Putnam
International
Growth and
Income Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
6-30-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce that shortly after the close of the fiscal
year Colin Moore was appointed to your fund's management team. Colin
joined Putnam earlier this year from Rockefeller & Co., Inc., and has 18
years of investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
August 16, 2000
REPORT FROM FUND MANAGEMENT
Deborah F. Kuenstner
George W. Stairs
Colin Moore
Putnam International Growth and Income Fund's 2000 fiscal year
performance reflects the challenges value investors faced in a largely
growth-oriented environment. For the better part of the year, the
world's markets experienced a strong sector bias in favor of technology,
telecommunications, and Internet-related stocks. Exorbitant prices for
such stocks precluded your fund's participation in the monumental tech
rally of 1999. However, the fund's value strategy also protected
shareholders from devastating losses experienced by some unfortunate
investors in the market correction of March 2000. Furthermore, as
investor sentiment shifted toward less risky securities following the
market upset, the stocks in your fund's portfolio rebounded
significantly. Overall, your fund's low-risk approach to international
investing proved effective during a period of great volatility.
Total return for 12 months ended 6/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
----------------------------------------------------------------------
16.33% 9.62% 15.41% 10.41% 15.50% 14.50% 15.83% 11.74%
----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* FUND DESIGNED TO OUTPERFORM IN DOWN MARKETS
Your fund's stock selection process is designed to identify underpriced
stocks of large international companies focused on rewarding
shareholders. Buying stocks at attractive valuations lessens the
potential severity of any further declines. In addition, our emphasis on
large, established companies that dominate their industries avoids the
pitfalls associated with investing in smaller companies or those without
track records of earnings and dividends. Our research is designed to
identify companies that focus on increasing shareholder value and
lifting stock prices. By diversifying across many sectors, investing in
stocks from leading industrialized countries and avoiding areas of
extreme volatility, we provide a lower-risk way to participate in the
growth of international markets.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 9.4%
Banking 8.5%
Insurance 8.2%
Electric utilities 7.2%
Pharmaceuticals 6.6%
Footnote reads:
*Based on net assets as of 6/30/00. Holdings will vary over time.
These risk-reduction strategies proved their worth when the market took
a severe tumble earlier this year. The stocks in your portfolio behaved
defensively, retaining more of their value than their growth-stock
counterparts. The correction reminded investors of the risk of investing
in stocks with high valuations, and investors returned to established
companies with compelling valuations and strong fundamentals, such as
those in which your fund invests. This in turn lifted the share prices
of many of your fund's holdings.
* NEW ECONOMY CREATES STRONGER COMPANIES
Conforming to the higher standards of the new economy, businesses are
undergoing significant change to strengthen their competitiveness and
increase profits. In moves reminiscent of those taken by U.S. companies
over the past 15 years, European and Japanese companies are
restructuring, shedding unprofitable divisions, and incorporating new
technologies. Mergers and acquisitions continue unabated, bringing
companies the benefits of improved cost structures and broader market
penetration. More companies are also giving their managers performance
incentives such as stock options that align their interests with
shareholders and focus their goals on lifting stock prices.
Amidst all this change, we selected strong performers for your fund from
many different sectors. Philips Electronics was the best performing
stock in the portfolio during the year. Located in the Netherlands,
Philips is a major semiconductor manufacturer and the world's third
largest manufacturer of consumer electronics such as televisions, VCRs,
CD players, and audio equipment, competing with Japanese companies such
as Matsushita and Sony. It is also one of the world's largest
manufacturers of light bulbs. We believe it is the most undervalued of
the major electronics companies. We took profits on the fund's holdings
when its shares started trading at prices comparable to stocks of pure
semiconductor companies. When the price fell back in line with stocks of
industrial companies, we reestablished a position. Although this stock,
as well as others mentioned in this report, was viewed favorably at the
end of the period, all portfolio holdings are subject to review and
adjustment in accordance with the fund's investment strategy and may
vary in the future.
"Cross-border merger and acquisition activity grew by nearly 50% last
year, and three-quarters of the cross-border deals took place in Western
Europe..."
-- The Wall Street Journal, July 19, 2000
The second best performer for the period was BCE, Inc. of Canada, a
telecommunications company that appreciated over 100% during the year.
The former Bell Canada, BCE benefited from its ownership stake in Nortel
Networks (formerly Northern Telecom), a telecommunications equipment
supplier with particular strength in optical systems and digital
switching equipment. Businesses are spending hefty sums for this
equipment to serve the rapidly-growing demand for mobile telephony,
data, and Internet access. In May, BCE spun off Nortel Networks,
unlocking the value of that investment. BCE has also come to dominate
the Canadian cellular phone market, which is growing more attractive
because prices have stabilized. Its main competitor is in disarray,
which makes BCE's growth prospects even more formidable.
Nomura Securities, Japan's No. 1 brokerage firm, performed especially
well during the year. Deregulation in the Japanese brokerage industry
proved less devastating than some had anticipated. Nomura not only
retained its market share but also added to it. The company's large
asset management business is growing steadily as investors transfer
billions of dollars of assets from low-interest postal savings accounts
into equity investments.
Among media stocks, British company Carlton Communications was a winner.
It is one of the three largest operators of the national Independent
Television Network (ITV), and produces television programming, films,
videos, DVDs and CDs. Confusion surrounding a possible merger with the
third largest owner of the ITV network, United News and Media, created
an opportunity. Three factors -- strong trends within the industry,
Carlton's depressed price, and the value-creating potential of such a
merger -- made this a very attractive buy. As the benefits of
consolidation became more widely recognized, the stock appreciated over
40% during a four-month period, and so we took profits. Even though the
merger ultimately did not occur, Carlton's story highlights how
shareholder value can be created as companies pursue positive changes
such as restructuring and consolidation.
Pharmaceutical stocks rebounded from earlier sector weakness. Your fund
had a relatively strong position in the health-care sector, and
benefited from good performance from Astra-Zeneca, Yamanouchi, and
Aventis. Aventis, formed by the 1999 merger of Rhone-Poulenc and
Hoechst, is one of our largest holdings. The stock was up 57% during the
year, a healthy advance attributable to strong management, several
promising drugs in development, and the fact that it has no imminent
patent expirations. Another positive factor is the relocation of its
research and development center to New Jersey, the heart of the U.S.
pharmaceutical industry.
* OUTLOOK IS FAVORABLE FOR INTERNATIONAL VALUE
In 1999, overseas markets provided higher returns than U.S. markets for
the first time since 1994. The Japanese economy is improving, yet we are
still extremely cautious on Japanese businesses. In Europe, the pace of
mergers, restructurings, and takeovers showed no signs of lessening. The
British market produced better returns, reversing a long period of
lackluster performance.
We are optimistic in our outlook for international value investing.
Stronger companies engaging in beneficial consolidation trends should
lead international markets to continuing strong, positive returns in the
coming year. Many sectors will experience improving performance as a
result of the rotation out of technology stocks. We anticipate that
heightened volatility will continue as a byproduct of significant
changes taking place worldwide, and your fund's conservative strategy
should enable it to weather these conditions. Furthermore, we believe
investors are becoming more discriminating in their stock selections,
demanding more in the way of solid fundamentals such as assets, cash
flow, earnings, and dividend payments. In this environment, the market
favors strong companies with steady revenues and cash flow that focus on
improving shareholder value. In short, the market favors the kinds of
stocks in which your fund invests. We believe your fund is well
positioned to provide attractive returns with less volatility over the
long term.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 6/30/00, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Nippon Telegraph and Telephone Corp.
Japan
Telecommunications
Aventis S.A.
France
Pharmaceuticals
Internationale Nederlanden
Groep (ING)
Netherlands
Insurance
Total Fina Elf S.A.
France
Oil and gas
Akzo-Nobel N.V.
Netherlands
Chemicals
Scottish Power PLC
United Kingdom
Electric utilities
Diageo PLC
United Kingdom
Beverage
Veba (Vereinigte Elekrizitaets
Bergwerks) AG
Germany
Electric utilities
Honda Motor Co., Ltd
Japan
Automotive
BCE, Inc.
Canada
Telecommunications
Footnote reads:
These holdings represent 21.9% of the fund's net assets as of 6/30/00.
Portfolio holdings will vary over time.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
International Growth and Income Fund is designed for investors seeking
long-term growth of capital. Current income is a secondary objective.
TOTAL RETURN FOR PERIODS ENDED 6/30/00
Class A Class B Class C Class M
(inception dates) (8/1/96) (8/1/96) (2/1/99) (8/1/96)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
1 year 16.33% 9.62% 15.41% 10.41% 15.50% 14.50% 15.83% 11.74%
------------------------------------------------------------------------------
Life of fund 93.66 82.53 87.87 84.87 88.18 88.18 89.91 83.25
Annual average 18.42 16.64 17.50 17.02 17.55 17.55 17.83 16.75
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/00
MSCI EAFE Consumer
Index price index
------------------------------------------------------
1 year 17.16% 3.67%
------------------------------------------------------
Life of fund 55.48 9.61
Annual average 11.93 2.37
------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50%, respectively. Class B share returns for the 1-year and
life-of-fund periods reflect the applicable contingent deferred sales
charge (CDSC), which is 5% in the first year, declines to 1% in the
sixth year, and is eliminated thereafter. For class C shares, returns
for periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the CDSC
currently applicable to class C shares, which is 1% for the first year
and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 8/1/96
Morgan Stanley
Capital International
Fund's class A (MSCI) EAFE Consumer price
Date shares at POP Index index
8/1/96 9,425 10,000 10,000
6/30/97 11,945 11,623 10,204
6/30/98 14,282 12,332 10,369
6/30/99 15,691 13,271 10,573
6/30/00 $18,253 $15,548 $10,961
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $18,787 ($18,487 with a redemption at the end
of the period); a $10,000 investment in the fund's class C shares would
have been valued at $18,818 and no contingent deferred sales charge
would apply; a $10,000 investment in the fund's class M shares would
have been valued at $18,991 ($18,325 at public offering price).
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 6/30/00
Class A Class B Class C Class M
----------------------------------------------------------------------
Distributions (number) 4 1 1 1
----------------------------------------------------------------------
Income $0.368 $0.299 $0.302 $0.307
----------------------------------------------------------------------
Capital gains
Long-term 0.681 0.681 0.681 0.681
----------------------------------------------------------------------
Short-term 0.683 0.683 0.683 0.683
----------------------------------------------------------------------
Total $1.732 $1.663 $1.666 $1.671
----------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
----------------------------------------------------------------------
6/30/99 $12.59 $13.36 $12.49 $12.57 $12.55 $13.01
----------------------------------------------------------------------
6/30/00 12.80 13.58 12.65 12.75 12.76 13.22
----------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is 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 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.
COMPARATIVE BENCHMARKS
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
list of equity securities from Europe, Australasia and the Far East,
with all values expressed in U.S. dollars. Securities indexes assume
reinvestment of all distributions and interest payments and do not take
in account brokerage fees or taxes. Securities in the fund do not match
those in the index and performance of the fund will differ. It is not
possible to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended June 30, 2000
To the Trustees of Putnam Funds Trust and Shareholders of
Putnam International Growth and Income Fund
(a series of Putnam Funds Trust)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam
International Growth and Income Fund (the "fund") at June 30, 2000, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at June 30,
2000 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
June 30, 2000
COMMON STOCKS (97.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace/Defense (0.8%)
-------------------------------------------------------------------------------------------------------------------
1,064,561 British Aerospace PLC (United Kingdom) $ 6,638,198
687,800 Rolls-Royce PLC (United Kingdom) 2,441,111
----------------
9,079,309
Airlines (0.5%)
-------------------------------------------------------------------------------------------------------------------
264,100 Deutsche Lufthansa AG (Germany) 6,201,279
Automotive (4.2%)
-------------------------------------------------------------------------------------------------------------------
667,000 Honda Motor Co., Ltd. (Japan) 22,762,999
595,500 Hyundai Motor Co., Ltd. (Korea) 7,638,039
314,503 Valeo S.A. (France) 16,879,502
----------------
47,280,540
Banking (8.5%)
-------------------------------------------------------------------------------------------------------------------
778,547 Australia & New Zealand Banking Group Ltd. (Australia) 5,984,910
723,422 Bank of Nova Scotia (Canada) 17,729,016
328,394 Barclays PLC (United Kingdom) 8,166,110
138,880 Banque Nationale de Paris (France) 13,416,741
426,767 DBS Group Holdings Ltd. (Singapore) 5,481,185
574,197 National Bank of Canada (Canada) 8,567,212
884,000 Overseas-Chinese Banking Corp., Ltd. (Singapore) 6,085,970
515,300 Royal Bank of Scotland Group PLC (United Kingdom) 8,625,766
930,415 Instituto Bancario San Paolo di Torino (Italy) 16,576,884
40,010 United Bank of Switzerland (UBS) AG (Switzerland) 5,882,376
----------------
96,516,170
Beverage (4.0%)
-------------------------------------------------------------------------------------------------------------------
1,154,090 Bass PLC (United Kingdom) 12,978,094
2,693,602 Diageo PLC (United Kingdom) 24,175,226
2,007,334 Fomento Economico Mexicano, S.A. de C.V. (Mexico) 8,569,631
----------------
45,722,951
Building Materials (0.5%)
-------------------------------------------------------------------------------------------------------------------
521,000 Asahi Glass Co., Ltd. (Japan) 5,836,500
Chemicals (6.3%)
-------------------------------------------------------------------------------------------------------------------
577,137 Akzo-Nobel N.V. (Netherlands) 24,614,200
919,499 BOC Group PLC (United Kingdom) 13,220,787
7,346 Clariant AG (Switzerland) 2,738,482
22,400 Clariant AG 144A (Switzerland) 8,350,394
116,925 Henkel KGaA (Germany) 5,884,319
505,300 Rhodia S.A. (France) 8,523,320
1,638,000 Teijin, Ltd. (Japan) 8,005,729
----------------
71,337,231
Commercial and Consumer Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
138,400 Hagemeyer N.V. (Netherlands) 3,830,717
Conglomerates (3.4%)
-------------------------------------------------------------------------------------------------------------------
377,965 Canadian Pacific, Ltd. (Canada) 9,798,715
2,801,313 Cookson Group PLC (United Kingdom) 9,348,731
408,400 Investor AB (Sweden) 5,613,986
502,900 Smiths Industries PLC (United Kingdom) 6,545,797
2,179,801 Tomkins PLC (United Kingdom) 7,084,879
----------------
38,392,108
Construction (0.7%)
-------------------------------------------------------------------------------------------------------------------
342,943 CRH PLC (Ireland) 6,211,987
421,800 CSR, Ltd. (Australia) 1,174,487
----------------
7,386,474
Consumer Finance (2.2%)
-------------------------------------------------------------------------------------------------------------------
83,775 Aiful Corp. (Japan) 7,745,505
223,400 Promise Co., Ltd. (Japan) 17,697,977
----------------
25,443,482
Consumer Goods (0.9%)
-------------------------------------------------------------------------------------------------------------------
678,000 Shiseido Co., Ltd. (Japan) 10,511,628
Electric Utilities (7.2%)
-------------------------------------------------------------------------------------------------------------------
474,342 Veba (Vereinigte Elekrizitaets Bergwerks) AG (Germany) 23,366,922
2,539,768 Hongkong Electric Holdings, Ltd. (Hong Kong) 8,178,295
692,359 Iberdrola S.A. (Spain) 8,958,018
325,300 Iberdrola SA 144A (Spain) 4,208,862
1,313,095 Scottish & Southern Energy PLC (United Kingdom) 12,043,458
2,897,070 Scottish Power PLC (United Kingdom) 24,554,406
----------------
81,309,961
Electrical Equipment (2.6%)
-------------------------------------------------------------------------------------------------------------------
4,771,876 Invensys PLC (United Kingdom) 17,911,141
164,310 Schneider Electric SA (France) 11,495,653
----------------
29,406,794
Electronics (2.9%)
-------------------------------------------------------------------------------------------------------------------
46,900 Hirose Electric Co., Ltd. (Japan) 7,320,089
34,300 Samsung Electronics Co. (South Korea) 11,352,319
579,520 Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) (NON) 2,751,542
82,000 TDK Corp. (Japan) 11,813,953
----------------
33,237,903
Food (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,500 Nestle S.A. (Switzerland) 3,012,734
Insurance (8.2%)
-------------------------------------------------------------------------------------------------------------------
29,172 Allianz AG (Germany) 10,624,209
827,281 Allied Zurich PLC (United Kingdom) 9,785,082
1,862,680 AMP Ltd. (Australia) 19,002,503
162,709 AGF (Assurances Generales de France) (France) 8,631,296
113,509 Axa S.A. (France) 17,949,859
397,125 Internationale Nederlanden Groep (ING) (Netherlands) 26,946,806
----------------
92,939,755
Investment Banking/Brokerage (2.4%)
-------------------------------------------------------------------------------------------------------------------
1,783,000 Nikko Securities Co., Ltd. (Japan) 17,698,525
379,000 Nomura Securities Co., Ltd. (Japan) 9,297,646
----------------
26,996,171
Lodging/Tourism (1.0%)
-------------------------------------------------------------------------------------------------------------------
1,184,577 Granada Group PLC (United Kingdom) 11,832,858
Manufacturing (0.8%)
-------------------------------------------------------------------------------------------------------------------
517,233 SKF AB Class B (Sweden) 8,703,156
Media (1.1%)
-------------------------------------------------------------------------------------------------------------------
319,358 Carlton Communications PLC (United Kingdom) 4,108,461
35,516 Groupe Bruxelles Lambert SA (Belgium) 8,901,077
----------------
13,009,538
Metals (0.5%)
-------------------------------------------------------------------------------------------------------------------
9,750 Pohang Iron & Steel Company, Ltd. (South Korea) 839,703
221,400 Pohang Iron & Steel Company, Ltd. ADR (South Korea) 5,313,600
----------------
6,153,303
Office Equipment & Supplies (1.8%)
-------------------------------------------------------------------------------------------------------------------
240,000 Canon, Inc. (Japan) 11,979,580
416,000 Ricoh Co., Ltd. (Japan) 8,828,890
----------------
20,808,470
Oil & Gas (5.8%)
-------------------------------------------------------------------------------------------------------------------
2,216,860 British Petroleum Co. PLC (United Kingdom) 21,272,080
3,371,892 Ente Nazionale Idrocarburi (ENI) SpA (Italy) 19,551,309
163,473 Total Fina Elf S.A. Class B (France) 25,161,607
----------------
65,984,996
Paper & Forest Products (3.2%)
-------------------------------------------------------------------------------------------------------------------
1,148,024 Abitibi-Consolidated Inc. (Canada) 10,657,123
4,938,726 Jefferson Smurfit Group PLC (Ireland) 8,408,808
1,132,569 Sappi, Ltd. (South Africa) 8,525,612
435,994 Svenska Cellulosa AB (SCA) (Sweden) 8,330,937
----------------
35,922,480
Pharmaceuticals (6.6%)
-------------------------------------------------------------------------------------------------------------------
293,307 Astra-Zeneca Group PLC (United Kingdom) 13,694,936
371,360 Aventis S.A. (France) 27,209,428
301,000 Eisai Co., Ltd. (Japan) 9,674,797
902,158 SmithKline Beecham PLC (United Kingdom) 11,810,850
219,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 11,987,238
----------------
74,377,249
Publishing (2.6%)
-------------------------------------------------------------------------------------------------------------------
500,000 Dai Nippon Printing Co., Ltd. (Japan) 8,834,373
1,626,200 Reed International PLC (United Kingdom) 14,152,209
233,176 Wolters Kluwer NV (Netherlands) 6,234,977
----------------
29,221,559
Railroads (0.8%)
-------------------------------------------------------------------------------------------------------------------
304,162 Canadian National Railway Co. (Canada) 8,850,515
Retail (1.4%)
-------------------------------------------------------------------------------------------------------------------
412,000 Marui Co., Ltd. (Japan) 7,906,599
2,534,465 Tesco PLC (United Kingdom) 7,882,801
----------------
15,789,400
Technology (5.8%)
-------------------------------------------------------------------------------------------------------------------
177,200 Alcatel (France) 11,667,217
461,000 Fujitsu Ltd. (Japan) 15,994,233
368,000 NEC Corp. (Japan) 11,584,799
930,000 Toshiba Corp. (Japan) 10,523,823
349,336 Philips Electronics N.V. (Netherlands) 16,539,299
----------------
66,309,371
Telecommunications (9.4%)
-------------------------------------------------------------------------------------------------------------------
910,000 BCE, Inc. (Canada) 21,669,368
312,494 Cable & Wireless PLC (United Kingdom) 5,292,419
168,542 Hellenic Telecommunications Organization S.A. (Greece) 4,131,025
728,482 Mahanager Telephone GDR 144A 7,466,941
2,081 Nippon Telephone and Telegraph Corp. (Japan) 27,738,798
983,567 Portugal Telecom S.A. (Portugal) 11,085,571
838,393 Telefonica S.A. (Spain) 18,079,107
200,000 Telefonos de Mexico S.A. ADR Class L, (Mexico) 11,425,000
----------------
106,888,229
Tobacco (0.5%)
-------------------------------------------------------------------------------------------------------------------
887,217 BAT Industries PLC (United Kingdom) 5,921,761
----------------
Total Common Stocks (cost $1,011,556,808) $ 1,107,164,110
UNITS (0.3%) (a)
NUMBER OF UNITS VALUE
-------------------------------------------------------------------------------------------------------------------
600,900 Taiwan Semi-Conductor Manufacturing Co. Structured
Note (issued by UBS AG Warburg Dillon Read) 3.70%
2001 (Taiwan) $ 2,949,518
SHORT-TERM INVESTMENTS (4.4%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 1,700,000 U.S Treasury Bills 5.77s, August 31, 2000 (SEG) $ 1,683,374
48,317,000 Interest in $729,703,000 joint repurchase agreement
dated June 30, 2000, year with Morgan (J.P.) & Co., Inc.
due July 3, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $48,342,970 for an
effective yield of 6.45% 48,317,000
----------------
Total Short-Term Investments (cost $50,000,374) $ 50,000,374
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,061,557,182) (b) $ 1,157,164,484
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,134,591,196.
(b) The aggregate identified cost on a tax basis is $1,080,674,964,
resulting in gross unrealized appreciation and depreciation of
$128,274,990 and $51,785,470, respectively, or net unrealized
appreciation of $76,489,520.
(NON) Non-income-producing security.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures contracts at June 30, 2000.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR or GDR after the name of a foreign holding stands for American
Depositary Receipts or Global Depositary Receipts respectively,
representing ownership of foreign securities on deposit with a domestic
custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at June 30, 2000:
(as percentage of Market Value)
Australia 2.2%
Canada 6.7
France 12.2
Germany 4.0
Ireland 1.2
Italy 3.1
Japan 21.7
Mexico 1.7
Netherlands 6.8
South Korea 1.5
Spain 2.7
Sweden 2.0
Switzerland 1.7
United Kingdom 22.4
United States 4.5
Other 5.6
-----------------------
Total 100.0%
---------------------------------------------------------------------
Forward Currency Contracts to Buy at June 30, 2000
(aggregate face value $60,607,609)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
---------------------------------------------------------------------
Euro Dollar $ 5,113,475 $ 5,090,870 9/15/00 $ 22,605
Euro Dollar 54,819,896 55,516,739 10/18/00 (696,843)
---------------------------------------------------------------------
$(674,238)
---------------------------------------------------------------------
Forward Currency Contracts to Sell at June 30, 2000
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
---------------------------------------------------------------------
Japanese Yen $10,853,360 $10,853,331 9/06/00 $(29)
---------------------------------------------------------------------
Futures Contracts Outstanding at June 30, 2000
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
---------------------------------------------------------------------
Dax Future
(Long) $4,995,660 $5,265,338 Sept-00 $(269,678)
---------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,061,557,182) (Note 1) $1,157,164,484
-------------------------------------------------------------------------------------------
Cash 555,286
-------------------------------------------------------------------------------------------
Foreign currency (cost $3,686,853) 4,138,359
-------------------------------------------------------------------------------------------
Dividends and other receivables 2,406,467
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 5,012,143
-------------------------------------------------------------------------------------------
Receivable for securities sold 11,259,789
-------------------------------------------------------------------------------------------
Receivable for variation margin 5,750
-------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 22,605
-------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 20,808
-------------------------------------------------------------------------------------------
Total assets 1,180,585,691
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 41,343,285
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 609,777
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,000,290
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 321,624
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 21,937
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,422
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 778,334
-------------------------------------------------------------------------------------------
Payable for organization expense (Note 1) 64,834
-------------------------------------------------------------------------------------------
Payable for open forward currency contracts 696,872
-------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 43,701
-------------------------------------------------------------------------------------------
Other accrued expenses 109,419
-------------------------------------------------------------------------------------------
Total liabilities 45,994,495
-------------------------------------------------------------------------------------------
Net assets $1,134,591,196
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $959,620,777
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (5,741,788)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 85,718,293
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 94,993,914
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $1,134,591,196
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($582,386,262 divided by 45,507,801 shares) $12.80
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.80)* $13.58
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($488,653,772 divided by 38,619,244 shares)** $12.65
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($22,903,072 divided by 1,796,217)** $12.75
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($40,648,090 divided by 3,186,348 shares) $12.76
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.76)* $13.22
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
** 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.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended June 30, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $2,327,579) $ 20,559,044
-------------------------------------------------------------------------------------------
Interest 2,831,589
-------------------------------------------------------------------------------------------
Total investment income 23,390,633
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 7,755,858
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,197,317
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 30,412
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 16,226
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,294,625
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,675,590
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 163,741
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 293,278
-------------------------------------------------------------------------------------------
Amortization of organizational expenses (Note 1) 17,355
-------------------------------------------------------------------------------------------
Other 639,583
-------------------------------------------------------------------------------------------
Total expenses 17,083,985
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (362,859)
-------------------------------------------------------------------------------------------
Net expenses 16,721,126
-------------------------------------------------------------------------------------------
Net investment income 6,669,507
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 133,710,569
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 3,287,545
-------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 582,744
-------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (591,253)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year 12,891,513
-------------------------------------------------------------------------------------------
Net gain on investments 149,881,118
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $156,550,625
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended June 30
--------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 6,669,507 $ 4,748,298
--------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 137,580,858 81,831,321
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies 12,300,260 (6,464,816)
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 156,550,625 80,114,803
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (7,374,706) (8,562,227)
--------------------------------------------------------------------------------------------------
Class B (5,480,410) (6,251,787)
--------------------------------------------------------------------------------------------------
Class C (190,172) (4,975)
--------------------------------------------------------------------------------------------------
Class M (462,972) (571,933)
--------------------------------------------------------------------------------------------------
In excess from of net investment income
Class A (6,948,131) --
--------------------------------------------------------------------------------------------------
Class B (5,163,407) --
--------------------------------------------------------------------------------------------------
Class C (179,172) --
--------------------------------------------------------------------------------------------------
Class M (436,191) --
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (52,384,086) (17,231,317)
--------------------------------------------------------------------------------------------------
Class B (48,555,741) (17,184,367)
--------------------------------------------------------------------------------------------------
Class C (1,668,165) --
--------------------------------------------------------------------------------------------------
Class M (3,994,975) (1,524,471)
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 150,225,853 68,971,565
--------------------------------------------------------------------------------------------------
Total increase in net assets 173,938,350 97,755,291
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 960,652,846 862,897,555
--------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
net investment income of $5,741,788 and
$7,723,753, respectively) $1,134,591,196 $960,652,846
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
----------------------------------------------------------------------------------------
For the period
Per-share August 1, 1996+
operating performance Year ended June 30 to June 30
----------------------------------------------------------------------------------------
2000 1999 1998 1997
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.59 $12.25 $10.76 $8.53
----------------------------------------------------------------------------------------
Investment operations
----------------------------------------------------------------------------------------
Net investment income (a) .13 .11 .23 .15
----------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.81 .98 1.78 2.13
----------------------------------------------------------------------------------------
Total from
investment operations 1.94 1.09 2.01 2.28
----------------------------------------------------------------------------------------
Less distributions:
----------------------------------------------------------------------------------------
From net
investment income (.20) (.25) (.16) (.05)
----------------------------------------------------------------------------------------
In excess of net
investment income (.17) -- -- --
----------------------------------------------------------------------------------------
From net realized gain
on investments (1.36) (.50) (.36) --
----------------------------------------------------------------------------------------
Total distributions (1.73) (.75) (.52) (.05)
----------------------------------------------------------------------------------------
Net asset value,
end of period $12.80 $12.59 $12.25 $10.76
----------------------------------------------------------------------------------------
Ratios and supplemental data
----------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 16.33 9.87 19.56 26.73*
----------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $582,386 $469,726 $409,456 $157,990
----------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.28 1.30 1.36 1.52*
----------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.02 .94 1.98 1.61*
----------------------------------------------------------------------------------------
Portfolio turnover (%) 82.07 88.09 53.57 70.25*
----------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements and
brokerage service arrangements. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
----------------------------------------------------------------------------------------
For the period
Per-share August 1, 1996+
operating performance Year ended June 30 to June 30
----------------------------------------------------------------------------------------
2000 1999 1998 1997
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.49 $12.18 $10.72 $8.53
----------------------------------------------------------------------------------------
Investment operations
----------------------------------------------------------------------------------------
Net investment income (a) .03 .02 .14 .10
----------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.79 .97 1.78 2.10
----------------------------------------------------------------------------------------
Total from
investment operations 1.82 .99 1.92 2.20
----------------------------------------------------------------------------------------
Less distributions:
----------------------------------------------------------------------------------------
From net
investment income (.15) (.18) (.10) (.01)
----------------------------------------------------------------------------------------
In excess of net
investment income (.15) -- -- --
----------------------------------------------------------------------------------------
From net realized gain
on investments (1.36) (.50) (.36) --
----------------------------------------------------------------------------------------
Total distributions (1.66) (.68) (.46) (.01)
----------------------------------------------------------------------------------------
Net asset value,
end of period $12.65 $12.49 $12.18 $10.72
----------------------------------------------------------------------------------------
Ratios and supplemental data
----------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 15.41 9.04 18.68 25.80*
----------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $488,654 $445,472 $414,609 $174,801
----------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.03 2.05 2.11 2.21*
----------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .25 .19 1.21 1.03*
----------------------------------------------------------------------------------------
Portfolio turnover (%) 82.07 88.09 53.57 70.25*
----------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements and
brokerage service arrangements. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
---------------------------------------------------------------------
For the period
Per-share Year ended Feb. 1, 1999+
operating performance June 30 to June 30
---------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $12.57 $11.10
---------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------
Net investment income (a) .04 .07
---------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.80 1.42
---------------------------------------------------------------------
Total from
investment operations 1.84 1.49
---------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------
From net
investment income (.15) (.02)
---------------------------------------------------------------------
In excess of net
investment income (.15) --
---------------------------------------------------------------------
From net realized gain
on investments (1.36) --
---------------------------------------------------------------------
Total distributions (1.66) (.02)
---------------------------------------------------------------------
Net asset value,
end of period $12.75 $12.57
---------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------
Total return at
net asset value (%)(b) 15.50 13.40*
---------------------------------------------------------------------
Net assets, end of period
(in thousands) $22,903 $9,163
---------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.03 .84*
---------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .34 .58*
---------------------------------------------------------------------
Portfolio turnover (%) 82.07 88.09
---------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements and
brokerage service arrangements. (Note 2)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
----------------------------------------------------------------------------------------
For the period
Per-share August 1, 1996+
operating performance Year ended June 30 to June 30
----------------------------------------------------------------------------------------
2000 1999 1998 1997
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.55 $12.22 $10.74 $8.53
----------------------------------------------------------------------------------------
Investment operations
----------------------------------------------------------------------------------------
Net investment income (a) .06 .05 .16 .12
----------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.82 .97 1.79 2.11
----------------------------------------------------------------------------------------
Total from
investment operations 1.88 1.02 1.95 2.23
----------------------------------------------------------------------------------------
Less distributions:
----------------------------------------------------------------------------------------
From net
investment income (.16) (.19) (.11) (.02)
----------------------------------------------------------------------------------------
In excess of net
investment income (.15) -- -- --
----------------------------------------------------------------------------------------
From net realized gain
on investments (1.36) (.50) (.36) --
----------------------------------------------------------------------------------------
Total distributions (1.67) (.69) (.47) (.02)
----------------------------------------------------------------------------------------
Net asset value,
end of period $12.76 $12.55 $12.22 $10.74
----------------------------------------------------------------------------------------
Ratios and supplemental data
----------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 15.83 9.24 18.95 26.17*
----------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $40,648 $36,291 $38,832 $17,105
----------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.78 1.80 1.86 1.98*
----------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .51 .40 1.40 1.19*
----------------------------------------------------------------------------------------
Portfolio turnover (%) 82.07 88.09 53.57 70.25*
----------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements and
brokerage service arrangements. (Note 2)
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
Note 1
Significant accounting policies
Putnam International Growth and Income Fund ("the fund") is a series of
Putnam Funds Trust (the "Trust") which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund invests primarily in common
stocks that offer potential for capital growth and may invest in stocks
that offer potential for current income.
The fund offers class A, class B, class C and class M shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing
distribution fee than class A shares, 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 the same fees and expenses as
class B shares, except that class C shares have a one-year 1.00%
contingent deferred sales charge and do not convert to class A shares.
Class M shares are sold with a maximum front end sales charge of 3.50%
and pay an ongoing distribution fee that is higher than class A shares
but lower than class B and class C shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). 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. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc.. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit
of the fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using current forward currency exchange rates supplied by a
quotation service. The market value of the contract will fluctuate with
changes in currency exchange rates. The contract is "marked to market"
daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain
or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The fund
could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet
the terms of their contracts or if the fund is unable to enter into a
closing position.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and 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, or if the counterparty to the contract is
unable to perform. 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. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. 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. Options traded over-the-counter are valued using prices
supplied by dealers.
H) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
June 30, 2000, the fund had no borrowings against the line of credit.
I) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
J) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences include temporary and permanent
differences of losses on wash sale transactions, foreign currency gains
and losses, post-October loss deferrals, organization costs, foreign
taxes, unrealized gains and losses on certain futures contracts, and
realized and unrealized gains and losses on passive foreign investment
companies. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations. For the year
ended June 30, 2000, the fund reclassified $21,547,619 to decrease
distribution in excess of net investment income and $15,644 to decrease
paid-in-capital, with a decrease to accumulated net realized gains of
$21,531,975. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
K) 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.
L) Unamortized organization expenses Expenses incurred by
the fund in connection with its organization, its registration with the
Securities and Exchange Commission and with various states and the
initial public offering of its shares were $64,834. These expenses are
being amortized on projected net asset levels over a five-year period.
The fund will reimburse Putnam Management for the payment of these
expenses.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.80% of the
first $500 million of average net assets, 0.70% of the next $500
million, 0.65% of the next $500 million, 0.60% of the next $5 billion,
0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54% of
the next $5 billion, and 0.53% thereafter.
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 Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the year ended June 30, 2000, fund expenses were reduced by $362,859
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,774
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fee 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. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Retail Management, Inc., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%, 1.00%,
1.00% and 0.75% of the average net assets attributable to class A, class
B, class C and class M shares respectively.
For the year ended June 30, 2000, Putnam Retail Management, Inc., acting
as underwriter received net commissions of $370,641 and $14,806 from the
sale of class A and class M shares, respectively, and received $643,442
and $5,745 in contingent deferred sales charges from redemptions of
class B and class C shares, respectively. A deferred sales charge of up
to 1% is assessed on certain redemptions of class A shares. For the year
ended June 30, 2000, Putnam Retail Management, Inc., acting as
underwriter received $31,937 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended June 30, 2000, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $871,691,338 and $803,800,181, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At June 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended June 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 39,521,548 $489,707,477
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,865,158 58,637,537
---------------------------------------------------------------------------
44,386,706 548,345,014
Shares
repurchased (36,202,992) (450,364,719)
---------------------------------------------------------------------------
Net increase 8,183,714 $ 97,980,295
---------------------------------------------------------------------------
Year ended June 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 25,486,440 $293,865,844
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,259,777 24,453,045
---------------------------------------------------------------------------
27,746,217 318,318,889
Shares
repurchased (23,849,432) (274,006,683)
---------------------------------------------------------------------------
Net increase 3,896,785 $ 44,312,206
---------------------------------------------------------------------------
Year ended June 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 8,200,397 $101,429,906
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,497,245 53,607,145
---------------------------------------------------------------------------
12,697,642 155,037,051
Shares
repurchased (9,757,166) (119,736,468)
---------------------------------------------------------------------------
Net increase 2,940,476 $ 35,300,583
---------------------------------------------------------------------------
Year ended June 30, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 8,011,247 $91,975,997
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,003,520 21,477,689
---------------------------------------------------------------------------
10,014,767 113,453,686
Shares
repurchased (8,373,704) (94,136,683)
---------------------------------------------------------------------------
Net increase 1,641,063 $19,317,003
---------------------------------------------------------------------------
Year ended June 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 1,766,149 $22,209,445
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 139,826 1,679,314
---------------------------------------------------------------------------
1,905,975 23,888,759
Shares
repurchased (838,701) (10,543,328)
---------------------------------------------------------------------------
Net increase 1,067,274 $13,345,431
---------------------------------------------------------------------------
For the period February 1, 1999
(commencement of operations) to
June 30, 1999
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 795,822 $9,522,643
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 308 3,755
---------------------------------------------------------------------------
796,130 9,526,398
Shares
repurchased (67,187) (845,963)
---------------------------------------------------------------------------
Net increase 728,943 $8,680,435
---------------------------------------------------------------------------
Year ended June 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 2,053,808 $25,485,200
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 394,356 4,732,271
---------------------------------------------------------------------------
2,448,164 30,217,471
Shares
repurchased (2,153,106) (26,617,927)
---------------------------------------------------------------------------
Net increase 295,058 $ 3,599,544
---------------------------------------------------------------------------
Year ended June 30, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 645,549 $ 7,389,654
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 177,635 1,911,353
---------------------------------------------------------------------------
823,184 9,301,007
Shares
repurchased (1,109,843) (12,639,086)
---------------------------------------------------------------------------
Net decrease (286,659) $(3,338,079)
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $73,973,349 as a 20% capital gain, for its
taxable year ended June 30, 2000.
For the period, interest and dividends from foreign countries were
$22,886,624 or $0.257 per share (for all share classes). Taxes paid to
foreign countries were $2,327,579 or $0.026 per share for all classes of
shares.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Technology Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Fund
Balanced Retirement Fund
Classic Equity Fund *
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Growth and Income Fund II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Deborah F. Kuenstner
Vice President and Fund Manager
George W. Stairs
Vice President and Fund Manager
Colin Moore
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam
International Growth and Income Fund. It may also be used as sales
literature when preceded or accompanied by the current prospectus, which
gives details of sales charges, investment objectives, and operating
policies of the fund, and the most recent copy of Putnam's Quarterly
Performance Summary. For more information or to request a prospectus,
call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site:
www.putnaminvestments.com
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN024-63293 2CE/2CG/2CH 8/00
