Putnam
Europe
Growth
Fund
SEMIANNUAL REPORT
December 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* According to Lipper Analytical Services, Putnam Europe Growth Fund's
class A share total return at net asset value for the five years ended
December 31, 1997, ranked 2 out of 19 European region funds, placing the
fund in the top 10% in this category.*
* "Even European multinational companies do not quite grasp what is coming
-- but the creation of a common European currency just over a year from
now, analysts say, will set the stage for a wave of consolidations in
banking and industry over much of the Continent."
-- The New York Times, December 27, 1997
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
16 Financial statements
* Lipper Analytical Services, an independent research organization, ranks
funds according to total return performance. These rankings vary over
time and do not reflect the effects of sales charges. For the one-year
period ended 12/31/97, the fund's class A shares ranked 16 out of 71
funds. The fund's class B and class M shares ranked 21 and 20,
respectively, out of 71 funds for the one-year period. Past performance
is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
With European Economic and Monetary Union scheduled to become a reality
in less than a year, much of the continent stands on the threshold of a
new economic era. Preparation for this momentous move has not been
without its fair share of uncertainty and adjustment on the part of
national governments, individuals, corporations, and investors.
But as we look forward to 1999 and beyond, the advent of a new currency,
the euro, for 11 major economies in Europe is likely to lead to further
adjustments -- and significant investment opportunities -- for your
management team.
We believe your choice of Putnam Europe Growth Fund, backed by the
considerable global research and analytical resources of one of the
world's leading investment management organizations, is a sound one. We
look forward to continued participation in your investment program.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
February 18, 1998
Report from the Fund Managers
Mark D. Pollard
Justin M. Scott
Omid Kamshad
Europe's Economic and Monetary Union (EMU) is firmly on track for its
start date of January 1, 1999, and promises profound changes for the
whole region. As the changeover approaches, we believe Putnam Europe
Growth Fund is well positioned to benefit from this era of change. For
the semiannual period ended December 31, 1997, the fund had a total
return of 6.27% at net asset value (0.14% at public offering price),
compared with the 8.35% return of the Morgan Stanley Capital
International Europe Index.
During the first half of your fund's fiscal 1998, the six months ended
December 31, 1997, we began to assess the macroeconomic impact of the
ongoing Asian financial crisis on the European economy as well as to
consider company-specific consequences. Overall the effect on Europe's
economic growth is expected to be modest with many of Europe's leading
companies relatively well insulated from the worst effects of the so-
called Asian flu. We have, nevertheless, made particular efforts to
identify those companies we consider relatively unaffected by the
situation in Asia along with those with the potential for corporate
restructuring.
* RESTRUCTURING STORIES PREDOMINATE
Over the semiannual period, corporate Europe and the European securities
markets benefited from the quickening pace of events leading up to EMU.
In anticipation of the common monetary policy promised by the union,
interest rates have converged at lower levels, driving equity valuations
higher in the process. Businesses are also continuing their rapid pace
of cost cutting and restructuring, seeking to meet the demands of a
larger, more competitive domestic -- as well as global -- environment.
While the fund's philosophy of seeking investments remains unchanged,
namely, to seek companies with a combination of compelling valuations
and reasonably predictable earnings growth, the changes in Europe are
themselves revealing investment opportunities. For example, the fund has
taken advantage of the great amount of consolidation and restructuring
occurring in the banking and financial industries. For years, banking in
Europe has been epitomized by inefficient institutions mainly catering
to their own countries' markets and having no incentive to focus on
profitability because of arcane ownership structures. Now there is a
realization that the single currency and the increasing globalization of
the financial services industry will foster greater competition.
In this environment, consolidation has become almost commonplace,
highlighted by the $62 billion merger of Swiss Bank Corporation and
Union Bank of Switzerland. The restructuring potential arising from such
a deal is enormous with the merged companies able to unlock significant
improvements in profitability from sizable headcount reductions, the
elimination of redundant back-office functions, and a near 20% decrease
in the combined branch network.
The fund has already begun to benefit from the SBC/UBS merger
announcement as well as several other important mergers and acquisitions
in the European banking sector. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all 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 COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
United Kingdom 34.8%
France 15.6%
Switzerland 10.9%
Netherlands 8.3%
Germany 7.5%
Footnote reads:
*Based on net assets as of 12/31/97. Holdings will vary over time.
* UNITED KINGDOM OFFERS SOLID INVESTMENT ENVIRONMENT
During the second half of 1997, we continued to add to the fund's
position in the United Kingdom -- which has opted out of the first wave
of EMU membership in 1999. The strong British pound and a rising
interest-rate environment have been major hurdles for the U.K. equity
market to overcome for some time now. While this asset shift has yet to
pay off for the fund, we believe these factors should moderate during
1998, a development that should reveal some of the most attractive
valuations in Europe.
Against this backdrop, we targeted a number of undervalued stocks. Some
examples include car rental company Avis Europe PLC, industrial
conglomerate Tomkins PLC, and Bass PLC, an international brewing and
hotel group.
* TARGETING UNDERVALUED GROWTH OPPORTUNITIES
In addition to the implementation of EMU, one of our considerations in
selecting stocks in Europe has been the potential slowdown in demand
from Asia for European goods as well as the deflationary pressure
emanating from that region. On an aggregate basis, Europe is relatively
insulated from the Asian fallout. Nevertheless, industries involved in
commodity goods, basic materials, chemicals, and commodity technology
products such as DRAM (dynamic random access memory) semiconductors will
be more affected than others. We sought to minimize the fund's exposure
to such areas. However, we also have to look beyond any short-term
period of uncertainty to identify investment opportunities that may have
arisen because of unwarranted stock price reductions.
One example is the mobile telecommunications industry. Today Europe and
North America are the leading growth areas for mobile communications
service companies, producing annual revenues of just under $40 billion,
according to a November 1997 review of the telecommunications industry
by the Financial Times. For the future, many developing countries around
the world are likely to shun relatively expensive fixed-line phone
systems in favor of cellular operators. Companies we have targeted as
leading players in this area include L.M. Ericsson of Sweden, Vodafone
Group PLC of the United Kingdom, and Compagnie Generale des Eaux of
France (which, while primarily a utility company, also owns a fast-
growing cellular business).
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Vodafone Group PLC (United Kingdom)
Telecommunications
Scottish Power PLC (United Kingdom)
Utilities
Union Bank of Switzerland (Switzerland)
Insurance and finance
Compagnie Generale des Eaux (France)
Utilities
Avis Europe PLC 144A ADR (United Kingdom)
Automotive
B A T Industries PLC (United Kingdom)
Consumer nondurables
Nestle S.A. (Switzerland)
Food and beverages
Burmah Castrol PLC (United Kingdom)
Oil and gas
Internationale Nederlanden Groep (Netherlands)
Insurance and finance
Portugal Telecom S.A. (Portugal)
Telecommunications
Footnote reads:
These holdings represent 25.9% of the fund's assets as of 12/31/97.
Portfolio holdings will vary over time.
Another long-term growth area is the pharmaceutical industry. Earlier in
the decade, pharmaceutical stocks suffered from investors' concerns that
government health-care reform and industry competition would bring down
drug prices. Instead, the pharmaceutical industry has demonstrated how
its products can lower health-care costs, prompting the U.S. and other
governments to tone down their rhetoric. Furthermore, many companies
have devoted additional resources to research and development and have
produced a new wave of innovative drugs ready to replace those with
expiring patents. Two leading pharmaceutical companies owned by the fund
are Glaxo Wellcome PLC of the United Kingdom (which, following the close
of the period, announced its intension to merge with SmithKline Beecham)
and Novartis AG of Switzerland, which is also the product of a
multibillion-dollar merger.
* OUTLOOK: WELL POSITIONED FOR THE FUTURE
As your fund enters the second half of this fiscal year, it is worth
reflecting on the fundamental themes that have propelled European
markets for the past few years and ask whether or not they can continue.
Today's low interest-rate environment is likely to remain supportive of
equity valuations throughout the region. Indeed, the Asian crisis and
the process of monetary union seem to indicate that inflationary
pressures remain subdued and interest rates remain low. In addition,
with corporate restructuring still in its early stages, we believe the
investment opportunities created by such positive changes should ensure
that Europe remains an attractive region for investors.
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 12/31/97, 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, not present with
domestic investments. Funds that invest in a particular region involve
more risk than diversified funds.
Performance summary
This section provides information about your fund's performance,
which should always be considered in light of its 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.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
Class A Class B Class M
(inception date) (9/7/90) (2/1/94) (12/1/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 6.27% 0.14% 5.91% 1.00% 6.00% 2.31%
- ------------------------------------------------------------------------------
1 year 21.96 14.94 21.04 16.04 21.32 17.05
- ------------------------------------------------------------------------------
5 years 153.02 138.50 143.98 141.98 148.01 139.34
Annual average 20.40 18.99 19.53 19.33 19.92 19.07
- ------------------------------------------------------------------------------
Life of fund 189.35 172.67 173.77 173.77 179.86 169.92
Annual average 15.62 14.69 14.75 14.75 15.10 14.53
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/97
MSCI Europe Consumer
Index Price Index
- ------------------------------------------------------------------------------
6 months 8.35% 0.62%
- ------------------------------------------------------------------------------
1 year 23.80 1.70
- ------------------------------------------------------------------------------
5 years 141.09 13.67
Annual average 19.25 2.60
- ------------------------------------------------------------------------------
Life of fund 147.44 22.57
Annual average 13.15 2.81
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum
initial sales charges of 5.75% for class A shares and 3.50% for class M
shares. One-, five-, and ten-year and life-of-fund returns for class B
shares reflect the applicable contingent deferred sales charges (CDSC),
which is 5% in the first year, declines each year to 1% in the sixth
year, and is eliminated thereafter. Returns shown for class B and class
M shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
initial sales charge or CDSC, if any, currently applicable to each class
and, in the case of class B and class M shares, the higher operating
costs applicable to such shares. Fund performance data do not take into
account any adjustments for taxes payable on reinvested distributions
and reflect an expense limitation in effect during the periods. Without
the limitation, results would have been lower. All returns assume
reinvestment of distributions at NAV and represent past performance;
they do not guarantee future results. 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.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 12/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income $0.373 $0.265 $0.298
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.826 0.826 0.826
- ------------------------------------------------------------------------------
Short-term 0.303 0.303 0.303
- ------------------------------------------------------------------------------
Total $1.502 $1.394 $1.427
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
6/30/97 $18.96 $20.12 $18.56 $18.85 $19.53
- ------------------------------------------------------------------------------
12/31/97 18.61 19.75 18.23 18.52 19.19
- ------------------------------------------------------------------------------
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 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 Europe Index is an unmanaged list
of approximately 627 equity securities originating in one of the 13
European countries, with all values expressed in U.S. dollars. The index
assumes reinvestment of all distributions and interest payments and does
not take into account brokerage fees or taxes. Securities in the fund do
not match those in the index and performance of the fund will differ. It
is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Portfolio of investments owned
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (96.6%) *
NUMBER OF SHARES VALUE
Austria (1.7%)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
243,800 Mayr-Melnhof Karton AG 144A ADS $ 3,230,350
67,022 VA Technolgies AG 10,178,810
--------------
13,409,160
Finland (1.6%)
- ---------------------------------------------------------------------------------------------------------
173,611 Oy Nokia AB Class A 12,338,841
France (15.6%)
- ---------------------------------------------------------------------------------------------------------
93,000 AGF (Assurances Generales de France) 4,924,074
96,600 Banque Nationale de Paris 5,130,722
146,720 Compagnie Generale des Eaux 20,462,361
128,570 Elf Aquitaine S.A. 14,942,554
170,704 Lafarge Coppee 11,192,265
298,528 Michelin Corp. Class B 15,018,095
39,510 Renault S.A. + 1,110,583
205,214 Scor 9,805,843
100,874 SGS-Thomson Microelectronics + 6,238,679
73,445 SGS-Thomson Microelectronics ADR + 4,484,735
78,023 Societe Generale 10,622,424
149,595 Total Corp. ADR Class B 16,268,425
--------------
120,200,760
Germany (7.5%)
- ---------------------------------------------------------------------------------------------------------
210,160 Bayer AG ADR 7,854,701
18,441 Bayerische Motoren Werke (BMW) AG 13,794,853
110,800 Deutsche Bank AG 7,826,251
709,521 Deutsche Telekom AG 13,357,779
142,814 Deutsche Telekom AG ADR + 2,659,911
8,569 Mannesmann AG 4,332,159
118,304 Veba (Vereinigte Elektrizitaets Bergwerks) AG 8,060,200
--------------
57,885,854
Ireland (5.7%)
- ---------------------------------------------------------------------------------------------------------
1,721,264 Allied Irish Banks PLC 16,691,923
571,856 Bank of Ireland 8,823,968
1,263,141 CRH PLC 14,807,223
797,695 Greencore Group PLC 3,754,056
--------------
44,077,170
Italy (2.0%)
- ---------------------------------------------------------------------------------------------------------
2,809,559 Ente Nazionale Idrocarburi SPA ADR 15,933,748
Netherlands (8.3%)
- ---------------------------------------------------------------------------------------------------------
147,504 ABN AMRO Holding N.V. 2,875,818
87,669 Akzo-Nobel N.V. 15,127,879
419,440 Internationale Nederlanden Groep 17,680,245
247,147 Philips Electronics N.V. 14,833,700
242,336 Vendex International N.V. 13,384,698
--------------
63,902,340
Poland (0.4%)
- ---------------------------------------------------------------------------------------------------------
94,600 Bank Handlowy 144A + 1,209,375
155,700 Bank Handlowy W Warszawie + 2,024,100
--------------
3,233,475
Portugal (4.4%)
- ---------------------------------------------------------------------------------------------------------
27,200 Brisa-Auto Estradas de Portugal, S.A. + 975,148
825,141 Electricidade de Portugal S.A. 15,636,854
366,909 Portugal Telecom S.A. 17,038,630
--------------
33,650,632
Spain (0.7%)
- ---------------------------------------------------------------------------------------------------------
32,199 Inmobiliaria Metropolitana Vasco Central S.A. 1,452,254
110,000 Mapfre Vida Seguros 3,870,801
--------------
5,323,055
Sweden (2.9%)
- ---------------------------------------------------------------------------------------------------------
110,537 Pharmacia & Upjohn, Inc. 4,069,394
34,265 Sandvik AB Class B 980,654
39,080 Sandvik Forsakings AB 1,113,531
532,724 Svenska Cellulosa AB Class B 11,988,910
108,710 Telefonaktiebolaget LM Ericsson Class B 4,091,222
--------------
22,243,711
Switzerland (10.9%)
- ---------------------------------------------------------------------------------------------------------
2,862 ABB AG 3,593,411
142,003 Ciba Specialty Chemicals AG + 16,906,276
1,416 Julius Baer Holdings AG 2,625,631
12,341 Nestle S.A. 18,484,057
10,053 Novartis AG ADR 16,302,162
14,876 Union Bank of Switzerland 21,497,169
8,762 Zurich Versicherungs-Gesellschaft 4,172,666
--------------
83,581,372
Turkey (0.1%)
- ---------------------------------------------------------------------------------------------------------
28,000 Brisa Bridgestone Sabanci Lastik San. Ve Tic A.S. 144A 1,003,829
United Kingdom (34.8%)
- ---------------------------------------------------------------------------------------------------------
6,840,850 Avis Europe PLC 144A ADR 19,628,177
2,089,453 B A T Industries PLC 19,088,114
663,376 Bass PLC 10,331,952
1,254,282 British Petroleum Co. PLC 16,546,488
3,871,000 BTR PLC 11,745,233
1,018,552 Burmah Castrol PLC 17,803,678
676,032 Cookson Group PLC 2,196,110
564,600 Dixons Group PLC 5,688,565
2,228,920 General Electric Co. PLC 14,499,804
482,661 Glaxo Wellcome PLC 11,461,075
445,777 HSBC Holdings PLC 11,467,346
376,649 Molins PLC 1,807,384
993,620 Peninsular and Oriental Steam Navigation Co. 11,346,468
932,843 Rio Tinto PLC 11,521,552
977,264 Rolls-Royce PLC 3,787,045
252,058 Royal & Sun Alliance Insurance Group PLC 2,547,896
2,517,870 Scottish Power PLC 22,337,586
1,171,498 Securicor Group PLC Class A 5,515,290
1,507,079 Shell Transportation & Trading 10,934,762
377,940 Smiths Industries PLC 5,284,932
1,327,900 Storehouse PLC 5,167,709
3,132,675 Tomkins PLC 15,032,423
611,200 Unilever PLC 5,250,996
50,250 Virgin Express Holdings PLC + 1,042,688
3,541,390 Vodafone Group PLC 25,636,512
--------------
267,669,785
--------------
Total Common Stocks (cost $640,163,086) $ 744,453,732
WARRANTS (--%) * + (cost $21,771) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
France (--%)
- ---------------------------------------------------------------------------------------------------------
36,340 Compagnie Generale des Eaux 5/2/01 $ 24,677
SHORT-TERM INVESTMENTS (4.2%) *(cost $32,147,803)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$32,142,000 Interest in $575,000,000 joint repurchase agreement
dated December 31, 1997 with Goldman, Sachs, Co.
due January 2, 1998 with respect to various U.S.
Treasury obligations -- maturity value of $32,153,606
for an effective yield of 6.50% $ 32,147,803
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $672,332,660) *** $ 776,626,212
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $770,105,483.
*** The aggregate identified cost on a tax basis is $672,805,599, resulting
in gross unrealized appreciation and depreciation of $111,046,641 and
$7,226,028, respectively, or net unrealized appreciation of $103,820,613.
+ Non-income-producing security.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR or ADS after the name of a foreign holding stands for American
Depository Receipts or American Depository Shares, respectively,
representing ownership of foreign securities on deposit with a
domestic custodian bank.
The fund had the following industry group concentrations greater
than 10% at December 31, 1997 (as a percentage of net assets):
Insurance and Finance 17.4%
Oil and Gas 12.0
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $672,332,660) (Note 1) $776,626,212
- ---------------------------------------------------------------------------------------------------
Cash 112,936
- ---------------------------------------------------------------------------------------------------
Dividends and other receivables 2,142,198
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 3,516,905
- ---------------------------------------------------------------------------------------------------
Total assets 782,398,251
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 4,840,750
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,409,210
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,440,102
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 295,191
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 12,294
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,977
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 568,783
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 1,657,051
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 66,410
- ---------------------------------------------------------------------------------------------------
Total liabilities 12,292,768
- ---------------------------------------------------------------------------------------------------
Net assets $770,105,483
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $657,992,365
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (608,647)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions(Note 1) 8,428,121
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 104,293,644
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $770,105,483
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($416,481,740 divided by 22,379,136 shares) $18.61
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $18.61)* $19.75
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($333,620,893 divided by 18,299,082 shares)** $18.23
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($20,002,850 divided by 1,079,919 shares) $18.52
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $18.52)* $19.19
- ---------------------------------------------------------------------------------------------------
* 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
Six months ended December 31, 1997 (Unaudited)
<S> <C>
Investment income:
- ---------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $625,808) $ 5,110,139
- ---------------------------------------------------------------------------------------------------
Interests 952,130
- ---------------------------------------------------------------------------------------------------
Total investment income 6,062,269
- ---------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 2,744,600
- ---------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,014,299
- ---------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 10,600
- ---------------------------------------------------------------------------------------------------
Administrative services (Note 2) 6,766
- ---------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 480,900
- ---------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,546,123
- ---------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 69,950
- ---------------------------------------------------------------------------------------------------
Reports to shareholders 38,329
- ---------------------------------------------------------------------------------------------------
Registration fees 806
- ---------------------------------------------------------------------------------------------------
Auditing 19,115
- ---------------------------------------------------------------------------------------------------
Legal 4,504
- ---------------------------------------------------------------------------------------------------
Postage 45,073
- ---------------------------------------------------------------------------------------------------
Other 44,614
- ---------------------------------------------------------------------------------------------------
Total expenses 6,025,679
- ---------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (198,547)
- ---------------------------------------------------------------------------------------------------
Net expenses 5,827,132
- ---------------------------------------------------------------------------------------------------
Net investment income 235,137
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 30,312,989
- ---------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Notes 1 and 3) 760,359
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (475,127)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 12,690,981
- ---------------------------------------------------------------------------------------------------
Net gain on investments 43,289,202
- ---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $43,524,339
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
December 31 June 30
1997* 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------
Net investment income $ 235,137 $ 4,096,685
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 31,073,348 34,980,853
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation
of investments and assets and
liabilities in foreign currencies 12,215,854 62,782,001
- ---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 43,524,339 101,859,539
- ---------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------
From net investment income
- ---------------------------------------------------------------------------------------------------
Class A (7,640,645) (2,225,968)
- ---------------------------------------------------------------------------------------------------
Class B (4,471,018) (1,016,631)
- ---------------------------------------------------------------------------------------------------
Class M (297,933) (79,263)
- ---------------------------------------------------------------------------------------------------
From net realized gain on investments
- ---------------------------------------------------------------------------------------------------
Class A (23,126,780) (11,300,291)
- ---------------------------------------------------------------------------------------------------
Class B (19,048,225) (8,451,546)
- ---------------------------------------------------------------------------------------------------
Class M (1,128,745) (486,635)
- ---------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 191,537,242 290,304,737
- ---------------------------------------------------------------------------------------------------
Total increase in net assets 179,348,235 368,603,942
Net assets
- ---------------------------------------------------------------------------------------------------
Beginning of period 590,757,248 222,153,306
- ---------------------------------------------------------------------------------------------------
End of period (including distribution in excess of
net investment income and undistributed net
investment income of $608,647 and
$11,565,812, respectively) $770,105,483 $590,757,248
- ---------------------------------------------------------------------------------------------------
* Unaudited
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share Dec. 31
operating performance (Unaudited) Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $18.96 $15.91 $13.88 $11.64 $9.84 $10.10
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .04 (c) .24 (c) .24 (c) .18 .18 .18
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.11 4.07 2.19 2.22 1.73 (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.15 4.31 2.43 2.40 1.91 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.37) (.20) -- -- (.11) (.15)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- -- (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.13) (1.06) (.40) (.16) -- (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.50) (1.26) (.40) (.16) (.11) (.30)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.61 $18.96 $15.91 $13.88 $11.64 $9.84
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 6.27 * 28.49 17.82 20.84 19.45 0.70
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $416,482 $313,492 $127,980 $90,420 $67,471 $17,552
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .68 * 1.45 1.47 1.38 1.50 1.81
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .20 * 1.43 1.59 1.45 1.17 1.38
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 20.91 * 55.45 38.85 44.33 36.73 58.56
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0360 $.0435
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 year ended
June 30, 1996 and thereafter, includes amounts paid through expense
offset and brokerage service arrangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
(d) Average commission rate paid on security trades is requuired for fiscal
periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Dec. 31 Feb. 1, 1994+
operating performance (Unaudited) Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $18.56 $15.64 $13.75 $11.62 $12.49
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.03) (c) .13 (c) .14 (c) .08 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.10 3.97 2.15 2.21 (.91)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.07 4.10 2.29 2.29 (.87)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.27) (.12) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.13) (1.06) (.40) (.16) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.40) (1.18) (.40) (.16) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.23 $18.56 $15.64 $13.75 $11.62
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 5.91 * 27.51 16.95 19.92 (6.97)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $333,621 $261,454 $90,126 $45,733 $21,368
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.06 * 2.20 2.23 2.13 .95 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.17)* .76 .96 .74 .54 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 20.91 * 55.45 38.85 44.33 36.73
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0360 $.0435
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 year ended
June 30, 1996 and thereafter, includes amounts paid through
expense offset and brokerage service arrangements. Prior period
ratios exclude these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during
the period.
(d) Average commission rate paid on security trades is requuired for
fiscal periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Dec. 31 Dec. 1, 1994+
operating performance (Unaudited) Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $18.85 $15.86 $13.90 $12.35
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.01)(c) .19 (c) .24 (c) .09
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.11 4.03 2.12 1.62
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.10 4.22 2.36 1.71
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.30) (.17) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.13) (1.06) (.40) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.43) (1.23) (.40) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.52 $18.85 $15.86 $13.90
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 6.00 * 27.91 17.28 14.06 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $20,003 $15,811 $4,047 $746
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .93 * 1.95 2.02 1.08 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.04)* 1.10 1.59 1.61 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 20.91 * 55.45 38.85 44.33
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0360 $.0435
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 year ended
June 30, 1996 and thereafter, includes amounts paid through expense
offset and brokerage service arrangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
(d) Average commission rate paid on security trades is requuired for fiscal
periods beginning on or after September 1, 1995.
</TABLE>
Notes to financial statements
December 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam Europe Growth Fund ("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 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.
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 gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net exchange gains
or losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
appreciation and depreciation of assets and liabilities in foreign
currencies arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using current forward currency exchange rates supplied by a
quotation service. The market value of the contract will fluctuate with
changes in currency exchange rates. The contract is "marked to market"
daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain
or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The fund
could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet
the terms of their contracts or if the fund is unable to enter into a
closing position.
G) 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 period ended
December 31, 1997, the fund had no borrowings against the line of
credit.
H) 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.
I) 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. 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.
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 six months ended December 31, 1997, fund expenses were reduced
by $198,547 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 $1,110
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution
in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted 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 currently limit payment
by the fund to 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 six months ended December 31, 1997, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $231,311 and $8,373
from the sale of class A and class M shares, respectively and $172,862
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 six months ended December 31, 1997, Putnam
Mutual Funds Corp., acting as underwriter received $9,326 on class A
redemptions.
Note 3
Purchases and sales of securities
During the six months ended December 31, 1997, purchases and sales of
investment securities other than short-term investments aggregated
$257,311,667 and $136,499,843, 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 December 31, 1997, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
December 31, 1997
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 31,070,843 $608,795,988
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,533,430 27,862,401
- ----------------------------------------------------
32,604,273 636,658,389
Shares
repurchased (26,762,614) (528,133,463)
- ----------------------------------------------------
Net increase 5,841,659 $108,524,926
- ----------------------------------------------------
Year ended
June 30, 1997
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 42,860,100 $736,786,046
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 760,153 12,291,699
- ----------------------------------------------------
43,620,253 749,077,745
Shares
repurchased (35,128,868) (606,739,760)
- ----------------------------------------------------
Net increase 8,491,385 $142,337,985
- ----------------------------------------------------
Six months ended
December 31, 1997
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 9,524,645 $182,675,763
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,190,794 21,208,077
- ----------------------------------------------------
10,715,439 203,883,840
Shares
repurchased (6,500,531) (125,344,632)
- ----------------------------------------------------
Net increase 4,214,908 $ 78,539,208
- ----------------------------------------------------
Year ended
June 30, 1997
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 18,005,860 $301,810,768
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 531,337 8,442,924
- ----------------------------------------------------
18,537,197 310,253,692
Shares
repurchased (10,217,228) (171,957,060)
- ----------------------------------------------------
Net increase 8,319,969 $138,296,632
- ----------------------------------------------------
Six months ended
December 31, 1997
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 951,166 $18,494,533
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 75,111 1,358,700
- ----------------------------------------------------
1,026,277 19,853,233
Shares
repurchased (785,382) (15,380,125)
- ----------------------------------------------------
Net increase 240,895 $ 4,473,108
- ----------------------------------------------------
Year ended
June 30, 1997
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 1,929,111 $33,275,091
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 33,373 537,639
- ----------------------------------------------------
1,962,484 33,812,730
Shares
repurchased (1,378,637) (24,142,610)
- ----------------------------------------------------
Net increase 583,847 $ 9,670,120
- ----------------------------------------------------
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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Anthony W. Regan
Vice President
Justin M. Scott
Vice President and Fund Manager
Mark D. Pollard
Vice President and Fund Manager
Omid Kamshad
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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. You can also learn more at Putnam Investments'
website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
SA005-36893 057/234/688 2/98
