Dynamic Risk Asset Allocation: Annual Report - Putnam Investments

ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is basedupon 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 areobservable, 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 inputsInvestments in securities: Level 1 Level 2 Level 3Common stocks*:Basic materials $3,570,299 $570,125 $—Capital goods 3,077,787 595,815 —Communication services 1,968,112 269,108 —Conglomerates 1,264,374 34,223 —Consumer cyclicals 10,090,985 1,168,847 —Consumer staples 7,165,356 654,147 —Energy 5,941,976 115,479 —Financials 20,050,110 2,537,472 —Health care 9,450,586 115,488 —Technology 7,504,278 906,048 —Transportation 2,354,487 527,193 —Utilities and power 2,414,231 22,929 —Total common stocks 74,852,581 7,516,874 —Commodity linked notes — 7,931,271 —Convertible bonds and notes — 48,344 —Convertible preferred stocks — 34,802 —Corporate bonds and notes — 33,492,661 —Investment companies 14,112 — —Mortgage-backed securities — 7,511,210 —Preferred stocks 70,673 106,536 —Purchased options outstanding — 631,076 —Senior loans — 290,115 —U.S. government and agency mortgage obligations — 7,492,032 —U.S. treasury obligations — 472,199 —Short-term investments 47,522,631 10,374,938 —Totals by level $122,459,997 $75,902,058 $—The accompanying notes are an integral part of these financial statements.Valuation inputsOther financial instruments: Level 1 Level 2 Level 3Forward currency contracts $— $(140,141 ) $—Futures contracts 872 — —Written options outstanding — (126,890 ) —Interest rate swap contracts — 1,995,888 —Total return swap contracts — (1,040,015 ) —Credit default contracts — 4,970,773 —Totals by level $872 $5,659,615 $—* Common stock classifications are presented at the sector level, which may differ from the fund’sportfolio presentation.Dynamic Risk Allocation Fund63