March - Putnam Investments

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fees and total expenses (excluding any applicable12b- 1 fee), which provides a generalindication of your fund’s relative standing. Inthe custom peer group, your fund ranked inthe third quintile in effective management fees(determined for your fund and the other fundsin the custom peer group based on fund assetsize and the applicable contractual managementfee schedule) and in the third quintile intotal expenses (excluding any applicable 12b- 1fees) as of December 31, 2012 (the first quintilerepresenting the least expensive funds andthe fifth quintile the most expensive funds).The fee and expense data reported by Lipperas of December 31, 2012 reflected the mostrecent fiscal year- end data available in Lipper’sdatabase at that time.In connection with their review of the managementfees and total expenses of the Putnamfunds, the Trustees also reviewed the costs ofthe services provided and the profits realizedby Putnam Management and its affiliates fromtheir contractual relationships with the funds.This information included trends in revenues,expenses and profitability of Putnam Managementand its affiliates relating to the investmentmanagement, investor servicing and distributionservices provided to the funds. In thisregard, the Trustees also reviewed an analysisof Putnam Management’s revenues, expensesand profitability, allocated on a fund- by- fundbasis, with respect to the funds’ management,distribution, and investor servicing contracts.For each fund, the analysis presented informationabout revenues, expenses and profitabilityfor each of the agreements separately and forthe agreements taken together on a combinedbasis. The Trustees concluded that, at currentasset levels, the fee schedules in place representedreasonable compensation for theservices being provided and represented anappropriate sharing of such economies of scaleas may exist in the management of the Putnamfunds at that time.The information examined by the Trusteesas part of their annual contract review for thePutnam funds has included for many yearsinformation regarding fees charged by PutnamManagement and its affiliates to institutionalclients such as defined benefit pension plans,college endowments, and the like. This informationincluded comparisons of those feeswith fees charged to the funds, as well as anassessment of the differences in the servicesprovided to these different types of clients. TheTrustees observed that the differences in feerates between institutional clients and mutualfunds are by no means uniform when examinedby individual asset sectors, suggesting thatdifferences in the pricing of investment managementservices to these types of clients mayreflect historical competitive forces operatingin separate markets. The Trustees consideredthe fact that in many cases fee rates across differentasset classes are higher on average formutual funds than for institutional clients, aswell as the differences between the servicesthat Putnam Management provides to thePutnam funds and those that it provides to itsinstitutional clients. The Trustees did not rely onthese comparisons to any significant extent inconcluding that the management fees paid byyour fund are reasonable.Investment performanceThe quality of the investment process providedby Putnam Management represented a majorfactor in the Trustees’ evaluation of the qualityof services provided by Putnam Managementunder your fund’s management contract. TheTrustees were assisted in their review of thePutnam funds’ investment process and performanceby the work of the investment oversightcommittees of the Trustees, which meet on aregular basis with the funds’ portfolio teamsand with the Chief Investment Officer and othersenior members of Putnam Management’sInvestment Division throughout the year. TheTrustees concluded that Putnam ManagementDynamic Asset Allocation Growth Fund 21
generally provides a high- quality investmentprocess — based on the experience and skills ofthe individuals assigned to the management offund portfolios, the resources made availableto them, and in general Putnam Management’sability to attract and retain high- quality personnel— but also recognized that this doesnot guarantee favorable investment results forevery fund in every time period.The Trustees considered that 2012 was a yearof strong competitive performance for many ofthe Putnam funds, with only a relatively smallnumber of exceptions. They noted that thisstrong performance was exemplified by thefact that the Putnam funds were recognized byBarron’s as the best performing mutual fundcomplex for 2012 — the second time in fouryears that Putnam Management has achievedthis distinction for the Putnam funds. They alsonoted, however, the disappointing investmentperformance of some funds for periods endedDecember 31, 2012 and considered informationprovided by Putnam Management regardingthe factors contributing to the underperformanceand actions being taken to improve theperformance of these particular funds. TheTrustees indicated their intention to continueto monitor performance trends to assess theeffectiveness of these efforts and to evaluatewhether additional actions to address areas ofunderperformance are warranted.For purposes of evaluating investment performance,the Trustees generally focus oncompetitive industry rankings for the one- year,three- year, and five- year periods. For a numberof Putnam funds with relatively uniqueinvestment mandates, the Trustees evaluatedperformance based on comparisons oftheir total returns with the returns of selectedinvestment benchmarks or targeted returns.In the case of your fund, the Trustees consideredthat its class A share cumulative totalreturn performance at net asset value was inthe following quartiles of its Lipper Inc. peergroup (Lipper Mixed- Asset Target AllocationGrowth Funds) for the one- year, three- yearand five- year periods ended December 31,2012 (the first quartile representing the bestperformingfunds and the fourth quartile theworst-performing funds):One- year period1stThree- year period1stFive- year period3rdFor the one- year period ended December 31,2012, your fund’s performance was in the topdecile of its Lipper Inc. peer group. Over theone- year, three- year and five- year periodsended December 31, 2012, there were 562,526 and 478 funds, respectively, in your fund’sLipper peer group. (When considering performanceinformation, shareholders shouldbe mindful that past performance is not aguarantee of future results.)Brokerage and soft- dollar allocations;investor servicingThe Trustees considered various potential benefitsthat Putnam Management may receive inconnection with the services it provides underthe management contract with your fund.These include benefits related to brokerageallocation and the use of soft dollars, wherebya portion of the commissions paid by a fundfor brokerage may be used to acquire researchservices that are expected to be useful toPutnam Management in managing the assetsof the fund and of other clients. Subject to policiesestablished by the Trustees, soft dollarsgenerated by these means are used primarilyto acquire brokerage and research services thatenhance Putnam Management’s investmentcapabilities and supplement Putnam Management’sinternal research efforts. However,the Trustees noted that a portion of availablesoft dollars continues to be used to pay fundexpenses. The Trustees indicated their continuedintent to monitor regulatory and industrydevelopments in this area with the assistance22 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 20 and 21: necessary or desirable for the comi
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%)*
Page 72 and 73:
CORPORATE BONDS AND NOTES (13.9%)*
Page 74 and 75:
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
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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
Page 122:
This report is for the information
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March - Putnam Investments

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