Putnam
International
Growth
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
6-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
After nearly a decade of ennui, the Japanese economy and stock market
finally have begun showing signs of renewal in recent months. The managers
of Putnam International Growth Fund, who have long been watching closely
for such signals, have responded by identifying and acting upon what they
regard as some potentially promising opportunities there.
Meanwhile, other Asian economies, more recent casualties of market
turmoil, have similarly rebounded along with other emerging markets. The
managers also see future potential in Europe's currently lackluster equity
markets.
Such has been the environment in which your fund's management team
operated during the fiscal year that ended on June 30, 1999. In the
following report, the managers review the fund's strategy and performance
during the period and offer their insights into prospects for the new
fiscal year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
August 18, 1999
Report from the Fund Managers
Omid Kamshad
Mark D. Pollard
Justin M. Scott
Paul Warren
In the 1990s, international investors often envied the dominance of the
U.S. market while lamenting the Japanese market's inability to mount any
sustainable gains. The inefficiencies of Japan's economy and companies
held it back for much of the decade. However, during Putnam International
Growth Fund's fiscal year that ended June 30, 1999, genuine corporate
restructuring began to emerge in Japan and international investors were
finally able to benefit from a sustained rally in Japanese equities.
Unfortunately, over this period, European markets did not echo Japan's
optimistic mood. Although there was a rally in the major markets after the
sharp global market correction in the second half of 1998, European
markets turned in a flat performance in the first half of calendar 1999,
due in part to the depreciation of the new euro -- down about 15% relative
to the U.S. dollar at fiscal year's end.
Nevertheless, in this up-and-down market atmosphere, your fund's results
at net asset value for the period were well ahead of the 7.62% provided by
the fund's benchmark, the Morgan Stanley Capital International Europe,
Australasia, Far East Index. In general, your fund's showing was the
result of strong stock picking in Japan, France, and Germany and a
fortuitous shift into industrial sectors that are now benefiting from the
uptick in world economic growth.
Total return for 12 months ended 6/30/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------
11.57% 5.15% 10.75% 5.75% 10.97% 7.09%
- ----------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 7.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
Japan 18.2%
United Kingdom 16.1%
France 11.3%
Germany 7.5%
The Netherlands 6.1%
Footnote reads:
*Based on net assets as of 6/30/99. Holdings will vary over time.
* MOVE TO JAPANESE STOCKS REFLECTS IMPROVED INVESTOR SENTIMENT
We believe the most significant development over the fiscal year was our
decision to increase the fund's weighting in Japanese stocks. It reflects
the fact that Japanese companies are finally beginning to respond to the
country's poor economic environment by increasing restructuring efforts,
focusing on return on equity and profitability, and attempting to add
value for shareholders. A number of major companies such as Sony, Toshiba,
and NEC have announced plans to reduce staff and costs dramatically. At
the same time, merger and acquisition activity has increased
substantially. According to the July 13, 1999, edition of the Financial
Times, the value of Japanese M&A activity rose 177% in the first half of
1999 to $57 billion. Cross border deals also tripled to $17 billion. This
combination of restructuring and M&A activity is creating attractive
investment opportunities.
We took advantage of these opportunities primarily through positions in
Japanese technology and telecommunications companies. We've found the
managers at many of these companies to be younger, more entrepreneurial,
and more willing to think globally than many of their older counterparts.
Companies such as Fujitsu, Nippon Telephone and Telegraph, and Murata
Manufacturing not only are strong players in surging global industries but
they are also taking the steps necessary to raise shareholder value.
We've also targeted Japanese financial companies such as Nikko Securities
that offer strong growth potential and that are shareholder-friendly. Like
an increasing number of other Japanese companies, Nikko has initiated
far-reaching plans to boost revenues, setting three-year targets of 15%
return on equity (an important measure of profitability and efficiency)
and planning staff reductions of 20%. Citigroup's 15% stake in the company
also contributed to the stock's recent rally. While these holdings, along
with others discussed in this report, were viewed favorably at the end of
the period, all are subject to review and adjustment in accordance with
the fund's investment strategy and may vary in the future.
* EUROPEAN MARKETS RECORD FLAT PERFORMANCE BUT EXUDE POTENTIAL
Europe's much-anticipated Economic and Monetary Union (EMU) and its new
euro got off to a smooth start at the beginning of the year. As the year
progressed, however, economic indicators revealed increasing weakness in
the Continent's industrial sectors and political infighting indicated a
lack of coordination among European policymakers. Furthermore, there
appeared to be a lack of monetary policy direction on the part of the new
European Central Bank. All three factors served to drive the value of the
euro down about 15% relative to the U.S. dollar. The resulting weakness in
the euro served to hurt the returns of dollar-based investments such as
your fund and resulted in a flat performance from the European markets.
Morningstar gave Putnam International Growth Fund's class A shares its
highest ranking of 5 stars for 3-year performance as of June 30, 1999. This
rating put the fund among the top 10% of the 987 international equity funds
rated.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 6/30/99 and are subject to change
every month. Morningstar ratings are calculated from a fund's 3-, 5-, and
10-year returns (with fee adjustments) in excess of 90-day Treasury bill
returns and a risk factor that reflects performance below 90-day Treasury
bill returns. For the 5-year performance, the fund received 4 stars. There
were 498 international equity funds rated. The top 10% of the funds in an
investment category receive 5 stars; the next 22.5% receive 4 stars.
Performance of other share classes will vary.
Our strategy in Europe was to identify companies that are undergoing
corporate restructuring and those with pricing power within their
industries. In addition, we also began to seek large, exporting industrial
companies that stand to benefit from the weakness of the euro as well as
the growing world economy. Some examples include oil giant Elf Aquitaine
(which following the close of the period was subject to a takeover attempt
from fellow French oil firm TotalFina) and U.S./German automaker
DaimlerChrysler.
Mergers and hostile takeovers are reshaping corporate Europe
Mergers and acquisitions activity involving European companies continues to
grow at an astounding pace and your fund has benefited in several instances.
According to Morgan Stanley Dean Witter and JP Morgan, the $654 billion in
European M&A activity in the first half of 1999 could not only break last
year's level of $870 billion, but also surpass the record of $1.3 trillion.
Shareholders should realize that this level of M&A activity, as well as the
presence of once unknown tactics like hostile takeovers, is truly
unprecedented in Europe.
Your fund was a shareholder in Telecom Italia (sold prior to the end of the
period), won by Olivetti after a long and often dramatic hostile takeover
fight that involved German giant Deutsche Telecom. In this well publicized
battle, fund holding Mannesmann of Germany was able to enhance its development
of a formidable fixed and cellular telecommunications franchise with the
purchase of Olivetti's fixed and cellular businesses, which Olivetti sold
during its attempts to acquire Telecom Italia.
Another large European company that epitomized our investment themes
during the reporting period was Hoechst in Germany. The company is
remaking itself from a diversified chemical company into a pure life
sciences company, i.e., focusing more on biotechnology and pharmaceuticals
and away from industrial chemicals. This move has unleashed great value
for Hoechst's shareholders in that its life sciences business is priced at
a fraction of the values assigned to other pure life sciences companies.
In addition, Hoechst plans to merge with Rhone-Poulenc of France to form
the world's largest life sciences company.
We also focused on advertising and media companies, whose revenues tend to
rise as economies strengthen. In this regard, we targeted companies such
as leading French broadcaster TF-1, U.K.-based global advertising agency
WPP Group, and French agency Publicis.
* EMERGING MARKETS MAKE COMEBACK
As interest rates began to fall and liquidity flowed back into world
markets, the world's battered emerging markets showed some signs of
recovery. After a Brazilian currency devaluation in January produced no
lasting impact on the markets, stocks in Asia and Latin America surged.
Signs of restructuring and repair in Asian economies and companies added
to investors' growing optimism about the world's emerging economies.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Mannesmann AG (Germany)
Telecommunications
British Telecommunications plc
ADR (United Kingdom)
Telecommunications
Fujitsu Ltd. (Japan)
Electronics and electrical equipment
Elf Aquitaine S.A. (France)
Oil and gas
Hoechst AG (Germany)
Chemicals
Nikko Securities Co. Ltd. (Japan)
Insurance and finance
Pharmacia & Upjohn, Inc. (Sweden)
Pharmaceuticals
Telefonaktiebolaget LM Ericsson
Class B (Sweden)
Telecommunications
Ente Nazionale Idrocarburi (ENI)
SpA (Italy)
Oil and gas
Internationale Nederlanden Groep
(ING) (Netherlands)
Insurance and finance
Footnote reads:
These holdings represent 20.5% of the fund's net assets as of 6/30/99.
Portfolio holdings will vary over time.
In particular, we looked for companies in Mexico, Brazil, and South Korea
in the technology and telecommunications areas. Companies such as
Telefonos de Mexico and Telesp Celular in Brazil are valued at significant
discounts to telecommunications companies in larger markets at the same
time, they offer much higher growth rates based on the greater potential
for growth in fixed and wireline businesses in emerging-markets
countries. This same rationale applies to mainland China operator China
Telecom.
In South Korea, stocks have outperformed their counterparts in other Asian
markets based on evidence of real corporate restructuring occurring at
many South Korean companies. At the end of the period, the fund had
positions in blue-chip South Korean companies such as Samsung, Korea
Electric Power, and Korea Telecom.
* CONTINUED FOCUS ON COMPANIES BENEFITING FROM GROWING GLOBAL ECONOMY
For the near future, we expect to continue to target growing multinational
companies that are benefiting from an expanding global economy. More
specifically we believe this strategy will lead us to add to the fund's
European holdings as exporting companies benefit from the continued
weakness of the euro. Generally, when a company's home currency is weak,
foreign demand for its goods rises and the company benefits when its
foreign earnings are repatriated to its home currency.
We are pleased by the progress many of the Asian markets have made and we
believe there is ample evidence that many of the economies in the region
have bottomed and are on the mend. Additionally we are heartened by some
of the restructuring programs and the merger and acquisition activity we
are observing in Japan. You should understand that the mere discussion of
these topics represents a fundamental change in Japanese corporate
governance. Of course, we are aware we are dealing with an extremely
complex and fluid situation in Japan. Therefore, we will continue to focus
on the merits of individual companies and, as always, place a strong
emphasis on fundamental research.
While the performance of undervalued, cyclical stocks has improved in line
with increasing evidence of an uptick in worldwide demand, we believe
companies in commodity-based areas, such as steel and commodity chemicals,
still have little or no pricing power. Instead, we believe that better
investments can be found by identifying companies that offer both growth
and attractive valuations.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 6/30/99, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam International
Growth Fund is designed for investors seeking capital appreciation primarily
through equity securities of issuers located outside the United States.
TOTAL RETURN FOR PERIODS ENDED 6/30/99
Class A Class B Class M
(inception dates) (2/28/91) (6/1/94) (12/1/94)
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------------
1 year 11.57% 5.15% 10.75% 5.75% 10.97% 7.09%
- ----------------------------------------------------------------------
5 years 110.24 98.18 102.49 100.49 105.39 98.20
Annual average 16.02 14.66 15.15 14.93 15.48 14.66
- ----------------------------------------------------------------------
Life of fund 198.22 180.96 178.74 178.74 185.27 175.31
Annual average 14.02 13.20 13.10 13.10 13.41 12.93
- ----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/99
MSCI Consumer
EAFE Index price index
- ----------------------------------------------------------------------
1 year 7.62% 1.96%
- ----------------------------------------------------------------------
5 years 48.36 12.30
Annual average 8.21 2.35
- ----------------------------------------------------------------------
Life of fund 84.33 23.29
Annual average 7.61 2.54
- ----------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50%, respectively. Class B share returns for the 1-year and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the case
of class B and class M shares the higher operating expenses applicable to
such shares. All returns assume reinvestment of distributions at NAV.
Investment return and principal value will fluctuate so that an investor's
shares when redeemed may be worth more or less than their original cost.
Performance data reflects an expense limitation previously in effect.
Without it, total returns would have been lower.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 2/28/91
Fund's class A MSCI EAFE Consumer price
Date shares at POP Index index
2/28/91 9,421 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 10,622 10,619 10,712
6/30/94 13,364 12,425 10,979
6/30/95 13,867 12,630 11,313
6/30/96 16,669 14,308 11,625
6/30/97 20,858 16,144 11,892
6/30/98 25,183 17,129 12,092
6/30/99 $28,096 $18,433 $12,329
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $27,874 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $28,527 ($27,531 at public offering price). See first page of
performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 6/30/99
Class A Class B Class M
- ---------------------------------------------------------------------
Distributions (number) 1 1 1
- ---------------------------------------------------------------------
Income $0.211 $0.099 $0.131
- ---------------------------------------------------------------------
Capital gains
Long-term 0.360 0.360 0.360
- ---------------------------------------------------------------------
Total $0.571 $0.459 $0.491
- ---------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ---------------------------------------------------------------------
6/30/98 $20.00 $21.22 $19.63 $19.85 $20.57
- ---------------------------------------------------------------------
6/30/99 21.64 22.96 21.20 21.45 22.23
- ---------------------------------------------------------------------
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
Comparative benchmarks
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
list of equity securities from Europe, Australasia, and the Far East, with
all values expressed in U.S. dollars.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type
and industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and share
price is determined. All investment and non-investment assets are added
together. Any unpaid expenses and other liabilities are subtracted from this
total. The result is divided by the number of shares to determine the net
asset value per share, which is calculated separately for each class of
shares. (For funds with preferred shares, the amount subtracted from total
assets includes the net assets allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for the
reporting period. This is determined by adding up all the fund's earnings --
from dividends and interest income -- and subtracting its operating expenses.
This statement also lists any net gain or loss the fund realized on the sales
of its holdings and -- for holdings that remain in the portfolio -- any change
in unrealized gains or losses over the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of the
fund's shares. It lists distributions and their sources (net investment income
or realized capital gains) over the current reporting period and the most
recent fiscal year-end. The distributions listed here may not match the
sources listed in the Statement of operations because the distributions are
determined on a tax basis and may be paid in a different period from the one
in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-ended funds, a separate table is
provided for each share class.
Report of independent accountants
For the fiscal year ended June 30, 1999
To the Trustees and Shareholders of
Putnam International Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Putnam International
Growth Fund (the "fund") at June 30, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at June 30, 1999 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 12, 1999
<TABLE>
<CAPTION>
The fund's portfolio
June 30, 1999
COMMON STOCKS (94.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Australia (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,360,600 Cable & Wireless Optus Ltd. $ 5,404,169
4,996,661 Coles Myer Ltd. 29,229,193
2,597,147 News Corp. Ltd. ADR 91,711,753
--------------
126,345,115
Brazil (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,080,200 Companhia Energetica de Minas Gerais ADR 22,144,100
465,625 Tele Centro Sul Participacoes S.A. 25,842,188
1,132,720 Telesp Celular Participacoes S.A. ADR 30,300,260
1,662,582 Telesp Participacoes S.A. ADR 38,031,563
--------------
116,318,111
Canada (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,119,055 Abitibi-Consolodated Inc. (NON) 12,910,116
1,161,167 Bank of Nova Scotia (NON) 25,365,106
726,929 BCE Mobile Communications, Inc. (NON) 22,330,401
26,400 BCE Mobile Communications, Inc. 144A (NON) 810,977
1,925,532 BCE, Inc. 94,311,503
998,887 Bombardier, Inc. (NON) 15,342,315
1 Nortel Networks Corp. 52
984,100 Toronto-Dominion Bank (NON) 44,841,747
--------------
215,912,217
Finland (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
94,875 Huhtamaki I Free 3,464,631
846,006 Oy Nokia AB Class A 74,391,423
179,600 Sampo Insurance Co., Ltd. Class A 5,220,873
--------------
83,076,927
France (11.3%)
- --------------------------------------------------------------------------------------------------------------------------
372,900 Aerospatiale Marta (NON) 8,621,849
39,100 Aerospatiale Marta 144A (NON) 904,034
346,617 Axa S.A. 42,419,456
422,327 Banque Nationale de Paris 35,301,300
194,573 Bouygues S.A. Rights 519,317
194,573 Bouygues S.A. (NON) 51,589,542
731,270 Elf Aquitaine S.A. 107,649,781
305,851 France Telecom S.A. 23,176,509
96,427 Groupe Danone 24,938,433
4,760 Havas Advertising SA 1,028,670
425,220 Lafarge Coppee 40,557,866
60,000 Publicis S.A. 12,724,350
933,286 Sanofi-Synthelabo SA (NON) 39,729,682
189,586 Societe Generale 33,518,056
1,084,180 STMicroelectronics N.V. ADR 75,214,988
221,656 Television Francaise I 51,822,508
478,430 Vivendi 38,877,210
--------------
588,593,551
Germany (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
38,210 Bayerische Motoren Werke (BMW) AG 26,365,339
866,291 DaimlerChrysler AG 75,278,955
2,331,320 Hoechst AG 105,875,849
871,205 Mannesmann AG 130,412,550
728,338 Volkswagen AG 46,790,218
110,882 Volkswagen AG (pfd) 4,112,261
--------------
388,835,172
Greece (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
685,333 Hellenic Telecommunication Organization S.A. 14,757,386
174,781 Hellenic Telecommunication Organization SA ADR 1,933,515
--------------
16,690,901
Hong Kong (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
31,008,000 China Telecom Ltd. (NON) 86,131,113
23,600,000 First Pacific Co., Ltd. 20,076,822
2,724,000 Henderson Land Development Co. Ltd. (R) 15,659,612
1,404,000 Hutchison Whampoa, Ltd. 12,713,129
--------------
134,580,676
Ireland (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,142,811 Allied Irish Banks plc 15,073,534
715,002 Bank of Ireland 12,056,613
3,367,757 CRH plc 59,923,847
--------------
87,053,994
Italy (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
16,115,419 Ente Nazionale Idrocarburi SpA 96,527,412
450,500 Mediaset SPA 4,017,284
--------------
100,544,696
Japan (18.2%)
- --------------------------------------------------------------------------------------------------------------------------
293,800 Advantest Corp. 32,307,072
182,300 Benesse Corp. 19,820,132
207,000 Canon, Inc. 5,955,850
902,100 Chubu Electric Power, Inc. 15,028,785
70 Circle K Japan Co. Ltd. 2,917
9,770 DDI Corp. 60,825,217
866,000 Eisai Co. Ltd. 17,076,561
5,561,000 Fujitsu Ltd. 111,955,643
608,000 Honda Motor Co., Ltd. 25,787,846
256,100 Mabuchi Motor 23,820,794
3,730,000 Matsushita Electric Industrial Co. 72,472,090
400 Mitsumi Electric Company, Ltd. 11,178
331,000 Murata Manufacturing Co. Ltd. 21,783,878
16,122,000 Nikko Securities Co. Ltd. 104,103,200
7,423 Nippon Telephone and Telegraph Corp. 86,535,180
73,720 Nippon Television Network Corp. 30,475,403
723,900 Promise Co., Ltd. 42,793,592
165,000 Rohm Co. Ltd. 25,851,592
176,000 Shin-Etsu Chemical Co. 5,893,344
3,418,000 Shiseido Co., Ltd. 51,262,935
601,500 Sony Corp. 64,904,430
137,200 Takefuji Corp. 14,190,757
163,000 TDK Corp. 14,918,644
1,371,600 Tokyo Electric Power Co. 28,974,270
1,852,000 Yamanouchi Pharmaceutical Co., Ltd. 70,895,081
--------------
947,646,391
Mexico (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
2,388,100 Carso Global Telecom 15,202,556
568,387 Coca-Cola Femsa S.A. ADR 11,012,498
5,467,400 Fomento Economico Mexicano, S.A. de C.V. 21,979,205
789,392 Grupo Televisa S.A.GDR 35,374,629
640,759 Telefonos de Mexico S.A. ADR Class L (NON) 51,781,337
--------------
135,350,225
Netherlands (6.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,909,230 ABN AMRO Holding N.V. 41,477,067
1,815,463 Akzo-Nobel N.V. 76,626,336
501,788 Gucci Group N.V. 35,125,160
1,739,548 Internationale Nederlanden Groep 94,477,026
296,924 Koninklijke Ahold N.V. 10,259,407
696,360 Laurasia Resources Ltd. 16,208,640
747,500 Libertel NV 14,692,486
421,006 TNT Post Group N.V. 10,082,536
531,006 Vedior NV 9,063,874
315,082 Vendex International N.V. 8,442,165
--------------
316,454,697
Portugal (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
952,250 Portugal Telecom S.A. 38,862,299
Singapore (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
477,000 Development Bank of Singapore Ltd. 5,836,235
2,273,700 Overseas Chinese Banking Corp. 18,992,082
2,001,000 United Overseas Bank Ltd. 14,007,000
--------------
38,835,317
South Korea (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
785,349 Korea Electric Power Corp. 32,635,237
618,800 Korea Telecom Corp. 24,752,000
111,829 Samsung Electronics Co. 12,269,791
442,200 Shinhan Bank 144A GDR 9,728,400
--------------
79,385,428
Spain (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,037,480 Telfonica S.A. 50,132,575
Sweden (5.1%)
- --------------------------------------------------------------------------------------------------------------------------
2,181,971 Investor AB 24,513,629
1,854,949 Pharmacia & Upjohn, Inc. 103,101,470
247,270 Sandvik AB Class A 5,424,383
205,820 Sandvik AB Class B 4,575,941
2,403,630 Svenska Handelsbanken 28,993,645
3,058,430 Telefonaktiebolaget LM Ericsson Class B 98,559,860
--------------
265,168,928
Switzerland (5.6%)
- --------------------------------------------------------------------------------------------------------------------------
42,695 Cie Finance Richemont 82,519,748
16,321 Julius Baer Holdings AG 46,736,930
18,791 Novartis AG ADR 27,573,090
61,830 Publicitas Holding S.A. 33,972,527
172,572 Swisscom AG ADR 65,258,319
118,195 United Bank of Switzerland (UBS) AG 35,450,860
--------------
291,511,474
United Kingdom (16.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,230,299 Allied Zurich AG 15,474,910
1,764,988 Anglian Water plc 19,527,930
931,377 Bass plc 13,521,847
4,501,397 British Airways plc 31,078,514
6,823,370 British Telecommunications plc ADR 114,398,133
4,075,025 Cable & Wireless plc (NON) 51,963,341
6,415,082 Diageo plc 67,030,871
6,332,973 EMI Group plc 50,840,778
3,488,023 Granada Group plc 64,750,417
275,300 Hanson plc 2,446,735
2,546,950 National Westminster Bancorp Inc. 54,029,316
1,675,300 Orange plc ADR (NON) 24,573,233
1,602,535 Peninsular and Oriental Steam Navigation Co. 24,074,611
3,839,400 Scottish Power plc 33,184,149
3,906,565 Securicor Group plc 34,288,382
8,154,848 Shell Transportation & Trading 61,190,138
3,182,600 Siebe plc 15,071,339
1,565,205 Smithkline Beecham plc ADR 20,353,948
2,222,332 Smiths Industries plc 29,372,420
23,904,200 Tesco plc 61,548,032
5,897,978 WPP Group plc 49,906,791
--------------
838,625,835
United States (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,736,000 Monte Dei Paschi NY Branch 7,722,336
6,095,000 Toshiba Corp. 43,488,921
--------------
51,211,257
--------------
Total Common Stocks (cost $4,015,342,762) $4,911,135,786
UNITS (1.8%) (a)
NUMBER OF UNITS VALUE
- --------------------------------------------------------------------------------------------------------------------------
417,000 Development Bank Of Singapore Structured Note
(Issued by Merrill Lynch & Co., Inc.) 3%, 2000
(Singapore) $ 4,522,490
804,000 Development Bank Of Singapore Structured Note
(Issued by Credit Suisse First Boston) zero %, 2000
(Singapore) 8,578,680
427,100 Overseas Chinese Banking Corp. Structured Note
(Issued by Credit Suisse First Boston) zero %,
2000 (Singapore) 3,254,502
569,800 Overseas Chinese Banking Corp. ser. D Structured Note
(Issued by Credit Suisse First Boston) zero %,
2000 (Singapore) 4,341,876
1,321,000 Overseas Chinese Banking Corp. Structured Note
(Issued by Merrill Lynch & Co., Inc.) 3%,
2000 (Singapore) 10,266,416
162,100 Pohang Iron & Steel Company, Ltd. Structured Warrants
(Issued by Lehman Brothers Finance S.A. Exp. 4/17/00)
(South Korea) 19,186,156
3,779,100 Singapore Airlines Ltd. Structured Warrants
(Issued by Lehman Brothers Finance S.A. Exp. 4/10/00)
(Singapore) 32,909,914
8,940 SK Telecom Co., Ltd. Structured Note
(Issued by Merrill Lynch & Co., Inc.) 3%, 2000
(South Korea) 13,165,133
--------------
Total Units (cost $61,344,113) $ 96,225,167
SHORT-TERM INVESTMENTS (3.8%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 25,000,000 Ciesco L.P., effective yield of 4.84%, July 20, 1999 $ 24,936,139
25,000,000 Corporate Receivables Co., effective yield of 5.30%, July 6, 1999 24,981,597
25,000,000 Federal Home Loan Mortgage, effective yield of 4.77%,
July 7, 1999 24,956,667
57,917,000 Interest in $500,000,000 joint tri-party repurchase
agreement dated June 30, 1999 with
Goldman Sachs, Inc. due July 1, 1999 with respect
to various U.S. Treasury obligations -- maturity value
of $57,924,803 for an effective yield of 4.85% 57,917,000
65,728,000 Interest in $250,000,000 joint repurchase agreement
dated June 30, 1999 with Lehman Brothers Inc.
due July 1, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $65,736,946 for an
effective yield of 4.90% 65,728,000
--------------
Total Short-Term Investments (cost $198,519,403) $ 198,519,403
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $4,275,206,278) (b) $5,205,880,356
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $5,213,617,248.
(b) The aggregate identified cost on a tax basis is $4,351,892,880, resulting in gross unrealized appreciation and
depreciation of $964,827,194 and $110,839,718, respectively, or net unrealized appreciation of $853,987,476.
(NON) Non-income-producing security.
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR and GDR after the name of a foreign holding stands for American Depository Receipts and Global Depository
Receipts, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank.
The fund had the following industry group concentrations greater than 10% at June 30, 1999 (as a percentage of net
assets):
Telecommunications 18.0%
Insurance and Finance 14.1
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $4,275,206,278) (Note 1) $5,205,880,356
- -----------------------------------------------------------------------------------------------
Cash 374
- -----------------------------------------------------------------------------------------------
Foreign currency, at value (cost $51,899,158) 51,982,342
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivable 14,081,098
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 54,782,042
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 53,383,339
- -----------------------------------------------------------------------------------------------
Total assets 5,380,109,551
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 136,888,030
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 15,753,443
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 7,657,857
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,320,161
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 30,022
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 8,763
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 3,496,231
- -----------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 701,853
- -----------------------------------------------------------------------------------------------
Other accrued expenses 635,943
- -----------------------------------------------------------------------------------------------
Total liabilities 166,492,303
- -----------------------------------------------------------------------------------------------
Net assets $5,213,617,248
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $4,219,431,940
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (33,621,782)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 96,764,243
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities
in foreign currencies 931,042,847
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $5,213,617,248
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,928,662,438 divided by 135,348,687 shares) $21.64
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $21.64)* $22.96
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,821,024,316 divided by 85,903,533 shares)** $21.20
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($208,063,855 divided by 9,697,944 shares) $21.45
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $21.45)* $22.23
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($255,866,639 divided by 11,777,663 shares) $21.72
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended June 30, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $7,850,334) $ 56,968,412
- -----------------------------------------------------------------------------------------------
Interest 7,572,349
- -----------------------------------------------------------------------------------------------
Total investment income 64,540,761
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 25,491,780
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 12,754,517
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 70,492
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 34,036
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 5,523,918
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 14,457,442
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,218,290
- -----------------------------------------------------------------------------------------------
Reports to shareholders 166,667
- -----------------------------------------------------------------------------------------------
Registration fees 426,260
- -----------------------------------------------------------------------------------------------
Auditing 80,730
- -----------------------------------------------------------------------------------------------
Legal 25,160
- -----------------------------------------------------------------------------------------------
Postage 722,312
- -----------------------------------------------------------------------------------------------
Other 733,594
- -----------------------------------------------------------------------------------------------
Total expenses 61,705,198
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,097,722)
- -----------------------------------------------------------------------------------------------
Net expenses 60,607,476
- -----------------------------------------------------------------------------------------------
Net investment income 3,933,285
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 103,747,034
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (30,854,317)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 5,986,432
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 454,305,807
- -----------------------------------------------------------------------------------------------
Net gain on investments 533,184,956
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $537,118,241
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended June 30
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 3,933,285 $ 17,525,968
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 72,892,717 129,006,993
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 460,292,239 307,884,420
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 537,118,241 454,417,381
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (22,568,753) (14,955,356)
- ---------------------------------------------------------------------------------------------------------------
Class B (7,287,243) (7,467,011)
- ---------------------------------------------------------------------------------------------------------------
Class M (1,060,968) (988,741)
- ---------------------------------------------------------------------------------------------------------------
Class Y (1,891,655) (1,576,368)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (38,505,930) (47,508,780)
- ---------------------------------------------------------------------------------------------------------------
Class B (26,499,065) (34,141,073)
- ---------------------------------------------------------------------------------------------------------------
Class M (2,915,639) (4,010,737)
- ---------------------------------------------------------------------------------------------------------------
Class Y (2,723,694) (4,501,470)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,434,362,924 1,649,963,229
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,868,028,218 1,989,231,074
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 3,345,589,030 1,356,357,956
- ---------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income and undistributed net investment
income of $33,621,782 and $23,677,636, respectively) $5,213,617,248 $3,345,589,030
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.00 $17.58 $14.25 $12.10 $11.83
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .07(c) .20(c) .15(c) .13(c) .08(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.14 3.26 3.39 2.29 .36
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.21 3.46 3.54 2.42 .44
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.25) (.15) (.26) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) (.79) (.06) (.01) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.57) (1.04) (.21) (.27) (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.64 $20.00 $17.58 $14.25 $12.10
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 11.57 20.73 25.13 20.21 3.76
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,928,662 $1,827,331 $728,849 $151,088 $32,856
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.27 1.36 1.59 1.74 1.61(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .38 1.07 .98 .99 .97(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.24 93.53 86.40 44.14 25.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
for the period.
(d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M
shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.63 $17.32 $14.10 $12.00 $11.82
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.07)(c) .06(c) .03(c) .04(c) .01(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.10 3.21 3.34 2.26 .34
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.03 3.27 3.37 2.30 .35
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.17) (.09) (.19) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) (.79) (.06) (.01) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.46) (.96) (.15) (.20) (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.20 $19.63 $17.32 $14.10 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 10.75 19.87 24.09 19.35 3.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,821,024 $1,226,917 $472,663 $132,013 $25,892
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 2.02 2.11 2.34 2.49 2.41(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.38) .31 .18 .32 .23(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.24 93.53 86.40 44.14 25.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
for the period.
(d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M
shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 1, 1994+
operating performance Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $19.85 $17.48 $14.22 $12.09 $11.87
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.02)(c) .10(c) .07(c) .08(c) .03(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.11 3.26 3.36 2.28 .36
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.09 3.36 3.43 2.36 .39
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.13) (.20) (.11) (.22) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) (.79) (.06) (.01) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.49) (.99) (.17) (.23) (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.45 $19.85 $17.48 $14.22 $12.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 10.97 20.18 24.40 19.71 3.33*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $208,064 $140,202 $58,471 $14,309 $1,777
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.77 1.86 2.09 2.25 1.61(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.12) .54 .44 .61 .58(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.24 93.53 86.40 44.14 25.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
for the period.
(d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M
shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 12, 1996+
operating performance Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $20.05 $17.60 $13.88
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .14(c) .22 (c) .20(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.13 3.30 3.75
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.27 3.52 3.95
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.24) (.28) (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) (.79) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.60) (1.07) (.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.72 $20.05 $17.60
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 11.83 21.08 25.44*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $255,867 $151,139 $96,375
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.02 1.11 1.30*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .70 1.22 1.26*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.24 93.53 86.40
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through
expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
for the period.
(d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M
shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
</TABLE>
Notes to financial statements
June 30, 1999
Note 1
Significant accounting policies
Putnam International Growth Fund ("the fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks capital appreciation by
investing primarily in equity securities of companies located outside the
United States.
The fund offers class A, class B, class M and class Y shares. Effective
July 26, 1999, the fund will begin offering class C shares. Class A shares
are sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class M
shares are sold with a maximum front end sales charge of 3.50% and pay an
ongoing distribution fee that is higher than class A shares but lower than
class B shares. Class Y shares, which are sold at net asset value, are
generally subject to the same expenses as class A, class B, and class M
shares, but do not bear a distribution fee. Class Y shares are sold to
defined contribution plans that invest at least $150 million in a
combination of Putnam Funds and other accounts managed by affiliates of
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price on the principal market in which the securities are
traded, or, if no sales are reported -- as in the case of some securities
traded over-the-counter -- the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other investments are
stated at fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the books
and records of the fund after translation to U.S. dollars based on the
exchange rates on that day. The cost of each security is determined using
historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when accrued or incurred. The fund does not
isolate that portion of realized or unrealized gains or losses resulting
from changes in the foreign exchange rate on investments from fluctuations
arising from changes in the market prices of the securities. Such gains
and losses are included with the net realized and unrealized gain or loss
on investments. Net realized gains and losses on foreign currency
transactions represent net exchange gains or losses on closed forward
currency contracts, disposition of foreign currencies and the difference
between the amount of investment income and foreign withholding taxes
recorded on the fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the
value of open forward currency contracts and assets and liabilities other
than investments at the period end, resulting from changes in the exchange
rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended June
30, 1999, the fund had no borrowings against the line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include losses on wash sale transactions, treatment of of
realized gains and losses on forward foreign currency contracts, foreign
taxes, and realized and unrealized gains and losses on passive foreign
investment companies. 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, 1999, the fund reclassified $28,424,084 to increase
distributions in excess of net investment income, with an increase to
accumulated net realized gain on investments of $28,424,084. The
calculation of net investment income per share in the financial highlights
table excludes these adjustments.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.80% of the first $500
million of average net assets, 0.70% of the next $500 million, 0.65% of
the next $500 million, 0.60% of the next $5 billion, 0.575% of the next $5
billion, 0.555% of the next $5 billion, 0.54% of the next $5 billion, and
0.53% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended June 30, 1999, fund expenses were reduced by $1,097,722
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $3,020
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%, and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees currently limit payment by the fund to an
annual rate of 0.25%, 1.00%, and 0.75% of the average net assets
attributable to class A, class B, and class M shares respectively.
For the year ended June 30, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $1,479,337 and $145,913 from the
sale of class A and class M shares, respectively and received $2,286,647
in contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended June 30, 1999, Putnam Mutual Funds
Corp., acting as underwriter received $119,903 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended June 30, 1999, purchases and sales of investment
securities other than short-term investments aggregated $5,064,706,961 and
$3,745,839,520, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
Note 4
Capital shares
At June 30, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 217,110,664 $4,256,867,643
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,117,893 57,181,946
- -----------------------------------------------------------------------------
220,228,557 4,314,049,589
Shares
repurchased (176,253,908) (3,467,222,878)
- -----------------------------------------------------------------------------
Net increase 43,974,649 $ 846,826,711
- -----------------------------------------------------------------------------
Year ended June 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 123,266,783 $2,252,767,517
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,480,561 59,099,849
- -----------------------------------------------------------------------------
126,747,344 2,311,867,366
Shares
repurchased (76,840,446) (1,405,944,518)
- -----------------------------------------------------------------------------
Net increase 49,906,898 $ 905,922,848
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 39,583,994 $ 758,304,651
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,608,670 29,020,279
- -----------------------------------------------------------------------------
41,192,664 787,324,930
Shares
repurchased (17,794,641) (337,422,833)
- -----------------------------------------------------------------------------
Net increase 23,398,023 $ 449,902,097
- -----------------------------------------------------------------------------
Year ended June 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 46,843,691 $847,319,199
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,153,109 36,043,044
- -----------------------------------------------------------------------------
48,966,800 883,362,243
Shares
repurchased (13,778,805) (245,963,625)
- -----------------------------------------------------------------------------
Net increase 35,217,995 $637,398,618
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,415,962 $125,270,005
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 208,034 3,791,905
- -----------------------------------------------------------------------------
6,623,996 129,061,910
Shares
repurchased (3,990,008) (77,706,579)
- -----------------------------------------------------------------------------
Net increase 2,633,988 $ 51,355,331
- -----------------------------------------------------------------------------
Year ended June 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,937,401 $108,032,817
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 286,746 4,846,002
- -----------------------------------------------------------------------------
6,224,147 112,878,819
Shares
repurchased (2,504,865) (45,375,018)
- -----------------------------------------------------------------------------
Net increase 3,719,282 $ 67,503,801
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,133,724 $142,964,956
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 245,487 4,615,349
- -----------------------------------------------------------------------------
7,379,211 147,580,305
Shares
repurchased (3,139,377) (61,301,520)
- -----------------------------------------------------------------------------
Net increase 4,239,834 $ 86,278,785
- -----------------------------------------------------------------------------
Year ended June 30, 1998
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,562,355 $66,835,897
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 357,524 6,077,838
- -----------------------------------------------------------------------------
3,919,879 72,913,735
Shares
repurchased (1,857,165) (33,775,773)
- -----------------------------------------------------------------------------
Net increase 2,062,714 $39,137,962
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $109,318,596 as a 20% capital gain, for its taxable year
ended June 30, 1999.
For the period, interest and dividends from foreign countries were
$54,323,532 or $.223 per share (for all share classes). Taxes paid to
foreign countries were $7,850,334 or $.032 per share (for all classes of
shares).
The fund has designated 8.57% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. Please
call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus
for any Putnam fund. It contains more complete information, including charges
and expenses. Please read it carefully before you invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Justin M. Scott
Vice President and Fund Manager
Omid Kamshad
Vice President and Fund Manager
Paul Warren
Vice President and Fund Manager
Mark D. Pollard
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam International
Growth Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
841/524/891/2BA 8/99
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam International Growth Fund
Supplement to Annual Report dated 6/30/99
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, and M shares, which are discussed more extensively in the annual report.
ANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return: NAV
One year ended 6/30/99 11.83%
5 years 111.86
Annual average 16.20
Life of class (since 2/28/91) 200.52
Annual average 14.12
- ----------------------------------------------------------------------------
Share value: NAV
6/30/98 $20.05
6/30/99 21.72
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
2 $0.240 $0.360 $0.60
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full
report for information on comparative benchmarks. If you have questions,
please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
