares and has not been adjusted for the lower investor servicing fees applicable to class P 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.

Comparative index returns For periods ended 11/30/18

  Life of  Annual    Annual    Annual     
  fund  average  5 years  average  3 years  average  1 year  6 months 
Russell 3000 Index  314.79%  15.53%  65.62%  10.62%  39.75%  11.80%  5.53%  1.89% 
Putnam Equity                 
Blended Index*  260.07  13.88  50.13  8.47  34.07  10.27  2.01  –0.74 
Lipper Multi-Cap Core                 
Funds category average†  257.14  13.66  48.60  8.15  30.40  9.20  2.56  0.07 

 

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

* Putnam Equity Blended Index is an unmanaged index administered by Putnam Management and comprises 75% the Russell 3000 Index, 19% the MSCI EAFE Index (ND), and 6% the MSCI Emerging Markets Index (GD).

† Over the 6-month, 1-year, 3-year, 5-year, and life-of-fund periods ended 11/30/18, there were 786, 753, 647, 551, and 392 funds, respectively, in this Lipper category.

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Fund price and distribution information For the six-month period ended 11/30/18

  Class A  Class P 
  Before  After  Net 
  sales  sales  asset 
Share value  charge  charge  value 
5/31/18  $13.28  $14.09  $13.30 
11/30/18  12.91  13.70  12.94 

 

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

The fund made no distributions during the period.

Fund performance as of most recent calendar quarter Total return for periods ended 12/31/18

  Life of  Annual    Annual    Annual     
  fund  average  5 years  average  3 years  average  1 year  6 months 
Class A (1/23/09)                 
Before sales charge  216.72%  12.30%  30.42%  5.46%  18.62%  5.86%  –10.07%  –10.07% 
After sales charge  198.51  11.63  22.92  4.21  11.80  3.79  –15.24  –15.24 
Class P (8/31/16)                 
Net asset value  218.68  12.37  31.23  5.59  19.37  6.08  –9.81  –9.88 

 

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


Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. 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 P 
Net expenses for the fiscal year ended 5/31/18*  0.87%  0.63% 
Total annual operating expenses for the fiscal year ended 5/31/18  1.13%  0.89% 
Annualized expense ratio for the six-month period ended 11/30/18  0.87%  0.63% 

 

Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

* Reflects Putnam Management’s contractual obligation to limit certain fund expenses through 9/30/19.

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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 6/1/18 to 11/30/18. 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 P 
Expenses paid per $1,000*†  $4.30  $3.12 
Ending value (after expenses)  $972.10  $972.90 

 

* 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 11/30/18. 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.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 11/30/18, use the following calculation method. To find the value of your investment on 6/1/18, call Putnam at 1-800-225-1581.


Compare expenses using the SEC’s method

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

  Class A  Class P 
Expenses paid per $1,000*†  $4.41  $3.19 
Ending value (after expenses)  $1,020.71  $1,021.91 

 

* 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 11/30/18. 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.

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Consider these risks before investing

Stock prices may fall or fail to rise over time for several reasons, including general financial market conditions, changing market perceptions, 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. International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. If the quantitative models or data that are used in managing the fund prove to be incorrect or incomplete, investment decisions made in reliance on the models or data may not produce the desired results and the fund may realize losses. You can lose money by investing in the fund.

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Terms and definitions

Important terms

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

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.

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 P shares require no minimum initial investment amount and no minimum subsequent investment amount. There is no initial or deferred sales charge. They are only available to other Putnam funds and other accounts managed by Putnam Management or its affiliates.

Comparative indexes

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 Emerging Markets Index (GD) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Gross total return (GD) indexes reinvest as much as possible of a company’s dividend distributions.

Putnam Equity Blended Index is an unmanaged index representing global stock market performance, and comprises 75% the Russell 3000 Index, 19% the MSCI EAFE Index (ND), and 6% the MSCI Emerging Markets Index (GD).

Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies.

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

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

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

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

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

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings

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are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.


Other information for shareholders

Important notice regarding delivery of shareholder documents

In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2018, are available in the Individual Investors section of putnam.com and on the SEC’s 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.

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 November 30, 2018, Putnam employees had approximately $477,000,000 and the Trustees had approximately $66,000,000 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.

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Trustee approval of management contract

General conclusions

The Board of Trustees of The Putnam Funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”), the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”), and the sub-advisory contract among Putnam Management, PIL, and another affiliate, The Putnam Advisory Company (“PAC”). The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of The Putnam Funds (“Independent Trustees”).

At the outset of the review process, members of the Board’s independent staff and independent legal counsel discussed with representatives of Putnam Management the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review, identifying possible changes in these materials that might be necessary or desirable for the coming year. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2018, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2018, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 2018 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2018. (Because PIL and PAC are affiliates of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL and PAC, the Trustees have not attempted to evaluate PIL or PAC as separate entities, and all subsequent references to Putnam Management below should be deemed to include reference to PIL and PAC as necessary or appropriate in the context.)

The Independent Trustees’ approval was based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the fund, and the application of certain reductions and waivers noted below; and

• That the fee schedule in effect for your fund represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of

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the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with some minor exceptions, the funds’ current fee arrangements under the management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to fund shareholders. (In a few instances, funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment strategy, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee structure for your fund would be appropriate at this time.

Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee rates as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management have implemented expense limitations that were in effect during your fund’s fiscal year ending in 2017. These expense limitations were: (i) a contractual expense limitation applicable to all open-end funds of 25 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds of 20 basis points, and, in the case of your fund, 2 basis points, on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds had sufficiently low expenses that these expense limitations were not operative. However, in the case of your fund, both expense limitations were operative during its fiscal year ending in 2017. Putnam Management has agreed to maintain these expense limitations until at least September 30, 2019. Putnam Management’s support for these expense limitation arrangements was an important factor in the Trustees’ decision to approve the continuance of your fund’s management, sub-management and sub-advisory contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Broadridge Financial Solutions, Inc. (“Broadridge”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fee), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the first quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the second quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2017. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of December 31, 2017 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam

14 Dynamic Asset Allocation Equity Fund 

 


Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees in connection with their annual contract review for the Putnam funds included information regarding fees charged by Putnam Management and its affiliates to institutional clients, including defined benefit pension and profit-sharing plans and sub-advised mutual funds. This information included, in cases where an institutional product’s investment strategy corresponds with a fund’s strategy, comparisons of those fees with fees charged to the Putnam funds, as well as an assessment of the differences in the services provided to these different types of clients as compared to the services provided to the Putnam funds. The Trustees observed that the differences in fee rates between these clients and the Putnam funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect, among other things, historical competitive forces operating in separate markets. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the investment oversight committees of the Trustees and the full Board of Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officers and other senior members of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that 2017 was a strong year for the performance of the Putnam funds, with generally favorable results for most asset classes, including U.S. equity, international and global equity, taxable and tax exempt fixed income, and global asset allocation Funds. In this regard, the Trustees considered that, for the one-year period ended December 31, 2017, the Putnam open-end Funds’ performance, on an asset-weighted basis, ranked in the 32nd percentile of their Lipper peers (excluding those Putnam funds that are evaluated based on their total returns and/or comparisons of those returns versus selected investment benchmarks or targeted annual returns). The Trustees observed that this strong performance has continued a positive trend that began in mid-year 2016 across most Putnam funds. They noted that the longer-term performance of the Putnam funds continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the 7th-best performing mutual fund complex out of 55 complexes for the five-year period ended December 31, 2017 and the 9th-best performing mutual fund complex out of 50 complexes for the ten-year period ended 2017. In addition, the survey ranked the Putnam funds 7th out of 59 mutual fund complexes for the one-year period ended 2017; the Putnam funds have ranked 1st

Dynamic Asset Allocation Equity Fund 15 

 


or 2nd in the survey for the one-year period three times since 2009 (most recently in 2013). They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2017 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor closely the performance of those funds, including the effectiveness of any efforts Putnam Management has undertaken to address underperformance and whether additional actions to address areas of underperformance are warranted.

For purposes of the Trustees’ evaluation of the Putnam Funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and, in most cases, comparisons of those returns with the returns of selected investment benchmarks. In the case of your fund, the Trustees considered information about your fund’s total return and its performance relative to its benchmark over the one-year, three-year and five-year periods ended December 31, 2017. Your fund’s class A shares’ return net of fees and expenses was positive and trailed the return of its benchmark over the one-year and three-year periods ended December 31, 2017 and was positive and exceeded the return of its benchmark over the five-year period ended December 31, 2017. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

The Trustees considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management continued to strengthen its fundamental research capabilities by adding new investment personnel.

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used predominantly to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. However, the Trustees noted that a portion of available soft dollars continues to be used to pay fund expenses. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee. The Trustees also indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management, sub-management and sub-advisory contracts, the Trustees reviewed your fund’s investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”) and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are fair and reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services. Furthermore, the Trustees were of the view that the services provided were required for the operation of the funds, and that they were of a quality at least equal to those provided by other providers.

16 Dynamic Asset Allocation Equity Fund 

 


Financial statements

These sections of the report, as well as the accompanying Notes, 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 period.

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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.

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 Asset Allocation Equity Fund 17 

 


The fund’s portfolio 11/30/18 (Unaudited)

COMMON STOCKS (91.0%)*  Shares  Value 
Advertising and marketing services (0.4%)     
Omnicom Group, Inc.  3,219  $247,766 
    247,766 
Aerospace and defense (2.7%)     
Boeing Co. (The)  3,349  1,161,299 
Curtiss-Wright Corp.  224  24,730 
Lockheed Martin Corp.  1,632  490,302 
Raytheon Co.  1,333  233,728 
Teledyne Technologies, Inc. †   156  35,034 
    1,945,093 
Airlines (1.5%)     
Delta Air Lines, Inc.  7,422  450,590 
easyJet PLC (United Kingdom)  5,445  77,369 
International Consolidated Airlines Group SA (Spain)  15,348  123,015 
Japan Airlines Co., Ltd. (Japan)  1,400  50,492 
United Continental Holdings, Inc. †   3,761  363,689 
    1,065,155 
Automotive (0.8%)     
Fiat Chrysler Automobiles NV (Italy) †   3,360  55,660 
Localiza Rent a Car SA (Brazil)  3,471  24,154 
Mitsubishi Motors Corp. (Japan)  2,100  12,944 
Peugeot SA (France)  5,280  116,071 
Suzuki Motor Corp. (Japan)  600  29,890 
Toyota Motor Corp. (Japan)  3,900  234,729 
Volvo AB (Sweden)  7,730  108,081 
    581,529 
Banking (7.1%)     
ABN AMRO Group NV GDR (Netherlands)  4,319  110,611 
ABSA Group, Ltd. (South Africa)  3,915  43,523 
Abu Dhabi Commercial Bank PJSC (United Arab Emirates) †   22,923  49,023 
Bank Tabungan Pensiunan Nasional Syariah Tbk PT (Indonesia) †   260,300  31,214 
Capital One Financial Corp.  3,209  287,783 
China Construction Bank Corp. (China)  94,000  80,382 
Citigroup, Inc.  16,473  1,067,286 
Citizens Financial Group, Inc.  6,713  244,085 
Comerica, Inc.  2,399  189,953 
Credicorp, Ltd. (Peru)  360  78,944 
DNB ASA (Norway)  5,006  86,277 
East West Bancorp, Inc.  1,039  55,784 
Hang Seng Bank, Ltd. (Hong Kong)  4,500  104,166 
HDFC Bank, Ltd. (India)  3,005  91,688 
HSBC Holdings PLC (United Kingdom)  3,007  25,476 
Itau Unibanco Holding SA ADR (Preference) (Brazil) †   9,599  89,554 
JPMorgan Chase & Co.  13,200  1,467,708 
Lloyds Banking Group PLC (United Kingdom)  85,013  60,003 
Mizuho Financial Group, Inc. (Japan)  84,816  140,752 
Moneta Money Bank AS (Czech Republic)  9,167  31,582 
Popular, Inc. (Puerto Rico)  900  50,760 
Resona Holdings, Inc. (Japan)  22,600  119,910 

 

18 Dynamic Asset Allocation Equity Fund 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Banking cont.     
Sberbank of Russia PJSC ADR (Russia)  2,532  $30,048 
Sumitomo Mitsui Financial Group, Inc. (Japan)  4,007  147,130 
Sumitomo Mitsui Trust Holdings, Inc. (Japan)  1,100  44,136 
Swedbank AB Class A (Sweden)  5,937  138,081 
Synovus Financial Corp.  2,149  81,254 
TCF Financial Corp.  1,540  34,635 
Turkiye Garanti Bankasi AS (Turkey)  17,657  27,868 
Wintrust Financial Corp.  445  34,421 
    5,044,037 
Beverage (2.8%)     
Carlsberg A/S Class B (Denmark)  573  63,465 
Coca-Cola Amatil, Ltd. (Australia)  2,568  16,219 
Coca-Cola Co. (The)  17,112  862,445 
Coca-Cola European Partners PLC (United Kingdom)  967  46,938 
Grape King Bio, Ltd. (Taiwan)  5,000  32,055 
Molson Coors Brewing Co. Class B  2,557  168,174 
PepsiCo, Inc.  6,516  794,561 
    1,983,857 
Biotechnology (1.9%)     
Amgen, Inc.  3,329  693,264 
Biogen, Inc. †   557  185,882 
Celgene Corp. †   1,302  94,030 
Gilead Sciences, Inc.  3,330  239,560 
Vertex Pharmaceuticals, Inc. †   721  130,350 
    1,343,086 
Broadcasting (0.1%)     
Liberty SiriusXM Group Class A †   1,002  39,870 
ProSiebenSat.1 Media SE (Germany)  2,023  41,047 
RTL Group SA (Belgium)  325  19,489 
    100,406 
Chemicals (1.7%)     
Arkema SA (France)  608  57,727 
BASF SE (Germany)  1,513  110,209 
Celanese Corp.  1,078  108,803 
Covestro AG (Germany)  1,787  102,798 
Evonik Industries AG (Germany)  781  20,979 
Formosa Plastics Corp. (Taiwan)  13,000  42,156 
Huntsman Corp.  5,253  106,216 
Indorama Ventures PCL (Foreign depositary shares) (Thailand)  32,300  53,035 
LyondellBasell Industries NV Class A  3,980  371,374 
Mexichem SAB de CV (Mexico)  12,622  29,456 
Mitsubishi Chemical Holdings Corp. (Japan)  3,300  26,995 
Mitsubishi Gas Chemical Co., Inc. (Japan)  1,300  21,367 
PETRONAS Chemicals Group (PCG) Bhd (Malaysia)  21,500  47,331 
Sasol, Ltd. (South Africa)  1,975  58,041 
Westlake Chemical Corp.  845  61,254 
    1,217,741 

 

Dynamic Asset Allocation Equity Fund 19 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Commercial and consumer services (1.8%)     
Alliance Global Group, Inc. (Philippines) †   104,500  $22,788 
Automatic Data Processing, Inc.  2,908  428,697 
Booking Holdings, Inc. †   210  397,295 
Booz Allen Hamilton Holding Corp.  1,888  96,873 
CoStar Group, Inc. †   297  109,709 
Fu Shou Yuan International Group, Ltd. (China)  37,000  28,128 
Randstad Holding NV (Netherlands)  610  29,705 
ServiceMaster Global Holdings, Inc. †   1,028  45,510 
Total System Services, Inc.  1,515  132,366 
    1,291,071 
Communications equipment (1.7%)     
Cisco Systems, Inc.  25,220  1,207,281 
    1,207,281 
Computers (3.8%)     
Amadeus IT Holding SA Class A (Spain)  1,501  107,825 
Apple, Inc.  7,247  1,294,169 
Aspen Technology, Inc. †   854  73,700 
CDW Corp. of Delaware  1,152  106,767 
Check Point Software Technologies, Ltd. (Israel) †   356  39,804 
Citrix Systems, Inc. †   1,807  196,909 
Dell Technologies, Inc. Class V †   1,948  205,475 
Douzone Bizon Co., Ltd. (South Korea)  533  23,853 
Fortinet, Inc. †   3,405  251,425 
Fujitsu, Ltd. (Japan)  500  30,776 
NetApp, Inc.  4,111  274,903 
Synopsys, Inc. †   1,296  119,154 
    2,724,760 
Conglomerates (0.6%)     
AMETEK, Inc.  1,548  113,670 
Marubeni Corp. (Japan)  14,400  107,611 
Mitsubishi Corp. (Japan)  2,700  72,883 
Mitsui & Co., Ltd. (Japan)  6,800  106,866 
    401,030 
Construction (0.5%)     
China National Building Material Co., Ltd. (China)  32,000  24,902 
China State Construction International Holdings, Ltd. (China)  30,000  26,148 
CIMIC Group, Ltd. (Australia)  1,011  30,161 
CTCI Corp. (Taiwan)  28,000  41,374 
HOCHTIEF AG (Germany)  214  30,364 
Shimizu Corp. (Japan)  3,500  30,046 
Sika AG (Switzerland)  89  11,026 
Taisei Corp. (Japan)  2,500  109,976 
West China Cement, Ltd. (China)  160,000  25,150 
    329,147 
Consumer finance (0.8%)     
Chailease Holding Co., Ltd. (Taiwan)  8,460  26,369 
Discover Financial Services  2,955  210,692 
Housing Development Finance Corp., Ltd. (HDFC) (India)  2,965  84,821 
Mitsubishi UFJ Lease & Finance Co., Ltd. (Japan)  3,500  19,086 
Synchrony Financial  7,356  191,109 
    532,077 

 

20 Dynamic Asset Allocation Equity Fund 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Consumer goods (0.8%)     
Kao Corp. (Japan)  300  $22,105 
L’Oreal SA (France)  512  121,031 
LG Household & Health Care, Ltd. (South Korea)  32  33,222 
Natura Cosmeticos SA (Brazil)  4,370  46,231 
Pola Orbis Holdings, Inc. (Japan)  700  19,782 
Procter & Gamble Co. (The)  3,317  313,490 
Unicharm Corp. (Japan)  900  28,194 
    584,055 
Consumer services (0.1%)     
Ashtead Group PLC (United Kingdom)  2,518  56,504 
    56,504 
Containers (0.2%)     
Berry Plastics Group, Inc. †   2,090  105,169 
    105,169 
Distribution (0.4%)     
Sysco Corp.  4,679  315,365 
    315,365 
Electric utilities (2.3%)     
AES Corp.  7,713  119,474 
Ameren Corp.  1,992  136,691 
CenterPoint Energy, Inc.  5,405  151,394 
CLP Holdings, Ltd. (Hong Kong)  10,000  110,231 
E.ON SE (Germany)  7,588  77,461 
Endesa SA (Spain)  3,903  86,993 
Enel SpA (Italy)  15,047  81,636 
Evergy, Inc.  1,477  87,689 
Exelon Corp.  7,309  339,065 
OGE Energy Corp.  2,104  83,360 
Pinnacle West Capital Corp.  1,365  121,976 
Public Service Enterprise Group, Inc.  4,347  242,997 
RWE AG (Germany)  733  15,848 
    1,654,815 
Electrical equipment (0.7%)     
Honeywell International, Inc.  2,624  385,072 
KEI Industries, Ltd. (India)  7,003  36,122 
Resideo Technologies, Inc. †   3,726  76,861 
    498,055 
Electronics (2.9%)     
Agilent Technologies, Inc.  3,958  286,361 
Brother Industries, Ltd. (Japan)  900  15,056 
Elite Material Co., Ltd. (Taiwan)  14,000  33,068 
Hoya Corp. (Japan)  2,400  147,325 
Intel Corp.  8,701  429,046 
Koninklijke Philips NV (Netherlands)  746  28,239 
MediaTek, Inc. (Taiwan)  9,000  69,516 
NXP Semiconductors NV  5,018  418,351 
Rockwell Automation, Inc.  1,123  195,784 
Samsung Electronics Co., Ltd. (South Korea)  5,200  195,227 

 

Dynamic Asset Allocation Equity Fund 21 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Electronics cont.     
Samsung Electronics Co., Ltd. (Preference) (South Korea)  1,486  $44,968 
Texas Instruments, Inc.  2,027  202,396 
    2,065,337 
Energy (oil field) (—%)     
Hilong Holding, Ltd. (China)  185,000  19,385 
    19,385 
Energy (other) (0.1%)     
Canvest Environmental Protection Group Co., Ltd. (China)  104,000  53,519 
    53,519 
Engineering and construction (0.1%)     
ACS Actividades de Construccion y Servicios SA (Spain)  2,320  89,356 
    89,356 
Entertainment (0.2%)     
Sony Corp. (Japan)  2,900  153,517 
    153,517 
Environmental (0.2%)     
Clean TeQ Holdings, Ltd. (Australia) † S   111,719  33,898 
Pentair PLC  1,961  83,735 
    117,633 
Financial (1.0%)     
3i Group PLC (United Kingdom)  6,114  65,181 
Broadridge Financial Solutions, Inc.  1,510  159,864 
CTBC Financial Holding Co., Ltd. (Taiwan)  46,000  30,638 
Deutsche Boerse AG (Germany)  251  32,081 
Edelweiss Financial Services, Ltd. (India)  13,277  32,374 
Hana Financial Group, Inc. (South Korea)  1,326  44,629 
London Stock Exchange Group PLC (United Kingdom)  573  29,464 
Macquarie Group, Ltd. (Australia)  1,641  138,105 
Old Mutual, Ltd. (South Africa)  12,838  21,479 
ORIX Corp. (Japan)  8,100  131,160 
    684,975 
Food (1.4%)     
Associated British Foods PLC (United Kingdom)  2,227  68,837 
Coles Group, Ltd. (Australia) †   675  5,777 
Colruyt SA (Belgium)  476  30,422 
Dino Polska SA (Poland) †   1,570  40,336 
Gruma SAB de CV Class B (Mexico)  3,343  36,627 
Hershey Co. (The)  1,725  186,818 
Marine Harvest ASA (Norway)  1,172  27,430 
Mondelez International, Inc. Class A  9,358  420,923 
Nestle India, Ltd. (India)  203  31,307 
Nestle SA (Switzerland)  1,165  99,479 
Wesfarmers, Ltd. (Australia)  675  15,605 
WH Group, Ltd. (Hong Kong)  21,500  15,689 
WM Morrison Supermarkets PLC (United Kingdom)  4,779  14,497 
X5 Retail Group NV GDR (Russia)  1,637  41,751 
    1,035,498 

 

22 Dynamic Asset Allocation Equity Fund 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Forest products and packaging (0.4%)     
Packaging Corp. of America  1,412  $138,122 
UPM-Kymmene OYJ (Finland)  3,097  82,554 
Weyerhaeuser Co. R   3,296  87,047 
    307,723 
Gaming and lottery (0.2%)     
Aristocrat Leisure, Ltd. (Australia)  1,519  26,276 
Las Vegas Sands Corp.  1,806  99,222 
    125,498 
Health-care services (2.7%)     
Alfresa Holdings Corp. (Japan)  1,700  45,436 
Bangkok Chain Hospital PCL (Thailand)  49,200  27,377 
Centene Corp. †   1,699  241,683 
Charles River Laboratories International, Inc. †   341  45,984 
Cigna Corp.  1,872  418,167 
Encompass Health Corp.  742  55,806 
Fresenius Medical Care AG & Co., KGaA (Germany)  776  63,105 
HCA Healthcare, Inc.  2,501  360,119 
Humana, Inc.  426  140,354 
McKesson Corp.  2,108  262,446 
Medipal Holdings Corp. (Japan)  1,400  32,203 
UnitedHealth Group, Inc.  939  264,197 
    1,956,877 
Homebuilding (0.1%)     
Berkeley Group Holdings PLC (The) (United Kingdom)  535  22,054 
Taylor Wimpey PLC (United Kingdom)  32,219  55,147 
    77,201 
Industrial (0.1%)     
HD Supply Holdings, Inc. †   2,018  80,518 
    80,518 
Insurance (3.5%)     
Aegon NV (Netherlands)  2,398  13,359 
Aflac, Inc.  4,228  193,389 
AIA Group, Ltd. (Hong Kong)  11,400  93,505 
Allianz SE (Germany)  889  187,760 
Allstate Corp. (The)  1,538  137,174 
American Financial Group, Inc.  468  47,904 
Athene Holding, Ltd. Class A †   1,635  71,106 
Aviva PLC (United Kingdom)  21,735  112,795 
Berkshire Hathaway, Inc. Class B †   279  60,889 
DB Insurance Co., Ltd. (South Korea)  635  38,378 
Discovery, Ltd. (South Africa)  1,689  18,846 
Hartford Financial Services Group, Inc. (The)  3,826  169,071 
Hyundai Marine & Fire Insurance Co., Ltd. (HDMF) (South Korea)  971  34,692 
Legal & General Group PLC (United Kingdom)  40,127  125,295 
Lincoln National Corp.  2,530  159,314 
MetLife, Inc.  9,799  437,329 
Ping An Insurance Group Co. of China, Ltd. Class H (China)  9,500  92,183 
Principal Financial Group, Inc.  1,597  78,764 
Prudential Financial, Inc.  3,010  282,218 

 

Dynamic Asset Allocation Equity Fund 23 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Insurance cont.     
Reinsurance Group of America, Inc.  395  $59,005 
Unum Group  2,855  102,523 
    2,515,499 
Investment banking/Brokerage (1.8%)     
Ameriprise Financial, Inc.  1,716  222,651 
Daiwa Securities Group, Inc. (Japan)  1,500  8,312 
E*Trade Financial Corp.  5,421  283,464 
Goldman Sachs Group, Inc. (The)  1,019  194,313 
Morgan Stanley  9,736  432,181 
Partners Group Holding AG (Switzerland)  168  110,409 
Schroders PLC (United Kingdom)  1,041  33,658 
    1,284,988 
Lodging/Tourism (0.7%)     
Crown, Ltd. (Australia)  4,433  38,028 
Extended Stay America, Inc. (Units)  3,159  57,494 
Galaxy Entertainment Group, Ltd. (Hong Kong)  12,000  74,172 
Hilton Worldwide Holdings, Inc.  2,571  194,213 
TUI AG (Germany)  5,202  74,094 
Wyndham Destinations, Inc.  1,500  62,205 
    500,206 
Machinery (0.8%)     
Cummins, Inc.  1,964  296,682 
Hitachi, Ltd. (Japan)  4,300  124,551 
Sandvik AB (Sweden)  7,882  116,981 
    538,214 
Manufacturing (0.5%)     
Ingersoll-Rand PLC  2,648  274,121 
SKF AB Class B (Sweden)  4,583  72,398 
    346,519 
Media (0.4%)     
Pearson PLC (United Kingdom)  5,701  70,024 
Twenty-First Century Fox, Inc.  4,953  242,846 
    312,870 
Medical technology (1.8%)     
Baxter International, Inc.  3,608  247,328 
Coloplast A/S Class B (Denmark)  96  9,156 
Hill-Rom Holdings, Inc.  619  60,018 
Masimo Corp. †   655  72,325 
Medtronic PLC  6,654  648,965 
ResMed, Inc.  929  103,853 
Siemens Healthineers AG (Germany) †   1,775  76,846 
Waters Corp. †   197  39,120 
    1,257,611 
Metals (1.2%)     
Anglo American PLC (United Kingdom)  4,152  82,968 
ArcelorMittal SA (France)  4,582  103,959 
BlueScope Steel, Ltd. (Australia)  10,030  82,957 
Boliden AB (Sweden)  783  17,556 
Freeport-McMoRan, Inc. (Indonesia)  21,934  261,892 

 

24 Dynamic Asset Allocation Equity Fund 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Metals cont.     
Glencore PLC (United Kingdom)  4,419  $16,360 
Rio Tinto PLC (United Kingdom)  3,332  151,261 
Skipper, Ltd. (India)  9,010  11,903 
South32, Ltd. (Australia)  17,646  40,239 
Steel Dynamics, Inc.  2,189  77,053 
Vale SA ADR (Brazil)  3,271  44,813 
    890,961 
Natural gas utilities (0.4%)     
Eni SpA (Italy)  8,412  135,708 
UGI Corp.  2,220  127,539 
    263,247 
Oil and gas (4.8%)     
BP PLC (United Kingdom)  1,091  7,235 
Chevron Corp.  8,869  1,054,879 
CNOOC, Ltd. (China)  47,000  79,282 
ConocoPhillips  8,916  590,061 
Equinor ASA (Norway)  5,180  121,030 
Exxon Mobil Corp.  1,021  81,170 
Geopark, Ltd. (Colombia) †   2,614  40,177 
JX Holdings, Inc. (Japan)  1,400  8,474 
Lukoil PJSC ADR (Russia)  1,329  97,742 
MOL Hungarian Oil & Gas PLC (Hungary)  3,642  40,319 
OMV AG (Austria)  982  49,806 
PBF Energy, Inc. Class A  2,773  107,260 
Petroleo Brasileiro SA — Petrobras ADR (Brazil)  5,007  72,902 
Phillips 66  3,629  339,384 
Repsol SA (Spain)  5,115  88,369 
Royal Dutch Shell PLC Class B (United Kingdom)  3,360  102,766 
TOTAL SA (France)  3,828  213,098 
Valero Energy Corp.  4,256  340,054 
    3,434,008 
Pharmaceuticals (5.6%)     
AbbVie, Inc.  2,758  259,997 
Allergan PLC  784  122,774 
Astellas Pharma, Inc. (Japan)  8,300  127,555 
Aurobindo Pharma, Ltd. (India)  2,710  31,532 
Bayer AG (Germany)  422  30,821 
Bristol-Myers Squibb Co.  2,733  146,106 
China Traditional Chinese Medicine Holdings Co., Ltd. (China)  66,000  44,054 
Eli Lilly & Co.  4,528  537,202 
GlaxoSmithKline PLC (United Kingdom)  9,921  205,291 
Ipsen SA (France)  64  8,256 
Johnson & Johnson  4,711  692,046 
Merck & Co., Inc.  7,038  558,395 
Novartis AG (Switzerland)  2,342  213,793 
Pfizer, Inc.  8,046  371,967 
Roche Holding AG (Switzerland)  1,054  273,491 
Sanofi (France)  1,078  97,565 
Shionogi & Co., Ltd. (Japan)  2,000  132,372 

 

Dynamic Asset Allocation Equity Fund 25 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Pharmaceuticals cont.     
UCB SA (Belgium)  731  $61,469 
Zoetis, Inc.  1,027  96,404 
    4,011,090 
Power producers (0.3%)     
NRG Energy, Inc.  4,766  183,157 
    183,157 
Publishing (0.1%)     
Wolters Kluwer NV (Netherlands)  1,365  82,418 
    82,418 
Railroads (0.2%)     
Central Japan Railway Co. (Japan)  700  144,244 
Kyushu Railway Co. (Japan)  900  29,744 
    173,988 
Real estate (3.3%)     
AGNC Investment Corp. R   7,753  137,228 
American Homes 4 Rent R   2,673  55,679 
Annaly Capital Management, Inc. R   9,700  97,388 
Apartment Investment & Management Co. Class A R   1,257  59,192 
Apple Hospitality REIT, Inc. R   2,160  34,279 
AvalonBay Communities, Inc. R   700  133,399 
Ayala Land, Inc. (Philippines)  36,600  29,133 
Brixmor Property Group, Inc. R   4,695  77,468 
Brookfield Property REIT, Inc. Class A R   1,333  24,007 
CBRE Group, Inc. Class A †   2,369  103,478 
Cheung Kong Property Holdings, Ltd. (Hong Kong)  18,500  133,637 
China Overseas Land & Investment, Ltd. (China)  8,000  27,910 
Douglas Emmett, Inc. R   949  35,037 
Duke Realty Corp. R   2,907  82,733 
Equity Lifestyle Properties, Inc. R   444  44,191 
Gaming and Leisure Properties, Inc. R   1,450  49,924 
Healthcare Trust of America, Inc. Class A R   2,281  64,142 
Henderson Land Development Co., Ltd. (Hong Kong)  11,000  56,511 
Highwoods Properties, Inc. R   1,110  48,141 
Hudson Pacific Properties, Inc. R   1,120  34,563 
Jones Lang LaSalle, Inc.  414  59,285 
Kerry Properties, Ltd. (Hong Kong)  2,500  8,608 
KWG Property Holding, Ltd. (China)  28,000  24,902 
Liberty Property Trust R   1,105  50,045 
Logan Property Holdings Co., Ltd. (China)  24,000  28,063 
Medical Properties Trust, Inc. R   3,512  60,652 
New Residential Investment Corp. R   6,037  103,836 
Paramount Group, Inc. R   2,051  29,268 
Persimmon PLC (United Kingdom)  4,001  96,922 
Scentre Group (Australia) R   16,418  46,850 
Senior Housing Properties Trust R   1,790  24,630 
SL Green Realty Corp. R   1,151  110,979 
Spirit Realty Capital, Inc. R   9,024  66,958 
Stockland (Units) (Australia) R   16,049  42,778 
STORE Capital Corp. R   2,463  73,791 

 

26 Dynamic Asset Allocation Equity Fund 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Real estate cont.     
Sun Hung Kai Properties, Ltd. (Hong Kong)  3,500  $50,006 
Swire Properties, Ltd. (Hong Kong)  3,800  13,282 
VICI Properties, Inc. R   4,676  101,797 
Weingarten Realty Investors R   1,029  29,697 
    2,350,389 
Restaurants (1.5%)     
Darden Restaurants, Inc.  1,858  205,383 
Starbucks Corp.  13,501  900,787 
    1,106,170 
Retail (6.2%)     
ABC-Mart, Inc. (Japan)  400  22,482 
Amazon.com, Inc. †   546  922,833 
CCC SA (Poland)  459  25,459 
Fast Retailing Co., Ltd. (Japan)  100  52,011 
GS Retail Co., Ltd. (South Korea)  1,218  41,353 
Home Depot, Inc. (The)  6,481  1,168,656 
Industria de Diseno Textil SA (Inditex) (Spain)  1,043  32,002 
J Sainsbury PLC (United Kingdom)  10,446  40,612 
KAR Auction Services, Inc.  1,618  92,453 
Koninklijke Ahold Delhaize NV (Netherlands)  6,156  158,789 
Lowe’s Cos., Inc.  6,808  642,471 
Mavi Giyim Sanayi Ve Ticaret AS (Turkey)  4,563  32,998 
Next PLC (United Kingdom)  521  32,546 
Poya International Co., Ltd. (Taiwan)  4,030  39,128 
Ross Stores, Inc.  4,259  373,088 
Tapestry, Inc.  639  24,876 
TCI Co., Ltd. (Taiwan)  2,000  32,426 
Walgreens Boots Alliance, Inc.  7,397  626,304 
Woolworths Group, Ltd. (Australia)  4,933  104,563 
    4,465,050 
Semiconductor (0.5%)     
KLA-Tencor Corp.  2,402  236,741 
Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)  18,000  131,586 
    368,327 
Software (4.9%)     
Adobe, Inc. †   2,885  723,818 
Black Knight, Inc. †   1,070  48,514 
Cadence Design Systems, Inc. †   2,602  117,194 
Electronic Arts, Inc. †   1,457  122,490 
F5 Networks, Inc. †   1,089  187,275 
Intuit, Inc.  2,104  451,371 
Microsoft Corp.  7,671  850,637 
NTT Data Corp. (Japan)  8,500  98,842 
Oracle Corp.  14,849  724,037 
Tencent Holdings, Ltd. (China)  4,900  196,545 
    3,520,723 
Technology services (6.1%)     
Alibaba Group Holding, Ltd. ADR (China) † S   1,431  230,191 
Alphabet, Inc. Class A †   1,788  1,984,054 

 

Dynamic Asset Allocation Equity Fund 27 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Technology services cont.     
Capgemini SE (France)  562  $65,611 
Cognizant Technology Solutions Corp. Class A  3,758  267,682 
Dun & Bradstreet Corp. (The)  707  101,483 
Facebook, Inc. Class A †   3,623  509,430 
IBM Corp.  7,363  915,000 
Infosys, Ltd. (India)  6,454  61,829 
Larsen & Toubro Infotech, Ltd. (India)  1,758  39,604 
Naspers, Ltd. Class N (South Africa)  354  71,116 
Zebra Technologies Corp. Class A †   555  99,789 
    4,345,789 
Telecommunications (0.5%)     
BT Group PLC (United Kingdom)  4,437  14,818 
China Mobile, Ltd. (China)  8,000  79,751 
Eutelsat Communications SA (France)  761  16,250 
Juniper Networks, Inc.  3,503  100,571 
NTT DoCoMo, Inc. (Japan)  3,000  69,467 
Safaricom, Ltd. (Kenya)  102,930  23,874 
Telenor ASA (Norway)  2,776  53,948 
    358,679 
Telephone (2.1%)     
KDDI Corp. (Japan)  5,900  138,463 
Nippon Telegraph & Telephone Corp. (Japan)  1,800  74,210 
Swisscom AG (Switzerland)  70  33,595 
Telephone & Data Systems, Inc.  1,534  54,810 
Verizon Communications, Inc.  20,225  1,219,568 
    1,520,646 
Textiles (0.4%)     
Hermes International (France)  215  116,808 
JNBY Design, Ltd. (China)  20,000  34,880 
Michael Kors Holdings, Ltd. †   3,330  145,688 
Moncler SpA (Italy)  478  15,629 
    313,005 
Tobacco (0.2%)     
Imperial Brands PLC (United Kingdom)  4,142  127,433 
Swedish Match AB (Sweden)  1,008  39,414 
    166,847 
Transportation services (0.1%)     
Aena SME SA (Spain)  603  95,906 
    95,906 
Trucks and parts (0.3%)     
Allison Transmission Holdings, Inc.  2,927  137,891 
Faurecia SA (France)  1,756  68,881 
Tupy SA (Brazil)  4,541  23,169 
    229,941 
Waste Management (0.6%)     
Republic Services, Inc.  1,398  108,121 
Sunny Friend Environmental Technology Co., Ltd. (Taiwan)  7,000  49,399 
Waste Management, Inc.  2,759  258,656 
    416,176 

 

28 Dynamic Asset Allocation Equity Fund 

 


COMMON STOCKS (91.0%)* cont.  Shares  Value 
Water Utilities (0.1%)     
China Water Affairs Group, Ltd. (China)  68,000  $76,477 
    76,477 
Total common stocks (cost $57,894,976)    $65,123,937 

 

  Expiration  Strike     
WARRANTS (0.4%)*†   date  price  Warrants  Value 
Al Rajhi Bank 144A (Saudi Arabia)  2/21/19  $0.00  2,380  $54,296 
Bupa Arabia for Cooperative Insurance Co. 144A         
(Saudi Arabia)  3/6/19  0.00  1,588  29,837 
Han’s Laser Technology Industry Group Co., Ltd.         
144A (China)  9/27/19  0.00  4,700  22,756 
National Bank of Kuwait SAKP 144A (Kuwait)  11/13/19  0.00  13,857  37,796 
Samba Financial Group 144A (Saudi Arabia)  7/15/19  0.00  5,441  44,881 
Saudi Kayan Petrochemical Co. 144A         
(Saudi Arabia)  7/2/19  0.00  7,362  27,273 
Wuliangye Yibin Co., Ltd. 144A (China)  4/12/19  0.00  6,823  51,479 
Total warrants (cost $297,185)        $268,318 

 

PURCHASED OPTIONS  Expiration       
OUTSTANDING (0.0%)*  date/strike  Notional  Contract   
Counterparty  price  amount  amount  Value 
Citibank, N.A.         
USD/JPY (Put)  Jan-19/JPY 108.00  1,118,100  $1,118,100  $1,592 
Goldman Sachs International         
USD/CNH (Call)  Apr-19/CNH 7.00  731,600  $731,600  10,275 
Total purchased options outstanding (cost $15,618)      $11,867 

 

  Principal amount/   
SHORT-TERM INVESTMENTS (10.0%)*    shares  Value 
Putnam Cash Collateral Pool, LLC 2.43% d   Shares   218,167  $218,167 
Putnam Short Term Investment Fund 2.37% L   Shares   6,684,798  6,684,798 
U.S. Treasury Bills 2.376%, 2/14/19 #     $264,000  262,758 
U.S. Treasury Bills 2.386%, 3/7/19 #     4,000  3,976 
Total short-term investments (cost $7,169,659)      $7,169,699 

 

TOTAL INVESTMENTS   
Total investments (cost $65,377,438)  $72,573,821 

 

Key to holding’s abbreviations

 

ADR  American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank 
GDR  Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank 
PJSC  Public Joint Stock Company 

 

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2018 through November 30, 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 $71,554,927.

Dynamic Asset Allocation Equity Fund 29 

 


† This security is non-income-producing.

# This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period. Collateral at period end totaled $266,682 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).

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.

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.

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

At the close of the reporting period, the fund maintained liquid assets totaling $97,284 to cover certain derivative contracts, and the settlement of certain securities.

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

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

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

DIVERSIFICATION BY COUNTRY 

 

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

 

United States  78.5%  Australia  0.9% 
Japan  4.1  Taiwan  0.7 
United Kingdom  2.4  Sweden  0.7 
China  1.7  South Korea  0.6 
France  1.4  Netherlands  0.6 
Germany  1.2  India  0.6 
Switzerland  1.0  Other  3.8 
Hong Kong  0.9  Total  100.0% 
Spain  0.9     

 

FORWARD CURRENCY CONTRACTS at 11/30/18 (aggregate face value $11,537,479) (Unaudited) 
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
Bank of America N.A.           
  Australian Dollar  Buy  1/16/19  $135,902  $134,479  $1,423 
  British Pound  Buy  12/19/18  598,145  613,910  (15,765) 
  Canadian Dollar  Sell  1/16/19  283,255  294,512  11,257 
  Euro  Buy  12/19/18  660,850  684,283  (23,433) 
  Hong Kong Dollar  Sell  2/20/19  161,933  161,713  (220) 
  South Korean Won  Buy  2/20/19  46  1,751  (1,705) 
  Swedish Krona  Buy  12/19/18  73,443  73,442  1 
  Swedish Krona  Sell  12/19/18  73,443  74,227  784 
Barclays Bank PLC             
  Australian Dollar  Buy  1/16/19  79,581  78,421  1,160 
  British Pound  Buy  12/19/18  90,806  90,781  25 
  British Pound  Sell  12/19/18  90,806  92,686  1,880 
  Hong Kong Dollar  Sell  2/20/19  12,297  12,281  (16) 

 

30 Dynamic Asset Allocation Equity Fund 

 


FORWARD CURRENCY CONTRACTS at 11/30/18 (aggregate face value $11,537,479) (Unaudited) cont. 
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
Barclays Bank PLC cont.           
  Norwegian Krone  Buy  12/19/18  $143,013  $145,928  $(2,915) 
  Singapore Dollar  Buy  2/20/19  2,409  2,341  68 
  Swiss Franc  Buy  12/19/18  135,252  140,076  (4,824) 
Citibank, N.A.             
  Australian Dollar  Buy  1/16/19  79,581  78,228  1,353 
  British Pound  Buy  12/19/18  117,078  118,989  (1,911) 
  British Pound  Sell  12/19/18  117,078  117,045  (33) 
  Canadian Dollar  Buy  1/16/19  69,928  71,885  (1,957) 
  Danish Krone  Buy  12/19/18  213,979  221,462  (7,483) 
  Euro  Buy  12/19/18  102,943  104,794  (1,851) 
  Euro  Sell  12/19/18  102,943  106,676  3,733 
  Japanese Yen  Buy  2/20/19  193,022  193,554  (532) 
  South Korean Won  Buy  2/20/19  2,508  1,883  625 
  Swedish Krona  Sell  12/19/18  32,300  33,933  1,633 
Credit Suisse International           
  Australian Dollar  Buy  1/16/19  174,229  172,313  1,916 
  British Pound  Buy  12/19/18  69,252  71,931  (2,679) 
  British Pound  Sell  12/19/18  69,252  69,227  (25) 
  Canadian Dollar  Buy  1/16/19  144,830  148,911  (4,081) 
  Euro  Sell  12/19/18  188,201  194,583  6,382 
  Japanese Yen  Sell  2/20/19  86,463  86,577  114 
  New Zealand Dollar  Sell  1/16/19  81,445  78,363  (3,082) 
  Norwegian Krone  Buy  12/19/18  3,062  3,143  (81) 
  Norwegian Krone  Sell  12/19/18  3,062  3,057  (5) 
  Swedish Krona  Buy  12/19/18  72,893  73,669  (776) 
  Swedish Krona  Sell  12/19/18  72,893  72,893  — 
  Swiss Franc  Buy  12/19/18  88,330  90,799  (2,469) 
  Swiss Franc  Sell  12/19/18  88,330  92,291  3,961 
Goldman Sachs International           
  Australian Dollar  Sell  1/16/19  228,575  226,245  (2,330) 
  Canadian Dollar  Sell  1/16/19  74,751  76,872  2,121 
  Chinese Yuan (Offshore)  Buy  2/20/19  207,661  207,712  (51) 
  Euro  Sell  12/19/18  275,723  282,358  6,635 
  New Taiwan Dollar  Buy  2/20/19  248  864  (616) 
  New Zealand Dollar  Buy  1/16/19  240,140  242,862  (2,722) 
  Norwegian Krone  Buy  12/19/18  230,033  226,222  3,811 
  South African Rand  Buy  1/16/19  1,048  2,589  (1,541) 
  Swedish Krona  Sell  12/19/18  71,683  66,381  (5,302) 
HSBC Bank USA, National Association           
  Australian Dollar  Buy  1/16/19  53,687  56,499  (2,812) 
  British Pound  Sell  12/19/18  18,875  19,026  151 
  Canadian Dollar  Buy  1/16/19  43,630  45,359  (1,729) 
  Euro  Sell  12/19/18  188,764  195,615  6,851 
  Indonesian Rupiah  Buy  12/19/18  94,980  90,571  4,409 

 

Dynamic Asset Allocation Equity Fund 31 

 


FORWARD CURRENCY CONTRACTS at 11/30/18 (aggregate face value $11,537,479) (Unaudited) cont. 
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
HSBC Bank USA, National Association cont.         
  Indonesian Rupiah  Sell  12/19/18  $94,980  $89,936  $(5,044) 
  Japanese Yen  Sell  2/20/19  62,230  62,746  516 
  Mexican Peso  Sell  1/16/19  1,967  1,517  (450) 
  New Zealand Dollar  Buy  1/16/19  115,083  109,662  5,421 
  Norwegian Krone  Buy  12/19/18  65,678  62,684  2,994 
  Swedish Krona  Buy  12/19/18  165,852  170,430  (4,578) 
  Swedish Krona  Sell  12/19/18  165,852  165,834  (18) 
JPMorgan Chase Bank N.A.           
  Australian Dollar  Buy  1/16/19  227,844  223,548  4,296 
  British Pound  Buy  12/19/18  90,295  92,584  (2,289) 
  British Pound  Sell  12/19/18  90,295  90,785  490 
  Canadian Dollar  Sell  1/16/19  72,038  73,052  1,014 
  Euro  Sell  12/19/18  141,830  145,736  3,906 
  New Zealand Dollar  Buy  1/16/19  108,961  105,269  3,692 
  Norwegian Krone  Sell  12/19/18  111,191  113,458  2,267 
  Singapore Dollar  Buy  2/20/19  197,303  197,238  65 
  South Korean Won  Buy  2/20/19  220,714  219,379  1,335 
  Swedish Krona  Sell  12/19/18  174,290  176,557  2,267 
  Swiss Franc  Buy  12/19/18  260,377  269,627  (9,250) 
NatWest Markets PLC           
  Australian Dollar  Buy  1/16/19  64,366  63,941  425 
  Canadian Dollar  Sell  1/16/19  75,051  76,542  1,491 
  Euro  Buy  12/19/18  62,582  64,108  (1,526) 
  Euro  Sell  12/19/18  62,582  64,227  1,645 
  New Zealand Dollar  Sell  1/16/19  42,098  40,202  (1,896) 
  Norwegian Krone  Buy  12/19/18  99,385  103,750  (4,365) 
  Swedish Krona  Buy  12/19/18  105,753  105,750  3 
  Swedish Krona  Sell  12/19/18  105,753  106,903  1,150 
State Street Bank and Trust Co.           
  Australian Dollar  Sell  1/16/19  65,391  62,923  (2,468) 
  British Pound  Sell  12/19/18  117,078  124,976  7,898 
  Canadian Dollar  Sell  1/16/19  110,544  112,828  2,284 
  Euro  Sell  12/19/18  156,228  162,372  6,144 
  Japanese Yen  Buy  2/20/19  99,118  99,937  (819) 
  New Zealand Dollar  Sell  1/16/19  93,483  87,890  (5,593) 
  Norwegian Krone  Buy  12/19/18  161,921  165,801  (3,880) 
  Swedish Krona  Sell  12/19/18  176,743  177,296  553 
UBS AG             
  Australian Dollar  Buy  1/16/19  330,391  324,764  5,627 
  British Pound  Sell  12/19/18  89,020  92,167  3,147 
  Euro  Sell  12/19/18  126,524  131,724  5,200 
  New Zealand Dollar  Sell  1/16/19  153,054  148,845  (4,209) 
  Norwegian Krone  Buy  12/19/18  105,824  109,598  (3,774) 
  Swedish Krona  Sell  12/19/18  78,316  77,961  (355) 

 

32 Dynamic Asset Allocation Equity Fund 

 


FORWARD CURRENCY CONTRACTS at 11/30/18 (aggregate face value $11,537,479) (Unaudited) cont. 
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
WestPac Banking Corp.           
  Australian Dollar  Sell  1/16/19  $72,486  $71,480  $(1,006) 
  New Zealand Dollar  Sell  1/16/19  47,189  45,240  (1,949) 
Unrealized appreciation          124,123 
Unrealized (depreciation)          (146,415) 
Total            $(22,292) 

 

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

 

FUTURES CONTRACTS OUTSTANDING at 11/30/18 (Unaudited)       
          Unrealized 
  Number of  Notional    Expiration  appreciation/ 
  contracts  amount  Value  date  (depreciation) 
Russell 2000 Index E-Mini (Long)  64  $4,906,452  $4,910,720  Dec-18  $(588,814) 
S&P 500 Index E-Mini (Long)  7  966,060  965,405  Dec-18  (47,299) 
S&P 500 Index E-Mini (Short)  6  828,051  827,490  Dec-18  40,525 
Tokyo Price Index (Long)  5  734,462  734,705  Dec-18  (6,304) 
Unrealized appreciation          40,525 
Unrealized (depreciation)          (642,417) 
Total          $(601,892) 

 

WRITTEN OPTIONS OUTSTANDING at 11/30/18 (premiums $6,926) (Unaudited)   
  Expiration  Notional  Contract   
Counterparty  date/strike price  amount  amount  Value 
Citibank, N.A.         
USD/JPY (Put)  Jan-19/JPY 105.00  $1,118,100  $1,118,100  $538 
Goldman Sachs International         
USD/CNH (Call)  Apr-19/CNH 7.20  731,600  731,600  4,740 
Total        $5,278 

 

Dynamic Asset Allocation Equity Fund 33 

 


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  $1,339,065  $1,406,507  $—­ 
Capital goods  3,775,088  591,586  —­ 
Communication services  1,374,949  504,376  —­ 
Conglomerates  113,670  287,360  —­ 
Consumer cyclicals  5,548,285  1,739,558  —­ 
Consumer staples  4,929,823  1,281,167  —­ 
Energy  2,625,887  881,025  —­ 
Financials  8,966,914  3,445,051  —­ 
Health care  7,115,719  1,481,184  —­ 
Technology  12,871,231  1,332,747  —­ 
Transportation  814,279  520,770  —­ 
Utilities and power  1,593,342  584,354  —­ 
Total common stocks  51,068,252  14,055,685  —­ 
 
Purchased options outstanding  —  11,867  —­ 
Warrants  —  268,318  —­ 
Short-term investments  6,684,798  484,901  —­ 
Totals by level  $57,753,050  $14,820,771  $—­ 
 
      Valuation inputs   
Other financial instruments:  Level 1  Level 2  Level 3 
Forward currency contracts  $—­  $(22,292)  $—­ 
Futures contracts  (601,892)  —­  —­ 
Written options outstanding  —­  (5,278)  —­ 
Totals by level  $(601,892)  $(27,570)  $—­ 

 

* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.

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

34 Dynamic Asset Allocation Equity Fund 

 


Statement of assets and liabilities 11/30/18 (Unaudited)

ASSETS   
Investment in securities, at value, including $218,213 of securities on loan (Notes 1 and 8):   
Unaffiliated issuers (identified cost $58,474,473)  $65,670,856 
Affiliated issuers (identified cost $6,902,965) (Notes 1 and 5)  6,902,965 
Cash  9 
Foreign currency (cost $75,201) (Note 1)  74,045 
Dividends, interest and other receivables  226,326 
Receivable for shares of the fund sold  140,501 
Receivable for investments sold  3,396,552 
Receivable for investor servicing fees (Note 2)  41 
Receivable from Manager (Note 2)  19,545 
Receivable for variation margin on futures contracts (Note 1)  38,644 
Unrealized appreciation on forward currency contracts (Note 1)  124,123 
Prepaid assets  11,010 
Total assets  76,604,617 
 
LIABILITIES   
Payable for investments purchased  4,184,656 
Payable for shares of the fund repurchased  392,294 
Payable for custodian fees (Note 2)  39,430 
Payable for Trustee compensation and expenses (Note 2)  7,032 
Payable for administrative services (Note 2)  336 
Payable for variation margin on futures contracts (Note 1)  11,782 
Unrealized depreciation on forward currency contracts (Note 1)  146,415 
Written options outstanding, at value (premiums $6,926) (Note 1)  5,278 
Collateral on securities loaned, at value (Note 1)  218,167 
Other accrued expenses  44,300 
Total liabilities  5,049,690 
 
Net assets  $71,554,927 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $56,305,931 
Total distributable earnings (Note 1)  15,248,996 
Total — Representing net assets applicable to capital shares outstanding  $71,554,927 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($20,195 divided by 1,565 shares)  $12.91† 
Offering price per class A share (100/94.25 of $12.91)*  $13.70 
Net asset value, offering price and redemption price per class P share   
($71,534,732 divided by 5,526,089 shares)  $12.94 

 

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

† Net asset value may not recalculate due to rounding of fractional shares.

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

Dynamic Asset Allocation Equity Fund 35 

 


Statement of operations Six months ended 11/30/18 (Unaudited)

INVESTMENT INCOME   
Dividends (net of foreign tax of $24,680)  $874,325 
Interest (including interest income of $105,592 from investments in affiliated issuers) (Note 5)  108,557 
Securities lending (net of expenses) (Notes 1 and 5)  1,443 
Total investment income  984,325 
 
EXPENSES   
Compensation of Manager (Note 2)  247,567 
Investor servicing fees (Note 2)  4,201 
Custodian fees (Note 2)  31,866 
Trustee compensation and expenses (Note 2)  2,104 
Administrative services (Note 2)  1,027 
Auditing and tax fees  50,363 
Other  25,284 
Fees waived and reimbursed by Manager (Note 2)  (101,683) 
Total expenses  260,729 
Expense reduction (Note 2)  (2,933) 
Net expenses  257,796 
 
Net investment income  726,529 
 
REALIZED AND UNREALIZED GAIN (LOSS)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (Notes 1 and 3)  4,631,078 
Foreign currency transactions (Note 1)  (4,686) 
Forward currency contracts (Note 1)  (179,478) 
Futures contracts (Note 1)  400,950 
Total net realized gain  4,847,864 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers  (6,172,061) 
Assets and liabilities in foreign currencies  (1,386) 
Forward currency contracts  55,881 
Futures contracts  (733,186) 
Written options  1,648 
Total change in net unrealized depreciation  (6,849,104) 
 
Net loss on investments  (2,001,240) 
 
Net decrease in net assets resulting from operations  $(1,274,711) 

 

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

36 Dynamic Asset Allocation Equity Fund 

 


Statement of changes in net assets

INCREASE (DECREASE) IN NET ASSETS  Six months ended 11/30/18*  Year ended 5/31/18 
Operations     
Net investment income  $726,529  $1,504,144 
Net realized gain on investments     
and foreign currency transactions  4,847,864  5,194,394 
Net unrealized appreciation (depreciation) of investments     
and assets and liabilities in foreign currencies  (6,849,104)  4,082,175 
Net increase (decrease) in net assets resulting     
from operations  (1,274,711)  10,780,713 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  —  (406) 
Class P  —  (1,866,485) 
From net realized long-term gain on investments     
Class A  —  (1,304) 
Class P  —  (5,403,296) 
Increase (decrease) from capital share transactions (Note 4)  (14,532,579)  1,761,030 
Total increase (decrease) in net assets  (15,807,290)  5,270,252 
 
NET ASSETS     
Beginning of period  87,362,217  82,091,965 
End of period (Note 1)  $71,554,927  $87,362,217 

 

* Unaudited.

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

Dynamic Asset Allocation Equity Fund 37 

 


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

  INVESTMENT OPERATIONS      LESS DISTRIBUTIONS        RATIOS AND SUPPLEMENTAL DATA   
                      Ratio  Ratio of net   
  Net asset    Net realized    From            of expenses  investment   
  value,    and unrealized  Total from  net  From    Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss)  investment  investment  net realized gain  Total  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)a  on investments­  operations­  income­  on investments­  distributions  of period­  value (%)b  (in thousands)  (%)c,d  net assets (%)d  (%) 
Class A­                           
November 30, 2018**   $13.28­  .10­  (.47)  (.37)  —­  —­  —­  $12.91­  (2.79)*  $20­  .43*  .74*  70* 
May 31, 2018­  12.75­  .20­  1.52­  1.72­  (.28)  (.91)  (1.19)  13.28­  13.56­  21­  .87­  1.52­  50­ 
May 31, 2017­  11.05­  .15­  1.70­  1.85­  (.15)  —­  (0.15)  12.75­  16.84­  18­  .89­  1.30­  106­ 
May 31, 2016­  12.19­  .14­  (.83)  (.69)  (.14)  (.31)  (0.45)  11.05­  (5.69)  16­  1.03­e  1.20­e  109­ 
May 31, 2015­  13.08­  .13­  1.26­  1.39­  (.20)  (2.08)  (2.28)  12.19­  11.69­  34­  1.03­  .96­  132­ 
May 31, 2014­  11.81­  .14­  2.14­  2.28­  (.10)  (.91)  (1.01)  13.08­  19.95­  39­  1.08­  1.08­  69­ 
Class P­                           
November 30, 2018**   $13.30­  .12­  (.48)  (.36)  —­  —­  —­  $12.94­  (2.71)*  $71,535­  .31*  .87*  70* 
May 31, 2018­  12.77­  .24­  1.51­  1.75­  (.31)  (.91)  (1.22)  13.30­  13.79­  87,341­  .63­  1.77­  50­ 
May 31, 2017­#  11.41­  .14­  1.38­  1.52­  (.16)  —­  (0.16)  12.77­  13.39*  82,074­  .45*  1.20*  106­ 

 

* Not annualized.

** Unaudited.

# For the period August 31, 2016 (commencement of operations) to May 31, 2017.

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

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

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

d Reflects 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 (Note 2):

    Percentage of average net assets 
  Class A  Class P 
November 30, 2018  0.12%  0.12% 
May 31, 2018  0.26  0.26 
May 31, 2017  0.29  0.23* 
May 31, 2016  0.33  — 
May 31, 2015  0.50  — 
May 31, 2014  0.57  — 

 

e Reflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of less than .01% as a percentage of average net assets per share for each class (Note 2).

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

38 Dynamic Asset Allocation Equity Fund  Dynamic Asset Allocation Equity Fund 39 

 


Notes to financial statements 11/30/18 (Unaudited)

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from June 1, 2018 through November 30, 2018.

Putnam Dynamic Asset Allocation Equity 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 long-term growth. The fund invests mainly in common stocks (growth or value stocks or both) of large and midsize companies worldwide. Under normal circumstances, the fund invests at least 80% of the fund’s net assets in common stocks. This policy may be changed only after 60 days’ notice to shareholders. While Putnam Management typically allocates approximately 75% of the fund’s assets to investments in U.S. companies, and 25% of the fund’s assets to investments in international companies, these allocations may vary. The fund invests mainly in developed countries, but may invest in emerging markets. 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 investments. Putnam Management may also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.

The fund offers class A and class P shares. Class A shares are sold with a maximum front-end sales charge of 5.75%, and generally do not pay a contingent deferred sales charge. Class P shares, which are sold at net asset value, are generally subject to the same expenses as class A, but do not bear a distribution fee and bear lower investor servicing fee, which is identified in Note 2. Class P shares are generally only available to corporate and institutional clients and clients in other approved programs. Class P shares are not available to all investors. As of the end of the reporting period, all of the class P shares are held by the Putnam RetirementReady Funds.

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

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

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

Note 1: Significant accounting policies

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

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

40 Dynamic Asset Allocation Equity Fund 

 


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 Disclosure s (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.

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

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

Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. 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. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

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

Dynamic Asset Allocation Equity Fund 41 

 


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.

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on 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 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, 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.

42 Dynamic Asset Allocation Equity Fund 

 


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.

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

Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts 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, is 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.

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 and 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 $44,502 on open derivative contracts subject to the Master Agreements. There was no collateral posted by the fund at period end for these 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 $218,167 and the value of securities loaned amounted to $218,213.

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

Dynamic Asset Allocation Equity Fund 43 

 


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

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

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

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

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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. 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.

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 aggregate identified cost on a tax basis is $65,730,720, resulting in gross unrealized appreciation and depreciation of $9,144,177 and $2,930,538, respectively, or net unrealized appreciation of $6,213,639.

For the fiscal year ended May 31, 2018, the fund had undistributed net investment income of $410,038.

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

Note 2: Management fee, administrative services and other transactions

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

0.750%  of the first $5 billion,  0.550%  of the next $50 billion, 
0.700%  of the next $5 billion,  0.530%  of the next $50 billion, 
0.650%  of the next $10 billion,  0.520%  of the next $100 billion and 
0.600%  of the next $10 billion,  0.515%  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 0.297% of the fund’s average net assets.

 

44 Dynamic Asset Allocation Equity Fund 

 


Putnam Management has contractually agreed, through September 30, 2019, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.02% 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 $101,683 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.

The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. PAC did not manage any portion of the assets of the fund during the reporting period. If Putnam Management or PIL were to engage the services of PAC, Putnam Management or PIL, as applicable, would pay a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.

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

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

Class A  $26 
Class P  4,175 
Total  $4,201 

 

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 $42 under the expense offset arrangements and by $2,891 under the brokerage/service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $64, 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

Dynamic Asset Allocation Equity Fund 45 

 


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 a distribution plan (the Plan) pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plan is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, for services provided and expenses incurred in distributing shares of the fund. The Plan provides for payment by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35% of the average net assets attributable to class A shares. The Trustees currently have not approved payments under the Plan.

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

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:

  Cost of purchases  Proceeds from sales 
Investments in securities (Long-term)  $53,132,845  $64,364,146 
U.S. government securities (Long-term)  —  — 
Total  $53,132,845  $64,364,146 

 

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:

  SIX MONTHS ENDED 11/30/18  YEAR ENDED 5/31/18 
Class A  Shares  Amount  Shares  Amount 
Shares sold  —  $—  —  $— 
Shares issued in connection with         
reinvestment of distributions  —  —  130  1,710 
  —  —  130  1,710 
Shares repurchased  —  —  —  — 
Net increase (decrease)  —  $—  130  $1,710 
 
  SIX MONTHS ENDED 11/30/18  YEAR ENDED 5/31/18 
Class P  Shares  Amount  Shares  Amount 
Shares sold  1,158,437  $15,557,362  2,056,598  $27,599,909 
Shares issued in connection with         
reinvestment of distributions  —  —  550,262  7,268,968 
  1,158,437  15,557,362  2,606,860  34,868,877 
Shares repurchased  (2,199,892)  (30,089,941)  (2,466,687)  (33,109,557) 
Net increase (decrease)  (1,041,455)  $(14,532,579)  140,173  $1,759,320 

 

46 Dynamic Asset Allocation Equity Fund 

 


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

  Shares owned  Percentage of ownership  Value 
Class A  1,031  65.88%  $13,310 

 

Note 5: Affiliated transactions

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

          Shares 
          outstanding 
          and fair 
  Fair value as  Purchase  Sale  Investment  value as 
Name of affiliate  of 5/31/18  cost  proceeds  income  of 11/30/18 
Short-term investments           
Putnam Cash Collateral           
Pool, LLC*  $701,420  $7,374,960  $7,858,213  $7,917  $218,167 
Putnam Short Term           
Investment Fund**  8,319,319  17,803,411  19,437,932  105,592  6,684,798 
Total Short-term           
investments  $9,020,739  $25,178,371  $27,296,145  $113,509  $6,902,965 

 

* 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.

Note 7: Summary of derivative activity

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

Purchased currency options (contract amount)  $880,000 
Written currency options (contract amount)  $790,000 
Futures contracts (number of contracts)  90 
Forward currency contracts (contract amount)  $26,900,000 
Warrants (number of warrants)  48,000 

 

Dynamic Asset Allocation Equity Fund 47 

 


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 
Foreign exchange  Investments,       
contracts  Receivables  $135,990  Payables  $151,693 
  Investments,       
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Equity contracts  appreciation  308,843*  Unrealized depreciation  642,417* 
Total    $444,833    $794,110 

 

* Includes cumulative appreciation/depreciation of futures contracts as reported in the fund’s portfolio. Only current day’s variation margin is reported within the Statement of assets and liabilities.

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

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments   
Derivatives not accounted        Forward   
for as hedging instruments        currency   
under ASC 815  Warrants  Options  Futures  contracts  Total 
Foreign exchange contracts  $—  $(6,775)  $—  $(179,478)  $(186,253) 
Equity contracts  (40,936)  —  400,950  —  360,014 
Total  $(40,936)  $(6,775)  $400,950  $(179,478)  $173,761 

 

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) 
on investments           
Derivatives not accounted        Forward   
for as hedging instruments        currency   
under ASC 815  Warrants  Options  Futures  contracts  Total 
Foreign exchange contracts  $—  $(2,682)  $—  $55,881  $53,199 
Equity contracts  (21,219)  —  (733,186)  —  (754,405) 
Total  $(21,219)  $(2,682)  $(733,186)  $55,881  $(701,206) 

 

48 Dynamic Asset Allocation Equity Fund 

 


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Dynamic Asset Allocation Equity Fund 49 

 


Note 8: Offsetting of financial and derivative assets and liabilities

The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.

  Bank of
America N.A.		 Barclays Bank
PLC		 Citibank, N.A. Credit Suisse
 International		 Goldman
Sachs
International		 HSBC Bank
USA, National
 Association		 JPMorgan
Chase Bank
N.A.		 Merrill Lynch,
Pierce, Fenner
& Smith, Inc.		 NatWest
Markets PLC		 State Street
Bank and
Trust Co.		 UBS AG WestPac
Banking Corp.		 Total
Assets:                           
Futures contracts§  $—  $—  $—  $—  $—  $—  $—  $38,644  $—  $—  $—  $—  $38,644 
Forward currency contracts#  13,465  3,133  7,344  12,373  12,567  20,342  19,332  —  4,714  16,879  13,974  —  124,123 
Purchased options**#  —  —  1,592  —  10,275  —  —  —  —  —  —  —  11,867 
Total Assets  $13,465  $3,133  $8,936  $12,373  $22,842  $20,342  $19,332  $38,644  $4,714  $16,879  $13,974  $—  $174,634 
Liabilities:                           
Futures contracts§  —  —  —  —  —  —  —  11,782  —  —  —  —  11,782 
Forward currency contracts#  41,123  7,755  13,767  13,198  12,562  14,631  11,539  —  7,787  12,760  8,338  2,955  146,415 
Written options#  —  —  538  —  4,740  —  —  —  —  —  —  —  5,278 
Total Liabilities  $41,123  $7,755  $14,305  $13,198  $17,302  $14,631  $11,539  $11,782  $7,787  $12,760  $8,338  $2,955  $163,475 
Total Financial and Derivative Net Assets  $(27,658)  $(4,622)  $(5,369)  $(825)  $5,540  $5,711  $7,793  $26,862  $(3,073)  $4,119  $5,636  $(2,955)  $11,159 
Total collateral received (pledged)†##  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—   
Net amount  $(27,658)  $(4,622)  $(5,369)  $(825)  $5,540  $5,711  $7,793  $26,862  $(3,073)  $4,119  $5,636  $(2,955)   
Controlled collateral received (including TBA                           
commitments)**  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Uncontrolled collateral received  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Collateral (pledged) (including TBA                           
commitments)**  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 

 

** 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 is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts, which is not included in the table above, amounted to $266,682.

Note 9: New accounting pronouncements

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

50 Dynamic Asset Allocation Equity Fund  Dynamic Asset Allocation Equity Fund 51 

 


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.

52 Dynamic Asset Allocation Equity Fund 

 


Fund information

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

Investment Manager  Trustees  Michael J. Higgins 
Putnam Investment  Kenneth R. Leibler, Chair  Vice President, Treasurer, 
Management, LLC  Liaquat Ahamed  and Clerk 
100 Federal Street  Ravi Akhoury   
Boston, MA 02110  Barbara M. Baumann  Janet C. Smith 
  Katinka Domotorffy  Vice President, 
Investment Sub-Advisors  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 
The Putnam Advisory Company, LLC  Manoj P. Singh  Vice President and 
100 Federal Street    Assistant Treasurer 
Boston, MA 02110  Officers   
  Robert L. Reynolds  Mark C. Trenchard 
Marketing Services  President  Vice President and 
Putnam Retail Management    BSA Compliance Officer 
100 Federal Street  Jonathan S. Horwitz   
Boston, MA 02110  Executive Vice President,  Nancy E. Florek 
  Principal Executive Officer,  Vice President, Director of 
Custodian  and Compliance Liaison  Proxy Voting and Corporate 
State Street Bank    Governance, Assistant Clerk, 
and Trust Company  Robert T. Burns  and Assistant Treasurer 
  Vice President and   
Legal Counsel  Chief Legal Officer  Denere P. Poulack 
Ropes & Gray 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 Asset Allocation Equity 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:
Not applicable

Item 3. Audit Committee Financial Expert:
Not applicable

Item 4. Principal Accountant Fees and Services:
Not applicable

Item 5. Audit Committee of Listed Registrants
Not applicable

Item 6. Schedule of Investments:
The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.

Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:
Not applicable

Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Not applicable

Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable

Item 11. Controls and Procedures:
(a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.
(b) Changes in internal control over financial reporting: Not applicable
Item 12. Exhibits:
(a)(1) Not applicable
(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: January 28, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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

Date: January 28, 2019
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: January 28, 2019