March - Putnam Investments

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the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contractsoutstanding, including the payment of any losses and costs resulting from such early termination, as reasonablydetermined by the terminating party. Any decision by one or more of the fund’s counterparties to elect earlytermination could impact the fund’s future derivative activity.At the close of the reporting period, the fund had a net liability position of $561,367 on open derivative contractssubject to the Master Agreements. Collateral posted by the fund for these agreements totaled $594,465.TBA purchase commitments The fund may enter into TBA (to be announced) commitments to purchase securitiesfor a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established,the principal value has not been finalized. However, it is anticipated that the amount of the commitmentswill not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash orhigh-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsettingcontracts for the forward sale of other securities it owns. Income on the securities will not be earned untilsettlement date. TBA purchase commitments may be considered securities themselves, and involve a risk of loss ifthe value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk ofdecline in the value of the fund’s other assets. Unsettled TBA purchase commitments are valued at their fair valueaccording to the procedures described under “Security valuation” above. The contract is marked to market dailyand the change in fair value is recorded by the fund as an unrealized gain or loss. Based on market circumstances,Putnam Management will determine whether to take delivery of the underlying securities or to dispose of the TBAcommitments prior to settlement.TBA sale commitments The fund may enter into TBA sale commitments to hedge its portfolio positions or to sellmortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitmentsare not received until the contractual settlement date. During the time a TBA sale commitment is outstanding,equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the salecommitment date, are held as “cover” for the transaction.Unsettled TBA sale commitments are valued at their fair value according to the procedures described under“Security valuation” above. The contract is marked to market daily and the change in fair value is recorded by thefund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsettingTBA purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment,the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date thecommitment was entered into. Based on market circumstances, Putnam Management will determine whether todeliver the underlying securities or to dispose of the TBA commitments prior to settlement. TBA sale commitmentsoutstanding at period end, if any, are listed after the fund’s portfolio.Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additionalincome. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. Thefair value of securities loaned is determined daily and any additional required collateral is allocated to the fund onthe next business day. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk ofloss with respect to the investment of the cash collateral. Income from securities lending is included in investmentincome on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limitedliability 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 PutnamCash Collateral Pool, LLC. At the close of the reporting period, the fund received cash collateral of $1,171,243 andthe value of securities loaned amounted to $1,133,383. Certain of these securities were sold prior to the close ofthe reporting period and are included in Receivable for investments sold on the Statement of assets and liabilities.Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending programpursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to otherPutnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investmentpolicies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be basedon the average of certain current market rates. During the reporting period, the fund did not utilize the program.Line of credit The fund participates, along with other Putnam funds, in a $315 million unsecured committed line ofcredit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may bemade for temporary or emergency purposes, including the funding of shareholder redemption requests and tradesettlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rateplus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit.Dynamic Asset Allocation Growth Fund 107
A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit hasbeen paid by the participating funds. In addition, a commitment fee of 0.11% per annum on any unutilized portionof the committed line of credit is allocated to the participating funds based on their relative net assets and paidquarterly. 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 andotherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicableto regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoidimposition 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 740sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expectedto be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanyingfinancial statements. No provision has been made for federal taxes on income, capital gains or unrealizedappreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returnsfor 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 aregenerally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to netinvestment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In somecases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, arereflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for anextended period of time, depending on the country of investment.At September 30, 2013, the fund had a capital loss carryover of $28,175,520 available to the extent allowed by theCode to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:Loss carryoverShort-term Long-term Total Expiration$28,175,520 N/A $28,175,520 September 30, 2018Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forwardcapital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, anylosses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a resultof this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally,post-enactment capital losses that are carried forward will retain their character as either short-term or long-termcapital losses rather than being considered all short-term as under previous law.The aggregate identified cost on a tax basis is $1,684,484,822, resulting in gross unrealized appreciation anddepreciation of $250,182,971 and $22,154,966, respectively, or net unrealized appreciation of $228,028,005.Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fundon the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid atleast annually. The amount and character of income and gains to be distributed are determined in accordance withincome tax regulations, which may differ from generally accepted accounting principles. Dividend sources are estimatedat the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determineduntil final tax calculations are completed after the end of the fund’s fiscal year. Reclassifications are made to thefund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers)under income tax regulations.Expenses of the Trust Expenses directly charged or attributable to any fund will be paid from the assets of thatfund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basisthat the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature ofthe services performed and relative applicability to each fund.108 Dynamic Asset Allocation Growth Fund
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Putnam DynamicAsset AllocationGrowt
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Putnam Dynamic Asset Allocation Gro
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Interview withyour fund’sportfoli
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“The U.S. economy has been stucki
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of the fund positions us to take ad
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Your fund’s performanceThis secti
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Your fund’s expensesAs a mutual f
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Terms and definitionsImportant term
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Trustee approval of management cont
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necessary or desirable for the comi
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fees and total expenses (excluding
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of their Brokerage Committee and al
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The fund’s portfolio 3/31/14 (Una
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COMMON STOCKS (60.9%)* cont. Shares
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CORPORATE BONDS AND NOTES (13.9%)*
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Page 56 and 57: CORPORATE BONDS AND NOTES (13.9%)*
Page 76 and 77: MORTGAGE-BACKED SECURITIES (2.8%)*
Page 78 and 79: MORTGAGE-BACKED SECURITIES (2.8%)*
Page 80 and 81: FOREIGN GOVERNMENT AND AGENCYBONDS
Page 82 and 83: Key to holding’s currency abbrevi
Page 84 and 85: FORWARD CURRENCY CONTRACTS at 3/31/
Page 86 and 87: FORWARD CURRENCY CONTRACTS at 3/31/
Page 88 and 89: CENTRALLY CLEARED INTEREST RATE SWA
Page 90 and 91: OTC TOTAL RETURN SWAP CONTRACTS OUT
Page 92 and 93: OTC CREDIT DEFAULT CONTRACTS OUTSTA
Page 94 and 95: Valuation inputsOther financial ins
Page 96 and 97: Statement of assets and liabilities
Page 98 and 99: Statement of changes in net assetsI
Page 100 and 101: Financial highlights (Continued)Rat
Page 102 and 103: securities under Accounting Standar
Page 104 and 105: Futures contracts are valued at the
Page 108 and 109: Note 2: Management fee, administrat
Page 110 and 111: Note 3: Purchases and sales of secu
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Page 116 and 117: Shareholder meeting results (Unaudi
Page 118 and 119: Absolute ReturnAbsolute Return 100
Page 120 and 121: Putnam’s commitmentto confidentia
Page 122: This report is for the information
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March - Putnam Investments

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