March - Putnam Investments

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necessary or desirable for the coming year. Followingthese discussions and in consultationwith the Contract Committee, the IndependentTrustees’ independent legal counsel requestedthat Putnam Management furnish specifiedinformation, together with any additional informationthat Putnam Management consideredrelevant, to the Contract Committee. Over thecourse of several months ending in June 2013,the Contract Committee met on a numberof occasions with representatives of PutnamManagement, and separately in executive session,to consider the information that PutnamManagement provided. Throughout this process,the Contract Committee was assistedby the members of the Board’s independentstaff and by independent legal counsel for thePutnam funds and the Independent Trustees.In May 2013, the Contract Committee met inexecutive session to discuss and consider itspreliminary recommendations with respectto the continuance of the contracts. At theTrustees’ June 20, 2013 meeting, the ContractCommittee met in executive session with theother Independent Trustees to review a summaryof the key financial data that the ContractCommittee considered in the course of itsreview. The Contract Committee then presentedits written report, which summarizedthe key factors that the Committee had consideredand set forth its final recommendations.The Contract Committee then recommended,and the Independent Trustees approved, thecontinuance of your fund’s management, submanagementand sub- advisory contracts,effective July 1, 2013, subject to certain changesin the sub- management and sub- advisory contractsnoted below. (Because PIL and PAC areaffiliates of Putnam Management and PutnamManagement remains fully responsible for allservices provided by PIL and PAC, the Trusteeshave not evaluated PIL or PAC as separate entities,and all subsequent references to PutnamManagement below should be deemed toinclude reference to PIL and PAC as necessaryor appropriate in the context.)The Independent Trustees’ June 2013 approvalwas based on the following conclusions:• That the fee schedule in effect for your fundrepresented reasonable compensation in lightof the nature and quality of the services beingprovided to the fund, the fees paid by competitivefunds, and the costs incurred by PutnamManagement in providing services to thefund, and• That the fee schedule represented an appropriatesharing between fund shareholders andPutnam Management of such economies ofscale as may exist in the management of thefund at current asset levels.These conclusions were based on a comprehensiveconsideration of all information providedto the Trustees and were not the result of anysingle factor. Some of the factors that figuredparticularly in the Trustees’ deliberations andhow the Trustees considered these factors aredescribed below, although individual Trusteesmay have evaluated the information presenteddifferently, giving different weights to variousfactors. It is also important to recognize that themanagement arrangements for your fund andthe other Putnam funds are the result of manyyears of review and discussion between theIndependent Trustees and Putnam Management,that some aspects of the arrangementsmay receive greater scrutiny in some yearsthan others, and that the Trustees’ conclusionsmay be based, in part, on their consideration offee arrangements in previous years. For example,with some minor exceptions, the currentfee arrangements in the management contractsfor the Putnam funds were implementedat the beginning of 2010 following extensivereview and discussion by the Trustees, as wellas approval by shareholders.As noted above, the Trustees consideredadministrative revisions to your fund’sDynamic Asset Allocation Growth Fund 19
sub- management and sub- advisory contracts.Putnam Management recommended thatthe sub- management contract be revised toreduce the sub- management fee that PutnamManagement pays to PIL with respect to theportion of the portfolios of certain funds, butnot your fund, that may be allocated to PILfrom time to time. Putnam Management alsorecommended that the sub- advisory contractbe revised to reflect the closure of PAC’sTokyo office and the termination of PAC’s nondiscretionaryinvestment adviser’s license withrespect to that office. The Independent Trustees’approval of these recommendations wasbased on their conclusion that these changeswould have no practical effect on Putnam Management’scontinued responsibility for themanagement of these funds or the costs borneby fund shareholders and would not resultin any reduction in the nature and quality ofservices provided to the funds.Management fee schedulesand total expensesThe Trustees reviewed the management feeschedules in effect for all Putnam funds, includingfee levels and breakpoints. The Trustees alsoreviewed the total expenses of each Putnamfund, recognizing that in most cases managementfees represented the major, but not thesole, determinant of total costs to shareholders.In reviewing fees and expenses, the Trusteesgenerally focus their attention on materialchanges in circumstances — for example,changes in assets under management, changesin a fund’s investment style, changes in PutnamManagement’s operating costs or profitability,or changes in competitive practices in themutual fund industry — that suggest that considerationof fee changes might be warranted.The Trustees concluded that the circumstancesdid not warrant changes to the managementfee structure of your fund.Under its management contract, your fundhas the benefit of breakpoints in its managementfee schedule that provide shareholderswith economies of scale in the form of reducedfee levels as assets under management in thePutnam family of funds increase. The Trusteesconcluded that the fee schedule in effectfor your fund represented an appropriatesharing of economies of scale between fundshareholders and Putnam Management.As in the past, the Trustees also focused on thecompetitiveness of each fund’s total expenseratio. In order to ensure that expenses of thePutnam funds continue to meet competitivestandards, the Trustees and Putnam Managementhave implemented certain expenselimitations. These expense limitations were:(i) a contractual expense limitation applicableto all retail open- end funds of 32 basis pointson investor servicing fees and expenses and(ii) a contractual expense limitation applicableto all open- end funds of 20 basis points onso- called “other expenses” (i.e., all expensesexclusive of management fees, investor servicingfees, distribution fees, investment- relatedexpenses, interest, taxes, brokerage commissions,extraordinary expenses and acquiredfund fees and expenses). These expenselimitations serve in particular to maintain competitiveexpense levels for funds with largenumbers of small shareholder accounts andfunds with relatively small net assets. Mostfunds, including your fund, had sufficientlylow expenses that these expense limitationsdid not apply. Putnam Management’s supportfor these expense limitations was an importantfactor in the Trustees’ decision to approvethe continuance of your fund’s management,sub- management and sub- advisory contracts.The Trustees reviewed comparative fee andexpense information for a custom group ofcompetitive funds selected by Lipper Inc. Thiscomparative information included your fund’spercentile ranking for effective management20 Dynamic Asset Allocation Growth Fund
Page 2 and 3: Putnam DynamicAsset AllocationGrowt
Page 4 and 5: Putnam Dynamic Asset Allocation Gro
Page 6 and 7: Interview withyour fund’sportfoli
Page 8 and 9: “The U.S. economy has been stucki
Page 10 and 11: of the fund positions us to take ad
Page 12 and 13: Your fund’s performanceThis secti
Page 14 and 15: Your fund’s expensesAs a mutual f
Page 16 and 17: Terms and definitionsImportant term
Page 18 and 19: Trustee approval of management cont
Page 22 and 23: fees and total expenses (excluding
Page 24 and 25: of their Brokerage Committee and al
Page 26 and 27: The fund’s portfolio 3/31/14 (Una
Page 28 and 29: COMMON STOCKS (60.9%)* cont. Shares
Page 46 and 47: CORPORATE BONDS AND NOTES (13.9%)*
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CORPORATE BONDS AND NOTES (13.9%)*
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MORTGAGE-BACKED SECURITIES (2.8%)*
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MORTGAGE-BACKED SECURITIES (2.8%)*
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FOREIGN GOVERNMENT AND AGENCYBONDS
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Key to holding’s currency abbrevi
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FORWARD CURRENCY CONTRACTS at 3/31/
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FORWARD CURRENCY CONTRACTS at 3/31/
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CENTRALLY CLEARED INTEREST RATE SWA
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OTC TOTAL RETURN SWAP CONTRACTS OUT
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OTC CREDIT DEFAULT CONTRACTS OUTSTA
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Valuation inputsOther financial ins
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Statement of assets and liabilities
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Statement of changes in net assetsI
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Financial highlights (Continued)Rat
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securities under Accounting Standar
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Futures contracts are valued at the
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the other party may elect to termin
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Note 2: Management fee, administrat
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Note 3: Purchases and sales of secu
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At the close of the reporting perio
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The following is a summary of reali
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Shareholder meeting results (Unaudi
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Absolute ReturnAbsolute Return 100
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Putnam’s commitmentto confidentia
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This report is for the information
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March - Putnam Investments

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