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


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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES



Investment Company Act file number: (811–07513)
Exact name of registrant as specified in charter: Putnam Funds Trust
Address of principal executive offices: 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 — May 31, 2019



Item 1. Report to Stockholders:

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



Putnam
Dynamic Risk
Allocation Fund

Annual report
5 | 31 | 19

 

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 free of charge after January 1, 2021, 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

July 18, 2019

Dear Fellow Shareholder:

If there is any lesson to be learned from constantly changing financial markets, it is the importance of positioning your investment portfolio for your long-term goals. We believe that one strategy is to diversify across different asset classes and investment approaches.

We also believe your mutual fund investment offers a number of advantages, including constant monitoring by experienced investment professionals who maintain a long-term perspective. Putnam’s portfolio managers and analysts take a research-intensive approach that includes risk management strategies designed to serve you through changing conditions.

Another key strategy, in our view, is seeking the counsel of a financial advisor. For over 80 years, Putnam has recognized the importance of professional investment advice. Your financial advisor can help in many ways, including defining and planning for goals such as retirement, evaluating the level of risk appropriate for you, and reviewing your investments on a regular basis and making adjustments as necessary.

As always, your fund’s Board of Trustees remains committed to protecting the interests of Putnam shareholders like you, and we thank you for investing with Putnam.




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


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

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

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


This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 5/31/19. See above and pages 10–12 for additional fund performance information. Index descriptions can be found on pages 16–17.

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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 1999 and has been in the investment industry since 1993.

Brett S. Goldstein, CFA, James A. Fetch, and Robert J. Schoen are also Portfolio Managers of the fund.

Jason, how would you describe the market environment during the 12-month reporting period ended May 31, 2019?

Global financial markets were marked by a series of ups and downs during the 12-month period. Investor appetite for relatively risky assets, such as stocks, continued to ebb and flow under pressure from the U.S.–China trade conflict and growing fears that the dispute would accelerate a global economic slowdown. Large-cap stocks outperformed their mid- and small-cap counterparts. The S&P 500 Index, a broad measure of U.S. stocks, rose 3.78% during the period. U.S. small-cap stocks, as measured by the Russell 2000 Index, dropped 9.04%.

Risk-averse investors around the world also flocked to the safety of government bonds as trade tensions escalated between the U.S. and China. The flight to perceived safe havens saw two-year and 10-year U.S. Treasury yields tumble. At the end of May 2019, the yield on the benchmark 10-year note — widely used in setting borrowing costs for consumers and businesses worldwide — hit its lowest closing level since September 2017. The two-year Treasury yield, which often moves with

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Allocations are shown as a percentage of the fund’s net assets as of 5/31/19. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

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

expectations for Federal Reserve policy, fell to below 2% at the end of the reporting period.

The U.S. Federal Reserve [Fed] had raised short-term rates four times in 2018, taking the federal funds rate to a range of 2.25% to 2.50%. But the central bank pivoted to a dovish stance on rates this year. Slowing economic activity, escalating trade tensions between the United States and China, and benign inflation contributed to the Fed’s decision to pause its three-year campaign to tighten monetary policy.

Fed Chair Jerome Powell in June 2019 said the central bank “will act as appropriate” to sustain U.S. economic expansion, fueling market speculation of a rate cut this year. The economy grew at a 3.1% annual rate in the first quarter of 2019, after expanding 2.2% in the fourth quarter of 2018. Unemployment has touched multi-decade lows, inflation has been anchored, and we believe the likelihood of a recession remains low.

How did the fund perform during the reporting period?

Putnam Dynamic Risk Allocation Fund declined 4.63% over the 12-month period. The fund underperformed the custom benchmark, the Putnam Dynamic Risk Allocation Blended Index. We seek to add value through asset allocation strategies and active security selection. However, both our dynamic asset allocation strategies and our active implementation decisions/security selections detracted from performance during the period.

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

The fund’s negative performance was driven by dynamic asset allocation decisions in bonds, commodities, and equities. Our underweight position in interest-rate-sensitive bonds was the biggest driver of benchmark-relative weakness during this period. As interest rates declined, bond prices moved higher. In addition, our overweight position in commodities during the fourth quarter of 2018 detracted, especially when energy prices declined.

We remained overweight in commodities in the first quarter of 2019; those positions rebounded but could not offset weakness from the end of last year. Our S&P 500 mean-reversion strategy, designed to take advantage of short-term moves in stocks, also detracted from the fund’s performance over this trailing year.


With regard to positive contributors, security selection in out-of-benchmark fixed-income assets, primarily mortgage credit, helped performance. Positive security selection in a strategy that targets low-beta stocks aided results. Beta is a measure of a stock’s volatility; low-beta stocks typically have less risk but can offer better risk-adjusted returns.

How did the fund use derivatives?

The fund used purchase and written options to hedge duration and prepayment risk, among


This table shows the fund’s top 10 individual holdings and the percentage of the fund’s net assets that each represented as of 5/31/19. Short-term investments, TBA commitments and derivatives, if any, are excluded. Holdings may vary over time.

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others. We used futures to manage exposure to market risk and interest-rate risk, among other things. The fund also utilized forward currency contracts, interest-rate swaps, and total return swaps.

What is your outlook, and how have you positioned the fund?

Higher real interest rates, weaker demand from China, political troubles in the eurozone, and protectionist tariffs have put pressure on global growth. The U.S. economy is also facing rising headwinds and is expected to expand at a more moderate pace in 2019 compared with last year. The Fed expects 2.1% growth this year, down from the 2.3% it forecast in December. We believe inflationary pressures will also remain modest.

We expect stock and bond market volatility to persist in 2019. We believe financial markets will remain jittery because of uncertainties related to the U.S.–China trade dispute, the Fed, and global growth. There appears to be concern among investors and businesses that the trade dispute between the United States and China could last indefinitely. Investors are still attempting to gauge the potential fallout to economic growth and corporate profits.

Against this backdrop, we are neutral on equities and inflation [commodities]. We had increased our equity allocation in the fourth quarter of 2018, looking to take advantage of short-term market weakness. But we moved back to neutral as the technical outlook weakened and valuation signals deteriorated. In addition, we remain wary of short-term mean reversion strategies given the sharp rally in stocks from the lows in December 2018. As for commodities, the strong rally in energy prices at the start of 2019 made our qualitative view more balanced. The absence of strong qualitative or quantitative signals brought us back to a neutral position.

We are neutral on credit risks and underweight in interest-rate-sensitive fixed-income assets as of the end of the period. In terms of credit, there are positive indications for the credit markets from our quantitative model but that is balanced by the uncertainty surrounding the U.S.–China trade negotiations.

As for our rates positioning, we believe bond yields will continue to drift higher in 2019 as we


Allocations are shown as a percentage of the fund’s net assets as of 5/31/19. Risk contribution is from Putnam research, which uses the historical standard deviation for the respective asset classes multiplied by the appropriate asset weight. Holdings and allocations may vary over time.

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expect interest-rate normalization to continue in the United States and globally. That is because the real yield on the 10-year Treasury note remains below average and the term premium estimates on the notes are at historically low levels. The term premium is the extra return [a risk premium] that investors demand to hold a long-term bond. In addition, we think interest rates are currently unattractive because of the very low carry inherent in the asset class due to the flat shape of the yield curve.

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

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

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

ABOUT DERIVATIVES

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

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

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

Dynamic Risk Allocation Fund 9 

 


Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2019, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 5/31/19

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Class A (9/19/11)               
Before sales charge  32.68%  3.74%  8.07%  1.56%  13.32%  4.26%  –4.63% 
After sales charge  25.05  2.95  1.86  0.37  6.81  2.22  –10.12 
Class B (9/19/11)               
Before CDSC  25.25  2.97  4.06  0.80  10.88  3.50  –5.27 
After CDSC  25.25  2.97  2.19  0.43  7.88  2.56  –9.98 
Class C (9/19/11)               
Before CDSC  25.31  2.97  4.08  0.80  10.91  3.51  –5.26 
After CDSC  25.31  2.97  4.08  0.80  10.91  3.51  –6.21 
Class M (9/19/11)               
Before sales charge  27.72  3.23  5.38  1.05  11.66  3.74  –5.07 
After sales charge  23.25  2.75  1.69  0.34  7.75  2.52  –8.39 
Class R (9/19/11)               
Net asset value  30.20  3.49  6.73  1.31  12.54  4.02  –4.77 
Class R6 (7/2/12)               
Net asset value  36.39  4.11  10.04  1.93  14.71  4.68  –4.17 
Class Y (9/19/11)               
Net asset value  35.38  4.01  9.46  1.83  14.26  4.54  –4.33 

 

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

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

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Comparative index returns For periods ended 5/31/19

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Putnam Dynamic               
Risk Allocation  42.20%  4.68%  10.13%  1.95%  17.24%  5.44%  –0.02% 
Blended Index*               
Lipper Alternative               
Global Macro               
Funds category  33.68  3.76  8.11  1.51  12.08  3.82  –0.54 
average†               

 

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

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

† Over the 1-year, 3-year, 5-year, and life-of-fund periods ended 5/31/19, there were 221, 199, 171, and 112 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $12,525 and $12,531, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $12,325. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $13,020, $13,639, and $13,538, respectively.

Dynamic Risk Allocation Fund 11 

 


Fund price and distribution information For the 12-month period ended 5/31/19

Distributions  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Number  1  1  1  1  1  1  1 
Income  $0.162  $0.066  $0.065  $0.106  $0.074  $0.213  $0.194 
Capital gains  —  —  —  —  —  —  — 
Total  $0.162  $0.066  $0.065  $0.106  $0.074  $0.213  $0.194 
  Before  After  Net  Net  Before  After  Net  Net  Net 
  sales  sales  asset  asset  sales  sales  asset  asset  asset 
Share value  charge  charge  value  value  charge  charge  value  value  value 
5/31/18  $11.61  $12.32  $11.39  $11.42  $11.59  $12.01  $11.56  $11.58  $11.63 
5/31/19  10.90  11.56  10.72  10.75  10.89  11.28  10.93  10.87  10.92 

 

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

Fund performance as of most recent calendar quarter Total return for periods ended 6/30/19

    Annual    Annual    Annual   
  Life of fund  average  5 years  average  3 years  average  1 year 
Class A (9/19/11)               
Before sales charge  37.79%  4.21%  11.08%  2.12%  15.66%  4.97%  –0.36% 
After sales charge  29.87  3.42  4.70  0.92  9.01  2.92  –6.09 
Class B (9/19/11)               
Before CDSC  30.04  3.43  7.01  1.36  13.21  4.22  –1.04 
After CDSC  30.04  3.43  5.08  1.00  10.21  3.29  –5.95 
Class C (9/19/11)               
Before CDSC  29.98  3.43  6.92  1.35  13.13  4.20  –1.13 
After CDSC  29.98  3.43  6.92  1.35  13.13  4.20  –2.12 
Class M (9/19/11)               
Before sales charge  32.64  3.70  8.33  1.61  14.07  4.49  –0.81 
After sales charge  28.00  3.22  4.53  0.89  10.08  3.25  –4.28 
Class R (9/19/11)               
Net asset value  35.20  3.95  9.69  1.87  14.84  4.72  –0.51 
Class R6 (7/2/12)               
Net asset value  41.66  4.58  13.12  2.50  17.09  5.40  0.05 
Class Y (9/19/11)               
Net asset value  40.58  4.48  12.41  2.37  16.50  5.22  –0.14 

 

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

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Your fund’s expenses

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

Expense ratios

  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Net expenses for the fiscal year               
ended 5/31/18*  1.15%  1.90%  1.90%  1.65%  1.40%  0.76%  0.90% 
Total annual operating expenses for the               
fiscal year ended 5/31/18  1.39%  2.14%  2.14%  1.89%  1.64%  1.00%  1.14% 
Annualized expense ratio for the               
six-month period ended 5/31/19†  1.16%  1.91%  1.91%  1.66%  1.41%  0.75%  0.91% 

 

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

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

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

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

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 12/1/18 to 5/31/19. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class B  Class C  Class M  Class R  Class R6  Class Y 
Expenses paid per $1,000*†  $5.86  $9.64  $9.64  $8.38  $7.13  $3.79  $4.60 
Ending value (after expenses)  $1,027.10  $1,023.70  $1,024.50  $1,025.40  $1,026.90  $1,029.40  $1,029.30 

 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/19. The expense ratio may differ for each share class.

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

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Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 5/31/19, use the following calculation method. To find the value of your investment on 12/1/18, 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 B  Class C  Class M  Class R  Class R6  Class Y 
Expenses paid per $1,000*†  $5.84  $9.60  $9.60  $8.35  $7.09  $3.78  $4.58 
Ending value (after expenses)  $1,019.15  $1,015.41  $1,015.41  $1,016.65  $1,017.90  $1,021.19  $1,020.39 

 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/19. 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

Emerging-market securities carry illiquidity and volatility risks. The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk, which means that they may increase in value less than other bonds when interest rates decline and decline in value more than other bonds when interest rates rise. Allocation of assets among asset classes may hurt performance, and efforts to diversify risk through the use of leverage and allocation decisions may not be successful. If the quantitative models or data that are used in managing the fund prove to be incorrect or incomplete, investment decisions made in reliance on the models or data may not produce the desired results and the fund may realize losses. Derivatives carry additional risks, such as the inability to terminate or sell derivatives positions and the failure of the other party to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Active trading strategies may lose money or not earn a return sufficient to cover trading and other costs. Use of leverage obtained through derivatives increases these risks by increasing investment exposure. Over-the-counter derivatives are also subject to the risk of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. REITs are subject to the risk of economic downturns that have an adverse impact on real estate markets. The use of short selling may result in losses if the securities appreciate in value. Commodities involve market, political, regulatory, and natural conditions risks. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, asset class, geography, industry or sector. International investing involves currency, economic, and political risks. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. 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 and 3.50% for class M shares.

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

Share classes

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

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

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

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

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

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

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

Comparative indexes

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

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

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

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

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

16 Dynamic Risk Allocation Fund 

 


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

MSCI All Country World Index [ND] is designed to represent performance of the full opportunity set of large- and mid-cap stocks across 23 developed and 26 emerging markets.

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

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

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

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

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

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

Dynamic Risk Allocation Fund 17 

 


Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2018, are available in the Individual Investors section of putnam.com and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.

Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of May 31, 2019, Putnam employees had approximately $488,000,000 and the Trustees had approximately $69,000,000 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.

Important notice regarding Putnam’s privacy policy

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

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

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

18 Dynamic Risk Allocation Fund 

 


Financial statements

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

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

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

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

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

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

Dynamic Risk Allocation Fund 19 

 


Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Putnam Funds Trust:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Putnam Dynamic Risk Allocation Fund (the “fund”), a series of the Putnam Funds Trust, including the fund’s portfolio, as of May 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the “financial statements”) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the fund as of May 31, 2019, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures included confirmation of securities owned as of May 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.


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

Boston, Massachusetts
July 18, 2019

20 Dynamic Risk Allocation Fund 

 


The fund’s portfolio 5/31/19

COMMON STOCKS (48.8%)*  Shares  Value 
Banking (3.2%)     
ABN AMRO Group NV GDR (Netherlands)  3,349  $70,680 
Banco Bilbao Vizcaya Argenta (Spain)  19,171  104,018 
Banco de Chile ADR (Chile)  416  11,873 
Banco do Brasil SA (Brazil)  5,988  79,124 
Banco Santander (Brasil) S.A. (Units) (Brazil)  4,600  53,574 
Banco Santander Chile ADR (Chile)  714  19,956 
Banco Santander Mexico SA Institucion de Banca Multiple Grupo     
Financiero Santand Class B (Mexico)  19,100  28,009 
Bank Leumi Le-Israel BM (Israel)  8,146  54,632 
Bank of China, Ltd. (China)  35,000  14,478 
Bank of Communications Co., Ltd. (China)  59,000  46,119 
BOC Hong Kong Holdings, Ltd. (Hong Kong)  6,500  24,901 
China Construction Bank Corp. Class H (China)  7,000  5,523 
Comerica, Inc.  4,001  275,349 
DNB ASA (Norway)  1,468  24,873 
FirstRand, Ltd. (South Africa)  7,788  35,724 
Fukuoka Financial Group, Inc. (Japan)  1,600  27,162 
Grupo Financiero Banorte SAB de CV (Mexico)  4,200  22,887 
Hang Seng Bank, Ltd. (Hong Kong)  3,300  82,613 
HSBC Holdings PLC (United Kingdom)  2,290  18,683 
Industrial & Commercial Bank of China, Ltd. (China)  129,000  91,942 
Industrial Bank of Korea (South Korea)  2,021  23,461 
ING Groep NV (Netherlands)  3,906  42,167 
Itau Unibanco Holding SA (Preference) (Brazil)   6,052  53,981 
JPMorgan Chase & Co.  6,305  668,078 
KBC Groep NV (Belgium)  646  42,431 
Lloyds Banking Group PLC (United Kingdom)  109,827  79,277 
RHB Bank Bhd (Malaysia)  16,000  22,254 
Sberbank of Russia PJSC ADR (Russia)  3,040  43,589 
Shinhan Financial Group Co., Ltd. (South Korea)  559  20,867 
Sumitomo Mitsui Financial Group, Inc. (Japan)  3,300  114,734 
Sumitomo Mitsui Trust Holdings, Inc. (Japan)  800  29,201 
U.S. Bancorp  8,086  405,917 
    2,638,077 
Basic materials (1.8%)     
Anglo American PLC (United Kingdom)  3,119  74,847 
Anhui Conch Cement Co., Ltd. (China)  11,500  66,958 
Arkema SA (France)  481  40,448 
Astral Foods, Ltd. (South Africa)  453  5,160 
Axalta Coating Systems, Ltd.  †   3,802  89,385 
Bemis Co., Inc.  1,280  74,688 
BlueScope Steel, Ltd. (Australia)  7,356  53,457 
Boliden AB (Sweden)  597  13,566 
Boliden AB (Sweden)  †   597  267 
Catcher Technology Co., Ltd. (Taiwan)  6,000  36,186 
China Oriental Group Co., Ltd. (China)  22,000  12,755 
Covestro AG (Germany)  1,868  81,713 
Evraz PLC (Russia)  7,016  52,250 

 

Dynamic Risk Allocation Fund 21 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Basic materials cont.     
Formosa Chemicals & Fibre Corp. (Taiwan)  6,000  $20,366 
Formosa Plastics Corp. (Taiwan)  2,000  6,978 
Fortescue Metals Group, Ltd. (Australia)  8,151  45,179 
Glencore PLC (United Kingdom)  3,450  11,129 
HeidelbergCement AG (Germany)  854  63,518 
HOCHTIEF AG (Germany)  275  32,658 
Kajima Corp. (Japan)  2,600  35,618 
Kumba Iron Ore, Ltd. (South Africa)  952  28,849 
Mitsubishi Gas Chemical Co., Inc. (Japan)  100  1,239 
PETRONAS Chemicals Group (PCG) Bhd (Malaysia)  14,400  28,564 
PTT Global Chemical PCL (Thailand)  25,300  48,565 
Rio Tinto PLC (United Kingdom)  2,108  121,103 
Sherwin-Williams Co. (The)  347  145,549 
Shin-Etsu Chemical Co., Ltd. (Japan)  1,200  99,412 
South32, Ltd. (Australia)  13,728  31,519 
Taisei Corp. (Japan)  1,500  54,586 
Tekfen Holding AS (Turkey)  2,726  11,634 
UPM-Kymmene OYJ (Finland)  2,370  59,214 
    1,447,360 
Capital goods (3.2%)     
ACS Actividades de Construccion y Servicios SA (Spain)  1,805  74,242 
Avery Dennison Corp.  199  20,708 
Berry Plastics Group, Inc.  †   2,841  133,584 
China Railway Group, Ltd. (China)  37,000  27,613 
Curtiss-Wright Corp.  640  71,354 
Daelim Industrial Co., Ltd. (South Korea)  432  37,486 
Dassault Aviation SA (France)  14  17,486 
Faurecia SA (France)  1,731  63,583 
General Dynamics Corp.  138  22,193 
HD Supply Holdings, Inc.  †   3,595  149,157 
Hitachi, Ltd. (Japan)  3,200  107,818 
Honeywell International, Inc.  3,057  502,296 
Northrop Grumman Corp.  1,347  408,478 
Raytheon Co.  2,358  411,471 
Sandvik AB (Sweden)  5,749  88,668 
Teledyne Technologies, Inc.  †   332  78,286 
Tervita Corp. (Canada)  †   63  299 
Waste Management, Inc.  3,220  352,107 
Weichai Power Co., Ltd. Class H (China)  37,000  56,064 
    2,622,893 
Communication services (1.7%)     
BT Group PLC (United Kingdom)  23,770  58,266 
China Mobile, Ltd. (China)  12,000  104,759 
Deutsche Telekom AG (Germany)  5,834  98,470 
Eutelsat Communications SA (France)  595  10,442 
Juniper Networks, Inc.  8,107  199,513 
KT Corp. (South Korea)  311  7,289 
LG Uplus Corp. (South Korea)  3,972  46,465 
Nippon Telegraph & Telephone Corp. (Japan)  900  40,275 

 

22 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Communication services cont.     
NTT DoCoMo, Inc. (Japan)  2,000  $45,882 
SK Telecom Co., Ltd. (South Korea)  256  53,741 
Swisscom AG (Switzerland)  54  25,844 
T-Mobile US, Inc.  †   4,724  346,931 
Telkom SA SOC, Ltd. (South Africa)  3,500  22,011 
Telstra Corp., Ltd. (Australia)  37,633  95,232 
Verizon Communications, Inc.  4,948  268,924 
    1,424,044 
Conglomerates (0.1%)     
Mitsubishi Corp. (Japan)  2,100  54,571 
    54,571 
Consumer cyclicals (6.1%)     
Amazon.com, Inc.  †   182  323,063 
Astro Malaysia Holdings Bhd (Malaysia)  5,100  1,692 
Atacadao Distribuicao Comercio e Industria Ltda. (Brazil)  663  3,911 
Automatic Data Processing, Inc.  2,799  448,176 
AutoZone, Inc.  †   365  374,895 
Berkeley Group Holdings PLC (The) (United Kingdom)  408  18,043 
Bridgestone Corp. (Japan)  1,400  52,078 
Carnival PLC (United Kingdom)  955  47,178 
CK Hutchison Holdings, Ltd. (Hong Kong)  4,000  37,719 
Clear Channel Outdoor Holdings, Inc.  †   6,654  33,803 
Crown, Ltd. (Australia)  3,376  29,297 
Daiwa House Industry Co., Ltd. (Japan)  1,200  35,866 
Dollar Tree, Inc.  †   1,729  175,649 
Dongfeng Motor Group Co., Ltd. (China)  22,000  18,090 
Ecolab, Inc.  616  113,399 
El Puerto de Liverpool SAB de CV Class C1 (Mexico)  3,768  21,091 
Fiat Chrysler Automobiles NV (Italy)  3,117  39,691 
Ford Otomotiv Sanayi AS (Turkey)  1,223  11,551 
Geely Automobile Holdings, Ltd. (China)  12,000  19,605 
Genting Bhd (Singapore)  70,000  44,280 
Genting Bhd (Malaysia)  10,400  15,854 
Guangzhou Automobile Group Co., Ltd. Class H (China)  48,000  46,130 
Haier Electronics Group Co., Ltd. (China)  4,000  10,155 
Hermes International (France)  129  85,810 
Home Product Center PCL (Thailand)  49,400  26,380 
Host Hotels & Resorts, Inc. R   4,208  76,207 
iHeartMedia, Inc. Class A  †   2,830  45,987 
Kering SA (France)  188  97,656 
Kia Motors Corp. (South Korea)  1,157  38,159 
Liberty Media Corp.-Liberty SiriusXM Class C  †   1,659  59,956 
Lojas Renner SA (Brazil)  220  2,469 
Lowe’s Cos., Inc.  1,208  112,682 
Mr Price Group, Ltd. (South Africa)  2,453  33,191 
Namco Bandai Holdings, Inc. (Japan)  500  24,554 
News Corp. Class A  6,832  77,816 
Next PLC (United Kingdom)  412  30,045 
Nintendo Co., Ltd. (Japan)  200  70,719 

 

Dynamic Risk Allocation Fund 23 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Consumer cyclicals cont.     
Omnicom Group, Inc.  4,272  $330,482 
Peugeot SA (France)  3,915  87,256 
Pou Chen Corp. (Taiwan)  4,000  4,529 
President Chain Store Corp. (Taiwan)  3,000  28,534 
Qualicorp SA (Brazil)  5,900  30,297 
Ross Stores, Inc.  2,561  238,147 
ServiceMaster Global Holdings, Inc.  †   999  53,946 
Shinsegae International, Inc. (South Korea)  65  14,507 
Sinotruk Hong Kong, Ltd. (China)  12,000  22,679 
Sony Corp. (Japan)  1,900  91,388 
Taylor Wimpey PLC (United Kingdom)  14,591  30,509 
TJX Cos., Inc. (The)  8,291  416,954 
Total System Services, Inc.  427  52,747 
TWDC Enterprises 18 Corp.  5,067  669,047 
Wal-Mart de Mexico SAB de CV (Mexico)  26,639  74,961 
Wolters Kluwer NV (Netherlands)  1,297  90,502 
Zhongsheng Group Holdings, Ltd. (China)  8,000  20,095 
    4,959,427 
Consumer finance (—%)     
Capitec Bank Holdings, Ltd. (South Africa)  240  21,729 
Mitsubishi UFJ Lease & Finance Co., Ltd. (Japan)  2,700  13,355 
    35,084 
Consumer staples (4.9%)     
Ashtead Group PLC (United Kingdom)  3,593  84,359 
Associated British Foods PLC (United Kingdom)  1,765  55,124 
Bright Horizons Family Solutions, Inc.  †   477  65,378 
Carlsberg A/S Class B (Denmark)  448  58,797 
Cia Cervecerias Unidas SA ADR (Chile)  1,052  28,204 
Coca-Cola Co. (The)  8,524  418,784 
Coca-Cola European Partners PLC (United Kingdom)  1,656  91,742 
Colgate-Palmolive Co.  1,405  97,816 
Colruyt SA (Belgium)  372  27,626 
Essity AB Class B (Sweden)  637  18,699 
Estacio Participacoes SA (Brazil)  478  3,587 
Hanjaya Mandala Sampoerna Tbk PT (Indonesia)  51,900  12,277 
Hershey Co. (The)  1,650  217,734 
Hindustan Unilever, Ltd. (India)  1,550  39,772 
Imperial Brands PLC (United Kingdom)  3,132  75,893 
Indofood Sukses Makmur Tbk PT (Indonesia)  22,300  10,300 
ITOCHU Corp. (Japan)  5,000  92,095 
Jardine Cycle & Carriage, Ltd. (Singapore)  900  22,126 
Koninklijke Ahold Delhaize NV (Netherlands)  4,411  99,122 
L’Oreal SA (France)  376  100,908 
LG Corp. (South Korea)  150  9,221 
McDonald’s Corp.  380  75,343 
Mondelez International, Inc. Class A  9,031  459,226 
Nestle SA (Switzerland)  1,358  134,873 
PepsiCo, Inc.  259  33,152 
Procter & Gamble Co. (The)  2,037  209,628 

 

24 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Consumer staples cont.     
Sao Martinho SA (Brazil)  1,346  $6,706 
Smiles Fidelidade SA (Brazil)  2,182  26,497 
Starbucks Corp.  6,262  476,288 
Sysco Corp.  5,207  358,346 
TCI Co., Ltd. (Taiwan)  1,000  15,809 
Tesco PLC (United Kingdom)  34,460  98,528 
Uni-President Enterprises Corp. (Taiwan)  18,000  46,265 
Unilever NV ADR (Netherlands)  1,690  101,851 
Unilever PLC (United Kingdom)  2,131  130,108 
United Tractors Tbk PT (Indonesia)  4,000  7,098 
US Foods Holding Corp.  †   3,599  124,381 
Want Want China Holdings, Ltd. (China)  36,000  25,624 
Wesfarmers, Ltd. (Australia)  528  13,535 
WH Group, Ltd. (Hong Kong)  77,500  69,431 
    4,042,253 
Energy (1.8%)     
BP PLC (United Kingdom)  7,110  48,221 
Chevron Corp.  630  71,726 
China Petroleum & Chemical Corp. (Sinopec) (China)  86,000  57,178 
Ecopetrol SA ADR (Colombia)  2,834  46,449 
Equinor ASA (Norway)  4,119  78,722 
Exxon Mobil Corp.  4,902  346,915 
Hindustan Petroleum Corp., Ltd. (India)  4,593  21,357 
Jastrzebska Spolka Weglowa SA (Poland)  †   629  8,230 
Nine Point Energy F   540  1,080 
Occidental Petroleum Corp.  5,419  269,704 
Oil & Natural Gas Corp., Ltd. (India)  2,393  5,902 
OMV AG (Austria)  891  41,822 
Phillips 66  1,120  90,496 
PTT PCL (Foreign depositary shares) (Thailand)  45,000  65,763 
Royal Dutch Shell PLC Class B (United Kingdom)  2,562  79,886 
Santos, Ltd. (Australia)  7,557  35,221 
Surgutneftegas OJSC (Russia)  28,926  17,968 
TOTAL SA (France)  3,091  159,889 
    1,446,529 
Financial (1.1%)     
3i Group PLC (United Kingdom)  4,163  55,218 
Broadridge Financial Solutions, Inc.  415  51,821 
CoreLogic, Inc.  †   1,116  43,736 
Deutsche Boerse AG (Germany)  198  27,370 
Intercontinental Exchange, Inc.  5,343  439,248 
Macquarie Group, Ltd. (Australia)  1,127  93,908 
ORIX Corp. (Japan)  5,900  83,083 
Partners Group Holding AG (Switzerland)  130  91,134 
Yuanta Financial Holding Co., Ltd. (Taiwan)  54,000  30,265 
    915,783 
Health care (5.7%)     
AbbVie, Inc.  1,165  89,367 
Advanz Pharma Corp. (Canada)  †   214  3,353 

 

Dynamic Risk Allocation Fund 25 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Health care cont.     
Alfresa Holdings Corp. (Japan)  1,100  $27,685 
Allergan PLC  273  33,281 
Amgen, Inc.  940  156,698 
Anthem, Inc.  344  95,625 
Astellas Pharma, Inc. (Japan)  6,200  82,929 
Aurobindo Pharma, Ltd. (India)  2,408  23,215 
Baxter International, Inc.  3,452  253,515 
Biogen, Inc.  †   467  102,408 
Bristol-Myers Squibb Co.  2,137  96,956 
Centene Corp.  †   5,230  302,033 
Cigna Corp.  242  35,821 
Eli Lilly & Co.  1,400  162,316 
Encompass Health Corp.  975  57,447 
Gilead Sciences, Inc.  1,048  65,238 
GlaxoSmithKline PLC (United Kingdom)  6,002  115,898 
Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. (China)  6,000  25,006 
Humana, Inc.  1,279  313,176 
Hypermarcas SA (Brazil)  4,300  33,116 
Ipsen SA (France)  66  7,873 
Jazz Pharmaceuticals PLC  †   160  20,088 
Johnson & Johnson  2,477  324,859 
Koninklijke Philips NV (Netherlands)  149  5,871 
Laboratory Corp. of America Holdings  †   815  132,527 
Medipal Holdings Corp. (Japan)  1,200  25,914 
Medtronic PLC  1,167  108,041 
Merck & Co., Inc.  3,133  248,165 
Novartis AG (Switzerland)  1,304  111,991 
Novo Nordisk A/S Class B (Denmark)  2,979  140,409 
Omega Healthcare Investors, Inc. R   1,885  67,144 
Pfizer, Inc.  6,462  268,302 
QIAGEN NV (Netherlands)  †   2,457  93,563 
Quest Diagnostics, Inc.  1,092  104,734 
Regeneron Pharmaceuticals, Inc.  †   149  44,956 
Roche Holding AG (Switzerland)  772  202,589 
Sartorius Stedim Biotech (France)  134  18,566 
Shionogi & Co., Ltd. (Japan)  1,400  76,243 
Suzuken Co., Ltd. (Japan)  600  36,817 
Thermo Fisher Scientific, Inc.  182  48,590 
UCB SA (Belgium)  573  43,769 
UnitedHealth Group, Inc.  779  188,362 
Ventas, Inc. R   588  37,808 
Vertex Pharmaceuticals, Inc.  †   461  76,609 
Waters Corp.  †   106  21,275 
Zoetis, Inc.  995  100,545 
    4,630,693 
Insurance (1.7%)     
Allianz SE (Germany)  643  142,819 
Allstate Corp. (The)  3,565  340,493 
American Financial Group, Inc.  792  77,774 

 

26 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Insurance cont.     
Athene Holding, Ltd. Class A  †   2,860  $116,259 
Aviva PLC (United Kingdom)  18,519  94,868 
Baloise Holding AG (Switzerland)  336  55,842 
Fosun International, Ltd. (China)  19,500  25,113 
IRB Brasil Resseguros SA (Brazil)  2,100  54,524 
Legal & General Group PLC (United Kingdom)  27,827  90,396 
Loews Corp.  3,419  175,600 
Ping An Insurance (Group) Co. of China, Ltd. Class H (China)  10,000  110,090 
Reinsurance Group of America, Inc.  559  82,766 
Swiss Life Holding AG (Switzerland)  42  19,087 
    1,385,631 
Investment banking/Brokerage (—%)     
Itausa — Investimentos Itau SA (Preference) (Brazil)  1,761  5,560 
Korea Investment Holdings Co., Ltd. (South Korea)  86  5,209 
    10,769 
Real estate (6.1%)     
AGNC Investment Corp. R   12,258  201,031 
Alexander’s, Inc. R   25  9,200 
Alexandria Real Estate Equities, Inc. R   30  4,392 
American Campus Communities, Inc. R   1,477  68,415 
American Homes 4 Rent R   4,114  100,423 
Americold Realty Trust R   1,780  55,714 
Annaly Capital Management, Inc. R   32,006  281,973 
Apartment Investment & Management Co. Class A R   1,497  74,775 
Apple Hospitality REIT, Inc. R   5,332  82,326 
AvalonBay Communities, Inc. R   725  147,182 
Boston Properties, Inc. R   204  26,689 
Brixmor Property Group, Inc. R   3,811  65,359 
Camden Property Trust R   923  95,401 
Cheung Kong Property Holdings, Ltd. (Hong Kong)  12,500  90,198 
City Office REIT, Inc. (Canada) R   1,989  23,450 
Columbia Property Trust, Inc. R   2,602  55,631 
Country Garden Holdings co., Ltd. (China)  28,000  37,721 
Cousins Properties, Inc. R   4,036  36,526 
Digital Realty Trust, Inc. R   350  41,202 
Duke Realty Corp. R   3,691  111,062 
Easterly Government Properties, Inc. R   2,721  50,094 
Empire State Realty Trust, Inc. Class A R   917  14,085 
EPR Properties R   867  67,713 
Equity Commonwealth R   2,052  66,834 
Equity Lifestyle Properties, Inc. R   1,184  144,045 
Equity Residential Trust R   4,507  345,101 
Essex Property Trust, Inc. R   73  21,297 
Extra Space Storage, Inc. R   899  96,337 
Four Corners Property Trust, Inc. R   1,669  48,000 
Gaming and Leisure Properties, Inc. R   4,164  164,436 
Getty Realty Corp. R   1,122  34,737 
Gladstone Commercial Corp. R   986  20,775 
Guangzhou R&F Properties Co., Ltd. (China)  15,600  29,463 

 

Dynamic Risk Allocation Fund 27 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Real estate cont.     
HCP, Inc. R   199  $6,310 
Healthcare Trust of America, Inc. Class A R   2,324  66,908 
Henderson Land Development Co., Ltd. (Hong Kong)  6,600  34,050 
Highwoods Properties, Inc. R   2,108  92,457 
JBG SMITH Properties R   1,545  61,012 
Kerry Properties, Ltd. (Hong Kong)  2,000  7,580 
Liberty Property Trust R   2,513  119,292 
Medical Properties Trust, Inc. R   3,880  68,986 
MFA Financial, Inc. R   4,428  31,173 
Mirvac Group (Australia) R   4,245  8,900 
Monmouth Real Estate Investment Corp. R   352  4,907 
National Health Investors, Inc. R   685  53,807 
National Retail Properties, Inc.  1,406  75,263 
New Residential Investment Corp. R   2,238  34,130 
Park Hotels & Resorts, Inc. R   2,218  61,261 
Persimmon PLC (United Kingdom)  2,990  74,281 
Piedmont Office Realty Trust, Inc. Class A R   2,852  57,981 
Prologis, Inc. R   1,574  115,957 
Public Storage R   329  78,263 
Realty Income Corp. R   387  27,121 
Scentre Group (Australia) R   15,175  39,910 
Senior Housing Properties Trust R   784  6,178 
Simon Property Group, Inc. R   1,343  217,687 
Spirit Realty Capital, Inc. R   1,437  61,302 
Starwood Property Trust, Inc. R   3,652  80,527 
STORE Capital Corp. R   2,069  70,801 
Sun Hung Kai Properties, Ltd. (Hong Kong)  2,500  39,518 
Swire Properties, Ltd. (Hong Kong)  2,400  9,872 
Two Harbors Investment Corp. R   3,240  39,593 
UDR, Inc. R   2,660  119,115 
VICI Properties, Inc. R   15,122  335,406 
Washington Real Estate Investment Trust R   1,118  29,750 
Weingarten Realty Investors R   1,974  55,667 
Welltower, Inc. R   736  59,778 
    4,956,330 
Technology (8.3%)     
Alibaba Group Holding, Ltd. ADR (China)  †   694  103,586 
Alphabet, Inc. Class A  †   538  595,297 
Amadeus IT Holding SA Class A (Spain)  567  43,208 
Amdocs, Ltd.  1,774  105,411 
Apple, Inc.  2,571  450,105 
Avaya Holdings Corp.  †   1,802  22,669 
Black Knight, Inc.  †   1,292  73,243 
Brother Industries, Ltd. (Japan)  700  11,875 
Cadence Design Systems, Inc.  †   3,379  214,803 
Capgemini SE (France)  441  49,211 
CDK Global, Inc.  2,114  102,318 
Cisco Systems, Inc.  5,937  308,902 
Cognizant Technology Solutions Corp. Class A  5,369  332,502 

 

28 Dynamic Risk Allocation Fund 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Technology cont.     
F5 Networks, Inc.  †   1,575  $208,026 
Facebook, Inc. Class A  †   799  141,799 
Fidelity National Information Services, Inc.  3,348  402,764 
Fiserv, Inc.  † S   1,057  90,754 
FUJIFILM Holdings Corp. (Japan)  1,300  62,030 
Fujitsu, Ltd. (Japan)  300  20,298 
Garmin, Ltd.  2,673  204,431 
Genpact, Ltd.  1,343  48,549 
Gentex Corp.  2,336  49,897 
HannStar Display Corp. (Taiwan)  29,000  6,348 
HCL Technologies, Ltd. (India)  4,070  63,796 
Hoya Corp. (Japan)  1,400  96,890 
Infosys, Ltd. (India)  2,930  30,939 
Innolux Corp. (Taiwan)  4,000  943 
Intuit, Inc.  1,681  411,593 
Maxim Integrated Products, Inc.  2,515  132,264 
Microsoft Corp.  4,049  500,780 
Naspers, Ltd. Class N (South Africa)  86  19,278 
NTT Data Corp. (Japan)  5,400  64,320 
NXP Semiconductors NV  2,726  240,324 
Otsuka Corp. (Japan)  900  34,901 
Qualcomm, Inc.  700  46,774 
Radiant Opto-Electronics Corp. (Taiwan)  13,000  40,973 
Samsung Electronics Co., Ltd. (South Korea)  5,574  197,863 
Samsung SDS Co., Ltd. (South Korea)  153  26,548 
SK Hynix, Inc. (South Korea)  1,293  70,247 
SoftBank Group Corp. (Japan)  500  46,915 
Synopsys, Inc.  †   1,466  170,701 
Taiwan Semiconductor Manufacturing Co., Ltd. ADR (Taiwan)  2,369  90,851 
Tata Consultancy Services, Ltd. (India)  2,663  83,918 
Tech Mahindra, Ltd. (India)  †   5,300  57,899 
Tencent Holdings, Ltd. (China)  3,300  136,854 
Teradata Corp.  †   1,300  44,642 
Texas Instruments, Inc.  4,189  436,955 
Thales SA (France)  497  54,636 
Tianneng Power International, Ltd. (China)  12,000  9,760 
Tripod Technology Corp. (Taiwan)  5,000  15,807 
Wipro, Ltd. (India)  5,538  22,750 
Xhen Ding Technology Holding, Ltd. (Taiwan)  11,000  32,124 
    6,830,271 
Transportation (1.0%)     
Aena SME SA (Spain)  431  79,266 
AirAsia Bhd (Malaysia)  26,000  17,910 
Central Japan Railway Co. (Japan)  500  104,195 
Delta Air Lines, Inc.  979  50,419 
Deutsche Lufthansa AG (Germany)  2,454  46,680 
Deutsche Post AG (Germany)  697  20,535 
Grupo Aeroportuario del Centro Norte SAB de CV (Mexico)  3,743  22,631 
Japan Airlines Co., Ltd. (Japan)  2,600  81,621 

 

Dynamic Risk Allocation Fund 29 

 


COMMON STOCKS (48.8%)* cont.  Shares  Value 
Transportation cont.     
Norfolk Southern Corp.  1,518  $296,223 
SG Holdings Co., Ltd. (Japan)  800  21,680 
United Continental Holdings, Inc.  †   734  56,995 
Yangzijiang Shipbuilding Holdings, Ltd. (China)  62,100  61,936 
    860,091 
Utilities and power (2.1%)     
AGL Energy, Ltd. (Australia)  329  4,680 
American Electric Power Co., Inc.  4,967  427,758 
CenterPoint Energy, Inc.  2,382  67,744 
Cia de Saneamento Basico do Estado de Sao Paulo (Brazil)  4,055  45,687 
CLP Holdings, Ltd. (Hong Kong)  3,500  39,569 
E.ON SE (Germany)  8,205  85,695 
Endesa SA (Spain)  2,993  74,560 
Enel Americas SA ADR (Chile)  2,134  17,051 
Enel SpA (Italy)  18,917  117,877 
Eni SpA (Italy)  6,191  93,397 
Exelon Corp.  8,517  409,497 
GAIL India, Ltd. (India)    5,012  26,141 
Glow Energy PCL (Thailand)  4,200  10,916 
Inter RAO UES PJSC (Russia)  421,088  25,947 
Kansai Electric Power Co., Inc. (The) (Japan)  400  4,651 
Kinder Morgan, Inc.  12,076  240,916 
Manila Electric Co. (Philippines)  1,430  10,568 
Pinnacle West Capital Corp.  143  13,429 
    1,716,083 
Total common stocks (cost $34,941,198)    $39,975,889 
 
  Principal   
CORPORATE BONDS AND NOTES (28.3%)*  amount  Value 
Basic materials (2.4%)     
Allegheny Technologies, Inc. sr. unsec. unsub. notes     
7.875%, 8/15/23  $35,000  $36,740 
ArcelorMittal SA sr. unsec. unsub. bonds 6.125%, 6/1/25 (France)  5,000  5,506 
ArcelorMittal SA sr. unsec. unsub. notes 7.00%, 10/15/39 (France)  30,000  34,182 
Beacon Roofing Supply, Inc. company guaranty sr. unsec. unsub.     
notes 6.375%, 10/1/23  30,000  30,900 
Beacon Roofing Supply, Inc. 144A company guaranty sr. unsec.     
notes 4.875%, 11/1/25  20,000  18,906 
Berry Global Escrow Corp. 144A notes 5.625%, 7/15/27 ##   10,000  10,104 
Big River Steel, LLC/BRS Finance Corp. 144A company guaranty sr.     
notes 7.25%, 9/1/25  55,000  57,200 
BMC East, LLC 144A company guaranty sr. notes 5.50%, 10/1/24  55,000  55,344 
Boise Cascade Co. 144A company guaranty sr. unsec. notes     
5.625%, 9/1/24  55,000  55,000 
Builders FirstSource, Inc. 144A company guaranty sr. unsub. notes     
5.625%, 9/1/24  35,000  34,956 
Builders FirstSource, Inc. 144A sr. notes 6.75%, 6/1/27  5,000  5,050 
BWAY Holding Co. 144A sr. notes 5.50%, 4/15/24  15,000  14,664 
BWAY Holding Co. 144A sr. unsec. notes 7.25%, 4/15/25  50,000  48,130 

 

30 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Basic materials cont.     
Celanese US Holdings, LLC company guaranty sr. unsec. notes     
3.50%, 5/8/24 (Germany)  $13,000  $13,118 
Celanese US Holdings, LLC company guaranty sr. unsec. unsub.     
notes 4.625%, 11/15/22 (Germany)  29,000  30,681 
CF Industries, Inc. company guaranty sr. unsec. bonds     
4.95%, 6/1/43  45,000  38,588 
CF Industries, Inc. 144A company guaranty sr. notes     
4.50%, 12/1/26  59,000  60,423 
Chemours Co. (The) company guaranty sr. unsec. notes     
5.375%, 5/15/27  25,000  22,625 
Chemours Co. (The) company guaranty sr. unsec. unsub. notes     
7.00%, 5/15/25  35,000  35,000 
Cleveland-Cliffs, Inc. company guaranty sr. unsec. notes     
5.75%, 3/1/25  4,000  3,900 
Compass Minerals International, Inc. 144A company guaranty sr.     
unsec. notes 4.875%, 7/15/24  80,000  75,600 
CPG Merger Sub, LLC 144A company guaranty sr. unsec. notes     
8.00%, 10/1/21  30,000  30,375 
Dow Chemical Co. (The) sr. unsec. unsub. bonds 3.50%, 10/1/24  37,000  37,774 
Freeport-McMoRan, Inc. company guaranty sr. unsec. notes     
6.875%, 2/15/23 (Indonesia)  30,000  31,350 
Freeport-McMoRan, Inc. company guaranty sr. unsec. unsub.     
notes 5.45%, 3/15/43 (Indonesia)  20,000  17,060 
GCP Applied Technologies, Inc. 144A sr. unsec. notes     
5.50%, 4/15/26  75,000  75,188 
Glencore Funding, LLC 144A company guaranty sr. unsec. unsub.     
notes 4.625%, 4/29/24  26,000  26,930 
Glencore Funding, LLC 144A company guaranty sr. unsec. unsub.     
notes 4.00%, 4/16/25  47,000  47,245 
Greif, Inc. 144A company guaranty sr. unsec. notes 6.50%, 3/1/27  35,000  35,175 
HudBay Minerals, Inc. 144A company guaranty sr. unsec. notes     
7.625%, 1/15/25 (Canada)  35,000  34,738 
Ingevity Corp. 144A sr. unsec. notes 4.50%, 2/1/26  50,000  47,750 
International Flavors & Fragrances, Inc. sr. unsec. notes     
4.45%, 9/26/28  25,000  26,568 
International Flavors & Fragrances, Inc. sr. unsec. notes     
3.40%, 9/25/20  85,000  85,605 
International Paper Co. sr. unsec. unsub. notes 3.00%, 2/15/27  14,000  13,538 
Joseph T Ryerson & Son, Inc. 144A sr. notes 11.00%, 5/15/22  15,000  15,825 
Kraton Polymers, LLC/Kraton Polymers Capital Corp. 144A     
company guaranty sr. unsec. notes 7.00%, 4/15/25  25,000  25,000 
Louisiana-Pacific Corp. company guaranty sr. unsec. unsub. notes     
4.875%, 9/15/24  25,000  25,188 
Mercer International, Inc. sr. unsec. notes 6.50%, 2/1/24 (Canada)  30,000  30,600 
Mercer International, Inc. sr. unsec. notes 5.50%, 1/15/26 (Canada)  20,000  19,695 
NCI Building Systems, Inc. 144A company guaranty sr. unsec. sub.     
notes 8.00%, 4/15/26  40,000  36,150 
Novelis Corp. 144A company guaranty sr. unsec. bonds     
5.875%, 9/30/26  75,000  73,079 
Nutrien, Ltd. sr. unsec. bonds 5.25%, 1/15/45 (Canada)  7,000  7,413 
Nutrien, Ltd. sr. unsec. bonds 4.125%, 3/15/35 (Canada)  18,000  17,279 

 

Dynamic Risk Allocation Fund 31 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Basic materials cont.     
Nutrien, Ltd. sr. unsec. sub. bonds 4.20%, 4/1/29 (Canada)  $25,000  $25,976 
PQ Corp. 144A company guaranty sr. unsec. notes 5.75%, 12/15/25  35,000  34,650 
Sherwin-Williams Co. (The) sr. unsec. unsub. bonds 3.45%, 6/1/27  16,000  15,952 
Sherwin-Williams Co. (The) sr. unsec. unsub. notes 2.75%, 6/1/22  11,000  10,977 
Smurfit Kappa Treasury Funding DAC company guaranty sr. unsec.     
unsub. notes 7.50%, 11/20/25 (Ireland)  40,000  45,900 
Steel Dynamics, Inc. company guaranty sr. unsec. notes     
5.00%, 12/15/26  15,000  15,338 
Steel Dynamics, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 10/1/24  30,000  30,555 
Teck Resources, Ltd. 144A company guaranty sr. unsec. notes     
8.50%, 6/1/24 (Canada)  10,000  10,700 
TMS International Corp. 144A sr. unsec. notes 7.25%, 8/15/25  30,000  29,250 
TopBuild Corp. 144A company guaranty sr. unsec. notes     
5.625%, 5/1/26  45,000  45,338 
Tronox Finance PLC 144A company guaranty sr. unsec. notes     
5.75%, 10/1/25 (United Kingdom)  15,000  13,575 
U.S. Concrete, Inc. company guaranty sr. unsec. unsub. notes     
6.375%, 6/1/24  33,000  33,578 
Westlake Chemical Corp. company guaranty sr. unsec. unsub.     
bonds 4.375%, 11/15/47  34,000  30,363 
Westlake Chemical Corp. company guaranty sr. unsec. unsub.     
notes 3.60%, 8/15/26  56,000  55,369 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
8.20%, 1/15/30  18,000  24,034 
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes     
7.95%, 2/15/31  14,000  18,586 
WR Grace & Co.- Conn. 144A company guaranty sr. unsec. notes     
5.625%, 10/1/24  35,000  36,575 
Zekelman Industries, Inc. 144A company guaranty sr. notes     
9.875%, 6/15/23  15,000  15,769 
    1,938,627 
Capital goods (1.6%)     
Allison Transmission, Inc. 144A company guaranty sr. unsec. notes     
4.75%, 10/1/27  40,000  38,350 
Amsted Industries, Inc. 144A company guaranty sr. unsec. sub.     
notes 5.625%, 7/1/27 ##   15,000  15,112 
ATS Automation Tooling Systems, Inc. 144A sr. unsec. notes 6.50%,     
6/15/23 (Canada)  35,000  36,006 
Berry Global, Inc. company guaranty unsub. notes 5.125%, 7/15/23  50,000  50,375 
Bombardier, Inc. 144A sr. unsec. notes 8.75%, 12/1/21 (Canada)  15,000  16,200 
Bombardier, Inc. 144A sr. unsec. notes 7.875%, 4/15/27 (Canada)  25,000  23,984 
Bombardier, Inc. 144A sr. unsec. notes 7.50%, 12/1/24 (Canada)  45,000  44,438 
Briggs & Stratton Corp. company guaranty sr. unsec. notes     
6.875%, 12/15/20  30,000  30,938 
Crown Americas, LLC/Crown Americas Capital Corp. VI company     
guaranty sr. unsec. notes 4.75%, 2/1/26  20,000  20,110 
Crown Cork & Seal Co., Inc. company guaranty sr. unsec. bonds     
7.375%, 12/15/26  20,000  22,500 
Gates Global, LLC/Gates Global Co. 144A company guaranty sr.     
unsec. notes 6.00%, 7/15/22  62,000  61,613 

 

32 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Capital goods cont.     
GFL Environmental, Inc. 144A sr. unsec. notes 8.50%,     
5/1/27 (Canada)  $30,000  $30,616 
Great Lakes Dredge & Dock Corp. company guaranty sr. unsec.     
notes 8.00%, 5/15/22  40,000  42,100 
Honeywell International, Inc. sr. unsec. bonds 3.812%, 11/21/47  43,000  44,439 
Hulk Finance Corp. 144A sr. unsec. notes 7.00%, 6/1/26 (Canada)  50,000  48,063 
Johnson Controls International PLC sr. unsec. bonds 4.95%, 7/2/64  25,000  24,226 
Johnson Controls International PLC sr. unsec. unsub. bonds     
4.50%, 2/15/47  15,000  15,123 
L3 Technologies, Inc. company guaranty sr. unsec. bonds     
3.85%, 12/15/26  28,000  29,024 
L3 Technologies, Inc. company guaranty sr. unsec. notes     
4.40%, 6/15/28  18,000  19,365 
Northrop Grumman Corp. sr. unsec. unsub. notes 3.25%, 1/15/28  32,000  31,952 
Oshkosh Corp. company guaranty sr. unsec. sub. notes     
5.375%, 3/1/25  65,000  67,275 
Oshkosh Corp. sr. unsec. sub. notes 4.60%, 5/15/28  39,000  40,238 
Panther BF Aggregator 2 LP/Panther Finance Co., Inc. 144A     
company guaranty sr. notes 6.25%, 5/15/26  5,000  5,100 
Panther BF Aggregator 2 LP/Panther Finance Co., Inc. 144A     
company guaranty sr. unsec. notes 8.50%, 5/15/27  35,000  34,913 
Park-Ohio Industries, Inc. company guaranty sr. unsec. notes     
6.625%, 4/15/27  20,000  19,650 
RBS Global, Inc./Rexnord, LLC 144A sr. unsec. notes     
4.875%, 12/15/25  50,000  49,125 
Republic Services, Inc. sr. unsec. notes 3.95%, 5/15/28  25,000  26,425 
Resideo Funding, Inc. 144A company guaranty sr. unsec. notes     
6.125%, 11/1/26  25,000  25,688 
Staples, Inc. 144A sr. notes 7.50%, 4/15/26  50,000  48,006 
Staples, Inc. 144A sr. unsec. notes 10.75%, 4/15/27  30,000  28,791 
Stevens Holding Co, Inc. 144A company guaranty sr. unsec. notes     
6.125%, 10/1/26  60,000  62,400 
TransDigm, Inc. company guaranty sr. unsec. sub. notes     
6.50%, 5/15/25  5,000  4,963 
TransDigm, Inc. company guaranty sr. unsec. sub. notes     
6.375%, 6/15/26  25,000  24,438 
TransDigm, Inc. 144A company guaranty sr. notes 6.25%, 3/15/26  45,000  45,956 
United Technologies Corp. sr. unsec. unsub. notes 1.90%, 5/4/20  113,000  112,355 
Vertiv Group Corp. 144A sr. unsec. notes 9.25%, 10/15/24  15,000  14,775 
Vertiv Intermediate Holding Corp. 144A sr. unsec. notes 12.00%,     
2/15/22  ‡‡   15,000  14,550 
Waste Management, Inc. company guaranty sr. unsec. unsub.     
notes 4.75%, 6/30/20  12,000  12,273 
    1,281,455 
Communication services (2.5%)     
American Tower Corp. sr. unsec. bonds 3.125%, 1/15/27 R   15,000  14,484 
American Tower Corp. sr. unsec. unsub. bonds 3.55%, 7/15/27 R   46,000  45,975 
AT&T, Inc. sr. unsec. notes 4.10%, 2/15/28  54,000  55,606 
AT&T, Inc. sr. unsec. unsub. bonds 4.35%, 3/1/29  12,000  12,531 
AT&T, Inc. sr. unsec. unsub. notes 4.75%, 5/15/46  36,000  35,816 

 

Dynamic Risk Allocation Fund 33 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Communication services cont.     
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A company     
guaranty sr. unsec. bonds 5.50%, 5/1/26  $35,000  $35,788 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A company     
guaranty sr. unsec. notes 5.875%, 4/1/24  60,000  61,950 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
bonds 5.375%, 6/1/29  25,000  25,047 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
notes 5.75%, 2/15/26  65,000  67,397 
CCO Holdings, LLC/CCO Holdings Capital Corp. 144A sr. unsec.     
unsub. notes 5.125%, 5/1/23  20,000  20,144 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. bonds 6.484%, 10/23/45  43,000  48,465 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. notes 4.908%, 7/23/25  21,000  22,164 
Charter Communications Operating, LLC/Charter     
Communications Operating Capital Corp. company guaranty sr.     
sub. bonds 5.375%, 5/1/47  30,000  29,953 
Comcast Corp. company guaranty sr. unsec. unsub. bonds     
3.969%, 11/1/47  22,000  21,759 
Comcast Corp. company guaranty sr. unsec. unsub. bonds     
2.35%, 1/15/27  5,000  4,773 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
6.50%, 11/15/35  46,000  60,399 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
3.375%, 2/15/25  24,000  24,669 
Comcast Corp. company guaranty sr. unsec. unsub. notes     
3.15%, 3/1/26  5,000  5,070 
CommScope Technologies, LLC 144A company guaranty sr. unsec.     
notes 6.00%, 6/15/25  60,000  54,421 
Cox Communications, Inc. 144A sr. unsec. bonds 3.50%, 8/15/27  14,000  13,873 
Crown Castle International Corp. sr. unsec. bonds 3.80%, 2/15/28 R   14,000  14,135 
Crown Castle International Corp. sr. unsec. bonds 3.65%, 9/1/27 R   22,000  22,056 
Crown Castle International Corp. sr. unsec. notes 4.875%, 4/15/22 R   5,000  5,277 
Crown Castle International Corp. sr. unsec. unsub. bonds     
3.70%, 6/15/26 R   24,000  24,318 
CSC Holdings, LLC sr. unsec. unsub. bonds 5.25%, 6/1/24  110,000  110,858 
CSC Holdings, LLC sr. unsec. unsub. notes 6.75%, 11/15/21  100,000  106,625 
Deutsche Telekom International Finance BV company guaranty sr.     
unsec. unsub. bonds 8.75%, 6/15/30 (Netherlands)  9,000  12,659 
DISH DBS Corp. company guaranty sr. unsec. unsub. notes     
5.875%, 11/15/24  80,000  71,924 
Equinix, Inc. sr. unsec. notes 5.375%, 5/15/27 R   64,000  67,040 
Frontier Communications Corp. sr. unsec. notes 11.00%, 9/15/25  60,000  37,800 
Frontier Communications Corp. 144A company guaranty notes     
8.50%, 4/1/26  40,000  38,400 
Intelsat Connect Finance SA 144A company guaranty sr. unsec.     
notes 9.50%, 2/15/23 (Luxembourg)  90,000  78,525 
Intelsat Jackson Holdings SA 144A sr. unsec. notes 9.75%,     
7/15/25 (Bermuda)  65,000  65,488 

 

34 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Communication services cont.     
Level 3 Financing, Inc. company guaranty sr. unsec. unsub. notes     
5.625%, 2/1/23  $20,000  $20,075 
NBCUniversal Media, LLC company guaranty sr. unsec. unsub.     
notes 5.15%, 4/30/20  24,000  24,545 
NBCUniversal Media, LLC company guaranty sr. unsec. unsub.     
notes 4.375%, 4/1/21  72,000  74,435 
Quebecor Media, Inc. sr. unsec. unsub. notes 5.75%,     
1/15/23 (Canada)  10,000  10,412 
Sprint Capital Corp. company guaranty sr. unsec. unsub. notes     
6.875%, 11/15/28  40,000  41,650 
Sprint Communications, Inc. sr. unsec. notes 7.00%, 8/15/20  65,000  67,275 
Sprint Corp. company guaranty sr. unsec. sub. notes     
7.25%, 9/15/21  105,000  110,381 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
6.375%, 3/1/25  10,000  10,364 
T-Mobile USA, Inc. company guaranty sr. unsec. notes     
5.375%, 4/15/27  65,000  67,661 
T-Mobile USA, Inc. company guaranty sr. unsec. unsub. bonds     
4.75%, 2/1/28  40,000  39,638 
Verizon Communications, Inc. sr. unsec. unsub. bonds     
4.672%, 3/15/55  20,000  21,340 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.40%, 11/1/34  16,000  16,928 
Verizon Communications, Inc. sr. unsec. unsub. notes     
4.329%, 9/21/28  105,000  113,723 
Videotron, Ltd./Videotron Ltee. 144A sr. unsec. notes 5.125%,     
4/15/27 (Canada)  100,000  100,500 
Vodafone Group PLC sr. unsec. unsub. notes 4.375%, 5/30/28     
(United Kingdom)  34,000  35,452 
    2,069,768 
Conglomerates (0.3%)     
Siemens Financieringsmaatschappij NV 144A company guaranty     
sr. unsec. notes 2.20%, 3/16/20 (Netherlands)  250,000  249,158 
    249,158 
Consumer cyclicals (4.5%)     
Alimentation Couche-Tard, Inc. 144A company guaranty sr. unsec.     
notes 3.55%, 7/26/27 (Canada)  14,000  14,017 
Amazon.com, Inc. sr. unsec. notes 3.15%, 8/22/27  50,000  51,369 
Amazon.com, Inc. sr. unsec. unsub. notes 3.30%, 12/5/21  68,000  69,419 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.875%, 11/15/26  10,000  8,775 
AMC Entertainment Holdings, Inc. company guaranty sr. unsec.     
sub. notes 5.75%, 6/15/25  35,000  31,806 
American Builders & Contractors Supply Co., Inc. 144A company     
guaranty sr. unsec. notes 5.875%, 5/15/26  10,000  10,163 
American Builders & Contractors Supply Co., Inc. 144A sr. unsec.     
notes 5.75%, 12/15/23  20,000  20,500 
Autonation, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 2/1/20  30,000  30,484 
BMW US Capital, LLC 144A company guaranty sr. unsec. notes     
3.95%, 8/14/28  2,000  2,089 

 

Dynamic Risk Allocation Fund 35 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Consumer cyclicals cont.     
BMW US Capital, LLC 144A company guaranty sr. unsec. notes     
3.40%, 8/13/21  $7,000  $7,115 
BMW US Capital, LLC 144A company guaranty sr. unsec. notes     
2.80%, 4/11/26  25,000  24,519 
BMW US Capital, LLC 144A company guaranty sr. unsec. notes     
2.00%, 4/11/21  42,000  41,512 
Boyd Gaming Corp. company guaranty sr. unsec. notes     
6.00%, 8/15/26  20,000  20,200 
Boyd Gaming Corp. company guaranty sr. unsec. unsub. notes     
6.375%, 4/1/26  35,000  36,054 
Carriage Services, Inc. 144A sr. unsec. notes 6.625%, 6/1/26  35,000  35,613 
CBS Corp. company guaranty sr. unsec. bonds 4.20%, 6/1/29  38,000  38,930 
CBS Corp. company guaranty sr. unsec. unsub. bonds     
2.90%, 1/15/27  30,000  28,303 
CBS Corp. company guaranty sr. unsec. unsub. notes     
4.60%, 1/15/45  13,000  12,747 
CBS Corp. company guaranty sr. unsec. unsub. notes     
4.00%, 1/15/26  6,000  6,143 
Cinemark USA, Inc. company guaranty sr. unsec. sub. notes     
4.875%, 6/1/23  35,000  35,219 
Clear Channel Worldwide Holdings, Inc. 144A company guaranty     
sr. unsec. notes 9.25%, 2/15/24  25,000  26,680 
Constellation Merger Sub, Inc. 144A sr. unsec. notes 8.50%, 9/15/25  90,000  84,805 
CRC Escrow Issuer, LLC/CRC Finco, Inc. 144A company guaranty sr.     
unsec. notes 5.25%, 10/15/25  65,000  63,570 
Ecolab, Inc. sr. unsec. notes 4.35%, 12/8/21  45,000  47,060 
Ecolab, Inc. sr. unsec. unsub. bonds 2.70%, 11/1/26  51,000  50,337 
Eldorado Resorts, Inc. company guaranty sr. unsec. notes     
6.00%, 9/15/26  5,000  5,175 
Eldorado Resorts, Inc. company guaranty sr. unsec. unsub. notes     
7.00%, 8/1/23  15,000  15,525 
Entercom Media Corp. 144A company guaranty notes     
6.50%, 5/1/27  30,000  30,450 
Entercom Media Corp. 144A company guaranty sr. unsec. notes     
7.25%, 11/1/24  35,000  35,788 
Fox Corp. 144A company guaranty sr. unsec. notes 4.03%, 1/25/24  20,000  20,943 
Gartner, Inc. 144A company guaranty sr. unsec. notes     
5.125%, 4/1/25  20,000  20,150 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
notes 4.00%, 10/6/26  35,000  34,173 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.30%, 7/13/25  11,000  11,108 
General Motors Financial Co., Inc. company guaranty sr. unsec.     
unsub. notes 4.00%, 1/15/25  5,000  4,956 
Gray Television, Inc. 144A company guaranty sr. unsec. notes     
5.875%, 7/15/26  30,000  30,779 
Gray Television, Inc. 144A sr. unsec. notes 7.00%, 5/15/27  35,000  37,073 
Hanesbrands, Inc. 144A company guaranty sr. unsec. unsub. notes     
4.625%, 5/15/24  30,000  29,775 
Hilton Worldwide Finance, LLC/Hilton Worldwide Finance Corp.     
company guaranty sr. unsec. notes 4.875%, 4/1/27  115,000  115,666 

 

36 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Consumer cyclicals cont.     
Howard Hughes Corp. (The) 144A sr. unsec. notes 5.375%, 3/15/25  $50,000  $49,375 
Hyatt Hotels Corp. sr. unsec. unsub. notes 4.85%, 3/15/26  32,000  34,418 
iHeartCommunications, Inc. company guaranty sr. notes     
6.375%, 5/1/26  16,005  16,625 
iHeartCommunications, Inc. company guaranty sr. unsec. notes     
8.375%, 5/1/27  29,008  30,350 
IHS Markit, Ltd. sr. unsec. sub. bonds 4.75%, 8/1/28     
(United Kingdom)  22,000  23,100 
IHS Markit, Ltd. 144A company guaranty notes 4.75%, 2/15/25     
(United Kingdom)  178,000  188,236 
Interpublic Group of Cos., Inc. (The) sr. unsec. sub. bonds     
4.65%, 10/1/28  97,000  103,669 
Iron Mountain, Inc. 144A company guaranty sr. unsec. bonds     
5.25%, 3/15/28 R   10,000  9,450 
Iron Mountain, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 9/15/27 R   35,000  32,725 
Jack Ohio Finance, LLC/Jack Ohio Finance 1 Corp. 144A company     
guaranty notes 10.25%, 11/15/22  40,000  42,900 
Jack Ohio Finance, LLC/Jack Ohio Finance 1 Corp. 144A company     
guaranty sr. notes 6.75%, 11/15/21  35,000  35,821 
Jeld-Wen, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 12/15/27  25,000  23,500 
Jeld-Wen, Inc. 144A company guaranty sr. unsec. notes     
4.625%, 12/15/25  30,000  28,650 
Lear Corp. sr. unsec. unsub. bonds 3.80%, 9/15/27  59,000  56,661 
Lennar Corp. company guaranty sr. unsec. sub. notes     
5.875%, 11/15/24  15,000  15,919 
Lions Gate Capital Holdings, LLC 144A company guaranty sr.     
unsec. notes 5.875%, 11/1/24  45,000  45,225 
Lions Gate Capital Holdings, LLC 144A sr. unsec. notes     
6.375%, 2/1/24  10,000  10,250 
Live Nation Entertainment, Inc. 144A company guaranty sr. unsec.     
notes 4.875%, 11/1/24  10,000  10,025 
Live Nation Entertainment, Inc. 144A company guaranty sr. unsec.     
sub. notes 5.625%, 3/15/26  30,000  30,825 
Mattamy Group Corp. 144A sr. unsec. notes 6.875%,     
12/15/23 (Canada)  35,000  35,875 
Meredith Corp. company guaranty sr. unsec. notes 6.875%, 2/1/26  55,000  56,645 
Navistar International Corp. 144A sr. unsec. notes 6.625%, 11/1/25  45,000  46,013 
Nexstar Broadcasting, Inc. 144A company guaranty sr. unsec.     
notes 5.625%, 8/1/24  55,000  55,413 
Nielsen Co. Luxembourg SARL (The) 144A company guaranty sr.     
unsec. notes 5.00%, 2/1/25 (Luxembourg)  25,000  24,346 
Nielsen Finance, LLC/Nielsen Finance Co. 144A company guaranty     
sr. unsec. sub. notes 5.00%, 4/15/22  40,000  39,564 
Omnicom Group, Inc. company guaranty sr. unsec. unsub. notes     
3.60%, 4/15/26  37,000  37,301 
Outfront Media Capital, LLC/Outfront Media Capital Corp.     
company guaranty sr. unsec. sub. notes 5.875%, 3/15/25  25,000  25,313 
Penn National Gaming, Inc. 144A sr. unsec. notes 5.625%, 1/15/27  25,000  24,500 

 

Dynamic Risk Allocation Fund 37 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Consumer cyclicals cont.     
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.75%, 10/1/22  $30,000  $30,300 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.50%, 5/15/26  35,000  34,650 
Penske Automotive Group, Inc. company guaranty sr. unsec. sub.     
notes 5.375%, 12/1/24  10,000  10,025 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
7.875%, 6/15/32  55,000  64,625 
PulteGroup, Inc. company guaranty sr. unsec. unsub. notes     
5.50%, 3/1/26  5,000  5,206 
Realogy Group, LLC/Realogy Co-Issuer Corp. 144A company     
guaranty sr. unsec. notes 9.375%, 4/1/27  10,000  9,548 
Refinitiv US Holdings, Inc. 144A company guaranty sr. notes     
6.25%, 5/15/26  45,000  45,356 
Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp.     
144A sr. notes 6.125%, 8/15/21  65,000  65,569 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
4.40%, 2/15/26  19,000  20,669 
S&P Global, Inc. company guaranty sr. unsec. unsub. notes     
2.95%, 1/22/27  16,000  15,980 
Sabre GLBL, Inc. 144A company guaranty sr. notes 5.375%, 4/15/23  30,000  30,230 
Scientific Games International, Inc. company guaranty sr. unsec.     
notes 10.00%, 12/1/22  49,000  51,389 
Scientific Games International, Inc. 144A company guaranty sr.     
unsec. notes 8.25%, 3/15/26  50,000  50,282 
Sinclair Television Group, Inc. 144A company guaranty sr. unsec.     
sub. notes 5.625%, 8/1/24  15,000  15,150 
Sirius XM Radio, Inc. 144A company guaranty sr. unsec. sub. notes     
6.00%, 7/15/24  25,000  25,688 
Sirius XM Radio, Inc. 144A sr. unsec. bonds 5.00%, 8/1/27  115,000  113,563 
Six Flags Entertainment Corp. 144A company guaranty sr. unsec.     
bonds 5.50%, 4/15/27  55,000  54,840 
Six Flags Entertainment Corp. 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 7/31/24  35,000  34,570 
Spectrum Brands, Inc. company guaranty sr. unsec. notes     
5.75%, 7/15/25  35,000  35,523 
Spectrum Brands, Inc. company guaranty sr. unsec. unsub. notes     
6.125%, 12/15/24  30,000  30,675 
Standard Industries, Inc. 144A sr. unsec. notes 5.375%, 11/15/24  40,000  40,431 
Standard Industries, Inc. 144A sr. unsec. notes 5.00%, 2/15/27  93,000  90,791 
SugarHouse HSP Gaming Prop. Mezz LP/SugarHouse HSP     
Gaming Finance Corp. 144A company guaranty sr. unsub. notes     
5.875%, 5/15/25  35,000  34,300 
Townsquare Media, Inc. 144A company guaranty sr. unsec. notes     
6.50%, 4/1/23  15,000  14,756 
TRI Pointe Group, Inc./TRI Pointe Homes, Inc. company guaranty     
sr. unsec. unsub. notes 5.875%, 6/15/24  25,000  24,754 
Tribune Media Co. company guaranty sr. unsec. notes     
5.875%, 7/15/22  10,000  10,110 
TWDC Enterprises 18 Corp. 144A company guaranty sr. unsec.     
bonds 7.75%, 12/1/45  67,000  108,832 

 

38 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Consumer cyclicals cont.     
Twin River Worldwide Holdings, Inc. 144A sr. unsec. notes     
6.75%, 6/1/27  $10,000  $10,149 
Univision Communications, Inc. 144A company guaranty sr. sub.     
notes 5.125%, 2/15/25  35,000  32,052 
Warner Media, LLC company guaranty sr. unsec. unsub. bonds     
3.80%, 2/15/27  76,000  77,505 
Warner Media, LLC company guaranty sr. unsec. unsub. bonds     
2.95%, 7/15/26  19,000  18,409 
Weekley Homes, LLC/Weekley Finance Corp. sr. unsec. notes     
6.00%, 2/1/23  30,000  29,400 
Werner FinCo LP/Werner FinCo, Inc. 144A company guaranty sr.     
unsec. notes 8.75%, 7/15/25  45,000  39,094 
WMG Acquisition Corp. 144A company guaranty sr. notes     
5.00%, 8/1/23  15,000  15,188 
WMG Acquisition Corp. 144A company guaranty sr. unsec. notes     
5.50%, 4/15/26  10,000  10,138 
Wolverine World Wide, Inc. 144A company guaranty sr. unsec.     
bonds 5.00%, 9/1/26  25,000  24,250 
Wyndham Hotels & Resorts, Inc. 144A company guaranty sr. unsec.     
notes 5.375%, 4/15/26  30,000  30,375 
Wynn Las Vegas, LLC/Wynn Las Vegas Capital Corp. 144A company     
guaranty sr. unsec. sub. notes 5.25%, 5/15/27  40,000  38,008 
    3,714,064 
Consumer staples (1.3%)     
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty     
notes 5.00%, 10/15/25 (Canada)  50,000  49,000 
1011778 BC ULC/New Red Finance, Inc. 144A company guaranty sr.     
notes 4.625%, 1/15/22 (Canada)  25,000  25,031 
Albertsons Cos., LLC/Safeway, Inc./New Albertsons LP/     
Albertson’s, LLC 144A company guaranty sr. unsec. notes     
7.50%, 3/15/26  35,000  36,575 
Anheuser-Busch Cos., LLC/Anheuser-Busch InBev Worldwide, Inc.     
company guaranty sr. unsec. unsub. notes 3.65%, 2/1/26  14,000  14,246 
Anheuser-Busch InBev Worldwide, Inc. company guaranty sr.     
unsec. unsub. bonds 5.55%, 1/23/49  16,000  18,093 
Anheuser-Busch InBev Worldwide, Inc. company guaranty sr.     
unsec. unsub. notes 4.75%, 1/23/29  19,000  20,644 
Anheuser-Busch InBev Worldwide, Inc. company guaranty sr.     
unsec. unsub. notes 4.15%, 1/23/25  16,000  16,877 
Ascend Learning, LLC 144A sr. unsec. notes 6.875%, 8/1/25  45,000  45,225 
Brand Energy & Infrastructure Services, Inc. 144A sr. unsec. notes     
8.50%, 7/15/25  35,000  29,750 
Diageo Investment Corp. company guaranty sr. unsec. notes     
8.00%, 9/15/22  5,000  5,850 
Energizer Holdings, Inc. 144A company guaranty sr. unsec. notes     
7.75%, 1/15/27  5,000  5,213 
Energizer Holdings, Inc. 144A company guaranty sr. unsec. sub.     
notes 6.375%, 7/15/26  15,000  15,038 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. bonds     
4.50%, 2/15/45  27,000  27,902 

 

Dynamic Risk Allocation Fund 39 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Consumer staples cont.     
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes     
7.00%, 10/15/37  $78,000  $103,978 
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes     
5.625%, 3/15/42  30,000  35,146 
Fresh Market, Inc. (The) 144A company guaranty sr. notes     
9.75%, 5/1/23  35,000  25,900 
Go Daddy Operating Co, LLC/GD Finance Co., Inc. 144A company     
guaranty sr. unsec. notes 5.25%, 12/1/27  10,000  10,063 
Golden Nugget, Inc. 144A company guaranty sr. unsec. sub. notes     
8.75%, 10/1/25  50,000  50,313 
Golden Nugget, Inc. 144A sr. unsec. notes 6.75%, 10/15/24  35,000  34,738 
IAA Spinco, Inc. 144A sr. unsec. notes 5.50%, 6/15/27 ##   5,000  5,075 
Itron, Inc. 144A company guaranty sr. unsec. notes 5.00%, 1/15/26  35,000  34,869 
Keurig Dr Pepper, Inc. 144A company guaranty sr. unsec. notes     
4.597%, 5/25/28  69,000  73,298 
Keurig Dr Pepper, Inc. 144A company guaranty sr. unsec. unsub.     
notes 4.417%, 5/25/25  18,000  18,992 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 5.25%, 6/1/26  35,000  35,363 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 5.00%, 6/1/24  15,000  15,188 
KFC Holding Co./Pizza Hut Holdings, LLC/Taco Bell of America, LLC     
144A company guaranty sr. unsec. notes 4.75%, 6/1/27  20,000  19,600 
Lamb Weston Holdings, Inc. 144A company guaranty sr. unsec.     
unsub. notes 4.875%, 11/1/26  105,000  105,263 
Match Group, Inc. 144A sr. unsec. bonds 5.00%, 12/15/27  40,000  40,100 
Netflix, Inc. sr. unsec. notes 4.875%, 4/15/28  35,000  34,570 
Netflix, Inc. sr. unsec. unsub. notes 5.875%, 11/15/28  10,000  10,500 
Netflix, Inc. 144A sr. unsec. bonds 6.375%, 5/15/29  20,000  21,752 
Newell Brands, Inc. sr. unsec. unsub. notes 4.20%, 4/1/26  25,000  24,347 
Rite Aid Corp. 144A company guaranty sr. unsec. unsub. notes     
6.125%, 4/1/23  65,000  53,300 
Walgreens Boots Alliance, Inc. sr. unsec. unsub. notes     
3.30%, 11/18/21  19,000  19,242 
    1,081,041 
Energy (3.5%)     
Antero Resources Corp. company guaranty sr. unsec. notes     
5.625%, 6/1/23  25,000  24,719 
Antero Resources Corp. company guaranty sr. unsec. notes     
5.00%, 3/1/25  5,000  4,744 
Antero Resources Corp. company guaranty sr. unsec. sub. notes     
5.375%, 11/1/21  20,000  19,930 
Apergy Corp. company guaranty sr. unsec. notes 6.375%, 5/1/26  35,000  35,875 
Ascent Resources Utica Holdings, LLC/ARU Finance Corp. 144A sr.     
unsec. notes 10.00%, 4/1/22  31,000  32,895 
Ascent Resources Utica Holdings, LLC/ARU Finance Corp. 144A sr.     
unsec. notes 7.00%, 11/1/26  20,000  18,744 
BP Capital Markets PLC company guaranty sr. unsec. unsub. notes     
2.315%, 2/13/20 (United Kingdom)  59,000  58,897 
BP Capital Markets PLC company guaranty sr. unsec. unsub. notes     
2.161%, 9/19/19 (United Kingdom)  21,000  20,946 

 

40 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Energy cont.     
California Resources Corp. company guaranty sr. unsec. sub. notes     
5.00%, 1/15/20  $15,000  $14,250 
California Resources Corp. 144A company guaranty notes     
8.00%, 12/15/22  11,000  7,673 
Cenovus Energy, Inc. sr. unsec. bonds 6.75%, 11/15/39 (Canada)  30,000  33,563 
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes     
5.875%, 3/31/25  45,000  48,375 
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes     
5.125%, 6/30/27  80,000  82,802 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
8.00%, 6/15/27  20,000  17,700 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
8.00%, 1/15/25  35,000  32,200 
Chesapeake Energy Corp. company guaranty sr. unsec. notes     
5.75%, 3/15/23  10,000  9,575 
Concho Resources, Inc. company guaranty sr. unsec. notes     
3.75%, 10/1/27  48,000  48,656 
Covey Park Energy, LLC/Covey Park Finance Corp. 144A company     
guaranty sr. unsec. notes 7.50%, 5/15/25  35,000  31,150 
DCP Midstream Operating LP 144A company guaranty sr. unsec.     
unsub. bonds 6.75%, 9/15/37  40,000  41,200 
Denbury Resources, Inc. 144A company guaranty notes     
9.00%, 5/15/21  21,000  20,423 
Denbury Resources, Inc. 144A notes 7.50%, 2/15/24  15,000  13,013 
Diamondback Energy, Inc. company guaranty sr. unsec. unsub.     
notes 5.375%, 5/31/25  50,000  52,000 
Diamondback Energy, Inc. company guaranty sr. unsec. unsub.     
notes 4.75%, 11/1/24  10,000  10,175 
Endeavor Energy Resources LP/EER Finance, Inc. 144A sr. unsec.     
bonds 5.75%, 1/30/28  60,000  61,950 
Endeavor Energy Resources LP/EER Finance, Inc. 144A sr. unsec.     
notes 5.50%, 1/30/26  20,000  20,200 
Energy Transfer Partners LP company guaranty sr. unsec. notes     
5.875%, 1/15/24  118,000  128,954 
Energy Transfer Partners LP company guaranty sr. unsec. notes     
5.50%, 6/1/27  10,000  10,817 
Energy Transfer Partners LP jr. unsec. sub. FRB Ser. B, 6.625%,     
perpetual maturity  86,000  79,550 
Energy Transfer Partners LP sr. unsec. unsub. bonds     
6.125%, 12/15/45  7,000  7,662 
Energy Transfer Partners LP sr. unsec. unsub. notes 5.20%, 2/1/22  18,000  18,921 
EOG Resources, Inc. sr. unsec. unsub. notes 4.15%, 1/15/26  5,000  5,348 
EOG Resources, Inc. sr. unsec. unsub. notes 2.625%, 3/15/23  25,000  24,989 
EQT Corp. sr. unsec. unsub. notes 3.90%, 10/1/27  35,000  33,365 
Exxon Mobil Corp. sr. unsec. unsub. notes 2.222%, 3/1/21  108,000  107,919 
Hess Infrastructure Partners LP/Hess Infrastructure Partners     
Finance Corp. 144A sr. unsec. notes 5.625%, 2/15/26  70,000  72,100 
Holly Energy Partners LP/Holly Energy Finance Corp. 144A     
company guaranty sr. unsec. notes 6.00%, 8/1/24  70,000  71,925 
Indigo Natural Resources, LLC 144A sr. unsec. notes     
6.875%, 2/15/26  45,000  40,388 

 

Dynamic Risk Allocation Fund 41 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Energy cont.     
MEG Energy Corp. 144A notes 6.50%, 1/15/25 (Canada)  $50,000  $48,110 
Nabors Industries, Inc. company guaranty sr. unsec. notes     
5.75%, 2/1/25  50,000  40,673 
Nine Energy Service, Inc. 144A sr. unsec. notes 8.75%, 11/1/23  20,000  19,800 
Noble Holding International, Ltd. 144A company guaranty sr.     
unsec. notes 7.875%, 2/1/26  25,000  21,625 
Oasis Petroleum, Inc. company guaranty sr. unsec. unsub. notes     
6.875%, 3/15/22  41,000  39,689 
Oasis Petroleum, Inc. 144A sr. unsec. notes 6.25%, 5/1/26  20,000  17,600 
Occidental Petroleum Corp. sr. unsec. unsub. bonds     
4.40%, 4/15/46  30,000  29,596 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
bonds 7.375%, 1/17/27 (Brazil)  73,000  82,001 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 6.125%, 1/17/22 (Brazil)  18,000  19,125 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 5.999%, 1/27/28 (Brazil)  126,000  128,993 
Petrobras Global Finance BV company guaranty sr. unsec. unsub.     
notes 5.299%, 1/27/25 (Brazil)  8,000  8,290 
Petroleos de Venezuela SA 144A company guaranty sr. unsec.     
notes 6.00%, 11/15/26 (Venezuela) (In default)  †   110,000  22,825 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
6.50%, 3/13/27 (Mexico)  159,000  160,407 
Petroleos Mexicanos company guaranty sr. unsec. unsub. notes     
6.375%, 1/23/45 (Mexico)  12,000  10,603 
Precision Drilling Corp. 144A company guaranty sr. unsec. notes     
7.125%, 1/15/26 (Canada)  45,000  42,638 
Range Resources Corp. company guaranty sr. unsec. sub. notes     
5.75%, 6/1/21  25,000  24,875 
Regency Energy Partners LP/Regency Energy Finance Corp.     
company guaranty sr. unsec. unsub. notes 5.875%, 3/1/22  5,000  5,335 
Regency Energy Partners LP/Regency Energy Finance Corp.     
company guaranty sr. unsec. unsub. notes 4.50%, 11/1/23  20,000  20,879 
Rose Rock Midstream LP/Rose Rock Finance Corp. company     
guaranty sr. unsec. sub. notes 5.625%, 11/15/23  5,000  4,750 
Rose Rock Midstream LP/Rose Rock Finance Corp. company     
guaranty sr. unsec. sub. notes 5.625%, 7/15/22  20,000  19,800 
Sabine Pass Liquefaction, LLC sr. bonds 4.20%, 3/15/28  14,000  14,152 
Sabine Pass Liquefaction, LLC sr. notes 5.00%, 3/15/27  20,000  21,338 
SESI, LLC company guaranty sr. unsec. notes 7.75%, 9/15/24  15,000  9,900 
SESI, LLC company guaranty sr. unsec. unsub. notes     
7.125%, 12/15/21  20,000  14,900 
Seventy Seven Energy, Inc. escrow sr. unsec. notes     
6.50%, 7/15/22 F   50,000  5 
Shell International Finance BV company guaranty sr. unsec. unsub.     
notes 2.875%, 5/10/26 (Netherlands)  40,000  39,973 
SM Energy Co. sr. unsec. notes 6.625%, 1/15/27  15,000  13,200 
SM Energy Co. sr. unsec. sub. notes 5.00%, 1/15/24  25,000  21,875 
SM Energy Co. sr. unsec. unsub. notes 6.125%, 11/15/22  19,000  18,383 
Spectra Energy Partners LP sr. unsec. notes 3.375%, 10/15/26  26,000  25,885 

 

42 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Energy cont.     
Statoil ASA company guaranty sr. unsec. unsub. notes 2.90%,     
11/8/20 (Norway)  $25,000  $25,152 
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp. 144A     
company guaranty sr. unsec. notes 5.50%, 1/15/28  30,000  29,850 
Targa Resources Partners LP/Targa Resources Partners Finance     
Corp. company guaranty sr. unsec. unsub. notes 5.00%, 1/15/28  45,000  43,299 
Targa Resources Partners LP/Targa Resources Partners Finance     
Corp. 144A company guaranty sr. unsec. notes 6.875%, 1/15/29  10,000  10,656 
Targa Resources Partners LP/Targa Resources Partners Finance     
Corp. 144A company guaranty sr. unsec. notes 6.50%, 7/15/27  15,000  15,622 
Total Capital International SA company guaranty sr. unsec. unsub.     
notes 2.75%, 6/19/21 (France)  109,000  109,660 
Transcanada Trust company guaranty jr. unsec. sub. FRB 5.30%,     
3/15/77 (Canada)  31,000  28,917 
Transocean Pontus, Ltd. 144A company guaranty sr. notes 6.125%,     
8/1/25 (Cayman Islands)  23,625  23,625 
Transocean Poseidon, Ltd. 144A company guaranty sr. notes     
6.875%, 2/1/27  15,000  15,431 
Transocean Sentry Ltd. 144A company guaranty sr. notes 5.375%,     
5/15/23 (Cayman Islands)  20,000  19,825 
Transocean, Inc. 144A company guaranty sr. unsec. notes     
9.00%, 7/15/23  2,000  2,055 
USA Compression Partners LP/USA Compression Finance Corp.     
company guaranty sr. unsec. notes 6.875%, 4/1/26  20,000  20,500 
USA Compression Partners LP/USA Compression Finance Corp.     
144A sr. unsec. notes 6.875%, 9/1/27  10,000  10,213 
Vermilion Energy, Inc. 144A company guaranty sr. unsec. notes     
5.625%, 3/15/25 (Canada)  20,000  19,375 
Whiting Petroleum Corp. sr. unsec. notes 6.625%, 1/15/26  20,000  18,300 
Williams Cos., Inc. (The) sr. unsec. unsub. notes 8.75%, 3/15/32  24,000  33,761 
Williams Partners LP sr. unsec. sub. notes 4.30%, 3/4/24  35,000  36,732 
WPX Energy, Inc. sr. unsec. notes 8.25%, 8/1/23  30,000  33,075 
WPX Energy, Inc. sr. unsec. notes 5.75%, 6/1/26  15,000  14,878 
WPX Energy, Inc. sr. unsec. unsub. notes 6.00%, 1/15/22  9,000  9,132 
    2,830,876 
Financials (6.6%)     
AIG Global Funding 144A sr. notes 2.15%, 7/2/20  32,000  31,903 
Air Lease Corp. sr. unsec. sub. bonds 4.625%, 10/1/28  63,000  64,934 
Air Lease Corp. sr. unsec. unsub. notes 3.625%, 4/1/27  30,000  29,140 
Alliance Data Systems Corp. 144A company guaranty sr. unsec.     
notes 5.375%, 8/1/22  40,000  40,350 
Alliant Holdings Intermediate, LLC 144A sr. unsec. notes     
8.25%, 8/1/23  20,000  20,400 
Ally Financial, Inc. company guaranty sr. unsec. notes     
8.00%, 11/1/31  65,000  82,388 
Ally Financial, Inc. sub. unsec. notes 5.75%, 11/20/25  45,000  48,150 
American International Group, Inc. jr. unsec. sub. FRB     
8.175%, 5/15/58  34,000  40,800 
Bank of America Corp. jr. unsec. sub. FRN Ser. AA, 6.10%,     
perpetual maturity  49,000  52,430 

 

Dynamic Risk Allocation Fund 43 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Financials cont.     
Bank of America Corp. jr. unsec. sub. FRN Ser. Z, 6.50%,     
perpetual maturity  $15,000  $16,313 
Bank of America Corp. sr. unsec. unsub. bonds Ser. MTN,     
3.248%, 10/21/27  40,000  39,815 
Bank of America Corp. sr. unsec. unsub. notes Ser. MTN,     
2.151%, 11/9/20  11,000  10,952 
Bank of America Corp. unsec. sub. notes 6.11%, 1/29/37  170,000  208,597 
Bank of Montreal sr. unsec. unsub. notes Ser. D, 3.10%,     
4/13/21 (Canada)  25,000  25,322 
Bank of Montreal unsec. sub. FRN 3.803%, 12/15/32 (Canada)  7,000  6,946 
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.70%,     
3/7/22 (Canada)  8,000  8,065 
Bank of Nova Scotia (The) sr. unsec. unsub. notes 2.35%,     
10/21/20 (Canada)  43,000  42,988 
Banque Federative du Credit Mutuel SA 144A sr. unsec. unsub.     
notes 2.20%, 7/20/20 (France)  245,000  243,530 
BGC Partners, Inc. sr. unsec. notes 5.125%, 5/27/21  5,000  5,113 
Cantor Fitzgerald LP 144A unsec. bonds 7.875%, 10/15/19  25,000  25,419 
Cantor Fitzgerald LP 144A unsec. notes 6.50%, 6/17/22  42,000  44,990 
CBRE Services, Inc. company guaranty sr. unsec. notes     
5.25%, 3/15/25  32,000  35,099 
CBRE Services, Inc. company guaranty sr. unsec. unsub. notes     
4.875%, 3/1/26  24,000  25,762 
CIT Group, Inc. sr. unsec. sub. notes 5.00%, 8/1/23  35,000  36,444 
CIT Group, Inc. sr. unsec. unsub. notes 5.25%, 3/7/25  88,000  92,962 
Citigroup, Inc. sr. unsec. FRB 3.668%, 7/24/28  43,000  43,541 
Citigroup, Inc. sr. unsec. notes 2.65%, 10/26/20  54,000  54,099 
Citigroup, Inc. sr. unsec. unsub. FRB 3.887%, 1/10/28  15,000  15,427 
Citigroup, Inc. unsec. sub. bonds 4.45%, 9/29/27  35,000  36,600 
Citigroup, Inc. unsec. sub. notes 4.60%, 3/9/26  35,000  36,983 
CNO Financial Group, Inc. sr. unsec. notes 5.25%, 5/30/29  15,000  15,150 
CNO Financial Group, Inc. sr. unsec. unsub. notes 5.25%, 5/30/25  25,000  25,875 
Commonwealth Bank of Australia 144A sr. unsec. notes 3.15%,     
9/19/27 (Australia)  40,000  40,514 
Commonwealth Bank of Australia 144A unsec. notes 2.20%,     
11/9/20 (Australia)  330,000  328,686 
Cooperatieve Rabobank UA company guaranty sr. unsec. unsub.     
bonds Ser. MTN, 5.25%, 5/24/41 (Netherlands)  22,000  27,217 
Credit Acceptance Corp. company guaranty sr. unsec. notes     
7.375%, 3/15/23  15,000  15,544 
Credit Acceptance Corp. 144A company guaranty sr. unsec. notes     
6.625%, 3/15/26  20,000  20,750 
Digital Realty Trust LP company guaranty sr. unsec. bonds     
4.45%, 7/15/28 R   54,000  57,560 
Digital Realty Trust LP company guaranty sr. unsec. notes     
3.40%, 10/1/20 R   18,000  18,174 
ESH Hospitality, Inc. 144A company guaranty sr. unsec. notes     
5.25%, 5/1/25 R   40,000  40,100 
Fairfax Financial Holdings, Ltd. sr. unsec. notes 4.85%,     
4/17/28 (Canada)  56,000  58,132 

 

44 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Financials cont.     
Fairfax US, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 8/13/24  $42,000  $43,851 
Fifth Third Bancorp jr. unsec. sub. FRB 5.10%, perpetual maturity  15,000  14,590 
Freedom Mortgage Corp. 144A sr. unsec. notes 8.25%, 4/15/25  15,000  12,488 
Freedom Mortgage Corp. 144A sr. unsec. notes 8.125%, 11/15/24  30,000  25,125 
GLP Capital LP/GLP Financing II, Inc. company guaranty sr. unsec.     
notes 5.25%, 6/1/25  30,000  31,613 
goeasy, Ltd. 144A company guaranty sr. unsec. notes 7.875%,     
11/1/22 (Canada)  30,000  31,167 
Goldman Sachs Group, Inc. (The) sr. unsec. FRB 4.223%, 5/1/29  61,000  63,391 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
3.85%, 1/26/27  86,000  87,834 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
2.943%, 12/13/19  62,000  61,891 
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes     
2.60%, 12/27/20  108,000  107,931 
Hospitality Properties Trust sr. unsec. notes 4.375%, 2/15/30 R   37,000  35,774 
Hospitality Properties Trust sr. unsec. unsub. notes     
4.50%, 3/15/25 R   7,000  7,196 
HUB International, Ltd. 144A sr. unsec. notes 7.00%, 5/1/26  40,000  39,336 
Huntington Bancshares, Inc. unsec. notes 4.35%, 2/4/23  22,000  22,953 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.75%, 2/1/24  30,000  30,750 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 6.25%, 2/1/22  30,000  30,563 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. company     
guaranty sr. unsec. notes 5.875%, 2/1/22  15,000  15,131 
Icahn Enterprises LP/Icahn Enterprises Finance Corp. 144A     
company guaranty sr. unsec. notes 6.25%, 5/15/26  10,000  9,925 
iStar, Inc. sr. unsec. notes 6.00%, 4/1/22 R   20,000  20,200 
JPMorgan Chase & Co. jr. unsec. bonds 6.10%, perpetual maturity  6,000  6,367 
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. Z, 5.30%,     
perpetual maturity  25,000  25,313 
JPMorgan Chase & Co. sr. unsec. unsub. FRB 3.964%, 11/15/48  135,000  136,378 
KKR Group Finance Co. III, LLC 144A company guaranty sr. unsec.     
unsub. bonds 5.125%, 6/1/44  14,000  14,899 
KKR Group Finance Co., LLC 144A company guaranty sr. unsec.     
unsub. notes 6.375%, 9/29/20  30,000  31,435 
Lloyds Banking Group PLC jr. unsec. sub. FRB 7.50%, perpetual     
maturity (United Kingdom)  200,000  205,000 
LPL Holdings, Inc. 144A company guaranty sr. unsec. notes     
5.75%, 9/15/25  60,000  60,300 
Macquarie Bank, Ltd. 144A sr. unsec. notes 2.85%,     
7/29/20 (Australia)  35,000  35,136 
Macquarie Group Ltd. 144A sr. unsec. notes 7.625%,     
8/13/19 (Australia)  50,000  50,443 
MGM Growth Properties Operating Partnership LP/MGP Finance     
Co-Issuer, Inc. company guaranty sr. unsec. notes 5.625%, 5/1/24 R   25,000  25,813 
MGM Growth Properties Operating Partnership LP/MGP Finance     
Co-Issuer, Inc. company guaranty sr. unsec. notes 4.50%, 1/15/28 R   15,000  14,138 
Mid-America Apartments LP sr. unsec. notes 4.30%, 10/15/23 R   12,000  12,640 

 

Dynamic Risk Allocation Fund 45 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Financials cont.     
Mitsubishi UFJ Financial Group, Inc. sr. unsec. notes 3.535%,     
7/26/21 (Japan)  $48,000  $48,959 
Morgan Stanley sr. unsec. unsub. notes 4.375%, 1/22/47  40,000  42,632 
Morgan Stanley sr. unsec. unsub. notes 3.625%, 1/20/27  86,000  87,557 
Morgan Stanley sr. unsec. unsub. notes 2.65%, 1/27/20  36,000  35,994 
National Australia Bank, Ltd./New York sr. unsec. notes 2.50%,     
1/12/21 (Australia)  250,000  250,231 
Nationstar Mortgage Holdings, Inc. 144A company guaranty sr.     
unsec. notes 9.125%, 7/15/26  10,000  9,838 
Nationstar Mortgage Holdings, Inc. 144A company guaranty sr.     
unsec. notes 8.125%, 7/15/23  35,000  34,913 
Nationstar Mortgage, LLC/Nationstar Capital Corp. company     
guaranty sr. unsec. unsub. notes 6.50%, 7/1/21  20,000  19,860 
Neuberger Berman Group, LLC/Neuberger Berman Finance Corp.     
144A sr. unsec. notes 4.875%, 4/15/45  28,000  26,567 
Peachtree Corners Funding Trust 144A company guaranty sr.     
unsec. unsub. bonds 3.976%, 2/15/25  100,000  103,009 
Provident Funding Associates LP/PFG Finance Corp. 144A sr.     
unsec. notes 6.375%, 6/15/25  40,000  37,550 
Regions Financial Corp. sr. unsec. unsub. notes 2.75%, 8/14/22  25,000  25,003 
Royal Bank of Canada sr. unsec. notes Ser. GMTN, 2.125%,     
3/2/20 (Canada)  40,000  39,920 
Royal Bank of Canada unsec. sub. notes Ser. GMTN, 4.65%,     
1/27/26 (Canada)  22,000  23,689 
Skandinaviska Enskilda Banken AB 144A sr. unsec. unsub. notes     
2.625%, 11/17/20 (Sweden)  270,000  270,509 
Springleaf Finance Corp. company guaranty sr. unsec. sub. notes     
7.125%, 3/15/26  15,000  15,727 
Springleaf Finance Corp. company guaranty sr. unsec. sub. notes     
6.625%, 1/15/28  10,000  10,125 
Springleaf Finance Corp. company guaranty sr. unsec. unsub.     
notes 6.875%, 3/15/25  35,000  36,477 
Starwood Property Trust, Inc. sr. unsec. notes 4.75%, 3/15/25 R   45,000  44,550 
Swiss Re Treasury US Corp. 144A company guaranty sr. unsec.     
notes 4.25%, 12/6/42  43,000  46,077 
Toronto-Dominion Bank (The) unsec. sub. FRB 3.625%,     
9/15/31 (Canada)  31,000  31,170 
UBS AG/London 144A sr. unsec. notes 2.20%, 6/8/20     
(United Kingdom)  200,000  199,396 
UBS Group Funding (Switzerland) AG 144A company guaranty sr.     
unsec. unsub. notes 2.65%, 2/1/22 (Switzerland)  200,000  198,889 
USIS Merger Sub, Inc. 144A sr. unsec. notes 6.875%, 5/1/25  55,000  53,350 
VEREIT Operating Partnership LP company guaranty sr. unsec.     
notes 4.60%, 2/6/24 R   23,000  24,163 
Wells Fargo & Co. jr. unsec. sub. FRB Ser. U, 5.875%,     
perpetual maturity  27,000  28,654 
Wells Fargo & Co. sr. unsec. notes Ser. GMTN, 2.60%, 7/22/20  52,000  52,048 
Westpac Banking Corp. sr. unsec. unsub. notes 2.15%,     
3/6/20 (Australia)  150,000  149,577 

 

46 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Financials cont.     
Westpac Banking Corp. sr. unsec. unsub. notes 2.00%,     
8/19/21 (Australia)  $32,000  $31,685 
WeWork Cos, Inc. 144A company guaranty sr. unsec. notes     
7.875%, 5/1/25  40,000  36,800 
    5,437,654 
Health care (2.2%)     
AbbVie, Inc. sr. unsec. notes 3.60%, 5/14/25  14,000  14,262 
Air Medical Merger Sub Corp. 144A sr. unsec. notes 6.375%, 5/15/23  70,000  65,800 
Allergan Funding SCS company guaranty sr. unsec. notes 3.45%,     
3/15/22 (Luxembourg)  12,000  12,072 
Allergan Funding SCS company guaranty sr. unsec. unsub. notes     
3.80%, 3/15/25 (Luxembourg)  11,000  11,071 
Amgen, Inc. sr. unsec. bonds 4.663%, 6/15/51  34,000  35,176 
Amgen, Inc. sr. unsec. unsub. notes 2.60%, 8/19/26  50,000  48,219 
ASP AMC Merger Sub, Inc. 144A sr. unsec. notes 8.00%, 5/15/25  50,000  35,000 
Bausch Health Americas, Inc. 144A company guaranty sr. unsec.     
notes 9.25%, 4/1/26  40,000  43,313 
Bausch Health Americas, Inc. 144A sr. unsec. notes 8.50%, 1/31/27  45,000  47,363 
Bausch Health Cos., Inc. 144A company guaranty sr. notes     
5.50%, 11/1/25  15,000  15,087 
Bausch Health Cos., Inc. 144A company guaranty sr. unsec. notes     
9.00%, 12/15/25  35,000  37,669 
Bausch Health Cos., Inc. 144A company guaranty sr. unsec. notes     
7.25%, 5/30/29  20,000  19,900 
Bausch Health Cos., Inc. 144A company guaranty sr. unsec. notes     
7.00%, 1/15/28  10,000  9,888 
Bausch Health Cos., Inc. 144A company guaranty sr. unsec. notes     
6.125%, 4/15/25  65,000  63,334 
Bausch Health Cos., Inc. 144A sr. notes 5.75%, 8/15/27  15,000  15,141 
Becton Dickinson and Co. sr. unsec. unsub. bonds 3.70%, 6/6/27  37,000  37,872 
Bristol-Myers Squibb Co. 144A sr. unsec. bonds 3.40%, 7/26/29  10,000  10,234 
Bristol-Myers Squibb Co. 144A sr. unsec. notes 2.90%, 7/26/24  40,000  40,523 
Centene Corp. sr. unsec. unsub. notes 6.125%, 2/15/24  30,000  31,316 
Centene Corp. sr. unsec. unsub. notes 4.75%, 5/15/22  15,000  15,146 
Centene Escrow I Corp. 144A sr. unsec. notes 5.375%, 6/1/26  20,000  20,744 
CHS/Community Health Systems, Inc. company guaranty sr. notes     
6.25%, 3/31/23  75,000  71,415 
CHS/Community Health Systems, Inc. company guaranty sr.     
unsec. notes 6.875%, 2/1/22  70,000  46,550 
CHS/Community Health Systems, Inc. 144A company guaranty sr.     
notes 8.00%, 3/15/26  20,000  19,160 
CHS/Community Health Systems, Inc. 144A company guaranty     
sub. notes 8.125%, 6/30/24  1,000  747 
Cigna Corp. 144A sr. unsub. notes 3.75%, 7/15/23  42,000  43,096 
CVS Health Corp. sr. unsec. unsub. notes 4.78%, 3/25/38  28,000  28,001 
CVS Health Corp. sr. unsec. unsub. notes 3.70%, 3/9/23  43,000  43,900 
Eagle Holding Co II, LLC 144A unsec. notes 7.75%, 5/15/22  ‡‡   5,000  5,031 
Elanco Animal Health, Inc. 144A sr. unsec. notes 4.90%, 8/28/28  60,000  65,013 
HCA, Inc. company guaranty sr. bonds 5.25%, 6/15/26  50,000  53,698 
HCA, Inc. company guaranty sr. sub. bonds 5.50%, 6/15/47  12,000  12,611 

 

Dynamic Risk Allocation Fund 47 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Health care cont.     
HCA, Inc. company guaranty sr. sub. notes 5.00%, 3/15/24  $35,000  $37,180 
Hologic, Inc. 144A company guaranty sr. unsec. notes     
4.375%, 10/15/25  20,000  19,775 
Jaguar Holding Co. II/Pharmaceutical Product Development, LLC     
144A company guaranty sr. unsec. notes 6.375%, 8/1/23  30,000  30,456 
Mallinckrodt International Finance SA/Mallinckrodt CB,     
LLC 144A company guaranty sr. unsec. unsub. notes 5.50%,     
4/15/25 (Luxembourg)  30,000  19,200 
Merck & Co., Inc. sr. unsec. notes 2.90%, 3/7/24  7,000  7,148 
Merck & Co., Inc. sr. unsec. unsub. notes 3.70%, 2/10/45  25,000  25,426 
Molina Healthcare, Inc. company guaranty sr. unsec. notes     
5.375%, 11/15/22  25,000  25,493 
Molina Healthcare, Inc. 144A company guaranty sr. unsec. notes     
4.875%, 6/15/25  20,000  19,825 
Novartis Capital Corp. company guaranty sr. unsec. unsub. bonds     
4.00%, 11/20/45  43,000  45,874 
Omega Healthcare Investors, Inc. company guaranty sr. unsec.     
notes 4.50%, 4/1/27 R   32,000  32,640 
Ortho-Clinical Diagnostics, Inc./Ortho-Clinical Diagnostics     
SA 144A sr. unsec. notes 6.625%, 5/15/22  45,000  41,963 
Par Pharmaceutical, Inc. 144A company guaranty sr. notes     
7.50%, 4/1/27  35,000  33,863 
Pfizer, Inc. sr. unsec. unsub. notes 3.00%, 12/15/26  22,000  22,261 
Pfizer, Inc. sr. unsec. unsub. notes 1.70%, 12/15/19  47,000  46,822 
Service Corp. International sr. unsec. bonds 5.125%, 6/1/29  30,000  30,518 
Service Corp. International sr. unsec. notes 4.625%, 12/15/27  20,000  20,050 
Service Corp. International sr. unsec. unsub. notes 5.375%, 5/15/24  25,000  25,625 
Shire Acquisitions Investments Ireland DAC company guaranty sr.     
unsec. unsub. notes 3.20%, 9/23/26 (Ireland)  24,000  23,581 
Shire Acquisitions Investments Ireland DAC company guaranty sr.     
unsec. unsub. notes 2.875%, 9/23/23 (Ireland)  19,000  18,867 
Sotera Health Holdings, LLC 144A sr. unsec. notes 6.50%, 5/15/23  40,000  40,100 
Tenet Healthcare Corp. company guaranty sr. notes     
4.625%, 7/15/24  20,000  19,854 
Tenet Healthcare Corp. sr. unsec. notes 8.125%, 4/1/22  25,000  26,135 
Tenet Healthcare Corp. 144A company guaranty notes     
6.25%, 2/1/27  20,000  20,400 
UnitedHealth Group, Inc. sr. unsec. unsub. notes 4.70%, 2/15/21  31,000  32,025 
UnitedHealth Group, Inc. sr. unsec. unsub. notes 3.85%, 6/15/28  65,000  68,752 
WellCare Health Plans, Inc. sr. unsec. notes 5.25%, 4/1/25  20,000  20,269 
WellCare Health Plans, Inc. 144A sr. unsec. notes 5.375%, 8/15/26  15,000  15,371 
Zoetis, Inc. sr. unsec. notes 3.90%, 8/20/28  22,000  22,965 
    1,810,790 
Technology (2.0%)     
Alphabet, Inc. sr. unsec. notes 1.998%, 8/15/26  22,000  21,057 
Analog Devices, Inc. sr. unsec. unsub. notes 2.85%, 3/12/20  32,000  32,041 
Apple, Inc. sr. unsec. bonds 4.25%, 2/9/47  14,000  14,943 
Apple, Inc. sr. unsec. notes 2.85%, 5/6/21  24,000  24,237 
Apple, Inc. sr. unsec. unsub. notes 4.375%, 5/13/45  20,000  21,904 
Apple, Inc. sr. unsec. unsub. notes 3.85%, 5/4/43  54,000  54,762 
Apple, Inc. sr. unsec. unsub. notes 2.00%, 5/6/20  15,000  14,944 

 

48 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Technology cont.     
Avaya, Inc. 144A escrow notes 7.00%, 4/1/20  $300,000  $— 
Banff Merger Sub, Inc. 144A sr. unsec. notes 9.75%, 9/1/26  65,000  60,775 
Broadcom Corp./Broadcom Cayman Finance, Ltd. company     
guaranty sr. unsec. unsub. notes 3.875%, 1/15/27  33,000  31,382 
Broadcom Corp./Broadcom Cayman Finance, Ltd. company     
guaranty sr. unsec. unsub. notes 3.50%, 1/15/28  50,000  45,643 
Cisco Systems, Inc. sr. unsec. unsub. notes 2.50%, 9/20/26  22,000  21,676 
Cisco Systems, Inc. sr. unsec. unsub. notes 2.20%, 2/28/21  68,000  67,758 
CommScope Finance, LLC 144A sr. notes 6.00%, 3/1/26  15,000  14,963 
CommScope Finance, LLC 144A sr. notes 5.50%, 3/1/24  10,000  10,050 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A     
company guaranty sr. notes 6.02%, 6/15/26  131,000  141,560 
Diamond 1 Finance Corp./Diamond 2 Finance Corp. 144A sr. bonds     
8.35%, 7/15/46  9,000  10,987 
Fidelity National Information Services, Inc. sr. unsec. notes     
3.75%, 5/21/29  36,000  36,772 
Fidelity National Information Services, Inc. sr. unsec. notes     
3.00%, 8/15/26  8,000  7,868 
Fidelity National Information Services, Inc. sr. unsec. sub. notes     
Ser. 10Y, 4.25%, 5/15/28  11,000  11,679 
First Data Corp. 144A notes 5.75%, 1/15/24  40,000  40,950 
Fiserv, Inc. sr. unsec. sub. bonds 4.20%, 10/1/28  32,000  33,823 
Google, LLC sr. unsec. notes 3.375%, 2/25/24  18,000  18,861 
Inception Merger Sub, Inc./Rackspace Hosting, Inc. 144A sr. unsec.     
notes 8.625%, 11/15/24  2,000  1,735 
Infor US, Inc. company guaranty sr. unsec. notes 6.50%, 5/15/22  15,000  15,173 
Legrand France SA sr. unsec. unsub. notes 8.50%, 2/15/25 (France)  10,000  12,596 
Microchip Technology, Inc. 144A company guaranty sr. notes     
4.333%, 6/1/23  55,000  56,450 
Microsoft Corp. sr. unsec. unsub. bonds 2.40%, 8/8/26  81,000  79,628 
Microsoft Corp. sr. unsec. unsub. notes 3.70%, 8/8/46  11,000  11,444 
Microsoft Corp. sr. unsec. unsub. notes 1.55%, 8/8/21  82,000  80,802 
Oracle Corp. sr. unsec. unsub. notes 2.65%, 7/15/26  65,000  63,730 
Oracle Corp. sr. unsec. unsub. notes 2.25%, 10/8/19  96,000  95,882 
Plantronics, Inc. 144A company guaranty sr. unsec. notes     
5.50%, 5/31/23  30,000  29,738 
Qorvo, Inc. 144A sr. unsec. notes 5.50%, 7/15/26  30,000  30,525 
Salesforce.com, Inc. sr. unsec. unsub. notes 3.70%, 4/11/28  46,000  48,895 
Solera, LLC/Solera Finance, Inc. 144A sr. unsec. notes     
10.50%, 3/1/24  80,000  86,096 
SS&C Technologies, Inc. 144A company guaranty sr. unsec. notes     
5.50%, 9/30/27  30,000  30,375 
Star Merger Sub, Inc. 144A sr. notes 6.875%, 8/15/26  20,000  20,450 
Tempo Acquisition, LLC/Tempo Acquisition Finance Corp. 144A sr.     
unsec. notes 6.75%, 6/1/25  80,000  80,600 
TTM Technologies, Inc. 144A company guaranty sr. unsec. notes     
5.625%, 10/1/25  70,000  67,375 
VMware, Inc. sr. unsec. notes 3.90%, 8/21/27  7,000  6,915 
Western Digital Corp. company guaranty sr. unsec. notes     
4.75%, 2/15/26  84,000  79,654 
    1,636,698 

 

Dynamic Risk Allocation Fund 49 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Transportation (0.1%)     
Penske Truck Leasing Co. LP/PTL Finance Corp. 144A sr. unsec.     
bonds 3.40%, 11/15/26  $12,000  $11,844 
Penske Truck Leasing Co. LP/PTL Finance Corp. 144A sr. unsec.     
notes 3.90%, 2/1/24  11,000  11,346 
United Airlines, Inc. Pass-Through Trust pass-through certificates     
Ser. 14-2, Class A, 3.75%, 9/3/26  20,036  20,603 
Watco Cos., LLC/Watco Finance Corp. 144A company guaranty sr.     
unsec. notes 6.375%, 4/1/23  40,000  40,400 
    84,193 
Utilities and power (1.3%)     
AES Corp./Virginia (The) sr. unsec. unsub. notes 5.50%, 4/15/25  140,000  144,200 
AES Corp./Virginia (The) sr. unsec. unsub. notes 5.125%, 9/1/27  40,000  40,901 
AES Corp./Virginia (The) sr. unsec. unsub. notes 4.50%, 3/15/23  20,000  20,125 
American Electric Power Co., Inc. sr. unsec. unsub. notes Ser. J,     
4.30%, 12/1/28  29,000  31,382 
American Transmission Systems, Inc. 144A sr. unsec. unsub. bonds     
5.00%, 9/1/44  49,000  56,465 
Berkshire Hathaway Energy Co. sr. unsec. bonds 3.80%, 7/15/48  22,000  21,574 
Berkshire Hathaway Energy Co. sr. unsec. unsub. bonds     
6.125%, 4/1/36  5,000  6,466 
Calpine Corp. sr. unsec. sub. notes 5.75%, 1/15/25  50,000  48,386 
Calpine Corp. 144A company guaranty sr. notes 5.25%, 6/1/26  25,000  24,471 
Calpine Corp. 144A company guaranty sr. sub. notes     
5.875%, 1/15/24  15,000  15,113 
Consolidated Edison, Inc. sr. unsec. unsub. notes Ser. A,     
2.00%, 3/15/20  4,000  3,974 
Duke Energy Corp. sr. unsec. notes 3.15%, 8/15/27  29,000  28,826 
Duke Energy Ohio, Inc. sr. bonds 3.65%, 2/1/29  22,000  23,290 
El Paso Natural Gas Co., LLC company guaranty sr. unsec. unsub.     
notes 8.375%, 6/15/32  20,000  26,265 
Enbridge, Inc. sr. unsec. unsub. bonds 4.25%, 12/1/26 (Canada)  28,000  29,770 
Enterprise Products Operating, LLC company guaranty sr. unsec.     
unsub. bonds 4.25%, 2/15/48  47,000  46,068 
FirstEnergy Transmission, LLC 144A sr. unsec. unsub. notes     
5.45%, 7/15/44  70,000  81,752 
IPALCO Enterprises, Inc. sr. sub. notes 3.70%, 9/1/24  25,000  25,621 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
notes 5.40%, 9/1/44  17,000  17,957 
Kinder Morgan Energy Partners LP company guaranty sr. unsec.     
unsub. notes 3.45%, 2/15/23  32,000  32,484 
Kinder Morgan, Inc. company guaranty sr. unsec. unsub. notes     
3.15%, 1/15/23  43,000  43,167 
MidAmerican Funding, LLC sr. bonds 6.927%, 3/1/29  15,000  19,294 
NextEra Energy Capital Holdings, Inc. company guaranty jr. unsec.     
sub. FRB 4.80%, 12/1/77  21,000  19,346 
NRG Energy, Inc. company guaranty sr. unsec. notes     
7.25%, 5/15/26  5,000  5,406 
NRG Energy, Inc. company guaranty sr. unsec. notes     
6.625%, 1/15/27  25,000  26,594 
NRG Energy, Inc. company guaranty sr. unsec. notes     
5.75%, 1/15/28  15,000  15,656 

 

50 Dynamic Risk Allocation Fund 

 


  Principal   
CORPORATE BONDS AND NOTES (28.3%)* cont.  amount  Value 
Utilities and power cont.     
NRG Energy, Inc. 144A company guaranty sr. bonds 4.45%, 6/15/29  $15,000  $15,403 
NRG Energy, Inc. 144A company guaranty sr. notes 3.75%, 6/15/24  30,000  30,363 
NRG Energy, Inc. 144A sr. unsec. bonds 5.25%, 6/15/29  20,000  20,553 
Oncor Electric Delivery Co., LLC sr. notes 3.75%, 4/1/45  46,000  47,282 
Vistra Energy Corp. company guaranty sr. unsec. unsub. notes     
7.625%, 11/1/24  33,000  34,714 
Vistra Energy Corp. 144A company guaranty sr. unsec. notes     
8.125%, 1/30/26  25,000  26,844 
Vistra Operations Co., LLC 144A sr. unsec. notes 5.625%, 2/15/27  20,000  20,569 
Vistra Operations Co., LLC 144A sr. unsec. notes 5.50%, 9/1/26  20,000  20,500 
    1,070,781 
Total corporate bonds and notes (cost $23,116,181)    $23,205,105 
 
U.S. GOVERNMENT AND AGENCY  Principal   
MORTGAGE OBLIGATIONS (15.4%)*  amount  Value 
U.S. Government Guaranteed Mortgage Obligations (2.5%)     
Government National Mortgage Association Pass-Through Certificates     
3.50%, TBA, 6/1/49  $2,000,000  $2,055,156 
    2,055,156 
U.S. Government Agency Mortgage Obligations (12.9%)     
Federal National Mortgage Association Pass-Through Certificates     
6.00%, TBA, 6/1/49  1,000,000  1,085,625 
4.00%, 1/1/57  78,782  82,762 
4.00%, TBA, 7/1/49  2,000,000  2,063,282 
4.00%, TBA, 6/1/49  4,000,000  4,127,812 
3.00%, TBA, 6/1/49  2,000,000  2,007,344 
3.00%, TBA, 6/1/34  1,000,000  1,014,375 
2.404%, 7/1/22 i   144,600  145,955 
    10,527,155 
Total U.S. government and agency mortgage obligations (cost $12,491,769)    $12,582,311 
 
  Principal   
COMMODITY LINKED NOTES (4.9%)*†††  amount  Value 
Citigroup Global Markets Holding, Inc. sr. notes Ser. N, 1-month LIBOR     
less 0.15%, 2019 (Indexed to the S&P GSCI 3 Month Forward Total Return     
Index multiplied by 3)  $1,499,000  $885,233 
UBS AG/London 144A sr. notes, 1-month LIBOR less 0.25%, 2020 (Indexed     
to the S&P GSCI Total Return Index multiplied by 3) (United Kingdom)  2,529,000  3,096,747 
Total commodity linked notes (cost $4,028,000)    $3,981,980 
 
  Principal   
MORTGAGE-BACKED SECURITIES (3.8%)*  amount  Value 
Agency collateralized mortgage obligations (0.6%)     
Federal Home Loan Mortgage Corporation IFB Ser. 3829, Class AS,     
IO, ((-1 x 1 Month US LIBOR) + 6.95%), 4.51%, 3/15/41  $151,974  $25,358 
Federal National Mortgage Association     
Connecticut Avenue Securities FRB Ser. 16-C01, Class 2M2,     
(1 Month US LIBOR + 6.95%), 9.38%, 8/25/28  42,898  49,586 
Connecticut Avenue Securities FRB Ser. 16-C02, Class 1M2,     
(1 Month US LIBOR + 6.00%), 8.43%, 9/25/28  106,187  119,945 

 

Dynamic Risk Allocation Fund 51 

 


  Principal   
MORTGAGE-BACKED SECURITIES (3.8%)* cont.  amount  Value 
Agency collateralized mortgage obligations cont.     
Federal National Mortgage Association     
Connecticut Avenue Securities FRB Ser. 15-C03, Class 2M2,     
(1 Month US LIBOR + 5.00%), 7.43%, 7/25/25  $44,690  $48,888 
Connecticut Avenue Securities FRB Ser. 14-C04, Class 1M2,     
(1 Month US LIBOR + 4.90%), 7.33%, 11/25/24  22,392  25,160 
Connecticut Avenue Securities FRB Ser. 16-C04, Class 1M2,     
(1 Month US LIBOR + 4.25%), 6.68%, 1/25/29  50,000  54,189 
Connecticut Avenue Securities FRB Ser. 14-C02, Class 1M2,     
(1 Month US LIBOR + 2.60%), 5.03%, 5/25/24  34,000  35,513 
Government National Mortgage Association     
Ser. 17-162, Class QI, IO, 5.00%, 10/20/47  153,573  30,331 
IFB Ser. 13-99, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%),     
3.609%, 6/20/43  264,336  44,468 
Ser. 16-123, Class LI, IO, 3.50%, 3/20/44  273,543  28,082 
Ser. 17-H22, Class EI, IO, 2.375%, 10/20/67 W   300,037  33,379 
Ser. 15-H26, Class DI, IO, 1.923%, 10/20/65 W   288,597  27,820 
    522,719 
Commercial mortgage-backed securities (2.2%)     
Citigroup Commercial Mortgage Trust FRB Ser. 14-GC19, Class XA,     
IO, 1.158%, 3/10/47 W   1,010,776  46,895 
Citigroup Commercial Mortgage Trust 144A FRB Ser. 12-GC8,     
Class XA, IO, 1.785%, 9/10/45 W   639,233  29,923 
COMM Mortgage Trust     
FRB Ser. 12-LC4, Class C, 5.538%, 12/10/44 W   33,000  34,374 
FRB Ser. 14-CR17, Class C, 4.778%, 5/10/47 W   37,000  38,726 
FRB Ser. 14-UBS6, Class C, 4.456%, 12/10/47 W   113,000  114,375 
FRB Ser. 14-LC15, Class XA, IO, 1.107%, 4/10/47 W   1,463,409  64,052 
FRB Ser. 14-UBS6, Class XA, IO, 0.94%, 12/10/47 W   1,362,540  52,384 
FRB Ser. 13-CR11, Class XA, IO, 0.936%, 8/10/50 W   641,274  22,702 
CSMC Trust FRB Ser. 16-NXSR, Class C, 4.361%, 12/15/49 W   125,000  128,790 
DBUBS Mortgage Trust 144A FRB Ser. 11-LC3A, Class D,     
5.338%, 8/10/44 W   100,000  104,087 
GS Mortgage Securities Trust FRB Ser. 14-GC22, Class XA, IO,     
0.988%, 6/10/47 W   1,761,298  60,816 
GS Mortgage Securities Trust 144A FRB Ser. 13-GC16, Class D,     
5.311%, 11/10/46 W   43,000  45,928 
JPMBB Commercial Mortgage Securities Trust     
FRB Ser. 14-C22, Class C, 4.558%, 9/15/47 W   118,000  119,643 
FRB Ser. 14-C22, Class XA, IO, 0.859%, 9/15/47 W   3,309,659  119,596 
LSTAR Commercial Mortgage Trust 144A FRB Ser. 15-3, Class B,     
3.127%, 4/20/48 W   147,000  143,850 
Morgan Stanley Bank of America Merrill Lynch Trust     
Ser. 14-C18, Class C, 4.489%, 10/15/47 W   45,000  47,050 
FRB Ser. 14-C17, Class C, 4.465%, 8/15/47 W   44,000  44,568 
Ser. 12-C5, Class AS, 3.792%, 8/15/45  41,000  42,154 
FRB Ser. 14-C17, Class XA, IO, 1.138%, 8/15/47 W   557,032  23,972 
FRB Ser. 13-C12, Class XA, IO, 0.613%, 10/15/46 W   725,079  16,138 
Morgan Stanley Capital I Trust 144A Ser. 12-C4, Class C,     
5.42%, 3/15/45 W   100,000  103,378 

 

52 Dynamic Risk Allocation Fund 

 


  Principal   
MORTGAGE-BACKED SECURITIES (3.8%)* cont.  amount  Value 
Commercial mortgage-backed securities cont.     
UBS-Barclays Commercial Mortgage Trust 144A     
FRB Ser. 12-C3, Class C, 5.031%, 8/10/49 W   $50,000  $52,005 
FRB Ser. 12-C2, Class D, 4.891%, 5/10/63 W   48,000  47,134 
Wells Fargo Commercial Mortgage Trust FRB Ser. 13-LC12, Class C,     
4.286%, 7/15/46 W   45,000  45,323 
WF-RBS Commercial Mortgage Trust     
FRB Ser. 13-C16, Class AS, 4.668%, 9/15/46 W   33,000  35,487 
Ser. 13-UBS1, Class AS, 4.306%, 3/15/46 W   48,000  50,742 
WF-RBS Commercial Mortgage Trust 144A     
FRB Ser. 11-C3, Class D, 5.683%, 3/15/44 W   47,000  43,355 
FRB Ser. 12-C6, Class D, 5.582%, 4/15/45 W   25,000  25,547 
FRB Ser. 11-C5, Class XA, IO, 1.725%, 11/15/44 W   948,744  29,292 
FRB Ser. 12-C10, Class XA, IO, 1.559%, 12/15/45 W   820,952  37,695 
    1,769,981 
Residential mortgage-backed securities (non-agency) (1.0%)     
Citigroup Mortgage Loan Trust, Inc. FRB Ser. 05-2, Class 1A2A,     
4.918%, 5/25/35 W   51,453  53,216 
Countrywide Alternative Loan Trust     
FRB Ser. 06-OA7, Class 1A2, (1 Month US LIBOR + 0.94%),     
3.421%, 6/25/46  182,224  167,085 
FRB Ser. 07-OH1, Class A1D, (1 Month US LIBOR + 0.21%),     
2.64%, 4/25/47  27,924  24,584 
Federal National Mortgage Association     
Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2,     
(1 Month US LIBOR + 5.70%), 8.13%, 4/25/28  155,808  176,541 
Connecticut Avenue Securities FRB Ser. 16-C06, Class 1M2,     
(1 Month US LIBOR + 4.25%), 6.68%, 4/25/29  10,000  11,008 
Connecticut Avenue Securities FRB Ser. 15-C02, Class 1M2,     
(1 Month US LIBOR + 4.00%), 6.43%, 5/25/25  10,009  10,761 
Connecticut Avenue Securities FRB Ser. 18-C01, Class 1M2,     
(1 Month US LIBOR + 2.25%), 4.68%, 7/25/30  10,000  10,140 
Federal National Mortgage Association 144A Connecticut Avenue     
Securities Trust FRB Ser. 19-R02, Class 1M2, (1 Month US LIBOR     
+ 2.30%), 4.73%, 8/25/31  16,000  16,203 
GSAA Trust FRB Ser. 07-6, Class 1A1, (1 Month US LIBOR + 0.12%),     
2.55%, 5/25/47  28,631  22,368 
Merrill Lynch Mortgage Investors Trust FRB Ser. 05-A2, Class A2,     
4.455%, 2/25/35 W   19,684  20,592 
Morgan Stanley Resecuritization Trust 144A Ser. 15-R4, Class CB1,     
3.30%, 8/26/47 W   80,000  78,876 
Structured Asset Investment Loan Trust FRB Ser. 04-10, Class A10,     
(1 Month US LIBOR + 0.90%), 3.33%, 11/25/34  65,976  66,116 
Structured Asset Mortgage Investments II Trust FRB Ser. 07-AR7,     
Class 1A1, (1 Month US LIBOR + 0.85%), 3.28%, 5/25/47  56,611  47,186 
WaMu Mortgage Pass-Through Certificates Trust     
FRB Ser. 05-AR10, Class 1A3, 4.104%, 9/25/35 W   23,363  23,635 
FRB Ser. 05-AR12, Class 1A8, 3.995%, 10/25/35 W   92,770  92,549 
    820,860 
Total mortgage-backed securities (cost $3,117,158)    $3,113,560 

 

Dynamic Risk Allocation Fund 53 

 


FOREIGN GOVERNMENT AND AGENCY    Principal   
BONDS AND NOTES (1.2%)*    amount  Value 
Argentina (Republic of) sr. unsec. unsub. notes 7.50%,       
4/22/26 (Argentina)    $255,000  $191,250 
Argentina (Republic of) sr. unsec. unsub. notes 6.875%,       
1/26/27 (Argentina)    150,000  108,000 
Argentina (Republic of) 144A sr. unsec. notes 7.125%,       
8/1/27 (Argentina)    160,000  113,000 
Indonesia (Republic of) sr. unsec. unsub. notes Ser. REGS, 4.75%,       
1/8/26 (Indonesia)    200,000  212,494 
Ivory Coast (Republic of) sr. unsec. unsub. bonds Ser. REGS, 5.25%,     
3/22/30 (Ivory Coast)  EUR  200,000  206,293 
Mexico (Government of) sr. unsec. bonds 5.55%, 1/21/45 (Mexico)    $105,000  116,155 
Venezuela (Republic of) sr. unsec. notes 9.00%, 5/7/23 (Venezuela)     
(In default)  †     51,000  14,216 
Venezuela (Republic of) sr. unsec. unsub. notes 8.25%, 10/13/24       
(Venezuela) (In default)  †     82,000  22,755 
Total foreign government and agency bonds and notes (cost $1,140,331)    $984,163 
 
    Principal   
ASSET-BACKED SECURITIES (1.0%)*    amount  Value 
Mello Warehouse Securitization Trust 144A FRB Ser. 18-W1,       
Class A, (1 Month US LIBOR + 0.85%), 3.28%, 11/25/51    $37,000  $37,000 
Station Place Securitization Trust 144A       
FRB Ser. 18-8, Class A, (1 Month US LIBOR + 0.70%),       
3.187%, 2/24/20    159,000  159,000 
FRB Ser. 18-5, Class A, (1 Month US LIBOR + 0.70%),       
3.187%, 9/24/19    248,000  248,000 
FRB Ser. 18-3, Class A, (1 Month US LIBOR + 0.70%),       
3.187%, 7/24/19    242,000  242,000 
FRB Ser. 19-3, Class A, (1 Month US LIBOR + 0.70%),       
zero %, 6/24/20    60,000  60,000 
Towd Point Asset Trust 144A FRB Ser. 18-SL1, Class A,       
(1 Month US LIBOR + 0.60%), 3.077%, 1/25/46    114,014  112,920 
Total asset-backed securities (cost $859,556)      $858,920 

 

PURCHASED OPTIONS  Expiration         
OUTSTANDING (0.7%)*  date/strike  Notional    Contract   
Counterparty  price  amount    amount  Value 
Bank of America N.A.           
SPDR S&P 500 ETF Trust (Put)  Apr-20/$255.00  $4,033,256    $14,652  $150,848 
SPDR S&P 500 ETF Trust (Put)  May-20/250.00  4,048,946    14,709  141,236 
Citibank, N.A.           
SPDR S&P 500 ETF Trust (Put)  Feb-20/240.00  4,033,256    14,652  85,839 
SPDR S&P 500 ETF Trust (Put)  Jan-20/230.00  4,033,256    14,652  55,680 
Goldman Sachs International           
AUD/JPY (Put)  Aug-19/JPY 76.00  1,009,403  AUD  1,455,100  23,690 
JPMorgan Chase Bank N.A.           
SPDR S&P 500 ETF Trust (Put)  Mar-20/$250.00  $4,033,256    $14,652  126,593 
SPDR S&P 500 ETF Trust (Put)  Dec-19/215.00  4,033,256    14,652  28,574 
Total purchased options outstanding (cost $682,976)        $612,460 

 

54 Dynamic Risk Allocation Fund 

 


  Principal   
SENIOR LOANS (0.7%)*c  amount  Value 
Avaya, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD 3 Month     
+ 4.25%), 6.723%, 12/15/24  $54,251  $53,030 
Brand Industrial Services, Inc. bank term loan FRN (BBA LIBOR     
USD 3 Month + 4.25%), 6.823%, 6/21/24  73,688  71,692 
California Resources Corp. bank term loan FRN (BBA LIBOR USD     
3 Month + 4.75%), 7.178%, 12/31/22  25,000  23,875 
CPG International, Inc. bank term loan FRN (BBA LIBOR USD     
3 Month + 3.75%), 6.633%, 5/5/24  9,644  9,560 
FTS International, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD     
3 Month + 4.75%), 7.233%, 4/16/21  13,205  13,172 
iHeartCommunications, Inc. bank term loan FRN (BBA LIBOR USD     
3 Month + 4.00%), 6.518%, 5/1/26  70,012  70,042 
Jo-Ann Stores, LLC bank term loan FRN (BBA LIBOR USD 3 Month     
+ 9.25%), 11.727%, 5/21/24  44,769  42,643 
Jo-Ann Stores, LLC bank term loan FRN (BBA LIBOR USD 3 Month     
+ 5.00%), 7.592%, 10/16/23  19,357  19,107 
Keane Group Holdings, LLC bank term loan FRN Ser. B, (BBA LIBOR     
USD 3 Month + 3.75%), 6.313%, 5/25/25  62  61 
Navistar, Inc. bank term loan FRN Ser. B, (BBA LIBOR USD 3 Month     
+ 3.50%), 5.89%, 11/6/24  93,763  93,646 
Neiman Marcus Group, Ltd., Inc. bank term loan FRN (BBA LIBOR     
USD 3 Month + 3.25%), 5.763%, 10/25/20  56,296  50,695 
Rackspace Hosting, Inc. bank term loan FRN (BBA LIBOR USD     
3 Month + 3.00%), 5.576%, 11/3/23  9,786  9,038 
Revlon Consumer Products Corp. bank term loan FRN Ser. B,     
(BBA LIBOR USD 3 Month + 3.50%), 6.129%, 9/7/23  28,478  22,984 
Robertshaw Holdings Corp. bank term loan FRN (BBA LIBOR USD     
3 Month + 8.00%), 10.50%, 2/28/26  30,000  25,800 
Robertshaw Holdings Corp. bank term loan FRN (BBA LIBOR USD     
3 Month + 3.50%), 6.00%, 2/28/25  29,700  27,473 
Titan Acquisition, Ltd. (United Kingdom) bank term loan FRN     
Ser. B, (BBA LIBOR USD 3 Month + 3.00%), 5.483%, 3/28/25  69,288  66,499 
Total senior loans (cost $646,930)    $599,317 

 

  Expiration  Strike     
WARRANTS (0.2%)* †   date  price  Warrants  Value 
Bank of Shanghai Co., Ltd. 144A (China)  12/12/19  $0.00  32,829  $53,550 
China Resources Sanjiu Medical &         
Pharmaceutical Co., Ltd. 144A (China)  2/25/20  0.00  4,700  18,758 
Gree Electric Appliances of Zhuhai, Inc.         
144A (China)  8/29/19  0.00  7,900  59,865 
Guangdong Kangmei Pharmaceutic 144A (China)  12/12/19  0.00  9,771  5,931 
Seazen Holdings Co., Ltd. 144A (China)  4/17/20  0.00  354  1,897 
Total warrants (cost $138,727)        $140,001 

 

CONVERTIBLE PREFERRED STOCKS (0.1%)*  Shares  Value 
EPR Properties Ser. C, $1.438 cv. pfd. R   1,550  $50,320 
Nine Point Energy 6.75% cv. pfd. F   11  2,200 
Total convertible preferred stocks (cost $45,286)    $52,520 

 

Dynamic Risk Allocation Fund 55 

 


  Principal   
CONVERTIBLE BONDS AND NOTES (—%)*  amount  Value 
DISH Network Corp. cv. sr. unsec. notes 3.375%, 8/15/26  $20,000  $18,378 
Total convertible bonds and notes (cost $18,678)    $18,378 

 

  Principal amount/   
SHORT-TERM INVESTMENTS (9.9%)*    shares  Value 
Putnam Cash Collateral Pool, LLC 2.56% d   Shares   80,100  $80,100 
Putnam Short Term Investment Fund 2.52% L   Shares   4,614,804  4,614,804 
State Street Institutional U.S. Government Money Market Fund,       
Premier Class 2.32% P   Shares   156,000  156,000 
U.S. Treasury Bills 2.531%, 6/6/19    $483,001  482,915 
U.S. Treasury Bills 2.528%, 6/20/19    127,999  127,863 
U.S. Treasury Bills 2.484%, 7/18/19 # §     1,131,000  1,127,755 
U.S. Treasury Bills 2.476%, 7/25/19 # §     1,138,000  1,134,230 
U.S. Treasury Bills 2.462%, 8/1/19 # §     187,000  186,298 
U.S. Treasury Bills 2.451%, 7/11/19    225,001  224,455 
Total short-term investments (cost $8,133,539)      $8,134,420 
 
TOTAL INVESTMENTS       
Total investments (cost $89,360,329)      $94,259,024 

 

Key to holding’s currency abbreviations

AUD  Australian Dollar 
EUR  Euro 
JPY  Japanese Yen 
USD/$  United States Dollar 

 

Key to holding’s abbreviations

ADR  American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank 
bp  Basis Points 
DAC  Designated Activity Company 
ETF  Exchange Traded Fund 
FRB  Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period. Rates may 
  be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in place at the 
  close of the reporting period. 
FRN  Floating Rate Notes: the rate shown is the current interest rate or yield at the close of the reporting period. 
  Rates may be subject to a cap or floor. For certain securities, the rate may represent a fixed rate currently in 
  place at the close of the reporting period. 
GDR  Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank 
GMTN  Global Medium Term Notes 
IFB  Inverse Floating Rate Bonds, which are securities that pay interest rates that vary inversely to changes in the 
  market interest rates. As interest rates rise, inverse floaters produce less current income. The rate shown is 
  the current interest rate at the close of the reporting period. Rates may be subject to a cap or floor. 
IO  Interest Only 
MTN  Medium Term Notes 
OJSC  Open Joint Stock Company 
OTC  Over-the-counter 
PJSC  Public Joint Stock Company 
REGS  Securities sold under Regulation S may not be offered, sold or delivered within the United States except 
  pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 
  Securities Act of 1933. 
SPDR  S&P Depository Receipts 
TBA  To Be Announced Commitments 

 

56 Dynamic Risk Allocation Fund 

 


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 May 31, 2019 (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 $81,905,599.

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

† This security is non-income-producing.

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

# This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period. Collateral at period end totaled $668,800 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 9).

§ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on the initial margin on certain centrally cleared derivative contracts at the close of the reporting period. Collateral at period end totaled $1,742,961 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 9).

## Forward commitment, in part or in entirety (Note 1).

c Senior loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for senior loans are the current interest rates at the close of the reporting period. Senior loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown (Notes 1 and 7).

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

F This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities are classified as Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).

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

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

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

R Real Estate Investment Trust.

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

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

At the close of the reporting period, the fund maintained liquid assets totaling $10,600,802 to cover certain derivative contracts and delayed delivery securities.

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

Debt obligations are considered secured unless otherwise indicated.

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

Dynamic Risk Allocation Fund 57 

 


See Note 1 to the financial statements regarding TBA commitments.

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

DIVERSIFICATION BY COUNTRY 

 

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

 

United States  77.5%  Netherlands  0.9% 
United Kingdom  5.8  Germany  0.7 
Japan  2.0  Brazil  0.7 
Australia  1.4  South Korea  0.6 
China  1.4  Mexico  0.5 
France  1.3  Hong Kong  0.5 
Canada  1.1  Other  4.7 
Switzerland  0.9  Total  100.0% 

 

FORWARD CURRENCY CONTRACTS at 5/31/19 (aggregate face value $34,593,010)   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
Bank of America N.A.           
  Australian Dollar  Buy  7/17/19  $854,353  $877,056  $(22,703) 
  British Pound  Buy  6/19/19  340,977  358,546  (17,569) 
  British Pound  Sell  6/19/19  340,977  355,635  14,658 
  Canadian Dollar  Buy  7/17/19  253,017  254,446  (1,429) 
  Euro  Sell  6/19/19  1,026,949  1,065,317  38,368 
  Japanese Yen  Sell  8/21/19  247,762  238,471  (9,291) 
  Norwegian Krone  Buy  6/19/19  86,285  87,284  (999) 
  Norwegian Krone  Sell  6/19/19  86,285  86,741  456 
Barclays Bank PLC             
  British Pound  Sell  6/19/19  138,415  142,279  3,864 
  Canadian Dollar  Sell  7/17/19  222,057  227,165  5,108 
  Euro  Sell  6/19/19  103,579  113,515  9,936 
  Euro  Sell  9/18/19  125,872  125,316  (556) 
  Hong Kong Dollar  Sell  8/21/19  427,395  427,537  142 
  Norwegian Krone  Buy  6/19/19  42,954  44,060  (1,106) 
  Norwegian Krone  Sell  6/19/19  42,954  43,180  226 
  Norwegian Krone  Buy  9/18/19  124,814  124,642  172 
  Swedish Krona  Buy  6/19/19  208,230  212,230  (4,000) 
  Swedish Krona  Sell  6/19/19  208,230  206,835  (1,395) 
Citibank, N.A.             
  Australian Dollar  Buy  7/17/19  372,651  386,303  (13,652) 
  British Pound  Buy  6/19/19  153,345  155,143  (1,798) 
  British Pound  Sell  6/19/19  153,345  154,422  1,077 
  Canadian Dollar  Sell  7/17/19  222,056  225,682  3,626 
  Danish Krone  Sell  6/19/19  62,600  55,181  (7,419) 
  Euro  Buy  6/19/19  399,326  401,973  (2,647) 
  Euro  Sell  6/19/19  399,326  408,845  9,519 
  Japanese Yen  Sell  8/21/19  367,171  355,517  (11,654) 
  New Zealand Dollar  Sell  7/17/19  44,593  42,031  (2,562) 

 

58 Dynamic Risk Allocation Fund 

 


FORWARD CURRENCY CONTRACTS at 5/31/19 (aggregate face value $34,593,010) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
Citibank, N.A. cont.           
  Norwegian Krone  Buy  6/19/19  $11,204  $11,493  $(289) 
  Norwegian Krone  Sell  6/19/19  11,204  11,263  59 
Credit Suisse International           
  Australian Dollar  Buy  7/17/19  402,171  416,659  (14,488) 
  Euro  Buy  6/19/19  126,285  126,524  (239) 
  Euro  Sell  6/19/19  126,285  126,373  88 
Goldman Sachs International           
  Australian Dollar  Sell  7/17/19  129,403  122,185  (7,218) 
  Euro  Buy  6/19/19  46,309  34,213  12,096 
  Japanese Yen  Sell  8/21/19  1,281,162  1,244,963  (36,199) 
  New Zealand Dollar  Sell  7/17/19  169,665  169,141  (524) 
  Norwegian Krone  Buy  6/19/19  124,208  135,906  (11,698) 
  Swedish Krona  Sell  6/19/19  13,350  6,273  (7,077) 
HSBC Bank USA, National Association           
  Australian Dollar  Buy  7/17/19  132,182  144,669  (12,487) 
  British Pound  Buy  6/19/19  578,839  608,681  (29,842) 
  British Pound  Sell  6/19/19  578,839  600,445  21,606 
  Canadian Dollar  Sell  7/17/19  162,654  165,977  3,323 
  Euro  Sell  6/19/19  1,500,994  1,518,450  17,456 
  Japanese Yen  Sell  8/21/19  762,812  742,297  (20,515) 
  Norwegian Krone  Buy  6/19/19  207,315  210,207  (2,892) 
  Norwegian Krone  Sell  6/19/19  207,315  212,115  4,800 
  Swedish Krona  Buy  6/19/19  63,901  63,477  424 
  Swedish Krona  Sell  6/19/19  63,901  63,317  (584) 
JPMorgan Chase Bank N.A.           
  Australian Dollar  Sell  7/17/19  169,829  174,560  4,731 
  British Pound  Buy  6/19/19  397,533  417,911  (20,378) 
  British Pound  Sell  6/19/19  397,533  403,513  5,980 
  Canadian Dollar  Sell  7/17/19  33,478  36,705  3,227 
  Euro  Buy  6/19/19  6,365,495  6,529,549  (164,054) 
  Japanese Yen  Buy  8/21/19  5,688,568  5,534,880  153,688 
  New Zealand Dollar  Sell  7/17/19  249,029  252,397  3,368 
  Norwegian Krone  Buy  6/19/19  325,292  338,988  (13,696) 
  Singapore Dollar  Sell  8/21/19  73,893  74,528  635 
  Swedish Krona  Sell  6/19/19  181,446  183,620  2,174 
  Swiss Franc  Sell  6/19/19  413,179  417,995  4,816 
NatWest Markets PLC           
  Australian Dollar  Sell  7/17/19  163,021  159,808  (3,213) 
  Canadian Dollar  Sell  7/17/19  217,317  220,988  3,671 
  Euro  Buy  6/19/19  968,113  971,356  (3,243) 
  Euro  Sell  6/19/19  968,113  982,731  14,618 
  Japanese Yen  Sell  8/21/19  242,192  235,335  (6,857) 
  Norwegian Krone  Buy  6/19/19  158,495  163,507  (5,012) 

 

Dynamic Risk Allocation Fund 59 

 


FORWARD CURRENCY CONTRACTS at 5/31/19 (aggregate face value $34,593,010) cont.   
            Unrealized 
    Contract  Delivery    Aggregate  appreciation/ 
Counterparty  Currency  type*  date  Value  face value  (depreciation) 
State Street Bank and Trust Co.           
  Australian Dollar  Sell  7/17/19  $12,086  $9,287  $(2,799) 
  British Pound  Sell  6/19/19  40,993  49,058  8,065 
  Canadian Dollar  Sell  7/17/19  180,801  183,169  2,368 
  Euro  Buy  6/19/19  304,472  305,599  (1,127) 
  Euro  Sell  6/19/19  304,472  311,423  6,951 
  Israeli Shekel  Buy  7/17/19  7,248  7,283  (35) 
  Japanese Yen  Sell  8/21/19  142,075  135,170  (6,905) 
  New Zealand Dollar  Sell  7/17/19  43,939  45,921  1,982 
  Norwegian Krone  Buy  6/19/19  394,828  409,992  (15,164) 
  Swedish Krona  Sell  6/19/19  337,352  346,320  8,968 
UBS AG             
  Euro  Sell  6/19/19  319,237  327,430  8,193 
  Japanese Yen  Sell  8/21/19  370,463  359,948  (10,515) 
WestPac Banking Corp.           
  Australian Dollar  Buy  7/17/19  27,298  30,249  (2,951) 
  Canadian Dollar  Buy  7/17/19  229,908  233,097  (3,189) 
  Euro  Buy  6/19/19  91,834  91,895  (61) 
  Euro  Sell  6/19/19  91,834  94,270  2,436 
  Japanese Yen  Sell  8/21/19  663,297  644,548  (18,749) 
Unrealized appreciation          382,875 
Unrealized (depreciation)          (520,780) 
Total            $(137,905) 

 

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

FUTURES CONTRACTS OUTSTANDING at 5/31/19         
          Unrealized 
  Number of  Notional    Expiration  appreciation/ 
  contracts  amount  Value  date  (depreciation) 
Euro-Bobl 5 yr (Long)  16  $2,393,740  $2,393,739  Jun-19  $22,522 
Euro-Bund 10 yr (Long)  23  4,325,404  4,325,403  Jun-19  94,889 
Euro-Buxl 30 yr (Long)  8  1,764,740  1,764,739  Jun-19  96,343 
Euro-Schatz 2 yr (Long)  15  1,878,404  1,878,404  Jun-19  3,687 
Japanese Government Bond           
10 yr (Long)  7  9,896,184  9,896,184  Jun-19  23,255 
Russell 2000 Index E-Mini (Long)  18  1,318,938  1,319,850  Jun-19  (68,272) 
S&P 500 Index E-Mini (Long)  50  6,880,150  6,881,500  Jun-19  (127,678) 
S&P 500 Index E-Mini (Short)  22  3,027,266  3,027,860  Jun-19  26,521 
U.K. Gilt 10 yr (Long)  16  2,622,560  2,622,560  Sep-19  14,401 
U.S. Treasury Bond 30 yr (Long)  3  461,156  461,156  Sep-19  10,110 
U.S. Treasury Bond Ultra 30 yr (Long)  8  1,406,250  1,406,250  Sep-19  43,482 
U.S. Treasury Note 2 yr (Long)  11  2,361,391  2,361,391  Sep-19  9,475 
U.S. Treasury Note 5 yr (Long)  25  2,934,180  2,934,180  Sep-19  22,991 

 

60 Dynamic Risk Allocation Fund 

 


FUTURES CONTRACTS OUTSTANDING at 5/31/19 cont.       
          Unrealized 
  Number of  Notional    Expiration  appreciation/ 
  contracts  amount  Value  date  (depreciation) 
U.S. Treasury Note 10 yr (Long)  26  $3,295,500  $3,295,500  Sep-19  $40,160 
U.S. Treasury Note 10 yr (Short)  253  32,067,750  32,067,750  Sep-19  (391,930) 
Unrealized appreciation          407,836 
Unrealized (depreciation)          (587,880) 
Total          $(180,044) 

 

WRITTEN OPTIONS OUTSTANDING at 5/31/19 (premiums $18,994)       
  Expiration  Notional    Contract   
Counterparty  date/strike price  amount    amount  Value 
Bank of America N.A.           
SPDR S&P 500 ETF Trust (Call)  Jun-19/$288.50  $4,958,163    $18,012  $7,147 
SPDR S&P 500 ETF Trust (Call)  Jun-19/297.50  4,908,064    17,830  267 
Goldman Sachs International           
AUD/JPY (Put)  Aug-19/JPY 72.00  1,514,070  AUD  2,182,600  8,983 
Total          $16,397 

 

TBA SALE COMMITMENTS OUTSTANDING at 5/31/19 (proceeds receivable $4,070,508)   
  Principal  Settlement   
Agency  amount  date  Value 
Federal National Mortgage Association, 4.00%, 6/1/49  $3,000,000  6/13/19  $3,095,859 
Federal National Mortgage Association, 3.00%, 6/1/49  1,000,000  6/13/19  1,003,672 
Total      $4,099,531 

 

CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/19   
    Upfront         
    premium        Unrealized 
    received  Termination  Payments  Payments  appreciation/ 
Notional amount  Value  (paid)  date  made by fund  received by fund  (depreciation) 
$1,638,000  $18,523 E  $(4,894)  6/19/21  3 month USD-  2.55% —  $13,629 
        LIBOR-BBA —  Semiannually   
        Quarterly     
4,821,000  54,516 E  25,260  6/19/21  2.55% —  3 month USD-  (29,255) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
788,500  21,598 E  (9,488)  6/19/24  3 month USD-  2.50% —  12,109 
        LIBOR-BBA —  Semiannually   
        Quarterly     
2,581,200  70,702 E  32,846  6/19/24  2.50% —  3 month USD-  (37,856) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
22,145,800  1,118,695 E  (529,215)  6/19/29  3 month USD-  2.65% —  589,480 
        LIBOR-BBA —  Semiannually   
        Quarterly     
4,231,600  213,759 E  101,936  6/19/29  2.65% —  3 month USD-  (111,823) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
793,800  88,284 E  (28,303)  6/19/49  3 month USD-  2.80% —  59,981 
        LIBOR-BBA —  Semiannually   
        Quarterly     

 

Dynamic Risk Allocation Fund 61 

 


CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS OUTSTANDING at 5/31/19 cont.   
    Upfront         
    premium        Unrealized 
    received  Termination  Payments  Payments  appreciation/ 
Notional amount  Value  (paid)  date  made by fund  received by fund  (depreciation) 
$306,600  $34,099 E  $15,506  6/19/49  2.80% —  3 month USD-  $(18,593) 
        Semiannually  LIBOR-BBA —   
          Quarterly   
252,000  9,090  (3)  5/3/29  3 month USD-  2.493% —  9,053 
        LIBOR-BBA —  Semiannually   
        Quarterly     
Total    $(396,355)        $486,725 

 

E Extended effective date.

OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/19     
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
Swap counterparty/    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
Bank of America N.A.             
$12,928,087  $12,012,271  $—  6/20/23  (3 month USD-  A basket (MLFCF15)  $(912,767) 
        LIBOR-BBA plus  of common   
        0.10%) — Quarterly stocks  — Quarterly *   
12,932,517  12,122,945   —  6/20/23  3 month USD-  Russell 1000 Total  835,565 
        LIBOR-BBA minus  Return Index —   
        0.07% — Quarterly  Quarterly   
Barclays Bank PLC             
9,103  8,594   —  1/12/43  3.50% (1 month  Synthetic TRS  (433) 
        USD-LIBOR) —  Index 3.50% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
269,443  251,750   —  1/12/41  4.00% (1 month  Synthetic TRS  (15,180) 
        USD-LIBOR) —  Index 4.00% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
Citibank, N.A.             
4,119,990  4,064,190   —  11/26/19  (3 month USD-  A basket  (54,957) 
        LIBOR-BBA  (CGPUTQL2) of   
        plus 0.34%) —  common stocks —   
        Quarterly  Quarterly *   
3,562,834  3,501,212   —  11/26/19  3 month USD-  Russell 1000 Total  62,139 
        LIBOR-BBA plus  Return Index —   
        0.09% — Quarterly  Quarterly   
Credit Suisse International           
22,776  21,108   —  1/12/45  3.50% (1 month  Synthetic TRS  (1,470) 
        USD-LIBOR) —  Index 3.50% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   

 

62 Dynamic Risk Allocation Fund 

 


OTC TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/19 cont.     
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
Swap counterparty/    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
JPMorgan Securities LLC           
$269,443  $251,750   —  1/12/41  (4.00%) 1 month  Synthetic TRS  $15,180 
        USD-LIBOR —  Index 4.00% 30 year   
        Monthly  Fannie Mae pools —   
          Monthly   
Upfront premium received   —    Unrealized appreciation  912,884 
Upfront premium (paid)   —    Unrealized (depreciation)  (984,807) 
Total    $—    Total    $(71,923) 

 

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

A BASKET (MLFCF15) OF COMMON STOCKS       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Alphabet, Inc. Class A  Technology  465  $514,717  4.28% 
JPMorgan Chase & Co.  Financials  3,226  341,850  2.85% 
Cisco Systems, Inc.  Technology  5,619  292,370  2.43% 
Chevron Corp.  Energy  2,463  280,373  2.33% 
Verizon Communications, Inc.  Communication services  4,900  266,338  2.22% 
Boeing Co. (The)  Capital goods  764  261,059  2.17% 
Amazon.com, Inc.  Consumer cyclicals  147  260,836  2.17% 
Apple, Inc.  Technology  1,484  259,792  2.16% 
Microsoft Corp.  Technology  2,078  257,062  2.14% 
Citigroup, Inc.  Financials  3,858  239,804  2.00% 
Home Depot, Inc. (The)  Consumer cyclicals  1,251  237,559  1.98% 
Oracle Corp.  Technology  4,655  235,563  1.96% 
Starbucks Corp.  Consumer staples  3,078  234,137  1.95% 
IBM Corp.  Technology  1,748  222,028  1.85% 
Adobe, Inc.  Technology  760  205,754  1.71% 
Coca-Cola Co. (The)  Consumer staples  4,127  202,768  1.69% 
Johnson & Johnson  Health care  1,252  164,169  1.37% 
Medtronic PLC  Health care  1,749  161,883  1.35% 
Lowe’s Cos., Inc.  Consumer cyclicals  1,654  154,270  1.28% 
PepsiCo, Inc.  Consumer staples  1,196  153,116  1.27% 
Abbott Laboratories  Health care  1,991  151,569  1.26% 
Merck & Co., Inc.  Health care  1,862  147,452  1.23% 
ConocoPhillips  Energy  2,275  134,114  1.12% 
Lockheed Martin Corp.  Capital goods  395  133,805  1.11% 
Amgen, Inc.  Health care  794  132,368  1.10% 
Honeywell International, Inc.  Capital goods  800  131,496  1.09% 
Intuit, Inc.  Technology  510  124,800  1.04% 
Automatic Data Processing, Inc.  Consumer cyclicals  703  112,507  0.94% 
MetLife, Inc.  Financials  2,405  111,144  0.93% 
Facebook, Inc. Class A  Technology  616  109,281  0.91% 
Mondelez International, Inc. Class A  Consumer staples  2,096  106,580  0.89% 

 

Dynamic Risk Allocation Fund 63 

 


A BASKET (MLFCF15) OF COMMON STOCKS cont.       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Walmart, Inc.  Consumer cyclicals  1,020  $103,483  0.86% 
NXP Semiconductors NV  Technology  1,171  103,252  0.86% 
Xilinx, Inc.  Technology  969  99,144  0.83% 
Delta Air Lines, Inc.  Transportation  1,814  93,400  0.78% 
Walgreens Boots Alliance, Inc.  Consumer staples  1,811  89,332  0.74% 
Morgan Stanley  Financials  2,179  88,668  0.74% 
Procter & Gamble Co. (The)  Consumer staples  842  86,662  0.72% 
eBay, Inc.  Technology  2,409  86,556  0.72% 
Exelon Corp.  Utilities and power  1,779  85,548  0.71% 
AbbVie, Inc.  Health care  1,041  79,823  0.66% 
Sysco Corp.  Consumer staples  1,138  78,305  0.65% 
Booking Holdings, Inc.  Consumer cyclicals  47  78,218  0.65% 
Ingersoll-Rand PLC  Capital goods  634  75,044  0.62% 
Waste Management, Inc.  Capital goods  676  73,885  0.62% 
LyondellBasell Industries NV Class A  Basic materials  988  73,334  0.61% 
Valero Energy Corp.  Energy  1,032  72,619  0.60% 
Pfizer, Inc.  Health care  1,723  71,553  0.60% 
Phillips 66  Energy  877  70,847  0.59% 
Cummins, Inc.  Capital goods  469  70,663  0.59% 
 
A BASKET (CGPUTQL2) OF COMMON STOCKS       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Walt Disney Co. (The)  Consumer cyclicals  833  $109,926  2.70% 
JPMorgan Chase & Co.  Financials  1,034  109,562  2.70% 
Alphabet, Inc. Class A  Technology  88  97,078  2.39% 
Honeywell International, Inc.  Capital goods  504  82,856  2.04% 
Microsoft Corp.  Technology  660  81,676  2.01% 
Starbucks Corp.  Consumer staples  1,023  77,793  1.91% 
Mondelez International, Inc. Class A  Consumer staples  1,463  74,415  1.83% 
Apple, Inc.  Technology  418  73,247  1.80% 
Automatic Data Processing, Inc.  Consumer cyclicals  456  72,997  1.80% 
Intercontinental Exchange, Inc.  Financials  865  71,150  1.75% 
Texas Instruments, Inc.  Technology  680  70,897  1.74% 
American Electric Power Co., Inc.  Utilities and power  817  70,397  1.73% 
Coca-Cola Co. (The)  Consumer staples  1,395  68,519  1.69% 
TJX Cos., Inc. (The)  Consumer cyclicals  1,359  68,334  1.68% 
Intuit, Inc.  Technology  276  67,479  1.66% 
Raytheon Co.  Capital goods  385  67,219  1.65% 
U.S. Bancorp  Financials  1,334  66,989  1.65% 
Exelon Corp.  Utilities and power  1,387  66,670  1.64% 
Northrop Grumman Corp.  Capital goods  219  66,458  1.64% 
Fidelity National Information  Technology  540  64,930  1.60% 
Services, Inc.         
AutoZone, Inc.  Consumer cyclicals  59  60,363  1.49% 
Sysco Corp.  Consumer staples  850  58,475  1.44% 

 

64 Dynamic Risk Allocation Fund 

 


A BASKET (CGPUTQL2) OF COMMON STOCKS cont.       
        Percentage 
Common stocks  Sector  Shares  Value  value 
Waste Management, Inc.  Capital goods  530  $57,922  1.43% 
T-Mobile US, Inc.  Communication services  782  57,428  1.41% 
Exxon Mobil Corp.  Energy  807  57,078  1.40% 
Allstate Corp. (The)  Financials  587  56,084  1.38% 
Omnicom Group, Inc.  Consumer cyclicals  703  54,380  1.34% 
Cognizant Technology Solutions  Technology  872  54,018  1.33% 
Corp. Class A         
Johnson & Johnson  Health care  405  53,179  1.31% 
Amazon.com, Inc.  Consumer cyclicals  30  53,043  1.31% 
Humana, Inc.  Health care  208  50,821  1.25% 
Cisco Systems, Inc.  Technology  965  50,216  1.24% 
Centene Corp.  Health care  855  49,398  1.22% 
Norfolk Southern Corp.  Transportation  249  48,583  1.20% 
Annaly Capital Management, Inc. R   Financials  5,331  46,969  1.16% 
Comerica, Inc.  Financials  659  45,338  1.12% 
Occidental Petroleum Corp.  Energy  895  44,523  1.10% 
Verizon Communications, Inc.  Communication services  813  44,183  1.09% 
Pfizer, Inc.  Health care  1,055  43,805  1.08% 
VICI Properties, Inc. R   Financials  1,931  42,839  1.05% 
Baxter International, Inc.  Health care  558  41,003  1.01% 
Merck & Co., Inc.  Health care  513  40,608  1.00% 
Kinder Morgan, Inc.  Utilities and power  1,989  39,682  0.98% 
Ross Stores, Inc.  Consumer cyclicals  417  38,755  0.95% 
Hershey Co. (The)  Consumer staples  272  35,859  0.88% 
NXP Semiconductors NV  Technology  403  35,545  0.87% 
Cadence Design Systems, Inc.  Technology  548  34,820  0.86% 
Procter & Gamble Co. (The)  Consumer staples  332  34,197  0.84% 
Garmin, Ltd.  Technology  442  33,785  0.83% 
F5 Networks, Inc.  Technology  252  33,333  0.82% 

 

CENTRALLY CLEARED TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/19   
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
$1,500,000  $11,882  $—  4/7/26  (1.858%) — At  USA Non Revised  $11,882 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,400,000  14,665   —  8/7/25  (1.92%) — At  USA Non Revised  (14,665) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   

 

Dynamic Risk Allocation Fund 65 

 


CENTRALLY CLEARED TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 5/31/19 cont.   
    Upfront         
    premium  Termina-  Payments  Total return  Unrealized 
    received  tion  received (paid)  received by  appreciation/ 
Notional amount  Value  (paid)  date  by fund  or paid by fund  (depreciation) 
$1,100,000  $19,665  $(18)  3/7/29  (2.138%) — At  USA Non Revised  $(19,683) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,400,000  22,730  (24)  2/7/29  (2.099%) — At  USA Non Revised  (22,754) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,400,000  59,163  (24)  4/6/28  (2.3075%) — At  USA Non Revised  (59,186) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
3,500,000  68,905  (38)  11/7/27  (2.1438%) — At  USA Non Revised  (68,942) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
700,000  77,291   —  9/10/22  (2.5925%) — At  USA Non Revised  (77,291) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
2,000,000  80,094   —  12/5/26  (2.308%) — At  USA Non Revised  (80,094) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,700,000  84,252  (29)  7/9/28  (2.3875%) — At  USA Non Revised  (84,281) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
1,600,000  170,814   —  8/8/22  (2.5325%) — At  USA Non Revised  (170,814) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
6,000,000  275,724  (99)  7/2/28  (2.356%) — At  USA Non Revised  (275,825) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
2,600,000  350,532   —  1/9/23  (2.76%) — At  USA Non Revised  (350,532) 
        maturity  Consumer Price   
          Index-Urban   
          (CPI-U) — At   
          maturity   
Total    $(232)        $(1,212,185) 

 

66 Dynamic Risk Allocation Fund 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/19   
    Upfront           
    premium      Termi-  Payments  Unrealized 
Swap counterparty/    received  Notional    nation  received  appreciation/ 
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  (depreciation) 
Citigroup Global Markets, Inc.             
CMBX NA BB.6  BB/P  $2,730  $13,000  $2,713  5/11/63  500 bp —  $17 
Index            Monthly   
CMBX NA BB.6  BB/P  4,923  20,000  4,174  5/11/63  500 bp —  768 
Index            Monthly   
CMBX NA BB.7  BB/P  555  4,000  494  1/17/47  500 bp —  66 
Index            Monthly   
CMBX NA BB.7  BB/P  643  5,000  617  1/17/47  500 bp —  31 
Index            Monthly   
CMBX NA BB.7  BB/P  966  8,000  987  1/17/47  500 bp —  (13) 
Index            Monthly   
CMBX NA BBB–.7  BBB–/P  280  3,000  142  1/17/47  300 bp —  140 
Index            Monthly   
Credit Suisse International             
CMBX NA A.6  A/P  158  7,000  18  5/11/63  200 bp —  143 
Index            Monthly   
CMBX NA A.6  A/P  997  20,000  50  5/11/63  200 bp —  955 
Index            Monthly   
CMBX NA A.6  A/P  893  46,000  115  5/11/63  200 bp —  796 
Index            Monthly   
CMBX NA A.6  A/P  4,009  79,000  198  5/11/63  200 bp —  3,842 
Index            Monthly   
CMBX NA A.7  A-/P  1,040  25,000  328  1/17/47  200 bp —  1,377 
Index            Monthly   
CMBX NA A.7  A-/P  943  24,000  314  1/17/47  200 bp —  1,267 
Index            Monthly   
CMBX NA A.7  A-/P  294  8,000  105  1/17/47  200 bp —  402 
Index            Monthly   
CMBX NA BB.7  BB/P  936  7,000  864  1/17/47  500 bp —  79 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,393  12,000  1,296  5/11/63  300 bp —  104 
Index            Monthly   
Goldman Sachs International             
CMBX NA A.6  A/P  607  12,000  30  5/11/63  200 bp —  582 
Index            Monthly   
CMBX NA A.6  A/P  301  13,000  33  5/11/63  200 bp —  273 
Index            Monthly   
CMBX NA A.6  A/P  759  15,000  38  5/11/63  200 bp —  728 
Index            Monthly   
CMBX NA A.6  A/P  781  15,000  38  5/11/63  200 bp —  749 
Index            Monthly   
CMBX NA A.6  A/P  1,248  19,000  48  5/11/63  200 bp —  1,208 
Index            Monthly   
CMBX NA A.6  A/P  1,133  22,000  55  5/11/63  200 bp —  1,087 
Index            Monthly   
CMBX NA A.6  A/P  1,186  24,000  60  5/11/63  200 bp —  1,135 
Index            Monthly   

 

Dynamic Risk Allocation Fund 67 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/19 cont.   
    Upfront           
    premium      Termi-  Payments  Unrealized 
Swap counterparty/    received  Notional    nation  received  appreciation/ 
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  (depreciation) 
Goldman Sachs International cont.           
CMBX NA A.6  A/P  $1,988  $31,000  $78  5/11/63  200 bp —  $1,923 
Index            Monthly   
CMBX NA A.6  A/P  1,083  35,000  88  5/11/63  200 bp —  1,009 
Index            Monthly   
CMBX NA A.6  A/P  1,820  58,000  145  5/11/63  200 bp —  1,697 
Index            Monthly   
CMBX NA A.6  A/P  3,736  62,000  155  5/11/63  200 bp —  3,605 
Index            Monthly   
CMBX NA A.6  A/P  3,257  64,000  160  5/11/63  200 bp —  3,122 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  109  1,000  108  5/11/63  300 bp —  1 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  317  4,000  432  5/11/63  300 bp —  (113) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,056  9,000  972  5/11/63  300 bp —  89 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  613  9,000  972  5/11/63  300 bp —  (354) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,266  15,000  1,620  5/11/63  300 bp —  (345) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  1,941  23,000  2,484  5/11/63  300 bp —  (530) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  4,261  35,000  3,780  5/11/63  300 bp —  502 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  5,939  79,000  8,532  5/11/63  300 bp —  (2,547) 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  8,253  88,000  9,504  5/11/63  300 bp —  (1,199) 
Index            Monthly   
JPMorgan Securities LLC             
CMBX NA BB.6  BB/P  1,059  5,000  1,044  5/11/63  500 bp —  21 
Index            Monthly   
CMBX NA BB.6  BB/P  1,270  6,000  1,252  5/11/63  500 bp —  24 
Index            Monthly   
CMBX NA A.6  A/P  10,996  478,000  1,195  5/11/63  200 bp —  10,000 
Index            Monthly   
CMBX NA BBB–.6  BBB–/P  10,716  81,000  8,748  5/11/63  300 bp —  2,015 
Index            Monthly   
Morgan Stanley & Co. International PLC           
CMBX NA A.6  A/P  622  46,000  115  5/11/63  200 bp —  525 
Index            Monthly   
CMBX NA BB.6  BB/P  1,473  6,000  1,252  5/11/63  500 bp —  227 
Index            Monthly   
CMBX NA BB.6  BB/P  3,203  13,000  2,713  5/11/63  500 bp —  503 
Index            Monthly   
Upfront premium received  91,753    Unrealized appreciation    41,012 
Upfront premium (paid)   —    Unrealized (depreciation)    (5,101) 
Total    $91,753  Total    $35,911 

 

68 Dynamic Risk Allocation Fund 

 


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

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

*** Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody’s, Standard & Poor’s or Fitch ratings are believed to be the most recent ratings available at May 31, 2019. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.

OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/19   
  Upfront           
  premium      Termi-  Payments  Unrealized 
Swap counterparty/  received  Notional    nation  (paid)  appreciation/ 
Referenced debt*  (paid)**  amount  Value  date  by fund  (depreciation) 
Citigroup Global Markets, Inc.             
CMBX NA A.7 Index  $(22)  $3,000  $39  1/17/47  (200 bp) —  $(63) 
          Monthly   
CMBX NA BB.10 Index  (877)  8,000  941  11/17/59  (500 bp) —  56 
          Monthly   
CMBX NA BB.10 Index  (417)  4,000  470  11/17/59  (500 bp) —  49 
          Monthly   
CMBX NA BB.11 Index  (1,684)  13,000  1,699  11/18/54  (500 bp) —  2 
          Monthly   
CMBX NA BB.9 Index  (1,828)  13,000  1,678  9/17/58  (500 bp) —  (162) 
          Monthly   
CMBX NA BB.9 Index  (1,393)  9,000  1,162  9/17/58  (500 bp) —  (240) 
          Monthly   
CMBX NA BB.9 Index  (1,386)  9,000  1,162  9/17/58  (500 bp) —  (233) 
          Monthly   
CMBX NA BB.9 Index  (1,386)  9,000  1,162  9/17/58  (500 bp) —  (233) 
          Monthly   
CMBX NA BB.9 Index  (1,075)  8,000  1,033  9/17/58  (500 bp) —  (50) 
          Monthly   
CMBX NA BB.9 Index  (1,040)  8,000  1,033  9/17/58  (500 bp) —  (15) 
          Monthly   
CMBX NA BB.9 Index  (626)  4,000  516  9/17/58  (500 bp) —  (114) 
          Monthly   
CMBX NA BBB–.6 Index  (49,772)  450,000  48,600  5/11/63  (300 bp) —  (1,434) 
          Monthly   
Credit Suisse International             
CMBX NA BB.10 Index  (1,070)  9,000  1,058  11/17/59  (500 bp) —  (21) 
          Monthly   
CMBX NA BB.10 Index  (1,201)  9,000  1,058  11/17/59  (500 bp) —  (151) 
          Monthly   
CMBX NA BB.10 Index  (622)  5,000  588  11/17/59  (500 bp) —  (38) 
          Monthly   
CMBX NA BB.7 Index  (2,012)  114,000  23,792  5/11/63  (500 bp) —  21,657 
          Monthly   
CMBX NA BB.9 Index  (2,235)  14,000  1,807  9/17/58  (500 bp) —  (441) 
          Monthly   
CMBX NA BB.9 Index  (767)  5,000  646  9/17/58  (500 bp) —  (127) 
          Monthly   
CMBX NA BB.9 Index  (616)  4,000  516  9/17/58  (500 bp) —  (103) 
          Monthly   

 

Dynamic Risk Allocation Fund 69 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/19 cont. 
  Upfront           
  premium      Termi-  Payments  Unrealized 
Swap counterparty/  received  Notional    nation  (paid)  appreciation/ 
Referenced debt*  (paid)**  amount  Value  date  by fund  (depreciation) 
Credit Suisse International cont.           
CMBX NA BB.9 Index  $(606)  $4,000  $516  9/17/58  (500 bp) —  $(94) 
          Monthly   
CMBX NA BB.9 Index  (313)  2,000  258  9/17/58  (500 bp) —  (57) 
          Monthly   
CMBX NA BBB–.7 Index  (78)  1,000  47  1/17/47  (300 bp) —  (32) 
          Monthly   
Goldman Sachs International             
CMBX NA BB.6 Index  (2,557)  25,000  5,218  5/11/63  (500 bp) —  2,636 
          Monthly   
CMBX NA BB.7 Index  (303)  2,000  247  1/17/47  (500 bp) —  (58) 
          Monthly   
CMBX NA BB.7 Index  (6,904)  34,000  4,196  1/17/47  (500 bp) —  (2,741) 
          Monthly   
CMBX NA BB.7 Index  (655)  4,000  494  1/17/47  (500 bp) —  (166) 
          Monthly   
JPMorgan Securities LLC             
CMBX NA A.7 Index  (1,138)  54,000  707  1/17/47  (200 bp) —  (1,867) 
          Monthly   
CMBX NA BB.7 Index  (9,238)  73,000  9,008  1/17/47  (500 bp) —  (301) 
          Monthly   
CMBX NA BBB–.7 Index  (38)  1,000  47  1/17/47  (300 bp) —  9 
          Monthly   
Merrill Lynch International             
CMBX NA BB.10 Index  (475)  4,000  470  11/17/59  (500 bp) —  (9) 
          Monthly   
CMBX NA BB.10 Index  (422)  4,000  470  11/17/59  (500 bp) —  45 
          Monthly   
CMBX NA BB.7 Index  (173)  1,000  123  1/17/47  (500 bp) —  (51) 
          Monthly   
CMBX NA BB.9 Index  (1,564)  10,000  1,291  9/17/58  (500 bp) —  (283) 
          Monthly   
CMBX NA BB.9 Index  (524)  4,000  516  9/17/58  (500 bp) —  (11) 
          Monthly   
Morgan Stanley & Co. International PLC           
CMBX NA BB.10 Index  (420)  4,000  470  11/17/59  (500 bp) —  47 
          Monthly   
CMBX NA BB.7 Index  (2,614)  13,000  1,604  1/17/47  (500 bp) —  (1,023) 
          Monthly   
CMBX NA BB.7 Index  (2,121)  11,000  1,357  1/17/47  (500 bp) —  (774) 
          Monthly   

 

70 Dynamic Risk Allocation Fund 

 


OTC CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/19 cont. 
  Upfront           
  premium      Termi-  Payments  Unrealized 
Swap counterparty/  received  Notional    nation  (paid)  appreciation/ 
Referenced debt*  (paid)**  amount  Value  date  by fund  (depreciation) 
Morgan Stanley & Co. International PLC cont.           
CMBX NA BB.7 Index  $(1,211)  $6,000  $740  1/17/47  (500 bp) —  $(476) 
          Monthly   
Upfront premium received   —    Unrealized appreciation    24,501 
Upfront premium (paid)  (101,383)    Unrealized (depreciation)    (11,368) 
Total  $(101,383)  Total    $13,133 

 

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

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

CENTRALLY CLEARED CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION SOLD at 5/31/19 
    Upfront           
    premium      Termi-  Payments   
    received  Notional    nation  received  Unrealized 
Referenced debt*  Rating***  (paid)**  amount  Value  date  by fund  depreciation 
EM Series 31  BBB–/P  $202,772  $5,700,000  $287,964  6/20/24  100 bp —  $(74,108) 
Index            Quarterly   
NA IG Series 32  BBB+/P  (12,174)  650,000  9,118  6/20/24  100 bp —  (2,184) 
Index            Quarterly   
Total    $190,598          $(76,292) 

 

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

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

*** Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody’s, Standard & Poor’s or Fitch ratings are believed to be the most recent ratings available at May 31, 2019. Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications.

CENTRALLY CLEARED CREDIT DEFAULT CONTRACTS OUTSTANDING — PROTECTION PURCHASED at 5/31/19 
  Upfront           
  premium      Termi-  Payments   
Referenced  received  Notional    nation  (paid)  Unrealized 
debt*  (paid)**  amount  Value  date  by fund  appreciation 
NA HY Series 32  $7,042  $118,000  $5,353  6/20/24  (500 bp) —  $624 
Index          Quarterly   
Total  $7,042          $624 

 

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

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

Dynamic Risk Allocation Fund 71 

 


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

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

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

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

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

      Valuation inputs  
Investments in securities:  Level 1  Level 2  Level 3 
Common stocks:       
Basic materials  $358,454  $1,088,906  $—­ 
Capital goods  2,149,933  472,960  —­ 
Communication services  815,368  608,676  —­ 
Conglomerates  —­  54,571  —­ 
Consumer cyclicals  3,762,065  1,197,362  —­ 
Consumer staples  2,692,812  1,349,441  —­ 
Energy  909,021  536,428  1,080 
Financials  7,591,366  2,350,308  —­ 
Health care  3,685,918  944,775  —­ 
Technology  5,529,940  1,300,331  —­ 
Transportation  426,268  433,823  —­ 
Utilities and power  1,258,945  457,138  —­ 
Total common stocks  29,180,090  10,794,719  1,080 
 
Asset-backed securities  —­  858,920  —­ 
Commodity linked notes  —­  3,981,980  —­ 
Convertible bonds and notes  —­  18,378  —­ 
Convertible preferred stocks  —­  50,320  2,200 
Corporate bonds and notes  —­  23,205,100  5 
Foreign government and agency bonds and notes  —­  984,163  —­ 
Mortgage-backed securities  —­  3,113,560  —­ 
Purchased options outstanding  —­  612,460  —­ 
Senior loans  —­  599,317  —­ 
U.S. government and agency mortgage obligations  —­  12,582,311  —­ 
Warrants  —­  140,001  —­ 
Short-term investments  4,770,804  3,363,616  —­ 
Totals by level  $33,950,894  $60,304,845  $3,285 

 

72 Dynamic Risk Allocation Fund 

 


      Valuation inputs  
Other financial instruments:  Level 1  Level 2  Level 3 
Forward currency contracts  $—­  $(137,905)  $—­ 
Futures contracts  (180,044)  —­  —­ 
Written options outstanding  —­  (16,397)  —­ 
TBA sale commitments  —­  (4,099,531)  —­ 
Interest rate swap contracts  —­  883,080  —­ 
Total return swap contracts  —­  (1,283,876)  —­ 
Credit default contracts  —­  (214,634)  —­ 
Totals by level  $(180,044)  $(4,869,263)  $—­ 

 

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

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

Dynamic Risk Allocation Fund 73 

 


Statement of assets and liabilities 5/31/19

ASSETS   
Investment in securities, at value, including $77,274 of securities on loan (Notes 1 and 9):   
Unaffiliated issuers (identified cost $84,665,425)  $89,564,120 
Affiliated issuers (identified cost $4,694,904) (Notes 1 and 5)  4,694,904 
Foreign currency (cost $49,005) (Note 1)  51,740 
Dividends, interest and other receivables  585,105 
Foreign tax reclaim  72,488 
Receivable for shares of the fund sold  195,784 
Receivable for investments sold  142,295 
Receivable for sales of delayed delivery securities (Note 1)  10,000 
Receivable for sales of TBA securities (Note 1)  2,061,573 
Receivable from Manager (Note 2)  37,748 
Receivable for variation margin on futures contracts (Note 1)  110,995 
Receivable for variation margin on centrally cleared swap contracts (Note 1)  161,989 
Unrealized appreciation on forward currency contracts (Note 1)  382,875 
Unrealized appreciation on OTC swap contracts (Note 1)  978,397 
Premium paid on OTC swap contracts (Note 1)  101,383 
Prepaid assets  35,841 
Total assets  99,187,237 
 
LIABILITIES   
Payable to custodian  19,426 
Payable for investments purchased  43,246 
Payable for purchases of delayed delivery securities (Note 1)  40,000 
Payable for purchases of TBA securities (Note 1)  10,269,089 
Payable for shares of the fund repurchased  257,480 
Payable for custodian fees (Note 2)  72,859 
Payable for investor servicing fees (Note 2)  22,178 
Payable for Trustee compensation and expenses (Note 2)  19,604 
Payable for administrative services (Note 2)  537 
Payable for distribution fees (Note 2)  12,082 
Payable for variation margin on futures contracts (Note 1)  269,463 
Payable for variation margin on centrally cleared swap contracts (Note 1)  40,682 
Unrealized depreciation on OTC swap contracts (Note 1)  1,001,276 
Premium received on OTC swap contracts (Note 1)  91,753 
Unrealized depreciation on forward currency contracts (Note 1)  520,780 
Written options outstanding, at value (premiums $18,994) (Note 1)  16,397 
TBA sale commitments, at value (proceeds receivable $4,070,508) (Note 1)  4,099,531 
Collateral on securities loaned, at value (Note 1)  80,100 
Collateral on certain derivative contracts and TBA commitments, at value (Notes 1 and 9)  301,955 
Other accrued expenses  103,200 
Total liabilities  17,281,638 
 
Net assets  $81,905,599 

 

(Continued on next page)

74 Dynamic Risk Allocation Fund 

 


Statement of assets and liabilities cont.

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $77,100,456 
Total distributable earnings (Note 1)  4,805,143 
Total — Representing net assets applicable to capital shares outstanding  $81,905,599 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($14,141,651 divided by 1,296,953 shares)  $10.90 
Offering price per class A share (100/94.25 of $10.90)*  $11.56 
Net asset value and offering price per class B share ($1,664,389 divided by 155,231 shares)**  $10.72 
Net asset value and offering price per class C share ($4,969,711 divided by 462,434 shares)**  $10.75 
Net asset value and redemption price per class M share ($257,816 divided by 23,669 shares)  $10.89 
Offering price per class M share (100/96.50 of $10.89)*  $11.28 
Net asset value, offering price and redemption price per class R share   
($9,820 divided by 898 shares)†  $10.93 
Net asset value, offering price and redemption price per class R6 share   
($19,331,676 divided by 1,778,175 shares)  $10.87 
Net asset value, offering price and redemption price per class Y share   
($41,530,536 divided by 3,802,708 shares)  $10.92 

 

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

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

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

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

Dynamic Risk Allocation Fund 75 

 


Statement of operations Year ended 5/31/19

INVESTMENT INCOME   
Interest (including interest income of $329,443 from investments in affiliated issuers) (Note 5)  $2,576,751 
Dividends (net of foreign tax of $73,383)  1,826,659 
Securities lending (net of expenses) (Notes 1 and 5)  3,352 
Total investment income  4,406,762 
 
EXPENSES   
Compensation of Manager (Note 2)  982,796 
Investor servicing fees (Note 2)  168,235 
Custodian fees (Note 2)  92,914 
Trustee compensation and expenses (Note 2)  6,710 
Distribution fees (Note 2)  114,945 
Administrative services (Note 2)  4,243 
Auditing and tax fees  117,736 
Blue sky expense  98,681 
Other  61,080 
Fees waived and reimbursed by Manager (Note 2)  (409,626) 
Total expenses  1,237,714 
Expense reduction (Note 2)  (4,435) 
Net expenses  1,233,279 
 
Net investment income  3,173,483 
 
REALIZED AND UNREALIZED GAIN (LOSS)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (Notes 1 and 3)  4,331,830 
Foreign currency transactions (Note 1)  (38,784) 
Forward currency contracts (Note 1)  (934,720) 
Futures contracts (Note 1)  (965,002) 
Swap contracts (Note 1)  (1,691,015) 
Written options (Note 1)  3,636 
Total net realized gain  705,945 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers and TBA sale commitments  (9,617,196) 
Assets and liabilities in foreign currencies  2,503 
Forward currency contracts  185,587 
Futures contracts  (1,202,073) 
Swap contracts  1,577,322 
Written options  (15,363) 
Total change in net unrealized depreciation  (9,069,220) 
 
Net loss on investments  (8,363,275) 
 
Net decrease in net assets resulting from operations  $(5,189,792) 

 

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

76 Dynamic Risk Allocation Fund 

 


Statement of changes in net assets

DECREASE IN NET ASSETS  Year ended 5/31/19  Year ended 5/31/18 
Operations     
Net investment income  $3,173,483  $3,418,916 
Net realized gain on investments     
and foreign currency transactions  705,945  6,743,056 
Change in net unrealized appreciation (depreciation)     
of investments and assets and liabilities     
in foreign currencies  (9,069,220)  3,523,652 
Net increase (decrease) in net assets resulting     
from operations  (5,189,792)  13,685,624 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (220,574)  (505,565) 
Class B  (11,715)  (49,532) 
Class C  (29,462)  (130,069) 
Class M  (2,465)  (5,868) 
Class R  (305)  (3,083) 
Class R6  (1,494,083)  (2,453,358) 
Class Y  (700,651)  (1,444,735) 
Increase in capital from payments from Affiliate  —  96,972 
Decrease from capital share transactions (Note 4)  (67,692,110)  (28,513,638) 
Total decrease in net assets  (75,341,157)  (19,323,252) 
 
NET ASSETS     
Beginning of year  157,246,756  176,570,008 
End of year (Note 1)  $81,905,599  $157,246,756 

 

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

Dynamic Risk Allocation Fund 77 

 


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

  INVESTMENT OPERATIONS LESS DISTRIBUTIONS RATIOS AND SUPPLEMENTAL DATA
                        Ratio of  Ratio of net   
  Net asset    Net realized      From            expenses  investment   
  value,    and unrealized  Total from  From net  net realized    Non-recurring  Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss) on  investment  investment  gain on  Total  reimburse-­  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)a  investments­  operations­  income­  investments­  distributions  ments­  of period­  value (%)b  (in thousands)  (%)c,d  net assets (%)d  (%)e 
Class A­                             
May 31, 2019­  $11.61­  .23­  (.78)  (.55)  (.16)  —­  (.16)  —­  $10.90­  (4.63)  $14,142­  1.15­  2.04­  255 
May 31, 2018­  10.96­  .22­  .74­  .96­  (.32)  —­  (.32)  .01­f  11.61­  8.86­  18,906­  1.14­  1.93­  312­ 
May 31, 2017­  10.28­  .17­  .76­  .93­  (.25)  —­  (.25)  —­  10.96­  9.18­  18,582­  1.13­  1.64­  299­ 
May 31, 2016­  11.10­  .15­  (.73)  (.58)  (.03)  (.21)  (.24)  —­  10.28­  (5.14)  20,236­  1.25­  1.49­  300­ 
May 31, 2015­  11.58­  .10­  (.05)  .05­  (.27)  (.26)  (.53)  —­  11.10­  .53­  28,223­  1.41­  .91­  245­ 
Class B­                             
May 31, 2019­  $11.39­  .14­  (.74)  (.60)  (.07)  —­  (.07)  —­  $10.72­  (5.27)  $1,664­  1.90­  1.30­  255 
May 31, 2018­  10.76­  .13­  .72­  .85­  (.23)  —­  (.23)  .01­f  11.39­  7.97­  2,315­  1.89­  1.18­  312­ 
May 31, 2017­  10.08­  .09­  .75­  .84­  (.16)  —­  (.16)  —­  10.76­  8.41­  2,669­  1.88­  .89­  299­ 
May 31, 2016­  10.94­  .08­  (.73)  (.65)  —­  (.21)  (.21)  —­  10.08­  (5.91)  3,207­  2.00­  .75­  300­ 
May 31, 2015­  11.44­  .02­  (.06)  (.04)  (.20)  (.26)  (.46)  —­  10.94­  (.26)  3,829­  2.16­  .17­  245­ 
Class C­                             
May 31, 2019­  $11.42­  .14­  (.74)  (.60)  (.07)  —­  (.07)  —­  $10.75­  (5.26)  $4,970­  1.90­  1.28­  255 
May 31, 2018­  10.78­  .13­  .72­  .85­  (.22)  —­  (.22)  .01­f  11.42­  7.99­  5,812­  1.89­  1.18­  312­ 
May 31, 2017­  10.09­  .09­  .75­  .84­  (.15)  —­  (.15)  —­  10.78­  8.42­  7,356­  1.88­  .88­  299­ 
May 31, 2016­  10.95­  .08­  (.73)  (.65)  —­  (.21)  (.21)  —­  10.09­  (5.90)  9,659­  2.00­  .74­  300­ 
May 31, 2015­  11.44­  .02­  (.06)  (.04)  (.19)  (.26)  (.45)  —­  10.95­  (.27)  15,125­  2.16­  .16­  245­ 
Class M­                             
May 31, 2019­  $11.59­  .17­  (.76)  (.59)  (.11)  —­  (.11)  —­  $10.89­  (5.07)  $258­  1.65­  1.52­  255 
May 31, 2018­  10.94­  .16­  .73­  .89­  (.25)  —­  (.25)  .01­f  11.59­  8.29­  297­  1.64­  1.43­  312­ 
May 31, 2017­  10.27­  .12­  .75­  .87­  (.20)  —­  (.20)  —­  10.94­  8.63­  289­  1.63­  1.15­  299­ 
May 31, 2016­  11.11­  .11­  (.74)  (.63)  —­  (.21)  (.21)  —­  10.27­  (5.63)  250­  1.75­  1.02­  300­ 
May 31, 2015­  11.60­  .05­  (.06)  (.01)  (.22)  (.26)  (.48)  —­  11.11­  .01­  336­  1.91­  .42­  245­ 
Class R­                             
May 31, 2019­  $11.56­  .21­  (.77)  (.56)  (.07)  —­  (.07)  —­  $10.93­  (4.77)  $10­  1.40­  1.87­  255 
May 31, 2018­  10.93­  .19­  .73­  .92­  (.30)  —­  (.30)  .01­f  11.56­  8.51­  103­  1.39­  1.67­  312­ 
May 31, 2017­  10.21­  .15­  .75­  .90­  (.18)  —­  (.18)  —­  10.93­  8.92­  110­  1.38­  1.40­  299­ 
May 31, 2016­  11.02­  .12­  (.72)  (.60)  —­  (.21)  (.21)  —­  10.21­  (5.40)  135­  1.50­  1.17­  300­ 
May 31, 2015­  11.52­  .07­  (.05)  .02­  (.26)  (.26)  (.52)  —­  11.02­  .25­  261­  1.66­  .66­  245­ 
Class R6­                             
May 31, 2019­  $11.58­  .28­  (.78)  (.50)  (.21)  —­  (.21)  —­  $10.87­  (4.17)  $19,332­  .75­  2.55­  255 
May 31, 2018­  10.94­  .26­  .73­  .99­  (.36)  —­  (.36)  .01­f  11.58­  9.19­  81,403­  .75­  2.31­  312­ 
May 31, 2017­  10.26­  .22­  .75­  .97­  (.29)  —­  (.29)  —­  10.94­  9.65­  102,097­  .75­  2.04­  299­ 
May 31, 2016­  11.10­  .22­  (.76)  (.54)  (.09)  (.21)  (.30)  —­  10.26­  (4.83)  96,118­  .81­  2.17­  300­ 
May 31, 2015­  11.61­  .14­  (.07)  .07­  (.32)  (.26)  (.58)  —­  11.10­  .79­  30,007­  1.11­  1.23­  245­ 

 

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

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

78 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 79 

 


Financial highlights cont.

  INVESTMENT OPERATIONS LESS DISTRIBUTIONS RATIOS AND SUPPLEMENTAL DATA
                        Ratio of  Ratio of net   
  Net asset    Net realized      From            expenses  investment   
  value,    and unrealized  Total from  From net  net realized    Non-recurring  Net asset  Total return  Net assets,  to average  income (loss)  Portfolio 
  beginning  Net investment  gain (loss) on  investment  investment  gain on  Total  reimburse-­  value, end  at net asset  end of period  net assets  to average  turnover 
Period ended­  of period­  income (loss)a  investments­  operations­  income­  investments­  distributions  ments­  of period­  value (%)b  (in thousands)  (%)c,d  net assets (%)d  (%)e 
Class Y­                             
May 31, 2019­  $11.63­  .25­  (.77)  (.52)  (.19)  —­  (.19)  —­  $10.92­  (4.33)  $41,531­  .90­  2.27­  255 
May 31, 2018­  10.99­  .25­  .73­  .98­  (.35)  —­  (.35)  .01­f  11.63­  9.02­  48,411­  .89­  2.17­  312­ 
May 31, 2017­  10.30­  .20­  .77­  .97­  (.28)  —­  (.28)  —­  10.99­  9.56­  45,467­  .88­  1.90­  299­ 
May 31, 2016­  11.10­  .17­  (.72)  (.55)  (.04)  (.21)  (.25)  —­  10.30­  (4.94)  47,321­  1.00­  1.62­  300­ 
May 31, 2015­  11.59­  .13­  (.06)  .07­  (.30)  (.26)  (.56)  —­  11.10­  .79­  135,058­  1.16­  1.17­  245­ 

 

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

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

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

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

      Percentage of average net assets 
  5/31/19  5/31/18  5/31/17  5/31/16  5/31/15 
Class A  0.30%  0.24%  0.23%  0.17%  0.10% 
Class B  0.30  0.24  0.23  0.17  0.10 
Class C  0.30  0.24  0.23  0.17  0.10 
Class M  0.30  0.24  0.23  0.17  0.10 
Class R  0.30  0.24  0.23  0.17  0.10 
Class R6  0.30  0.24  0.23  0.20  N/A 
Class Y  0.30  0.24  0.23  0.17  0.10 

 

e Portfolio turnover includes TBA purchase and sale commitments.

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

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

80 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 81 

 


Notes to financial statements 5/31/19

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 May 31, 2019.

Putnam Dynamic Risk Allocation Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek total return. Total return is composed of capital appreciation and income. The fund invests in a diversified set of asset classes. By investing in a broader set of asset classes than a traditional balanced fund, and by using leverage to increase the fund’s exposures to asset classes, Putnam Management believes the fund may achieve a higher total return than a traditional balanced fund with approximately the same amount of risk as a traditional balanced fund. Risk is measured by the volatility of the fund’s investment portfolio. The fund may invest without limit in U.S., international, and emerging markets equity securities (growth or value stocks or both) of companies of any size and fixed-income securities (including in below-investment-grade securities, which are sometimes referred to as “junk bonds”); mortgage- and asset-backed securities; inflation-protected securities; commodities; and real estate investment trusts (REITs). These asset classes offer different return potential and exposure to different investment risks. Putnam Management allocates the fund’s assets among asset classes in a manner intended to diversify the fund’s exposure to these different types of risk. Putnam Management typically uses leverage to adjust or to increase the fund’s exposure to certain asset classes in order to diversify or balance risk exposure. Putnam Management expects that, on average, net notional investment exposure of approximately 150% of the net assets of the fund will result from the fund’s allocation strategy under normal market conditions, although the amounts of leverage may be significantly higher or lower at any given time. Putnam Management believes that better risk diversification creates the potential for the fund to perform well in a variety of market environments. Because the potential risks and returns of asset classes, the costs of leverage, and the benefits of diversification vary over time and with market conditions, Putnam Management makes dynamic adjustments to the fund’s asset allocations as the market environment changes. Putnam Management uses qualitative analysis, which includes evaluation of the business cycle environment and its impact on different asset classes, and quantitative techniques, which incorporate individual valuation and relative valuation measures, to establish asset class allocations that it believes will enable the fund to perform well in a variety of environments. Putnam Management also uses active trading strategies, such as active security selection, tactical asset allocation, currency transactions and options transactions. Certain of these strategies may introduce additional investment leverage. When making particular investments within an asset class, Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell equity investments, and among other factors, credit, interest rate and prepayment risks when deciding whether to buy or sell fixed-income investments. Putnam Management may also take into account general market conditions when making investment decisions. Putnam Management typically uses derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, to a significant extent for hedging purposes, to obtain leverage, and to adjust the return and volatility characteristics of the fund’s investments. The fund may also engage in short sales of securities.

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

82 Dynamic Risk Allocation Fund 

 


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

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

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

Note 1: Significant accounting policies

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

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

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

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

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

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

Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of

Dynamic Risk Allocation Fund 83 

 


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

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

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

All premiums/discounts are amortized/accreted on a yield-to-maturity basis.

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

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

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

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

84 Dynamic Risk Allocation Fund 

 


foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.

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

The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.

Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.

Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap option contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract. Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Futures contracts The fund uses futures contracts to manage exposure to market risk, to hedge prepayment risk, to hedge interest rate risk, to gain exposure to interest rates and to equitize cash.

The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

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

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

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

The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. The fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed when the contract matures or by delivery of the currency. The fund 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.

Dynamic Risk Allocation Fund 85 

 


Interest rate swap contracts The fund entered into OTC and/or centrally cleared interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to hedge interest rate risk, to gain exposure on interest rates and to hedge prepayment risk.

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

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

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

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

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

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

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

86 Dynamic Risk Allocation Fund 

 


In OTC and centrally cleared credit default contracts, the protection buyer typically makes a periodic stream of payments to a counterparty, the protection seller, in exchange for the right to receive a contingent payment upon the occurrence of a credit event on the reference obligation or all other equally ranked obligations of the reference entity. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. For OTC credit default contracts, an upfront payment received by the fund is recorded as a liability on the fund’s books. An upfront payment made by the fund is recorded as an asset on the fund’s books. Centrally cleared credit default contracts provide the same rights to the protection buyer and seller except the payments between parties, including upfront premiums, are settled through a central clearing agent through variation margin payments. Upfront and periodic payments received or paid by the fund for OTC and centrally cleared credit default contracts are recorded as realized gains or losses at the reset date or close of the contract. The OTC and centrally cleared credit default contracts are marked to market daily based upon quotations from an independent pricing service or market makers. Any change in value of OTC credit default contracts is recorded as an unrealized gain or loss. Daily fluctuations in the value of centrally cleared credit default contracts are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Upon the occurrence of a credit event, the difference between the par value and fair value of the reference obligation, net of any proportional amount of the upfront payment, is recorded as a realized gain or loss.

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

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

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

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

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

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

Dynamic Risk Allocation Fund 87 

 


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

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements that govern OTC derivative and foreign exchange contracts and Master Securities Forward Transaction Agreements that govern transactions involving mortgage-backed and other asset-backed securities that may result in delayed delivery (Master Agreements) with certain counterparties entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.

Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.

With respect to ISDA Master Agreements, termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term or short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.

At the close of the reporting period, the fund had a net liability position of $101,660 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 $80,100 and the value of securities loaned amounted to $77,274.

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

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

88 Dynamic Risk Allocation Fund 

 


applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.

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

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

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At May 31, 2019, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:

  Loss carryover   
Short-term  Long-term  Total 
$1,055,042  $—  $1,055,042 

 

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and/or permanent differences from losses on wash sale transactions, from foreign currency gains and losses, from nontaxable dividends, from defaulted bond interest, from realized gains and losses on certain futures contracts, from unrealized gains and losses on certain futures contracts, from unrealized gains and losses on passive foreign investment companies and from income on swap contracts. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the reporting period, the fund reclassified $1,364,427 to decrease undistributed net investment income, $1,241 to increase paid-in capital and $1,363,186 to decrease accumulated net realized loss.

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

Unrealized appreciation  $10,731,414 
Unrealized depreciation  (6,822,439) 
Net unrealized appreciation  3,908,975 
Undistributed ordinary income  2,006,661 
Capital loss carryforward  (1,055,042) 
Cost for federal income tax purposes  $85,300,742 

 

For the fiscal year ended May 31, 2018, the fund had undistributed net investment income of $2,829,088.

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

Dynamic Risk Allocation Fund 89 

 


Note 2: Management fee, administrative services and other transactions

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

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

 

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.722% of the fund’s average net assets.

Putnam Management has contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through September 30, 2020, to the extent that total expenses of the fund (excluding brokerage, interest, taxes, investment-related expenses, payments under distribution plans, extraordinary expenses, payments under the fund’s investor servicing contract and acquired fund fees and expenses, but including payments under the fund’s investment management contract) would exceed an annual rate of 0.70% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $301,949 as a result of this limit.

Putnam Management has also contractually agreed, through September 30, 2020, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $107,677 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 fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.

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

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

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

90 Dynamic Risk Allocation Fund 

 


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

Class A  $31,046  Class R  94 
Class B  3,975  Class R6  34,735 
Class C  10,644  Class Y  87,209 
Class M  532  Total  $168,235 

 

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 $836 under the expense offset arrangements and by $3,599 under the brokerage/service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $79, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

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

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

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

  Maximum %  Approved %  Amount 
Class A  0.35%  0.25%  $39,182 
Class B  1.00%  1.00%  20,036 
Class C  1.00%  1.00%  53,473 
Class M  1.00%  0.75%  2,005 
Class R  1.00%  0.50%  249 
Total      $114,945 

 

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $4,457 and $40 from the sale of class A and class M shares, respectively, and received $835 and $17 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

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

Dynamic Risk Allocation Fund 91 

 


Note 3: Purchases and sales of securities

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

  Cost of purchases  Proceeds from sales 
Investments in securities, including TBA commitments (Long-term)  $319,713,437  $374,508,111 
U.S. government securities (Long-term)  —  — 
Total  $319,713,437  $374,508,111 

 

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

Note 4: Capital shares

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

  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class A  Shares  Amount  Shares  Amount 
Shares sold  202,519  $2,201,091  198,902  $2,251,499 
Shares issued in connection with         
reinvestment of distributions  21,137  217,075  43,227  493,216 
  223,656  2,418,166  242,129  2,744,715 
Shares repurchased  (555,790)  (6,182,041)  (308,230)  (3,505,305) 
Net decrease  (332,134)  $(3,763,875)  (66,101)  $(760,590) 
 
  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class B  Shares  Amount  Shares  Amount 
Shares sold  2,079  $22,638  1,921  $21,299 
Shares issued in connection with         
reinvestment of distributions  1,098  11,122  4,228  47,524 
  3,177  33,760  6,149  68,823 
Shares repurchased  (51,176)  (566,507)  (50,898)  (566,737) 
Net decrease  (47,999)  $(532,747)  (44,749)  $(497,914) 
 
  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class C  Shares  Amount  Shares  Amount 
Shares sold  88,421  $904,422  40,373  $449,972 
Shares issued in connection with         
reinvestment of distributions  2,755  27,961  10,870  122,399 
  91,176  932,383  51,243  572,371 
Shares repurchased  (137,770)  (1,524,042)  (224,662)  (2,491,797) 
Net decrease  (46,594)  $(591,659)  (173,419)  $(1,919,426) 

 

92 Dynamic Risk Allocation Fund 

 


  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class M  Shares  Amount  Shares  Amount 
Shares sold  709  $8,156  3,687  $41,556 
Shares issued in connection with         
reinvestment of distributions  240  2,465  514  5,868 
  949  10,621  4,201  47,424 
Shares repurchased  (2,927)  (33,852)  (4,978)  (56,342) 
Net decrease  (1,978)  $(23,231)  (777)  $(8,918) 
 
  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class R  Shares  Amount  Shares  Amount 
Shares sold  1,792  $20,147  1,469  $16,466 
Shares issued in connection with         
reinvestment of distributions  —  —  141  1,601 
  1,792  20,147  1,610  18,067 
Shares repurchased  (9,785)  (110,270)  (2,739)  (31,554) 
Net decrease  (7,993)  $(90,123)  (1,129)  $(13,487) 
 
  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class R6  Shares  Amount  Shares  Amount 
Shares sold  466,747  $5,171,428  3,496,720  $38,241,197 
Shares issued in connection with         
reinvestment of distributions  146,192  1,494,083  215,775  2,453,358 
  612,939  6,665,511  3,712,495  40,694,555 
Shares repurchased  (5,862,871)  (65,260,876)  (6,017,580)  (66,293,580) 
Net decrease  (5,249,932)  $(58,595,365)  (2,305,085)  $(25,599,025) 
 
  YEAR ENDED 5/31/19  YEAR ENDED 5/31/18 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  692,286  $7,589,074  548,443  $6,252,757 
Shares issued in connection with         
reinvestment of distributions  67,929  697,632  125,093  1,428,565 
  760,215  8,286,706  673,536  7,681,322 
Shares repurchased  (1,119,601)  (12,381,816)  (650,061)  (7,395,600) 
Net increase (decrease)  (359,386)  $(4,095,110)  23,475  $285,722 

 

At the close of the reporting period, Putnam Investments, LLC owned 898 class R shares of the fund 100.00% of class R shares outstanding), valued at $9,820.

At the close of the reporting period, a shareholder of record owned 22.0% of the outstanding shares of the fund.

Dynamic Risk Allocation Fund 93 

 


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 5/31/19 
Short-term investments           
Putnam Cash Collateral           
Pool, LLC*  $144,050  $5,583,079  $5,647,029  $11,852  $80,100 
Putnam Short Term           
Investment Fund**  19,395,321  51,752,192  66,532,709  329,443  4,614,804 
Total Short-term           
investments  $19,539,371  $57,335,271  $72,179,738  $341,295  $4,694,904 

 

* No management fees are charged to Putnam Cash Collateral Pool, LLC (Note 1). Investment income shown is included in securities lending income on the Statement of operations. There were no realized or unrealized gains or losses during the period.

** Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations. The fund may invest in higher-yielding, lower-rated bonds that may have a higher rate of default. The fund may invest a significant portion of its assets in securitized debt instruments, including mortgage-backed and asset-backed investments. The yields and values of these investments are sensitive to changes in interest rates, the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market for these investments may be volatile and limited, which may make them difficult to buy or sell.

Note 7: Senior loan commitments

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

94 Dynamic Risk Allocation Fund 

 


Note 8: Summary of derivative activity

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

Purchased equity option contracts (contract amount)  $140,000 
Purchased currency option contracts (contract amount)  $2,400,000 
Written equity option contracts (contract amount)  $64,000 
Written currency option contracts (contract amount)  $2,600,000 
Futures contracts (number of contracts)  700 
Forward currency contracts (contract amount)  $74,400,000 
Centrally cleared interest rate swap contracts (notional)  $60,500,000 
OTC total return swap contracts (notional)  $53,900,000 
Centrally cleared total return swap contracts (notional)  $37,800,000 
OTC credit default contracts (notional)  $6,000,000 
Centrally cleared credit default contracts (notional)  $16,500,000 
Warrants (number of warrants)  61,000 

 

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

Fair value of derivative instruments as of the close of the reporting period   
  ASSET DERIVATIVES LIABILITY DERIVATIVES
Derivatives not         
accounted for as  Statement of    Statement of   
hedging instruments  assets and    assets and   
under ASC 815  liabilities location  Fair value  liabilities location  Fair value 
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Credit contracts  appreciation  $126,045*  Unrealized depreciation  $340,679* 
Foreign exchange         
contracts  Investments, Receivables  406,565  Payables  529,763 
  Investments,       
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Equity contracts  appreciation  1,652,996*  Unrealized depreciation  1,171,088* 
  Receivables, Net       
  assets — Unrealized    Payables, Net assets —   
Interest rate contracts  appreciation  1,664,532*  Unrealized depreciation  2,005,923* 
Total    $3,850,138    $4,047,453 

 

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

Dynamic Risk Allocation Fund 95 

 


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

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments   
Derivatives not             
accounted for as             
hedging        Forward     
instruments under        currency     
ASC 815  Warrants  Options  Futures  contracts  Swaps  Total 
Credit contracts  $—  $—  $—  $—  $(7,677)  $(7,677) 
Foreign exchange             
contracts  —  (31,929)  —  (934,720)  —  $(966,649) 
Equity contracts  17,406  (1,008,055)  (1,947,056)  —  (377,594)  $(3,315,299) 
Interest rate             
contracts  —  —  982,054  —  (1,305,744)  $(323,690) 
Total  $17,406  $(1,039,984)  $(965,002)  $(934,720)  $(1,691,015)  $(4,613,315) 

 

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) 
on investments             
Derivatives not             
accounted for as             
hedging        Forward     
instruments under        currency     
ASC 815  Warrants  Options  Futures  contracts  Swaps  Total 
Credit contracts  $—  $—  $—  $—  $156,688  $156,688 
Foreign exchange             
contracts  —  5,400  —  185,587  —  $190,987 
Equity contracts  722  145,047  (539,015)  —  (111,052)  $(504,298) 
Interest rate             
contracts  —  —  (663,058)  —  1,531,686  $868,628 
Total  $722  $150,447  $(1,202,073)  $185,587  $1,577,322  $712,005 

 

96 Dynamic Risk Allocation Fund 

 


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Dynamic Risk Allocation Fund 97 

 


Note 9: Offsetting of financial and derivative assets and liabilities

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

  Bank of America N.A. Barclays Bank PLC Barclays
Capital, Inc. (clearing
broker)		 BofA
Securities,
Inc. 		 Citibank, N.A. Citigroup
Global
Markets, Inc.		 Credit Suisse International Goldman
Sachs
International		 HSBC Bank USA, National Association JPMorgan
Chase Bank
N.A.		 JPMorgan
Securities LLC		 Merrill Lynch International Morgan
Stanley & Co. International
PLC		 NatWest
Markets PLC		 State Street Bank and
Trust Co.		 UBS AG WestPac
Banking Corp.		 Total
Assets:                                     
Centrally cleared interest rate                                     
swap contracts§  $—  $—  $161,164  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $161,164 
OTC Total return swap contracts*#  835,565  —  —  —  62,139  —  —  —  —  —  15,180  —  —  —  —  —  —  912,884 
Centrally cleared total return                                     
swap contracts§  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  — 
OTC Credit default contracts —                                     
protection sold*#  —  —  —  —  —  —  769  —  —  —  —  —  —  —  —  —  —  769 
OTC Credit default contracts —                                     
protection purchased*#  —  —  —  —  —  59,110  30,113  10,090  —  —  8,984  2,849  4,140  —  —  —  —  115,286 
Centrally cleared credit default contracts§  —  —  825  —  —  —  —  —  —  —  —  —  —  —  —  —  —  825 
Futures contracts§  —  —  —  110,995  —  —  —  —  —  —  —  —  —  —  —  —  —  110,995 
Forward currency contracts#  53,482  19,448  —  —  14,281  —  88  12,096  47,609  178,619  —  —  —  18,289  28,334  8,193  2,436  382,875 
Purchased options**#  292,084  —  —  —  141,519  —  —  23,690  —  155,167  —  —  —  —  —  —  —  612,460 
Total Assets  $1,181,131  $19,448  $161,989  $110,995  $217,939  $59,110  $30,970  $45,876  $47,609  $333,786  $24,164  $2,849  $4,140  $18,289  $28,334  $8,193  $2,436  $2,297,258 
Liabilities:                                     
Centrally cleared interest rate                                     
swap contracts§  —  —  17,190  —  —  —  —  —  —  —  —  —  —  —  —  —  —  17,190 
OTC Total return swap contracts*#  912,767  15,613  —  —  54,957  —  1,470  —  —  —  —  —  —  —  —  —  —  984,807 
Centrally cleared total return                                     
swap contracts§  —  —  16,176  —  —  —  —  —  —  —  —  —  —  —  —  —  —  16,176 
OTC Credit default contracts —                                     
protection sold*#  —  —  —  —  —  9,088  2,467  29,032  —  —  11,981  —  4,043  —  —  —  —  56,611 
OTC Credit default contracts —                                     
protection purchased*#  —  —  —  —  —  41  —  —  —  —  729  —  —  —  —  —  —  770 
Centrally cleared credit default contracts§  —  —  7,316  —  —  —  —  —  —  —  —  —  —  —  —  —  —  7,316 
Futures contracts§  —  —  —  98,830  —  —  —  —  —  —  170,633  —  —  —  —  —  —  269,463 
Forward currency contracts#  51,991  7,057  —  —  40,021  —  14,727  62,716  66,320  198,128  —  —  —  18,325  26,030  10,515  24,950  520,780 
Written options#  7,414  —  —  —  —  —  —  8,983  —  —  —  —  —  —  —  —  —  16,397 
Total Liabilities  $972,172  $22,670  $40,682  $98,830  $94,978  $9,129  $18,664  $100,731  $66,320  $198,128  $183,343  $—  $4,043  $18,325  $26,030  $10,515  $24,950  $1,889,510 
Total Financial and Derivative Net Assets  $208,959  $(3,222)  $121,307  $12,165  $122,961  $49,981  $12,306  $(54,855)  $(18,711)  $135,658  $(159,179)  $2,849  $97  $(36)  $2,304  $(2,322)  $(22,514)  $407,748 
Total collateral received (pledged)†##  $145,955  $—  $—  $—  $122,961  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—   
Net amount  $63,004  $(3,222)  $121,307  $12,165  $—  $49,981  $12,306  $(54,855)  $(18,711)  $135,658  $(159,179)  $2,849  $97  $(36)  $2,304  $(2,322)  $(22,514)   

 

98 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 99 

 


  Bank of
America N.A.		 Barclays
Bank PLC		 Barclays
Capital, Inc. (clearing
broker)		 BofA
Securities,
Inc.		 Citibank, N.A. Citigroup
Global
Markets, Inc.		 Credit Suisse International Goldman
Sachs
International		 HSBC Bank
USA, National Association		 JPMorgan
Chase Bank
N.A.		 JPMorgan
Securities LLC		 Merrill Lynch International Morgan
Stanley & Co. Internationa
lPLC		 NatWest
Markets PLC		 State Street Bank and
Trust Co.		 UBS AG WestPac
Banking Corp.		 Total
Controlled collateral received (including                                     
TBA commitments)**  $145,955  $—  $—  $—  $150,000  $—  $—  $—  $—  $—  $6,000  $—  $—  $—  $—  $—  $—  $301,955 
Uncontrolled collateral received  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Collateral (pledged) (including                                     
TBA commitments)**  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 

 

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

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

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

# Covered by master netting agreement (Note 1).

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

§ Includes current day’s variation margin only as reported on the Statement of assets and liabilities, which is not collateralized. Cumulative appreciation/(depreciation) for futures contracts and centrally cleared swap contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts and centrally cleared swap contracts, which is not included in the table above, amounted to $668,800 and $1,742,961, respectively.

Note 10: New accounting pronouncements

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

100 Dynamic Risk Allocation Fund  Dynamic Risk Allocation Fund 101 

 


Federal tax information (Unaudited)

The fund designated 34.71% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For the reporting period, the fund hereby designates 62.36%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

The Form 1099 that will be mailed to you in January 2020 will show the tax status of all distributions paid to your account in calendar 2019.

102 Dynamic Risk Allocation Fund 

 



Dynamic Risk Allocation Fund 103 

 


* Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.

The address of each Trustee is 100 Federal Street, Boston, MA 02110.

As of May 31, 2019, there were 99 Putnam funds. All Trustees serve as Trustees of all Putnam funds.

Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.

104 Dynamic Risk Allocation Fund 

 


Officers

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

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

 

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is 100 Federal Street, Boston, MA 02110.

Dynamic Risk Allocation Fund 105 

 


Putnam family of funds

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

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

 

106 Dynamic Risk Allocation Fund 

 


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

 

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

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

‡ Not available in all states.

** Sub-advised by PanAgora Asset Management.

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

Dynamic Risk Allocation Fund 107 

 


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.

108 Dynamic Risk Allocation Fund 

 


Fund information

Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage 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-Advisor  Catharine Bond Hill  Principal Financial Officer, 
Putnam Investments Limited  Paul L. Joskow  Principal Accounting Officer, 
16 St James’s Street  Robert E. Patterson  and Assistant Treasurer 
London, England SW1A 1ER  George Putnam, III 
  Robert L. Reynolds  Susan G. Malloy 
Marketing Services  Manoj P. Singh  Vice President and 
Putnam Retail Management    Assistant Treasurer 
100 Federal Street  Officers 
Boston, MA 02110  Robert L. Reynolds  Mark C. Trenchard 
  President  Vice President and 
Custodian    BSA Compliance Officer 
State Street Bank  Jonathan S. Horwitz 
and Trust Company  Executive Vice President,  Nancy E. Florek 
  Principal Executive Officer,  Vice President, Director of 
Legal Counsel  and Compliance Liaison  Proxy Voting and Corporate 
Ropes & Gray LLP    Governance, Assistant Clerk, 
  Robert T. Burns  and Assistant Treasurer 
Independent Registered Public  Vice President and   
Accounting Firm  Chief Legal Officer  Denere P. Poulack 
KPMG LLP    Assistant Vice President, Assistant 
  James F. Clark  Clerk, and Assistant Treasurer 
  Vice President and   
  Chief Compliance Officer   

 

This report is for the information of shareholders of Putnam Dynamic Risk Allocation Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.



Item 2. Code of Ethics:
(a) The fund's principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers.

(c) In February 2018, the Code of Ethics of Putnam Investments was amended.  The key changes to the Code of Ethics are as follows: (i) Prohibition of investing in public coin offerings or token offerings, (ii) Removal of monetary fines as available sanctions for violations of the Code of Ethics, and (iii) Expanded definition of “Immediate Family Member”.

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

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


Fiscal year ended Audit Fees Audit-Related Fees Tax Fees All Other Fees
May 31, 2019 $107,357 $ — $5,443 $ —
May 31, 2018 $76,478 $ — $5,288 $ —

For the fiscal years ended May 31, 2019 and May 31, 2018, the fund's independent auditor billed aggregate non-audit fees in the amounts of $5,443 and $5,288 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.

Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.

Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.

Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.

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

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


Fiscal year ended Audit-Related Fees Tax Fees All Other Fees Total Non-Audit Fees
May 31, 2019 $ — $ — $ — $ —
May 31, 2018 $ — $ — $ — $ —

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. Disclosures of Securities Lending Activities for Closed-End Management Investment Companies:

Not Applicable
Item 13. Exhibits:
(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.

(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Putnam Funds Trust
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: July 26, 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: July 26, 2019
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: July 26, 2019