March - Putnam Investments

Interview withyour fund’sportfolio managerRobert J. Kea, CFAHow would you describe the investmentenvironment during the six months thatended March 31, 2014?Volatility returned to the markets, which weanticipated would take place after the strongrun-up in equities. The period got off to anuncertain start with congressional debateabout the U.S. debt ceiling and a 16-daypartial shutdown of the federal government.A temporary solution to the budgetimpasse was reached in mid-October, whenPresident Obama signed a short-term billthat suspended the debt ceiling and fundedthe government through mid-January 2014.After this, equity markets came roaringback, posting record highs during the finalmonths of 2013. Early in the period, therewas also uncertainty regarding when theU.S. Federal Reserve would begin to reduceits $85-billion-a-month in bond purchases.In mid-December, the Fed put the taperingquestion to rest, announcing it would scaleback its bond purchases to $75 billion,beginning in January 2014. Equity marketsreacted positively to the news, whichindicated that the central bank was confidentthat the U.S. economy was improving. Bondprices declined, however, as interest ratesinched higher.During the opening months of 2014, capitalmarkets around the world seemed to havedifficulty establishing clear directions. Thesecond half of the semiannual period beganmostly on a down note, with investorsBroad market index and fund performanceU.S. stocks (S&P 500 Index)12.51%Fund’s primary benchmark (Russell 3000 Index)Putnam Dynamic Asset Allocation Growth Fund(class A shares before sales charge)10.91%12.28%Fund’s secondary benchmark(Putnam Growth Blended Benchmark)9.00%U.S. bonds (Barclays U.S. Aggregate Bond Index)1.70%Cash(BofA Merrill Lynch U.S. 3-Month Treasury Bill Index)0.03%This comparison shows your fund’s performance in the context of broad market indexes for thesix months ended 3/31/14. See pages 4 and 11–12 for additional fund performance information. Indexdescriptions can be found on page 16.Dynamic Asset Allocation Growth Fund 5