Putnam
Asia Pacific
Fund II
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:
Last summer, with virtually all of Asia's markets beset by turbulence and
uncertainty, it would have been difficult to imagine that a scant year
later we would be commenting on the remarkable resilience of any of them.
However, as recoveries took hold in South Korea, Hong Kong, and Singapore,
Putnam Asia Pacific Fund II was among the beneficiaries, as shown by the
fund's results for its first full fiscal year.
Total return for 12 months ended 8/31/99
Net asset value POP
- ----------------------------------------------------------------
111.52% 99.32%
- ----------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* SPURT IN CHIP DEMAND PROVIDES BOOST FOR REGION
As interest rates fell and stability returned to the region, governments
in countries such as South Korea were able to force large companies to
restructure and reform noncompetitive practices. In addition, as the
Japanese yen strengthened in the past few months, a major impediment to
the competitiveness of Asian export growth was removed.
An important development for the region has been the upturn in the
semiconductor business cycle. Prices for commodity-type memory chips such
as DRAMS -- which is a large market for Asian companies -- have improved
substantially as demand for high-tech goods has increased around the
world.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and finance 17.3%
Electronics and
electrical equipment 17.0%
Real estate 10.1%
Telecommunications 7.4%
Computers 4.9%
Footnote reads:
*Based on net assets as of 8/31/99. Holdings will vary over time.
Taiwan was among the direct beneficiaries of the upturn in the chip cycle,
and managers Carmel Peters and Paul Warren were successful in selecting
some key holdings. For example, the fund owned Taiwanese blue-chips such
as Taiwan Semiconductor as well as some strong performing but lesser known
chip stocks such as Winbond Electronics and United Microelectronics. While
these holdings, along with others discussed in this report, were viewed
favorably at the end of the period, all are subject to review and
adjustment in accordance with the fund's investment strategy and may vary
in the future.
* CORPORATE RESTRUCTURING BOOSTS KOREAN MARKET
South Korea has been the top-performing emerging market for some time.
Carmel and Paul have also been impressed with the level of restructuring
that has taken place at the large industrial groups known as chaebol.
Samsung Electronics, along with being a major beneficiary of the upturn in
semiconductor prices, has also been one of the most aggressive companies
in leading the restructuring trend in the country.
The fund also owned stakes in other Korean bellwethers such as Korea
Electric Power Company, Pohang Iron and Steel, and Korea Telecom
Corporation. Of course with the relief afforded by stronger markets and
capital inflows, the drive to restructure may slow somewhat.
* HONG KONG PROVIDES ENTRY TO CHINESE MARKETS
With the Hong Kong market up about 30% so far in 1999, it is hardly
surprising that four of the fund's top five fund holdings are from that
market. Some of the fund's positions in Hong Kong, such as the Hutchison
Whampoa, and Sun Hung Kai conglomerates, were attractive because of their
control over exports.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Samsung Electronics Co. GDR
South Korea
Electronics and electrical equipment
Hutchison Whampoa, Ltd.
Hong Kong
Conglomerates
Cheung Kong Infrastructure Holdings
Hong Kong
Real estate
Hang Seng Bank Ltd.
Hong Kong
Insurance and finance
Sun Hung Kai Properties Ltd.
Hong Kong
Real estate
Korea Electric Power Corp.
South Korea
Utilities
China Telecom Ltd.
Hong Kong
Telecommunications
Taiwan Semiconductor Manufacturing Co.
Taiwan
Electronics and electrical equipment
Development Bank of Singapore Ltd.
Singapore
Insurance and finance
United Microelectronics Corp.
Taiwan
Electronics and electrical equipment
Footnote reads:
These holdings represent 30.7% of the fund's net assets as of 8/31/99.
Portfolio holdings will vary over time.
In light of the stronger Japanese yen and China's efforts to get more of
its goods into the world markets, the flow of exports through Hong Kong is
likely to pick up. Hong Kong has also provided the opportunity for the
fund to gain a foothold in China's developing telecommunications business
through its holdings in China Telecom.
Despite this generally favorable environment, some potentially troublesome
issues lurk for Hong Kong. Among them is the government's 40% stake in the
equity market that it acquired fighting off the Hong Kong dollar's peg to
the U.S. dollar. China has its own problems; relations with Taiwan are
heating up, price deflation is being linked to concerns about a Chinese
currency devaluation, and the potential for social unrest continues as the
government grapples with a growing unemployment problem.
* DESPITE SOME SHORT-TERM ISSUES, OUTLOOK IS POSITIVE
Your fund's managers remain mindful of some important short-term issues.
Should U.S. interest rates move higher, emerging-market stocks could
suffer. In addition, trading in emerging-markets securities could remain
volatile as investor concerns about Y2K escalate in the final months of
1999.
We should also note that shortly after the close of the fund's reporting
period Taiwan sustained a major earthquake. While the loss of life and the
safety of survivors are the primary concerns, from an economic point of
view, DRAM spot prices spiked higher in the immediate aftermath of the
earthquake. Although the estimates of disruption in the production of
memory chips and technological components have varied, it appears at this
time to be a short-term concern. Carmel and Paul will continue to monitor
the situation closely.
Of course, no matter what occurs in the near future, investors should
remember that emerging markets represent a volatile asset class. That is
why your fund's managers will continue to adhere to their investment
strategy of selecting countries they believe offer the best mix of rewards
and risks within the context of emerging-markets investing. In turn, this
will help them to identify companies priced below the economic value of
their businesses.
Carmel and Paul believe this approach steers the fund toward valuable
long-term investment opportunities. Overall, however, it is clear that
economic recovery has taken hold in Asia and they remain optimistic about
prospects for the year ahead.
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. The fund concentrates its
investments in one region or industry and involves more risk than a fund
that invests more broadly. International investing involves certain risks,
such as currency fluctuations, economic instability, and political
developments. Additional risks, including liquidity and volatility, may be
associated with emerging-markets securities. The fund invests a portion of
its assets in smaller companies. Such investments increase the risk of
greater price fluctuations.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Asia Pacific
Fund II is designed for investors seeking long-term capital appreciation
through common stocks and other securities of companies located in Asia other
than Japan.
TOTAL RETURN FOR PERIOD ENDED 8/31/99
(Inception 3/23/98)
MSCI Asia Free Consumer
NAV POP ex Japan Index price index
- -------------------------------------------------------------------------
1 year 111.52% 99.32% 80.50% 2.33%
- -------------------------------------------------------------------------
Life of fund 30.14 22.64 12.75 3.08
Annual average 20.08 15.23 8.82 2.16
- -------------------------------------------------------------------------
TOTAL RETURN FOR PERIOD ENDED 9/30/99 (most recent calendar quarter)
NAV POP
- --------------------------------------------------------------------------
1 year 76.19% 66.07%
- --------------------------------------------------------------------------
Life of fund (since 3/23/98) 22.50 15.44
Annual average 14.28 9.91
- --------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. Returns at public offering price reflect the current maximum
initial sales charge of 5.75%. All returns assume reinvestment of
distributions at net asset value. Investment returns and principal value
will fluctuate so that an investor's shares, when sold, may be worth more
or less than their original cost. Performance data do not take into
account any adjustments for taxes payable on reinvested distributions and
reflect an expense limitation which is 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 $0.092
- -----------------------------------------------------------------------
Return of capital* $0.018
- -----------------------------------------------------------------------
Total $0.110
- -----------------------------------------------------------------------
Share value: NAV POP
- -----------------------------------------------------------------------
8/31/98 $5.23 $5.55
- -----------------------------------------------------------------------
8/31/99 10.90 11.56
- -----------------------------------------------------------------------
*See page 24.
[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
Fund's class A MSCI Asia Free Consumer price
Date shares at POP ex Japan Index index
3/23/98 9,425 10,000 10,000
5/31/98 7,650 8,121 10,037
7/31/98 6,730 7,309 10,062
9/30/98 6,552 6,763 10,074
11/30/98 8,171 8,510 10,111
1/31/99 8,270 8,661 10,148
3/31/99 8,653 9,220 10,173
5/31/99 10,408 10,197 10,247
7/31/99 12,073 11,256 10,277
8/31/99 $12,264 $11,275 $10,308
Footnote reads:
Past performance is no assurance of future results.
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.
Class A shares are generally subject to an initial sales charge.
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 for class A
shares.
Comparative benchmarks
Morgan Stanley Capital International (MSCI) Asia Free ex-Japan Index is an
arithmetic, market value weighted average of the performance of the
securities listed on the stock exchanges of those countries, excluding
issues denominated in yen. The 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
index 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 Board of Trustees of Putnam Funds Trust and
Shareholders of Putnam Asia Pacific Fund II
(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 Asia Pacific
Fund II (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 14, 1999
<TABLE>
<CAPTION>
The fund's portfolio
August 31, 1999
COMMON STOCKS (97.4%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
China (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
80,000 Beijing Yanhua Petrochemical Co., Ltd. Class H $ 16,895
100,000 Shanghai Petrochemical Co. Ltd. (NON) 21,507
40,000 Yanzhou Coal Mining Co. Ltd. 17,644
--------------
56,046
Hong Kong (27.2%)
- --------------------------------------------------------------------------------------------------------------------------
6,000 Beijing Enterprises Holdings Ltd. 11,977
18,000 Cable & Wireless HKT Ltd. (NON) 40,915
20,000 Cathay Pacific Airways (NON) 34,000
13,000 Cheung Kong Infrastructure Holdings (NON) 113,010
14,000 China Merchants Holdings Ltd. 11,810
10,000 China Resources Enterprise Ltd. 16,420
26,000 China Telecom Ltd. (NON) 80,865
7,000 Citic Pacific Ltd. (NON) 21,771
3,000 Dao Heng Bank Group Ltd. 13,677
24,000 Esprit Holdings Ltd. 19,009
8,000 Hang Seng Bank Ltd. 90,408
24,300 Hong Kong and China Gas Co., Ltd. 34,112
15,000 Hutchison Whampoa, Ltd. 146,333
8,000 Johnson Electric Holdings Ltd. 36,060
30,000 Leefung - Asco Printers Holdings Ltd. 6,298
17,000 Legend Holdings Ltd. 16,420
6,000 Li & Fung Ltd. 19,241
10,000 New World Development Co. Ltd. 24,083
10,000 Sun Hung Kai Properties Ltd. 85,643
17,000 Tianjin Development Hldgs Ltd. (NON) 11,932
6,371 Wharf (Holdings) Ltd. 17,313
--------------
851,297
India (8.9%)
- --------------------------------------------------------------------------------------------------------------------------
350 Cipla Ltd. 22,379
1,900 Gujarat Ambuja Cements Ltd. 23,247
539 Hindalco Industries. Ltd. 11,401
600 Hindustan Lever Ltd. 36,843
4,000 Housing Development Finance Corporation Ltd. 23,816
1,200 ITC Ltd. 28,410
900 Indian Hotels, Co. Ltd. GDR 11,588
150 Infosys Technologies Ltd. 19,355
840 Larsen & Toubro Ltd. 19,341
1,800 Mahindra & Mahindra Ltd. (NON) 17,088
700 Ranbaxy Laboratories Ltd. GDR 18,305
860 Satyam Computer Services Ltd. 17,392
370 Zee Telefilms Ltd. (NON) 27,707
--------------
276,872
Indonesia (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
25,000 PT Astra International Inc. 8,824
6,000 PT Semen Gresik 11,765
8,500 PT Indofood Sukses 9,111
2,620 PT Telekomunikasi Indonesia ADR 20,141
6,000 Sampoerna Industries 12,510
--------------
62,351
Malaysia (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,000 Commerce Asset-Holding Berhad 9,211
3,000 Edaran Otomobil Nasional Berhad 11,053
15,000 IJM Corp. Berhad 12,079
8,000 Jaya Tiasa Holdings Berhad 14,948
22,000 Public Bank Berhad 18,527
6,000 Resorts World Berhad 15,237
5,000 Telekom Malaysia 14,869
6,000 UMW Holdings Berhad 12,948
4,000 WTK Holdings Berhad 10,948
--------------
119,820
Philippines (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
3,800 Bank of the Philippine Islands 144A 10,939
1,000 Bank of the Philippine Islands 2,879
29,900 Benpres Holdings Corp. GDR 5,889
70,500 International Container Terminal Services, Inc.(NON) 7,566
4,500 Manila Electric Co. Class B 13,409
7,400 San Miguel Corp. 12,053
47,000 SM Prime Holdings Inc. 8,664
--------------
61,399
Singapore (12.6%)
- --------------------------------------------------------------------------------------------------------------------------
600 Asia Pulp & Paper Co. Ltd. ADR 4,575
4,000 City Developments Ltd. 24,231
2,000 Cycle & Carriage Ltd. 11,284
4,000 Datacraft Asia Ltd. 15,440
5,000 DBS Land Ltd. 11,403
20,000 Del Monte Pacific Ltd. (NON) 10,200
5,815 Development Bank of Singapore Ltd. 66,653
8,000 JIT Holdings Ltd. 17,769
5,000 Keppel Corp. 16,184
11,000 Omni Industries Ltd. 13,066
5,000 Oversea Chinese Banking Corp. 35,040
5,000 Singapore Airlines Ltd. 46,918
1,600 Singapore Press Holdings Ltd. 26,606
16,000 Singapore Telecommunications, Ltd. 28,412
2,000 Star Cruises PLC (NON) 12,200
3,600 United Overseas Bank Ltd. 26,725
3,000 Venture Manufacturing Ltd. 28,685
--------------
395,391
South Korea (18.4%)
- --------------------------------------------------------------------------------------------------------------------------
829 AP SK Corp. 20,022
1,000 Daelim Industrial Co. 14,153
1,200 Dongwon Securities Co. 29,288
300 Halla Climate Control Co. 16,220
3,200 Hankook Tire Manufacturing Co. 14,834
11 Hanwha Chemical Corp. 110
640 Housing & Commercial Bank GDR 14,969
1,000 Hyundai Industrial Development & Construction 15,593
1,200 Korea Data System 16,525
2,250 Korea Electric Power Corp. 83,898
500 Korea Telecom Corp. 31,356
600 L.G. Chemical Ltd. 19,169
630 L.G. Electronics 26,695
260 Pohang Iron & Steel Company, Ltd. 35,336
877 Samsung Electronics Co. GDR 166,481
300 Samsung Fire & Marine Insurance 14,822
1,800 Shinhan Bank 19,373
200 Shinsegae Department Store Co. 15,746
1,799 SK Telecom Co., Ltd. ADR 20,351
--------------
574,941
Taiwan (16.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,610 Acer Inc. (NON) 17,147
7,000 Acer Peripherals Inc. 18,218
5,535 Advanced Semiconductor Engineering Inc. (NON) 16,675
900 Ase Test Limited 20,700
3,003 Asustek Computer, Inc. GDR 32,398
29,139 Bank Sinopac 18,017
11,200 Cathay Life Insurance Co., Ltd. 33,741
1,285 China Steel Corp. GDR 23,130
683 China Steel Corp. GDR 144A 12,285
15,080 Chinatrust Commercial Bank 15,128
960 Evergreen Marine Corp. 996
10,700 Far Eastern Textile Ltd. 15,561
9,000 Formosa Plastics Corp. 17,319
4,200 Hon Hai Precision Industry 27,426
7,000 Nan Ya Plastic Corp. 11,593
5,900 President Chain Store Corp. 17,309
1,500 Reliance Industries GDS 16,575
2,000 Synnex Technology Intl. Corp. 10,662
2,400 Taishin Intl. Bank 1,544
18,600 Taiwan Semiconductor Manufacturing Co. (NON) 79,211
10,000 United World Chinese Commercial Bank Corp. 13,470
19,400 United Microelectronics Corp. 49,571
1,800 Windbond Electronics Corp. 144A GDR 34,200
15,000 Yageo Corp. 15,946
--------------
518,822
Thailand (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,200 Advanced Info Service Public Co., Ltd. (NON) 16,472
7,200 Bangkok Bank Public Co., Ltd. 18,319
10,000 International Broadcasting Corporation
Public Company Ltd. 6,394
9,300 Land and House Public Co. Ltd. 14,076
18,000 National Financial Insurance 8,388
11,000 National Petrochemical Co. 9,258
1,400 PTT Exploration & Production Plc 11,033
3,500 Siam City Cement Co. Ltd. 12,970
12,200 Siam Commercial Bank Public Co. Ltd. 5,492
12,000 TelecomAsia Corporation Public Co. Ltd. 11,459
11,000 Thai Farmers Bank Public Co. 15,788
--------------
129,649
--------------
Total Common Stocks (cost $2,123,136) $ 3,046,588
CONVERTIBLE PREFERRED STOCKS (0.8%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
3,000 Compal Electronics, Inc. zero % c.v. pfd. $ 10,319
12,800 Siam Commercial Bank Public Co. Ltd. 144A
$5.25 c.v. pfd. 14,530
--------------
Total Convertible Preferred Stocks (cost $20,622) $ 24,849
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,143,758) (b) $ 3,071,437
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,129,494.
(b) The aggregate identified cost on a tax basis is $2,187,552, resulting in gross unrealized appreciation and
depreciation of $914,797 and $30,912, respectively, or net unrealized appreciation of $883,885.
(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,
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):
Insurance and finance 17.3%
Electronics and electrical equipment 17.0
Real estate 10.1
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 $2,143,758) (Note 1) $3,071,437
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $101,028) 100,817
- -----------------------------------------------------------------------------------------------
Dividends receivable 4,003
- -----------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 9,120
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 193,829
- -----------------------------------------------------------------------------------------------
Total assets 3,379,206
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 82,981
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 131,971
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 515
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 435
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7
- -----------------------------------------------------------------------------------------------
Other accrued expenses 33,803
- -----------------------------------------------------------------------------------------------
Total liabilities 249,712
- -----------------------------------------------------------------------------------------------
Net assets $3,129,494
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,418,867
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (7,411)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (209,359)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 927,397
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,129,494
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,129,494 divided by 287,110 shares) $10.90
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.90)* $11.56
- -----------------------------------------------------------------------------------------------
* 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 $3,663) $ 41,594
- -----------------------------------------------------------------------------------------------
Interest 611
- -----------------------------------------------------------------------------------------------
Total investment income 42,205
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 22,438
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,146
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,310
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 40
- -----------------------------------------------------------------------------------------------
Auditing 33,581
- -----------------------------------------------------------------------------------------------
Legal 3,604
- -----------------------------------------------------------------------------------------------
Other 2,836
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by manager (Note 2) (31,933)
- -----------------------------------------------------------------------------------------------
Total expenses 37,022
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,781)
- -----------------------------------------------------------------------------------------------
Net expenses 34,241
- -----------------------------------------------------------------------------------------------
Net investment income 7,964
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 297,030
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (7,250)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (Note 1) (2,556)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 1,267,334
- -----------------------------------------------------------------------------------------------
Net gain on investments 1,554,558
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,562,522
- -----------------------------------------------------------------------------------------------
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 $ 7,964 $ 18,006
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 289,780 (508,833)
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in
foreign currencies 1,264,778 (337,381)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 1,562,522 (828,208)
- ---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------
From net investment income (7,964) --
- ---------------------------------------------------------------------------------------------------------------------
In excess of net investment income (15,394) --
- ---------------------------------------------------------------------------------------------------------------------
From return of capital (4,667) --
- ---------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 264,290 158,915
- ---------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,798,787 (669,293)
Net assets
- ---------------------------------------------------------------------------------------------------------------------
Beginning of year (Note 5) 1,330,707 2,000,000
- ---------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
net investment income and undistributed net
investment income of $7,411 and
$13,148, respectively) $3,129,494 $1,330,707
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
Year For the period
Per-share ended March 23, 1998+
operating performance August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $5.23 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a)(b) .03 .06
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 5.75 (3.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.78 (3.27)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income (.03) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.11) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.90 $5.23
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(c) 111.52 (38.47)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,129 $1,331
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(d) 1.65 .73*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) .35 .99*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 234.28 202.60*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses for the fund reflect a
reduction of $.12 and $.07 per share for the periods ended August 31, 1999 and August 31, 1998, respectively. (Note 2)
(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
Notes to financial statements
August 31, 1999
Note 1
Significant accounting policies
Putnam Asia Pacific Fund II (the "fund") is a series of Putnam Funds Trust
("the trust") which is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company. The fund seeks long term capital appreciation by investing
primarily in common stocks and other securities of companies located in
Asia other than Japan.
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 in 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 value following procedures
approved by the Trustees.
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. Interest income is recorded on the accrual 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) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
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
$142,000 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, foreign taxes, market discount, realized gains and losses on
passive foreign investment companies, unrealized gains and losses on
passive foreign investment companies, and accretion/amortization
adjustments. 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 $5,165 to increase distributions in excess
of net investment income and $329 to increase paid-in-capital, with a
decrease to accumulated net realized losses of $4,836. 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, 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,
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.
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.
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 advance for the settlement of a
security purchased.
For the year ended August 31, 1999, fund expenses were reduced by $2,781
under expense offset arrangements with PFTC and brokerage service
arrangements. 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 of the
fund. 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 of securities
During the year ended August 31, 1999, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $5,510,586 and $5,090,569, 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 shares were as follows:
For the year ended August 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 43,710 $359,791
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,792 28,025
- -----------------------------------------------------------------------------
47,502 387,816
Shares
repurchased (15,071) (123,526)
- -----------------------------------------------------------------------------
Net increase 32,431 $264,290
- -----------------------------------------------------------------------------
For the period March 23, 1998
(commencement of operations)
to August 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 104,744 $659,238
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
104,744 659,238
Shares
repurchased (85,359) (500,323)
- -----------------------------------------------------------------------------
Net increase 19,385 $158,915
- -----------------------------------------------------------------------------
Note 5
Initial capitalization and
offering of shares
The fund was established as a Massachusetts business trust on January 22,
1996. During the period January 22, 1996 to March 23, 1998, the fund had
no operations other than those related to organizational matters,
including the initial capital contribution of $2,000,000 and the issuance
of 235,294 shares to Putnam Mutual Funds Corp., on March 20, 1998.
At August 31, 1999, Putnam Investments, Inc. owned 256,891 shares of the
fund (89.5% of class shares outstanding), valued at $2,800,112.
Federal tax information
(Unaudited)
For the period, interest and dividends from foreign countries were $45,256
or $.157 per share. Taxes paid to foreign countries were $3,663 or $.013
per share.
For the year ended August 31, 1999, a portion of the fund's distribution
represents a return of capital and is therefore not taxable to
shareholders.
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
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
John J. Morgan, Jr.
Vice President
Brett C. Browchuk
Vice President
Carmel Peters
Vice President and Fund Manager
Paul C. Warren
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 Asia Pacific
Growth II. 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.
55088 10/99
