| 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
Asset Allocation
Equity 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 11, 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.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 7–8 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
* Putnam Equity Blended Index is an unmanaged index administered by Putnam Management and comprises 75% the Russell 3000 Index, 19% the MSCI EAFE Index (ND), and 6% the MSCI Emerging Markets Index (GD).
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 7–8 for additional fund performance information. Index descriptions can be found on pages 12–13.
| 2 Dynamic Asset Allocation Equity 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. 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. Meanwhile, U.S. small-cap stocks, as measured by the Russell 2000 Index, dropped 9.04%. International markets were broadly negative, hampered by concerns about protectionist tariffs and global growth. The MSCI EAFE Index [ND], which tracks stocks in international developed markets, fell 5.75%, and the MSCI Emerging Markets Index [ND] dropped 8.70% during the period.
The U.S. Federal Reserve [Fed] 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. Investor appetite for relatively risky assets, such as stocks, continued
| Dynamic Asset Allocation Equity Fund 3 |
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 5/31/19. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time.
This chart shows how the fund’s top weightings have changed over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.
| 4 Dynamic Asset Allocation Equity Fund |
to ebb and flow amid concerns about the fallout from the U.S.–China spat and flagging economic growth in Europe.
Fed Chair Jerome Powell in June 2019 said the central bank “will act as appropriate” to sustain the 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 period?
Putnam Dynamic Asset Allocation Equity Fund declined 3.72% over the 12-month period. The fund underperformed the custom secondary benchmark, the Putnam Equity Blended Index, and its primary benchmark, the all-equity Russell 3000 Index, a broad index of U.S. stocks.
What strategies affected relative performance?
We seek to add value through asset allocation strategies and active security selection. However, the fund’s dynamic asset allocation strategies and our active implementation decisions/security selections detracted from performance during the period. The fund’s performance was primarily driven by weakness in security selection. Our positions in U.S. large-cap stocks underperformed relative to the benchmark during the 12-month period, and they were the primary reason the fund trailed the benchmark. Selection within international developed-market stocks also hampered results during the period. Our asset allocation strategy was only a minor detractor, and the fund’s preference for Japanese stocks over U.S. stocks hurt results.
On a more positive note, an underweight position in international developed-market equities relative to the benchmark provided a slight boost to relative performance. This was because stocks in developed markets underperformed U.S. equities during the period.
What is your outlook for the months ahead?
We have a mostly neutral outlook. We eliminated our overweight position in Japanese equities earlier in 2019. In our view, the United States has the most durable economy globally, fueled by the low cost of capital and benign inflation rates.
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 are concerns among investors and businesses that the trade dispute between the United States and China could last indefinitely. Investors are attempting to gauge the potential fallout to economic growth and corporate profits. We think earnings will continue to expand at a reasonably solid clip this year, but not at the same robust pace we saw in 2018.
Against this backdrop, we continue to have conviction in our stock-selection strategies, based on their strong long-term results. As for asset allocation, we will continue to take a tactical approach, adjusting the fund’s exposure across various markets as conditions warrant.
| Dynamic Asset Allocation Equity Fund 5 |
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.
ABOUT DERIVATIVES
Derivatives are an increasingly common type of investment instrument, the performance of which is derived from an underlying security, index, currency, or other area of the capital markets. Derivatives employed by the fund’s managers generally serve one of two main purposes: to implement a strategy that may be difficult or more expensive to invest in through traditional securities, or to hedge unwanted risk associated with a particular position.
For example, the fund’s managers might use currency forward contracts to capitalize on an anticipated change in exchange rates between two currencies. This approach would require a significantly smaller outlay of capital than purchasing traditional bonds denominated in the underlying currencies. In another example, the managers may identify a bond that they believe is undervalued relative to its risk of default, but may seek to reduce the interest-rate risk of that bond by using interest-rate swaps, a derivative through which two parties “swap” payments based on the movement of certain rates. In other examples, the managers may use options and futures contracts to hedge against a variety of risks by establishing a combination of long and short exposures to specific equity markets or sectors.
Like any other investment, derivatives may not appreciate in value and may lose money. Derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities. And because derivatives typically represent contractual agreements between two financial institutions, derivatives entail “counterparty risk,” which is the risk that the other party is unable or unwilling to pay. Putnam monitors the counterparty risks we assume. For example, Putnam often enters into collateral agreements that require the counterparties to post collateral on a regular basis to cover their obligations to the fund. Counterparty risk for exchange-traded futures and centrally cleared swaps is mitigated by the daily exchange of margin and other safeguards against default through their respective clearinghouses.
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Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended 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 P shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.
Fund performance Total return for periods ended 5/31/19
| Annual | ||||||||
| average | Annual | Annual | Annual | |||||
| (life of fund) | 10 years | average | 5 years | average | 3 years | average | 1 year | |
| Class A (1/23/09) | ||||||||
| Before sales charge | 12.59% | 188.10% | 11.16% | 34.56% | 6.12% | 27.75% | 8.51% | –3.72% |
| After sales charge | 11.94 | 171.53 | 10.50 | 26.83 | 4.87 | 20.40 | 6.38 | –9.26 |
| Class P (8/31/16) | ||||||||
| Net asset value | 12.66 | 190.12 | 11.24 | 35.51 | 6.27 | 28.66 | 8.76 | –3.43 |
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 5.75% sales charge, levied at the time of purchase. Class P shares have no initial sales charge or CDSC. Performance for class P shares prior to their inception is derived from the historical performance of class A shares and has not been adjusted for the lower investor servicing fees applicable to class P shares; had it, returns would have been higher.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
Comparative index returns For periods ended 5/31/19
| Annual | ||||||||
| average | Annual | Annual | Annual | |||||
| (life of fund) | 10 years | average | 5 years | average | 3 years | average | 1 year | |
| Russell 3000 Index | 14.79% | 268.47% | 13.93% | 55.60% | 9.25% | 38.80% | 11.55% | 2.50% |
| Putnam Equity | ||||||||
| Blended Index* | 13.28 | 210.39 | 11.99 | 42.49 | 7.34 | 34.73 | 10.45 | 0.28 |
| Lipper Multi-Cap Core | ||||||||
| Funds category average† | 12.98 | 212.86 | 11.97 | 39.83 | 6.84 | 30.91 | 9.35 | –0.15 |
Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Putnam Equity Blended Index is an unmanaged index administered by Putnam Management and comprises 75% the Russell 3000 Index, 19% the MSCI EAFE Index (ND), and 6% the MSCI Emerging Markets Index (GD).
† Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 5/31/19, there were 742, 644, 561, 391, and 378 funds, respectively, in this Lipper category.
| Dynamic Asset Allocation Equity Fund 7 |
Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class P shares would have been valued at $29,012.
Fund price and distribution information For the 12-month period ended 5/31/19
| Distributions | Class A | Class P | |
| Number | 1 | 1 | |
| Income | $0.173857 | $0.205857 | |
| Capital gains | |||
| Long-term gains | 1.248355 | 1.248355 | |
| Short-term gains | 0.186788 | 0.186788 | |
| Total | $1.609000 | $1.641000 | |
| Before | After | Net | |
| sales | sales | asset | |
| Share value | charge | charge | value |
| 5/31/18 | $13.28 | $14.09 | $13.30 |
| 5/31/19 | 11.07 | 11.75 | 11.09 |
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A shares if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
Fund performance as of most recent calendar quarter Total return for periods ended 6/30/19
| Annual | ||||||||
| average | Annual | Annual | Annual | |||||
| (life of fund) | 10 years | average | 5 years | average | 3 years | average | 1 year | |
| Class A (1/23/09) | ||||||||
| Before sales charge | 13.21% | 209.18% | 11.95% | 41.12% | 7.13% | 38.39% | 11.44% | 3.68% |
| After sales charge | 12.57 | 191.40 | 11.29 | 33.00 | 5.87 | 30.43 | 9.26 | –2.28 |
| Class P (8/31/16) | ||||||||
| Net asset value | 13.28 | 211.05 | 12.02 | 41.97 | 7.26 | 39.24 | 11.67 | 3.89 |
See the discussion following the fund performance table on page 7 for information about the calculation of fund performance.
| 8 Dynamic Asset Allocation Equity Fund |
Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund’s expenses were limited; had expenses not been limited, they would have been higher. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
| Class A | Class P | |
| Net expenses for the fiscal year ended 5/31/18* | 0.87% | 0.63% |
| Total annual operating expenses for the fiscal year ended 5/31/18 | 1.13% | 0.89% |
| Annualized expense ratio for the six-month period ended 5/31/19† | 0.86% | 0.62% |
Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.
Expenses are shown as a percentage of average net assets.
Although the fund’s distribution and service (12b-1) plan provides payments at annual rates (based on average net assets) of up to 0.35% on class A shares, no payments under the plan have been authorized by the Trustees.
* 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 P | |
| Expenses paid per $1,000*† | $4.27 | $3.08 |
| Ending value (after expenses) | $990.40 | $992.50 |
* 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.
| Dynamic Asset Allocation Equity Fund 9 |
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 P | |
| Expenses paid per $1,000*† | $4.33 | $3.13 |
| Ending value (after expenses) | $1,020.64 | $1,021.84 |
* 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.
| 10 Dynamic Asset Allocation Equity Fund |
Consider these risks before investing
The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. If the quantitative models or data that are used in managing the fund prove to be incorrect or incomplete, investment decisions made in reliance on the models or data may not produce the desired results and the fund may realize losses. You can lose money by investing in the fund.
| Dynamic Asset Allocation Equity Fund 11 |
Terms and definitions
Important terms
Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class P shares require no minimum initial investment amount and no minimum subsequent investment amount. There is no initial or deferred sales charge. They are only available to other Putnam funds and other accounts managed by Putnam Management or its affiliates.
Comparative indexes
Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
ICE BofAML (Intercontinental Exchange Bank of America Merrill Lynch) U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
MSCI EAFE Index (ND) is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.
MSCI Emerging Markets Index (ND) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.
MSCI Emerging Markets Index (GD) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Gross total return (GD) indexes reinvest as much as possible of a company’s dividend distributions.
Putnam Equity Blended Index is an unmanaged index representing global stock market performance, and comprises 75% the Russell 3000 Index, 19% the MSCI EAFE Index (ND), and 6% the MSCI Emerging Markets Index (GD).
Russell 2000 Index is an unmanaged index of 2,000 small companies in the Russell 3000 Index.
Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
ICE Data Indices, LLC (“ICE BofAML”), used with permission. ICE BofAML permits use of the ICE BofAML indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of
| 12 Dynamic Asset Allocation Equity Fund |
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.
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.
| Dynamic Asset Allocation Equity Fund 13 |
Important notice regarding Putnam’s privacy policy
In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.
It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.
Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.
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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.
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Report of Independent Registered Public Accounting Firm
To the Trustees of Putnam Funds Trust and Shareholders of
Putnam Dynamic Asset Allocation Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam Dynamic Asset Allocation Equity Fund (one of the funds constituting Putnam Funds Trust, referred to hereafter as the “Fund”) as of May 31, 2019, the related statement of operations for the year ended May 31, 2019, the statement of changes in net assets for each of the two years in the period ended May 31, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2019 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2019 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 11, 2019
We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.
| 16 Dynamic Asset Allocation Equity Fund |
The fund’s portfolio 5/31/19
| COMMON STOCKS (89.7%)* | Shares | Value |
| Advertising and marketing services (0.4%) | ||
| Omnicom Group, Inc. | 3,510 | $271,534 |
| 271,534 | ||
| Aerospace and defense (2.4%) | ||
| Boeing Co. (The) | 3,370 | 1,151,226 |
| Dassault Aviation SA (France) | 21 | 26,229 |
| Lockheed Martin Corp. | 1,779 | 602,263 |
| Raytheon Co. | 205 | 35,773 |
| Teledyne Technologies, Inc. † | 218 | 51,404 |
| 1,866,895 | ||
| Airlines (0.8%) | ||
| Azul SA ADR (Brazil) † | 1,274 | 37,927 |
| Delta Air Lines, Inc. | 8,093 | 416,790 |
| Deutsche Lufthansa AG (Germany) | 3,653 | 69,488 |
| Japan Airlines Co., Ltd. (Japan) | 3,800 | 119,292 |
| 643,497 | ||
| Automotive (0.5%) | ||
| Cia de Locacao das Americas (Brazil) | 5,095 | 57,780 |
| Fiat Chrysler Automobiles NV (Italy) | 4,640 | 59,085 |
| Lear Corp. | 893 | 106,294 |
| Peugeot SA (France) | 5,770 | 128,600 |
| 351,759 | ||
| Banking (6.3%) | ||
| ABN AMRO Group NV GDR (Netherlands) | 4,857 | 102,506 |
| ABSA Group, Ltd. (South Africa) | 4,227 | 48,979 |
| Abu Dhabi Commercial Bank PJSC (United Arab Emirates) | 26,926 | 65,734 |
| Banco Bilbao Vizcaya Argenta (Spain) | 28,543 | 154,868 |
| Bank Leumi Le-Israel BM (Israel) | 12,128 | 81,337 |
| Bank Tabungan Pensiunan Nasional Syariah Tbk PT (Indonesia) † | 336,700 | 67,229 |
| BOC Hong Kong Holdings, Ltd. (Hong Kong) | 10,000 | 38,310 |
| China Construction Bank Corp. Class H (China) | 69,000 | 54,445 |
| Citigroup, Inc. | 17,129 | 1,064,567 |
| Citizens Financial Group, Inc. | 7,319 | 238,453 |
| Comerica, Inc. | 2,616 | 180,033 |
| Commercial International Bank (CIB) Egypt SAE GDR (Egypt) | 16,426 | 66,359 |
| Credicorp, Ltd. (Peru) | 292 | 65,350 |
| DNB ASA (Norway) | 2,132 | 36,124 |
| Fukuoka Financial Group, Inc. (Japan) | 2,400 | 40,743 |
| Grupo Financiero Galicia SA ADR (Argentina) | 1,228 | 31,449 |
| Hang Seng Bank, Ltd. (Hong Kong) | 4,800 | 120,164 |
| HDFC Bank, Ltd. (India) | 3,493 | 121,684 |
| HSBC Holdings PLC (United Kingdom) | 3,321 | 27,094 |
| ING Groep NV (Netherlands) | 5,658 | 61,081 |
| Itau Unibanco Holding SA ADR (Preference) (Brazil) | 4,377 | 38,955 |
| JPMorgan Chase & Co. | 14,423 | 1,528,261 |
| KBC Groep NV (Belgium) | 943 | 61,938 |
| Lloyds Banking Group PLC (United Kingdom) | 163,513 | 118,029 |
| Moneta Money Bank AS (Czech Republic) † | 18,488 | 60,352 |
| Popular, Inc. (Puerto Rico) | 980 | 51,166 |
| Dynamic Asset Allocation Equity Fund 17 |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Banking cont. | ||
| Sberbank of Russia PJSC ADR (Russia) | 2,723 | $39,044 |
| Sumitomo Mitsui Financial Group, Inc. (Japan) | 5,007 | 174,083 |
| Sumitomo Mitsui Trust Holdings, Inc. (Japan) | 1,200 | 43,802 |
| Wells Fargo & Co. | 2,467 | 109,461 |
| Wintrust Financial Corp. | 635 | 43,015 |
| 4,934,615 | ||
| Beverage (2.6%) | ||
| Carlsberg A/S Class B (Denmark) | 649 | 85,177 |
| Coca-Cola Co. (The) | 18,660 | 916,766 |
| Coca-Cola European Partners PLC (United Kingdom) | 2,465 | 136,561 |
| Grape King Bio, Ltd. (Taiwan) | 6,000 | 41,042 |
| Molson Coors Brewing Co. Class B | 2,787 | 153,229 |
| PepsiCo, Inc. | 5,321 | 681,088 |
| 2,013,863 | ||
| Biotechnology (1.5%) | ||
| Amgen, Inc. | 3,537 | 589,618 |
| Biogen, Inc. † | 1,399 | 306,787 |
| Gilead Sciences, Inc. | 3,630 | 225,968 |
| Illumina, Inc. † | 190 | 58,313 |
| 1,180,686 | ||
| Broadcasting (0.2%) | ||
| Discovery, Inc. Class A † S | 5,466 | 149,003 |
| Liberty SiriusXM Group Class A † | 1,091 | 39,298 |
| 188,301 | ||
| Cable television (0.2%) | ||
| Comcast Corp. Class A | 4,305 | 176,505 |
| 176,505 | ||
| Chemicals (1.3%) | ||
| Arkema SA (France) | 697 | 58,612 |
| Celanese Corp. | 551 | 52,306 |
| CF Industries Holdings, Inc. | 4,221 | 169,853 |
| Covestro AG (Germany) | 2,781 | 121,651 |
| Huntsman Corp. | 5,727 | 99,478 |
| LyondellBasell Industries NV Class A | 4,339 | 322,171 |
| Mitsubishi Gas Chemical Co., Inc. (Japan) | 200 | 2,477 |
| Shin-Etsu Chemical Co., Ltd. (Japan) | 1,800 | 149,117 |
| W.R. Grace & Co. | 480 | 33,830 |
| 1,009,495 | ||
| Commercial and consumer services (2.0%) | ||
| Alliance Global Group, Inc. (Philippines) | 229,200 | 68,514 |
| Automatic Data Processing, Inc. | 3,170 | 507,580 |
| Booking Holdings, Inc. † | 206 | 341,181 |
| CK Hutchison Holdings, Ltd. (Hong Kong) | 6,500 | 61,293 |
| CoStar Group, Inc. † | 98 | 49,945 |
| Ctrip.com International, Ltd. ADR (China) † | 998 | 34,491 |
| Fu Shou Yuan International Group, Ltd. (China) | 56,000 | 44,221 |
| Macquarie Infrastructure Co., LLC | 898 | 35,803 |
| Nielsen Holdings PLC | 4,081 | 92,761 |
| 18 Dynamic Asset Allocation Equity Fund |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Commercial and consumer services cont. | ||
| PayPal Holdings, Inc. † | 2,951 | $323,872 |
| ServiceMaster Global Holdings, Inc. † | 740 | 39,960 |
| 1,599,621 | ||
| Communications equipment (1.7%) | ||
| Cisco Systems, Inc. | 24,908 | 1,295,963 |
| 1,295,963 | ||
| Computers (2.9%) | ||
| Amadeus IT Holding SA Class A (Spain) | 844 | 64,317 |
| Apple, Inc. | 6,470 | 1,132,703 |
| Aspen Technology, Inc. † | 930 | 105,657 |
| CDW Corp. of Delaware | 1,256 | 123,641 |
| Dell Technologies, Inc. Class C † | 2,953 | 175,851 |
| Fortinet, Inc. † | 3,712 | 269,046 |
| Fujitsu, Ltd. (Japan) | 500 | 33,831 |
| Nuance Communications, Inc. † | 2,148 | 36,881 |
| Otsuka Corp. (Japan) | 1,300 | 50,412 |
| ServiceNow, Inc. † | 577 | 151,134 |
| Xerox Corp. | 3,835 | 117,389 |
| 2,260,862 | ||
| Conglomerates (0.3%) | ||
| AMETEK, Inc. | 1,687 | 138,148 |
| Mitsubishi Corp. (Japan) | 3,000 | 77,959 |
| 216,107 | ||
| Construction (0.5%) | ||
| CTCI Corp. (Taiwan) | 30,000 | 44,448 |
| HeidelbergCement AG (Germany) | 1,272 | 94,607 |
| HOCHTIEF AG (Germany) | 409 | 48,572 |
| Kajima Corp. (Japan) | 3,800 | 52,058 |
| Loma Negra Cia Industrial Argentina SA ADR (Argentina) † | 2,882 | 28,676 |
| Mota-Engil SGPS SA (Portugal) † | 13,710 | 32,345 |
| Taisei Corp. (Japan) | 2,300 | 83,698 |
| Wijaya Karya Persero Tbk PT (Indonesia) | 188,100 | 29,877 |
| 414,281 | ||
| Consumer cyclicals (0.1%) | ||
| Genting Bhd (Singapore) | 100,800 | 63,763 |
| 63,763 | ||
| Consumer finance (1.2%) | ||
| Capital One Financial Corp. | 3,498 | 300,373 |
| Chailease Holding Co., Ltd. (Taiwan) | 8,460 | 31,013 |
| Discover Financial Services | 3,222 | 240,200 |
| Housing Development Finance Corp., Ltd. (HDFC) (India) | 3,313 | 103,778 |
| Mitsubishi UFJ Lease & Finance Co., Ltd. (Japan) | 3,500 | 17,312 |
| Synchrony Financial | 8,380 | 281,819 |
| 974,495 | ||
| Consumer goods (1.2%) | ||
| Essity AB Class B (Sweden) | 921 | 27,036 |
| L’Oreal SA (France) | 544 | 145,994 |
| LG Household & Health Care, Ltd. (South Korea) | 45 | 48,147 |
| Procter & Gamble Co. (The) | 3,785 | 389,514 |
| Dynamic Asset Allocation Equity Fund 19 |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Consumer goods cont. | ||
| Unilever NV ADR (Netherlands) | 2,487 | $149,883 |
| Unilever PLC (United Kingdom) | 3,256 | 198,795 |
| 959,369 | ||
| Consumer services (0.4%) | ||
| AfreecaTV Co., Ltd. (South Korea) | 619 | 33,858 |
| Ashtead Group PLC (United Kingdom) | 5,348 | 125,564 |
| Pinduoduo, Inc. ADR (China) † | 1,575 | 30,587 |
| TripAdvisor, Inc. † | 2,632 | 111,255 |
| 301,264 | ||
| Containers (0.3%) | ||
| Ball Corp. | 1,416 | 86,928 |
| Berry Plastics Group, Inc. † | 2,279 | 107,159 |
| 194,087 | ||
| Distribution (0.7%) | ||
| ITOCHU Corp. (Japan) | 7,400 | 136,301 |
| Jardine Cycle & Carriage, Ltd. (Singapore) | 1,400 | 34,418 |
| Sysco Corp. | 5,102 | 351,120 |
| 521,839 | ||
| Electric utilities (2.2%) | ||
| AES Corp. | 8,410 | 132,878 |
| AGL Energy, Ltd. (Australia) | 382 | 5,434 |
| CenterPoint Energy, Inc. | 5,893 | 167,597 |
| CLP Holdings, Ltd. (Hong Kong) | 5,000 | 56,527 |
| E.ON SE (Germany) | 12,083 | 126,197 |
| Endesa SA (Spain) | 4,341 | 108,140 |
| Enel SpA (Italy) | 28,165 | 175,504 |
| Evergy, Inc. | 2,195 | 127,617 |
| Exelon Corp. | 7,969 | 383,150 |
| Kansai Electric Power Co., Inc. (The) (Japan) | 400 | 4,651 |
| Pinnacle West Capital Corp. | 1,487 | 139,644 |
| Public Service Enterprise Group, Inc. | 4,740 | 278,522 |
| 1,705,861 | ||
| Electrical equipment (1.1%) | ||
| Emerson Electric Co. | 3,311 | 199,455 |
| Honeywell International, Inc. | 3,594 | 590,530 |
| KEI Industries, Ltd. (India) | 7,870 | 59,315 |
| WESCO International, Inc. † | 673 | 31,517 |
| 880,817 | ||
| Electronics (3.2%) | ||
| Agilent Technologies, Inc. | 3,811 | 255,528 |
| Broadcom, Inc. | 1,154 | 290,393 |
| Brother Industries, Ltd. (Japan) | 900 | 15,268 |
| Garmin, Ltd. | 776 | 59,348 |
| Hoya Corp. (Japan) | 2,100 | 145,335 |
| Keysight Technologies, Inc. † | 1,976 | 148,457 |
| Koninklijke Philips NV (Netherlands) | 221 | 8,708 |
| MediaTek, Inc. (Taiwan) | 9,000 | 88,105 |
| nVent Electric PLC (United Kingdom) | 1,727 | 39,825 |
| NXP Semiconductors NV | 5,841 | 514,943 |
| 20 Dynamic Asset Allocation Equity Fund |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Electronics cont. | ||
| Rockwell Automation, Inc. | 1,223 | $182,044 |
| Samsung Electronics Co., Ltd. (South Korea) | 6,142 | 218,025 |
| Sino-American Silicon Products, Inc. (Taiwan) | 18,000 | 44,693 |
| Thales SA (France) | 719 | 79,040 |
| Xilinx, Inc. | 4,521 | 462,544 |
| 2,552,256 | ||
| Energy (oil field) (—%) | ||
| Hilong Holding, Ltd. (China) | 185,000 | 19,780 |
| 19,780 | ||
| Energy (other) (—%) | ||
| Canvest Environmental Protection Group Co., Ltd. (China) | 17,000 | 7,776 |
| 7,776 | ||
| Engineering and construction (0.1%) | ||
| ACS Actividades de Construccion y Servicios SA (Spain) | 2,571 | 105,748 |
| 105,748 | ||
| Entertainment (0.2%) | ||
| Sony Corp. (Japan) | 2,800 | 134,678 |
| 134,678 | ||
| Environmental (0.1%) | ||
| Clean TeQ Holdings, Ltd. (Australia) † S | 106,597 | 20,388 |
| Pentair PLC | 2,137 | 74,410 |
| 94,798 | ||
| Financial (0.8%) | ||
| 3i Group PLC (United Kingdom) | 6,032 | 80,009 |
| Deutsche Boerse AG (Germany) | 286 | 39,534 |
| Edelweiss Financial Services, Ltd. (India) | 22,345 | 65,061 |
| Hana Financial Group, Inc. (South Korea) | 1,425 | 43,332 |
| Hong Kong Exchanges and Clearing, Ltd. (Hong Kong) | 700 | 22,201 |
| Macquarie Group, Ltd. (Australia) | 1,684 | 140,321 |
| ORIX Corp. (Japan) | 8,600 | 121,104 |
| Partners Group Holding AG (Switzerland) | 192 | 134,598 |
| 646,160 | ||
| Food (1.9%) | ||
| Associated British Foods PLC (United Kingdom) | 2,559 | 79,922 |
| Colruyt SA (Belgium) | 539 | 40,028 |
| Dino Polska SA (Poland) † | 1,286 | 41,654 |
| Grupo Bimbo SAB de CV Ser. A (Mexico) | 33,072 | 66,823 |
| Hershey Co. (The) | 1,784 | 235,417 |
| Jeronimo Martins SGPS SA (Portugal) | 2,532 | 38,487 |
| Mondelez International, Inc. Class A | 9,305 | 473,159 |
| Nestle India, Ltd. (India) | 261 | 43,000 |
| Nestle SA (Switzerland) | 2,022 | 200,820 |
| Tesco PLC (United Kingdom) | 51,305 | 146,691 |
| Wesfarmers, Ltd. (Australia) | 675 | 17,303 |
| WH Group, Ltd. (Hong Kong) | 114,000 | 102,131 |
| X5 Retail Group NV GDR (Russia) | 1,442 | 42,384 |
| 1,527,819 |
| Dynamic Asset Allocation Equity Fund 21 |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Forest products and packaging (0.3%) | ||
| Packaging Corp. of America | 1,538 | $137,005 |
| Sonoco Products Co. | 670 | 41,426 |
| UPM-Kymmene OYJ (Finland) | 3,437 | 85,873 |
| 264,304 | ||
| Gaming and lottery (0.2%) | ||
| Las Vegas Sands Corp. | 2,549 | 140,195 |
| 140,195 | ||
| Health-care services (1.4%) | ||
| Alfresa Holdings Corp. (Japan) | 1,600 | 40,269 |
| Cardinal Health, Inc. | 4,074 | 171,393 |
| Charles River Laboratories International, Inc. † | 411 | 51,560 |
| Chemed Corp. | 193 | 63,292 |
| Encompass Health Corp. | 890 | 52,439 |
| HCA Healthcare, Inc. | 284 | 34,353 |
| Humana, Inc. | 207 | 50,686 |
| McKesson Corp. | 2,297 | 280,556 |
| Medipal Holdings Corp. (Japan) | 1,700 | 36,712 |
| Suzuken Co., Ltd. (Japan) | 900 | 55,225 |
| UnitedHealth Group, Inc. | 1,023 | 247,361 |
| 1,083,846 | ||
| Homebuilding (0.2%) | ||
| Berkeley Group Holdings PLC (The) (United Kingdom) | 590 | 26,092 |
| Daiwa House Industry Co., Ltd. (Japan) | 1,800 | 53,799 |
| PulteGroup, Inc. | 1,273 | 39,463 |
| Taylor Wimpey PLC (United Kingdom) | 21,089 | 44,096 |
| 163,450 | ||
| Industrial (0.1%) | ||
| HD Supply Holdings, Inc. † | 2,473 | 102,605 |
| 102,605 | ||
| Insurance (3.4%) | ||
| Aflac, Inc. | 4,610 | 236,493 |
| AIA Group, Ltd. (Hong Kong) | 11,000 | 103,052 |
| Allianz SE (Germany) | 946 | 210,120 |
| Allstate Corp. (The) | 1,677 | 160,170 |
| American Financial Group, Inc. | 509 | 49,984 |
| Athene Holding, Ltd. Class A † | 2,208 | 89,755 |
| Aviva PLC (United Kingdom) | 27,572 | 141,244 |
| Baloise Holding AG (Switzerland) | 501 | 83,265 |
| Berkshire Hathaway, Inc. Class B † | 138 | 27,244 |
| Hartford Financial Services Group, Inc. (The) | 3,705 | 195,105 |
| Legal & General Group PLC (United Kingdom) | 41,028 | 133,280 |
| Lincoln National Corp. | 2,758 | 163,963 |
| MetLife, Inc. | 10,685 | 493,754 |
| Ping An Insurance (Group) Co. of China, Ltd. Class H (China) | 12,000 | 132,108 |
| Prudential Financial, Inc. | 3,281 | 303,099 |
| Reinsurance Group of America, Inc. | 430 | 63,666 |
| Swiss Life Holding AG (Switzerland) | 60 | 27,267 |
| Unum Group | 3,113 | 98,028 |
| 2,711,597 |
| 22 Dynamic Asset Allocation Equity Fund |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Investment banking/Brokerage (1.4%) | ||
| Ameriprise Financial, Inc. | 1,829 | $252,823 |
| E*Trade Financial Corp. | 4,969 | 222,611 |
| Goldman Sachs Group, Inc. (The) | 1,110 | 202,564 |
| Morgan Stanley | 9,745 | 396,524 |
| 1,074,522 | ||
| Lodging/Tourism (0.6%) | ||
| Carnival PLC (United Kingdom) | 1,421 | 70,199 |
| Crown, Ltd. (Australia) | 4,897 | 42,497 |
| Extended Stay America, Inc. (Units) | 3,124 | 53,545 |
| Hilton Worldwide Holdings, Inc. | 3,011 | 269,304 |
| 435,545 | ||
| Machinery (0.8%) | ||
| Cummins, Inc. | 2,140 | 322,626 |
| Curtiss-Wright Corp. | 243 | 27,092 |
| Hitachi, Ltd. (Japan) | 4,800 | 161,727 |
| Sandvik AB (Sweden) | 8,545 | 131,791 |
| 643,236 | ||
| Manufacturing (0.6%) | ||
| Dover Corp. | 1,324 | 118,379 |
| Ingersoll-Rand PLC | 2,887 | 341,648 |
| 460,027 | ||
| Media (0.1%) | ||
| Interpublic Group of Cos., Inc. (The) | 4,108 | 87,172 |
| 87,172 | ||
| Medical technology (2.7%) | ||
| Abbott Laboratories | 9,304 | 708,314 |
| Baxter International, Inc. | 264 | 19,388 |
| Hill-Rom Holdings, Inc. | 734 | 70,574 |
| Hologic, Inc. † | 1,968 | 86,612 |
| i-SENS, Inc. (South Korea) | 1,121 | 22,803 |
| Masimo Corp. † | 713 | 93,218 |
| Medtronic PLC | 7,960 | 736,937 |
| Sartorius Stedim Biotech (France) | 191 | 26,463 |
| Thermo Fisher Scientific, Inc. | 437 | 116,670 |
| Waters Corp. † | 166 | 33,318 |
| Zimmer Biomet Holdings, Inc. | 1,797 | 204,732 |
| 2,119,029 | ||
| Metals (0.8%) | ||
| Anglo American PLC (United Kingdom) | 4,457 | 106,955 |
| BlueScope Steel, Ltd. (Australia) | 10,627 | 77,228 |
| Boliden AB (Sweden) | 783 | 17,792 |
| Boliden AB (Sweden) † | 783 | 350 |
| Cobalt 27 Capital Corp. (Canada) † | 11,373 | 33,237 |
| Fortescue Metals Group, Ltd. (Australia) | 11,806 | 65,437 |
| Glencore PLC (United Kingdom) | 5,004 | 16,142 |
| Ivanhoe Mines, Ltd. Class A (Canada) † | 15,383 | 37,103 |
| Rio Tinto PLC (United Kingdom) | 3,253 | 186,883 |
| South32, Ltd. (Australia) | 19,917 | 45,729 |
| Steel Dynamics, Inc. | 2,874 | 72,281 |
| 659,137 |
| Dynamic Asset Allocation Equity Fund 23 |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Natural gas utilities (0.2%) | ||
| Eni SpA (Italy) | 8,959 | $135,155 |
| UGI Corp. | 657 | 33,908 |
| 169,063 | ||
| Office equipment and supplies (0.1%) | ||
| Avery Dennison Corp. | 715 | 74,403 |
| 74,403 | ||
| Oil and gas (4.9%) | ||
| BP PLC (United Kingdom) | 10,287 | 69,767 |
| Chevron Corp. | 11,413 | 1,299,370 |
| CNOOC, Ltd. (China) | 44,000 | 71,532 |
| ConocoPhillips | 10,276 | 605,873 |
| Devon Energy Corp. | 3,342 | 84,085 |
| Equinor ASA (Norway) | 5,975 | 114,194 |
| Exxon Mobil Corp. | 1,112 | 78,696 |
| Geopark, Ltd. (Colombia) † | 3,094 | 48,916 |
| Lukoil PJSC ADR (Russia) | 1,187 | 95,232 |
| Marathon Petroleum Corp. | 1,937 | 89,083 |
| MOL Hungarian Oil & Gas PLC (Hungary) † | 5,348 | 60,195 |
| OMV AG (Austria) | 1,327 | 62,288 |
| PBF Energy, Inc. Class A | 2,127 | 56,153 |
| Petroleo Brasileiro SA — Petrobras ADR (Brazil) | 6,153 | 88,788 |
| Phillips 66 | 3,957 | 319,726 |
| Royal Dutch Shell PLC Class B (United Kingdom) | 3,650 | 113,812 |
| Santos, Ltd. (Australia) | 11,251 | 52,438 |
| TOTAL SA (France) | 4,602 | 238,049 |
| Valero Energy Corp. | 4,640 | 326,656 |
| 3,874,853 | ||
| Pharmaceuticals (5.0%) | ||
| AbbVie, Inc. | 4,658 | 357,315 |
| Allergan PLC | 1,374 | 167,504 |
| Astellas Pharma, Inc. (Japan) | 9,000 | 120,381 |
| Aurobindo Pharma, Ltd. (India) | 6,583 | 63,466 |
| Bristol-Myers Squibb Co. | 2,979 | 135,157 |
| China Traditional Chinese Medicine Holdings Co., Ltd. (China) | 38,000 | 20,041 |
| Eli Lilly & Co. | 1,530 | 177,388 |
| GlaxoSmithKline PLC (United Kingdom) | 8,935 | 172,534 |
| Ipsen SA (France) | 64 | 7,635 |
| Jazz Pharmaceuticals PLC † | 266 | 33,396 |
| Johnson & Johnson | 5,600 | 734,440 |
| Merck & Co., Inc. | 8,459 | 670,037 |
| Novartis AG (Switzerland) | 1,956 | 167,987 |
| Novo Nordisk A/S Class B (Denmark) | 4,436 | 209,081 |
| Pfizer, Inc. | 7,971 | 330,956 |
| Roche Holding AG (Switzerland) | 1,149 | 301,522 |
| Shionogi & Co., Ltd. (Japan) | 2,100 | 114,365 |
| UCB SA (Belgium) | 831 | 63,476 |
| Zoetis, Inc. | 1,001 | 101,151 |
| 3,947,832 |
| 24 Dynamic Asset Allocation Equity Fund |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Photography/Imaging (0.1%) | ||
| FUJIFILM Holdings Corp. (Japan) | 1,900 | $90,660 |
| 90,660 | ||
| Power producers (0.3%) | ||
| NRG Energy, Inc. | 4,258 | 144,942 |
| Vistra Energy Corp. | 4,155 | 97,892 |
| 242,834 | ||
| Publishing (0.2%) | ||
| News Corp. Class A | 2,910 | 33,145 |
| Wolters Kluwer NV (Netherlands) | 1,932 | 134,810 |
| 167,955 | ||
| Railroads (0.6%) | ||
| Central Japan Railway Co. (Japan) | 700 | 145,873 |
| Norfolk Southern Corp. | 1,633 | 318,664 |
| 464,537 | ||
| Real estate (3.2%) | ||
| AGNC Investment Corp. R | 8,454 | 138,646 |
| Annaly Capital Management, Inc. R | 8,125 | 71,581 |
| Apple Hospitality REIT, Inc. R | 2,355 | 36,361 |
| AvalonBay Communities, Inc. R | 763 | 154,897 |
| Ayala Land, Inc. (Philippines) | 53,300 | 50,579 |
| Brixmor Property Group, Inc. R | 5,119 | 87,791 |
| Brookfield Property REIT, Inc. Class A R | 2,027 | 37,378 |
| Camden Property Trust R | 766 | 79,174 |
| CBRE Group, Inc. Class A † | 2,582 | 117,997 |
| Cheung Kong Property Holdings, Ltd. (Hong Kong) | 19,000 | 137,101 |
| China Overseas Land & Investment, Ltd. (China) | 12,000 | 41,549 |
| Douglas Emmett, Inc. R | 1,034 | 41,660 |
| Duke Realty Corp. R | 3,169 | 95,355 |
| Gaming and Leisure Properties, Inc. R | 1,891 | 74,676 |
| Healthcare Trust of America, Inc. Class A R | 2,487 | 71,601 |
| Henderson Land Development Co., Ltd. (Hong Kong) | 9,900 | 51,075 |
| Highwoods Properties, Inc. R | 1,210 | 53,071 |
| Hudson Pacific Properties, Inc. R | 1,220 | 40,760 |
| Jones Lang LaSalle, Inc. | 488 | 60,732 |
| Kerry Properties, Ltd. (Hong Kong) | 2,500 | 9,475 |
| Liberty Property Trust R | 1,204 | 57,154 |
| Logan Property Holdings Co., Ltd. (China) | 32,000 | 47,120 |
| Medical Properties Trust, Inc. R | 5,086 | 90,429 |
| Mirvac Group (Australia) R | 6,320 | 13,251 |
| New Residential Investment Corp. R | 6,582 | 100,376 |
| Outfront Media, Inc. R | 1,751 | 43,162 |
| Persimmon PLC (United Kingdom) | 4,288 | 106,527 |
| Prologis, Inc. R | 1,291 | 95,108 |
| Scentre Group (Australia) R | 22,016 | 57,901 |
| SL Green Realty Corp. R | 992 | 85,312 |
| STORE Capital Corp. R | 2,685 | 91,881 |
| Sun Hung Kai Properties, Ltd. (Hong Kong) | 3,500 | 55,325 |
| Swire Properties, Ltd. (Hong Kong) | 3,800 | 15,631 |
| Two Harbors Investment Corp. R | 3,061 | 37,405 |
| Dynamic Asset Allocation Equity Fund 25 |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Real estate cont. | ||
| VICI Properties, Inc. R | 5,098 | $113,074 |
| Weingarten Realty Investors R | 1,322 | 37,280 |
| 2,498,395 | ||
| Regional Bells (0.1%) | ||
| AT&T, Inc. | 1,841 | 56,298 |
| 56,298 | ||
| Restaurants (1.7%) | ||
| Darden Restaurants, Inc. | 2,025 | 235,548 |
| Jubilant Foodworks, Ltd. (India) | 3,700 | 69,636 |
| Starbucks Corp. | 13,754 | 1,046,129 |
| 1,351,313 | ||
| Retail (5.8%) | ||
| Amazon.com, Inc. † | 649 | 1,152,020 |
| Atacadao Distribuicao Comercio e Industria Ltda. (Brazil) | 11,259 | 66,424 |
| Foot Locker, Inc. | 3,194 | 125,684 |
| GS Retail Co., Ltd. (South Korea) | 764 | 21,783 |
| Home Depot, Inc. (The) | 5,532 | 1,050,250 |
| KAR Auction Services, Inc. | 1,763 | 99,116 |
| Koninklijke Ahold Delhaize NV (Netherlands) | 6,568 | 147,593 |
| Lowe’s Cos., Inc. | 7,423 | 692,417 |
| Next PLC (United Kingdom) | 597 | 43,537 |
| Poya International Co., Ltd. (Taiwan) | 5,030 | 59,299 |
| Tapestry, Inc. | 857 | 24,476 |
| TCI Co., Ltd. (Taiwan) | 4,000 | 63,235 |
| Wal-Mart de Mexico SAB de CV (Mexico) | 19,728 | 55,514 |
| Walgreens Boots Alliance, Inc. | 8,066 | 397,976 |
| Walmart, Inc. | 4,667 | 473,420 |
| Wilcon Depot, Inc. (Philippines) | 163,000 | 53,036 |
| 4,525,780 | ||
| Semiconductor (0.6%) | ||
| KLA-Tencor Corp. | 2,619 | 269,940 |
| Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) | 22,000 | 162,952 |
| 432,892 | ||
| Shipping (0.1%) | ||
| Yangzijiang Shipbuilding Holdings, Ltd. (China) | 92,500 | 92,256 |
| 92,256 | ||
| Software (6.0%) | ||
| Adobe, Inc. † | 3,429 | 928,916 |
| Black Knight, Inc. † | 1,166 | 66,101 |
| Cadence Design Systems, Inc. † | 2,837 | 180,348 |
| Electronic Arts, Inc. † | 1,730 | 161,028 |
| F5 Networks, Inc. † | 1,187 | 156,779 |
| Intuit, Inc. | 2,293 | 561,441 |
| Microsoft Corp. | 9,350 | 1,156,408 |
| NetEase, Inc. ADR (China) | 235 | 58,423 |
| NTT Data Corp. (Japan) | 7,900 | 94,098 |
| Oracle Corp. | 20,991 | 1,062,145 |
| Tencent Holdings, Ltd. (China) | 5,500 | 228,090 |
| Tencent Holdings, Ltd. ADR (China) | 866 | 36,164 |
| 4,689,941 |
| 26 Dynamic Asset Allocation Equity Fund |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Technology (0.1%) | ||
| SoftBank Group Corp. (Japan) | 800 | $75,063 |
| 75,063 | ||
| Technology services (6.1%) | ||
| Alibaba Group Holding, Ltd. ADR (China) † | 1,688 | 251,951 |
| Alphabet, Inc. Class A † | 1,903 | 2,105,663 |
| Capgemini SE (France) | 639 | 71,306 |
| eBay, Inc. | 11,256 | 404,428 |
| Facebook, Inc. Class A † | 2,680 | 475,620 |
| Fair Isaac Corp. † | 279 | 82,556 |
| IBM Corp. | 7,823 | 993,443 |
| Infosys, Ltd. (India) | 7,488 | 79,068 |
| Naspers, Ltd. Class N (South Africa) | 378 | 84,732 |
| Naspers, Ltd. Class N ADR (South Africa) | 579 | 26,038 |
| Proofpoint, Inc. † | 507 | 56,967 |
| Yandex NV Class A (Russia) † | 1,004 | 36,064 |
| Zebra Technologies Corp. Class A † | 605 | 103,721 |
| 4,771,557 | ||
| Telecommunications (1.0%) | ||
| BT Group PLC (United Kingdom) | 34,486 | 84,534 |
| Crown Castle International Corp. R | 2,440 | 317,224 |
| Equinix, Inc. R | 131 | 63,638 |
| Eutelsat Communications SA (France) | 761 | 13,355 |
| Juniper Networks, Inc. | 3,820 | 94,010 |
| NTT DoCoMo, Inc. (Japan) | 2,700 | 61,941 |
| Safaricom PLC (Kenya) | 156,118 | 42,355 |
| Telstra Corp., Ltd. (Australia) | 56,029 | 141,784 |
| 818,841 | ||
| Telephone (1.9%) | ||
| Deutsche Telekom AG (Germany) | 8,686 | 146,608 |
| Nippon Telegraph & Telephone Corp. (Japan) | 1,300 | 58,175 |
| Swisscom AG (Switzerland) | 77 | 36,851 |
| Telephone & Data Systems, Inc. | 1,671 | 48,142 |
| Verizon Communications, Inc. | 22,055 | 1,198,689 |
| 1,488,465 | ||
| Textiles (0.4%) | ||
| Hermes International (France) | 189 | 125,722 |
| Kering SA (France) | 289 | 150,120 |
| Shenzhou International Group Holdings, Ltd. (China) | 3,000 | 35,271 |
| 311,113 | ||
| Tire and rubber (0.1%) | ||
| Bridgestone Corp. (Japan) | 2,200 | 81,837 |
| 81,837 | ||
| Tobacco (0.1%) | ||
| Imperial Brands PLC (United Kingdom) | 4,614 | 111,804 |
| 111,804 | ||
| Toys (0.2%) | ||
| Namco Bandai Holdings, Inc. (Japan) | 700 | 34,376 |
| Nintendo Co., Ltd. (Japan) | 300 | 106,079 |
| 140,455 |
| Dynamic Asset Allocation Equity Fund 27 |
| COMMON STOCKS (89.7%)* cont. | Shares | Value |
| Transportation services (0.2%) | ||
| Aena SME SA (Spain) | 624 | $114,761 |
| Deutsche Post AG (Germany) | 1,010 | 29,757 |
| SG Holdings Co., Ltd. (Japan) | 1,200 | 32,520 |
| 177,038 | ||
| Trucks and parts (0.2%) | ||
| Allison Transmission Holdings, Inc. | 2,284 | 94,535 |
| Faurecia SA (France) | 2,577 | 94,658 |
| 189,193 | ||
| Waste Management (0.7%) | ||
| Republic Services, Inc. | 1,524 | 128,915 |
| Sunny Friend Environmental Technology Co., Ltd. (Taiwan) | 9,000 | 73,881 |
| Waste Management, Inc. | 3,007 | 328,815 |
| 531,611 | ||
| Water Utilities (0.1%) | ||
| China Water Affairs Group, Ltd. (China) | 84,000 | 81,357 |
| 81,357 | ||
| Total common stocks (cost $64,498,597) | $70,516,505 |
| INVESTMENT COMPANIES (1.0%)* | Shares | Value |
| iShares MSCI EAFE ETF | 1,098 | $69,613 |
| iShares MSCI Emerging Markets ETF | 1,936 | 78,815 |
| SPDR S&P 500 ETF Trust S | 2,116 | 582,471 |
| SPDR S&P MidCap 400 ETF Trust | 232 | 76,590 |
| Total investment companies (cost $838,566) | $807,489 |
| Expiration | Strike | |||
| WARRANTS (0.3%)* † | date | price | Warrants | Value |
| Bupa Arabia for Cooperative Insurance Co. 144A | ||||
| (Saudi Arabia) | 12/16/21 | $0.00 | 2,838 | $66,592 |
| Guangzhou Baiyun International Airport | ||||
| 144A (China) | 4/10/20 | 0.00 | 17,800 | 40,406 |
| Jarir Marketing Co. 144A (Saudi Arabia) | 1/20/22 | 0.00 | 923 | 41,100 |
| National Bank of Kuwait SAKP 144A (Kuwait) | 1/16/20 | 0.00 | 17,623 | 56,100 |
| Saudi Co. For Hardware CJSC 144A (Saudi Arabia) | 1/20/22 | 0.00 | 2,150 | 35,830 |
| United International Transportation Co. 144A | ||||
| (Saudi Arabia) | 12/9/21 | 0.00 | 3,264 | 28,721 |
| Total warrants (cost $264,438) | $268,749 |
| PURCHASED OPTIONS | Expiration | ||||
| OUTSTANDING (0.0%)* | date/strike | Notional | Contract | ||
| Counterparty | price | amount | amount | Value | |
| Goldman Sachs International | |||||
| AUD/JPY (Put) | Aug-19/JPY 76.00 | 658,946 | AUD | 949,900 | $15,465 |
| Total purchased options outstanding (cost $9,140) | $15,465 | ||||
| Principal amount/ | |||
| SHORT-TERM INVESTMENTS (9.8%)* | shares | Value | |
| Putnam Cash Collateral Pool, LLC 2.56% d | Shares | 685,922 | $685,922 |
| Putnam Short Term Investment Fund 2.52% L | Shares | 6,727,586 | 6,727,586 |
| U.S. Treasury Bills 2.405%, 6/20/19 # | $20,000 | 19,979 | |
| U.S. Treasury Bills 2.471%, 6/27/19 # | 3,001 | 2,995 | |
| 28 Dynamic Asset Allocation Equity Fund |
| Principal amount/ | ||
| SHORT-TERM INVESTMENTS (9.8%)* cont. | shares | Value |
| U.S. Treasury Bills 2.473%, 7/25/19 # | $135,002 | $134,552 |
| U.S. Treasury Bills 2.466%, 8/1/19 # | 16,000 | 15,939 |
| U.S. Treasury Bills 2.466%, 7/18/19 # | 131,000 | 130,624 |
| Total short-term investments (cost $7,717,512) | $7,717,597 |
| TOTAL INVESTMENTS | |
| Total investments (cost $73,328,253) | $79,325,805 |
Key to holding’s currency abbreviations
| AUD | Australian Dollar |
Key to holding’s abbreviations
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| CJSC | Closed Joint Stock Company |
| ETF | Exchange Traded Fund |
| GDR | Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| PJSC | Public Joint Stock Company |
| SPDR | S&P Depository Receipts |
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 $78,640,198.
† This security is non-income-producing.
# This security, in part or in entirety, was pledged and segregated with the broker to cover margin requirements for futures contracts at the close of the reporting period. Collateral at period end totaled $296,023 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).
d Affiliated company. See Notes 1 and 5 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
R Real Estate Investment Trust.
S Security on loan, in part or in entirety, at the close of the reporting period (Note 1).
At the close of the reporting period, the fund maintained liquid assets totaling $1,096,683 to cover certain derivative contracts.
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.
The dates shown on debt obligations are the original maturity dates.
| Dynamic Asset Allocation Equity Fund 29 |
| DIVERSIFICATION BY COUNTRY |
Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value):
| United States | 78.2% | Taiwan | 0.8% | |
| Japan | 3.5 | India | 0.8 | |
| United Kingdom | 3.0 | Netherlands | 0.8 | |
| China | 1.7 | Spain | 0.7 | |
| France | 1.5 | South Korea | 0.5 | |
| Switzerland | 1.2 | Italy | 0.5 | |
| Germany | 1.1 | Other | 3.8 | |
| Hong Kong | 1.0 | Total | 100.0% | |
| Australia | 0.9 |
| FORWARD CURRENCY CONTRACTS at 5/31/19 (aggregate face value $11,625,272) | ||||||
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type* | date | Value | face value | (depreciation) |
| Bank of America N.A. | ||||||
| Australian Dollar | Buy | 7/17/19 | $302,080 | $309,784 | $(7,704) | |
| British Pound | Buy | 6/19/19 | 94,766 | 109,618 | (14,852) | |
| Canadian Dollar | Buy | 7/17/19 | 188,874 | 190,148 | (1,274) | |
| Euro | Buy | 6/19/19 | 670,015 | 689,004 | (18,989) | |
| Japanese Yen | Buy | 8/21/19 | 82,558 | 82,126 | 432 | |
| Norwegian Krone | Buy | 6/19/19 | 45,881 | 46,412 | (531) | |
| Norwegian Krone | Sell | 6/19/19 | 45,881 | 46,123 | 242 | |
| Barclays Bank PLC | ||||||
| Canadian Dollar | Sell | 7/17/19 | 215,835 | 219,843 | 4,008 | |
| Euro | Buy | 6/19/19 | 93,064 | 93,300 | (236) | |
| Euro | Sell | 9/18/19 | 80,684 | 80,328 | (356) | |
| Hong Kong Dollar | Sell | 8/21/19 | 173,670 | 173,728 | 58 | |
| Norwegian Krone | Buy | 6/19/19 | 192,704 | 197,664 | (4,960) | |
| Norwegian Krone | Buy | 9/18/19 | 80,010 | 79,901 | 109 | |
| Swedish Krona | Buy | 6/19/19 | 78,760 | 80,273 | (1,513) | |
| Swedish Krona | Sell | 6/19/19 | 78,760 | 78,233 | (527) | |
| Swiss Franc | Buy | 6/19/19 | 134,926 | 136,516 | (1,590) | |
| Citibank, N.A. | ||||||
| Australian Dollar | Buy | 7/17/19 | 97,521 | 102,320 | (4,799) | |
| British Pound | Buy | 6/19/19 | 80,848 | 81,074 | (226) | |
| British Pound | Sell | 6/19/19 | 80,848 | 81,493 | 645 | |
| Canadian Dollar | Sell | 7/17/19 | 154,284 | 156,782 | 2,498 | |
| Danish Krone | Sell | 6/19/19 | 38,903 | 32,104 | (6,799) | |
| Euro | Buy | 6/19/19 | 168,567 | 169,799 | (1,232) | |
| Euro | Sell | 6/19/19 | 168,567 | 173,059 | 4,492 | |
| Japanese Yen | Buy | 8/21/19 | 370,840 | 363,197 | 7,643 | |
| New Zealand Dollar | Sell | 7/17/19 | 42,040 | 40,790 | (1,250) | |
| Norwegian Krone | Buy | 6/19/19 | 54,432 | 58,387 | (3,955) | |
| 30 Dynamic Asset Allocation Equity Fund |
| FORWARD CURRENCY CONTRACTS at 5/31/19 (aggregate face value $11,625,272) cont. | ||||||
| Unrealized | ||||||
| Contract | Delivery | Aggregate | appreciation/ | |||
| Counterparty | Currency | type* | date | Value | face value | (depreciation) |
| Credit Suisse International | ||||||
| Australian Dollar | Buy | 7/17/19 | $113,498 | $118,751 | $(5,253) | |
| Canadian Dollar | Sell | 7/17/19 | 815 | 826 | 11 | |
| Euro | Buy | 6/19/19 | 80,872 | 81,025 | (153) | |
| Euro | Sell | 6/19/19 | 80,872 | 82,992 | 2,120 | |
| Goldman Sachs International | ||||||
| Australian Dollar | Sell | 7/17/19 | 184,624 | 182,822 | (1,802) | |
| Euro | Sell | 6/19/19 | 32,326 | 37,639 | 5,313 | |
| Japanese Yen | Buy | 8/21/19 | 981 | 953 | 28 | |
| New Zealand Dollar | Sell | 7/17/19 | 123,238 | 123,286 | 48 | |
| Norwegian Krone | Buy | 6/19/19 | 195,435 | 202,186 | (6,751) | |
| Swedish Krona | Sell | 6/19/19 | 90,327 | 86,158 | (4,169) | |
| HSBC Bank USA, National Association | ||||||
| Australian Dollar | Buy | 7/17/19 | 101,480 | 108,197 | (6,717) | |
| British Pound | Buy | 6/19/19 | 183,078 | 192,516 | (9,438) | |
| British Pound | Sell | 6/19/19 | 183,078 | 187,233 | 4,155 | |
| Canadian Dollar | Sell | 7/17/19 | 36,812 | 38,003 | 1,191 | |
| Chinese Yuan | Buy | 8/21/19 | 168,663 | 173,335 | (4,672) | |
| Euro | Sell | 6/19/19 | 14,765 | 20,514 | 5,749 | |
| Japanese Yen | Sell | 8/21/19 | 86,067 | 84,308 | (1,759) | |
| Norwegian Krone | Buy | 6/19/19 | 78,476 | 79,363 | (887) | |
| Norwegian Krone | Sell | 6/19/19 | 78,476 | 80,293 | 1,817 | |
| Swedish Krona | Buy | 6/19/19 | 41,296 | 41,021 | 275 | |
| Swedish Krona | Sell | 6/19/19 | 41,296 | 40,918 | (378) | |
| JPMorgan Chase Bank N.A. | ||||||
| Australian Dollar | Buy | 7/17/19 | 92,034 | 94,576 | (2,542) | |
| British Pound | Buy | 6/19/19 | 6,453 | 15,174 | (8,721) | |
| Canadian Dollar | Sell | 7/17/19 | 245,832 | 248,845 | 3,013 | |
| Euro | Buy | 6/19/19 | 612,299 | 617,543 | (5,244) | |
| Euro | Sell | 6/19/19 | 612,299 | 617,758 | 5,459 | |
| Japanese Yen | Buy | 8/21/19 | 164,671 | 163,546 | 1,125 | |
| New Zealand Dollar | Sell | 7/17/19 | 160,431 | 161,995 | 1,564 | |
| Norwegian Krone | Buy | 6/19/19 | 6,551 | 4,665 | 1,886 | |
| Singapore Dollar | Buy | 8/21/19 | 196,391 | 198,079 | (1,688) | |
| South Korean Won | Buy | 8/21/19 | 207,707 | 213,253 | (5,546) | |
| Swedish Krona | Buy | 6/19/19 | 93,979 | 96,129 | (2,150) | |
| Swiss Franc | Buy | 6/19/19 | 259,749 | 262,777 | (3,028) | |
| NatWest Markets PLC | ||||||
| Australian Dollar | Buy | 7/17/19 | 354,730 | 364,686 | (9,956) | |
| Canadian Dollar | Buy | 7/17/19 | 17,480 | 17,238 | 242 | |
| Euro | Sell | 6/19/19 | 113,533 | 119,292 | 5,759 | |
| Japanese Yen | Sell | 8/21/19 | 44,221 | 42,969 | (1,252) | |
| Norwegian Krone | Buy | 6/19/19 | 34,505 | 35,670 | (1,165) | |
| Dynamic Asset Allocation Equity Fund 31 |
| FORWARD CURRENCY CONTRACTS at 5/31/19 (aggregate face value $11,625,272) 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 | $76,684 | $76,783 | $99 | |
| British Pound | Buy | 6/19/19 | 157,520 | 157,960 | (440) | |
| British Pound | Sell | 6/19/19 | 157,520 | 162,945 | 5,425 | |
| Canadian Dollar | Sell | 7/17/19 | 9,481 | 9,507 | 26 | |
| Euro | Buy | 6/19/19 | 203,242 | 203,976 | (734) | |
| Euro | Sell | 6/19/19 | 203,242 | 208,088 | 4,846 | |
| Japanese Yen | Sell | 8/21/19 | 50,696 | 47,385 | (3,311) | |
| New Zealand Dollar | Sell | 7/17/19 | 10,543 | 11,018 | 475 | |
| Norwegian Krone | Buy | 6/19/19 | 113,484 | 119,658 | (6,174) | |
| Swedish Krona | Sell | 6/19/19 | 135,513 | 139,167 | 3,654 | |
| UBS AG | ||||||
| Australian Dollar | Buy | 7/17/19 | 277,491 | 286,910 | (9,419) | |
| British Pound | Buy | 6/19/19 | 204,586 | 205,159 | (573) | |
| British Pound | Sell | 6/19/19 | 204,586 | 211,474 | 6,888 | |
| Canadian Dollar | Sell | 7/17/19 | 68,587 | 69,555 | 968 | |
| Euro | Buy | 6/19/19 | 164,764 | 165,698 | (934) | |
| Euro | Sell | 6/19/19 | 164,764 | 166,960 | 2,196 | |
| Japanese Yen | Sell | 8/21/19 | 152,793 | 147,696 | (5,097) | |
| Swedish Krona | Sell | 6/19/19 | 80,829 | 80,044 | (785) | |
| WestPac Banking Corp. | ||||||
| Australian Dollar | Sell | 7/17/19 | 14,308 | 13,643 | (665) | |
| Euro | Buy | 6/19/19 | 16,331 | 16,342 | (11) | |
| Euro | Sell | 6/19/19 | 16,331 | 16,764 | 433 | |
| Unrealized appreciation | 84,892 | |||||
| Unrealized (depreciation) | (182,207) | |||||
| Total | $(97,315) | |||||
* 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) | |
| Russell 2000 Index E-Mini (Long) | 68 | $4,982,655 | $4,986,100 | Jun-19 | $(263,546) |
| S&P 500 Index E-Mini (Long) | 7 | 963,221 | 963,410 | Jun-19 | (8,432) |
| Unrealized appreciation | — | ||||
| Unrealized (depreciation) | (271,978) | ||||
| Total | $(271,978) | ||||
| WRITTEN OPTIONS OUTSTANDING at 5/31/19 (premiums $4,088) | |||||
| Expiration | Notional | Contract | |||
| Counterparty | date/strike price | amount | amount | Value | |
| Goldman Sachs International | |||||
| AUD/JPY (Put) | Aug-19/JPY 72.00 | $988,384 | AUD | $1,424,800 | $5,864 |
| Total | $5,864 | ||||
| 32 Dynamic Asset Allocation Equity Fund |
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | |||||
| Investments in securities: | Level 1 | Level 2 | Level 3 | ||
| Common stocks*: | |||||
| Basic materials | $1,027,716 | $1,319,501 | $— | ||
| Capital goods | 4,469,683 | 673,737 | — | ||
| Communication services | 1,954,506 | 585,603 | — | ||
| Conglomerates | 138,148 | 77,959 | — | ||
| Consumer cyclicals | 6,411,647 | 1,642,707 | — | ||
| Consumer staples | 5,225,172 | 2,170,903 | — | ||
| Energy | 2,997,346 | 905,063 | — | ||
| Financials | 9,041,746 | 3,798,038 | — | ||
| Health care | 6,909,433 | 1,430,668 | — | ||
| Technology | 14,535,491 | 1,624,995 | — | ||
| Transportation | 773,381 | 603,947 | — | ||
| Utilities and power | 1,506,150 | 692,965 | — | ||
| Total common stocks | 54,990,419 | 15,526,086 | — | ||
| Investment companies | 807,489 | — | — | ||
| Purchased options outstanding | — | 15,465 | — | ||
| Warrants | — | 268,749 | — | ||
| Short-term investments | 6,727,586 | 990,011 | — | ||
| Totals by level | $62,525,494 | $16,800,311 | $— | ||
| Valuation inputs | |||||
| Other financial instruments: | Level 1 | Level 2 | Level 3 | ||
| Forward currency contracts | $— | $(97,315) | $— | ||
| Futures contracts | (271,978) | — | — | ||
| Written options outstanding | — | (5,864) | — | ||
| Totals by level | $(271,978) | $(103,179) | $— | ||
* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.
The accompanying notes are an integral part of these financial statements.
| Dynamic Asset Allocation Equity Fund 33 |
Statement of assets and liabilities 5/31/19
| ASSETS | |
| Investment in securities, at value, including $665,054 of securities on loan (Notes 1 and 8): | |
| Unaffiliated issuers (identified cost $65,914,745) | $71,912,297 |
| Affiliated issuers (identified cost $7,413,508) (Notes 1 and 5) | 7,413,508 |
| Cash | 19,203 |
| Foreign currency (cost $47,298) (Note 1) | 44,318 |
| Dividends, interest and other receivables | 222,670 |
| Foreign tax reclaim | 41,577 |
| Receivable for shares of the fund sold | 132,642 |
| Receivable for investments sold | 1,825 |
| Receivable for investor servicing fees (Note 2) | 381 |
| Receivable from Manager (Note 2) | 9,190 |
| Unrealized appreciation on forward currency contracts (Note 1) | 84,892 |
| Prepaid assets | 15,545 |
| Total assets | 79,898,048 |
| LIABILITIES | |
| Payable for shares of the fund repurchased | 138,612 |
| Payable for custodian fees (Note 2) | 72,478 |
| Payable for Trustee compensation and expenses (Note 2) | 6,806 |
| Payable for administrative services (Note 2) | 315 |
| Payable for auditing and tax fees | 74,959 |
| Payable for variation margin on futures contracts (Note 1) | 80,890 |
| Unrealized depreciation on forward currency contracts (Note 1) | 182,207 |
| Written options outstanding, at value (premiums $4,088) (Note 1) | 5,864 |
| Collateral on securities loaned, at value (Note 1) | 685,922 |
| Other accrued expenses | 9,797 |
| Total liabilities | 1,257,850 |
| Net assets | $78,640,198 |
| REPRESENTED BY | |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $73,168,771 |
| Total distributable earnings (Note 1) | 5,471,427 |
| Total — Representing net assets applicable to capital shares outstanding | $78,640,198 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
| Net asset value and redemption price per class A share ($38,512 divided by 3,477 shares) | $11.07† |
| Offering price per class A share (100/94.25 of $11.07)* | $11.75 |
| Net asset value, offering price and redemption price per class P share | |
| ($78,601,686 divided by 7,089,266 shares) | $11.09 |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
† Net asset value may not recalculate due to rounding of fractional shares.
The accompanying notes are an integral part of these financial statements.
| 34 Dynamic Asset Allocation Equity Fund |
Statement of operations Year ended 5/31/19
| INVESTMENT INCOME | |
| Dividends (net of foreign tax of $59,517) | $1,815,384 |
| Interest (including interest income of $148,739 from investments in affiliated issuers) (Note 5) | 155,231 |
| Securities lending (net of expenses) (Notes 1 and 5) | 5,070 |
| Total investment income | 1,975,685 |
| EXPENSES | |
| Compensation of Manager (Note 2) | 473,433 |
| Investor servicing fees (Note 2) | 8,066 |
| Custodian fees (Note 2) | 82,849 |
| Trustee compensation and expenses (Note 2) | 3,942 |
| Administrative services (Note 2) | 2,376 |
| Auditing and tax fees | 100,101 |
| Other | 52,294 |
| Fees waived and reimbursed by Manager (Note 2) | (224,588) |
| Total expenses | 498,473 |
| Expense reduction (Note 2) | (3,880) |
| Net expenses | 494,593 |
| Net investment income | 1,481,092 |
| REALIZED AND UNREALIZED GAIN (LOSS) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (net of foreign tax of $1,159) (Notes 1 and 3) | 4,901,869 |
| Foreign currency transactions (Note 1) | (8,841) |
| Forward currency contracts (Note 1) | (198,124) |
| Futures contracts (Note 1) | (219,886) |
| Written options (Note 1) | 6,833 |
| Total net realized gain | 4,481,851 |
| Change in net unrealized appreciation (depreciation) on: | |
| Securities from unaffiliated issuers | (7,370,892) |
| Assets and liabilities in foreign currencies | (2,522) |
| Forward currency contracts | (19,142) |
| Futures contracts | (403,272) |
| Written options | (1,776) |
| Total change in net unrealized depreciation | (7,797,604) |
| Net loss on investments | (3,315,753) |
| Net decrease in net assets resulting from operations | $(1,834,661) |
The accompanying notes are an integral part of these financial statements.
| Dynamic Asset Allocation Equity Fund 35 |
Statement of changes in net assets
| INCREASE (DECREASE) IN NET ASSETS | Year ended 5/31/19 | Year ended 5/31/18 |
| Operations | ||
| Net investment income | $1,481,092 | $1,504,144 |
| Net realized gain on investments | ||
| and foreign currency transactions | 4,481,851 | 5,194,394 |
| Change in net unrealized appreciation (depreciation) | ||
| of investments and assets and liabilities | ||
| in foreign currencies | (7,797,604) | 4,082,175 |
| Net increase (decrease) in net assets resulting | ||
| from operations | (1,834,661) | 10,780,713 |
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
| Class A | (272) | (406) |
| Class P | (1,165,086) | (1,866,485) |
| Net realized short-term gain on investments | ||
| Class A | (292) | — |
| Class P | (1,047,731) | — |
| From net realized long-term gain on investments | ||
| Class A | (1,953) | (1,304) |
| Class P | (7,002,285) | (5,403,296) |
| Increase from capital share transactions (Note 4) | 2,330,261 | 1,761,030 |
| Total increase (decrease) in net assets | (8,722,019) | 5,270,252 |
| NET ASSETS | ||
| Beginning of year | 87,362,217 | 82,091,965 |
| End of year (Note 1) | $78,640,198 | $87,362,217 |
The accompanying notes are an integral part of these financial statements.
| 36 Dynamic Asset Allocation Equity Fund |
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| Dynamic Asset Allocation Equity Fund 37 |
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS | LESS DISTRIBUTIONS | RATIOS AND SUPPLEMENTAL DATA | |||||||||||
| Ratio | Ratio of net | ||||||||||||
| Net asset | Net realized | of expenses | investment | ||||||||||
| value, | and unrealized | Total from | From net | From | Net asset | Total return | Net assets, | to average | income (loss) | Portfolio | |||
| beginning | Net investment | gain (loss) | investment | investment | net realized gain | Total | value, end | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss)a | on investments | operations | income | on investments | distributions | of period | value (%)b | (in thousands) | (%)c,d | net assets (%)d | (%) |
| Class A | |||||||||||||
| May 31, 2019 | $13.28 | .21 | (.81) | (.60) | (.17) | (1.44) | (1.61) | $11.07 | (3.72) | $39 | .86 | 1.71 | 115 |
| May 31, 2018 | 12.75 | .20 | 1.52 | 1.72 | (.28) | (.91) | (1.19) | 13.28 | 13.56 | 21 | .87 | 1.52 | 50 |
| May 31, 2017 | 11.05 | .15 | 1.70 | 1.85 | (.15) | — | (0.15) | 12.75 | 16.84 | 18 | .89 | 1.30 | 106 |
| May 31, 2016 | 12.19 | .14 | (.83) | (.69) | (.14) | (.31) | (0.45) | 11.05 | (5.69) | 16 | 1.03e | 1.20e | 109 |
| May 31, 2015 | 13.08 | .13 | 1.26 | 1.39 | (.20) | (2.08) | (2.28) | 12.19 | 11.69 | 34 | 1.03 | .96 | 132 |
| Class P | |||||||||||||
| May 31, 2019 | $13.30 | .23 | (.79) | (.56) | (.21) | (1.44) | (1.65) | $11.09 | (3.43) | $78,602 | .62 | 1.85 | 115 |
| May 31, 2018 | 12.77 | .24 | 1.51 | 1.75 | (.31) | (.91) | (1.22) | 13.30 | 13.79 | 87,341 | .63 | 1.77 | 50 |
| May 31, 2017† | 11.41 | .14 | 1.38 | 1.52 | (.16) | — | (0.16) | 12.77 | 13.39* | 82,074 | .45* | 1.20* | 106 |
* Not annualized.
† For the period August 31, 2016 (commencement of operations) to May 31, 2017.
a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
c Includes amounts paid through expense offset and/or brokerage service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.
d Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):
| Percentage of average net assets | ||
| Class A | Class P | |
| May 31,2019 | 0.28% | 0.28% |
| May 31, 2018 | 0.26 | 0.26 |
| May 31, 2017 | 0.29 | 0.23* |
| May 31, 2016 | 0.33 | — |
| May 31, 2015 | 0.50 | — |
e Reflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of less than .01% as a percentage of average net assets per share for each class (Note 2).
The accompanying notes are an integral part of these financial statements.
| 38 Dynamic Asset Allocation Equity Fund | Dynamic Asset Allocation Equity Fund 39 |
Notes to financial statements 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 Asset Allocation Equity Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek long-term growth. The fund invests mainly in common stocks (growth or value stocks or both) of large and midsize companies worldwide. Under normal circumstances, the fund invests at least 80% of the fund’s net assets in common stocks. This policy may be changed only after 60 days’ notice to shareholders. While Putnam Management typically allocates approximately 75% of the fund’s assets to investments in U.S. companies, and 25% of the fund’s assets to investments in international companies, these allocations may vary. Putnam Management invests mainly in developed countries but may invest in emerging markets. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The fund may also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.
The fund offers class A and class P shares. Class A shares are sold with a maximum front-end sales charge of 5.75%, and generally do not pay a contingent deferred sales charge. Class P shares, which are sold at net asset value, are generally subject to the same expenses as class A, but do not bear a distribution fee and bear lower investor servicing fee, which is identified in Note 2. Class P shares are generally only available to corporate and institutional clients and clients in other approved programs. Class P shares are not available to all investors. As of the end of the reporting period, all of the class P shares are held by the Putnam RetirementReady Funds.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the fund’s Amended and Restated Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Note 1: Significant accounting policies
The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
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
| 40 Dynamic Asset Allocation Equity Fund |
procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.
Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
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
| Dynamic Asset Allocation Equity Fund 41 |
or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain. All premiums/discounts are amortized/accreted on a yield-to-maturity basis.
Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.
Options contracts The fund uses options contracts to enhance the return on a security owned, to gain exposure to securities and to manage downside risks.
The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.
Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap option contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract.
Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Futures contracts The fund uses futures contracts to manage exposure to market risk, and to equitize cash.
The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”
Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.
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.
| 42 Dynamic Asset Allocation Equity Fund |
The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. The fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements 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 $93,848 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 $685,922 and the value of securities loaned amounted to $665,054.
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
| Dynamic Asset Allocation Equity Fund 43 |
committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer certain capital losses of $704,640 recognized during the period between November 1, 2018 and May 31, 2019 to its fiscal year ending May 31, 2020.
Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and/or permanent differences from losses on wash sale transactions, from foreign currency gains and losses, from late year loss deferrals, from unrealized gains and losses on certain futures contracts, from unrealized gains and losses on passive foreign investment companies, and from redesignation of taxable distributions. 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 $258,236 to decrease undistributed net investment income, and $258,236 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 | $9,869,074 |
| Unrealized depreciation | (4,067,737) |
| Net unrealized appreciation | 5,801,337 |
| Undistributed ordinary income | 378,651 |
| Post-October capital loss deferral | (704,640) |
| Cost for federal income tax purposes | $73,149,311 |
For the fiscal year ended May 31, 2018, the fund had undistributed net investment income of $410,038.
Expenses of the Trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.
| 44 Dynamic Asset Allocation Equity Fund |
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:
| 0.750% | of the first $5 billion, | 0.550% | of the next $50 billion, | |
| 0.700% | of the next $5 billion, | 0.530% | of the next $50 billion, | |
| 0.650% | of the next $10 billion, | 0.520% | of the next $100 billion and | |
| 0.600% | of the next $10 billion, | 0.515% | of any excess thereafter. |
For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.591% of the fund’s average net assets.
Putnam Management has 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 0.02% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $224,588 as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.
The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. PAC did not manage any portion of the assets of the fund during the reporting period. If Putnam Management or PIL were to engage the services of PAC, Putnam Management or PIL, as applicable, would pay a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, and class P shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.
Class P shares paid a monthly fee based on the average net assets of class P shares at an annual rate of 0.01%.
During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:
| Class A | $62 | |||||||||||
| Class P | 8,004 | |||||||||||
| Total | $8,066 |
| Dynamic Asset Allocation Equity Fund 45 |
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 $103 under the expense offset arrangements and by $3,777 under the brokerage/service arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $58, 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 a distribution plan (the Plan) pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plan is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, for services provided and expenses incurred in distributing shares of the fund.
The Plan provides for payment by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35% of the average net assets attributable to class A shares. The Trustees currently have not approved payments under the Plan.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies for net commissions from the sale of shares.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A redemptions.
Note 3: Purchases and sales of securities
During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:
| Cost of purchases | Proceeds from sales | |
| Investments in securities (Long-term) | $84,731,791 | $88,504,966 |
| U.S. government securities (Long-term) | — | — |
| Total | $84,731,791 | $88,504,966 |
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.
| 46 Dynamic Asset Allocation Equity Fund |
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 | 1,669 | $18,758 | — | $— |
| Shares issued in connection with | ||||
| reinvestment of distributions | 243 | 2,517 | 130 | 1,710 |
| 1,912 | 21,275 | 130 | 1,710 | |
| Shares repurchased | — | — | — | — |
| Net increase | 1,912 | $21,275 | 130 | $1,710 |
| YEAR ENDED 5/31/19 | YEAR ENDED 5/31/18 | |||
| Class P | Shares | Amount | Shares | Amount |
| Shares sold | 2,777,757 | $33,906,980 | 2,056,598 | $27,599,909 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 887,775 | 9,215,102 | 550,262 | 7,268,968 |
| 3,665,532 | 43,122,082 | 2,606,860 | 34,868,877 | |
| Shares repurchased | (3,143,810) | (40,813,096) | (2,466,687) | (33,109,557) |
| Net increase | 521,722 | $2,308,986 | 140,173 | $1,759,320 |
At the close of the reporting period, Putnam Investments, LLC owned the following shares of the fund:
| Shares owned | Percentage of ownership | Value | |
| Class A | 1,190 | 34.22% | $13,173 |
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* | $701,420 | $17,351,172 | $17,366,670 | $22,415 | $685,922 |
| Putnam Short Term | |||||
| Investment Fund** | 8,319,319 | 29,062,055 | 30,653,788 | 148,739 | 6,727,586 |
| Total Short-term | |||||
| investments | $9,020,739 | $46,413,227 | $48,020,458 | $171,154 | $7,413,508 |
* 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.
| Dynamic Asset Allocation Equity Fund 47 |
Note 6: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.
Note 7: Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:
| Purchased currency option contracts (contract amount) | $930,000 |
| Written currency option contracts (contract amount) | $1,000,000 |
| Futures contracts (number of contracts) | 90 |
| Forward currency contracts (contract amount) | $25,500,000 |
| Warrants (number of warrants) | 54,000 |
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 |
| Foreign exchange | Investments, | |||
| contracts | Receivables | $100,357 | Payables | $188,071 |
| Investments, Net | ||||
| assets — Unrealized | Payables, Net assets — | |||
| Equity contracts | appreciation | 268,749 | Unrealized depreciation | 271,978* |
| Total | $369,106 | $460,049 | ||
* Includes cumulative appreciation/depreciation of futures contracts as reported in the fund’s portfolio. Only current day’s variation margin is reported within the Statement of assets and liabilities.
| 48 Dynamic Asset Allocation Equity Fund |
The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):
| Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments | |||||
| Derivatives not accounted | Forward | ||||
| for as hedging instruments | currency | ||||
| under ASC 815 | Warrants | Options | Futures | contracts | Total |
| Foreign exchange contracts | $— | $(12,070) | $— | $(198,124) | $(210,194) |
| Equity contracts | 12,240 | — | (219,886) | — | (207,646) |
| Total | $12,240 | $(12,070) | $(219,886) | $(198,124) | $(417,840) |
| Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) | |||||
| on investments | |||||
| Derivatives not accounted | Forward | ||||
| for as hedging instruments | currency | ||||
| under ASC 815 | Warrants | Options | Futures | contracts | Total |
| Foreign exchange contracts | $— | $3,970 | $— | $(19,142) | $(15,172) |
| Equity contracts | 11,959 | — | (403,272) | — | (391,313) |
| Total | $11,959 | $3,970 | $(403,272) | $(19,142) | $(406,485) |
| Dynamic Asset Allocation Equity Fund 49 |
Note 8: Offsetting of financial and derivative assets and liabilities
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.
| Bank of America N.A. |
Barclays Bank PLC |
BofA Securities, Inc. |
Citibank, N.A. | Credit Suisse International |
Goldman Sachs International |
HSBC Bank USA, National Association |
JPMorgan Chase Bank N.A. |
NatWest Markets PLC |
State Street Bank and Trust Co. |
UBS AG | WestPac Banking Corp. |
Total | |
| Assets: | |||||||||||||
| Futures contracts§ | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| Forward currency contracts# | 674 | 4,175 | — | 15,278 | 2,131 | 5,389 | 13,187 | 13,047 | 6,001 | 14,525 | 10,052 | 433 | 84,892 |
| Purchased options**# | — | — | — | — | — | 15,465 | — | — | — | — | — | — | 15,465 |
| Total Assets | $674 | $4,175 | $— | $15,278 | $2,131 | $20,854 | $13,187 | $13,047 | $6,001 | $14,525 | $10,052 | $433 | $100,357 |
| Liabilities: | |||||||||||||
| Futures contracts§ | — | — | 80,890 | — | — | — | — | — | — | — | — | — | 80,890 |
| Forward currency contracts# | 43,350 | 9,182 | — | 18,261 | 5,406 | 12,722 | 23,851 | 28,919 | 12,373 | 10,659 | 16,808 | 676 | 182,207 |
| Written options# | — | — | — | — | — | 5,864 | — | — | — | — | — | — | 5,864 |
| Total Liabilities | $43,350 | $9,182 | $80,890 | $18,261 | $5,406 | $18,586 | $23,851 | $28,919 | $12,373 | $10,659 | $16,808 | $676 | $268,961 |
| Total Financial and Derivative Net Assets | $(42,676) | $(5,007) | $(80,890) | $(2,983) | $(3,275) | $2,268 | $(10,664) | $(15,872) | $(6,372) | $3,866 | $(6,756) | $(243) | $(168,604) |
| Total collateral received (pledged)†## | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | |
| Net amount | $(42,676) | $(5,007) | $(80,890) | $(2,983) | $(3,275) | $2,268 | $(10,664) | $(15,872) | $(6,372) | $3,866 | $(6,756) | $(243) | |
| Controlled collateral received (including | |||||||||||||
| TBA commitments)** | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| Uncontrolled collateral received | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| Collateral (pledged) (including | |||||||||||||
| TBA commitments)** | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
** Included with Investments in securities on the Statement of assets and liabilities.
† Additional collateral may be required from certain brokers based on individual agreements.
# Covered by master netting agreement (Note 1).
## Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.
§ Includes current day’s variation margin only as reported on the Statement of assets and liabilities, which is not collateralized. Cumulative appreciation/(depreciation) for futures contracts and centrally cleared swap contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts, which is not included in the table above, amounted to $296,023.
Note 9: New accounting pronouncements
In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017–08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310–20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities held at a premium, to be amortized to the earliest call date. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
| 50 Dynamic Asset Allocation Equity Fund | Dynamic Asset Allocation Equity Fund 51 |
Federal tax information (Unaudited)
Pursuant to §852 of the Internal Revenue Code, as amended, the fund hereby designates $5,428,859 as a capital gain dividend with respect to the taxable year ended May 31, 2019, or, if subsequently determined to be different, the net capital gain of such year.
The fund designated 88.42% of ordinary income distributions as qualifying for the dividends received deduction for corporations.
For the reporting period, the fund hereby designates 100.00%, 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.
| 52 Dynamic Asset Allocation Equity Fund |
| Dynamic Asset Allocation Equity Fund 53 |
* Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.
The address of each Trustee is 100 Federal Street, Boston, MA 02110.
As of May 31, 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.
| 54 Dynamic Asset Allocation Equity 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 Asset Allocation Equity Fund 55 |
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.
| 56 Dynamic Asset Allocation Equity Fund |
Fund information
Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.
| Investment Manager | Trustees | Michael J. Higgins |
| Putnam Investment | Kenneth R. Leibler, Chair | Vice President, Treasurer, |
| Management, LLC | Liaquat Ahamed | and Clerk |
| 100 Federal Street | Ravi Akhoury | |
| Boston, MA 02110 | Barbara M. Baumann | Janet C. Smith |
| Katinka Domotorffy | Vice President, | |
| Investment Sub-Advisors | Catharine Bond Hill | Principal Financial Officer, |
| Putnam Investments Limited | Paul L. Joskow | Principal Accounting Officer, |
| 16 St James’s Street | Robert E. Patterson | and Assistant Treasurer |
| London, England SW1A 1ER | George Putnam, III | |
| Robert L. Reynolds | Susan G. Malloy | |
| The Putnam Advisory Company, LLC | Manoj P. Singh | Vice President and |
| 100 Federal Street | Assistant Treasurer | |
| Boston, MA 02110 | Officers | |
| Robert L. Reynolds | Mark C. Trenchard | |
| Marketing Services | President | Vice President and |
| Putnam Retail Management | BSA Compliance Officer | |
| 100 Federal Street | Jonathan S. Horwitz | |
| Boston, MA 02110 | Executive Vice President, | Nancy E. Florek |
| Principal Executive Officer, | Vice President, Director of | |
| Custodian | and Compliance Liaison | Proxy Voting and Corporate |
| State Street Bank | Governance, Assistant Clerk, | |
| and Trust Company | Robert T. Burns | and Assistant Treasurer |
| Vice President and | ||
| Legal Counsel | Chief Legal Officer | Denere P. Poulack |
| Ropes & Gray LLP | Assistant Vice President, Assistant | |
| James F. Clark | Clerk, and Assistant Treasurer | |
| Independent Registered Public | Vice President and | |
| Accounting Firm | Chief Compliance Officer | |
| PricewaterhouseCoopers LLP |
This report is for the information of shareholders of Putnam Dynamic Asset Allocation Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| Item 2. Code of Ethics: |
| (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 | $69,738 | $ — | $25,352 | $ — | |
| May 31, 2018 | $66,722 | $ — | $19,462 | $114 | |
| 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 $572,336 and $617,808 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. |
| All Other Fees represent fees billed for services relating to an analysis of fund profitability |
| 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 | $ — | $546,984 | $ — | $ — | |
| May 31, 2018 | $ — | $600,294 | $ — | $ — | |
| 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 |