| UNITED STATES SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
FORM N-CSR | ||
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES | ||
| Investment Company Act file number: | (811–07513) |
| Exact name of registrant as specified in charter: | Putnam Funds Trust |
| Address of principal executive offices: | 100 Federal Street, Boston, Massachusetts 02110 |
| Name and address of agent for service: | Robert T. Burns, Vice President 100 Federal Street Boston, Massachusetts 02110 |
| Copy to: | Bryan Chegwidden, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036 |
| Registrant's telephone number, including area code: | (617) 292–1000 |
| Date of fiscal year end: | August 31, 2020 |
| Date of reporting period: | September 1, 2019 — August 31, 2020 |
Item 1. Report to Stockholders: |
| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |||
Putnam
Emerging Markets
Equity Fund
Annual report
8 | 31 | 20
IMPORTANT NOTICE: Delivery of paper fund reports
In accordance with regulations adopted by the Securities and Exchange Commission, beginning on January 1, 2021, reports like this one will no longer be sent by mail unless you specifically request it. Instead, they will be on Putnam’s website, and you will be notified by mail whenever a new one is available, and provided with a website link to access the report.
If you wish to stop receiving paper reports sooner, or if you wish to continue to receive paper reports free of charge after January 1, 2021, please see the back cover or insert for instructions. If you invest through a bank or broker, your choice will apply to all funds held in your account. If you invest directly with Putnam, your choice will apply to all Putnam funds in your account.
If you already receive these reports electronically, no action is required.
Message from the Trustees
October 7, 2020
Dear Fellow Shareholder:
As the world continues to confront the challenges of the COVID-19 pandemic, financial markets, it seems, are enjoying a respite from fear. U.S. markets rallied this summer despite many challenges that weighed down economic activity, including the public health impact of the pandemic, high unemployment, and tensions related to calls for racial equity. In this context, Putnam continues to pursue superior investment performance for you and your fellow shareholders while also working toward its goals of improving diversity and inclusion within its organization.
We would like to take this opportunity to thank Robert E. Patterson, who retired as a Trustee on June 30, 2020, for his 36 years of service. We will miss Bob’s experienced judgment and insights, and we wish him well. We are also pleased to welcome Mona K. Sutphen to the Board. Ms. Sutphen brings extensive professional and directorship experience to her role as a Trustee.
As always, thank you for investing with Putnam.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 7–9 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
* Source: Lipper, a Refinitiv company.
This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 8/31/20. See above and pages 7–9 for additional fund performance information. Index descriptions can be found on pages 13–14.
| 2 Emerging Markets Equity Fund | |
How was the investing environment for the 12-month period?
Emerging-market stocks advanced during a remarkable period for investors worldwide. The period began in September 2019, when global stocks posted gains despite ongoing challenges such as the U.S.–China trade war and a slowdown in growth for many economies. These issues caused some turbulence through the end of 2019, but stocks continued to rally.
After a relatively calm start to 2020, market conditions changed dramatically in February. As the COVID-19 pandemic began its global spread, financial markets encountered unprecedented bouts of volatility. Manufacturing and services activities ceased across the globe as businesses were closed and stay-at-home orders went into effect. Also contributing to losses was a breakdown in Saudi Arabia–Russia oil output negotiations, which caused oil prices to plummet. During March, stock markets worldwide continued to experience severe declines. Emerging-market stocks posted a decline of 15.40% for that one-month period.
In the months that followed, however, financial markets made a remarkable comeback. In April, major U.S. stock indexes posted their
| Emerging Markets Equity Fund 3 |
Allocations are shown as a percentage of the fund’s net assets as of 8/31/20. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, and rounding. Holdings and allocations may vary over time.
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 8/31/20. Short-term investments and derivatives, if any, are excluded. Holdings may vary over time.
| 4 Emerging Markets Equity Fund |
best monthly percentage gains since 1987. Emerging-market stocks advanced in each month through August, the final month of the reporting period.
How did the fund perform in this environment?
It was a very strong period of performance for Putnam Emerging Markets Equity Fund. For the 12-month reporting period, the fund gained 34.30%, significantly outperforming its benchmark, the MSCI Emerging Markets Index [ND], which returned 14.49%. Performance strength came from a wide range of sectors, particularly industrials, consumer discretionary, and communication services.
Could you provide some examples of stocks that contributed to the fund’s performance for the reporting period?
A-Living Services, a Chinese property management company, was a key contributor. A-Living’s business is recurring, and we believe one of the company’s strengths is its ability to remain resilient in difficult economic environments. In our view, the company has high growth potential, with the ability to gain market share, acquire subscale players, and raise pricing. Our thesis that A-Living would use its strong balance sheet for accretive mergers and acquisitions has played out so far. A-Living acquired 60% of Shanghai-based China Minsheng Investment Group during the reporting period — a deal that was well received by investors. An accretive acquisition increases the acquiring company’s earnings per share.
Another portfolio highlight was our investment in Tencent Holdings, a China-based technology conglomerate. This global giant specializes in a range of internet-related services, including social networking, music, web portals, e-commerce, mobile games, artificial intelligence, and payment systems. The company continued to experience strong growth during the period, particularly in mobile gaming, financial technology, and advertising.
Alibaba Group was another top contributor to performance for the period. Alibaba is a Chinese technology company with businesses that include e-commerce, electronic payments, shopping search engines, and cloud computing services. The company has benefited from rapid e-commerce growth in China. And after a disappointing March quarter, Alibaba recovered from the depths of the COVID-19 shutdowns faster than expected.
What were some holdings that detracted from performance for the period?
During the period, detractors had a relatively minimal impact on performance, but included HDFC Bank, an India-based retail and lending business. Shutdowns related to the COVID-19 pandemic have been especially difficult for Indian banks, which are anticipating a large increase in non-performing assets as consumers and businesses are unable to make loan payments.
Another underperforming stock for the period was SK Hynix, a South Korea-based supplier of semiconductors. While the overall technology sector has been strong, the memory chip industry remains challenged by weak pricing and demand trends.
What are some areas of focus as you position the portfolio?
As we continue to seek investment opportunities, we are eyeing potential new winners in China. We believe some clear themes have emerged this year as our analyst team has had nearly 100 calls with the management teams of Chinese companies. One notable trend is that Chinese brands are taking market share
| Emerging Markets Equity Fund 5 |
from international brands across nearly every sector. Also, “Made in China 2025” is one of the Chinese government’s highest priorities. Its goals include increasing domestic-made content of core materials in key industries such as pharmaceuticals, aerospace, and information technology. We are watching these trends carefully and using insights from our meetings with company management teams to position the fund in what we believe are promising growth opportunities.
As the fund begins a new fiscal year, what is your outlook?
In an environment where bullish forecasts are relatively rare, we are optimistic about the prospects for emerging-market stocks. Much is still unknown about the possible future economic impact of COVID-19 across global economies, and there is a wide range of potential outcomes. However, in terms of stocks, we believe the negative effects of the global pandemic will be less intense for emerging markets, particularly relative to U.S. and European markets. In our view, emerging-market stocks in most regions offer an attractive absolute and relative risk/reward profile. We believe lower global interest rates could also provide a tailwind.
Thank you, Brian, for your time and insights on the fund.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.
Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.
This chart shows the fund’s largest allocation shifts, by percentage, over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.
| 6 Emerging Markets Equity Fund |
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended August 31, 2020, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.
| Fund performance Total return for periods ended 8/31/20 | ||||||||
| Annual | ||||||||
| average | Annual | Annual | Annual | |||||
| (life of fund) | 10 years | average | 5 years | average | 3 years | average | 1 year | |
| Class A (9/29/08) | ||||||||
| Before sales charge | 5.80% | 67.90% | 5.32% | 83.59% | 12.92% | 28.30% | 8.66% | 34.30% |
| After sales charge | 5.28 | 58.25 | 4.70 | 73.03 | 11.59 | 20.92 | 6.54 | 26.58 |
| Class B (9/29/08) | ||||||||
| Before CDSC | 5.27 | 58.22 | 4.70 | 76.80 | 12.07 | 25.48 | 7.86 | 33.26 |
| After CDSC | 5.27 | 58.22 | 4.70 | 74.80 | 11.82 | 22.48 | 6.99 | 28.26 |
| Class C (9/29/08) | ||||||||
| Before CDSC | 5.14 | 55.90 | 4.54 | 76.74 | 12.06 | 25.46 | 7.85 | 33.27 |
| After CDSC | 5.14 | 55.90 | 4.54 | 76.74 | 12.06 | 25.46 | 7.85 | 32.27 |
| Class R (9/29/08) | ||||||||
| Net asset value | 5.54 | 63.78 | 5.06 | 81.18 | 12.62 | 27.31 | 8.38 | 33.86 |
| Class R6 (5/22/18) | ||||||||
| Net asset value | 6.11 | 72.93 | 5.63 | 86.59 | 13.29 | 29.80 | 9.08 | 34.81 |
| Class Y (9/29/08) | ||||||||
| Net asset value | 6.07 | 72.25 | 5.59 | 85.86 | 13.20 | 29.29 | 8.94 | 34.66 |
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 5.75% sales charge levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R6, and Y shares have no initial sales charge or CDSC. Performance for class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
The fund has had performance fee adjustments that may have had a positive or negative impact on returns.
Class B share performance reflects conversion to class A shares after eight years.
Class C share performance reflects conversion to class A shares after 10 years.
| Emerging Markets Equity Fund 7 |
| Comparative index returns For periods ended 8/31/20 | ||||||||
| Annual | ||||||||
| average | Annual | Annual | Annual | |||||
| (life of fund) | 10 years | average | 5 years | average | 3 years | average | 1 year | |
| MSCI Emerging Markets | ||||||||
| Index (ND) | 5.49% | 44.62% | 3.76% | 51.45% | 8.66% | 8.75% | 2.83% | 14.49% |
| Lipper Emerging Markets | ||||||||
| Funds category average* | 5.74 | 49.06 | 3.82 | 50.02 | 8.16 | 9.34 | 2.78 | 14.07 |
Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 8/31/20, there were 767, 669, 558, 264, and 208 funds, respectively, in this Lipper category.
Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $15,822 and $15,590, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $16,378, $17,293 and $17,225, respectively.
| 8 Emerging Markets Equity Fund | |
| Fund price and distribution information For the 12-month period ended 8/31/20 | |||||||
| Distributions | Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Number | 1 | 1 | 1 | 1 | 1 | 1 | |
| Income | $0.136 | $0.059 | $0.074 | $0.055 | $0.208 | $0.177 | |
| Capital gains | — | — | — | — | — | — | |
| Total | $0.136 | $0.059 | $0.074 | $0.055 | $0.208 | $0.177 | |
| Before | After | Net | Net | Net | Net | Net | |
| sales | sales | asset | asset | asset | asset | asset | |
| Share value | charge | charge | value | value | value | value | value |
| 8/31/19 | $11.05 | $11.72 | $10.52 | $10.48 | $10.97 | $11.22 | $11.19 |
| 8/31/20 | 14.68 | 15.58 | 13.95 | 13.88 | 14.62 | 14.88 | 14.86 |
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
| Fund performance as of most recent calendar quarter Total return for periods ended 9/30/20 | ||||||||
| Annual | ||||||||
| average | Annual | Annual | Annual | |||||
| (life of fund) | 10 years | average | 5 years | average | 3 years | average | 1 year | |
| Class A (9/29/08) | ||||||||
| Before sales charge | 5.72% | 49.36% | 4.09% | 84.56% | 13.04% | 26.63% | 8.19% | 30.96% |
| After sales charge | 5.20 | 40.78 | 3.48 | 73.95 | 11.71 | 19.35 | 6.07 | 23.43 |
| Class B (9/29/08) | ||||||||
| Before CDSC | 5.19 | 40.63 | 3.47 | 77.75 | 12.19 | 23.89 | 7.40 | 30.03 |
| After CDSC | 5.19 | 40.63 | 3.47 | 75.75 | 11.94 | 20.89 | 6.53 | 25.03 |
| Class C (9/29/08) | ||||||||
| Before CDSC | 5.06 | 38.57 | 3.32 | 77.91 | 12.21 | 23.86 | 7.39 | 30.02 |
| After CDSC | 5.06 | 38.57 | 3.32 | 77.91 | 12.21 | 23.86 | 7.39 | 29.02 |
| Class R (9/29/08) | ||||||||
| Net asset value | 5.46 | 45.64 | 3.83 | 82.50 | 12.79 | 25.74 | 7.93 | 30.72 |
| Class R6 (5/22/18) | ||||||||
| Net asset value | 6.02 | 53.76 | 4.40 | 87.69 | 13.42 | 28.12 | 8.61 | 31.48 |
| Class Y (9/29/08) | ||||||||
| Net asset value | 5.99 | 53.16 | 4.36 | 86.95 | 13.33 | 27.61 | 8.47 | 31.33 |
See the discussion following the fund performance table on page 7 for information about the calculation of fund performance.
| Emerging Markets Equity Fund 9 |
Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund’s expenses were limited; had expenses not been limited, they would have been higher. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
| Expense ratios | ||||||
| Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Net expenses for the fiscal year | ||||||
| ended 8/31/19* | 1.29% | 2.04% | 2.04% | 1.54% | 0.85% | 1.04% |
| Total annual operating expenses for the | ||||||
| fiscal year ended 8/31/19 | 1.74% | 2.49% | 2.49% | 1.99% | 1.30% | 1.49% |
| Annualized expense ratio for the | ||||||
| six-month period ended 8/31/20 †‡ | 1.33% | 2.08% | 2.08% | 1.58% | 0.91% | 1.08% |
Fiscal year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.
Prospectus expense information also includes the impact of acquired fund fees and expenses of 0.03%, which is not included in the financial highlights or annualized expense ratios. Expenses are shown as a percentage of average net assets.
* Reflects Putnam Management’s contractual obligation to limit certain fund expenses through 12/30/20.
† Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.
‡ Includes an increase of 0.08% from annualizing the performance fee adjustment for the six months ended 8/31/20.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 3/1/20 to 8/31/20. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Expenses paid per $1,000 *† | $7.50 | $11.70 | $11.70 | $8.90 | $5.14 | $6.09 |
| Ending value (after expenses) | $1,243.00 | $1,237.80 | $1,238.20 | $1,241.10 | $1,245.20 | $1,244.60 |
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 8/31/20. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
| 10 Emerging Markets Equity Fund | |
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended 8/31/20, use the following calculation method. To find the value of your investment on 3/1/20, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Class A | Class B | Class C | Class R | Class R6 | Class Y | |
| Expenses paid per $1,000 *† | $6.75 | $10.53 | $10.53 | $8.01 | $4.62 | $5.48 |
| Ending value (after expenses) | $1,018.45 | $1,014.68 | $1,014.68 | $1,017.19 | $1,020.56 | $1,019.71 |
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 8/31/20. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.
| Emerging Markets Equity Fund 11 |
Consider these risks before investing
International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. From time to time, the fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those industries or sectors. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. You can lose money by investing in the fund.
| 12 Emerging Markets Equity Fund | |
Terms and definitions
Important terms
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/ or capital gains reinvestment. They are not subject to an initial sales charge and may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class R shares are not subject to an initial sales charge or CDSC and are only available to employer-sponsored retirement plans.
Class R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.
Class Y shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.
Comparative indexes
Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
ICE BofA (Intercontinental Exchange Bank of America) U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
MSCI Emerging Markets Index (ND) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
ICE Data Indices, LLC (“ICE BofA”), used with permission. ICE BofA permits use of the ICE BofA indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.
| Emerging Markets Equity Fund 13 |
Lipper, a Refinitiv company, is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.
Other information for shareholders
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2020, are available in the Individual Investors section of putnam.com and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.
Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.
Trustee and employee fund ownership
Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of August 31, 2020, Putnam employees had approximately $505,000,000 and the Trustees had approximately $78,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.
Liquidity risk management program
Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the first annual report on the program to the Trustees in April 2020. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from December 2018 through March 2020. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2019. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. The report also included a discussion of liquidity monitoring during the period, including during the market liquidity challenges caused by the COVID-19 pandemic, and the impact those challenges had on the liquidity of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.
| 14 Emerging Markets Equity Fund | |
Important notice regarding Putnam’s privacy policy
In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.
It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.
Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.
| Emerging Markets Equity Fund 15 |
Trustee approval of management contract
General conclusions
The Board of Trustees of The Putnam Funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”), the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”), and the sub-advisory contract among Putnam Management, PIL, and another affiliate, The Putnam Advisory Company (“PAC”). The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of The Putnam Funds (“Independent Trustees”).
At the outset of the review process, members of the Board’s independent staff and independent legal counsel considered any possible changes to the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review and, as applicable, identified those changes to Putnam Management. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2020, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.
In May 2020, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 2020 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2020. (Because PIL and PAC are affiliates of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL and PAC, the Trustees have not attempted to evaluate PIL or PAC as separate entities, and all subsequent references to Putnam Management below should be deemed to include reference to PIL and PAC as necessary or appropriate in the context.)
The Independent Trustees’ approval was based on the following conclusions:
• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the fund, and the application of certain reductions and waivers noted below; and
• That the fee schedule in effect for your fund represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater
| 16 Emerging Markets Equity Fund |
scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with certain exceptions primarily involving newly launched or repositioned funds, the current fee arrangements under the vast majority of the funds’ management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.
Management fee schedules and total expenses
The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to fund shareholders. (Two funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)
In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment strategy, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee schedule for your fund would be appropriate at this time.
Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee levels as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.
Your fund’s management contract provides that its management fees will be adjusted up or down depending upon whether your fund’s performance is better or worse than the performance of an appropriate index of securities prices specified in the management contract. In the course of reviewing investment performance, the Trustees examined the operation of your fund’s performance fees and concluded that these fees were operating effectively to align further Putnam Management’s economic interests with those of the fund’s shareholders. In addition, the Trustees previously approved, at their meeting on January 24, 2020, an amended and restated management contract in connection with the proposed merger (which subsequently closed on May 18, 2020) of Putnam International Growth Fund, another mutual fund managed by Putnam Management, with and into your fund. The amended and restated management contract provided that, effective upon the closing of the merger, the performance adjustment calculation for your fund would take into account the net assets of Putnam International Growth Fund for periods before the consummation of the merger, except that if the use of combined assets would result in a higher management fee, only the assets of your fund would be used.
As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management and the funds’ investor servicing agent, Putnam Investor Services, Inc. (“PSERV”), have implemented expense limitations that were in effect during your fund’s fiscal year ending in 2019. These expense limitations were: (i) a contractual expense limitation applicable to specified open-end funds, including your fund, of 25 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2019. However, in the case of your fund, both expense limitations applied during its fiscal year ending in 2019. Putnam Management and PSERV have agreed to maintain these expense limitations until at least December 30, 2021. In addition, Putnam Management contractually agreed to waive fees and/or reimburse expenses
| Emerging Markets Equity Fund 17 |
of your fund to the extent that expenses of the fund (excluding payments under the fund’s distribution plans, investor servicing fees, any applicable performance-based upward or downward adjustments to the fund’s base management fee, brokerage, interest, taxes, investment-related expenses, extraordinary expenses, and acquired fund fees and expenses) would exceed an annual rate of 0.78% of its average net assets through at least December 30, 2021. During its fiscal year ending in 2019, your fund’s expenses were reduced as a result of this expense limitation. The support of Putnam Management and PSERV for these expense limitation arrangements was an important factor in the Trustees’ decision to approve the continuance of your fund’s management, sub-management and sub-advisory contracts.
The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Broadridge Financial Solutions, Inc. (“Broadridge”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fees), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the third quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the second quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2019. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of December 31, 2019 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.
In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of the revenues, expenses and profitability of Putnam Management and its affiliates, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the Putnam funds at that time.
The information examined by the Trustees in connection with their annual contract review for the Putnam funds included information regarding services provided and fees charged by Putnam Management and its affiliates to other clients, including defined benefit pension and profit-sharing plans, sub-advised mutual funds, private funds sponsored by affiliates of Putnam Management, and model-only separately managed accounts. This information included, in cases where a product’s investment strategy corresponds with a fund’s strategy, comparisons of those fees with fees charged to the Putnam funds, as well as an assessment of the differences in the services provided to these clients as compared to the services provided to the Putnam funds. The Trustees observed that the differences in fee rates between these clients and the Putnam funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect, among other things, historical competitive forces operating in separate marketplaces. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for mutual funds than for other clients, and the Trustees also considered the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.
Investment performance
The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees
| 18 Emerging Markets Equity Fund | |
were assisted in their review of Putnam Management’s investment process and performance by the work of the investment oversight committees of the Trustees and the full Board of Trustees, which meet on a regular basis with individual portfolio managers and with senior management of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.
The Trustees considered that, in the aggregate, 2019 was a strong year of performance for The Putnam Funds, with the Putnam funds, on an asset-weighted basis, ranking in the top quartile of their Lipper Inc. (“Lipper”) peers for the year ended December 31, 2019. For those funds that are evaluated based on their total returns versus selected investment benchmarks, the Trustees observed that the funds, on an asset-weighted-basis, delivered a gross return that was 2.3% ahead of their benchmarks in 2019. In addition to the performance of the individual Putnam funds, the Trustees considered, as they had in prior years, the performance of The Putnam Fund complex versus competitor fund complexes. In this regard, the Trustees observed that The Putnam Funds’ relative performance, as reported in the Barron’s/Lipper Fund Families survey, was exceptionally strong over both the short and long term, with The Putnam Funds ranking as the 8th best performing mutual fund complex out of 55 complexes for the one-year period ended December 31, 2019 and the 8th best performing mutual fund complex out of 45 complexes for the ten-year period, with 2019 marking the third consecutive year that The Putnam Funds have ranked in the top ten fund complexes for the ten-year period. The Trustees also noted that The Putnam Funds ranked 26th out of 52 complexes for the five-year period ended December 31, 2019. In addition to the Barron’s/Lipper Fund Families Survey, the Trustees also considered the funds’ ratings assigned by Morningstar Inc., noting that 22 of the funds were four- or five-star rated at the end of 2019 and that this included five funds that had achieved a five-star rating. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2019 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor closely the performance of those funds, including the effectiveness of any efforts Putnam Management has undertaken to address underperformance and whether additional actions to address areas of underperformance are warranted.
For purposes of the Trustees’ evaluation of the Putnam funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and comparisons of those returns with the returns of selected investment benchmarks. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper peer group (Lipper Emerging Markets Funds) for the one-year, three-year and five-year periods ended December 31, 2019 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):
| One-year period | 2nd |
| Three-year period | 2nd |
| Five-year period | 2nd |
Over the one-year, three-year and five-year periods ended December 31, 2019, there were 793, 677 and 552 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)
The Trustees considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that
| Emerging Markets Equity Fund 19 |
Putnam Management had made selective hires and internal promotions in 2019 to strengthen its investment team.
Brokerage and soft-dollar allocations; investor servicing
The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used predominantly to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. The Trustees noted that, in 2019, they had approved the elimination of a fund expense recapture program, whereby a portion of available soft dollars were used to pay fund expenses, and that the amount of commissions allocated to that program were instead used to increase, by a corresponding amount, the budget allocated for execution services. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee. In addition, with the assistance of their Brokerage Committee, the Trustees indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.
Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management, sub-management and sub-advisory contracts, the Trustees reviewed your fund’s investor servicing agreement with PSERV and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are fair and reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services. Furthermore, the Trustees were of the view that the services provided were required for the operation of the funds, and that they were of a quality at least equal to those provided by other providers.
| 20 Emerging Markets Equity Fund |
Audited financial statements
These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s audited 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 are 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 liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal year.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, 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 highlights table also includes the current reporting period.
| Emerging Markets Equity Fund 21 |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Putnam Funds Trust and Shareholders of
Putnam Emerging Markets Equity Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam Emerging Markets Equity Fund (one of the funds constituting Putnam Funds Trust, referred to hereafter as the “Fund”) as of August 31, 2020, the related statement of operations and changes in net assets for the year ended August 31, 2020, including the related notes, and the financial highlights for the year ended August 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2020, the results of its operations, changes in its net assets and the financial highlights for the year ended August 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended August 31, 2019 and the financial highlights for each of the periods ended on or prior to August 31, 2019 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated October 8, 2019 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of August 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 7, 2020
We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.
| 22 Emerging Markets Equity Fund | |
| The fund’s portfolio 8/31/20 | ||
| COMMON STOCKS (97.5%)* | Shares | Value |
| Banks (4.9%) | ||
| Bank Tabungan Pensiunan Nasional Syariah Tbk PT (Indonesia) | 12,916,300 | $3,447,434 |
| Hana Financial Group, Inc. (South Korea) | 169,111 | 3,992,019 |
| HDFC Bank, Ltd. (India) † | 518,491 | 7,825,719 |
| Sberbank of Russia PJSC ADR (Russia) † | 316,948 | 3,827,147 |
| 19,092,319 | ||
| Beverages (1.1%) | ||
| Wuliangye Yibin Co., Ltd. Class A (China) | 122,045 | 4,273,035 |
| 4,273,035 | ||
| Building products (1.2%) | ||
| China Lesso Group Holdings, Ltd. (China) | 2,564,000 | 4,770,821 |
| 4,770,821 | ||
| Capital markets (2.7%) | ||
| B3 SA — Brasil Bolsa Balcao (Brazil) | 561,400 | 6,025,430 |
| Hong Kong Exchanges and Clearing, Ltd. (Hong Kong) | 88,000 | 4,423,815 |
| 10,449,245 | ||
| Chemicals (1.8%) | ||
| Asian Paints, Ltd. (India) | 113,838 | 2,934,436 |
| LG Chemical, Ltd. (South Korea) | 6,885 | 4,261,912 |
| 7,196,348 | ||
| Commercial services and supplies (1.5%) | ||
| A-Living Services Co., Ltd. Class H (China) | 635,500 | 3,270,466 |
| Sunny Friend Environmental Technology Co., Ltd. (Taiwan) | 328,000 | 2,747,916 |
| 6,018,382 | ||
| Diversified consumer services (1.0%) | ||
| Fu Shou Yuan International Group, Ltd. (China) | 3,812,000 | 3,929,465 |
| 3,929,465 | ||
| Electric utilities (0.8%) | ||
| Companhia Paranaense de Energia-Copel (Preference) (Brazil) | 259,773 | 2,929,411 |
| 2,929,411 | ||
| Electrical equipment (1.1%) | ||
| Voltronic Power Technology Corp. (Taiwan) | 121,000 | 4,260,316 |
| 4,260,316 | ||
| Electronic equipment, instruments, and components (1.0%) | ||
| Elite Material Co., Ltd. (Taiwan) | 711,000 | 4,101,461 |
| 4,101,461 | ||
| Entertainment (0.6%) | ||
| Sea, Ltd. ADR (Thailand) † | 16,600 | 2,536,646 |
| 2,536,646 | ||
| Food and staples retail (3.6%) | ||
| Clicks Group, Ltd. (South Africa) | 264,146 | 3,584,018 |
| Dino Polska SA (Poland) † | 40,056 | 2,431,921 |
| Wal-Mart de Mexico SAB de CV (Mexico) | 3,350,800 | 8,024,034 |
| 14,039,973 | ||
| Gas utilities (0.8%) | ||
| China Resources Gas Group, Ltd. (China) | 638,000 | 2,982,501 |
| 2,982,501 | ||
| Emerging Markets Equity Fund 23 |
| COMMON STOCKS (97.5%)* cont. | Shares | Value |
| Health-care equipment and supplies (1.4%) | ||
| Shenzhen Mindray Bio-Medical Electronics Co., Ltd. Class A (China) | 109,800 | $5,476,820 |
| 5,476,820 | ||
| Health-care providers and services (0.8%) | ||
| Universal Vision Biotechnology Co., Ltd. (Taiwan) | 345,000 | 2,937,392 |
| 2,937,392 | ||
| Hotels, restaurants, and leisure (0.6%) | ||
| Jubilant Foodworks, Ltd. (India) | 80,526 | 2,290,650 |
| 2,290,650 | ||
| Household durables (—%) | ||
| HC Brillant Services GmbH (acquired 8/2/13, cost $8) (Private) | ||
| (Germany) † F | 12 | 11 |
| 11 | ||
| Household products (1.4%) | ||
| Hindustan Unilever, Ltd. (India) | 189,691 | 5,448,197 |
| 5,448,197 | ||
| Interactive media and services (12.9%) | ||
| Kakao Corp. (South Korea) | 10,037 | 3,422,966 |
| NAVER Corp. (South Korea) | 23,664 | 6,392,647 |
| Tencent Holdings, Ltd. (China) | 521,300 | 35,525,294 |
| Yandex NV Class A (Russia) † S | 76,453 | 5,216,388 |
| 50,557,295 | ||
| Internet and direct marketing retail (18.3%) | ||
| Alibaba Group Holding, Ltd. (China) † | 1,195,068 | 42,996,092 |
| JD.com, Inc. ADR (China) † | 102,400 | 8,052,736 |
| Meituan Dianping Class B (China) † | 281,100 | 9,239,081 |
| MercadoLibre, Inc. (Argentina) † | 3,500 | 4,090,065 |
| Prosus NV (Netherlands) † | 70,732 | 7,093,542 |
| 71,471,516 | ||
| IT Services (1.8%) | ||
| Tata Consultancy Services, Ltd. (India) | 225,728 | 6,921,116 |
| 6,921,116 | ||
| Life sciences tools and services (1.2%) | ||
| WuXi AppTec Co., Ltd. Class H (China) | 310,520 | 4,584,714 |
| 4,584,714 | ||
| Machinery (3.4%) | ||
| Airtac International Group (China) | 180,000 | 3,960,378 |
| Shenzhen Inovance Technology Co., Ltd. Class A (China) | 476,489 | 3,872,071 |
| Techtronic Industries Co., Ltd. (TTI) (Hong Kong) | 440,500 | 5,566,655 |
| 13,399,104 | ||
| Multiline retail (1.1%) | ||
| Poya International Co., Ltd. (Taiwan) | 214,260 | 4,191,962 |
| 4,191,962 | ||
| Oil, gas, and consumable fuels (4.6%) | ||
| Lukoil PJSC ADR (Russia) | 80,957 | 5,537,459 |
| Reliance Industries, Ltd. (India) | 448,292 | 12,637,246 |
| 18,174,705 | ||
| Pharmaceuticals (0.9%) | ||
| Hypera SA (Brazil) | 628,400 | 3,630,348 |
| 3,630,348 |
| 24 Emerging Markets Equity Fund | |
| COMMON STOCKS (97.5%)* cont. | Shares | Value |
| Professional services (1.5%) | ||
| Centre Testing International Group Co., Ltd. Class A (China) | 1,427,088 | $5,692,182 |
| 5,692,182 | ||
| Real estate management and development (0.6%) | ||
| Sichuan Languang Justbon Services Group Co., Ltd. Class H (China) | 375,100 | 2,363,366 |
| 2,363,366 | ||
| Road and rail (0.7%) | ||
| Companhia de Locacao das Americas (Brazil) | 754,754 | 2,810,437 |
| 2,810,437 | ||
| Semiconductors and semiconductor equipment (9.6%) | ||
| MediaTek, Inc. (Taiwan) | 183,000 | 3,463,957 |
| Silergy Corp. (China) | 29,000 | 1,836,888 |
| SK Hynix, Inc. (South Korea) | 108,875 | 6,850,546 |
| Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) | 1,757,889 | 25,579,457 |
| 37,730,848 | ||
| Software (1.4%) | ||
| Totvs SA (Brazil) | 1,022,595 | 5,386,893 |
| 5,386,893 | ||
| Specialty retail (2.5%) | ||
| JUMBO SA (Greece) | 197,468 | 3,428,685 |
| Wilcon Depot, Inc. (Philippines) | 6,704,500 | 2,238,691 |
| Zhongsheng Group Holdings, Ltd. (China) | 688,500 | 4,276,494 |
| 9,943,870 | ||
| Technology hardware, storage, and peripherals (5.4%) | ||
| Samsung Electronics Co., Ltd. (South Korea) | 408,272 | 18,563,389 |
| Wiwynn Corp. (Taiwan) | 90,000 | 2,392,013 |
| 20,955,402 | ||
| Textiles, apparel, and luxury goods (1.3%) | ||
| Li Ning Co., Ltd. (China) | 1,254,000 | 5,278,833 |
| 5,278,833 | ||
| Wireless telecommunication services (4.0%) | ||
| China Mobile, Ltd. (China) | 1,356,000 | 9,461,213 |
| MTN Group, Ltd. (South Africa) | 771,727 | 2,780,289 |
| Safaricom PLC (Kenya) | 12,930,900 | 3,525,521 |
| 15,767,023 | ||
| Total common stocks (cost $306,892,956) | $381,592,607 | |
| INVESTMENT COMPANIES (2.4%)* | Shares | Value |
| iShares Core MSCI Emerging Markets ETF | 173,506 | $9,247,870 |
| Total investment companies (cost $9,200,963) | $9,247,870 | |
| SHORT-TERM INVESTMENTS (1.8%)* | Shares | Value |
| Putnam Cash Collateral Pool, LLC 0.24% d | 4,582,531 | $4,582,531 |
| Putnam Short Term Investment Fund Class P 0.21% L | 2,481,781 | 2,481,781 |
| Total short-term investments (cost $7,064,312) | $7,064,312 | |
| TOTAL INVESTMENTS | ||
| Total investments (cost $323,158,231) | $397,904,789 | |
| Emerging Markets Equity Fund 25 |
| Key to holding’s abbreviations | |
| ADR | American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank |
| ETF | Exchange Traded Fund |
| PJSC | Public Joint Stock Company |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2019 through August 31, 2020 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $391,550,816.
† This security is non-income-producing.
ΔΔ This security is restricted with regard to public resale. The total fair value of this security and any other restricted securities (excluding 144A securities), if any, held at the close of the reporting period was $11, or less than 0.1% of net assets.
d Affiliated company. See Notes 1 and 5 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
F This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities are classified as Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).
L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
S Security on loan, in part or in entirety, at the close of the reporting period (Note 1).
| DIVERSIFICATION BY COUNTRY | ||||
| Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value): | ||||
| China | 41.2% | South Africa | 1.6% | |
| Taiwan | 12.6 | Argentina | 1.0 | |
| South Korea | 11.1 | Kenya | 0.9 | |
| India | 9.7 | Indonesia | 0.9 | |
| Brazil | 5.3 | Greece | 0.9 | |
| Russia | 3.7 | Thailand | 0.6 | |
| United States | 3.0 | Poland | 0.6 | |
| Hong Kong | 2.5 | Philippines | 0.6 | |
| Mexico | 2.0 | Germany | <0.1 | |
| Netherlands | 1.8 | Total | 100.0% | |
| 26 Emerging Markets Equity Fund | |
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| Valuation inputs | |||
| Investments in securities: | Level 1 | Level 2 | Level 3 |
| Common stocks * : | |||
| Communication services | $14,058,844 | $54,802,120 | $— |
| Consumer discretionary | 22,665,028 | 74,441,268 | 11 |
| Consumer staples | 18,313,008 | 5,448,197 | — |
| Energy | 5,537,459 | 12,637,246 | — |
| Financials | 9,852,577 | 19,688,987 | — |
| Health care | 3,630,348 | 12,998,926 | — |
| Industrials | 2,810,437 | 34,140,805 | — |
| Information technology | 5,386,893 | 69,708,827 | — |
| Materials | — | 7,196,348 | — |
| Real estate | — | 2,363,366 | — |
| Utilities | 2,929,411 | 2,982,501 | — |
| Total common stocks | 85,184,005 | 296,408,591 | 11 |
| Investment companies | 9,247,870 | — | — |
| Short-term investments | 2,481,781 | 4,582,531 | — |
| Totals by level | $96,913,656 | $300,991,122 | $11 |
* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.
At the start and close of the reporting period, Level 3 investments in securities represented less than 1% of the fund’s net assets and were not considered a significant portion of the fund’s portfolio.
The accompanying notes are an integral part of these financial statements.
| Emerging Markets Equity Fund 27 |
| Statement of assets and liabilities 8/31/20 | |
| ASSETS | |
| Investment in securities, at value, including $4,693,610 of securities on loan (Note 1): | |
| Unaffiliated issuers (identified cost $316,093,919) | $390,840,477 |
| Affiliated issuers (identified cost $7,064,312) (Notes 1 and 5) | 7,064,312 |
| Foreign currency (cost $83,827) (Note 1) | 83,549 |
| Dividends, interest and other receivables | 489,417 |
| Receivable for investments sold | 2,451,689 |
| Foreign tax reclaim | 265,294 |
| Receivable for shares of the fund sold | 485,933 |
| Prepaid assets | 73,571 |
| Total assets | 401,754,242 |
| LIABILITIES | |
| Payable for investments purchased | 3,276,981 |
| Payable for shares of the fund repurchased | 656,807 |
| Payable for compensation of Manager (Note 2) | 80,404 |
| Payable for custodian fees (Note 2) | 182,187 |
| Payable for investor servicing fees (Note 2) | 130,310 |
| Payable for Trustee compensation and expenses (Note 2) | 219,819 |
| Payable for administrative services (Note 2) | 553 |
| Payable for distribution fees (Note 2) | 124,129 |
| Payable for foreign capital gains taxes | 727,046 |
| Collateral on securities loaned, at value (Note 1) | 4,582,531 |
| Other accrued expenses | 222,659 |
| Total liabilities | 10,203,426 |
| Net assets | $391,550,816 |
| REPRESENTED BY | |
| Paid-in capital (Unlimited shares authorized) (Notes 1, 4 and 7) | $327,026,389 |
| Total distributable earnings (Notes 1 and 7) | 64,524,427 |
| Total — Representing net assets applicable to capital shares outstanding | $391,550,816 |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
| Net asset value and redemption price per class A share | |
| ($269,748,037 divided by 18,376,660 shares) | $14.68 |
| Offering price per class A share (100/94.25 of $14.68)* | $15.58 |
| Net asset value and offering price per class B share ($3,493,430 divided by 250,418 shares)** | $13.95 |
| Net asset value and offering price per class C share ($11,605,639 divided by 836,393 shares)** | $13.88 |
| Net asset value, offering price and redemption price per class R share | |
| ($1,118,908 divided by 76,514 shares) | $14.62 |
| Net asset value, offering price and redemption price per class R6 share | |
| ($22,944,803 divided by 1,541,491 shares) | $14.88 |
| Net asset value, offering price and redemption price per class Y share | |
| ($82,639,999 divided by 5,561,211 shares) | $14.86 |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
| 28 Emerging Markets Equity Fund | |
| Statement of operations Year ended 8/31/20 | |
| INVESTMENT INCOME | |
| Dividends (net of foreign tax of $441,098) | $3,168,903 |
| Interest (including interest income of $14,736 from investments in affiliated issuers) (Note 5) | 14,937 |
| Securities lending (net of expenses) (Notes 1 and 5) | 3,377 |
| Total investment income | 3,187,217 |
| EXPENSES | |
| Compensation of Manager (Note 2) | 1,797,258 |
| Investor servicing fees (Note 2) | 383,116 |
| Custodian fees (Note 2) | 101,519 |
| Trustee compensation and expenses (Note 2) | 8,174 |
| Distribution fees (Note 2) | 347,893 |
| Administrative services (Note 2) | 4,148 |
| Legal | 178,945 |
| Other | 339,338 |
| Fees waived and reimbursed by Manager (Note 2) | (876,796) |
| Total expenses | 2,283,595 |
| Expense reduction (Note 2) | (24,700) |
| Net expenses | 2,258,895 |
| Net investment income | 928,322 |
| REALIZED AND UNREALIZED GAIN (LOSS) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (net of foreign tax of $53,242) (Notes 1 and 3) | 20,775,287 |
| Foreign currency transactions (Note 1) | (325,473) |
| Futures contracts (Note 1) | (291,211) |
| Swap contracts (Note 1) | (79,003) |
| Written options (Note 1) | 123,286 |
| Total net realized gain | 20,202,886 |
| Change in net unrealized appreciation (depreciation) on: | |
| Securities from unaffiliated issuers (net of foreign tax of $727,046) | 73,024,155 |
| Assets and liabilities in foreign currencies | 3,654 |
| Swap contracts | 60,915 |
| Written options | 186,984 |
| Total change in net unrealized appreciation | 73,275,708 |
| Net gain on investments | 93,478,594 |
| Net increase in net assets resulting from operations | $94,406,916 |
The accompanying notes are an integral part of these financial statements.
| Emerging Markets Equity Fund 29 |
| Statement of changes in net assets | ||
| INCREASE (DECREASE) IN NET ASSETS | Year ended 8/31/20 | Year ended 8/31/19 |
| Operations | ||
| Net investment income | $928,322 | $1,623,349 |
| Net realized gain (loss) on investments | ||
| and foreign currency transactions | 20,202,886 | (6,819,820) |
| Change in net unrealized appreciation of investments | ||
| and assets and liabilities in foreign currencies | 73,275,708 | 2,690,582 |
| Net increase (decrease) in net assets resulting | ||
| from operations | 94,406,916 | (2,505,889) |
| Distributions to shareholders (Note 1): | ||
| From ordinary income | ||
| Net investment income | ||
| Class A | (416,965) | (75,196) |
| Class B | (10,152) | — |
| Class C | (45,186) | — |
| Class M | — | — |
| Class R | (2,556) | — |
| Class R6 | (173,077) | (21,003) |
| Class Y | (906,463) | (145,228) |
| From net realized long-term gain on investments | ||
| Class A | — | (1,721,139) |
| Class B | — | (45,320) |
| Class C | — | (134,954) |
| Class M | — | (12,932) |
| Class R | — | (19,979) |
| Class R6 | — | (206,031) |
| Class Y | — | (1,574,577) |
| Increase (decrease) from capital share transactions | ||
| (Notes 4 and 7) | 171,972,247 | (8,451,554) |
| Total increase (decrease) in net assets | 264,824,764 | (14,913,802) |
| NET ASSETS | ||
| Beginning of year | 126,726,052 | 141,639,854 |
| End of year | $391,550,816 | $126,726,052 |
The accompanying notes are an integral part of these financial statements.
| 30 Emerging Markets Equity Fund | |
| This page left blank intentionally. |
| Emerging Markets Equity Fund 31 |
| Financial highlights (For a common share outstanding throughout the period) | |||||||||||||
| INVESTMENT OPERATIONS | LESS DISTRIBUTIONS | RATIOS AND SUPPLEMENTAL DATA | |||||||||||
| Ratio | Ratio of net | ||||||||||||
| Net asset | Net realized | of expenses | investment | ||||||||||
| value, | and unrealized | Total from | From net | From | Net asset | Total return | Net assets, | to average | income (loss) | Portfolio | |||
| beginning | Net investment | gain (loss) | investment | investment | net realized gain | Total | value, end | at net asset | end of period | net assets | to average | turnover | |
| Period ended | of period | income (loss) a | on investments | operations | income | on investments | distributions | of period | value (%) b | (in thousands) | (%) c,d | net assets (%) c | (%) |
| Class A | |||||||||||||
| August 31, 2020 | $11.05 | .08e | 3.69 | 3.77 | (.14) | — | (.14) | $14.68 | 34.30 | $269,748 | 1.31 | .60e | 127 |
| August 31, 2019 | 11.75 | .09 | (.57) | (.48) | (.01) | (.21) | (.22) | 11.05 | (3.96) | 36,325 | 1.26 | .80 | 175 |
| August 31, 2018 | 11.82 | .08 | (.14) | (.06) | (.01) | — | (.01) | 11.75 | (.53) | 41,379 | 1.57 | .67 | 172 |
| August 31, 2017 | 9.54 | .05 | 2.31 | 2.36 | (.08) | — | (.08) | 11.82 | 25.07 | 28,408 | 1.63 | .55 | 137 |
| August 31, 2016 | 8.44 | .02 | 1.19 | 1.21 | (.11) | — | (.11) | 9.54 | 14.41 | 19,784 | 1.65f | .25f | 156 |
| Class B | |||||||||||||
| August 31, 2020 | $10.52 | (.05) | 3.54 | 3.49 | (.06) | — | (.06) | $13.95 | 33.26 | $3,493 | 2.06 | (.43) | 127 |
| August 31, 2019 | 11.27 | .02 | (.56) | (.54) | — | (.21) | (.21) | 10.52 | (4.67) | 1,998 | 2.01 | .17 | 175 |
| August 31, 2018 | 11.41 | (.01) | (.13) | (.14) | — | — | — | 11.27 | (1.23) | 2,650 | 2.32 | (.09) | 172 |
| August 31, 2017 | 9.22 | (.02) | 2.23 | 2.21 | (.02) | — | (.02) | 11.41 | 24.07 | 2,054 | 2.38 | (.22) | 137 |
| August 31, 2016 | 8.15 | (.04) | 1.14 | 1.10 | (.03) | — | (.03) | 9.22 | 13.57 | 1,727 | 2.40f | (.46) f | 156 |
| Class C | |||||||||||||
| August 31, 2020 | $10.48 | (.05) | 3.52 | 3.47 | (.07) | — | (.07) | $13.88 | 33.27 | $11,606 | 2.06 | (.47) | 127 |
| August 31, 2019 | 11.23 | .02 | (.56) | (.54) | — | (.21) | (.21) | 10.48 | (4.69) | 6,546 | 2.01 | .19 | 175 |
| August 31, 2018 | 11.37 | (.02) | (.12) | (.14) | — | — | — | 11.23 | (1.23) | 7,163 | 2.32 | (.12) | 172 |
| August 31, 2017 | 9.19 | (.02) | 2.22 | 2.20 | (.02) | — | (.02) | 11.37 | 24.07 | 4,475 | 2.38 | (.19) | 137 |
| August 31, 2016 | 8.13 | (.04) | 1.14 | 1.10 | (.04) | — | (.04) | 9.19 | 13.55 | 2,802 | 2.40f | (.45) f | 156 |
| Class R | |||||||||||||
| August 31, 2020 | $10.97 | .01 | 3.70 | 3.71 | (.06) | — | (.06) | $14.62 | 33.86 | $1,119 | 1.56 | .11 | 127 |
| August 31, 2019 | 11.68 | .08 | (.58) | (.50) | — | (.21) | (.21) | 10.97 | (4.16) | 1,093 | 1.51 | .74 | 175 |
| August 31, 2018 | 11.77 | .04 | (.13) | (.09) | — | — | — | 11.68 | (.76) | 1,100 | 1.82 | .32 | 172 |
| August 31, 2017 | 9.53 | .04 | 2.29 | 2.33 | (.09) | — | (.09) | 11.77 | 24.69 | 1,010 | 1.88 | .36 | 137 |
| August 31, 2016 | 8.35 | .03e | 1.15 | 1.18 | — | — | — | 9.53 | 14.13 | 661 | 1.90f | .34e,f | 156 |
| Class R6 | |||||||||||||
| August 31, 2020 | $11.22 | .10 | 3.77 | 3.87 | (.21) | — | (.21) | $14.88 | 34.81 | $22,945 | .89 | .76 | 127 |
| August 31, 2019 | 11.89 | .17 | (.61) | (.44) | (.02) | (.21) | (.23) | 11.22 | (3.55) | 10,143 | .82 | 1.47 | 175 |
| August 31, 2018 † | 13.13 | .12 | (1.36) | (1.24) | — | — | — | 11.89 | (9.44)* | 7,219 | .32* | .98 * | 172 |
| Class Y | |||||||||||||
| August 31, 2020 | $11.19 | .06 | 3.79 | 3.85 | (.18) | — | (.18) | $14.86 | 34.66 | $82,640 | 1.06 | .46 | 127 |
| August 31, 2019 | 11.88 | .13 | (.59) | (.46) | (.02) | (.21) | (.23) | 11.19 | (3.74) | 69,989 | 1.01 | 1.17 | 175 |
| August 31, 2018 | 11.94 | .13 | (.16) | (.03) | (.03) | — | (.03) | 11.88 | (.26) | 81,472 | 1.32 | 1.00 | 172 |
| August 31, 2017 | 9.64 | .10 | 2.31 | 2.41 | (.11) | — | (.11) | 11.94 | 25.34 | 22,882 | 1.38 | .94 | 137 |
| August 31, 2016 | 8.53 | .06e | 1.18 | 1.24 | (.13) | — | (.13) | 9.64 | 14.69 | 9,573 | 1.40f | .63e,f | 156 |
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
| 32 Emerging Markets Equity Fund | Emerging Markets Equity Fund 33 |
Financial highlights cont.
* Not annualized.
† For the period May 22, 2018 (commencement of operations) to August 31, 2018.
a Per share net investment income (loss) 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 Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts as a percentage of the average net assets of each class (Note 2):
| 8/31/20 | 8/31/19 | 8/31/18 | 8/31/17 | 8/31/16 | |
| Class A | 0.48% | 0.45% | 0.21% | 0.43% | 0.55% |
| Class B | 0.48 | 0.45 | 0.21 | 0.43 | 0.55 |
| Class C | 0.48 | 0.45 | 0.21 | 0.43 | 0.55 |
| Class R | 0.48 | 0.45 | 0.21 | 0.43 | 0.55 |
| Class R6 | 0.48 | 0.45 | 0.06 | N/A | N/A |
| Class Y | 0.48 | 0.45 | 0.21 | 0.43 | 0.55 |
d Includes amounts paid through expense offset and/or brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.
e The net investment income ratio and per share amount shown for the period ending may not correspond with the expected class specific differences for the period due to the timing of subscriptions into the class.
f Reflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waiver, the expenses of each class reflect a reduction of less than 0.01% as a percentage of average net assets.
The accompanying notes are an integral part of these financial statements.
| 34 Emerging Markets Equity Fund | |
Notes to financial statements 8/31/20
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from September 1, 2019 through August 31, 2020.
Putnam Emerging Markets Equity Fund (the fund) is a diversified series of Putnam Funds Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek long-term capital appreciation. The fund invests mainly in common stocks (growth or value stocks or both) of emerging market companies that Putnam Management believes have favorable investment potential. For example, the fund may purchase stocks of companies with stock prices that reflect a value lower than that which Putnam Management places on the company. Putnam Management may also consider other factors that Putnam Management believes will cause the stock price to rise. Under normal circumstances, Putnam Management invests at least 80% of the fund’s net assets in equity securities of emerging market companies. This policy may be changed only after 60 days’ notice to shareholders. Emerging markets include countries in the MSCI Emerging Markets Index or that Putnam Management considers to be emerging markets based on Putnam Management’s evaluation of their level of economic development or the size and experience of their securities markets. The fund invests significantly in small and midsize companies. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The fund may also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.
The fund offers class A, class B, class C, class R, class R6 and class Y shares. Effective November 25, 2019, all class M shares were converted to class A shares and are no longer available for purchase. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A shares generally are not subject to a contingent deferred sales charge and class R, class R6 and class Y shares are not subject to a contingent deferred sales charge. Prior to November 25, 2019, class M shares were sold with a maximum front-end sales charge of 3.50% and were not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and generally convert to class A shares after approximately ten years. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C and class R shares, but do not bear a distribution fee, and in the case of class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R6 and class Y shares are not available to all investors.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the fund’s Amended and Restated Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Note 1: Significant accounting policies
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 accounting principles
| Emerging Markets Equity Fund 35 |
generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Short-term securities with remaining maturities of 60 days or less are valued using an independent pricing service approved by the Trustees, and are classified as Level 2 securities.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
| 36 Emerging Markets Equity Fund |
Joint trading account Pursuant to an exemptive order from the SEC, 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 Management. These balances may be invested in issues of short-term investments having maturities of up to 90 days.
Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the fair 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. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, net of any applicable withholding taxes, if any, and including amortization and accretion of premiums and discounts on debt securities, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.
Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is 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 earned 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 realized exchange gains or losses on disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions 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 assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.
Options contracts The fund uses options contracts to gain exposure to securities.
The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.
Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap option contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract.
Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Futures contracts The fund uses futures contracts to manage exposure to market risk.
| Emerging Markets Equity Fund 37 |
The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. 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.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”
Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Total return swap contracts The fund entered into OTC and/or centrally cleared total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, to gain exposure to a basket of securities.
To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC and/or centrally cleared total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market maker. Any change is recorded as an unrealized gain or loss on OTC total return swaps. Daily fluctuations in the value of centrally cleared total return swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC and/or centrally cleared total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC total return swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared total return swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared total return swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.
OTC and/or centrally cleared total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund did not have a net liability position on open derivative contracts subject to the Master Agreements.
| 38 Emerging Markets Equity Fund | |
Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The remaining maturities of the securities lending transactions are considered overnight and continuous. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund received cash collateral of $4,582,531 and the value of securities loaned amounted to $4,693,610.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.
The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At August 31, 2020, the fund had a capital loss carryover of $16,320,566 available to the extent allowed by the Code to offset future net capital gain, if any. As a result of the May 18, 2020 merger, the fund acquired $16,303,785 in capital loss carryovers from Putnam International Growth Fund, which are subject to limitations imposed by the Code. The amounts of the combined carryovers are as follows:
| Loss carryover | ||
| Short-term | Long-term | Total |
| $12,622,443 | $3,698,123 | $16,320,566 |
| Emerging Markets Equity Fund 39 |
Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, 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/or permanent differences from losses on wash sale transactions, from foreign currency gains and losses, from foreign taxes paid on capital gains and from non-deductible merger expenses. 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. At the close of the reporting period, the fund reclassified $1,279,131 to decrease accumulated net investment loss, $992,228 to decrease paid-in capital and $286,903 to increase accumulated net realized loss.
Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:
| Unrealized appreciation | $87,944,401 |
| Unrealized depreciation | (13,705,949) |
| Net unrealized appreciation | 74,238,452 |
| Capital loss carryforward | (16,320,566) |
| Undistributed short-term gain | 7,331,811 |
| Cost for federal income tax purposes | $323,666,337 |
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
The fund pays Putnam Management a management fee (base fee) (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:
| 1.080% | of the first $5 billion, | 0.880% | of the next $50 billion, | |
| 1.030% | of the next $5 billion, | 0.860% | of the next $50 billion, | |
| 0.980% | of the next $10 billion, | 0.850% | of the next $100 billion and | |
| 0.930% | of the next $10 billion, | 0.845% | of any excess thereafter. |
In addition, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended. Each month, the performance adjustment is calculated by multiplying the performance adjustment rate and the fund’s average net assets over the performance period and dividing the result by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the MSCI Emerging Markets Index (Net Dividends) each measured over the performance period. The maximum annualized performance adjustment rate is +/–0.21%. The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the thirty-six month performance period. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have declined significantly over that period, the negative performance adjustment may exceed the base fee. In this event, Putnam Management would make a payment to the fund.
In connection with the merger of Putnam International Growth Fund (“acquired fund”) into the fund on May 18, 2020, the management contract was amended such that, after completion of the merger, the combined fund’s performance adjustment will be calculated based on the combined assets of the fund and the acquired fund for
| 40 Emerging Markets Equity Fund | |
any portion of a performance period that is prior to the merger, unless the use of the combined assets results in a fee payable by the fund under the amended management contract that is higher than the management fee that would have been paid under the fund’s current management contract. Under those circumstances, Putnam Management has agreed to reduce its management fee to reflect the lower amount that would have been payable under the fund’s current fee schedule, which would only take into account the assets of the fund for the period prior to the closing of the mergers. As a result of these management contract changes, the fund’s shareholders may pay a lower management fee, but would never pay a higher management fee, under the amended management contract than they would have paid under the fund’s current management contract.
Because the performance adjustment is based on the fund’s performance relative to its applicable benchmark index, and not its absolute performance, the performance adjustment could increase Putnam Management’s fee even if the fund’s shares lose value during the performance period provided that the fund outperformed its benchmark index, and could decrease Putnam Management’s fee even if the fund’s shares increase in value during the performance period provided that the fund underperformed its benchmark index.
For the reporting period, the management fee represented an effective rate (excluding the impact of any expense waiver in effect) of 0.977% of the fund’s average net assets, which included an effective base fee of 0.913% and an increase of 0.064% ($117,311) based on performance.
Putnam Management has contractually agreed to waive fees (and, to the extent necessary, bear other expenses) of the fund through December 30, 2021, to the extent that total expenses of the fund (before any applicable performance-based adjustment to the fund’s base management fee and excluding brokerage, interest, taxes, investment-related expenses, payments under distribution plans, extraordinary expenses, payments under the fund’s investor servicing contract and acquired fund fees and expenses, but including payments under the fund’s investment management contract) would exceed an annual rate of 0.78% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $614,287 as a result of this limit.
Putnam Management has also contractually agreed, through December 30, 2021, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were reduced by $262,509 as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.
The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. Putnam Management or PIL, as applicable, pays a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.
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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts. Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.
| Emerging Markets Equity Fund 41 |
Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.
| During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows: | ||||
| Class A | $215,900 | Class R | 1,679 | |
| Class B | 5,087 | Class R6 | 6,530 | |
| Class C | 16,828 | Class Y | 136,723 | |
| Class M | 369 | Total | $383,116 | |
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $355 under the expense offset arrangements and by $24,345 under the brokerage/ service arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $242, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
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 a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to the following share classes pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (Maximum %) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (Approved %) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:
| Maximum % | Approved % | Amount | |
| Class A | 0.35% | 0.25% | $243,685 |
| Class B | 1.00% | 1.00% | 23,000 |
| Class C | 1.00% | 1.00% | 76,221 |
| ClassM * | 1.00% | 0.75% | 1,212 |
| Class R | 1.00% | 0.50% | 3,775 |
| Total | $347,893 |
* Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $12,796 and $322 from the sale of class A and class M shares, respectively, and received $240 and $88 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
| 42 Emerging Markets Equity Fund |
A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $36 on class A redemptions.
Note 3: Purchases and sales of securities
During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:
| Cost of purchases | Proceeds from sales | |
| Investments in securities (Long-term) | $367,395,450 | $234,737,194 |
| U.S. government securities (Long-term) | — | — |
| Total | $367,395,450 | $234,737,194 |
The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.
Note 4: Capital shares
At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:
| YEAR ENDED 8/31/20 | YEAR ENDED 8/31/19 | |||
| Class A | Shares | Amount | Shares | Amount |
| Shares sold | 925,643 | $11,595,650 | 6,354,697 | $68,887,743 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 33,064 | 411,642 | 175,972 | 1,784,358 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | 15,751,644 | 177,406,043 | — | — |
| 16,710,351 | 189,413,335 | 6,530,669 | 70,672,101 | |
| Shares repurchased | (1,620,389) | (19,962,465) | (6,765,400) | (74,836,201) |
| Net increase (decrease) | 15,089,962 | $169,450,870 | (234,731) | $(4,164,100) |
| YEAR ENDED 8/31/20 | YEAR ENDED 8/31/19 | |||
| Class B | Shares | Amount | Shares | Amount |
| Shares sold | 1,667 | $19,005 | 10,255 | $109,247 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 848 | 10,091 | 4,637 | 44,978 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | 125,809 | 1,349,552 | — | — |
| 128,324 | 1,378,648 | 14,892 | 154,225 | |
| Shares repurchased | (67,809) | (794,479) | (60,152) | (638,348) |
| Net increase (decrease) | 60,515 | $584,169 | (45,260) | $(484,123) |
| Emerging Markets Equity Fund 43 |
| YEAR ENDED 8/31/20 | YEAR ENDED 8/31/19 | |||
| Class C | Shares | Amount | Shares | Amount |
| Shares sold | 131,556 | $1,566,802 | 248,579 | $2,605,626 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 3,820 | 45,186 | 13,933 | 134,589 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | 295,345 | 3,151,248 | — | — |
| 430,721 | 4,763,236 | 262,512 | 2,740,215 | |
| Shares repurchased | (219,092) | (2,453,518) | (275,897) | (2,874,042) |
| Net increase (decrease) | 211,629 | $2,309,718 | (13,385) | $(133,827) |
| YEAR ENDED 8/31/20 * | YEAR ENDED 8/31/19 | |||
| Class M | Shares | Amount | Shares | Amount |
| Shares sold | 5,486 | $61,149 | 10,081 | $109,688 |
| Shares issued in connection with | ||||
| reinvestment of distributions | — | — | 1,306 | 12,902 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | — | — | — | — |
| 5,486 | 61,149 | 11,387 | 122,590 | |
| Shares repurchased | (64,468) | (745,402) | (9,718) | (107,113) |
| Net increase (decrease) | (58,982) | $(684,253) | 1,669 | $15,477 |
| YEAR ENDED 8/31/20 | YEAR ENDED 8/31/19 | |||
| Class R | Shares | Amount | Shares | Amount |
| Shares sold | 17,397 | $212,054 | 17,396 | $193,606 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 203 | 2,521 | 1,870 | 18,854 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | 36,033 | 404,592 | — | — |
| 53,633 | 619,167 | 19,266 | 212,460 | |
| Shares repurchased | (76,742) | (881,567) | (13,817) | (149,671) |
| Net increase (decrease) | (23,109) | $(262,400) | 5,449 | $62,789 |
| YEAR ENDED 8/31/20 | YEAR ENDED 8/31/19 | |||
| Class R6 | Shares | Amount | Shares | Amount |
| Shares sold | 345,355 | $4,319,274 | 698,380 | $7,766,774 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 13,747 | 173,077 | 22,128 | 227,034 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | 719,612 | 8,208,395 | — | — |
| 1,078,714 | 12,700,746 | 720,508 | 7,993,808 | |
| Shares repurchased | (441,090) | (5,267,810) | (423,888) | (4,747,468) |
| Net increase | 637,624 | $7,432,936 | 296,620 | $3,246,340 |
| 44 Emerging Markets Equity Fund | |
| YEAR ENDED 8/31/20 | YEAR ENDED 8/31/19 | |||
| Class Y | Shares | Amount | Shares | Amount |
| Shares sold | 2,498,632 | $31,721,582 | 4,796,326 | $53,200,715 |
| Shares issued in connection with | ||||
| reinvestment of distributions | 71,186 | 896,238 | 167,018 | 1,711,939 |
| Shares issued in connection with the | ||||
| merger of Putnam International | ||||
| Growth Fund | 661,735 | 7,539,285 | — | — |
| 3,231,553 | 40,157,105 | 4,963,344 | 54,912,654 | |
| Shares repurchased | (3,922,485) | (47,015,898) | (5,568,748) | (61,906,764) |
| Net decrease | (690,932) | $(6,858,793) | (605,404) | $(6,994,110) |
* Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.
Note 5: Affiliated transactions
Transactions during the reporting period with any company which is under common ownership or control were as follows:
| Shares | |||||
| outstanding | |||||
| and fair | |||||
| Fair value as | Purchase | Sale | Investment | value as | |
| Name of affiliate | of 8/31/19 | cost | proceeds | income | of 8/31/20 |
| Short-term investments | |||||
| Putnam Cash Collateral | |||||
| Pool, LLC* | $— | $36,636,403 | $32,053,872 | $5,945 | $4,582,531 |
| Putnam Short Term | |||||
| Investment Fund** | 1,272,692 | 96,355,087 | 95,145,998 | 14,736 | 2,481,781 |
| Total Short-term | |||||
| investments | $1,272,692 | $132,991,490 | $127,199,870 | $20,681 | $7,064,312 |
* No management fees are charged to Putnam Cash Collateral Pool, LLC (Note 1). Investment income shown is included in securities lending income on the Statement of operations. There were no realized or unrealized gains or losses during the period.
** Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.
Note 6: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.
Beginning in January 2020, global financial markets have experienced, and may continue to experience, significant volatility resulting from the spread of a virus known as COVID–19. The outbreak of COVID–19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand, and general market uncertainty. The effects of COVID–19 have adversely affected, and may continue to adversely affect, the global economy, the economies of certain nations, and individual issuers, all of which may negatively impact the fund’s performance.
| Emerging Markets Equity Fund 45 |
Note 7: Acquisition of Putnam International Growth Fund
On May 18, 2020, the fund issued 15,751,644, 125,809, 295,345, 36,033, 719,612 and 661,735 class A, class B, class C, class R, class R6 and class Y shares, respectively, for 9,329,508, 80,420, 183,383, 21,869, 423,683 and 390,036 class A, class B, class C, class R, class R6 and class Y shares of Putnam International Growth Fund to acquire that fund’s net assets in a tax-free exchange approved by the shareholders. The merger combined two Putnam funds with identical investment objectives and substantially similar investment strategies into a single Putnam fund with a larger asset base and therefore potentially lower expenses for fund shareholders. The investment portfolio of Putnam International Growth Fund, with a fair value of $197,633,004 and an identified cost of $194,342,746 at May 15, 2020 were the principal assets acquired by the fund. The net assets of the fund and Putnam International Growth Fund on May 15, 2020 were $96,359,522 and $198,059,115 respectively. On May 15, 2020 Putnam International Growth Fund had accumulated net investment loss of $2,173,596, accumulated net realized loss of $21,768,761 and unrealized appreciation of $3,279,772. The aggregate net assets of the fund immediately following the acquisition were $294,418,637.
Information presented in the Statement of operations and changes in net assets reflect only the operations of Putnam Emerging Markets Equity Fund.
Assuming the acquisition had been completed on September 1, 2019, the fund’s pro forma results of operations for the reporting period are as follows (unaudited):
| Net investment income | $1,245,138 |
| Net gain on investments | $77,463,782 |
| Net Increase in net assets resulting from operations | $78,708,920 |
Because the combined investment portfolios have been managed as a single portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of Putnam International Growth Fund that have been included in the fund’s Statement of operations for the current fiscal period.
Note 8: Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:
| Purchased equity option contracts (contract amount) | $60,000 |
| Written equity option contracts (contract amount) | $60,000 |
| Futures contracts (number of contracts) | —* |
| OTC total return swap contracts (notional) | $410,000 |
| Warrants (number of warrants) | 100,000 |
* For the reporting period, there were no holdings at the end of each fiscal quarter and the transactions were considered minimal.
As of the close of the reporting period, the fund did not hold any derivative instruments.
| 46 Emerging Markets Equity Fund |
The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):
| Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments | |||||
| Derivatives not accounted | |||||
| for as hedging instruments | |||||
| under ASC 815 | Warrants | Options | Futures | Swaps | Total |
| Equity contracts | $382,833 | $(92,140) | $(291,211) | $(79,003) | $(79,521) |
| Total | $382,833 | $(92,140) | $(291,211) | $(79,003) | $(79,521) |
| Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) | |||||
| on investments | |||||
| Derivatives not | |||||
| accounted for as | |||||
| hedging instruments | |||||
| under ASC 815 | Warrants | Options | Swaps | Total | |
| Equity contracts | $(571,475) | $(229,565) | $60,915 | $(740,125) | |
| Total | $(571,475) | $(229,565) | $60,915 | $(740,125) | |
Note 9: Change in independent accountants (unaudited)
On March 20, 2020, the Audit, Compliance and Distributions Committee of the Trustees of the Putnam Funds approved and recommended the decision to change the Fund’s independent accountant and to not retain KPMG LLP, and on April 3, 2020, upon request of the Putnam Funds, KPMG LLP provided a letter of resignation. During the two previous fiscal years, KPMG LLP audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope, or accounting principle. Further, in connection with its audits for the two previous fiscal years and the subsequent interim period through April 3, 2020: (i) there were no disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of KPMG LLP would have caused it to make reference to the subject matter of the disagreements in its report on the Fund’s financial statements for such years, and (ii) there were no “reportable events” of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
On April 17, 2020, the Audit, Compliance and Distributions Committee of the Trustees of the Putnam Funds approved and recommended the decision to appoint PricewaterhouseCoopers LLP as the Fund’s independent accountant.
| Emerging Markets Equity Fund 47 |
Federal tax information (Unaudited)
For the reporting period, total interest and dividend income from foreign countries were $3,594,004, or $0.13 per share (for all classes of shares). Taxes paid to foreign countries were $440,284, or $0.02 per share (for all classes of shares).
For the reporting period, the fund hereby designates 20.51%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.
The Form 1099 that will be mailed to you in January 2021 will show the tax status of all distributions paid to your account in calendar 2020.
| 48 Emerging Markets Equity Fund | |
| Emerging Markets Equity Fund 49 |
* Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.
The address of each Trustee is 100 Federal Street, Boston, MA 02110.
As of August 31, 2020, there were 98 Putnam funds. All Trustees serve as Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.
| 50 Emerging Markets Equity Fund | |
Officers
In addition to Robert L. Reynolds, the other officers of the fund are shown below:
| Robert T. Burns (Born 1961) | Richard T. Kircher (Born 1962) |
| Vice President and Chief Legal Officer | Vice President and BSA Compliance Officer |
| Since 2011 | Since 2019 |
| General Counsel, Putnam Investments, | Assistant Director, Operational Compliance, Putnam |
| Putnam Management, and Putnam Retail Management | Investments and Putnam Retail Management |
| James F. Clark (Born 1974) | Susan G. Malloy (Born 1957) |
| Vice President and Chief Compliance Officer | Vice President and Assistant Treasurer |
| Since 2016 | Since 2007 |
| Chief Compliance Officer and Chief Risk Officer, | Head of Accounting and Middle Office Services, |
| Putnam Investments and Chief Compliance Officer, | Putnam Investments and Putnam Management |
| Putnam Management | |
| Denere P. Poulack (Born 1968) | |
| Nancy E. Florek (Born 1957) | Assistant Vice President, Assistant Clerk, |
| Vice President, Director of Proxy Voting and Corporate | and Assistant Treasurer |
| Governance, Assistant Clerk, and Assistant Treasurer | Since 2004 |
| Since 2000 | |
| Janet C. Smith (Born 1965) | |
| Michael J. Higgins (Born 1976) | Vice President, Principal Financial Officer, Principal |
| Vice President, Treasurer, and Clerk | Accounting Officer, and Assistant Treasurer |
| Since 2010 | Since 2007 |
| Head of Fund Administration Services, | |
| Jonathan S. Horwitz (Born 1955) | Putnam Investments and Putnam Management |
| Executive Vice President, Principal Executive Officer, | |
| and Compliance Liaison | Mark C. Trenchard (Born 1962) |
| Since 2004 | Vice President |
| Since 2002 | |
| Director of Operational Compliance, Putnam | |
| Investments and Putnam Retail Management | |
The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is 100 Federal Street, Boston, MA 02110.
| Emerging Markets Equity Fund 51 |
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the
transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
| 52 Emerging Markets Equity Fund | |
Fund information
Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.
| Investment Manager | Trustees | Michael J. Higgins |
| Putnam Investment | Kenneth R. Leibler, Chair | Vice President, Treasurer, |
| Management, LLC | Liaquat Ahamed | and Clerk |
| 100 Federal Street | Ravi Akhoury | |
| Boston, MA 02110 | Barbara M. Baumann | Jonathan S. Horwitz |
| Katinka Domotorffy | Executive Vice President, | |
| Investment Sub-Advisors | Catharine Bond Hill | Principal Executive Officer, |
| Putnam Investments Limited | Paul L. Joskow | and Compliance Liaison |
| 16 St James’s Street | George Putnam, III | |
| London, England SW1A 1ER | Robert L. Reynolds | Richard T. Kircher |
| Manoj P. Singh | Vice President and BSA | |
| The Putnam Advisory Company, LLC | Mona K. Sutphen | Compliance Officer |
| 100 Federal Street | ||
| Boston, MA 02110 | Officers | Susan G. Malloy |
| Robert L. Reynolds | Vice President and | |
| Marketing Services | President | Assistant Treasurer |
| Putnam Retail Management | ||
| 100 Federal Street | Robert T. Burns | Denere P. Poulack |
| Boston, MA 02110 | Vice President and | Assistant Vice President, Assistant |
| Chief Legal Officer | Clerk, and Assistant Treasurer | |
| Custodian | ||
| State Street Bank | James F. Clark | Janet C. Smith |
| and Trust Company | Vice President, Chief Compliance | Vice President, |
| Officer, and Chief Risk Officer | Principal Financial Officer, | |
| Legal Counsel | Principal Accounting Officer, | |
| Ropes & Gray LLP | Nancy E. Florek | and Assistant Treasurer |
| Vice President, Director of | ||
| Independent Registered Public | Proxy Voting and Corporate | Mark C. Trenchard |
| Accounting Firm | Governance, Assistant Clerk, | Vice President |
| PricewaterhouseCoopers LLP | and Assistant Treasurer | |
This report is for the information of shareholders of Putnam Emerging Markets Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
| Item 2. Code of Ethics: |
| (a) The fund's principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers. |
| (c) In October 2019, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Employee notification to the Code of Ethics Officer before acting as a public official for any government entity (ii) Clarifying changes to the Insider Trading provisions and to the rules for trading in securities issued by Great-West Lifeco. |
| Item 3. Audit Committee Financial Expert: |
| The Funds' Audit, Compliance and Risk Committee is comprised solely of Trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Trustees believe that each member of the Audit, Compliance and Distributions Committee also possesses a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualifies him or her for service on the Committee. In addition, the Trustees have determined that each of Dr. Hill, Dr. Joskow, and Mr. Singh qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on their review of his or her pertinent experience and education; in the case of Dr. Joskow, including his experience serving on the audit committees of several public companies and institutions and his education and experience as an economist who studies companies and industries, routinely using public company financial statements in his research. The SEC has stated, and the funds' amended and restated agreement and Declaration of Trust provides, that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit, Compliance and Risk Committee and the Board of Trustees in the absence of such designation or identification. |
| Item 4. Principal Accountant Fees and Services: |
| The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor: |
| Fiscal year ended | Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees | |
| August 31, 2020 | $48,202 | $20,500* | $23,588 | $ — | |
| August 31, 2019 | $55,628 | $ — | $5,775 | $ — | |
| * | Fees billed to the fund for services relating to a fund merger. |
| For the fiscal years ended August 31, 2020 and August 31, 2019, the fund's independent auditor billed aggregate non-audit fees in the amounts of $389,930 and $5,775 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund. |
| Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements. |
| Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation. |
| Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities. |
| Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures. |
| The Audit, Compliance and Distributions Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds' independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm. |
| The following table presents fees billed by the fund's independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2–01 of Regulation S-X. |
| Fiscal year ended | Audit-Related Fees | Tax Fees | All Other Fees | Total Non-Audit Fees | |
| August 31, 2020 | $ — | $345,842 | $ — | $ — | |
| August 31, 2019 | $ — | $ — | $ — | $ — | |
| Item 5. Audit Committee of Listed Registrants |
| Not applicable |
| Item 6. Schedule of Investments: |
| The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
| Not applicable |
| Item 8. Portfolio Managers of Closed-End Investment Companies |
| Not Applicable |
| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
| Not applicable |
| Item 10. Submission of Matters to a Vote of Security Holders: |
| Not applicable |
| Item 11. Controls and Procedures: |
| (a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 180 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. |
| (b) Changes in internal control over financial reporting: Not applicable |
| Item 12. Disclosures of Securities Lending Activities for Closed-End Management Investment Companies: |
| Not Applicable |
| Item 13. Exhibits: |
| (a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith. |
| (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith. |
| SIGNATURES |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
| Putnam Funds Trust |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Accounting Officer |
| Date: October 29, 2020 |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
| By (Signature and Title): |
| /s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer |
| Date: October 29, 2020 |
| By (Signature and Title): |
| /s/ Janet C. Smith Janet C. Smith Principal Financial Officer |
| Date: October 29, 2020 |