(logo)
Putnam
Europe
Growth
Fund
Semiannual Report
December 31, 1993
(artwork)
For investors seeking capital appreciation through a diversified
portfolio of common stocks and other securities of European
companies
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Semiannual Report
7 Portfolio of investments owned
9 Financial statements
15 Fund performance supplement
<PAGE>
How your
fund performed
For periods ended December 31, 1993
Total Return* Morgan Stanley
Fund Capital
EAFE International S&P 500
NAV POP Index Europe Index
6 months 20.27% 13.36% 7.73% 19.43% 4.95%
1 year 31.05 23.53 32.86 29.76 10.04
Life-of-fund
(since 9/7/90) 49.88 41.23 25.65 34.67 60.60
annualized 12.96 10.96 7.12 9.38 15.34
Share data
NAV POP
June 30, 1993 $9.84 $10.44
December 31, 1993 $11.72 $12.44
In excess of
Distributions Investmentinvestment Capital
6 months ended Number income income gains Total
December 31, 1993 1 $0.04 $0.073 -- $0.113
* Performance data represent past results. Investment return and
net asset value will fluctuate so an investor's shares, when
redeemed, may be worth more or less than their original cost.
On February 1, 1994, the fund began offering class B shares.
Performance for these shares will differ.
<PAGE>
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
public offering price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not reflecting any sales charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum sales charge of 5.75% levied at the time of
purchase.
Please see the fund performance supplement on page 15 for
additional information about performance comparisons.
<PAGE>
From the
Chairman
(photograph of George Putnam)
(c) Karsh, Ottawa
George Putnam
Chairman
Of the Trustees
Dear Shareholder:
Putnam Europe Growth Fund's strong performance during the past
six months reflects both the long-awaited rebound of European
stock markets and the successful implementation of Fund Manager
Justin Scott's two-fold investment approach.
When making portfolio allocations, Justin and his team first
carefully assess the economic outlook and stock market valuation
of individual countries. Individual stock selection comes next
and involves identifying the longer-term worth of companies. The
fund invests in stocks whose prices Putnam Management believes do
not accurately reflect their longer-term worth and potential
earnings growth.
In addition, currency hedges are used to protect the dollar value
of fund holdings. Should the dollar strengthen or weaken against
a foreign currency, hedges enable the management team to buy or
sell currency when necessary.
This tiered approach has proven quite effective. According to
Lipper Analytical Services, the fund provided better-than-average
performance relative to its competitors since its inception in
1990. In fact, as of December 31, 1993, Putnam Europe Growth Fund
ranked in the top 20% of its class for 3- and 2-year performance
and ranked number 8 out of 28 funds for 1-year performance.
I encourage you to read the following Report from Putnam
Management in which Justin discusses the countries and stocks he
chose for the fund's investments during the past six months. I am
confident he has positioned the fund to meet any future
challenges head on.
Respectfully yours,
George Putnam
February 16, 1994
<PAGE>
Report from
Putnam Management
Top 10 holdings
Based on percentage of
net assets as of 12/31/93
CRH PLC ORD Ireland
Rothmans Units
Burmah Oil ORD
Union Bank Switzerland
Wolters Kluwer CTF
Pearson ORD UK
North West Water Ord UK
Royal Insurance
Holdings/ORD UK
Credit Local De France
Sovac ORD France
Represents 21.11% of the portfolio. Holdings will vary in the
future.
Against a backdrop of recessionary conditions, many European
stock markets performed exceedingly well, as did Putnam Europe
Growth Fund. The fund provided you with outstanding double-digit
returns of 20.27% at net asset value and 13.36% at public
offering price. As indicated in the table on page 2, the fund
outpaced three leading benchmarks at net asset value for the six
months ended December 31, 1993. Performance for other periods can
also be found in the table.
The primary contributor to widespread stock market rallies and
your fund's strong performance has been falling interest rates
throughout Europe.
Long-awaited catalyst The loosening of Europe's Exchange Rate
Mechanism (ERM) in early August was an important catalyst,
setting the stage for interest rates to come down all over the
continent. The ERM had tied most European countries too closely
to Germany's interest rate position, often at the expense of
their own economies' health. With the French franc and Danish
krone under relentless pressure, the European Community's finance
ministers and central bankers held a summit meeting and agreed to
permit member currencies to fluctuate within much wider ranges
against one another. This action allowed individual countries
greater flexibility to pursue domestic interest rate policies
independent of the actions of Germany's Bundesbank.
The dynamics of economic recovery vary from country to country.
It's important, therefore, not to make too sweeping a
generalization when evaluating European markets. The only general
similarity is that a great number of innovative fiscal strategies
do not appear available to bring individual countries out of
recession. For the time being, we believe the emphasis will be on
stimulating economies through interest rate reductions.
As interest rates are lowered, however, the dollar has the
potential to strengthen against European currencies. Since any
profit your fund realizes on its holdings must be translated back
into U.S. currency, this strengthening could erode some of the
fund's gains. Consequently, to protect the value of the fund's
foreign holdings, we have some currency hedges in place against
the French and Swiss francs and Dutch guilder.
As you review the fund's list of holdings, you'll notice that the
United Kingdom and France have anchored the portfolio throughout
the period. However, of particular interest to us as fiscal 1994
progresses are the smaller markets of Europe, specifically the
Netherlands, Switzerland, Ireland, Portugal and Greece, where we
believe there are select opportunities for value investing.
Here's where we positioned the fund during the first half of
fiscal 1994 and why.
The United Kingdom represented 29.2% of net assets as of
December 31, 1993. Throughout the past six months, the U.K.
showed slow but steady economic recovery with the corporate
profits' outlook brightening. As inflation, interest rates, and
unemployment have subsided, British companies have lowered their
production and spending costs, setting the stage for future
earnings growth.
In France, unemployment has continued to grow and the management
at the companies we visit tell us that business conditions are
deteriorating. Stimulating the economy through interest rate
reductions seems to be the next likely step. And when that
happens, financial institutions and cyclical companies -- those
that have effectively restructured their operations and whose
businesses stand to profit from a rebounding economy -- will most
likely benefit. France has remained your fund's second largest
position throughout the period for just this reason.
Sommer-Allibert, one of our French holdings is a basic industrial
manufacturing firm that has recently completed a 4-year
restructuring program. We believe the company has effectively
positioned its automotive, construction, textiles, and
waste containment divisions for strong growth in the years ahead.
Interest rates are also expected to come down in the
Netherlands, Switzerland, and Ireland as they have in France. For
some of the same reasons, significant portions of the fund's
assets remain invested in the financial and cyclical companies of
these countries. Akzo, a Dutch chemical and pharmaceutical
company, fits the classic profile of a cyclical poised for
recovery. Some of our more attractive purchases have been Swiss
bank stocks, which had underperformed for quite some time, until
recently. One of your fund's largest Swiss holdings is Bank
Julius Baer, a small firm with an emphasis on private banking.
Other financial holdings include Allied Irish Bank and Irish
Life, your fund's key financial stocks in Ireland, and Banco
Commercial Portugues, the fund's largest holding in Portugal.
Germany's Bundesbank remains hesitant to agree to a common
currency other than the deutschemark. While we believe interest
rates will eventually come down in Germany, it appears such
action will be at a slower pace than previously anticipated. For
these reasons, your fund's weighting in Germany remained
relatively low -- 2.9% of net assets on December 31, 1993.
Diversification by country
Based on percentage of net assets as of 12/31/93
Austria 0.8%
Belgium 0.8%
Denmark 3.1%
Finland 0.8%
France 17.5%
Germany 2.9%
Greece 1.2%
Ireland 5.0%
Italy 2.0%
Netherlands 13.0%
Norway 1.9%
Portugal 3.0%
Spain 2.1%
Switzerland 12.0%
United Kingdom 29.2%
Outlook We've been anticipating the eventual rebound of European
stock markets for some time now. During the past six months, we
have finally witnessed some concrete evidence of this rebound.
Despite the strong rise in stock prices, we believe the majority
of European markets will remain attractive throughout fiscal 1994
for these reasons:
We believe stock market prices continue to be reasonably valued
on an international basis and in comparison to the United States.
For the first time in several years, we have witnessed the most
preliminary signs of economic recovery and increased productivity
across broad sectors of the European market. However fragile
these signs may be, these should, in turn, stimulate recovery in
corporate earnings around late 1994 and early 1995.
Many European corporations have taken extensive cost-cutting and
restructuring measures as a result of the long recession and a
shift in power between labor and management. In an effort to
improve bottom lines, companies have agreed upon attractive
settlements and have implemented flexible work schedules.
The companies of Western Europe have experienced increased
competition from the low labor and productivity costs available
in Eastern Europe, pressuring Western corporations to restructure
and streamline operations.
We expect the continued decline of interest rates.
In general, we anticipate the continued positive momentum of
prices in European markets due to increased demand, as local
investors increase their exposure to stocks and as international
investors realize that possibilities for growth abound in
European companies.
<PAGE>
Portfolio of
investments owned
December 31, 1993 (Unaudited)
Common Stocks (94.5%)(a)(b)
Number of Shares Value
United Kingdom (29.2%)
30,000 Argyll Group PLC $ 122,322
65,000 Associated British Ports PLC 525,252
65,000 BAT Industries PLC 531,499
108,300 Baird (William) PLC 369,585
80,000 British Telecom 254,096
63,000 Burmah Oil 777,137
14,000 Dalgety PLC 101,549
27,500 East Midlands Electric PLC 264,069
130,000 General Electric Co. (The) PLC 655,850
25,000 Guinness PLC 176,353
80,000 Molins PLC 679,560
87,000 North West Water Group PLC 753,159
85,000 Pearson PLC 763,470
114,000 Rothmans International PLC 806,698
149,000 Royal Insurance Holdings PLC 748,397
115,000 Scotia Holdings PLC (c)(d) 484,185
25,000 Securicor Group PLC Class A 319,835
22,500 Security Services PLC 246,636
295,000 Senior Engineering Group PLC 551,296
45,000 Shell Transportation & Trading Co. PLC 483,300
16,728 Siebe PLC 140,860
11,400 SmithKline Beecham PLC ADR 312,075
16,000 South Wales Electricity PLC 180,112
22,500 South Western Electric PLC 231,012
30,000 Vendome Lux Group 171,516
10,649,823
France (17.5%)
2,450 Alcatel Alsthom CGE S.A. 348,610
2,550 Alcatel Cable 322,332
11,000 Banque Nationale de Paris (c) 534,432
9,000 Credit Local de France 744,943
5,000 Docks de France 613,435
1,260 Financiere et Industrielle Gaz et Eaux 447,574
9,700 Pechiney International 336,365
4,775 Remy Cointreau 190,435
6,000 Schneider Corp. Units (c)(d) 447,148
4,500 Societe Generale D'Enterprises 582,510
5,000 Societe Generale D'Enterprises 236,587
880 Sommer-Allibert $ 301,736
2,200 Sovac 730,173
70,000 Tampella (c) 302,183
<PAGE>
610 ZODIAC 220,703
6,359,166
Switzerland (12.0%)
4,000 Baer Holdings AG 483,449
2,080 Nestle S.A. (Registered) 179,188
1,400 Nestle S.A. (Registered) ADR 60,463
40 Nestle S.A. (Registered) ADR (c) 1,728
6,500 RS CS Holding 641,576
2,850 Rieter Holding AG (Registered) 300,443
750 SMH AG (Registered) 114,315
150 SMH Bearer 104,747
690 Sandoz AG 193,430
350 Sulzer PC 190,358
250 Sulzer PC (Registered) 141,509
1,900 Swiss Bank Corp. (Registered) 295,978
11,930 Swiss Reinsurance Co. (Registered) (d) 588,769
8,530 Union Bank of Switzerland (Bearer) 775,507
3,000 Zurich Insurance Co. (Bearer) 305,177
4,376,637
Netherlands (13.0%)
15,110 ABN AMRO Holding N.V. 555,457
9,500 Aegon N.V. (Bearer) 515,296
5,100 Akzo N.V. 492,956
3,000 DSM N.V. 164,422
3,900 Elsevier 365,337
5,000 Elsevier N.V. 419,096
21,000 Getronics Electric N.V. 471,826
892 Hollandsche Beton Group N.V. 123,825
25,000 IHC Caland N.V. 500,000
3,000 Sphinx 66,324
2,525 Unilever N.V. 292,095
12,200 Wolters Kluwer N.V. 769,635
4,736,269
Ireland (5.0%)
111,800 Allied Irish Banks $ 479,432
70,000 Bank of Ireland 297,227
156,000 CRH PLC 818,126
50,000 Greencore PLC 242,535
1,837,320
Denmark (3.1%)
4,000 Danisco 577,328
4,200 International Service System, Ser. B 140,414
10,000 NKT Holdings 395,190
1,112,932
<PAGE>
Portugal (3.0%)
18,000 Banco Commercial Portugues, S.A.
(Registered) 333,936
17,200 Banco Commercial Portugues, S.A. ADR 262,300
15,600 Banco Commercial Portugues, S.A. ADR 234,618
13,300 Banco Totta and Acores (BTA)
Nationalisert 246,741
1,077,595
Germany (2.9%)
1,150 Deutsche Bank AG 583,266
2,100 Spar Preferred Handels N.V. 481,829
1,065,095
Spain (2.1%)
3,400 Argentaria ADS 143,558
10,000 Hidrolectrica del Cantabrico 304,090
9,700 Repsol S.A. 301,748
749,396
Italy (2.0%)
176,000 Credito Italiano 237,477
40,000 Danieli & Co. 256,512
71,000 Danieli & Co. (Savings Shares) 239,661
733,650
Norway (1.9%)
37,500 Christiana Bank Kreditkass ADR (c)(d) 665,625
3,200 Saga Petroleum A.S. 31,011
696,636
Greece (1.2%)
40,000 Greek Progress Fund-Units $445,692
Austria (0.8%)
7,000 Austria Mikro Systeme (c)(d) 297,457
Belgium (0.8%)
500 Bekaert S.A. 288,488
Total Common Stocks
(cost $28,934,262) $34,426,156
<PAGE>
Warrants (0.5%)(a)(b)
Expiration
Date Value
8,000 Remy Cointreau Warrants 3/31/95 $ 74,356
6,000 Schneider Corp. Units 5/30/97 76,249
125 Sulzer PC, Ser. A 7/29/94 671
350 Sulzer PC, Ser. B 7/29/94 1,739
1,085 Swiss Reinsurance Co., Ser. A 10/14/94 8,378
1,085 Swiss Reinsurance Co., Ser. B 6/30/95 7,467
Total Warrants
(cost $78,405) $168,860
Short-Term Investments (5.8%)(a) (cost $2,126,000)
Principal Amount Value
$2,126,000 Interest in $498,844,000 joint
repurchase agreement dated
December 31, 1993 with
Goldman Sachs due January 3,
1994 with respect to various
U.S. Treasury obligations --
maturity value of $2,126,000 for
an effective yield of 3.10% $2,126,000
Total Investments (cost
$31,138,667)(e) $36,721,016
Notes
(a) Percentages indicated are based on total net assets of
$36,418,436, which correspond to a net asset value per share of
$11.72.
(b) Value is determined or significantly influenced by trading on
exchanges not in the United States or Canada. ADR or ADS after
the name of a foreign holding stands for American Depository
Receipt or American Depository Shares, respectively, representing
ownership of securities on deposit with a domestic custodian
bank.
(c) Securities 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. At December 31, 1993 these securities
amounted to $2,732,758 or 7.5% of net assets.
(d) Non-income-producing security.
<PAGE>
(e) The aggregate identified cost for federal income tax purposes
is $31,138,668, resulting in gross unrealized appreciation and
depreciation of $6,762,432 and $1,180,084, respectively, or net
unrealized appreciation of $5,582,348.
Forward Currency Contracts Outstanding
December 31, 1993
Unrealized
Market Aggregate Delivery Appreciation
Contracts Value Face Value Date (Depreciation)
French Francs
(Sell) $2,861,100 $2,853,785 2/14/94 $(7,315)
Dutch Guilders
(Sell) 1,794,450 1,828,536 2/14/94 34,086
Swiss Francs
(Sell) 1,274,140 1,266,160 2/14/94 (7,980)
$18,791
<PAGE>
<TABLE>
<CAPTION>
Statement of
assets and liabilities
December 31, 1993 (Unaudited)
<S> <C> <C>
Assets
Investments in securities, at value (identified cost
$31,138,667) (Note 1) $36,721,016
Cash 475
Dividends and other receivables 136,511
Receivable for securities sold 174,622
Receivable for shares of the Fund sold 664,835
Receivable for open forward currency contracts 34,086
Unamortized organization expenses (Note 1) 11,473
Total assets 37,743,018
Liabilities
Payable for securities purchased $1,148,219
Payable for shares of the Fund purchased 49,174
Payable for compensation of Manager (Note 2) 62,094
Payable for investor servicing and custodian fees (Note 2) 12,347
Payable for open forward currency contracts 15,295
Payable for administrative services (Note 2) 10
Payable for Trustees 136
Payable for distribution fees (Note 2) 19,405
Other accrued expenses 17,902
Total liabilities 1,324,582
Net assets $36,418,436
Represented by
Paid-in capital (Note 4) $31,182,600
Distributions in excess of net investment income (73,585)
Accumulated net realized loss on investment transactions (285,813)
Net unrealized foreign currency translation loss (5,906)
Net unrealized appreciation of investments and forward currency contracts 5,601,140
Total -- Representing net assets applicable to capital shares
outstanding $36,418,436
Computation of net asset value and offering price
Net asset value and redemption price per share
($36,418,436 divided by 3,106,848 shares) $11.72
Offering price per share (100/94.25 of $11.72)* $12.44
*On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.The accompanying notes are an integral part of these
financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
Six months ended December 31, 1993 (unaudited)
<S> <C> <C>
Investment income:
Interest $2,344
Dividends (net of foreign tax of $25,982) 313,630
Total investment income 315,974
Expenses:
Compensation of Manager (Note 2) $105,490
Investor servicing and custodian fees (Note 2) 23,139
Compensation of Trustees (Note 2) 876
Reports to shareholders 9,364
Auditing 7,895
Distribution fees (Note 2) 32,886
Administrative services (Note 2) 20
Amortization of organization expenses (Note 1) 3,474
Other 3,970
Total expenses 187,114
Net investment income 128,860
Net realized gain on investments (Notes 1 and 3) 147,226
Net realized loss on foreign currency (Note 1) (2,904)
Net realized gain on forward currency contracts (Notes 1 and 3) 163,698
Net unrealized foreign currency translation loss during the period (1,179)
Net unrealized appreciation of investments and forward currency
contracts during the period 4,360,872
Net gain on investments 4,667,713
Net increase in net assets resulting from operations 4,796,573
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
Six months ended Year ended
December 31 June 30
1993* 1993
<S> <C> <C>
Increase in net assets
Operations:
Net investment income $128,860 $157,731
Net realized gain (loss) on investments 147,226 (464,421)
Net realized loss on foreign currency (2,904) (4,319)
Net realized gain on forward currency contracts 163,698 217,804
Net unrealized foreign currency translation loss (1,179) (6,699)
Net unrealized appreciation of investments and
forward currency contracts 4,360,872 354,157
Net increase in net assets resulting from operations 4,796,573 254,253
Distributions to shareholders:
From net investment income (128,860) (157,731)
In excess of net investment income (201,982) (120,817)
From net realized gain on investments -- (46,068)
Increase from capital share transactions (Note 4) 14,400,622 8,004,071
Total increase in net assets 18,866,353 7,933,708
Net assets
Beginning of year 17,552,083 9,618,375
End of year (including overdistributed net investment
income of $73,585 and $102,655, respectively) $36,418,436 $17,552,083
* Unaudited.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial highlights*
(For a share outstanding throughout the period)
For the period
September 7, 1990
(commencement
Six months ended Year ended of operations) to
December 31 June 30 June 30
1993** 1993 1992 1991
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.84 $10.10 $8.74 $8.50
Investment operations
Net Investment Income .07 .18 .15(a) .19(a)
Net Realized and Unrealized Gain (Loss) on Investments 1.92 (.14) 1.49 .14
Total from Investment Operations 1.99 .04 1.64 .33
Less Distributions from:
Net Investment Income (.04) (.15) (.22) (.09)
In Excess of Net Investment Income (.07) (.11) -- --
Net Realized Gain on Investments -- (.04) (.06) --
Total Distributions (.11) (.30) (.28) (.09)
Net Asset Value, End of Period $11.72 $9.84 $10.10 $8.74
Total Investment Return at Net Asset Value (%)(b) 40.54(c) .70 19.10 4.77(c)
Net Assets, End of Period (in thousands) $36,418 $17,552 $9,618 $3,369
Ratio of Expenses to Average Net Assets (%) 1.41(c) 1.81 2.14(a) 2.23(a)(c)
Ratio of Net Investment Income to Average Net Assets (%) .97(c) 1.38 1.63(a) 2.81(a)(c)
Portfolio Turnover (%) 145.84(d) 58.56 54.45 30.83(d)
* Financial highlights for periods ended through June 30, 1992 have been restated to conform with requirements issued by
the SEC in April 1993.
** Unaudited.
(a) Reflects a voluntary expense limitation in effect during the period. As a result of such limitation, net investment
income for the year ended June 30, 1992, and the period ended June 30, 1991 reflect expense reductions of approximately
$0.04 and $0.15, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Annualized.
(d) Not annualized.
/TABLE
<PAGE>
Notes to
financial statements
December 31, 1993 (Unaudited)
Note 1 Significant accounting policies
The Fund is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment
company. The Fund seeks capital appreciation by investing
primarily in common stocks and other securities of European
companies.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.
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, except that certain U.S. government
obligations are stated at the mean between the last reported bid
and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at
fair value following procedures approved by the Trustees.
Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Gains and losses on
securities that arise from changes in exchange rates are not
segregated from gains and losses that arise from changes in
market prices of investments. The effects on net investment
income arising from changes in exchange rates are also not
segregated.
B) Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund may transfer
uninvested cash balances into a joint trading account, along with
the cash of other registered investment companies managed by
Putnam Investment Management, Inc. ("Putnam Management"), the
Fund's Manager, a wholly-owned subsidiary of Putnam Investments,
Inc., and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
C) Repurchase agreements The Fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. The Fund's Manager 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 and 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.
Foreign currency-denominated receivables and payables are
"marked-to-market" using the current exchange rate. The
fluctuation between the original exchange rate and the current
exchange rate is recorded as unrealized translation gain or loss.
Upon receipt or payment, the Fund realizes a gain or loss
amounting to the difference between the original value and the
ending value of the receivable or payable.
E) Forward currency contracts A forward currency contract is an
agreement between two parties to buy and sell a currency at a set
price on a future date. 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 by the Fund 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
maximum potential loss from forward currency contracts is the
aggregate face value in U.S. dollars at the time the contract was
opened; however, management believes the likelihood of such a
loss to be remote.
F) Federal taxes It is the policy of the Fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
Fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities
held and excise tax on income and capital gains.
G) Distributions to shareholders Distributions to shareholders
from net investment income are recorded by the Fund on the
ex-dividend date. Capital gain distributions, if any, are
recorded on the ex-dividend date and paid annually.
H) Unamortized organization expenses Expenses incurred by the
Fund in connection with its organization, its registration with
the Securities and Exchange Commission and with various states
and the initial public offering of its shares were $34,512. These
expenses are being amortized on a straight-line basis over a
five-year period.
Note 2 Management fee, administrative services, and other
transactions
Compensation of Putnam Management, the Fund's Manager, for
management and investment advisory services is paid quarterly
based on the average net assets of the Fund for the quarter. Such
fee is an annual rate of 0.80% of the first $500 million of
average net assets, 0.70% of the next $500 million, 0.65% of the
next $500 million, and 0.60% of any amount over $1.5 billion. The
fee is subject to reduction in any year to the extent that
expenses (exclusive of distribution fees, brokerage, interest,
taxes and extraordinary expenses) of the Fund exceed 2.5% of the
first $30 million of average net assets, 2% of the next $70
million and 1.5% of any amount over $100 million and by the
amount of certain brokerage commissions and fees (less expenses)
received by affiliates of the Manager on the Fund's portfolio
transactions.
The Fund also reimburses the Manager 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. For the six months ended December 31, 1993, the Fund
paid $20 for these services.
Trustees of the Fund receive an annual Trustee's fee of $100 and
an additional fee for each Trustees' meeting attended. Trustees
who are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the Fund 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 PFTC. Fees paid for these investor
servicing and custodial functions for the six months ended
December 31, 1993 amounted to $23,139.
Investor servicing and custodian fees reported in the Statement
of operations for the six months ended December 31, 1993 have
been reduced by credits allowed by PFTC.
Pursuant to the Fund's underwriting agreement and to a
distribution plan adopted under Rule 12b-1 of the Investment
Company Act of 1940, the Fund pays Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc., a quarterly
distribution fee at the annual rate of 0.25% of average net
assets of the Fund attributable to qualifying investment dealers
of record for Fund shareholders. For the six months ended
December 31, 1993, the Fund paid $32,886 in distribution fees.
During the six months ended December 31, 1993, Putnam Mutual
Funds Corp., acting as an underwriter, received net commissions
of $26,901 from the sale of shares of the Fund.
At December 31, 1993, Putnam Investments, Inc. owned 255,759
shares outstanding of the Fund, valued at $2,997,495.
Note 3 Purchases and sales of securities
During the six months ended December 31, 1993, purchases and
sales of investment securities other than short-term investments
aggregated $18,167,445 and $4,891,191, respectively. There were
no purchases or sales of U.S. government obligations during the
year. In determining the net gain or loss on securities sold, the
cost of securities has been determined on the identified cost
basis.
Transactions in forward currency contracts during the year are
summarized as follows:
Sales of Forward
Currency Contracts
Aggregate
Face Value
Open at beginning of period $4,588,871
Contracts opened 11,370,596
Contracts closed (10,010,986)
Open at end of period $5,948,481
<PAGE>
<TABLE>
<CAPTION>
Note 4 Capital shares
At December 31, 1993, there was an unlimited number of shares of beneficial interest
authorized. Transactions in capital shares were as follows:
Six months ended Year ended
December 31 June 30
1993 1993
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 1,993,318 $21,708,296 1,760,011 $16,863,113
Shares issued in connection with
reinvestment of distributions 24,673 285,465 33,679 303,783
2,017,991 21,993,761 1,793,690 17,166,896
Shares repurchased (694,589) (7,593,139) (962,926) (9,162,825)
Net increase 1,323,402 $14,400,622 830,764 $8,004,071
/TABLE
<PAGE>
Note 5 Reclassification of Capital Accounts
Effective July 1, 1993, Putnam Europe Growth Fund has adopted the
provisions of Statement of Position (SOP) 93-2 "Determination,
Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions, by Investment
Companies." The purpose of this SOP is to report the accumulated
net investment income (loss) and accumulated net realized gain
(loss) accounts in such a manner as to approximate amounts
available for future distributions (or to offset future realized
capital gains) and to achieve uniformity in the presentation of
distributions by investment companies.
As a result of the SOP, the Fund has reclassified $231,052 to
increase undistributed net investment income and $213,581 to
decrease accumulated gain, and decrease additional paid in
capital by $17,441.
These adjustments represent the cumulated amounts necessary to
report these balances through June 30, 1993, the close of the
Fund's most recent fiscal year end for financial reporting and
tax purposes.
Fund performance supplement
Putnam Europe Growth Fund is a portfolio managed for capital
appreciation through investments in common stocks and other
securities of European companies. The Europe, Australia and the
Far East (EAFE) component of the Morgan Stanley Capital
International World Index is an unmanaged list of international
equity securities, excluding U.S., with all values expressed in
U.S. dollars. The Europe component of the World Index is an
unmanaged list of 639 companies representing 13 European
countries, with values expressed in U.S. dollars. Standard &
Poor's 500 Index is an unmanaged list of large-capitalization
common stocks. The index assumes reinvestment of all
distributions and do not take into account brokerage commissions
or other costs. The fund's portfolio contains securities that
differ from those in the indexes. Investment in the fund is
subject to special international risks, such as currency
fluctuations and political developments.
Fund performance data do not take into account any adjustment for
taxes that may have been payable.
Lipper Analytical Services is an industry research firm; rankings
vary over time and do not include the effects of sales charges.
Lipper's European regions funds category included 21 funds 3
years ago, 25 funds 2 years ago, and 28 funds at present.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and
the indexes used for performance comparisons. The information is
not part of the portfolio of investments owned or the financial
statements.
<PAGE>
Putnam
Europe
Growth
Fund
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
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
(DALBAR logo)
Putnam Investor Services
has received the DALBAR
award each year since the
award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
A44-10468<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
John R. Verani
Vice President
Peter Carman
Vice President
Anthony W. Regan
Vice President
Justin Scott
Vice President and Fund Manager
William N. Shiebler
Vice President
John D. Hughes
Vice President and Treasurer
Paul O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam
Europe Growth Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives
details of sales charges, investment objectives and operating
policies of the fund.
<PAGE>
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ----------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- ----------------
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
