Putnam
Europe
Growth
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
12-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
This is the last letter to you and the other shareholders of Putnam Europe
Growth Fund that I will be signing. After more than 30 years as Chairman
of the Trustees and President of the Putnam Funds, the time has come for
me to step aside. In June, John Hill will become Chairman. John is
currently an independent Trustee and has served on the board for the past
14 years. In addition, my son, George Putnam, III, will take on the role
of President. I am confident that the leadership of the funds will be in
exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
In one final piece of news, I am pleased to announce the addition of
Nicholas J. Melhuish to Putnam Europe Growth Fund's management team.
Nicholas joined Putnam's Global Core Equity Group in 1999 from Schroder
Capital Management International. He has 8 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
February 16, 2000
Report from the Fund Managers
Mark D. Pollard
Omid Kamshad
Nigel Hart
Nicholas J. Melhuish
Putnam Europe Growth Fund ended its semiannual period on December 31,
1999, on a solid note. The fund benefited from long-standing positions in
technology and telecommunications stocks, the global economic recovery,
and the hard evidence of a recovery in the euro zone economy as well as
from record levels of mergers and acquisitions. We also continued to
de-emphasize underperforming sectors such as banking, autos,
pharmaceuticals, and basic industries.
As the callout found on page 2 attests, the fund continued to generate
attractive risk-adjusted returns relative to its peers. Additionally the
fund's total return for the reporting period remained significantly higher
than that of its benchmark index, the Morgan Stanley Capital International
Europe Index. (See page 6 for complete performance information.)
Total return for 6 months ended 12/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------
23.33% 16.21% 22.89% 17.89% 22.87% 21.87% 23.06% 18.75%
- ---------------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* TECHNOLOGY AND TELECOMMUNICATIONS STOCKS STAND OUT
The rise of the Internet around the world, rapidly increasing flows of
data through broadband networks, and worldwide demand for cellular and
wireless telecommunications services have driven the outstanding
performance of technology and telecommunications companies this year.
Investors continued to recognize the strong fundamentals and growth
potential present in these sectors. A number of European companies have
leading positions in areas such as telecommunications equipment,
semiconductors, and information technology services.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
United Kingdom 32.8%
France 19.1%
Netherlands 10.3%
Germany 6.3%
Italy 6.3%
Footnote reads:
*Based on net assets as of 12/31/99. Holdings will vary over time.
On an ongoing basis, we have sought out technology and telecommunications
companies that have significant pricing power within their respective
industries, are recognized leaders in product innovation, and are focused
on earning a high return on capital. Fund holdings exhibiting these
characteristics include Nokia, ST Microelectronics, Vodafone AirTouch,
Bouygues, Telecom Italia Mobil (TIM), and Mannesmann.*
Morningstar gave the fund's class A shares four out of five stars for
risk-adjusted performance for the three years ended December 31, 1999. This
put the fund among the top 22.5% of the 1104 international equity funds rated.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 12/31/99 and are subject to change
every month. Morningstar ratings are calculated from a fund's 3-, 5-, and
10-year returns (with fee adjustments) in excess of 90-day Treasury bill
returns and a risk factor that reflects performance below 90-day Treasury bill
returns. For the 5-year period, the fund received 4 stars. Performance of
other share classes will vary.
For example, ST Microelectronics of France was buoyed by the continued
upswing in semiconductor prices and benefited from its status as a top
provider of chips for cellular handsets. Nokia retains the bulk of market
share in the handset market and has moved aggressively into the
development of next-generation wireless products. Cellular companies
Bouygues of France and TIM in Italy are experiencing strong volume growth
in their respective markets. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the period,
all are subject to review and adjustment in accordance with the fund's
investment strategy and may vary in the future.
*Please see page 4 for a discussion of the Vodafone/Mannesmann deal as well as
other important developments that affected the fund in this record year of
European mergers and acquisitions.
* COMPANIES THAT BENEFIT FROM THE GLOBAL RECOVERY
With economic growth accelerating around the world and a weak euro making
the goods of European exporting companies more attractively priced outside
Europe, we targeted value-added exporters such as telecommunications
equipment companies, luxury goods companies, and advertising and media
firms.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Shell Transportation & Trading
United Kingdom
Oil and gas
Oy Nokia AB Class A
Finland
Telecommunications
Total S.A. Class B
France
Oil and gas
Mannesmann AG
Germany
Business equipment and services
British Telecommunications
PLC ADR
United Kingdom
Telecommunications
Telefonaktiebolaget LM Ericsson Class B (Ericsson AB)
Sweden
Telecommunications
Internationale Nederlanden
Groep (ING)
Netherlands
Insurance and finance
Aventis S.A.
France
Pharmaceuticals and biotechnology
Telecom Italia Mobile SpA
Italy
Telecommunications
British Petroleum Co. PLC
United Kingdom
Oil and gas
Footnote reads:
These holdings represent 29.7% of the fund's net assets as of 12/31/99.
Portfolio holdings will vary over time.
Luxury goods companies Gucci Group, which fended off a hostile takeover
attempt from rival LVMH in 1999, and Compagnie Financiere Richemont
particularly benefited from the Asian economic recovery and renewed Asian
consumer demand for Gucci's high-fashion products and Richemont's Cartier
jewelry. These companies are able to retain pricing power because of their
strong brand image.
Advertising and media companies such as Havas Advertising, WPP, and
Publicis are benefiting from a renewed focus by companies on creating
leading global brands both in the online and off-line worlds. For example,
Havas is one of Europe's leading advertising agencies and has successfully
transformed itself into a global agency through a carefully balanced
strategy of internal and external growth. The company's client list
includes large well-known names such as Microsoft, Volvo, MCI WorldCom,
and Procter & Gamble. It has also been successful in capturing revenues
from dot.com companies seeking to establish their brands among both
investors and consumers.
Record merger and acquisition activity is positive but must be evaluated on an
individual basis
According to Thomson Financial Securities Data, merger and acquisition activity
involving European companies rose to $1.23 trillion in 1999, double 1998
levels. Additionally Europe took a greater share of the world's biggest mergers
as European M&A activity accounted for 39% of the global total up from 22% in
1998. The level of hostile takeover activity in 1999 was unprecedented in
Europe with takeover fights such as Telecom Italia and Olivetti, Total Fina and
Elf Aquitaine, and the three-way fight among BNP, Paribas, and Societe
Generale. More friendly deals also occurred such as those of Vodafone and
AirTouch and Mannesmann and Orange -- all being a precursor to the recent
hostile bid by Vodafone AirTouch for Mannesman to create a European
telecommunications giant. Your fund has benefited from participation in many of
1999's largest mergers.
Of course, not all mergers are positive for shareholders and some may be
undertaken out of weakness. As portfolio managers, our job is to evaluate these
deals on a case-by-case basis to determine if value is actually created, if the
promised cost savings might occur, if synergies exist, and if the new entity
can achieve the growth potential outlined by the new management.
* UNITED KINGDOM, BANKS, AND PHARMACEUTICAL COMPANIES DE-EMPHASIZED ACROSS
REGION
While the fund maintains a significant weighting in the United Kingdom, it
is still a small percentage considering the size of the overall U.K.
market within Europe. The reason for this is because we continue to find
U.K. stocks relatively unattractive. More than 28% of the broad U.K.
market is comprised of banking and pharmaceutical stocks. Currently we
believe both of these sectors are too richly valued given their growth
prospects. Instead, a substantial portion of our U.K. weighting is made up
of growing global companies such as Vodafone Airtouch and multinationals
such as Shell Transport and Trading, the sister company of the
multinational oil company Royal Dutch Shell. We also found more value and
growth prospects in U.K. mid-capitalization stocks.
Banking and financial companies across Europe are now feeling the pressure
of low interest rates on their loan profitability. The Internet is also
beginning to play a role in fulfilling the financial needs of Europeans
and we are concerned that as financial intermediaries, European banks are
not responding quickly enough. In the pharmaceutical industry, we think
industry growth may be reduced by government policy changes and patents
expirations.
* POSITIVE CHANGE SHOULD CONTINUE, BUT IT MUST BE EVALUATED IN EUROPEAN CONTEXT
Record merger and acquisition activity, corporate restructuring,
industrial consolidation, and an increasing focus on shareholder value are
all elements of the European investment story that make many observers
compare corporate Europe today to the United States in the 1980s and early
1990s. This year, with the introduction of the euro, the pace of change
has accelerated.
Of course, Europe still has a long way to go to make itself competitive
with the United States. However, we have seen positive developments such
as the recent German tax reduction proposals and these leave us feeling
optimistic that Europe is committed to positive change.
Looking ahead, we believe the portfolio is well positioned for a continued
upswing in global economic growth with relatively low inflation. We
believe this type of environment can work in the favor of a great variety
of European companies.
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 12/31/99, 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. Funds
investing in a single sector may be subject to more volatility than funds
investing in a diverse group of sectors.
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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 12/31/99
Class A Class B Class C Class M
(inception dates) (9/7/90) (2/1/94) (7/26/99) (12/1/94)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 23.33% 16.21% 22.89% 17.89% 22.87% 21.87% 23.06% 18.75%
- --------------------------------------------------------------------------------------------
1 year 23.15 16.06 22.26 17.26 22.26 21.26 22.61 18.33
- --------------------------------------------------------------------------------------------
5 years 176.10 160.25 166.07 164.07 166.01 166.01 171.04 161.49
Annual average 22.52 21.08 21.62 21.44 21.61 21.61 22.07 21.20
- --------------------------------------------------------------------------------------------
Life of fund 340.46 315.06 310.89 310.89 310.46 310.46 322.45 307.46
Annual average 17.26 16.52 16.39 16.39 16.38 16.38 16.74 16.29
- --------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/99
MSCI Consumer
Europe Index price Index
- ---------------------------------------------------------------------
6 months 18.76% 1.56%
- ---------------------------------------------------------------------
1 year 15.89 2.80
- ---------------------------------------------------------------------
5 years 171.58 12.76
Annual average 22.12 2.43
- ---------------------------------------------------------------------
Life of fund 268.58 28.27
Annual average 15.00 2.70
- ---------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50%, respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. 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 expenses applicable to such shares. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 12/31/99
Class A Class B Class C Class M
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distributions (number) 1 1 1 1
- --------------------------------------------------------------------------------------
Income $0.188 $0.020 $0.164 $0.005
- --------------------------------------------------------------------------------------
Capital gains
Long-term 0.037 0.037 0.037 0.037
- --------------------------------------------------------------------------------------
Short-term -- -- -- --
- --------------------------------------------------------------------------------------
Total $0.225 $0.057 $0.201 $0.042
- --------------------------------------------------------------------------------------
Share value NAV POP NAV NAV NAV POP
- --------------------------------------------------------------------------------------
6/30/99 $21.72 $23.05 $21.14 -- $21.48 $22.26
- --------------------------------------------------------------------------------------
7/26/99* -- -- -- $21.68 -- --
- --------------------------------------------------------------------------------------
12/31/99 26.55 28.17 25.92 26.49 26.39 27.35
- --------------------------------------------------------------------------------------
*Inception date of class C shares.
</TABLE>
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B or C shares and assumes redemption at the end of
the period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Morgan Stanley Capital International Europe Index (MSCI) is an unmanaged
list of equity securities originating in one of the 15 European countries,
with all values expressed in U.S. dollars.
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 in 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.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
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<TABLE>
<CAPTION>
The fund's portfolio
December 31, 1999 (Unaudited)
COMMON STOCKS (98.0%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Australia (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,252,853 Standard Chartered Bank Australia Ltd. $ 19,449,282
Canada (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
503,258 Laurasia Resources Ltd. 9,062,368
Finland (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
15,200 Helsingin Puhelin Oyj (Helsinki Telephone Corp.) Class E 1,264,582
23,675 HPY Holding Oyj (NON) 887,185
410,440 Oy Nokia AB Class A 74,322,475
--------------
76,474,242
France (19.1%)
- --------------------------------------------------------------------------------------------------------------------------
4,570 Alcatel Alsthom CGE S.A. 1,048,212
830,857 Aventis S.A. 48,060,950
171,299 Axa S.A. 23,850,028
208,383 Banque Nationale de Paris 19,202,410
36,395 Bouygues S.A. 23,103,036
101,775 Carrefour Supermarche S.A. 18,746,813
4,823 Castorama Dubois 1,465,285
192,207 CNP Assurances 7,069,250
105,726 CNP Assurances 144A (NON) 3,888,535
116,371 France Telecom S.A. 15,371,189
39,497 Havas Advertising S.A. 16,807,474
69,325 Lafarge Coppee 8,062,054
36,015 Publicis S.A. 13,586,659
103,800 Rhodia S.A. 2,343,248
701,733 Sanofi-Synthelabo S.A. (NON) 29,183,700
253,553 Schneider S.A. 19,883,043
52,342 Societe Generale 12,163,548
104,997 STMicroelectronics 16,139,803
26,743 Television Francaise I (TF1) 13,989,798
530,570 Total S.A. Class B 70,722,328
234,492 Vivendi 21,148,341
--------------
385,835,704
Germany (6.3%)
- --------------------------------------------------------------------------------------------------------------------------
640,456 Bayerische Motoren Werke (BMW) AG 19,522,252
68,440 Bayerische Vereinsbank AG 4,668,073
32 Celanese AG (NON) 579
275,610 Mannesmann AG 66,404,647
103,591 ProSieben Media AG 6,013,064
657 SAP AG 323,201
247,589 Siemens AG 31,458,114
--------------
128,389,930
Ireland (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,210,181 Allied Irish Banks PLC 13,781,444
1,288,966 CRH PLC 27,749,376
258,361 Elan Corp. PLC ADR (NON) 7,419,814
196,529 Esat Telecom Group PLC (NON) 17,982,404
3,490,316 Jefferson Smurfit Group PLC 10,458,966
--------------
77,392,004
Italy (6.3%)
- --------------------------------------------------------------------------------------------------------------------------
951,857 Alleanza Assicurazioni SpA 11,596,150
125,056 Banca Popolare di Brescia SpA 11,052,087
3,917,235 Ente Nazionale Idrocarburi (ENI) SpA 21,516,432
1,240,791 Istituto Bancario San Paolo di Torino 16,838,700
1,289,765 Mediaset SpA 20,033,455
4,115,117 Telecom Italia Mobile SpA 45,910,467
--------------
126,947,291
Netherlands (10.3%)
- --------------------------------------------------------------------------------------------------------------------------
649,654 Akzo-Nobel N.V. 32,546,886
83,976 ASM Lithography Holding N.V. (NON) 9,318,128
414,193 Fortis Amev N.V. 14,896,244
239,299 Gucci Group N.V. 27,399,736
810,543 Internationale Nederlanden Groep (ING) 48,875,451
262,840 Libertel N.V. (NON) 6,874,843
225,878 Libertel N.V. (NON) 5,908,065
235,995 Philips Electronics N.V. 32,050,481
16,721 Randstad Holding N.V. 804,059
310,429 Vendex International N.V. 8,244,498
663,096 Wolters Kluwer N.V. 22,413,706
--------------
209,332,097
Portugal (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,937,013 Portugal Telecom S.A. 21,220,636
Spain (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
181,675 Acciona S.A. 10,234,843
218,501 Mapfre Vida Seguros 5,033,695
933,174 Telefonica S.A. (NON) 23,281,571
--------------
38,550,109
Sweden (6.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,776,390 Investor AB 25,062,230
267,951 Pharmacia & Upjohn, Inc. 12,160,259
266,310 SKF AB Class B 6,481,238
1,489,968 Svenska Handelsbanken 18,743,939
921,460 Telefonaktiebolaget LM Ericsson Class B (Ericsson AB) 59,260,316
--------------
121,707,982
Switzerland (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
13,828 Ares-Serono Group Class B 29,532,161
14,934 Cie Finance Richemont AG Class A 35,646,482
18,485 Clariant AG 8,812,886
69,985 Credit Suisse Group 13,913,475
14,764 Fantastic Corp. (NON) 2,792,286
2,884 Fantastic Corp. (NON) 8,713,593
2,190 Swatch Group AG (The) 2,522,902
14,932 United Bank of Switzerland (UBS) AG 4,033,141
--------------
105,966,926
United Kingdom (32.8%)
- --------------------------------------------------------------------------------------------------------------------------
3,257,158 Aegis Group PLC 11,838,629
2,448,411 Allied Zurich AG 28,852,915
426,279 Barclays PLC 12,271,050
1,227,692 Bass PLC 15,280,661
2,327,706 British Aerospace PLC 15,416,723
4,519,710 British Petroleum Co. PLC 45,449,594
2,637,685 British Telecommunications PLC ADR 64,467,664
398,500 Cable & Wireless Communications (NON) 5,729,258
1,773,419 Cable & Wireless PLC 30,051,553
2,279,274 Carlton Communications PLC 22,202,093
3,378,085 Diageo PLC 27,175,653
740,057 Dixons Group PLC 17,800,817
1,497,042 EMI Group PLC 14,691,304
3,425,561 Granada Group PLC 34,723,662
1,006,801 Hanson PLC 8,440,945
1,439,829 HSBC Holdings PLC 20,072,515
18,100 Jazztel PLC 1,178,763
884,388 Land Securities PLC 9,914,764
392,656 Misys PLC 6,120,961
1,354,556 Next PLC 12,997,610
938,974 Peninsular and Oriental Steam Navigation Co. 15,668,736
2,564,282 Scottish Power PLC 19,427,580
3,675,346 Securicor Group PLC (NON) 9,543,975
9,321,172 Shell Transportation & Trading 77,472,816
5,131,421 Siebe PLC 27,934,933
1,211,837 Smithkline Beecham PLC ADR 15,465,052
1,671,337 Smiths Industries PLC 24,973,870
10,902,224 Tesco PLC 33,153,560
336,300 Trinity PLC 3,590,942
3,900,997 Vodafone Group PLC 19,330,374
978,801 Wolseley PLC 7,506,534
396,417 WPP Group PLC 6,282,050
--------------
665,027,556
United States (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
6,500 NTL, Inc. $ 810,875
--------------
Total Common Stocks (cost $1,476,305,747) $1,986,167,002
PREFERRED STOCKS (--%) (a) (cost $941,574)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,562 Sap Ag Systeme Preference Bearer (Germany) $ 939,680
SHORT-TERM INVESTMENTS (1.9%) (a) (cost $38,728,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$38,728,000 Interest in $578,946,000 joint repurchase agreement dated
December 31, 1999 with J P Morgan due January 3, 2000
with respect to various U.S. Treasury obligations -- maturity
value of $38,736,068 for an effective yield of 2.50% $ 38,728,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,515,975,321) (b) $2,025,834,682
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,025,831,527.
(b) The aggregate identified cost on a tax basis is $1,517,033,939 resulting in gross unrealized appreciation and
depreciation of $545,581,284 and $36,780,541, respectively, or net unrealized appreciation of $508,800,743.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR after the name of a foreign holding stands for American Depositary Receipts, representing ownership of foreign
securities on deposit with a domestic custodian bank.
The fund had the following industry group concentrations greater than 10% at December 31, 1999 (as a percentage of
net assets):
Telecommunications 19.2%
Insurance and finance 16.3
Oil and gas 11.1
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,515,975,321) (Note 1) $2,025,834,682
- -----------------------------------------------------------------------------------------------
Cash 963
- -----------------------------------------------------------------------------------------------
Foreign currency 1,123
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 5,553,496
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 7,758,200
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 31,650,680
- -----------------------------------------------------------------------------------------------
Total assets 2,070,799,144
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 36,130,682
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,663,945
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 3,215,586
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 307,513
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 44,262
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,187
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,501,905
- -----------------------------------------------------------------------------------------------
Other accrued expenses 98,537
- -----------------------------------------------------------------------------------------------
Total liabilities 44,967,617
- -----------------------------------------------------------------------------------------------
Net assets $2,025,831,527
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,449,588,626
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (959,770)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investment
and foreign currency transactions (Note 1) 67,442,722
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 509,759,949
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,025,831,527
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,014,315,546 divided by 38,199,734 shares) $26.55
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $26.55)* $28.17
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($911,777,684 divided by 35,170,691 shares)** $25.92
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($4,333,691 divided by 163,567 shares)** $26.49
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($95,404,606 divided by 3,614,809 shares) $26.39
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $26.39)* $27.35
- -----------------------------------------------------------------------------------------------
* 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, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $1,334,357) $ 13,155,442
- -----------------------------------------------------------------------------------------------
Interest 613,477
- -----------------------------------------------------------------------------------------------
Total investment income 13,768,919
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,290,754
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,879,813
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 18,418
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 10,200
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,133,782
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,037,282
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 9,218
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 344,867
- -----------------------------------------------------------------------------------------------
Reports to shareholders 37,332
- -----------------------------------------------------------------------------------------------
Auditing 61,203
- -----------------------------------------------------------------------------------------------
Legal 6,778
- -----------------------------------------------------------------------------------------------
Postage 114,018
- -----------------------------------------------------------------------------------------------
Other 186,391
- -----------------------------------------------------------------------------------------------
Total expenses 14,130,056
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (619,986)
- -----------------------------------------------------------------------------------------------
Net expenses 13,510,070
- -----------------------------------------------------------------------------------------------
Net investment income 258,849
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 82,649,854
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Notes 1 and 3) (640,838)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 120,633
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 306,320,009
- -----------------------------------------------------------------------------------------------
Net gain on investments 388,449,658
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $388,708,507
- -----------------------------------------------------------------------------------------------
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
1999* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 258,849 $ 6,302,471
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 82,009,016 11,887,118
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currencies 306,440,642 (67,165,107)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 388,708,507 (48,975,518)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (7,156,559) (8,081,573)
- ---------------------------------------------------------------------------------------------------------------
Class B (701,242) (3,212,251)
- ---------------------------------------------------------------------------------------------------------------
Class C (26,075) --
- ---------------------------------------------------------------------------------------------------------------
Class M (18,373) (2,085,646)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,408,472) (33,386,409)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,297,297) (29,928,941)
- ---------------------------------------------------------------------------------------------------------------
Class C (5,883) --
- ---------------------------------------------------------------------------------------------------------------
Class M (135,958) (9,042,716)
- ---------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
Class A -- (4,505,495)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (4,038,909)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (1,220,314)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (144,454,054) 469,025,201
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 233,504,594 324,547,429
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 1,792,326,933 1,467,779,504
- ---------------------------------------------------------------------------------------------------------------
End of period (including distribution is excess of
net investment income and undistributed
net investment income of $959,770 and
$6,683,630, respectively) $2,025,831,527 $1,792,326,933
- ---------------------------------------------------------------------------------------------------------------
* 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 December 31
operating performance (Unaudited) Year ended June 30
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.72 $23.68 $18.96 $15.91 $13.88 $11.64
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .04(c) .16(c) .31(c) .24(c) .24(c) .18
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.02 (.91) 5.91 4.07 2.19 2.22
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.06 (.75) 6.22 4.31 2.43 2.40
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.19) (.21) (.37) (.20) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.04) (.88) (1.13) (1.06) (.40) (.16)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments -- (.12) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (1.21) (1.50) (1.26) (.40) (.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $26.55 $21.72 $23.68 $18.96 $15.91 $13.88
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 23.33* (2.99) 35.22 28.49 17.82 20.84
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,014,316 $903,697 $791,871 $313,492 $127,980 $90,420
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .60* 1.23 1.32 1.45 1.47 1.38
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .20* .72 1.46 1.43 1.59 1.45
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.94* 65.08 48.86 55.45 38.85 44.33
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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) Net investment income was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share December 31
operating performance (Unaudited) Year ended June 30
- --------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.14 $23.11 $18.56 $15.64 $13.75 $11.62
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (.04)(c) --(c)(d) .14(c) .13(c) .14(c) .08
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 4.88 (.88) 5.80 3.97 2.15 2.21
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 4.84 (.88) 5.94 4.10 2.29 2.29
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.02) (.09) (.26) (.12) -- --
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.04) (.88) (1.13) (1.06) (.40) (.16)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments -- (.12) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) (1.09) (1.39) (1.18) (.40) (.16)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $25.92 $21.14 $23.11 $18.56 $15.64 $13.75
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 22.89* (3.66) 34.26 27.51 16.95 19.92
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $911,778 $790,680 $633,294 $261,454 $90,126 $45,733
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .98* 1.98 2.07 2.20 2.23 2.13
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.18)* (.01) .69 .76 .96 .74
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.94* 65.08 48.86 55.45 38.85 44.33
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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) Net investment income was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- -------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to December 31
- -------------------------------------------------------------------------------------------------------------------------------
1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $21.68
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) (.03)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.04
- -------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.01
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.16)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.04)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.20)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $26.49
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 23.16*
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,334
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .84*
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.13) *
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.94*
- -------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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) Net investment income was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- --------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share December 31 Dec. 1, 1994+
operating performance (Unaudited) Year ended June 30 to June 30
- --------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.48 $23.51 $18.85 $15.86 $13.90 $12.35
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (.01)(c) .02(c) .20(c) .19(c) .24(c) .09
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 4.96 (.85) 5.89 4.03 2.12 1.62
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 4.95 (.83) 6.09 4.22 2.36 1.71
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income --(d) (.20) (.30) (.17) -- --
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.04) (.88) (1.13) (1.06) (.40) (.16)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain
on investments -- (.12) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.04) (1.20) (1.43) (1.23) (.40) (.16)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $26.39 $21.48 $23.51 $18.85 $15.86 $13.90
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 23.06* (3.37) 34.56 27.91 17.28 14.06*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $95,405 $97,950 $42,614 $15,811 $4,047 $746
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .85* 1.73 1.82 1.95 2.02 1.08*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.06)* .07 .99 1.10 1.59 1.61*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 46.94* 65.08 48.86 55.45 38.85 44.33
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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) Net investment income was less than $0.01 per share.
</TABLE>
Notes to financial statements
December 31, 1999 (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, class C and class M shares. The fund
began offering class C shares on July 26, 1999. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than
class A shares, and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class C shares are
subject to the same fees and expenses as class B shares, except that class
C shares have a one-year 1.00% contingent deferred sales charge and do not
convert to class A shares. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that
is 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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sales price on its principal exchange, or if no sales are
reported -- as in the case of some securities traded over-the-counter --
the last reported bid price. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value. Other investments,
including restricted securities, are stated at fair value following
procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate. Investments in foreign securities involve
certain risks, including those related to economic instability,
unfavorable political developments, and currency fluctuations, not present
with domestic investments.
F) 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 six months
ended December 31, 1999, the fund had no borrowings against the line of
credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
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, 1999, fund expenses were reduced by
$619,986 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 $1,981
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and meeting
fees for the three years preceding retirement. Pension expense for the
fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C, and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the six months ended December 31, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $181,301 and $219,518
from the sale of class A and class M shares, respectively, and received
$838,528 and $21 in contingent deferred sales charges from redemptions of
class B and class C shares, respectively. A deferred sales charge of up to
1% is assessed on certain redemptions of class A shares. For the six
months ended December 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received $29,469 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended December 31, 1999, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $827,200,752 and $968,072,386, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At December 31, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended December 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 20,403,333 $463,166,819
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 307,755 7,801,076
- -----------------------------------------------------------------------------
20,711,088 470,967,895
Shares
repurchased (24,119,366) (549,112,693)
- -----------------------------------------------------------------------------
Net decrease (3,408,278) $(78,144,798)
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 68,151,339 $1,483,701,940
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,995,595 41,787,368
- -----------------------------------------------------------------------------
70,146,934 1,525,489,308
Shares
repurchased (61,985,227) (1,347,029,128)
- -----------------------------------------------------------------------------
Net increase 8,161,707 $ 178,460,180
- -----------------------------------------------------------------------------
Six months ended December 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,459,698 $ 77,020,597
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 72,210 1,787,797
- -----------------------------------------------------------------------------
3,531,908 78,808,394
Shares
repurchased (5,758,000) (126,976,347)
- -----------------------------------------------------------------------------
Net decrease (2,226,092) $(48,167,953)
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 22,405,603 $483,946,091
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,616,996 33,083,649
- -----------------------------------------------------------------------------
24,022,599 517,029,740
Shares
repurchased (14,033,529) (296,361,954)
- -----------------------------------------------------------------------------
Net increase 9,989,070 $220,667,786
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations
to December 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 297,193 $6,738,255
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,156 29,235
- -----------------------------------------------------------------------------
298,349 6,767,490
Shares
repurchased (134,782) (3,078,774)
- -----------------------------------------------------------------------------
Net increase 163,567 $3,688,716
- -----------------------------------------------------------------------------
Six months ended December 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,617,440 $ 60,565,204
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,524 63,623
- -----------------------------------------------------------------------------
2,619,964 60,628,827
Shares
repurchased (3,564,680) (82,458,846)
- -----------------------------------------------------------------------------
Net decrease (944,716) $(21,830,019)
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 22,977,103 $505,100,716
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 98,706 2,049,124
- -----------------------------------------------------------------------------
23,075,809 507,149,840
Shares
repurchased (20,329,254) (437,252,605)
- -----------------------------------------------------------------------------
Net increase 2,746,555 $ 69,897,235
- -----------------------------------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative. To learn more about Putnam, visit our Web site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number.
1-800-225-1581
* DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+ Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. Please
call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus
for any Putnam fund. It contains more complete information, including charges
and expenses. Please read it carefully before you invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Mark D. Pollard
Vice President and Fund Manager
Omid Kamshad
Vice President and Fund Manager
Nigel Hart
Vice President and Fund Manager
Nicholas J. Melhuish
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam 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' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA005-58381 057/234/688 2/00
