Putnam
Europe
Growth
Fund
ANNUAL REPORT
June 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* According to Lipper Analytical Services, Putnam Europe Growth
Fund's class A share total return ranked 2 out of 17 European region
funds for the five-year period ended June 30, 1996, placing the fund
in the top 12% in this category.*
* "Looking ahead, [Fund Manager Justin] Scott is very optimistic
concerning the European market. He cites the trend over the last four
years in which public corporations have become increasingly mindful of
acting in their shareholders' best interests....The fund's strong
track record...relative to its European Equity peers should appeal to
those seeking to diversify their portfolios."
-- Value Line Mutual Fund Survey, May 28, 1996
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
17 Financial statements
*Lipper Analytical Services, an independent research organization,
ranks funds according to total return performance. Rankings vary over
time and do not reflect the effects of sales charges. For the one-year
period ended 6/30/96, the fund's class A, class B, and class M shares
ranked 17, 20, and 19, respectively, out of 43 European region funds.
Class B and class M shares were not ranked over longer periods. Past
performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
When European economies are booming, most European region funds have
shown themselves to be quite capable of delivering impressive returns.
When the tide turns, however, only a select few remain successful.
During the fiscal year that ended June 30, 1996, Putnam Europe Growth
Fund was one of those few.
Your fund's positive performance during the period is evidenced by its
solid outperformance of its benchmark index and is documented by the
report from your fund's management team, which follows this letter.
Together, lead manager Justin Scott in Boston and Mark Pollard in the
London office are keeping close watch on the trends and developments
throughout Europe that form the basis of their investment decisions.
When economies languish, as they have done in much of Europe over the
past several months, the challenge becomes one of choosing the right
countries as well as the right companies. While their success over the
past year is no guarantee of future results, Justin and Mark believe
they have positioned your fund well for the environment they envision
in the months ahead.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
August 21, 1996
Report from the Fund Managers
Justin M. Scott
Mark D. Pollard
Although sluggish economic growth persisted across much of Europe
during the fiscal year ended June 30, 1996, your fund delivered solid
results. The fund's class A shares returned 17.82% at net asset value
(11.02% at public offering price), outpacing the 14.68% total return
of the Morgan Stanley Capital International Europe 14 Index, the
fund's benchmark. Complete performance information appears on pages 9
and 10.
In order to sustain robust performance when economic growth slackens,
we believe it's essential to recognize and capitalize on the type of
business trends that develop in a slower-growth environment. For your
fund, we did just that, taking advantage of a fundamental shift in
management philosophy now emerging among European companies.
* EVOLVING MANAGEMENT OBJECTIVES AMONG EUROPEAN COMPANIES
With the major European economies faltering over much of the past
year, the key to successful investing in this region involved
correctly targeting those companies that could perform well despite
tough economic conditions. A key element of this strategy during the
period entailed recognizing a shift in the emphasis that European
corporations place on the interests of their shareholders.
In the past, the interests of shareholders were often a subordinate
concern for European corporate management, traditionally considered
only after the needs of creditors (particularly banks), employees, and
management. However, for some time we've been aware that the pressures
of global competition force corporations to redefine their management
objectives. Today, enhancing shareholder value is becoming an
increasingly prominent corporate goal, particularly among companies in
Switzerland, the Netherlands, and Germany.
Investors have demonstrated that they will pay more for a company that
operates more exclusively on their behalf in anticipation of a
superior return on capital. A shift to a shareholder-oriented focus
typically improves the quality and endurance of the company's return
on equity (a measure of efficiency), even in the midst of a sluggish
economic environment. While those companies that have contributed to
this trend remain a minority, they have nevertheless set themselves
apart.
Your fund's results reflect the outstanding performance of several
European companies that have shifted their goals in this way. One
example is the leading reinsurance group, Swiss Reinsurance Co. This
company's recent efforts to emphasize the best interests of its
shareholders included setting ambitious return on equity objectives
and selling unprofitable lines of business. The result: The value of
the company's stock rose roughly 33% during the fiscal year despite
unimpressive performance in the reinsurance industry as a whole. Other
fund holdings that took part in this burgeoning trend and enjoyed a
substantial increase in the values of their stocks are Ciba Geigy, a
Swiss pharmaceuticals and chemicals company, and the German electric
utility Veba AG. While these stocks, along with others discussed in
this report, were viewed favorably at the end of the fiscal period,
all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the
future.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
United Kingdom 16.2%
France 15.0%
Netherlands 14.1%
Sweden 10.1%
Switzerland 10.1%
*Based on net assets as of 6/30/96. Allocations will vary over time.
* TARGETING THE BEST OF GROWTH AND VALUE
An ongoing tenet of your fund's investment strategy is to seek to
identify stocks that are selling at levels significantly below their
long-term worth. This leads us to promising investment opportunities
among both growth and value-oriented stocks. Noteworthy holdings in
the former category over the fiscal year included Getronics, a
Netherlands-based computer products and services company and a long-
standing holding, and Vodafone Group, an international cellular
telephone company based in the United Kingdom.
Value opportunities, on the other hand, include a number of well-
managed companies in relatively mature industries that we believe to
be undervalued. Among the top performers in this category during the
fiscal year were CRH, an international cement and building materials
manufacturer with headquarters in Ireland, and Danisco, a food
processing company based in Denmark.
* THE EUROPEAN MONETARY UNION MAY OFFER OPPORTUNITIES
Just as the growing focus on shareholder value represents a trend
among individual corporations -- that is, a microeconomic development
- -- investment opportunities in Europe have more recently been
influenced by an issue that affects European economies on a broader
(macroeconomic) basis. Led by the governments of France and Germany,
most European countries -- with the notable exception of the United
Kingdom -- have reemphasized their commitment to the European Monetary
Union (EMU). As part of the Maastricht Treaty to unify Europe, EMU
would create a single currency to be used among member nations.
A daunting obstacle to implementation of EMU is the Maastricht
Treaty's requirement that each member nation achieve a budgetary
deficit of no more than 3% of its gross domestic product (GDP) in
1997. (GDP is the total value of goods and services produced.) Most
European nations appear likely to exceed this limit, and many are now
focusing on reducing fiscal expenses despite weak economic growth.
Among European governments, two strategies are becoming more prevalent
in achieving this goal. First, increasing privatization of government-
run businesses is creating a swelling field of privately run
companies, which translates into expanded investment opportunities for
your fund. The second measure is a sustained pressure toward lower
interest rates and weaker European currencies. Such developments can
spur domestic economic activity and the volume of exports. This in
turn, can have positive implications for the valuation of stocks in
your fund's portfolio.
[GRAPHIC CHART OMITTED: TOP 10 HOLDINGS]
Ciba Geigy (Switzerland)
Pharmaceuticals and chemicals
Pharmacia & Upjohn, Inc. (Sweden)
Pharmaceuticals and biotechnology
Total S.A. Class B (France)
Oil and gas
Munich Re (Germany)
Reinsurance and banking
ABN AMRO Holding (Netherlands)
Banking and financial services
Repsol S.A. (Spain)
Oil and gas
Allied Irish Banks (Ireland)
Banking and financial services
Veba AG (Germany)
Electric utility
BAT Industries (United Kingdom)
Tobacco and financial services
Nestle (Switzerland)
Food products
Footnote reads:
These holdings represent 22.1% of the fund's net assets as of 6/30/96.
Portfolio holdings will vary over time.
* THE POTENTIAL FOR EXPANDED INVESTMENT OPPORTUNITIES
As we move into the second half of 1996 and look forward to 1997, we
anticipate improved economic growth in Europe. The shift toward
shareholder-oriented corporate management is gathering momentum and
may continue to foster investment opportunities for the next several
years. To capitalize on this trend, we will use exhaustive research to
distinguish those companies that are truly adjusting their objectives
from those that merely claim to be.
In light of the likelihood that European interest rates will trend
lower than U.S. interest rates, we plan to maintain partial currency
hedges on a portion of our European investments in order to lock in
favorable exchange rates between these currencies and the dollar. At
the same time, we will continue to search the Continent for what we
believe are further undervalued investment opportunities.
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 6/30/96, there is no guarantee
the fund will continue to hold these securities in the future.
International investing involves certain risks, including political
developments, economic instability, and currency fluctuations, not
present with domestic investments. The fund concentrates its
investments in one region and involves more risk than a fund that
invests more broadly.
Performance summary
Performance should always be considered in light of a fund's
investment strategy. Putnam Europe Growth Fund is designed for
investors seeking capital appreciation through investments primarily
in common stocks and other securities of European companies.
This section provides, at a glance, information about your fund's
performance. 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.
TOTAL RETURN FOR PERIODS ENDED 6/30/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (9/7/90) (2/1/94) (12/1/94)
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------------
1 year 17.82% 11.02% 16.95% 11.95% 17.28% 13.21%
- ----------------------------------------------------------------------
5 years 103.94 92.29 -- -- -- --
Annual average 15.32 13.97 -- -- -- --
- ----------------------------------------------------------------------
Life of class 111.92 99.70 30.48 27.48 33.77 29.06
Annual average 13.77 12.62 11.67 10.60 20.22 17.52
- ----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/96
MSCI Standard
Europe 14 & Poor's
Index 500 Index
- ----------------------------------------------------------------------
1 year 14.68% 25.93%
- ----------------------------------------------------------------------
5 years 88.52 107.19
Annual average 13.51 15.68
- ----------------------------------------------------------------------
Life of class A 75.67 146.97
Annual average 10.14 16.81
- ----------------------------------------------------------------------
Life of class B 25.98 48.52
Annual average 10.05 17.84
- ----------------------------------------------------------------------
Life of class M 30.18 54.27
Annual average 18.13 31.57
- ----------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take
into account any adjustment for taxes payable on reinvested
distributions. Investment returns and net asset value will fluctuate
so that an investor's shares, when sold, may be worth more or less
than their original cost. POP assumes 5.75% maximum sales charge for
class A shares and 3.50% for class M shares. CDSC for class B shares
assumes the applicable sales charge, with the maximum being 5%.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 6/30/96
Class A Class B Class M
- ----------------------------------------------------------------------
Distributions (number) 1 1 1
- ----------------------------------------------------------------------
Income -- -- --
- ----------------------------------------------------------------------
Capital gains
- ----------------------------------------------------------------------
Long-term $0.365 $0.365 $0.365
- ----------------------------------------------------------------------
Short-term 0.030 0.030 0.030
- ----------------------------------------------------------------------
Total $0.395 $0.395 $0.395
- ----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ----------------------------------------------------------------------
6/30/95 $13.88 $14.73 $13.75 $13.90 $14.40
- ----------------------------------------------------------------------
6/30/96 15.91 16.88 15.64 15.86 16.44
- ----------------------------------------------------------------------
[GRAPHIC WORM CHART OMITTED:GROWTH OF A $10,000 INVESTMENT]
Caption reads: Cumulative total return of a $10,000
investment since 9/7/90
Starting value ending total
$9,425 Fund's class A shares at POP $19,970
$10,000 MSCI Europe 14 Index $17,567
$10,000 Consumer Price Index $11,907
(plot points for 10-year total return mountain chart)
Date/year Fund at POP MSCI Europe 14 Index CPI
- ---------------------------------------------------------------
9/7/90 9,425 10,000 10,000
6/30/91 9,792 9,318 10,334
6/30/92 11,662 11,416 10,653
6/30/93 11,743 11,129 10,973
6/30/94 14,027 12,896 11,246
6/30/95 16,950 15,318 11,588
6/30/96 19,970 17,567 11,907
Past performance is no assurance of future results. A $10,000
investment in the fund's class B shares at inception on 2/1/94
would have been valued at $13,048 on 6/30/96 ($12,748 with a
redemption at the end of the period). A $10,000 investment in
the fund's class M shares at inception on 12/1/94 would have
been valued at $13,377 at net asset value on 6/30/96 ($12,906
at public offering price.)
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
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 maximum 5.75% 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 shares and assumes redemption at the
end of the period. Your fund's 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.
COMPARATIVE BENCHMARKS
Morgan Stanley Capital International (MSCI) Europe 14 Index* is an
unmanaged list of approximately 627 equity securities originating in
one of the 14 European countries, with all values expressed in U.S.
dollars.
Standard & Poor's 500 Index* is an unmanaged list of common U.S.
stocks that is frequently used as a general measure of stock market
performance.
Consumer Price Index (CPI) is a commonly used measure of inflation;
it does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and
interest payments and do not take into account brokerage fees or
taxes. Securities in the fund do not match those in the indexes and
performance of the fund will differ. It is not possible to invest
directly in an index.
Report of Independent Accountants
To the Trustees and Shareholders of
Putnam Europe Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, 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 Europe Growth Fund at June 30, 1996, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements
and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of investments owned at June 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
August 15, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
June 30, 1996
<S> <C> <C> <C>
COMMON STOCKS (93.1%) *
NUMBER OF SHARES VALUE
Austria (2.5%)
- --------------------------------------------------------------------------------------------------------
168,300 Mayr-Melnhof Karton AG 144A ADS + $1,809,225
30,912 VA Technolgies AG 3,783,966
------------
5,593,191
Belgium (1.3%)
- --------------------------------------------------------------------------------------------------------
1,027 N.V. Bekaert S.A. 822,203
3,400 Solvay S.A. 2,084,875
------------
2,907,078
Croatia (0.9%)
- --------------------------------------------------------------------------------------------------------
53,000 Pliva D.D. GDR + 2,093,500
Denmark (2.6%)
- --------------------------------------------------------------------------------------------------------
44,646 Danisco A/S 2,221,648
137,640 Tele Danmark A/S ADS 3,492,615
------------
5,714,263
France (15.0%)
- --------------------------------------------------------------------------------------------------------
6,920 Chargeurs Internationale S.A. 309,273
8,670 Cie Bancaire S.A. 976,712
41,060 Credit Locale de France S.A. 3,341,583
20,000 Elf Aquitane ADR 735,000
1,004 Financiere et Industrelle Gaz et Eaux 409,517
64,145 Lafarge Coppee 3,880,969
54,000 Michelin Corp. Class B 2,638,905
6,920 Pathe S.A. + 1,623,650
25,000 Peugeot Citroen S.A. 3,345,635
99,000 SGS-Thomson Microelectronics ADR 3,551,625
33,095 Societe Generale Paris 3,638,297
34,000 Societe Nationale Elf Aquitaine 2,500,223
59,900 Sommer Allibert 1,521,787
66,721 Total S.A. Class B 4,947,864
------------
33,421,040
Germany (8.1%)
- --------------------------------------------------------------------------------------------------------
49,940 Bayer AG 1,762,492
6,550 Bayerische Motoren Werke (BMW) AG 3,795,387
2,366 Munich Re 4,878,030
11,600 Preussag AG 2,932,370
86,700 Veba (Vereinigte Elektrizitaets Bergwerks) AG 4,603,696
------------
17,971,975
Ireland (5.5%)
- --------------------------------------------------------------------------------------------------------
889,497 Allied Irish Banks PLC 4,613,243
446,314 CRH PLC 4,401,568
605,246 Greencore Group PLC 3,139,018
------------
12,153,829
Netherlands (14.1%)
- --------------------------------------------------------------------------------------------------------
86,949 ABN AMRO Holdings N.V. 4,663,073
82,175 Aegon N.V. 3,781,590
20,400 Akzo-Nobel N.V. 2,442,506
24,534 Dutch States Mines N.V. 2,434,727
83,104 Getronics Electric N.V. 1,839,187
60,000 IHC Caland N.V. 2,950,820
113,432 K.L.M.-Royal Dutch Airlines 3,626,105
125,876 Philips Electronics N.V. 4,090,233
25,000 Unilever N.V. 3,615,340
51,500 Vendex International N.V. 1,794,057
------------
31,237,638
Portugal (0.8%)
- --------------------------------------------------------------------------------------------------------
89,900 Banco Totta & Accores S.A. 1,760,637
Spain (5.9%)
- --------------------------------------------------------------------------------------------------------
25,822 Banco de Bilbao Vizcaya 1,045,368
55,000 Mapfre Vida Seguros 3,088,923
132,883 Repsol S.A. 4,617,735
85,000 Tabacalera S.A. Series A 4,276,520
------------
13,028,546
Sweden (10.1%)
- --------------------------------------------------------------------------------------------------------
56,352 Astra AB 2,490,367
130,200 Autoliv AB 3,966,878
50,180 Electrolux AB 2,524,137
217,000 IRO AB 2,225,641
129,556 Pharmacia & Upjohn, Inc. 5,666,854
14,960 Sandvik AB Class B 345,231
80,180 Skandia Forsakrings AB 2,122,412
150,000 Svenska Cellulosa AB Class B 3,088,235
------------
22,429,755
Switzerland (10.1%)
- --------------------------------------------------------------------------------------------------------
700 Baer Holdings AG 754,371
3,170 ABB AG 3,917,267
1,400 Ciba-Geigy AG Class B 1,696,496
3,750 Ciba-Geigy AG 4,565,139
3,862 Nestle S.A. 4,405,522
6,240 Rieter Holding AG 1,683,659
4,750 Surveillance 2,085,495
3,335 Swiss Reinsurance Co. 3,420,991
------------
22,528,940
United Kingdom (16.2%)
- --------------------------------------------------------------------------------------------------------
402,433 Argyll Group PLC 2,167,558
568,754 B A T Industries PLC 4,422,928
259,327 Burmah Oil PLC 4,101,754
151,700 East Midlands Electricity 1,226,792
240,000 General Electric Co. (The) PLC 1,292,672
288,021 Guinness PLC 2,092,270
118,200 Molins PLC 1,790,668
289,062 North West Water Group PLC 2,431,857
85,000 Pearson PLC 876,062
381,474 Royal Insurance Holdings PLC 2,356,653
50,246 Royal PTT 1,900,405
358,301 Scottish Power PLC 1,690,711
850,600 Sears PLC 1,307,098
572,614 Securicor Group PLC Class A 2,324,242
103,209 Tate & Lyle PLC 733,721
637,562 Vodafone Group PLC 2,370,142
736,962 Weir Group PLC (The) 2,871,220
------------
35,956,753
------------
Total Common Stocks (cost $178,082,924) $206,797,145
CONVERTIBLE BONDS AND NOTES (0.7%) *(cost $1,191,543)
PRINCIPAL AMOUNT VALUE
Denmark (0.7%)
- --------------------------------------------------------------------------------------------------------
DKK 8,000,000 Danisco Cv. Bond 5s, 2004 $1,571,234
WARRANTS (--%) * +
NUMBER OF WARRANTS EXPIRATION DATE VALUE
Italy (--%)
- --------------------------------------------------------------------------------------------------------
3,750 Danieli & Co. 11/30/99 $2,934
Switzerland (--%)
- --------------------------------------------------------------------------------------------------------
6,000 Rieter Holding AG 2/28/97 5,987
------------
Total Warrants (cost $--) $8,921
Short-Term Investments (8.8%) *(cost $19,581,971)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------
$19,573,000 Interest in $500,000,000 joint repurchase agreement dated
June 28, 1996 with Lehman Brothers Inc. due July 1, 1996 with
respect to various U.S. Treasury obligations-maturity
value of $19,581,971 for an effective yield of 5.50% $19,581,971
- --------------------------------------------------------------------------------------------------------
Total Investments (cost $198,856,438)*** $227,959,271
- --------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $222,153,306
*** The aggregate identified cost on a tax basis is
$199,429,286, resulting in gross unrealized appreciation and
depreciation of $35,183,743 and $6,653,758, respectively,
or net unrealized appreciation of $28,529,985.
+ Non-income-producing security.
144A after the name of a security represents those exempt
from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional
buyers.
ADR, ADS or GDR after the name of a foreign holding
stands for American Depository Receipts, American Depository
Shares or Global Depository Receipts, respectively, representing
ownership of foreign securities on deposit with a domestic custodian
bank.
<CAPTION>
- -------------------------------------------------------------------------------
Forward Currency Contracts to Sell at June 30, 1996
(aggregate face value $54,253,252)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $ 4,313,159 $ 4,285,162 11/12/96 $(27,997)
Deutschemarks 8,301,909 8,360,000 11/12/96 58,091
Dutch Guilder 14,482,097 14,646,978 11/12/96 164,881
French Francs 26,972,881 26,961,112 11/12/96 (11,769)
- -------------------------------------------------------------------------------
$ 183,206
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1996
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $198,856,438) (Note 1) $227,959,271
- -----------------------------------------------------------------------------------------------------------------
Cash 740
- -----------------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 1,387,855
- -----------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,782,491
- -----------------------------------------------------------------------------------------------------------------
Receivable for securities sold 3,871,322
- -----------------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 289,831
- -----------------------------------------------------------------------------------------------------------------
Total assets 235,291,510
Liabilities
- -----------------------------------------------------------------------------------------------------------------
Payable for securities purchased 9,261,021
- -----------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,962,575
- -----------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 418,529
- -----------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,233
- -----------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 155,200
- -----------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 162,577
- -----------------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 106,625
- -----------------------------------------------------------------------------------------------------------------
Other accrued expenses 69,444
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 13,138,204
- -----------------------------------------------------------------------------------------------------------------
Net assets $222,153,306
Represented by
- -----------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $175,778,230
- -----------------------------------------------------------------------------------------------------------------
Undistributed in excess of net investment income (Note 1) 2,543,011
- -----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions (Note 1) 14,536,276
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 29,295,789
- -----------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $222,153,306
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($127,980,303 divided by 8,046,092 shares) $15.91
- -----------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $15.91)* $16.88
- -----------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($90,125,770 divided by 5,764,205 shares)+ $15.64
- -----------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($4,047,233 divided by 255,177 shares) $15.86
- -----------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $15.86)* $16.44
- -----------------------------------------------------------------------------------------------------------------
* 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, 1996
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $412,439) $4,836,549
- --------------------------------------------------------------------------------------------
Interest 549,679
- --------------------------------------------------------------------------------------------
Total investment income 5,386,228
Expenses:
- --------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,411,198
- --------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 591,181
- --------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,798
- --------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,032
- --------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 270,536
- --------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 662,417
- --------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 15,434
- --------------------------------------------------------------------------------------------
Reports to shareholders 33,934
- --------------------------------------------------------------------------------------------
Auditing 28,573
- --------------------------------------------------------------------------------------------
Legal 6,108
- --------------------------------------------------------------------------------------------
Postage 40,504
- --------------------------------------------------------------------------------------------
Registration fees 21,190
- --------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,118
- --------------------------------------------------------------------------------------------
Other 12,823
- --------------------------------------------------------------------------------------------
Total expenses 3,117,846
- --------------------------------------------------------------------------------------------
Expense reduction (Note 2) (120,820)
- --------------------------------------------------------------------------------------------
Net expenses 2,997,026
- --------------------------------------------------------------------------------------------
Net investment income 2,389,202
- --------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 16,869,730
- --------------------------------------------------------------------------------------------
Net realized gain on forward currency contracts
and foreign currency translation (Note 1) 2,186,963
- --------------------------------------------------------------------------------------------
Net unrealized appreciation on forward currency contracts
and foreign currency translation during the year 319,825
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 6,469,496
- --------------------------------------------------------------------------------------------
Net gain on investments 25,846,014
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $28,235,216
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended June 30
--------------------------
1996 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Increase in net assets
- ------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------
Net investment income $2,389,202 $1,451,000
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 19,056,693 (611,507)
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 6,789,321 20,171,610
- ------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 28,235,216 21,011,103
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (2,656,313) (1,071,976)
- ------------------------------------------------------------------------------------------------------
Class B (1,668,837) (505,129)
- ------------------------------------------------------------------------------------------------------
Class M (45,021) (599)
- ------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 61,389,284 28,627,017
- ------------------------------------------------------------------------------------------------------
Total increase in net assets 85,254,329 48,060,416
- ------------------------------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------------------------------
Beginning of year 136,898,977 88,838,561
- ------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income and
distributions in excess of net investment income of $2,543,011
and $3,072,474, respectively) $222,153,306 $136,898,977
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the Period
December 1, 1994
(commencement
Year ended of operations) to Year ended
June 30 June 30 June 30
-------------------------------------------------------
1996 1995 1996
-------------------------------------------------------
Class M
-------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.90 $12.35 $13.75
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .24(c) .09 .14(c)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.12 1.62 2.15
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.36 1.71 2.29
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.40) (.16) (.40)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.16) (.40)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.86 $13.90 $15.64
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 17.28 14.06(d) 16.95
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $4,047 $746 $90,126
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 2.02 1.08(d) 2.23
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.59 1.61(d) .96
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 38.85 44.33 38.85
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the Period
February 1, 1994
(commencement
Year ended of operations) to Year ended
June 30 June 30 June 30
-------------------------------------------------------
1995 1994 1996
-------------------------------------------------------
Class B
-------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.62 $12.49 $13.88
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .08 .04 .24(c)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.21 (.91) 2.19
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.29 (.87) 2.43
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.16) -- (.40)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) -- (.40)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.75 $11.62 $15.91
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 19.92 (6.97)(d) 17.82
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $45,733 $21,368 $127,980
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 2.13 .95(d) 1.47
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .74 .54(d) 1.59
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.33 36.73 38.85
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended June 30
-------------------------------------------------
1995 1994 1993
-------------------------------------------------
Class A
-------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.64 $9.84 $10.10
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .18 .18 .18
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.22 1.73 (.14)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.40 1.91 .04
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income -- (.11) (.15)
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (.11)
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.16) -- (.04)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.11) (.30)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.88 $11.64 $9.84
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 20.84 19.45 0.70
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $90,420 $67,471 $17,552
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.38 1.50 1.81
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.45 1.17 1.38
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.33 36.73 58.56
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
1992
-----------
<S> <C>
Net asset value, beginning of period $8.74
- -----------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------
Net investment income (loss) .15(e)
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.49
- -----------------------------------------------------------------------------------
Total from investment operations 1.64
- -----------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------
From net investment income (.22)
- -----------------------------------------------------------------------------------
In excess of net investment income --
- -----------------------------------------------------------------------------------
From net realized gain on investments (.06)
- -----------------------------------------------------------------------------------
Total distributions (.28)
- -----------------------------------------------------------------------------------
Net asset value, end of period $10.10
- -----------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 19.10
- -----------------------------------------------------------------------------------
Net assets, end of period (in thousands) $9,618
- -----------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 2.14(e)
- -----------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.63(e)
- -----------------------------------------------------------------------------------
Portfolio turnover (%) 54.45
- -----------------------------------------------------------------------------------
(a) Total investment return assumes dividend reinvestment
and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended June 30,
1996, includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(d) Not annualized.
(e) Reflects an expense limitation in effect during the period. As a result
of such limitations, net investment income for the year ended
June 30, 1992 reflects expense reductions of approximately $0.04.
</TABLE>
Notes to financial statements
June 30, 1996
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks capital appreciation by investing primarily in common
stocks and other securities of European companies.
The fund offers class A, class B 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 M shares are sold with a maximum front-end sales
charge of 3.50% and pay an ongoing distribution fee that is lower than
class B shares and higher than class A 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 the 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. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price on the principal market in which
the securities are traded, or, if no sales are reported -- as in the
case of some securities traded over-the-counter --the last reported
bid price. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. All other investments are stated at fair value following
procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of
other registered investment companies managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-
owned subsidiary of Putnam Investments, Inc. and certain other
accounts. 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. 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). Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, 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 fluctuations are included
with the net realized and unrealized gain or loss on investments. Net
realized gains and losses on foreign currency transactions represent
net exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the
amount of investment income and foreign withholding taxes recorded on
the fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized gains and losses on foreign currency
transactions arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a
decline in value relative to the U.S. dollar of the currencies in
which its portfolio securities are denominated or quoted (or an
increase in the value of a currency in which securities a fund intends
to buy are denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using forward currency exchange rates supplied by a
quotation service. The market value of the contract will fluctuate
with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed. The fund could be exposed to risk if the value of the
currency changes unfavorably, if the counterparties to the contracts
are unable to meet the terms of their contracts or if the fund is
unable to enter into a closing position.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to
distribute an amount sufficient to avoid imposition of any excise tax
under Section 4982 of the Internal Revenue Code of 1986. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held and for excise tax on
income and capital gains.
K) 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 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 treatment of losses on wash sale
transactions, realized and unrealized gains and losses on passive
foreign investment companies and realized and unrealized gains and
losses on forward foreign currency contracts. 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, 1996, the
fund reclassified $3,226,283 to increase undistributed net investment
income and $355,000 to decrease paid-in-capital, with a decrease to
accumulated net realized gains on investments of $2,871,283. The
calculation of net investment income per share in the financial
highlights table excludes these adjustments.
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 $34,512. The expenses have been fully
amortized over a five year period as of June 30, 1996.
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 for the quarter. Such fee is an annual rate of 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, and 0.60% of any amount over
$1.5 billion, subject under current law, to reduction in any year by
the amount of certain brokerage commissions and fees (less expenses)
received by affiliates of Putnam Management on the fund's portfolio
transactions.
The fund reimburses Putnam Management 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 wholly-owned 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, 1996, fund expenses were reduced by
$120,820 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the
assets utilized in connection with the expense offset arrangements in
an income producing asset if it had not entered into such
arrangements.
Trustees of the fund receive an annual Trustees fee of $940 and an
additional fee for each Trustee's meeting attended. Trustees who are
not interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 in the fund
and invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B 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 Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred
by it in distributing shares of the fund. The Plans provide for
payments by the fund to Putnam Mutual Funds Corp. at an annual rate up
to 0.35%, 1.00% and 1.00% of the average net assets attributable to
class A, class B and class M shares, respectively. The Trustees have
approved payment by the fund at an annual rate of 0.25%, 1.00% and
0.75% of the average net assets attributable to class A, class B and
class M shares, respectively.
For the year ended June 30, 1996, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $165,776 and $5,994 from the
sale of class A and class M shares, respectively and $110,311 in
contingent deferred sales charges from redemptions of class B shares.
A deferred sales charge of up to 1% is assessed on certain redemptions
of class A shares. For the year ended June 30, 1996, Putnam Mutual
Funds Corp., acting as underwriter received $1,219 on class A
redemptions.
Note 3
Purchase and sales of securities
During the year ended June 30, 1996, purchases and sales of investment
securities other than short-term investments aggregated $116,542,792
and $64,531,797, respectively. There were no purchases and sales of
U.S. government obligations. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At June 30, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
June 30, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 13,600,473 $204,079,424
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 172,016 2,440,951
- ----------------------------------------------------
13,772,489 206,520,375
Shares
repurchased (12,242,792) (183,994,466)
- ----------------------------------------------------
Net increase 1,529,697 $22,525,909
- ----------------------------------------------------
Year ended
June 30, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 6,207,675 $79,375,730
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 81,382 984,724
- ----------------------------------------------------
6,289,057 80,360,454
Shares
repurchased (5,570,659) (71,266,570)
- ----------------------------------------------------
Net increase 718,398 $ 9,093,884
- ----------------------------------------------------
Year ended
June 30, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 6,541,696 $96,280,375
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 106,373 1,489,076
- ----------------------------------------------------
6,648,069 97,769,451
Shares
repurchased (4,209,843) (61,944,580)
- ----------------------------------------------------
Net increase 2,438,226 $35,824,871
- ----------------------------------------------------
Year ended
June 30, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 3,864,840 $48,800,205
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 36,738 442,334
- ----------------------------------------------------
3,901,578 49,242,539
Shares
repurchased (2,414,407) (30,401,989)
- ----------------------------------------------------
Net increase 1,487,171 $18,840,550
- ----------------------------------------------------
Year ended
June 30, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 294,873 $4,425,967
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,097 43,910
- ----------------------------------------------------
297,970 4,469,877
Shares
repurchased (96,466) (1,431,373)
- ----------------------------------------------------
Net increase 201,504 $3,038,504
- ----------------------------------------------------
For the period
December 1, 1994
(commencement of
operations) to
June 30, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 91,188 $1,177,622
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 47 571
- ----------------------------------------------------
91,235 1,178,193
Shares
repurchased (37,562) (485,610)
- ----------------------------------------------------
Net increase 53,673 $ 692,583
- ----------------------------------------------------
- ----------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the fund hereby
designates $.365 per share (or if different, the amount necessary to
offset net capital gain earned by the fund) for all share classes as
capital gain dividends for its taxable year ended June 30, 1996.
For the period, interest and dividends from foreign countries were
$5,346,670 or $.380 per share. Taxes paid to foreign countries were
$412,439 or $.029 per share.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Brett C. Browchuk
Vice President
Anthony W. Regan
Vice President
Justin M. Scott
Vice President and Fund Manager
Mark D. Pollard
Vice President and Fund Manager
Tim Ferguson
Vice President
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Europe
Growth 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.
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 principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
26300-057/234/688 8/96
