Putnam Dynamic Risk Allocation Fund Annual report 5 | 31 | 22 Asset allocation funds invest in a mix of many different types of investments to help weather changing market environments. FUND SYMBOL CLASS A PDREX Putnam Dynamic Risk Allocation Fund Annual report 5 |31 |22 Message from the Trustees 1 About the fund 2 Interview with your fund’s portfolio manager 6 Your fund’s performance 11 Your fund’s expenses 14 Consider these risks before investing 16 Terms and definitions 17 Other information for shareholders 19 Important notice regarding Putnam’s privacy policy 20 Audited financial statements 21 Report of Independent Registered Public Accounting Firm 22 Federal tax information 57 About the Trustees 58 Officers 60 Message from the Trustees July 14, 2022 Dear Fellow Shareholder: Financial markets in the first half of 2022 have tested the patience of investors. High inflation and rising interest rates have clouded the outlook for the U.S. economy. The Russia-Ukraine War has disrupted global energy markets, while pandemic-driven lockdowns in China have slowed global growth. These issues, which are important to monitor and may persist for some time, are likely shorter term in nature than your long-term financial goals. History has shown that markets eventually recover from downturns. At Putnam, dedicated and experienced investors are working for you. They are evaluating risks while trying to achieve strong performance for your fund. Learn more in the interview with your fund manager(s) in the following pages. Thank you for investing with Putnam. Respectfully yours, Robert L. Reynolds Kenneth R. Leibler President and Chief Executive Officer Chair, Board of Trustees Putnam Investments About the fund A strategy for allocating risks rather than assets Traditional balanced funds can be unbalanced in terms of risk. Instead of balancing stocks and bonds, Putnam Dynamic Risk Allocation Fund makes allocations across four different risk sources — equity, credit, inflation, and interest rates. We believe this flexible approach can produce better risk-adjusted returns for investors over time. The fund’s management team has experience in global allocation strategies over several market cycles. Robert J. Schoen Brett S. Goldstein, CFA Co-Chief Investment Officer Co-Chief Investment Officer Global Asset Allocation Global Asset Allocation Industry since 1990 Industry since 2010 At Putnam since 1997 At Putnam since 2010 Adrian H. Chan, CFA James A. Fetch Portfolio Manager Head of Portfolio Construction Industry since 2003 Industry since 1994 At Putnam since 2003 At Putnam since 1994 Diversification does not assure a profit or protect against loss. It is possible to lose money in a diversified portfolio. The fund is not intended to outperform stocks and bonds during strong market rallies. 2 Dynamic Risk Allocation Fund A traditional balanced fund emphasizes equity risk In a traditionally balanced portfolio — 60% stocks and 40% bonds — stocks Fixed Stocks income dominate overall portfolio 40% Stocks 90% risk, which can lead to an 60% unbalanced risk profile. Fixed income 10% Asset weight Contribution to risk A risk allocation fund de-emphasizes equity risk Equity Putnam Dynamic Risk Allocation Fund diversifies its exposures Interest rates across a wider range of risk sources, adjusting these allocations based on the Inflation portfolio managers’ expectations for risk-adjusted returns. Credit Contribution to risk Illustrations are hypothetical and are not intended to represent the current allocation of any Putnam fund. A traditional balanced fund is represented by a 60%/40% split between equities and fixed income, as defined by Lipper. Risk contribution is from Putnam research, which uses the historical standard deviation for the respective asset classes multiplied by the appropriate asset weight. Leverage may be achieved either through short-term borrowing or through the use of derivatives. Asset weights may exceed 100% in funds that employ leverage due to borrowed capital and/or derivatives exposure. Risk, as measured by standard deviation, gauges how widely a set of values varies from the mean. It is a historical measure of the variability of return earned by an investment portfolio over a three-year period. Asset weight for Putnam Dynamic Risk Allocation Fund represents a baseline allocation selected by the fund’s portfolio managers and is subject to change. It is inclusive of leverage and represents a starting point for future active allocation. Dynamic Risk Allocation Fund 3 Performance history as of 5/31/22 Annualized total return (%) comparison The fund — class A shares Fund’s benchmark Fund’s Lipper before sales charge Putnam Dynamic Risk peer group average Putnam Dynamic Risk Allocation Blended Index* Alternative Global Allocation Fund (PDREX) Macro Funds 4.78 4.97 4.76 5.03 3.55 3.64 3.24 4.09 1.78 1.53 LIFE OF FUND 10 YEARS 5 YEARS 3 YEARS 1 YEAR (since 9/19/11) –1.12 –3.08 –5.30 –8.84 –13.02 Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See page 5 and pages 11–13 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com. All Bloomberg indices are provided by Bloomberg Index Services Limited. Lipper peer group average is provided by Lipper, a Refinitiv company. * The Putnam Dynamic Risk Allocation Blended Index is an unmanaged index administered by Putnam Management. Effective September 1, 2020, the composition of the Putnam Dynamic Risk Allocation Blended Index is 60% MSCI World Index (ND) and 40% FTSE World Government Bond Index. Prior to September 1, 2020, the Putnam Dynamic Risk Allocation Blended Index was comprised as follows: 50% MSCI World Index (ND), 40% Bloomberg Global Aggregate Bond Index, and 10% S&P GSCI. 4 Dynamic Risk Allocation Fund Performance history as of 5/31/22 Annualized total return (%) comparison Recent broad market index and fund performance The fund — class A shares Fund’s benchmark Fund’s Lipper Cash before sales charge Putnam Dynamic Risk peer group average 0.14% (ICE BofA U.S. 3-Month Treasury Bill Index) Putnam Dynamic Risk Allocation Blended Index* Alternative Global Allocation Fund (PDREX) Macro Funds U.S. stocks –0.30% (S&P 500 Index) 4.78 4.97 4.76 5.03 3.55 3.64 3.24 4.09 U.S. bonds 1.78 1.53 –8.22% (Bloomberg U.S. Aggregate Bond Index) LIFE OF FUND 10 YEARS 5 YEARS 3 YEARS 1 YEAR (since 9/19/11) Fund’s benchmark –8.84% –1.12 (Putnam Dynamic Risk Allocation Blended Index) –3.08 International stocks –5.30 –10.66% (MSCI EAFE Index (ND)) –8.84 Putnam Dynamic Risk Allocation Fund –13.02% (class A shares before sales charge) –13.02 This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. 5/31/22. See page 4 and pages 11–13 for additional fund performance information. Index descriptions can Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. be found on pages 17–18. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See page 5 and pages 11–13 All Bloomberg indices are provided by Bloomberg Index Services Limited. for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com. All Bloomberg indices are provided by Bloomberg Index Services Limited. Lipper peer group average is provided by Lipper, a Refinitiv company. * The Putnam Dynamic Risk Allocation Blended Index is an unmanaged index administered by Putnam Management. Effective September 1, 2020, the composition of the Putnam Dynamic Risk Allocation Blended Index is 60% MSCI World Index (ND) and 40% FTSE World Government Bond Index. Prior to September 1, 2020, the Putnam Dynamic Risk Allocation Blended Index was comprised as follows: 50% MSCI World Index (ND), 40% Bloomberg Global Aggregate Bond Index, and 10% S&P GSCI. Dynamic Risk Allocation Fund 5 Interview with your fund’s portfolio manager Interview with your fund’s portfolio manager Brett Goldstein discusses the investing environment and fund performance for the 12 months ended May 31, 2022, and his outlook for the fund. Brett, please describe investing conditions over the 12-month reporting period. At the start of the period, stocks were buoyed by a recovering global economy, the lifting of mobility restrictions, and fiscal and monetary stimulus. However, the spread of new Covid-19 Brett S. Goldstein, CFA variants, high inflation, and a hawkish policy Portfolio Manager pivot by the U.S. Federal Reserve dampened Brett is Co-Chief Investment Officer, investor sentiment. In November 2021, the Global Asset Allocation. He has an M.P.S. Fed began tapering its bond-buying program in Statistics, a B.S. in Finance, and a B.S. and indicated it would raise interest rates in in Biometry and Statistics from Cornell University. Brett has been in the investment calendar 2022. Despite increased market vola- industry since he joined Putnam in 2010. tility, stocks posted double-digit gains in the first Adrian H. Chan, CFA, James A. Fetch, half of the period. and Robert J. Schoen are also Portfolio In the latter half of the period, investor sentiment Managers of the fund. turned risk averse. Overseas, Russia’s invasion of Ukraine on February 24, 2022, caused a flight to safety. Investors sold off stocks in favor of safer-haven assets, including U.S. Treasuries. The U.S. dollar strengthened, and global commodity prices soared. At the same time, China entered an extended lockdown period to control an outbreak of Covid. Disruptions to the world’s supply chains slowed global growth. In March 2022, the Fed raised interest rates for the first time since 2018, adding 0.25% to borrowing costs. Markets factored in several 6 Dynamic Risk Allocation Fund Portfolio composition International bonds 47.7% U.S. investment- 23.7% grade bonds U.S. equities 19.3% International equities 6.6% Commodities 2.7% U.S. money markets 0.1% Allocations are shown as a percentage of the fund’s net assets as of 5/31/22. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding. Allocations include the notional value of certain derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities and may result in negative weights. Holdings and allocations may vary over time. Due to rounding, percentages may not equal to 100%. more interest-rate hikes anticipated in 2022. What investment decisions influenced the In May, persistent inflation led the Fed to fund’s performance during the period? raise interest rates by an additional 0.50%. Overall, our asset allocation decisions helped Policymakers lowered their U.S. annual performance. The portfolio benefited from growth estimates and increased inflation equity positioning over the 12-month reporting expectations for 2022. Stocks and bonds took a period. During the first few months of the significant downturn. period, our equity positioning ranged from For the 12-month reporting period, stocks, moderately overweight to overweight relative as measured by the S&P 500 Index, returned to the policy portfolio [the starting allocation –0.30%. The Bloomberg U.S. Aggregate Bond around which we make active decisions]. This Index, a measure of investment-grade corporate lifted performance as stocks soared to new bonds, returned –8.22%. At period-end, the highs due to more stimulus, progress in the yield on the benchmark 10-year Treasury note fight against Covid-19, and continued signs had climbed to 2.85% from 1.58% at the start of of economic recovery. Equity positioning in the period. At times, yields on shorter-term U.S. the first quarter of calendar 2022 also aided Treasuries edged above those of longer-term results. We implemented short-term over- and Treasuries. This created a flat or inverted yield underweights relative to the policy portfolio, curve, which often signals a recession. which enabled us to take advantage of equity market volatility. How did the fund perform for the Tactical commodity positioning also added reporting period? value. The portfolio held a long position to The fund returned –13.02%, underperforming commodity risk from the start of the period its custom benchmark, the Putnam Dynamic until mid-August 2021. We anticipated that Risk Allocation Blended Index, which the vaccine rollout, fiscal support, and returned –8.84%. easy monetary conditions would stimulate significant global demand for commodities. At Dynamic Risk Allocation Fund 7 the beginning of March 2022, we implemented a Volatility has been a major modest long position to commodity risk, as we constant across markets year expected greater upside risks arising from the to date. war in Ukraine and strong demand for global crude as global Covid restrictions were lifted. Brett Goldstein Exposure to interest rates and credit did not have a significant impact on fund results. In addition, total return swaps were used to Security selection detracted from fund help hedge sector exposure; manage exposure performance over the period. Strategic global to specific sectors, industries, or securities; macroeconomic trades in equities and curren- gain exposure to a basket of securities, specific cies were the primary source of weakness. Our markets, countries, sectors, or industries; and quantitative international equity strategy was generate additional income for the portfolio. slightly additive. What is your near‑term outlook for How were derivatives used during the the markets? reporting period? Volatility has been a major constant across Futures were used to help manage exposure markets year to date. Rising inflation, supply to market risk and equitize cash. Interest- chain disruptions, monetary policy tightening, rate swaps and futures also were used to and Russia’s invasion of Ukraine have fueled gain exposure to interest rates, and hedge sell-offs in stocks and bonds. Looking ahead, we interest-rate and prepayment risks. Forward expect market volatility to persist and investor currency contracts were used to hedge foreign sentiment to waver given many uncertainties exchange risk and gain exposure to currencies. and fears of a looming recession. Top 10 holdings HOLDING (PERCENTAGE OF FUND’S NET ASSETS) SECURITY TYPE SECTOR/INDUSTRY Goldman Sachs International 144A notes zero %, Commodity linked Financials/Investment 2022 (Indexed to the S&P GSCI Excess Return Index notes banking/brokerage multiplied by 3) (1.1%) Roche Holding AG (Switzerland) (0.3%) Common stocks Health care/Pharmaceuticals Shell PLC (London Exchange) Common stocks Energy/Oil and gas (United Kingdom) (0.3%) Novartis AG (Switzerland) (0.2%) Common stocks Health care/Pharmaceuticals Novo Nordisk A/S class B (Denmark) (0.2%) Common stocks Health care/Pharmaceuticals BP PLC (United Kingdom) (0.2%) Common stocks Energy/Oil and gas Sony Group Corp. (Japan) (0.2%) Common stocks Consumer cyclicals/ Entertainment L'Oreal SA (France) (0.2%) Common stocks Consumer staples/ Consumer goods UBS Group AG (Switzerland) (0.2%) Common stocks Financials/Banking Diageo PLC (United Kingdom) (0.1%) Common stocks Consumer staples/Beverage This table shows the fund’s top 10 individual holdings and the percentage of the fund’s net assets that each represented as of 5/31/22. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time. 8 Dynamic Risk Allocation Fund