Putnam
Overseas
Growth
Fund
ANNUAL REPORT
June 30, 1994
(Balance Scales)
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
For the 12 months ended June 30, 1994, the fund's total return ranked among
the top quartile of all 139 international funds tracked by Lipper
Analytical Services.*
With the help of state-of-the-art trading rooms and advanced technology,
Putnam now manages more than $11 billion in international equity and fixed
income assets, an increase of more than 514% from 5 years ago.
Performance should always be considered in light of a fund's investment
strategy. Putnam Overseas Growth Fund is for investors seeking capital
appreciation through equity securities of issuers located outside North
America.
FISCAL 1994 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Total return: NAV POP
<S> <C> <C> <C> <C> <C>
.................................................................................................
12 months ended 6/30/94
(change in value during
period plus reinvested
distributions) 25.81% 18.63%
Share value: NAV POP
.................................................................................................
Class A
6/30/93 $ 9.58 $10.16
6/30/94 11.83 12.55
Capital gains
Distributions: No. Income Long-term Short-term Total
.................................................................................................
Class A 1 -- $0.215 -- $0.215
</TABLE>
Performance data represent past results and will differ for each share class.
The fund began operations 2/28/91 offering shares now known as class A.
Effective 6/1/94, the fund began offering class B shares. For additional
performance information, see pages 9 and 10. POP assumes 5.75% maximum sales
charge. The fund's performance reflects a voluntary expense limitation in
effect. Had the expense limitation not been in effect, the fund's total
return would have been lower.
* Lipper Analytical Services is an industry research firm whose rankings vary
over time and do not include the effects of sales charges. For periods ended
6/30/94, the fund ranked as follows: for one year, 21 of 139 funds; for two
years, 17 of 94 funds; for three years, 20 of 68 funds. Past performance is
not indicative of future results.
<PAGE>
From the Chairman
Dear Shareholder:
(George Putnam photo)
(c) Karsh, Ottawa
The first six months of 1994 served as a reminder that the world's closely
linked financial markets are always shifting and sometimes do so
dramatically.
This spring, higher interest rates in the United States lessened fears of
inflation and moderated growth while sparking volatility that affected
virtually every sector of the stock and bond markets, at home and overseas.
Conditions now appear more stable. Most of the world's major economies show
stronger fundamentals, while Japan and Europe appear on the brink of
recovery.
Yet, apprehension lingers. The markets remain skittish about rising U.S.
interest rates and discount the generally good economic news. Meanwhile, the
dollar poses a new concern as it loses ground to other currencies.
Most stocks, domestic and foreign, joined other investments in losing value
at some point during the past five months. However it is important to
remember that market declines may have the hidden potential to pave the way
for opportunities that could make up for the downturns.
In the report that follows, Fund Manager Justin Scott explains how he plans
to use Putnam's considerable resources in positioning your fund to meet the
challenges of the coming months.
Respectfully yours,
(George Putnam signature)
George Putnam
Chairman of the Trustees
August 17, 1994
<PAGE>
Report from the fund manager
Justin Scott
Putnam Overseas Growth Fund provided an exceptionally strong total return for
the 12 months ended June 30, 1994.
Although the fund became available to the public on June 1, 1994, the fund's
class A shares have a track record dating back to February 25, 1991. The fund
has outperformed average returns measured by both the Standard & Poor's
500(R) Index and the Dow Jones Industrial Average--unmanaged indexes
representative of U.S. stock market performance--for the 3-year and 1-year
periods ended June 30, 1994.
> THE FORCES DRIVING EUROPEAN STOCK MARKETS SHIFT
European stock markets lost ground steadily relative to the U.S. market
during 1991 and 1992. The underperformance was largely a reflection of the
strength of the U.S. market rather than of any significant weakness in
European markets. The end of 1992 marked the turn of such relative
underperformance.
During calendar 1993, which included the first six months of your fund's
fiscal year, European markets were driven primarily by falling interest
rates. A drop in rates across the Continent provided the impetus for a bull
market in both bonds and stocks.
As we moved into the latter half of your fund's fiscal year, the forces
driving the stock markets changed. Rising interest rates in the U.S. and the
resulting decline in bond prices caused turmoil in European markets,
distracting investors' attention from what we believe will drive European
stock market performance in 1994 and 1995--corporate earnings growth.
Initially, we anticipate that earnings growth will come about as a result of
the substantial cost-cutting that many European corporations are undergoing
and then, eventually, economic recovery.
The extent of the cost-cutting and corporate restructuring is dramatic.
Management and labor are embarking on programs of a scale not witnessed in
Europe for 20 years. The combination of a political shift to the right, a
prolonged recession, and the new challenge of a skilled and inexpensive
workforce in Eastern
<PAGE>
Europe, has provided company management with the will, as well as the means,
to attack costs.
We believe these measures will gain momentum at the same time that European
economies begin to recover. In our last report, we wrote that the economic
recession in Europe was abating but that a recovery was unlikely before
year's end. Since then, the early signs of recovery have strengthened
considerably and the economy is picking up sooner than expected. The combined
effects should create a stronger environment for European stocks over the
next two to three years.
PACIFIC RIM: RIDING SOUTHEAST ASIA'S TIGER
During 1993, the stock market returns of Hong Kong, Malaysia, and Indonesia
were exceptional by any standards. While these markets flourished, Japan
languished. Low consumer confidence and spending, recurrent government
crises, the threat of deflation, and trade friction with the Clinton
administration added to Japan's woes.
DIVERSIFICATION BY COUNTRY*
Japan 27.4%
....................................
United Kingdom 10.1%
....................................
France 6.2%
....................................
Netherlands 6.2%
....................................
Switzerland 4.3%
....................................
Singapore 3.9%
....................................
Hong Kong 3.3%
....................................
Ireland 2.5%
....................................
Germany 1.9%
....................................
Malaysia 1.9%
....................................
Denmark 1.9%
....................................
Italy 1.8%
....................................
Spain 1.7%
....................................
Sweden 1.5%
....................................
Mexico 1.5%
....................................
Austria 1.5%
....................................
Belgium 0.9%
....................................
Taiwan 0.8%
....................................
Australia 0.8%
....................................
Greece 0.7%
....................................
Argentina 0.5%
....................................
Finland 0.5%
....................................
Portugal 0.4%
....................................
Norway 0.2%
*Based on net assets on 6/30/94. Geographic allocations will vary in the
future.
<PAGE>
Last fall, Japan's situation prompted us to redirect a portion of the fund's
assets from Japan into the Southeast Asian markets. As a result, your fund
was able to benefit from opportunities in those markets as they approached
their peaks. During the winter, we sensed that opportunities might again be
forthcoming in Japan. We began reducing positions in Hong Kong, Singapore,
Malaysia, and Thailand and gradually began diverting the assets back into
Japanese stocks.
This tactical shift helped reduce the performance-dampening effects of a
sudden change in investor sentiment. Early in 1994, the markets of Southeast
Asia underwent a significant correction when investors hastily took profits
after rising U.S. interest rates caused uncertainty in markets around the
world.
> FUND POSITIONED TO BENEFIT FROM CHANGING CURRENCY TRENDS
The one development that surprised markets was on the currency front. Over
the last six months, against consensus expectations, the dollar weakened
against European currencies. Hindsight shows why. The U.S. economy has
strengthened and foreign markets have become disenchanted with the Clinton
administration's tacit support of a weaker dollar to reduce trade deficits.
With a weaker dollar, we phased out the currency hedges we had in place at
midyear and positioned the fund to benefit from stronger overseas currencies.
> OUTLOOK
As the fund enters fiscal 1995, our outlook for foreign stocks is optimistic.
*In Europe, stocks have only partially recovered their previous
underperformance against the U.S. market. In our opinion, valuations remain
attractive. The market's concerns about election results and a potential
political shift to the left have diminished. We will remain focused on
companies that have cut costs, improved productivity, and show the greatest
potential for stronger-than-expected results.
*In Japan, we will be on the watch for slowly improving fundamentals and a
strong recovery in corporate profits over the next 18-24 months.
<PAGE>
TOTAL RETURN IN STOCK MARKETS
6 months ended 6/30/94, net dividends
Local
currency U.S. $
- ---------------------------------------------
U.K. -12.45% -8.66%
.............................................
France -13.59 -6.93
.............................................
Netherlands -7.59 0.55
.............................................
Spain -9.17 -1.36
.............................................
Germany -9.53 -1.29
.............................................
Switzerland -8.81 1.21
.............................................
Japan 14.88 29.98
.............................................
Australia -6.87 0.25
.............................................
Hong Kong -24.11 -24.13
.............................................
Singapore -9.69 -4.72
.............................................
Malaysia -21.50 -18.76
.............................................
United States -3.78 -3.78
.............................................
MSCI EAFE Index -- 8.78
- ---------------------------------------------
Source: Morgan Stanley Capital International.
*Despite the declines recently experienced by the smaller Southeast Asian
markets, their economic fundamentals and corporate earnings outlooks remain
attractive. We are at this time however, limiting our exposure to this region
as we believe the market correction has not yet run its course.
In selecting stocks, we will continue to use our valuation techniques,
looking at the price that we as investors have to pay for corporate assets
and comparing it to the return that we expect to earn. We apply this
valuation technique to growth companies, cyclical companies, and to companies
that are downsizing. We strive to find stocks that we believe are mispriced,
selling significantly below what we believe to be a company's true worth.
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund. We show total return in two
ways: on a cumulative long-term basis and on average how the fund might have
grown each year over varying periods. For comparative purposes, we show how
the fund performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDING 6/30/94
<TABLE>
<CAPTION>
Standard MSCI Consumer
&
Class A Poor's(r) EAFE Price
NAV POP 500 Index Index Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year 25.81% 18.63% 1.43% 17.00% 2.49
- -----------------------------------------------------------------------------
3 years 49.65 41.03 30.59 39.81 8.82
Annual average 14.38 12.14 9.30 11.82 2.86
- -------------------------------------------------------------------------------
Life of fund 41.85 33.64 34.18 24.25 9.79
(since 2/28/91)
Annual average 11.03 9.07 9.20 6.73 2.84
- --------------------------------------------------------------------------------
</TABLE>
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions or, for class A shares, distribution fees
prior to implementation of the class A distribution plan in 1991. Effective
June 1, 1994, the fund began offering class B shares. Performance of share
classes will differ. Performance data represent past results and are not
indicative of future performance. Investment returns and net asset value will
fluctuate so an investor's shares, when sold, may be worth more or less than
their original cost.
(LINE GRAPH: GROWTH OF A $10,000 INVESTMENT)
<TABLE>
<CAPTION>
Fund's Class A
shares at POP MSCI EAFE CPI
<S> <C> <C> <C>
2/28/91 9,425 10,000 10,000
6/30/91 8,930 8,887 10,089
6/30/92 9,780 8,829 10,401
6/30/93 10,623 10,620 10,712
6/30/94 13,364 12,425 10,979
</TABLE>
<PAGE>
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance figures
shown here assume the maximum 5.75% sales charge.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of shares and assumes redemption at the end of the period.
Your fund's CDSC declines from a 5% maximum during the first year to 1%
during the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
The Europe, Australia and the Far East (EAFE) component of the Morgan Stanley
Capital International (MSCI) 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. 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.
Standard & Poor's 500 Index is an unmanaged list of large-capitalization
common stocks and assumes reinvestment of all distributions. The index is a
widely used measure of stock market performance and does not take into
account brokerage commissions or other costs. The fund's portfolio contains
securities that do not match those in the index.
Consumer Price Index is a commonly used measure of inflation; it does not
represent an investment return.
<PAGE>
The Putnam Fund Selector(TM)
The Putnam Fund Selector shows the many opportunities for investors within
every investment strategy. All investors should first accumulate a base of
conservative, cash-equivalent investments. Then, with the help of your
investment advisor, diversify your portfolio by investing in the Putnam
Family of Funds.
(Graphic: RISK/REWARD Pyramid)
RISK/REWARD
PUTNAM
GROWTH
FUNDS
PUTNAM GROWTH
AND INCOME FUNDS
PUTNAM INCOME
OR TAX-FREE INCOME
FUNDS
MOST CONSERVATIVE INVESTMENTS
<PAGE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Fund
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH
AND INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds*
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS+
Putnam money market funds:
California Tax Exempt Money Market Fund
Daily Dividend Trust
New York Tax-Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts++
*Not available in all states.
+Relative to above.
++Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
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. Read it carefully
before you invest or send money.
<PAGE>
Report of Independent Accountants
For the Fiscal Year Ended June 30, 1994
To the Trustees and Shareholders of Putnam Overseas Growth Fund
We have audited the accompanying statement of assets and liabilities of
Putnam Overseas Growth Fund, including the portfolio of investments owned, as
of June 30, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and the "Financial Highlights" for each of the three
years in the period then ended and for the period February 28, 1991
(commencement of operations) to June 30, 1991 for class A shares and for the
period June 1, 1994 (commencement of operations) to June 30, 1994 for class B
shares. These financial statements and "Financial Highlights" are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and "Financial Highlights" based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
"Financial Highlights" are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1994 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and "Financial Highlights" referred
to above present fairly, in all material respects, the financial position of
Putnam Overseas Growth Fund as of June 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the "Financial Highlights" for
each of the three years in the period then ended and for the period February
28, 1991 (commencement of operations) to June 30, 1991 for class A shares and
for the period June 1, 1994 (commencement of operations) to June 30, 1994 for
class B shares, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 17, 1994
<PAGE>
Portfolio of investments owned
June 30, 1994
<TABLE>
<CAPTION>
Common Stocks (82.1%)(a)
Number of Shares Value
- -------------------------------------------------------------------
Japan (27.4%)(b)
- -------------------------------------------------------------------
<C> <S> <C>
5,000 Best Denki Co., Ltd. (c) $ 89,368
3,000 CSK Corp. (c) 115,771
124 Chain Store Okuwa Co., Ltd. 2,644
8,000 Daiwa Securities Ltd. 140,550
11,000 Fujitsu, Ltd. (c) 126,232
3,000 Futaba Industrial Co., Ltd. 155,073
1,000 Ito Yokado Ltd. 55,347
2,000 Japan CBM Corp. (c) 84,290
14,000 Komatsu, Ltd. 136,489
4,000 Komori Corp. 126,722
5,000 Kurita Water Ltd. 146,745
6,000 Matsushita Electric Ind. Ltd. 110,287
11,000 Mitsubishi Cable Ind. Ltd. 95,400
16,000 Mitsubishi Motors Corp. (c) 159,237
6,000 Mitsui Fudosan Co., Ltd. 73,119
3,000 Murata Manufacturing Co. Ltd. 141,363
6,000 Nippondenso Co., Ltd. (c) 126,130
25,000 Nisshin Steel Co., Ltd. 113,740
8,000 Omron Corp. 143,800
12,000 Rengo Co, Ltd. (c) 108,216
5,000 Rikei Corp. (c) 80,736
100 Santen Pharmaceutical Co., Ltd. 2,437
2,000 Sony Corp. (c) 122,880
4,000 Taihei Dengyo (c) 116,990
5,000 Takuma Co., Ltd. (c) 96,476
8,000 Tokio Marine & Fire Insurance Co.
(c) 103,178
17,000 Toray Industries, Inc. (c) 128,444
2,000 Toyo Seikan Kaisha (c) 64,994
8,000 Yamato Transport Co., Ltd. (c) 106,428
-------------
3,073,086
Number of Shares Value
- -------------------------------------------------------------------
United Kingdom (10.1%)(b)
- -------------------------------------------------------------------
15,000 Argyll Group PLC $ 53,252
22,300 Associated British Ports PLC 85,362
5,700 BAT Industries PLC 35,192
45,200 British Steel PLC 99,069
7,150 Burmah Oil 95,572
3,000 East Midlands Electric PLC 27,829
8,500 General Electric Co. (The) PLC 36,933
3,200 Guinness PLC 21,584
12,700 Molins PLC 111,735
14,661 North West Water Group PLC 107,263
9,600 Pearson PLC 86,831
5,300 Rothmans International
Units (c) 29,695
5,100 Royal Insurance Holdings PLC 19,522
2,850 Securicor Group PLC Class A 34,532
7,000 Security Services PLC 65,692
29,000 Senior Engineering Group PLC 54,274
4,600 Shell Transportation & Trading
Co. PLC 48,281
5,000 South Western Electric PLC 47,463
11,100 Tate & Lyle PLC 70,073
-------------
1,130,154
France (6.2%)(b)
- -------------------------------------------------------------------
630 Credit Local de France 43,213
350 Docks de France 41,063
1,500 Elf Aquitaine 104,708
1,000 Essilor Intl. Pfd. ADP 98,382
1,700 Michelin Class B (c) 70,651
585 Pechiney International 16,298
650 Societe Generale D'Enterprises 66,817
200 Societe Generale D'Enterprises 7,668
300 Sommer-Allbert 102,887
1,200 Sovac 117,837
53 Zodiac SA 21,393
-------------
690,917
<PAGE>
Number of Shares Value
- -------------------------------------------------------------------
Netherlands (6.2%)(b)
- -------------------------------------------------------------------
1,591 ABN AMRO Holding N.V. $ 52,693
925 Aegon N.V. (Bearer) 47,488
1,200 Akzo N.V. 128,880
5,564 Getronics Electric N.V. 136,409
1,500 IHC Caland N.V. 30,702
3,000 Randstad Holdings (c) 134,615
1,400 Royal Ptt Nederland N.V. (c) 39,204
2,000 Wolters Kluwer N.V. 118,646
-------------
688,637
Switzerland (4.3%)(b)
- -------------------------------------------------------------------
56 BBC Brown Boveri AG (Bearer) 49,313
35 Baer Holding AG (c) 36,754
35 Baer Holding AG Rights (c) 1,417
100 Ciba-Geigy AG (Registered) 59,181
155 Georg Fischer (Bearer) (c) 159,860
28 Nestle SA (Registered) 23,585
60 Rieter Holdings Ltd. AG 74,482
25 Rieter Holdings Ltd. AG 5,532
30 SGS Societe Generale De
Surveillance Holdings SA 44,779
110 Swiss Bank Corp. (Registered) 16,048
-------------
470,951
Singapore (3.9%)(b)
- -------------------------------------------------------------------
12,000 Cycle & Carriage Ltd. 89,687
5,000 Genting Berhad 59,531
56,000 Informatics Holdings Ltd. 82,606
5,000 Jurong Shipyard Ltd. 44,254
7,000 Singapore Airlines Ltd. 57,825
9,750 United Overseas Bank
Ltd. (c) 77,984
475 United Overseas Bank Ltd. Rights
(c) 2,351
7,000 Venture Manufacturing Ltd. 15,145
2,800 Venture Manufacturing Ltd. Rights
(c) 1,285
-------------
430,668
Number of Shares Value
- -------------------------------------------------------------------
Hong Kong (3.3%)(b)
- -------------------------------------------------------------------
4,000 Cheung Kong Holdings Ltd. $ 17,466
9,000 Guoco Group Ltd. 38,425
8,800 HSBC Holdings PLC 97,243
13,000 Hong Kong Land Holdings Ltd. 32,796
12,800 Jardine Matheson Holdings Ltd. 98,533
4,000 Swire Pacific Ltd. Class A 28,722
40,000 Varitronix International Ltd. 61,584
-------------
374,769
Ireland (2.5%)(b)
- -------------------------------------------------------------------
15,144 Allied Irish Banks 54,968
14,000 Bank of Ireland 55,087
25,000 CRH PLC 123,915
10,000 Greencore PLC 51,091
-------------
285,061
Germany (1.9%)(b)
- -------------------------------------------------------------------
550 BASF AG 105,769
80 Spar Handels AG 18,411
300 VEBA AG 94,672
-------------
218,852
Malaysia (1.9%)(b)
- -------------------------------------------------------------------
19,000 Development & Commercial Bank 43,419
2,000 Genting Berhad 23,812
23,000 Hong Leong Industries Berhad 104,236
15,500 Pilecon Engineering Berhad 23,337
5,000 United Engineers Berhad 20,164
-------------
214,968
Denmark (1.9%)(b)
- -------------------------------------------------------------------
800 Danisco A/S 118,110
750 NKT Holdings 34,903
2,400 Tele Danmark A/S ADR (c) 59,100
-------------
212,113
<PAGE>
Number of Shares Value
- -------------------------------------------------------------------
Italy (1.8%)(b)
- -------------------------------------------------------------------
15,000 Banca Commerciale Italiana $ 43,421
4,950 Danieli & Co. 35,155
14,300 Danieli & Co. (Savings Shares) 53,501
13,600 Fiat Privilege SPA 33,935
6,000 Instituto Mobiliare Italiano 40,634
-------------
206,646
Spain (1.7%)(b)
- -------------------------------------------------------------------
880 Argentaria ADS 34,260
1,000 Hidrolectrica del Cantabrico 29,771
1,700 Inmobiliaria Metropolitana Vasco
Central 60,214
2,500 Repsol S.A. 72,138
-------------
196,383
Sweden (1.5%)(b)(c)
- -------------------------------------------------------------------
3,000 Arjo AB 51,337
2,600 Autoliv AB 59,096
30,000 Foreningsbanken AB 61,134
-------------
171,567
Mexico (1.5%)(b)
- -------------------------------------------------------------------
1,200 Grupo Embotellador De Mexico SA
de CV 30,300
2,750 Grupo Financiero Banacci
(Registered) 17,400
1,400 Grupo Financiero Serfin SA de CV
ADR 24,675
600 Grupo Iusacell SA Ser. D ADR (c) 15,825
1,400 Grupo Iusacell SA Ser. L ADR (c) 36,400
500 Grupo Televisa SA ADS 25,375
350 Tolmex SA de CV 1,500
600 Transportacion MaritimaMexicana,
SA ADS 4,575
2,200 Transportacion MaritimaMexicana,
SA Class A ADS 15,400
-------------
171,450
Number of Shares Value
- -------------------------------------------------------------------
Austria (1.5%)(b)
- -------------------------------------------------------------------
1,400 Austria Mikro Systeme
Intl. (d) $ 80,721
2,500 Mayr-Melnhof Karton AG ADS (c)(d) 37,500
625 VA Technologie AG (c) 51,560
-------------
169,781
Belgium (0.9%)(b)
- -------------------------------------------------------------------
145 Bekaert SA 106,611
Taiwan (0.8%) (b)
- -------------------------------------------------------------------
3,000 Hocheng Group Corp.(c)(d) 91,500
Australia (0.8%)(b)
- -------------------------------------------------------------------
7,400 Amcor, Ltd. 48,733
1,600 CRA Ltd. 20,748
10,128 MIM Holdings Ltd. 21,250
115 Western Mining Holdings, Ltd. 604
-------------
91,335
Greece (0.7%)(b)
- -------------------------------------------------------------------
1,000 Credit Bank of Athens 39,683
3,500 Greek Progress Fund 36,111
-------------
75,794
Argentina (0.5%)(b)
- -------------------------------------------------------------------
2,300 Banco Del Sud Class B
(Registered) 33,891
2,436 Ciadea 26,860
-------------
60,751
Portugal (0.4%)(b)
- -------------------------------------------------------------------
400 Banco Commercial Portugues, S.A.
(Registered) 4,948
2,295 Banco Totta and Accores (BTA)
Nationalisert 41,810
-------------
46,758
<PAGE>
Number of Shares Value
- -------------------------------------------------------------------
Norway (0.2%)(b)
- -------------------------------------------------------------------
1,500 Christiana Bank OG Kreditkass ADR
(c)(d) $ 27,750
Finland (0.2%)(b)
- -------------------------------------------------------------------
1,750 Effjohn OY Ser. A (Bearer) 27,154
- -------------------------------------------------------------------
Total Common Stocks
(cost $8,543,796) $9,233,656
- -------------------------------------------------------------------
Foreign Bonds and Notes (0.3%) (a)(b)
(cost $29,533)
- -------------------------------------------------------------------
Principal Amount Value
- -------------------------------------------------------------------
Finland
- -------------------------------------------------------------------
FIM150,000 Effjohn OY-AB
Cv. bond 7s, 2004 $ 26,681
- -------------------------------------------------------------------
Warrants (--%)(a)(b)(c)(cost $--)
- -------------------------------------------------------------------
Expiration
Number of Warrants Date Value
- -------------------------------------------------------------------
Malaysia (--%)
- -------------------------------------------------------------------
5,167 Pilecon Engineering
Berhad 12/31/99 $784
- -------------------------------------------------------------------
Short-Term Investments (25.5%)(a)
(cost $2,874,339)
Principal Amount Value
- ------------------------------------------------------------------
$2,874,000 Interest in $410,000,000
joint repurchase
agreement dated June 30,
1994 with Goldman Sachs &
Co., Inc. due July 1, 1994
with respect to various
U.S. Treasury
obligations--maturity
value of $2,874,339 for an
effective yield of 4.25% $ 2,874,339
- ------------------------------------------------------------------
Total Investments
(cost $11,447,668)(e) $12,135,460
- ------------------------------------------------------------------
</TABLE>
(a) Percentages indicated are based on total net assets of $11,251,276, which
correspond to a net asset value per share for class A and class B
shareholders of $11.83 and $11.82, respectively.
(b) Securities whose 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 foreign securities on deposit
with a domestic custodian bank.
(c) Non-income-producing security.
(d) 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 June 30,1994,
these securities amounted to $237,471 or 2.1% of net assets.
(e) The aggregate identified cost on a tax basis is $11,459,119, resulting in
gross unrealized appreciation and depreciation of $1,359,585 and $683,244,
respectively, or net unrealized appreciation of $676,341.
<PAGE>
Percentage of net assets invested in foreign countries at June 30, 1994:
Japan 27.4% Spain 1.7%
United Kingdom 10.1 Sweden 1.5
France 6.2 Mexico 1.5
Netherlands 6.2 Austria 1.5
Switzerland 4.3 Belgium 0.9
Singapore 3.9 Taiwan 0.8
Hong Kong 3.3 Australia 0.8
Ireland 2.5 Greece 0.7
Germany 1.9 Argentina 0.5
Malaysia 1.9 Finland 0.5
Denmark 1.9 Portugal 0.4
Italy 1.8 Norway 0.2
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of assets and liabilities
June 30, 1994
<TABLE>
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $8,573,329) (Note 1) $ 9,261,121
Repurchase agreement, at value (identified cost $2,874,339) (Note 1) 2,874,339
Dividends, interest and other receivables 22,086
Receivable for securities sold 48,216
Receivable for shares of the fund sold 619,860
Receivable from Manager (Note 2) 2,632
Unamortized organization expenses (Note 1) 4,730
- ----------------------------------------------------------------------------------------------
Total assets 12,832,984
Liabilities
Payable for securities purchased $ 1,558,633
Payable to the subcustodian (Note 2) 3,784
Payable for shares of the fund repurchased 1,897
Payable for investor servicing and custodian fees (Note 2) 6,923
Payable for administrative services (Note 2) 10
Payable for distribution fees--class A (Note 2) 3,320
Payable for distribution fees--class B (Note 2) 757
Payable for compensation of Trustees (Note 2) 101
Other accrued expenses 6,283
- ----------------------------------------------------------------------------------------------
Total liabilities 1,581,708
- ----------------------------------------------------------------------------------------------
Net assets $11,251,276
Represented by
- ---------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $10,221,101
Accumulated net realized gain on investment transactions 340,990
Net unrealized foreign currency translation gain 1,393
Net unrealized appreciation of investments 687,792
- ----------------------------------------------------------------------------------------------
Total--Representing net assets applicable to capital shares outstanding $11,251,276
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares ($8,781,002 divided
by 742,421 shares) $11.83
-------------
Offering price per share (100/94.25 of $11.83)* $12.55
Net asset value and offering price of class B shares ($2,470,274 divided by
209,041 shares)+ $11.82
- ---------------------------------------------------------------------------------------------
</TABLE>
*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 defferred sales charge.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of operations
Year ended June 30, 1994
<TABLE>
<S> <C>
Investment income:
- --------------------------------------------------------------------------------
Dividends (net of foreign tax of $8,170) $ 82,999
Interest 491
- ---------------------------------------------------------------------------------
Total investment income $ 83,490
Expenses:
- --------------------------------------------------------------------------------
Compensation of Manager (Note 2) $ 32,861
Investor servicing and custodian fees (Note 2) 34,481
Reports to shareholders 130
Compensation of Trustees (Note 2) 1,402
Administrative services (Note 2) 40
Distribution fees--class A (Note 2) 13,641
Distribution fees--class B (Note 2) 757
Auditing 10,702
Legal 13,038
Postage 139
Registration fees 3,033
Amortization of organization expenses (Note 1) 2,794
Other 978
Fees waived by Manager (Note 2) (22,860)
- ---------------------------------------------------------------------------------
Total expenses 91,136
- ---------------------------------------------------------------------------------
Net investment loss (7,646)
- ---------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 587,507
Net realized gain on foreign currency (Note 1) 744
Net realized loss on forward currency contracts (Notes 1 and 3) (3,601)
Net unrealized foreign currency translation gain during the year 1,884
Net unrealized appreciation of investments and forward currency
contracts during the year 227,688
- ---------------------------------------------------------------------------------
Net gain on investments 814,222
- ---------------------------------------------------------------------------------
Net increase in net assets resulting from operations $806,576
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Year ended June 30
------------------------------
1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ (7,646) $ 20,199
Net realized gain (loss) on investments 587,507 (71,834)
Net realized gain on foreign currency 744 --
Net realized loss on options -- (303)
Net realized loss on forward currency contracts (3,601) (26,175)
Net unrealized foreign currency translation gains
(losses) 1,884 (1,153)
Net unrealized appreciation of investments and
forward currency contracts 227,688 305,046
Net increase in net assets resulting from operations 806,576 225,780
Distributions to shareholders from:
Net realized gain on investments--class A (Note 1) (70,167) --
Increase from capital share transactions (Note 4) 7,656,085 130,947
- --------------------------------------------------------------------------------------
Total increase in net assets 8,392,494 356,727
Net assets
- -------------------------------------------------------------------------------------
Beginning of year 2,858,782 2,502,055
End of year (including undistributed net investment
income of $0 and $23,084, respectively) $11,251,276 $2,858,782
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights*
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
June 1, 1994 For the period
(commencement February 28, 1991
of (commencement
operations) to of operations) to
June 30 Year ended June 30 June 30
- --------------------------------------------------------------------------------------------------------
1994 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
Class B Class A
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.78 $ 9.58 $ 8.82 $ 8.18 $ 8.63
Investment operations
Net investment income
(loss) (.01)(a)(b) (.06)(a) .07(a) .06 .07(a)
Net realized and
unrealized gain (loss)
on investments .05 2.53 .69 .71 (.52)
Total from investment
operations .04 2.47 .76 .77 (.45)
Distributions to
shareholders from:
Net investment income -- -- -- (.13) --
Net realized gain on
investments -- (.22) -- -- --
Total distributions -- (.22) -- (.13) --
Net asset value, end of
period $11.82 $11.83 $ 9.58 $ 8.82 $ 8.18
Total investment return
at net asset value (%)
(c) 7.50(d) 25.81 8.62 9.52 (15.32)(d)
Net assets, end of period
(in thousands) $2,470 $8,781 $2,859 $2,502 $ 2,054
Ratio of expenses to
average net assets (%) 1.80(a)(b)(d) 2.17(a) 1.80(a) 1.98 2.33(a)(d)
Ratio of net investment
income (loss) to
average net assets (%) (.75)(a)(b)(d) (.17)(a) .81(a) .76 2.57(a)(d)
Portfolio turnover (%) 96.13(e) 96.13 80.92 82.45 14.54(e)
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Financial highlights for periods ended through June 30, 1992 have been
restated to conform with requirements issued by the SEC in April 1993.
(a)Reflects a voluntary expense limitation applicable during the period. As a
result of such limitation, expenses for class A shares of the fund for the
periods ended June 30, 1994, June 30, 1993, and June 30, 1991 reflect per
share reductions of approximately $0.03, $0.05, and $0.10, respectively.
Expenses for class B shares of the fund for the period ended June 30, 1994
reflect a reduction of less than $0.01 per share.
(b)Per share net investment income for the period ended June 30, 1994 has been
determined on the basis of the weighted average number of shares outstanding
for the period.
(c)Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d)Annualized.
(e)Not annualized.
<PAGE>
Notes to financial statements
June 30, 1994
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 equity securities of companies
located outside North America.
The fund offers both class A and class B shares. The fund commenced its
public offering of class B shares on June 1, 1994. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class
A shares, and may be subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Expenses of the fund are
borne pro-rata by the holders of both classes of shares, except that each
class bears expenses unique to that class (including the distribution fees
applicable to such class) and 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 should 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
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 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 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 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.
<PAGE>
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. The order permits the fund's cash
balance to be deposited into a single joint 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 on foreign currency amounting to the difference between the original
value and the ending value of the receivable or payable. Foreign currency
gains and losses related to interest receivable are reported as part of
interest income.
E) Option accounting principles When the fund writes a call or put option, an
amount equal to the premium received by the fund is included in the fund's
"Statement of assets and liabilities" as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The current market
value of an option is the last sale price or, in the absence of a sale, the
last offering price, except that certain options on U.S. government
obligations are stated at fair value on the basis of valuations furnished by
a pricing service approved by the Trustees. If an option expires on its
stipulated expiration date, or if the fund enters into a closing purchase
transaction, the fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the
<PAGE>
liability related to such option is extinguished. If a written call option is
exercised, the fund realizes a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received reduces the cost of the security which the fund purchases
upon exercise of the option.
The fund writes covered call options; that is, options for which it holds the
underlying security or its equivalent. Accordingly, the risk in writing a
call option is that the fund relinquishes the opportunity to profit if the
market price of the underlying security increases and the option is
exercised. In writing a put option, the fund assumes the risk of incurring a
loss if the market price of the underlying security decreases and the option
is exercised.
The premium paid by the fund for the purchase of a call or put option is
included in the fund's "Statement of assets and liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of
the option. If an option the fund has purchased expires on the stipulated
expiration date, the fund realizes a loss in the amount of the cost of the
option. If the fund enters into a closing sale transaction, the fund realizes
a gain or loss, depending on whether proceeds from the closing sale
transaction are greater or less than the cost of the option. If the fund
exercises a call option, the cost of the securities acquired by exercising
the call is increased by the premium paid to buy the call. If the fund
exercises a put option, it realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are decreased by the
premium originally paid.
Options on foreign currencies The fund writes and purchases put and call
options on foreign currencies. The accounting principles and risks involved
are similar to those described above relating to options on securities. The
amount of potential loss to the fund upon exercise of a written call option
is the value (in U.S. dollars) of the currency sold, converted at the spot
price, less the value of U.S. dollars received in exchange. The amount of
potential loss to the fund upon exercise of a written put option is the value
(in U.S. dollars) of the currency received converted at the spot price, less
the value of the U.S. dollars paid in exchange.
<PAGE>
Forward currency contracts A forward currency contract ("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 such
contracts is the aggregate face value in U.S. dollars at the time the
contract was opened; however, management of the fund believes the likelihood
of such a loss to be remote.
The fund may enter into forward foreign currency contracts in connection with
planned purchases or sales of securities or to hedge the U.S. dollar value of
portfolio securities denominated in a particular currency. The fund will not
enter into contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the fund to deliver an amount of
foreign currency in excess of the value of the fund's securities or other
assets denominated in that currency.
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 are recorded
by the fund on the ex-dividend date. The amount and character of income and
gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include treatment of wash sales, foreign currency gains and
losses, and post October loss deferrals. Reclassifications are made to the
Fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For the
year ended June 30, 1994, the Fund reclassified $59,082 to increase
undistributed net investment income, $59,232 to decrease accumulated net
realized gain on investments, and $150 to increase paid-in capital.
<PAGE>
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 $14,123. 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 Investment Management for management and investment
advisory services is paid quarterly based on the average net assets of the
fund for the quarter. Such fee is an annual rate of 0.80% of the first $500
million of average net assets, 0.70% of the next $500 million, 0.65% of the
next $500 million, and 0.60% of any amount over $1.5 billion subject to
reduction in any year by the amount of certain brokerage commissions and fees
(less expenses) received by affiliates of the Manager on the fund's portfolio
transactions.
Until December 31, 1994, the Manager has voluntarily agreed to reduce its
compensation to the extent that expenses of the fund exceed 1.90% of average
net assets. The fund's expenses subject to this limitation are exclusive of
brokerage, interest, taxes, amortization of deferred organizational and
extraordinary expenses, and payments required under the fund's Distribution
Plans. This limitation is accomplished by a reduction of the compensation
payable to the Manager and, if necessary, payment of additional Fund expenses
by the Manager. For the year ended June 30, 1994, the fund's expenses were
reduced by $22,860. For the purpose of determining any such reduction in
Putnam Management's compensation, expenses of the fund do not reflect the
application of commissions or cash management credits that may reduce
designated fund expenses.
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 year ended
June 30, 1994, the fund paid $40 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 year
ended June 30, 1994 amounted to $34,481.
<PAGE>
Investor servicing and custodian fees reported in the Statement of operations
for the year ended June 30, 1994 have been reduced by credits allowed by
PFTC.
As part of the custodian contract between Putnam Fiduciary Trust Company and
the subcustodian bank, the subcustodian has a lien on the securities of the
fund to the extent permitted by the fund's investment restrictions to cover
any advances made by the subcustodian for the settlement of securities
purchased by the fund. At June 30, 1994, the payable to subcustodian
represents the amount due for cash advanced for the settlement of a security
purchase.
The fund has adopted a distribution plan with respect to its class A shares
(the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The purpose of Class A Plan 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 class A shares. The
Trustees have approved payment by the fund to Putnam Mutual Funds Corp. at an
annual rate of 0.25% of the fund's average net assets attributable to class A
shares. For the year ended June 30, 1994, the fund paid $13,641 in
distribution fees for class A shares.
During the year ended June 30, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, received net commissions of $6,203 from the sale of class A
shares of the fund.
A deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares purchased as part of an investment of $1 million or more. For
the year ended June 30, 1994, Putnam Mutual Funds Corp., acting as
underwriter, received no such charge.
The fund has adopted a separate distribution plan with respect to its class B
shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The purpose of the Class B Plan is to compensate Putnam
Mutual Funds Corp. for services provided and expenses incurred by it in
distributing Class B shares. The Class B Plan provides for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate of 1.00% of the funds
average net assets attributable to Class B shares. From June 1, 1994
(commencement of operations) to June 30, 1994, the fund incurred fees of $757
for class B shares.
Putnam Mutual Funds Corp. also receives the proceeds of contingent deferred
sales charges levied on class B share redemptions within six years of
purchase. The charge is based on declining rates, which begin at 5.0% of the
net asset value of the redeemed shares. Putnam Mutual Funds Corp. received no
contingent deferred sales charges from such redemptions for the period June
1, 1994 (commencement of operations) to June 30, 1994.
<PAGE>
Note 3
Purchases and sales of securities
During the year ended June 30, 1994, purchases and sales of investment
securities other than short-term investments aggregated $9,479,600 and
$3,879,455, 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:
<TABLE>
<CAPTION>
Sales of Forward Currency Contracts
- --------------------------------------------------------------------------------
Number of
contracts Aggregate Face Value
<S> <C> <C>
Contracts outstanding at beginning of year 1,769 $ 576,226
- --------------------------------------------------------------------------------
Contracts opened 5,580 1,508,746
Contracts closed (7,349) (2,084,972)
- --------------------------------------------------------------------------------
Open at end of year -- $ --
- --------------------------------------------------------------------------------
</TABLE>
Note 4
Capital shares
At June 30, 1994, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Year ended June 30
- -------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 507,115 $5,922,768 15,778 $138,604
- -------------------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 6,134 70,166 -- --
- -------------------------------------------------------------------------------------------
513,249 5,992,934 15,778 138,604
Shares repurchased (69,326) (789,703) (911) (7,657)
- -------------------------------------------------------------------------------------------
Net increase 443,923 $5,203,231 14,867 $130,947
- -------------------------------------------------------------------------------------------
</TABLE>
From June 1, 1994
(commencement of
operations)
to June 30, 1994
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 209,041 $2,452,854
- ----------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- --
- ----------------------------------------------------------------
209,041 2,452,854
Shares repurchased -- --
- ----------------------------------------------------------------
Net increase 209,041 $2,452,854
- ----------------------------------------------------------------
<PAGE>
Note 5
Reclassification of capital account
Effective July 1, 1993, Putnam Overseas Growth Fund has adopted the
provisions of Statement of Position 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies (SOP)." 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 $74,520 to increase
distributions in excess of net investment income and $83,781 to increase
accumulated net realized gain with a decrease of $9,261 to additional paid in
capital.
These adjustments represent the cumulative amounts necessary to report these
balances through June 30, 1993.
<PAGE>
Federal tax information
The fund paid a long term capital gain of $.215 per share for the year ended
June 30, 1994.
The Form 1099 you receive in January 1995 will show you the tax status of all
distributions, if any, paid to your account in calendar year 1994.
As required by law, your fund reports to the Internal Revenue Service on a
calendar year basis the amount of distributions paid to each shareholder.
The fund has elected under Section 853 of the Internal Revenue Code to pass
through to its shareholders the opportunity to claim a foreign tax credit or
deduction. Therefore, you will be deemed to have received in your December
1994 dividend the allocable amount of foreign taxes and to have paid those
taxes directly. When you file your federal income tax return (Form 1040), you
may claim the amount of foreign taxes paid either as a foreign tax credit or
as an itemized deduction but not both. A foreign tax credit will generally
result in a direct reduction in your U.S. tax liability, subject to the
limitations of Section 904 of the Code. The amount of your foreign tax credit
will be reflected on the Form 1099 that you will receive after December 31,
1994. During the year ended June 30, 1994, the fund earned $91,169 from
foreign countries and paid $8,170 in taxes to those foreign countries.
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
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
Anthony W. Regan
Vice President
Justin Scott
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Overseas 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
Putnam Quarterly Performance Summary.
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APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) are omitted.
(3) Certain tabular and columnar headings and symbols are
displayed differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Trademark symbol replaced with (TM)
