Note 5: Affiliated transactionsTransactions during the reporting period with <strong>Putnam</strong> Money Market Liquidity Fund and <strong>Putnam</strong> Short TermInvestment Fund, which are under common ownership or control, were as follows:Name of affiliateFair value at thebeginning ofthe reportingperiod Purchase cost Sale proceedsInvestmentincomeFair value atthe end ofthe reportingperiod<strong>Putnam</strong> Money MarketLiquidity Fund * $11,166,000 $32,379,644 $32,584,797 $15,108 $10,960,847<strong>Putnam</strong> Short TermInvestment Fund * 54,887,051 98,811,835 117,937,102 25,765 35,761,784Totals $66,053,051 $131,191,479 $150,521,899 $40,873 $46,722,631* Management fees charged to <strong>Putnam</strong> Money Market Liquidity Fund and <strong>Putnam</strong> Short Term Investment Fund havebeen waived by <strong>Putnam</strong> Management.Note 6: Senior loan commitmentsSenior loans are purchased or sold on a when-issued or delayed delivery basis and may be settled a month or moreafter the trade date, which from time to time can delay the actual investment of available cash balances; interestincome is accrued based on the terms of the securities. Senior loans can be acquired through an agent, by assignmentfrom another holder of the loan, or as a participation interest in another holder’s portion of the loan. When thefund invests in a loan or participation, the fund is subject to the risk that an intermediate participant between thefund and the borrower will fail to meet its obligations to the fund, in addition to the risk that the borrower under theloan may default on its obligations.Note 7: Market, credit and other risksIn the normal course of business, the fund trades financial instruments and enters into financial transactions whererisk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to thetransaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or otherentity with which the fund has unsettled or open transactions will default. <strong>Investments</strong> in foreign securities involvecertain risks, including those related to economic instability, unfavorable political developments, and currencyfluctuations. The fund may invest in higher yielding, lower rated bonds that may have a higher rate of default. Thefund may invest a significant portion of its assets in securitized debt instruments, including mortgage-backed andasset-backed investments. The yields and values of these investments are sensitive to changes in interest rates,the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market forthese investments may be volatile and limited, which may make them difficult to buy or sell.Note 8: Summary of derivative activityThe volume of activity for the reporting period for any derivative type that was held during the period is listedbelow and was as follows based on an average of the holdings at the end of each fiscal quarter:Purchased equity option contracts (contract amount ) $260,000Written equity option contracts (contract amount ) (Note 3 ) $110,000Futures contracts (number of contracts ) 700Forward currency contracts (contract amount ) $135,700,000OTC interest rate swap contracts (notional ) $32,600,000Centrally cleared interest rate swap contracts (notional ) $56,300,000OTC total return swap contracts (notional ) $134,700,000OTC credit default contracts (notional ) $34,400,000Centrally cleared credit default contracts (notional ) $37,000,00082 <strong>Dynamic</strong> <strong>Risk</strong> <strong>Allocation</strong> Fund
The following is a summary of the fair value of derivative instruments as of the close of the reporting period:Fair value of derivative instruments as of the close of the reporting periodDerivatives notaccounted for ashedging instrumentsunder ASC 815Credit contracts<strong>Asset</strong> derivativesStatement ofassets andliabilities locationFair valueLiability derivativesStatement ofassets andliabilities locationFair valueReceivables, Netassets — Unrealizedappreciation $4,970,773 * Payables $—Foreign exchangecontracts Receivables 204,770 Payables 344,911Equity contractsInterest rate contracts<strong>Investments</strong>,Receivables, Netassets — Unrealizedappreciation 2,618,797 *Receivables, Netassets — Unrealizedappreciation 2,592,487 *Payables, Netassets — Unrealizeddepreciation 2,197,553 *Payables, Netassets — Unrealizeddepreciation 1,552,800 *Total $10,386,827 $4,095,264* Includes cumulative appreciation/depreciation of futures contracts and centrally cleared swaps as reported in thefund’s portfolio. Only current day’s variation margin is reported within the Statement of assets and liabilities.The following is a summary of realized and change in unrealized gains or losses of derivative instruments on theStatement of operations for the reporting period (see Note 1):Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investmentsDerivatives not accountedfor as hedging instrumentsunder ASC 815 Options FuturesForwardcurrencycontracts Swaps TotalCredit contracts $— $— $— $5,290,138 $5,290,138Foreign exchangecontracts — — (1,528,570) — $(1,528,570 )Equity contracts (2,294,695 ) (344,081 ) — (539,632 ) $(3,178,408 )Interest rate contracts — (627,333 ) — (2,756,125 ) $(3,383,458 )Total $(2,294,695 ) $(971,414 ) $(1,528,570 ) $1,994,381 $(2,800,298 )Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investmentsDerivatives not accountedfor as hedging instrumentsunder ASC 815 Options FuturesForwardcurrencycontracts Swaps TotalCredit contracts $— $— $— $(270,253 ) $(270,253 )Foreign exchangecontracts — — 874,559 — $874,559Equity contracts (101,395 ) (447,446 ) — 574,579 $25,738Interest rate contracts — 1,066,863 — 1,882,742 $2,949,605Total $(101,395 ) $619,417 $874,559 $2,187,068 $3,579,649<strong>Dynamic</strong> <strong>Risk</strong> <strong>Allocation</strong> Fund83