Putnam
Latin America
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
8-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Investors in Latin American stocks who did not give up on the region's future
during several difficult months have been properly rewarded. At the time of
our last report, emerging markets had bottomed out and the world economic
system was in a very fragile state. Latin American stocks, in particular, had
been heavily battered. Then an unusual thing happened. Brazil devalued its
currency and its stock market -- driven mostly by local investors in search of
an inflation hedge -- responded with an unexpected rally. The rest of Latin
America took its cue from the rising Brazilian stock market, and with the
support of three interest rate cuts by the U.S. Federal Reserve Board, the
entire region began to pull itself up by the bootstraps. After a very
challenging period, it is a pleasure to report that Putnam Latin America Fund
produced an exceptional total return for the past 12 months.
Total return for 12 months ended 8/31/99
Net asset value Public offering price
- ------------------------------------------------------------------------
38.27% 30.38%
- ------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 5.
* RISING COMMODITY PRICES KEY TO RECOVERY
The dramatic rise of commodity prices after the first of the year, including
pulp, paper, copper, steel, and oil, has been one of the driving forces of the
region's recovery. Higher prices helped many Latin American economies,
especially in Brazil and Mexico where we have concentrated more and more of
the fund's investments. During the year, it became clearer that some of the
smaller countries were still held back by political disruptions, and so we
decreased our investments in these areas. We have moved our focus to
large-cap, globally dominant companies located primarily in Mexico (45.8% of
the portfolio) and Brazil (36.3% of the portfolio).
While commodity prices were rising, we invested in Companhia Vale do Rio Doce,
which is the largest iron ore producer in Brazil. We have also taken positions
in Aracruz, the world's largest pulp company, which is located in Brazil as
well. In Mexico, we have invested in Grupo Mexico, the world's largest copper
producer. Mexico continues to benefit from its proximity to the United States
and the strong U.S. economy. While these holdings and others discussed in this
report were viewed favorably at the end of the period, all holdings are subject
to review in accordance with the fund's investment strategy and may vary in the
future.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Telefonos de Mexico S.A. ADR
Class L
Utilities
Grupo Televisa S.A. GDR
Broadcasting
Cemex S.A. de C.V. Class B
Building and construction
Petroleo Brasileiro S/A-Petrobras ADR
Oil and gas
Companhia Vale do Rio Doce ADR
Metals and mining
Telesp Celular Participacoes S.A. ADR
Telecommunications
Grupo Modelo S.A. de C.V.
Foods and beverages
Grupo Financiero Banamex Accival, S.A. de C.V.
Insurance and finance
Grupo Mexico S.A.
Metals and mining
Telesp Participacoes S.A. ADR
Telecommunications
Footnote reads:
These holdings represent 44.1% of the fund's net assets as of 8/31/99.
Portfolio holdings will vary over time.
* OUTLOOK FOR REGION IS OPTIMISTIC
As we look ahead to the remainder of this year and to the millennium, we have
a generally positive outlook about the performance of this fund. The world is
a much less fragile place now. Brazil handled its last financial crisis
extremely well. The U.S. economy is still healthy with a very protective Fed
watching out for inflation. Asia is recovering and Europe, though sluggish, is
showing more signs of strong economic growth.
We are not overly concerned about the effects of Y2K, which is one of the
reasons foreign investors have stayed away from Latin America. The problematic
chips date back to the 1980s, when the degree of computerization in Latin
America was practically nil. When computers finally made their way to Mexico
and Brazil in the mid 1990s, most were manufactured to be Y2K compliant.
Another reason that we feel comfortable about the impact of Y2K on the region
is that Third World countries are very accustomed to disruptions and switch
easily to manual operations.
However, there are some risks. If the Fed continues to raise rates, the stock
markets in Latin America won't continue to climb. Additionally, presidential
elections lie ahead in Mexico (July 2000) and Argentina (this fall) and are
expected to increase stock market volatility. But overall, valuations of Latin
American stocks are still low, coexisting with interest rates of 20%. Even if
turbulence continues, there is plenty of room for interest rates to fall -- a
potentially positive event for the Brazilian and Mexican economies. Interest
from international investors is still quite passive. Should their interest
increase, such demand will bode well for the prices of Latin American stocks.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
October 20, 1999
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 8/31/99, there is no guarantee the fund will continue to hold
these securities in the future. International investing involves certain risks,
including economic instability, political developments, and currency
fluctuations. These risks are increased in emerging markets. Single sector
investments may be subject to more volatility than those investing in a diverse
group of sectors.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Latin America
Fund is designed for investors seeking long-term capital appreciation primarily
through common stocks of companies located in Latin America.
TOTAL RETURN FOR PERIODS ENDED 8/31/99
MSCI EMF Latin Consumer
NAV POP America Index price index
- ---------------------------------------------------------------------------
1 year 38.27% 30.38% 38.47% 2.33%
- ---------------------------------------------------------------------------
Life of fund
(since 3/23/98) -27.45 -31.63 -24.03 3.08
Annual average -19.97 -23.21 -17.63 2.16
- ---------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Returns at public offering price reflect the current
maximum initial sales charge of 5.75%. Investment return and principal
value will fluctuate so that an investor's shares when redeemed may be
worth more or less than their original cost. Performance data reflect an
expense limitation currently in effect. Without the expense limitation,
total returns would have been lower.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 8/31/99
- ---------------------------------------------------------------------------
Distributions (number) 1
- ---------------------------------------------------------------------------
Income $0.150
- ---------------------------------------------------------------------------
Capital gains --
- ---------------------------------------------------------------------------
Total $0.150
- ---------------------------------------------------------------------------
Share value: NAV POP
- ---------------------------------------------------------------------------
8/31/98 $4.46 $4.73
- ---------------------------------------------------------------------------
8/31/99 5.98 6.34
- ---------------------------------------------------------------------------
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 3/23/98
MSCI EMF
Fund's shares Latin America Consumer price
Date at POP Index index
3/23/98 9,425 10,000 10,000
5/31/98 7,982 8,507 10,037
7/31/98 7,783 8,400 10,062
9/30/98 5,189 6,048 10,074
11/30/98 6,220 7,019 10,111
1/31/99 5,111 5,710 10,148
3/31/99 6,540 7,309 10,173
5/31/99 7,066 8,100 10,247
7/31/99 7,008 7,833 10,277
8/31/99 $6,837 $7,597 $10,308
Footnote reads:
Past performance is no assurance of future results. See first page of
performance section for performance calculation method.
TOTAL RETURN FOR PERIODS ENDED 9/30/99 (most recent calendar quarter)
NAV POP
- ---------------------------------------------------------------------------
1 year 33.75% 25.95%
- ---------------------------------------------------------------------------
Life of fund
(since 3/23/98) -26.36 -30.60
Annual average -18.23 -21.36
- ---------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge.
Comparative benchmarks
The MSCI EMF (Morgan Stanley Capital International) Latin America Index is
an index of approximately 218 securities representing 7 Latin American
markets, with all values expressed in U.S. dollars. This index assumes
reinvestment of all distributions and interest payments and does not take
into account brokerage fees or taxes. Securities in the fund do not match
those in the indexes and performance of the fund will differ. It is not
possible to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price is determined. All investment and non-investment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-ended funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended August 31, 1999
To the Trustees of Putnam Funds Trust and Shareholders of
Putnam Latin America Fund (a series of Putnam Funds Trust)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Putnam Latin America
Fund (the "fund") at August 31, 1999, and the results of its operations,
the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of investments owned at
August 31, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 12, 1999
<TABLE>
<CAPTION>
The fund's portfolio
August 31, 1999
COMMON STOCKS (99.4%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Argentina (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,000 Banco De Galicia y Buenos Aires ADR S.A. de C.V. ADR
Class B $ 19,313
3,200 Perez Companc S.A. Class B 18,626
700 Telecom Argentina S.A. ADR 19,775
1,150 Telefonica de Argentina S.A. ADR 34,213
900 Transportadora de Gas del Sur ADR 6,863
--------------
98,790
Brazil (36.1%)
- --------------------------------------------------------------------------------------------------------------------------
19,700 Aracruz Celulose S.A. 39,626
4,100 Banco Bradesco S.A. ADR 15,119
41 Banco Itau S.A. 19,065
4,500 Centrais Electricas Brasilieras S.A. 33,750
2,914 Cia Cervejaria Brahma ADR 30,779
100 Companhia Cimento Portland Itau 8,359
1,968 Companhia Energetica de Minas Gerais ADR 30,012
2,700 Companhia Paranaense de Energia-Copel ADR 18,563
3,300 Companhia Vale do Rio Doce ADR 70,950
1,800 Companhia Siderurgica Nacional 43,721
10,500 Empresa Bras Aeronautica 29,185
2,500 Gerdau S.A. 37,879
5,880 Petroleo Brasileiro S/A-Petrobras ADR 77,175
5,200 Tele Centro Oeste Celular Participacoes ADR 17,550
650 Tele Centro Sul Participacoes S.A. 35,547
800 Tele Sudeste Celular Participacoes S.A. ADR 18,750
1 Telecomunicacoes de Sao Paulo S.A. 57
2,730 Telesp Celular Participacoes S.A. ADR 63,131
2,700 Telesp Participacoes S.A. ADR 44,044
--------------
633,262
Chile (8.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,600 Banco Santiago S.A. 33,600
900 Chilectra S.A. 144A ADR 17,550
1,276 Cia de Telecomunicationes de Chile S.A. ADR 28,710
1,100 Compania Cervecera Unidas ADR 28,806
500 Sociedad Quimica y Minera de Chile S.A. ADR 15,031
17 Sociedad Quimica y Minera de Chile S.A. ADR 497
600 Vina Concha Y Toro S.A. ADR 23,325
--------------
147,519
Mexico (45.5%)
- --------------------------------------------------------------------------------------------------------------------------
8,200 Alfa S.A. de C.V. Class A 31,144
7,800 Carso Global Telecom (NON) 43,310
18,000 Cemex S.A. de C.V. Class B (NON) 80,111
487 Cemex S.A. de C.V. 2,157
1,000 Coca-Cola Femsa S.A. ADR 15,188
7,504 Corporacion Interamericana de Entretenimiento S.A. 20,151
14,000 Corporacion Moctezuma S.A. de C.V. (NON) 17,974
450 Desc S.A. de C.V. ADR 8,803
8,500 Fomento Economico Mexicano S.A. de C.V. (NON) 27,964
25,800 Grupo Financiero Banamex Accival S.A. de C.V. 49,684
7,100 Grupo Carso S.A. de C.V. 27,612
2,100 Grupo Imsa S.A. de C.V. ADR (NON) 33,600
12,526 Grupo Industrial Bimbo S.A. de C.V. 26,427
10,700 Grupo Mexico S.A. 46,420
22,700 Grupo Modelo S.A. de C.V. 60,836
2,300 Grupo Televisa S.A.GDR 83,663
2,640 Telefonos de Mexico S.A. ADR Class L 196,350
5,300 TV Azteca, S.A. de C.V. 26,831
--------------
798,225
Peru (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,100 Compania de Minas Buenaventura S.A. ADR 32,228
2,400 Telefonica del Peru S.A. ADR 32,917
--------------
65,145
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,689,578) (b) $ 1,742,941
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,753,277.
(b) The aggregate identified cost on a tax basis is $1,730,319, resulting in gross unrealized appreciation and
depreciation of $178,372 and $165,750, respectively, or net unrealized appreciation of $12,622.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depositary Receipts, or Global Depositary Receipts,
respectively representing ownership of foreign securities on deposit with a domestic custodian bank.
The fund had the following industry group concentrations greater than 10% at August 31, 1999 (as a percentage of net
assets):
Telecommunications 17.3%
Utilities 17.3
Metals and mining 13.2
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
August 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,689,578) (Note 1) $1,742,941
- -----------------------------------------------------------------------------------------------
Dividends receivable 2,847
- -----------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 10,595
- -----------------------------------------------------------------------------------------------
Total assets 1,756,383
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 1,346
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 417
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 435
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7
- -----------------------------------------------------------------------------------------------
Other accrued expenses 901
- -----------------------------------------------------------------------------------------------
Total liabilities 3,106
- -----------------------------------------------------------------------------------------------
Net assets $1,753,277
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,355,604
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,375
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (655,733)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 52,031
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,753,277
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($1,753,277 divided by 293,282 shares) $5.98
- -----------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $5.98)* $6.34
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended August 31, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $2,942) $ 47,535
- -----------------------------------------------------------------------------------------------
Interest 254
- -----------------------------------------------------------------------------------------------
Total investment income 47,789
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,740
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,959
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,310
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 40
- -----------------------------------------------------------------------------------------------
Reports to shareholders 3,851
- -----------------------------------------------------------------------------------------------
Registration fees 110
- -----------------------------------------------------------------------------------------------
Auditing 31,036
- -----------------------------------------------------------------------------------------------
Legal 3,633
- -----------------------------------------------------------------------------------------------
Postage 72
- -----------------------------------------------------------------------------------------------
Other 110
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (33,890)
- -----------------------------------------------------------------------------------------------
Total expenses 25,971
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,211)
- -----------------------------------------------------------------------------------------------
Net expenses 23,760
- -----------------------------------------------------------------------------------------------
Net investment income 24,029
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (556,611)
- -----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 1,317
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (Note 1) (1,376)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 981,246
- -----------------------------------------------------------------------------------------------
Net gain on investments 424,576
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $448,605
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
March 23, 1998
Year ended (commencement
August 31 of operations)
1999 to August 31, 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- --------------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 24,029 $ 15,595
- --------------------------------------------------------------------------------------------------------------
Net realized loss on investments and
foreign currency transactions (555,294) (100,515)
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies 979,870 (927,839)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 448,605 (1,012,759)
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------------------
From net investment income (38,173) --
- --------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 209,626 145,978
- --------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 620,058 (866,781)
Net assets
- --------------------------------------------------------------------------------------------------------------
Beginning of year (Note 5) 1,133,219 2,000,000
- --------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,375 and $14,203, respectively) $1,753,277 $1,133,219
- --------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended March 23, 1998+
operating performance August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $4.46 $8.50
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (a)(d) .09 .06
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.58 (4.10)
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.67 (4.04)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.15) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $5.98 $4.46
- ------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 38.27 (47.53)*
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,753 $1,133
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.65 .73*
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) 1.53 .87*
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 131.26 44.39*
- ------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
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).
(d) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses for the fund for the
periods ended August 31, 1999 and August 31, 1998 reflect a reduction of $0.12 and $0.08 per share, respectively (Note 1).
</TABLE>
Notes to financial statements
August 31, 1999
Note 1
Significant accounting policies
Putnam Latin America Fund (the "fund") is a series of Putnam Funds Trust
(the "trust") which is registered under the Investment Company Act of 1940,
as amended, as an open-end diversified management investment company. The
objective of the fund is to seek long-term capital appreciation by
investing primarily in equity securities of Latin American companies.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value which is determined using the last
reported sale price on its principle exchange, or if no sales are reported
- -- as is the case of some securities traded over the counter -- the last
reported bid price. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost, which approximates market
value. All other investments are stated at fair market value following
procedures approved by the Trustees. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at the current exchange rate.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gain or loss on securities sold are determined on the
identified cost basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net exchange gains or losses on closed
forward currency contracts, disposition of foreign currencies and the
difference between the amount of investment income and foreign withholding
taxes recorded on the fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the
value of open forward currency contracts and assets and liabilities other
than investments at the period end, resulting from changes in the exchange
rate.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
August 31, 1999, the fund had no borrowings against the line of credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At August 31, 1999, the fund had a capital loss carryover of approximately
$363,000 available to offset future net capital gain, if any, which will
expire on August 31, 2007.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sale transactions, foreign currency gains and losses, post-October loss
deferrals, and foreign taxes. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended August 31, 1999, the fund reclassified $1,316 to increase
undistributed net investment income and $1,316 to increase to accumulated
net realized losses. The calculation of net investment income per share in
the financial highlights table excludes these adjustments.
I) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 1.00% of the first $500
million of average net assets, 0.90% of the next $500 million, 0.85% of
the next $500 million, and 0.80% of the next $5 billion, 0.775% of the
next $5 billion, 0.755% of the next $5 billion, 0.74% of the next $5
billion and 0.73% thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through December 31, 1999, to the extent
that expenses of the fund (exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expense, credits from
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc. and payments under the Trust's distribution plan) would exceed an
annual rate of 1.65 % of the fund's average net assets.
As part of the subcustodian contract between the subcustodian bank and
PFTC, the subcustodian bank has a lien on the securities of the fund to
the extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At August 31, 1999, the payable to the subcustodian
bank represents the amount due for cash advanced for the settlement of a
security purchased.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended August 31, 1999, fund expenses were reduced by $2,211
under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing
asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $100 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan is
to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35% of
the fund's average net assets. The fund is not currently making any
payments pursuant to the plan.
For the year ended August 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received no net commissions from the sale of shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
shares. For the year ended August 31, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received no monies on redemptions.
Note 3
Purchases and sales
During the year ended August 31, 1999, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $2,238,508 and $1,978,828 respectively. There were no purchases
and sales of U.S. government obligations.
Note 4
Capital shares
At August 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital were as follows:
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 62,389 $362,692
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,838 38,017
- -----------------------------------------------------------------------------
70,227 400,709
Shares
repurchased (31,254) (191,083)
- -----------------------------------------------------------------------------
Net increase 38,973 $209,626
- -----------------------------------------------------------------------------
Period ended March 23, 1998
(commencement of operations)
to August 31, 1998
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 19,623 $149,023
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
19,623 149,023
Shares
repurchased (608) (3,045)
- -----------------------------------------------------------------------------
Net increase 19,015 $145,978
- -----------------------------------------------------------------------------
Note 5
Initial capitalization and offering
of shares
The fund had an initial capital contribution of $2,000,000 and an issuance
of 235,294 shares to Putnam Mutual Funds Corp. on March 23, 1998.
At August 31, 1999, Putnam Investments, Inc. owned 263,836 shares of the
fund (90.0% of shares outstanding), valued at $1,577,739.
Federal tax information
(Unaudited)
For the period, dividends from foreign countries were $51,148 or $.174 per
share. Taxes paid to foreign countries were $2,942 or $.010 per share.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oler
Vice President and Fund Manager
Thomas Haslet
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Latin America
Fund. It may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most
recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
21A 55084 10/99
