Financial highlights (Continued)* Not annualized.† For the period September 19, 2011 (commencement of operations) to May 31, 2012.†† For the period July 3, 2012 (commencement of operations) to May 31, 2013.a Per share net investment income (loss) has been determined on the basis of the weighted average number of sharesoutstanding during the period.b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.c Includes amounts paid through expense offset arrangements (Note 2). Also excludes acquired fund fees andexpenses, if any.d Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, theexpenses of each class reflect a reduction of the following amounts as a percentage of average net assets (Note 2):Percentage of average net assets5/31/14 5/31/13 5/31/12Class A 0.10% 0.16% 0.61%Class B 0.10 0.16 0.61Class C 0.10 0.16 0.61Class M 0.10 0.16 0.61Class R 0.10 0.16 0.61Class R5 0.06 0.08 N/AClass R6 N/A N/A N/AClass Y 0.10 0.16 0.61e Portfolio turnover excludes TBA roll commitments.The accompanying notes are an integral part of these financial statements.70 <strong>Dynamic</strong> <strong>Risk</strong> <strong>Allocation</strong> Fund
Notes to financial statements 5/31/14Within the following Notes to financial statements, references to “State Street” represent State Street Bankand Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to“<strong>Putnam</strong> Management” represent <strong>Putnam</strong> Investment Management, LLC, the fund’s manager, an indirect whollyownedsubsidiary of <strong>Putnam</strong> <strong>Investments</strong>, LLC and references to “OTC”, if any, represent over-the-counter. Unlessotherwise noted, the “reporting period” represents the period from June 1, 2013 through May 31, 2014.<strong>Putnam</strong> <strong>Dynamic</strong> <strong>Risk</strong> <strong>Allocation</strong> Fund (the fund) is a diversified series of <strong>Putnam</strong> Funds Trust (the Trust), a Massachusettsbusiness trust registered under the Investment Company Act of 1940, as amended, as an open-endmanagement investment company. The investment objective of the fund is to seek total return. Total return iscomposed of capital appreciation and income. The fund invests in a diversified set of asset classes. By investingin a broader set of asset classes than a traditional balanced fund, and by using leverage to increase the fund’sexposure to asset classes, <strong>Putnam</strong> Management believes the fund may achieve a higher total return than a traditionalbalanced fund with approximately the same amount of risk as a traditional balanced fund. <strong>Risk</strong> is measuredby the volatility of the fund’s investment portfolio. The fund may invest without limit in U.S., international, andemerging markets equity securities (growth or value stocks or both) of companies of any size and fixed-incomesecurities (including in high yield securities, which are sometimes referred to as “junk bonds”); mortgage-andasset-backed securities; inflation-protected securities; commodities; and real estate investment trusts. These assetclasses offer different return potential and exposure to different investment risks.The fund offers class A, class B, class C, class M, class R, class R5, class R6 and class Y shares. Class A and class Mshares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do notpay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eightyears, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares areredeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge anddo not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value.The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of eachclass, which is identified in Note 2. Class R5, class R6 and class Y shares, which are sold at net asset value, are generallysubject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distributionfee and in the case of class R5 and class R6 shares, bear a lower investor servicing fee, which is identified inNote 2. Class R5, class R6 and class Y shares are not available to all investors.In the normal course of business, the fund enters into contracts that may include agreements to indemnify anotherparty under given circumstances. The fund’s maximum exposure under these arrangements is unknown as thiswould involve future claims that may be, but have not yet been, made against the fund. However, the fund’smanagement team expects the risk of material loss to be remote.Note 1: Significant accounting policiesThe following is a summary of significant accounting policies consistently followed by the fund in the preparationof its financial statements. The preparation of financial statements is in conformity with accounting principlesgenerally accepted in the United States of America and requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities in the financial statements and the reported amounts ofincreases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequentevents after the Statement of assets and liabilities date through the date that the financial statements wereissued have been evaluated in the preparation of the financial statements.Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based onthe relative net assets of each class to the total net assets of the fund, except that each class bears expenses uniqueto that class (including the distribution fees applicable to such classes). Each class votes as a class only with respectto its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees.If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. Inaddition, the Trustees declare separate dividends on each class of shares.Security valuation <strong>Investments</strong> for which market quotations are readily available are valued at the last reportedsales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If nosales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bidprice and is generally categorized as a Level 2 security.<strong>Dynamic</strong> <strong>Risk</strong> <strong>Allocation</strong> Fund71
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