a_europeequityfnd.htm

Putnam
Europe Equity
Fund

Semiannual report
12 | 31 | 13


Message from the Trustees	1

About the fund	2

Performance snapshot	4

Interview with your fund’s portfolio manager	5

Your fund’s performance	11

Your fund’s expenses	13

Terms and definitions	15

Other information for shareholders	16

Trustee approval of management contract	17

Financial statements	24

Consider these risks before investing: International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Investments in a single region may be affected by common economic forces and other factors. In addition, events in any one country within the region may impact the other countries or the region as a whole. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Stock prices may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific issuer or industry. You can lose money by investing in the fund.

Message from the Trustees

Dear Fellow Shareholder:

As 2014 gets under way, signs point to a more widespread economic recovery around the world. We are encouraged by the improvement that the larger developed economies are showing in key areas such as unemployment, housing, and manufacturing.

Some storm clouds also have cleared. It is no longer a guessing game as to when the U.S. Federal Reserve will begin reducing its stimulative bond-buying program. And the looming threat of another federal government shutdown is easing. Moreover, the embattled 17-nation eurozone, which just a year ago appeared to teeter on the verge of financial collapse, seems to be emerging from recession. At the same time, Japan is pursuing structural policies seeking to reverse its deflationary spiral, while China is working toward instituting important domestic reforms to support sustainable growth.

In 2013, U.S. stocks, as measured by the S&P 500 Index, soared more than 30%, posting their best year since 1997. Equities may continue to benefit from better business conditions, but it is worth remembering that advances of such magnitude are rare. For fixed-income investors, rising Treasury yields may continue to pose a challenge requiring a different set of strategies than those that were common during the years of falling rates.

To help you pursue your financial goals in this environment, Putnam offers fresh thinking and a commitment to fundamental research, active investing, and risk management strategies. Your financial advisor also can help guide you toward your investment goals, while taking into account your time horizon and tolerance for risk.

We would like to welcome new shareholders of the fund and to thank you for investing with Putnam. We would also like to extend our thanks to Elizabeth Kennan, who has retired from the Board of Trustees, for her 20 years of dedicated service.

About the fund

Pursuing growth in European markets since 1990

As a shareholder of Putnam Europe Equity Fund, you are seeking to benefit from opportunities in one of the world’s most developed economic regions. Europe has a long history of capitalism and stock investing, and the region continues to evolve. Today, the 28 member states of the European Union form a large, integrated economy that exports more goods and services than any nation in the world, and that has demonstrated its resilience to difficult economic conditions through the recent sovereign debt crisis.

European companies continue to rank among global leaders in many business sectors, including financials, health care, and telecommunications. If you look at the products or services you use every day — from cars and cell phones to household products — you are likely to find many items made by European companies.

European stocks can offer diversification to U.S. investors because Europe can follow a different business cycle than that of the United States. Though international markets can experience downturns, investing internationally gives investors a chance to keep building wealth even if U.S. stocks struggle.

Since 1990, the fund has sought attractively valued companies across European markets. Pursuing Putnam’s “blend” strategy, the fund’s manager targets stocks believed to be worth more than their current prices indicate, and seeks to position the fund to perform well whether growth- or value-style stocks are leading international markets. The manager selects stocks and determines market and sector weightings relying in part on the proprietary research of Putnam analysts based in Boston and London.

In-depth analysis is key to successful stock selection.

Drawing on the expertise of a dedicated team of stock analysts, the fund’s portfolio manager seeks stocks that are believed to be underpriced by the market. Once a stock is selected for the portfolio, it is regularly assessed to ensure that it continues to be attractive. Areas of focus include:

Valuation Considering how each stock is valued, seeking stocks whose valuations are attractive relative to the company’s growth potential and capital requirements.

Cash flow Examining company financials, particularly the amount of cash a company generates relative to the earnings that it reports, and projects its ability to generate cash returns going forward.

Quality Seeking high-quality companies with characteristics such as solid management teams and sound business models.

Interview with your fund’s portfolio manager

European equity markets made strong gains during the first six months of the fund’s fiscal year. What factors supported this trend?

A number of policy-related developments helped the European stock market advance through the six-month period ended December 31, 2013. One key factor was the decline in fears over the impact of Federal Reserve tapering. Though investors grew anxious over this policy change earlier in the year and markets experienced temporary declines through October, ultimately they shrugged off concerns that tapering would be a major headwind for stocks.

Another important development centered on China. In December, the Chinese political leadership announced its commitment to a wide-ranging series of domestic reforms, touching on everything from China’s long-held one-child policy to changes in the national banking system. As details about these reforms emerged, they were gradually seen to be positive for the long-term sustainability of China’s economic growth.

We also saw better-than-expected economic data in the United States. Despite the U.S. government shutdown in the fall, it appears that the U.S. economy has remained on a positive trajectory. Because European economic and market developments generally lag those in the United States, better U.S. data pointed to an improved outlook for Europe.

This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 12/31/13. See pages 4 and 11–12 for additional fund performance information. Index descriptions can be found on page 15.


Europe Equity Fund	5

Lastly, real evidence of improving economic data in Europe lent support to European equities. Though problems will likely emerge along the path to recovery, it appears to us that we may be past the worst risks for the eurozone and peripheral European economies — which only 18 months ago seemed to be edging toward disintegration and financial disaster.

Putnam Europe Equity Fund outpaced its benchmark, the MSCI Europe Index. What drove this result?

Our continued strong stock selection drove the fund’s performance relative to the benchmark. Stock selection added value in a variety of sectors, including technology, consumer discretionary, industrials, and health care.

At this phase in Europe’s recovery, which sectors appear most interesting to you from an investment perspective?

While we are looking constantly for opportunities in all sectors, we are currently focused on finding investment opportunities among those stocks that appear to be most exposed to a continued economic recovery, particularly in the eurozone and especially among peripheral European countries.

We see interesting opportunities in the financials sector, particularly banks, and the telecommunications sector, among others. We expect financials to continue to normalize their earnings in an upward trajectory, and we believe merger-and-acquisition activity among telecoms has the potential to be a significant catalyst for equity market gains.

In our view, there is a strong IPO pipeline in Europe, which is reflective of a healthy appetite for new and attractively valued

Allocations are shown as a percentage of the fund’s net assets as of 12/31/13. Short-term investments and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, and the exclusion of as-of trades, if any. Holdings and allocations may vary over time.


6	Europe Equity Fund

companies. In addition, there is a significant stream of capital flows into Europe. That investor interest, in our view, will be supportive of continued strong performance.

Which stocks helped the fund’s relative performance?

French auto-part manufacturer Valeo benefited from its strategy of refocusing on a narrower range of higher-value products. Specifically, the company shifted its business toward safety and energy-efficiency products, which typically generate higher profit margins in an industry where vehicles are taking on ever-greater technological sophistication. The market generally missed these strengths of Valeo, which was widely misperceived as a poorly managed, low-margin business that was overexposed to the French car industry. We sold the stock and locked in profits for the fund by the end of the period.

Deutsche Post, which is the incumbent mail operator in Germany, was the second-largest contributor to the fund’s relative results. The company has three major segments: domestic mail, express freight operations, and freight logistics. The second segment is the company DHL, which is currently the leading express freight operator in Asia, and which has benefited from strong economic growth in Asia and particularly from strengthening Asia-Europe trade.

When we bought the stock, Deutsche Post also had a North American component that was losing market share. Deutsche Post subsequently shut down its North American operations and thereby significantly improved its express freight business. As for its domestic mail business, Germany

This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 12/31/13. Short-term holdings and derivatives, if any, are excluded. Holdings may vary over time.


Europe Equity Fund	7

increased stamp prices in 2013 — the first such increase in a long time — which helped Deutsche Post’s overall business results; also, aggregate mail volume is being supported by the rise of online shopping.

The third top contributor was Associated British Foods [ABF], a diversified British conglomerate that includes a sugar business, a grocery chain, and retail fashion under its corporate umbrella. Sugar helped drive the company’s performance in 2012 and to a lesser extent in 2013, as higher-trending world sugar prices allowed producers such as ABF to reap higher profits in the domestic European market. In 2013, the primary growth story for ABF focused on its affordable teen-fashion retailer, Primark, which we believe has significant potential to expand its market penetration in the United Kingdom as well as continental Europe.

Which stocks detracted from performance?

A growth-oriented information technology company, Telecity, was the largest detractor from the fund’s performance. The stock has been a strong contributor in the past, and we continue to like it for its unique characteristics. This company provides high-connectivity data-center capacity for time-critical applications in industries such as online gaming and high-frequency investment trading. Companies in these industries require massive energy-intensive server support to minimize data reaction latency, which is where Telecity has proven to be a valuable partner to a variety of businesses. The stock suffered because there was some excess supply in the market during the period, which caused some investors to doubt the company’s ability to charge a high premium for its services.

This chart shows the fund’s largest allocation shifts, by percentage, over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, and the use of different classifications of securities for presentation purposes. Holdings and allocations may vary over time.


8	Europe Equity Fund

Sanofi, a major global health-care company based in France, was the second-largest detractor from results. It lagged the market, we believe, because of a general preference among investors for cyclical stocks over more defensive health-care names, which is how Sanofi is generally perceived. We continue to think the company has an excellent pipeline of vaccines, and that its positive exposure to emerging markets — particularly in the area of diabetes treatment in China — should help the company grow over the long term. We also believe the stock has strong potential in the short to medium term due to EPS [earnings-per-share] accretion that we think it could achieve through capital restructuring.

British American Tobacco is another more defensive type of investment that held back the fund’s results. The company’s exposure to emerging markets, which suffered during the period due to fears over Fed tapering effects, caused its stock to lag. In addition, there is increasing regulatory pressure on tobacco use and marketing in a variety of countries, and this is making life somewhat difficult for the industry. Notwithstanding these headwinds, we continue to like the stock given its strong cash flow generation and shareholder-friendly dividend policies.

What is your outlook for European stocks?

We expect the European economy will move into recovery in 2014. As European countries gradually reduce the intensity of their fiscal austerity programs, there will likely be a weaker fiscal drag, which we think should result in better GDP growth, improved revenue growth for corporations, and better margins for companies that streamlined their operations during the period of austerity instituted by European governments.

The European equity market rose quite strongly in 2013, and so it appears to us that some of the forward-looking economic improvement has been priced into the market. However, European corporate profits are still below their pre-financial-crisis peak — unlike U.S. corporate profits, which have achieved new historical highs. Consequently, we expect European companies to embark on an earnings recovery, one that is not yet fully priced into a variety of European stocks.

Thanks, Sam, for this update on the fund.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

Portfolio Manager Simon Davis is Co-Head of International Equities at Putnam. He has a B.A. from Oxford University. Simon joined Putnam in 2000 and has been in the investment industry since 1988.


Europe Equity Fund	9

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended December 31, 2013, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R and class Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 12/31/13


	Class A		Class B		Class C		Class M		Class R	Class Y
(inception dates)	(9/7/90)		(2/1/94)		(7/26/99)		(12/1/94)		(12/1/03)	(10/4/05)

	Before	After					Before	After	Net	Net
	sales	sales	Before	After	Before	After	sales	sales	asset	asset
	charge	charge	CDSC	CDSC	CDSC	CDSC	charge	charge	value	value

Annual average
(life of fund)	8.82%	8.54%	8.54%	8.54%	8.01%	8.01%	8.30%	8.13%	8.56%	8.91%

10 years	111.12	98.98	98.84	98.84	96.01	96.01	100.82	93.79	106.55	115.53
Annual average	7.76	7.12	7.12	7.12	6.96	6.96	7.22	6.84	7.52	7.98

5 years	107.03	95.13	99.32	97.32	99.43	99.43	101.99	94.92	104.43	109.52
Annual average	15.67	14.30	14.79	14.56	14.80	14.80	15.10	14.28	15.37	15.94

3 years	45.89	37.50	42.69	39.69	42.64	42.64	43.71	38.68	44.75	46.96
Annual average	13.42	11.20	12.58	11.79	12.57	12.57	12.85	11.52	13.12	13.69

1 year	31.93	24.34	30.96	25.96	30.98	29.98	31.28	26.69	31.60	32.27

6 months	24.22	17.08	23.79	18.79	23.78	22.78	23.95	19.61	24.12	24.39

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable.

Recent performance may have benefited from one or more legal settlements.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

Class B share performance reflects conversion to class A shares after eight years.


Europe Equity Fund	11

Comparative index returns For periods ended 12/31/13


		Lipper European Region
	MSCI Europe Index (ND)	Funds category average*

Annual average (life of fund)	8.73%	8.82%

10 years	102.00	126.13
Annual average	7.28	8.21

5 years	87.22	101.83
Annual average	13.36	14.71

3 years	32.69	34.96
Annual average	9.89	10.42

1 year	25.23	27.49

6 months	22.57	22.03

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

* Over the 6-month, 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 12/31/13, there were 130, 119, 100, 87, 74, and 8 funds, respectively, in this Lipper category.

Fund price and distribution information For the six-month period ended 12/31/13


Distributions	Class A		Class B	Class C	Class M		Class R	Class Y

Number	1		1	1	1		1	1

Income	$0.215		$0.046	$0.184	$0.094		$0.189	0.271

Capital gains	—		—	—	—		—	—

Total	$0.215		$0.046	$0.184	$0.094		$0.189	$0.271

	Before	After	Net	Net	Before	After	Net	Net
	sales	sales	asset	asset	sales	sales	asset	asset
Share value	charge	charge	value	value	charge	charge	value	value

6/30/13	$21.73	$23.06	$20.80	$21.28	$21.49	$22.27	$21.46	$21.82

12/31/13	26.77	28.40	25.70	26.15	26.54	27.50	26.44	26.86

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.


12	Europe Equity Fund

Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Expense ratios


	Class A	Class B	Class C	Class M	Class R	Class Y

Total annual operating expenses
for the fiscal year ended 6/30/13	1.48%	2.23%	2.23%	1.98%	1.73%	1.23%

Annualized expense ratio for
the six-month period ended
12/31/13*	1.45%	2.20%	2.20%	1.95%	1.70%	1.20%

Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report. Expenses are shown as a percentage of average net assets.

* Includes an increase of 0.09% from annualizing the performance fee adjustment for the six months ended 12/31/13.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in the fund from July 1, 2013, to December 31, 2013. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.


	Class A	Class B	Class C	Class M	Class R	Class Y

Expenses paid per $1,000*†	$8.19	$12.41	$12.41	$11.01	$9.60	$6.79

Ending value (after expenses)	$1,242.20	$1,237.90	$1,237.80	$1,239.50	$1,241.20	$1,243.90

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 12/31/13. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.


Europe Equity Fund	13

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended December 31, 2013, use the following calculation method. To find the value of your investment on July 1, 2013, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.


	Class A	Class B	Class C	Class M	Class R	Class Y

Expenses paid per $1,000*†	$7.37	$11.17	$11.17	$9.91	$8.64	$6.11

Ending value (after expenses)	$1,017.90	$1,014.12	$1,014.12	$1,015.38	$1,016.64	$1,019.16

† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.


14	Europe Equity Fund

Terms and definitions

Important terms

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.

Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge 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 generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are not subject to an initial sales charge. They may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.

Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class R shares are not subject to an initial sales charge or CDSC and are available only to certain employer-sponsored retirement plans.

Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Comparative indexes

Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.

BofA Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

MSCI Europe Index (ND) is an unmanaged index of Western European equity securities.

S&P 500 Index is an unmanaged index of common stock performance.

Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.


Europe Equity Fund	15

Other information for shareholders

Important notice regarding delivery of shareholder documents

In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2013, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of December 31, 2013, Putnam employees had approximately $438,000,000 and the Trustees had approximately $106,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.


16	Europe Equity Fund

Trustee approval of management contract

Putnam Investment Management (“Putnam Management”) serves as investment manager to your fund under a management contract. In addition, Putnam Management’s affiliate, Putnam Investments Limited (“PIL”), provides services to your fund under a sub-management contract between Putnam Management and PIL, and another affiliate, The Putnam Advisory Company (“PAC”), provides services to your fund under a sub-advisory contract among Putnam Management, PIL and PAC. Putnam Management is majority owned (directly and indirectly) by Power Corporation of Canada, a diversified international management and holding company with interests in companies in the financial services, communications and other business sectors. Until his death on October 8, 2013, The Honourable Paul G. Desmarais, both directly and through holding companies, controlled a majority of the voting shares of Power Corporation of Canada. Upon his death, Mr. Desmarais’ voting control of shares of Power Corporation of Canada was transferred to The Desmarais Family Residuary Trust (the “Transfer”). As a technical matter, the Transfer may have constituted an “assignment” within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”), causing your fund’s existing management, sub-management and sub-advisory contracts to terminate automatically. On October 18, 2013, the Trustees, including all of the Trustees who are not “interested persons” (as this term is defined in the 1940 Act) of the Putnam funds (the “Independent Trustees”), approved interim management contracts between the Putnam funds and Putnam Management and the continuance of your fund’s sub-management and sub-advisory contracts to address this possibility and to avoid disruption of investment advisory and other services provided to the Putnam funds. At a subsequent meeting on November 22, 2013, the Trustees, including all of the Independent Trustees, approved new definitive management contracts between the Putnam funds and Putnam Management and determined to recommend their approval to the shareholders of the Putnam funds at a shareholder meeting called for February 27, 2014. The Trustees also approved new sub-management and sub-advisory contracts, to be effective at the same time as the new definitive management contracts.

In considering whether to approve your fund’s interim management contract and the continuance of your fund’s sub-management and sub-advisory contracts in October, and in considering whether to approve your fund’s new definitive management contract and its new sub-management and sub-advisory contracts in November, the Trustees took into account that they had recently approved the continuation (through June 30, 2014) of the fund’s previous management, sub-management and sub-advisory contracts at their meeting in June 2013. The Trustees considered that the terms of the interim management contract and new definitive management contract were identical to those of the previous management contract, except for the effective dates and initial terms and for certain non-substantive changes. They also considered that the terms of the sub-management and sub-advisory contracts were identical to those of the previous sub-management and sub-advisory contracts, respectively, except for the effective dates and initial terms. In light of the substantial similarity between the proposed contracts and the previous versions of these contracts approved by the Trustees at their June 2013 meeting, the Trustees relied to a considerable extent on their review of these contracts in connection with their June meeting. In addition, the Trustees considered a number other factors relating to the Transfer, including, but not limited to, the following:


Europe Equity Fund	17

• Information about the operations of The Desmarais Family Residuary Trust, including that Paul Desmarais, Jr. and André Desmarais, Mr. Desmarais’ sons, were expected to exercise, jointly, voting control over the Power Corporation of Canada shares controlled by The Desmarais Family Residuary Trust.

• That Paul Desmarais, Jr. and André Desmarais had been playing active managerial roles at Power Corporation of Canada, with responsibility for the oversight of Power Corporation of Canada’s subsidiaries, including Putnam Investments, since Power Corporation of Canada had acquired Putnam Investments in 2007, including serving as Directors of Putnam Investments, and that the Transfer would not affect their responsibilities as officers of Power Corporation of Canada.

• The intention expressed by representatives of Power Corporation of Canada and its subsidiaries, Power Financial Corporation and Great-West Lifeco, that there would be no change to the operations or management of Putnam Investments, to Putnam Management’s management of the funds or to investment, advisory and other services provided to the funds by Putnam Management and its affiliates as a result of the Transfer.

• Putnam Management’s assurances that, following the Transfer, Putnam Management would continue to provide the same level of services to each fund and that the Transfer will not have an adverse impact on the ability of Putnam Management and its affiliates to continue to provide high quality investment advisory and other services to the funds.

• Putnam Management’s assurances that there are no current plans to make any changes to the operations of the funds, existing management fees, expense limitations, distribution arrangements, or the quality of any services provided to the funds or their shareholders, as a result of the Transfer.

• The benefits that the funds have received and may potentially receive as a result of Putnam Management being a member of the Power Corporation of Canada group of companies, which promotes the stability of the Putnam organization.

• Putnam Investments’ commitment to bear a reasonable share of the expenses incurred by the Putnam Funds in connection with the Transfer.

General conclusions in connection with the Trustees’ June 2013 approval of the fund’s management, sub-management and sub-advisory contracts

As noted above, in connection with their deliberations in October and November 2013, in addition to the factors described above, the Trustees considered their recent approval of your fund’s management, sub-management and sub-advisory contracts in June 2013. The Board oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management, sub-management and sub-advisory contracts. The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Independent Trustees.

At the outset of the review process, members of the Board’s independent staff and independent legal counsel met with representatives of Putnam Management to review the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review and to discuss possible changes in these materials that might be necessary or desirable for the coming year. Following these discussions and in consultation with the Contract Committee, the Independent


18	Europe Equity Fund

Trustees’ independent legal counsel requested that Putnam Management furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2013, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for the Putnam funds and the Independent Trustees.

In May 2013, the Contract Committee met in executive session to discuss and consider its preliminary recommendations with respect to the continuance of the contracts. At the Trustees’ June 20, 2013 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its final recommendations. The Contract Committee then recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2013, subject to certain changes in the sub-management and sub-advisory contracts noted below. (Because PIL and PAC are affiliates of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL and PAC, the Trustees have not evaluated PIL or PAC as separate entities, and all subsequent references to Putnam Management below should be deemed to include reference to PIL and PAC as necessary or appropriate in the context.)

The Independent Trustees’ June 2013 approval was based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, and the costs incurred by Putnam Management in providing services to the fund, and

• That the fee schedule represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with some minor exceptions, the current fee arrangements in the management contracts for the Putnam funds were implemented at the beginning of 2010 following extensive review and discussion by the Trustees, as well as approval by shareholders.

As noted above, the Trustees considered administrative revisions to your fund’s sub-management and sub-advisory contracts. Putnam Management recommended that the sub-management contract be revised to


Europe Equity Fund	19

reduce the sub-management fee that Putnam Management pays to PIL with respect to the portion of the portfolios of certain funds, but not your fund, that may be allocated to PIL from time to time. Putnam Management also recommended that the sub-advisory contract be revised to reflect the closure of PAC’s Tokyo office and the termination of PAC’s non-discretionary investment adviser’s license with respect to that office. The Independent Trustees’ approval of these recommendations was based on their conclusion that these changes would have no practical effect on Putnam Management’s continued responsibility for the management of these funds or the costs borne by fund shareholders and would not result in any reduction in the nature and quality of services provided to the funds.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to shareholders.

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment style, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not warrant changes to the management fee structure of your fund.

Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee levels as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

In addition, your fund’s management contract provides that its management fees will be adjusted up or down depending upon whether your fund’s performance is better or worse than the performance of an appropriate index of securities prices specified in the management contract. In the course of reviewing investment performance, the Trustees examined the operation of your fund’s performance fees and concluded that these fees were operating effectively to align further Putnam Management’s economic interests with those of the fund’s shareholders.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to ensure that expenses of the Putnam funds continue to meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations. These expense limitations were: (i) a contractual expense limitation applicable to all retail open-end funds of 32 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to all open-end funds of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, investor servicing fees, distribution fees, investment-related expenses, interest, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses). These expense limitations serve in particular to maintain competitive expense levels for funds with large numbers of small shareholder accounts and funds with relatively small net assets. Most funds had sufficiently low expenses that these expense limitations did not apply. However, in the case of your fund, the first of the expense limitations applied


20	Europe Equity Fund

during its fiscal year ending in 2012. Putnam Management’s support for these expense limitations, including its agreement to reduce the expense limitation applicable to the open-end funds’ investor servicing fees and expenses as noted above, was an important factor in the Trustees’ decision to approve the continuance of your fund’s management, sub-management and sub-advisory contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Lipper Inc. This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fee), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the first quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the second quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2012 (the first quintile representing the least expensive funds and the fifth quintile the most expensive funds). The fee and expense data reported by Lipper as of December 31, 2012 reflected the most recent fiscal year-end data available in Lipper’s database at that time.

In connection with their review of the management fees and total expenses of the Putnam funds, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees as part of their annual contract review for the Putnam funds has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, and the like. This information included comparisons of those fees with fees charged to the funds, as well as an assessment of the differences in the services provided to these different types of clients. The Trustees observed that the differences in fee rates between institutional clients and mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect historical competitive forces operating in separate markets. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its institutional clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.


Europe Equity Fund	21

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the investment oversight committees of the Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officer and other senior members of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that 2012 was a year of strong competitive performance for many of the Putnam funds, with only a relatively small number of exceptions. They noted that this strong performance was exemplified by the fact that the Putnam funds were recognized by Barron’s as the best performing mutual fund complex for 2012 — the second time in four years that Putnam Management has achieved this distinction for the Putnam funds. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2012 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these efforts and to evaluate whether additional actions to address areas of underperformance are warranted.

For purposes of evaluating investment performance, the Trustees generally focus on competitive industry rankings for the one-year, three-year, and five-year periods. For a number of Putnam funds with relatively unique investment mandates, the Trustees evaluated performance based on comparisons of their total returns with the returns of selected investment benchmarks or targeted returns. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper Inc. peer group (Lipper European Region Funds) for the one-year, three-year and five-year periods ended December 31, 2012 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):


One-year period	1st

Three-year period	2nd

Five-year period	2nd

Over the one-year, three-year and five-year periods ended December 31, 2012, there were 111, 97 and 86 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to


22	Europe Equity Fund

policies established by the Trustees, soft dollars generated by these means are used primarily to acquire brokerage and research services that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. However, the Trustees noted that a portion of available soft dollars continues to be used to pay fund expenses. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee and also indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management, sub-management and sub-advisory contracts, the Trustees reviewed your fund’s investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”) and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services.


Europe Equity Fund	23

Financial statements

A guide to financial statements

These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.

The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.

Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and 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 liquidation preference of preferred shares.)

Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.

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 highlights table also includes the current reporting period.


24	Europe Equity Fund

The fund’s portfolio 12/31/13 (Unaudited)


COMMON STOCKS (96.5%)*	Shares	Value

Austria (1.1%)
voestalpine AG	52,406	$2,537,872

		2,537,872
Belgium (1.3%)
Solvay SA	18,817	2,978,413

		2,978,413
Czech Republic (0.9%)
Erste Group Bank AG	57,734	2,019,793

		2,019,793
France (15.3%)
Alcatel-Lucent † ^S	436,778	1,959,409

BNP Paribas SA	85,302	6,679,377

Eurazeo SA	20,078	1,574,382

Airbus Group NV	74,050	5,707,619

Faurecia † ^S	49,273	1,881,051

L’Oreal SA	14,289	2,516,288

Nexity	47,530	1,795,453

Numericable SAS †	53,033	1,926,077

Sanofi	66,343	7,061,944

SCOR SE	88,882	3,249,175

Veolia Environnement	108,636	1,775,146

		36,125,921
Germany (12.2%)
BASF SE	35,595	3,795,666

Biotest AG-Vorzugsaktien (Preference)	18,874	1,979,799

Daimler AG (Registered Shares)	56,543	4,894,409

Deutsche Post AG	151,898	5,539,049

Henkel AG & Co. KGaA (Preference)	40,418	4,688,931

Merck KGaA	11,544	2,079,887

Siemens AG	39,458	5,391,300

Zalando AG (acquired 9/30/13, cost $313,871) (Private) †∆∆ ^F	7	271,305

		28,640,346
Ireland (2.3%)
Hibernia REIT PLC † ^R	1,158,000	1,863,880

Kerry Group PLC Class A	50,985	3,542,808

		5,406,688
Italy (4.8%)
ENI SpA	165,364	3,998,436

Fiat SpA †	210,228	1,725,400

Luxottica Group SpA	41,911	2,251,071

Moncler SpA †	31,928	693,989

UniCredit SpA	366,438	2,728,607

		11,397,503
Netherlands (4.0%)
ASML Holding NV	19,155	1,798,752

ING Groep NV GDR †	404,742	5,659,773

Ziggo NV	43,593	1,995,072

		9,453,597
Portugal (0.9%)
Banco Espirito Santo SA †	1,423,039	2,035,820

		2,035,820


Europe Equity Fund	25


COMMON STOCKS (96.5%)* cont.	Shares	Value

Russia (2.0%)
Aeroflot — Russian Airlines OJSC †	94,801	$244,643

Magnit OJSC	8,248	2,304,466

Yandex NV Class A † ^S	47,700	2,058,255

		4,607,364
Spain (3.2%)
Banco Bilbao Vizcaya Argentaria SA (BBVA)	311,909	3,864,673

Banco Popular Espanol SA †	332,649	2,008,439

Jazztel PLC †	156,511	1,678,450

		7,551,562
Sweden (3.0%)
Assa Abloy AB Class B	42,709	2,264,308

Nordea Bank AB	233,343	3,159,706

Volvo AB Class B	132,750	1,749,859

		7,173,873
Switzerland (5.9%)
Barry Callebaut AG	1,836	2,303,310

Compagnie Financiere Richemont SA	54,569	5,460,660

Nestle SA	49,862	3,660,267

Partners Group Holding AG	9,272	2,473,782

		13,898,019
Turkey (0.3%)
Turk Hava Yollari Anonim Ortakligi (THY)	225,779	680,778

		680,778
United Kingdom (37.6%)
Associated British Foods PLC	85,714	3,472,382

AstraZeneca PLC	108,773	6,451,985

Barclays PLC	899,913	4,071,740

BG Group PLC	162,960	3,511,830

British American Tobacco (BAT) PLC	104,350	5,598,798

Britvic PLC	196,198	2,254,807

BT Group PLC	579,947	3,651,560

Compass Group PLC	220,838	3,540,878

Experian PLC	123,614	2,281,446

Genel Energy PLC †	84,374	1,505,492

Glencore Xstrata PLC	465,550	2,420,173

HSBC Holdings PLC	149,157	1,635,938

Kingfisher PLC	372,219	2,379,542

Liberty Global PLC Ser. C †	17,200	1,450,304

Persimmon PLC	201,091	4,131,150

Petrofac, Ltd.	71,981	1,460,800

Prudential PLC	199,748	4,470,565

Regus PLC	559,905	2,020,346

Royal Dutch Shell PLC Class A	254,895	9,154,383

Shire PLC	67,220	3,167,522

Telecity Group PLC	231,367	2,786,737

Thomas Cook Group PLC †	728,154	2,017,171

TUI Travel PLC	526,956	3,607,679

Vodafone Group PLC	1,602,518	6,299,620

WPP PLC	230,050	5,279,165

		88,622,013


26	Europe Equity Fund


COMMON STOCKS (96.5%)* cont.	Shares	Value

United States (1.7%)
KKR & Co. LP	88,100	$2,144,354

Monsanto Co.	16,400	1,911,422

		4,055,776

Total common stocks (cost $177,837,157)		$227,185,338

SHORT-TERM INVESTMENTS (4.1%)*	Shares	Value

Putnam Cash Collateral Pool, LLC 0.14% ^d	3,070,502	$ 3,070,502

Putnam Short Term Investment Fund 0.08% ^L	6,482,593	6,482,593

Total short-term investments (cost $9,553,095)		$9,553,095

TOTAL INVESTMENTS

Total investments (cost $187,390,252)		$236,738,433

Key to holding’s abbreviations

OJSC Open Joint Stock Company

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from July 1, 2013 through December 31, 2013 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $235,464,268.

† Non-income-producing security.

∆∆ Security is restricted with regard to public resale. The total fair value of this security and any other restricted securities (excluding 144A securities), if any, held at the close of the reporting period was $271,305, or 0.1% of net assets.

^dAffiliated company. See Note 1 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

^FIs valued at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).

^LAffiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

^RReal Estate Investment Trust.

^SSecurity on loan, in part or in entirety, at the close of the reporting period (Note 1).

144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Financials	21.1%
Consumer discretionary	18.4
Consumer staples	12.9
Industrials	11.0


Europe Equity Fund	27

ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1: Valuations based on quoted prices for identical securities in active markets.

Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Common stocks:

Austria	$—	$2,537,872	$—

Belgium	—	2,978,413	—

Czech Republic	—	2,019,793	—

France	1,926,077	34,199,844	—

Germany	—	28,369,041	271,305

Ireland	1,863,880	3,542,808	—

Italy	693,989	10,703,514	—

Netherlands	—	9,453,597	—

Portugal	—	2,035,820	—

Russia	4,607,364	—	—

Spain	—	7,551,562	—

Sweden	—	7,173,873	—

Switzerland	—	13,898,019	—

Turkey	—	680,778	—

United Kingdom	1,450,304	87,171,709	—

United States	4,055,776	—	—

Total common stocks	14,597,390	212,316,643	271,305

Short-term investments	6,482,593	3,070,502	—

Totals by level	$21,079,983	$215,387,145	$271,305

At the start and close of the reporting period, Level 3 investments in securities were not considered a significant portion of the fund’s portfolio.

The accompanying notes are an integral part of these financial statements.


28	Europe Equity Fund

Statement of assets and liabilities 12/31/13 (Unaudited)


ASSETS

Investment in securities, at value, including $2,907,305 of securities on loan (Note 1):
Unaffiliated issuers (identified cost $177,837,157)	$227,185,338
Affiliated issuers (identified cost $9,553,095) (Notes 1 and 5)	9,553,095

Dividends, interest and other receivables	409,269

Receivable for shares of the fund sold	2,321,343

Total assets	239,469,045

LIABILITIES

Payable to custodian	10,070

Payable for shares of the fund repurchased	281,181

Payable for compensation of Manager (Note 2)	146,629

Payable for custodian fees (Note 2)	16,354

Payable for investor servicing fees (Note 2)	41,114

Payable for Trustee compensation and expenses (Note 2)	184,831

Payable for administrative services (Note 2)	1,541

Payable for distribution fees (Note 2)	124,445

Collateral on securities loaned, at value (Note 1)	3,070,502

Other accrued expenses	128,110

Total liabilities	4,004,777

Net assets	$235,464,268


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$260,788,720

Distributions in excess of net investment income (Note 1)	(1,952,684)

Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(72,725,435)

Net unrealized appreciation of investments and assets and liabilities in foreign currencies	49,353,667

Total — Representing net assets applicable to capital shares outstanding	$235,464,268

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($186,632,692 divided by 6,971,209 shares)	$26.77

Offering price per class A share (100/94.25 of $26.77)*	$28.40

Net asset value and offering price per class B share ($3,681,134 divided by 143,236 shares)**	$25.70

Net asset value and offering price per class C share ($12,169,121 divided by 465,345 shares)**	$26.15

Net asset value and redemption price per class M share ($3,335,773 divided by 125,687 shares)	$26.54

Offering price per class M share (100/96.50 of $26.54)*	$27.50

Net asset value, offering price and redemption price per class R share
($361,597 divided by 13,677 shares)	$26.44

Net asset value, offering price and redemption price per class Y share
($29,283,951 divided by 1,090,052 shares)	$26.86

* On single retail sales of less than $50,000. On sales of $50,000 or more 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.


Europe Equity Fund	29

Statement of operations Six months ended 12/31/13 (Unaudited)


INVESTMENT INCOME

Dividends (net of foreign tax of $83,123)	$1,288,283

Interest (including interest income of $1,487 from investments in affiliated issuers) (Note 5)	1,542

Securities lending (Note 1)	44,939

Total investment income	1,334,764

EXPENSES

Compensation of Manager (Note 2)	771,870

Investor servicing fees (Note 2)	229,273

Custodian fees (Note 2)	18,793

Trustee compensation and expenses (Note 2)	6,860

Distribution fees (Note 2)	267,202

Administrative services (Note 2)	3,242

Other	135,350

Total expenses	1,432,590

Expense reduction (Note 2)	(312)

Net expenses	1,432,278

Net investment loss	(97,514)


Net realized gain on investments (Notes 1 and 3)	10,065,724

Net realized gain on foreign currency transactions (Note 1)	2,082

Net unrealized appreciation of assets and liabilities in foreign currencies during the period	16,046

Net unrealized appreciation of investments and when-issued securities during the period	31,231,143

Net gain on investments	41,314,995

Net increase in net assets resulting from operations	$41,217,481

The accompanying notes are an integral part of these financial statements.


30	Europe Equity Fund

Statement of changes in net assets


INCREASE IN NET ASSETS	Six months ended 12/31/13*	Year ended 6/30/13

Operations:
Net investment income (loss)	$(97,514)	$2,237,479

Net realized gain on investments
and foreign currency transactions	10,067,806	18,439,271

Net unrealized appreciation of investments and assets
and liabilities in foreign currencies	31,247,189	15,290,410

Net increase in net assets resulting from operations	41,217,481	35,967,160

Distributions to shareholders (Note 1):
From ordinary income
Net investment income

Class A	(1,479,045)	(2,081,310)

Class B	(6,573)	(24,925)

Class C	(81,048)	(14,521)

Class M	(11,855)	(29,115)

Class R	(2,492)	(1,914)

Class Y	(271,467)	(148,088)

Increase in capital from settlement payments	56,290	—

Redemption fees (Note 1)	—	1,786

Increase (decrease) from capital share transactions (Note 4)	34,618,211	(17,515,780)

Total increase in net assets	74,039,502	16,153,293

NET ASSETS

Beginning of period	161,424,766	145,271,473

End of period (including distributions in excess of net
investment income of $1,952,684 and $2,690, respectively)	$235,464,268	$161,424,766

* Unaudited

The accompanying notes are an integral part of these financial statements.


Europe Equity Fund	31

Financial highlights (For a common share outstanding throughout the period)


INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:								RATIOS AND SUPPLEMENTAL DATA:

															Ratio
	Net asset	Net	Net realized			From								Ratio	of net investment
	value,	investment	and unrealized	Total from	From net	net realized	From						Net assets,	of expenses	income (loss)
	beginning	income	gain (loss)	investment	investment	gain on	return	Total	Redemption	Non-recurring	Net asset value,	Total return at net	end of period	to average	to average	Portfolio
Period ended	of period	(loss) ^a	on investments	operations	income	investments	of capital	distributions	fees	reimbursements	end of period	asset value (%) ^b	(in thousands)	net assets (%) ^c	net assets (%)	turnover (%)

Class A
December 31, 2013**	$21.73	(.01)	5.26	5.25	(.22)	—	—	(.22)	—	.01 ^e	$26.77	24.22 *	$186,633	.73 *	(.03) *	26 *
June 30, 2013	17.45	.29	4.30	4.59	(.31)	—	—	(.31)	— ^d	—	21.73	26.39	143,122	1.48	1.43	66
June 30, 2012	21.50	.32	(3.94)	(3.62)	(.84)	—	(.03)	(.87)	.01	.43 ^f,g,h	17.45	(14.38) ^f,h	130,428	1.47	1.78	62
June 30, 2011	15.83	.31	5.72	6.03	(.37)	—	—	(.37)	— ^d	.01 ^i,j	21.50	38.36	177,369	1.43	1.54	70
June 30, 2010	15.12	.23	.49	.72	(.09)	—	—	(.09)	— ^d	.08 ^k	15.83	5.20	151,329	1.52 ^l	1.25 ^l	113
June 30, 2009	23.20	.42	(8.56)	(8.14)	—	—	—	—	— ^d	.06 ^m,n	15.12	(34.83)	169,467	1.47 ^l	2.65 ^l	79

Class B
December 31, 2013**	$20.80	(.10)	5.04	4.94	(.05)	—	—	(.05)	—	.01 ^e	$25.70	23.79 *	$3,681	1.11 *	(.41) *	26 *
June 30, 2013	16.72	.12	4.11	4.23	(.15)	—	—	(.15)	— ^d	—	20.80	25.36	2,907	2.23	.60	66
June 30, 2012	20.55	.16	(3.72)	(3.56)	(.66)	—	(.03)	(.69)	.01	.41 ^f,g,h	16.72	(14.98) ^f,h	3,126	2.22	.92	62
June 30, 2011	15.12	.12	5.49	5.61	(.19)	—	—	(.19)	— ^d	.01 ^i,j	20.55	37.29	5,580	2.18	.65	70
June 30, 2010	14.48	.06	.50	.56	—	—	—	—	— ^d	.08 ^k	15.12	4.42	6,671	2.27 ^l	.37 ^l	113
June 30, 2009	22.39	.27	(8.24)	(7.97)	—	—	—	—	— ^d	.06 ^m,n	14.48	(35.33)	10,391	2.22 ^l	1.74 ^l	79

Class C
December 31, 2013**	$21.28	(.13)	5.17	5.04	(.18)	—	—	(.18)	—	.01 ^e	$26.15	23.78 *	$12,169	1.11 *	(.53) *	26 *
June 30, 2013	17.11	.18	4.16	4.34	(.17)	—	—	(.17)	— ^d	—	21.28	25.41	2,679	2.23	.90	66
June 30, 2012	21.05	.18	(3.84)	(3.66)	(.68)	—	(.03)	(.71)	.01	.42 ^f,g,h	17.11	(15.01) ^f,h	1,502	2.22	1.01	62
June 30, 2011	15.50	.15	5.60	5.75	(.21)	—	—	(.21)	— ^d	.01 ^i,j	21.05	37.32	2,217	2.18	.80	70
June 30, 2010	14.84	.09	.49	.58	—	—	—	—	— ^d	.08 ^k	15.50	4.45	1,859	2.27 ^l	.48 ^l	113
June 30, 2009	22.94	.30	(8.46)	(8.16)	—	—	—	—	— ^d	.06 ^m,n	14.84	(35.31)	2,325	2.22 ^l	1.90 ^l	79

Class M
December 31, 2013**	$21.49	(.07)	5.20	5.13	(.09)	—	—	(.09)	—	.01 ^e	$26.54	23.95 *	$3,336	.98 *	(.27) *	26 *
June 30, 2013	17.27	.18	4.25	4.43	(.21)	—	—	(.21)	— ^d	—	21.49	25.71	2,795	1.98	.92	66
June 30, 2012	21.26	.22	(3.87)	(3.65)	(.74)	—	(.03)	(.77)	.01	.42 ^f,g,h	17.27	(14.80) ^f,h	2,565	1.97	1.24	62
June 30, 2011	15.65	.21	5.66	5.87	(.27)	—	—	(.27)	— ^d	.01 ^i,j	21.26	37.72	3,751	1.93	1.06	70
June 30, 2010	14.96	.13	.49	.62	(.01)	—	—	(.01)	— ^d	.08 ^k	15.65	4.64	3,250	2.02 ^l	.75 ^l	113
June 30, 2009	23.07	.34	(8.51)	(8.17)	—	—	—	—	— ^d	.06 ^m,n	14.96	(35.15)	3,683	1.97 ^l	2.19 ^l	79

Class R
December 31, 2013**	$21.46	(.04)	5.20	5.16	(.19)	—	—	(.19)	—	.01 ^e	$26.44	24.12 *	$362	.85 *	(.18) *	26 *
June 30, 2013	17.23	.25	4.22	4.47	(.24)	—	—	(.24)	— ^d	—	21.46	26.02	206	1.73	1.27	66
June 30, 2012	21.25	.27	(3.89)	(3.62)	(.81)	—	(.03)	(.84)	.01	.43 ^f,g,h	17.23	(14.60) ^f,h	168	1.72	1.51	62
June 30, 2011	15.66	.29	5.62	5.91	(.33)	—	—	(.33)	— ^d	.01 ^i,j	21.25	38.00	219	1.68	1.49	70
June 30, 2010	14.97	.21	.46	.67	(.06)	—	—	(.06)	— ^d	.08 ^k	15.66	4.97	133	1.77 ^l	1.20 ^l	113
June 30, 2009	23.02	.42	(8.53)	(8.11)	—	—	—	—	— ^d	.06 ^m,n	14.97	(34.97)	97	1.72 ^l	2.80 ^l	79

Class Y
December 31, 2013**	$21.82	.01	5.29	5.30	(.27)	—	—	(.27)	—	.01 ^e	$26.86	24.39 *	$29,284	.60 *	.04 *	26 *
June 30, 2013	17.53	.36	4.29	4.65	(.36)	—	—	(.36)	— ^d	—	21.82	26.63	9,714	1.23	1.77	66
June 30, 2012	21.60	.37	(3.95)	(3.58)	(.90)	—	(.03)	(.93)	.01	.43 ^f,g,h	17.53	(14.13) ^f,h	7,484	1.22	2.04	62
June 30, 2011	15.90	.37	5.74	6.11	(.42)	—	—	(.42)	— ^d	.01 ^i,j	21.60	38.73	9,947	1.18	1.84	70
June 30, 2010	15.19	.27	.49	.76	(.13)	—	—	(.13)	— ^d	.08 ^k	15.90	5.41	8,356	1.27 ^l	1.52 ^l	113
June 30, 2009	23.24	.52	(8.63)	(8.11)	—	—	—	—	— ^d	.06 ^m,n	15.19	(34.64)	8,987	1.22 ^l	3.50 ^l	79

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.


32	Europe Equity Fund	Europe Equity Fund	33

Financial highlights (Continued)

* Not annualized.

** Unaudited.

^a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

^b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

^c Includes amounts paid through expense offset and/or brokerage/service arrangements (Note 2).

^d Amount represents less than $0.01 per share.

^e Reflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Morgan Stanley & Co. which amounted to $0.01 per share outstanding on November 27, 2013.

^f Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Bank of America which amounted to the following amounts per share outstanding on December 15, 2011:


	Per share

Class A	$0.15

Class B	0.14

Class C	0.15

Class M	0.15

Class R	0.15

Class Y	0.15

This payment resulted in an increase to total returns of 0.73% for the period ended June 30, 2012.

^g Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Canadian Imperial Holdings, Inc. and CIBC World Markets Corp. which amounted to the following amounts per share outstanding on November 29, 2011:


	Per share

Class A	$0.08

Class B	0.07

Class C	0.08

Class M	0.08

Class R	0.08

Class Y	0.08

^h Reflects a non-recurring reimbursement related to restitution amounts in connection with a distribution plan approved by the SEC, which amounted to the following amounts per share outstanding on July 21, 2011:


	Per share

Class A	$0.20

Class B	0.19

Class C	0.20

Class M	0.20

Class R	0.20

Class Y	0.20

This payment resulted in an increase to total returns of 0.98% for the period ended June 30, 2012.

ⁱ Reflects a non-recurring reimbursement related to short-term trading related lawsuits, which amounted to $0.01 per share outstanding on May 11, 2011.

^j Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Zurich Capital Markets, Inc., which amounted to less than $0.01 per share outstanding on December 21, 2010.

The accompanying notes are an integral part of these financial statements.


34	Europe Equity Fund

Financial highlights (Continued)

^k Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Prudential Securities, Inc., which amounted to $0.08 per share outstanding as of March 30, 2010.

^l Reflects an involuntary contractual expense limitation in effect during the period. For periods prior to June 30, 2010 certain fund expenses were waived in connection with the fund’s investment in Putnam Prime Money Market Fund. As a result of such limitation and/or waivers, the expenses of each class reflect a reduction of the following amounts:


	Percentage of
	average net assets

June 30, 2010	0.02%

June 30, 2009	0.14

^m Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P., Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.03 per share outstanding as of June 23, 2009.

ⁿ Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Bear, Stearns & Co., Inc. and Bear, Stearns Securities Corp., which amounted to $0.03 per share outstanding as of May 21, 2009.

The accompanying notes are an integral part of these financial statements.


Europe Equity Fund	35

Notes to financial statements 12/31/13 (Unaudited)

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from July 1, 2013 through December 31, 2013.

Putnam Europe Equity Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks (growth or value stocks or both) of large and midsize European companies that Putnam Management believes have favorable investment potential. Putnam Management also considers other factors that it believes will cause the stock price to rise. The fund invests mainly in developed countries, but may invest in emerging markets, such as those in Eastern Europe.

The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

Note 1: Significant accounting policies

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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

A short-term trading fee of 1.00% may have applied to redemptions (including exchanges into another fund) of shares purchased before January 2, 2013 and held for 90 days or less. The short-term trading fee was accounted for as an addition to paid-in-capital. No short-term trading fee applies to shares purchased on or after January 2, 2013.

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). 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. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

Security valuation Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.

Investments in open-end investment companies (excluding exchange traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such


36	Europe Equity Fund

investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.

Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value and are classified as Level 2 securities.

To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.

Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

Interest income, net of any applicable withholding taxes, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.

All premiums/discounts are amortized/accreted on a yield-to-maturity basis.

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is 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 earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions 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.

Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending is included in


Europe Equity Fund	37

investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the value of securities loaned amounted to $2,907,305 and the fund received cash collateral of $3,070,502.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Line of credit The fund participates, along with other Putnam funds, in a $315 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.11% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.

The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.

At June 30, 2013, the fund had a capital loss carryover of $82,677,455 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:


Loss carryover

Short-term	Long-term	Total	Expiration

$24,303,787	$—	$24,303,787	June 30, 2017

58,373,668	—	58,373,668	June 30, 2018

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

The aggregate identified cost on a tax basis is $187,506,038, resulting in gross unrealized appreciation and depreciation of $50,412,535 and $1,180,140, respectively, or net unrealized appreciation of $49,232,395.


38	Europe Equity Fund

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations.

Note 2: Management fee, administrative services and other transactions

The fund pays Putnam Management a management fee (base fee) (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:


0.850%	of the first $5 billion,	0.650%	of the next $50 billion,

0.800%	of the next $5 billion,	0.630%	of the next $50 billion,

0.750%	of the next $10 billion,	0.620%	of the next $100 billion and

0.700%	of the next $10 billion,	0.615%	of any excess thereafter.

Following the death on October 8, 2013 of The Honourable Paul G. Desmarais, who controlled directly and indirectly a majority of the voting shares of Power Corporation of Canada, the ultimate parent company of Putnam Management, the Trustees of the fund approved an interim management contract with Putnam Management. Consistent with Rule 15a–4 under the Investment Company Act of 1940, the interim management contract will remain in effect until the earlier to occur of (i) approval by the fund’s shareholders of a new management contract and (ii) March 7, 2014. Except with respect to termination, the substantive terms of the interim management contract, including terms relating to fees payable to Putnam Management, are identical to the terms of the fund’s previous management contract with Putnam Management. The Trustees of the fund also approved the continuance, effective October 8, 2013, of the sub-management contract between Putnam Management and Putnam Investments Limited (PIL) and the sub-advisory contract between Putnam Management, PIL and The Putnam Advisory Company, LLC (PAC) described below, for a term no longer than March 7, 2014. The Trustees of the fund have called a shareholder meeting for February 27, 2014, at which shareholders of the fund will consider approval of a proposed new management contract between the fund and Putnam Management. The substantive terms of the proposed new management contract, including terms relating to fees, are identical to the terms of the fund’s previous management contract. Further information regarding the proposed new management contract is included in a proxy statement filed with the SEC on December 20, 2013. The proxy statement was mailed to shareholders of record beginning on or about December 23, 2013.

In addition, beginning with January 2011, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended. Each month, the performance adjustment is calculated by multiplying the performance adjustment rate and the fund’s average net assets over the performance period and the result is divided by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the MSCI Europe Index (Net Dividends), each measured over the performance period. The maximum annualized performance adjustment rates are +/–0.15%. The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the performance period of up to thirty-six months. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have declined significantly over that period, the negative performance adjustment may exceed the base fee. In this event, Putnam Management would make a payment to the fund.

Because the performance adjustment is based on the fund’s performance relative to its applicable benchmark index, and not its absolute performance, the performance adjustment could increase Putnam Management’s fee even if the fund’s shares lose value during the performance period provided that the fund outperformed its benchmark index, and could decrease Putnam Management’s fee even if the fund’s shares increase in value during the performance period provided that the fund underperformed its benchmark index.


Europe Equity Fund	39

For the reporting period, the base fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.352% of the fund’s average net assets before an increase of $91,125 (0.047% of the fund’s average net assets) based on performance.

Putnam Management has also contractually agreed, through June 30, 2014, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. This expense limitation remains in place under the interim management contract described above. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

PIL, an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.

PAC, an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. Putnam Management or PIL, as applicable, pays a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.

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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. Investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets. During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:


Class A	$195,670	Class R	301

Class B	3,898	Class Y	18,731

Class C	7,001	Total	$229,273

Class M	3,672

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $312 under the expense offset arrangements.

Each independent Trustee of the fund receives an annual Trustee fee, of which $130, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.

The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.


40	Europe Equity Fund

The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. During the reporting period, the class specific expenses related to distribution fees were as follows:


Class A	$208,010	Class M	11,710

Class B	16,585	Class R	640

Class C	30,257	Total	$267,202

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $20,326 and $10 from the sale of class A and class M shares, respectively, and received $829 and $596 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A and class M redemptions.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $78,569,484 and $48,724,327, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Six months ended 12/31/13		Year ended 6/30/13

Class A	Shares	Amount	Shares	Amount

Shares sold	808,822	$20,129,083	282,501	$6,002,923

Shares issued in connection with
reinvestment of distributions	53,617	1,384,382	94,381	1,932,922

	862,439	21,513,465	376,882	7,935,845

Shares repurchased	(478,410)	(11,839,632)	(1,262,088)	(25,424,919)

Net increase (decrease)	384,029	$9,673,833	(885,206)	$(17,489,074)


	Six months ended 12/31/13		Year ended 6/30/13

Class B	Shares	Amount	Shares	Amount

Shares sold	22,243	$524,552	11,423	$224,554

Shares issued in connection with
reinvestment of distributions	256	6,337	1,232	24,244

	22,499	530,889	12,655	248,798

Shares repurchased	(18,998)	(438,394)	(59,893)	(1,163,837)

Net increase (decrease)	3,501	$92,495	(47,238)	$(915,039)


Europe Equity Fund	41


	Six months ended 12/31/13		Year ended 6/30/13

Class C	Shares	Amount	Shares	Amount

Shares sold	348,217	$8,588,703	45,764	$981,129

Shares issued in connection with
reinvestment of distributions	2,859	72,132	618	12,447

	351,076	8,660,835	46,382	993,576

Shares repurchased	(11,635)	(282,884)	(8,232)	(165,162)

Net increase	339,441	$8,377,951	38,150	$828,414


	Six months ended 12/31/13		Year ended 6/30/13

Class M	Shares	Amount	Shares	Amount

Shares sold	283	$6,438	391	$7,885

Shares issued in connection with
reinvestment of distributions	312	7,987	976	19,824

	595	14,425	1,367	27,709

Shares repurchased	(4,949)	(118,722)	(19,788)	(396,307)

Net decrease	(4,354)	$(104,297)	(18,421)	$(368,598)


	Six months ended 12/31/13		Year ended 6/30/13

Class R	Shares	Amount	Shares	Amount

Shares sold	5,787	$144,588	3,417	$70,723

Shares issued in connection with
reinvestment of distributions	98	2,492	94	1,914

	5,885	147,080	3,511	72,637

Shares repurchased	(1,823)	(46,419)	(3,625)	(70,697)

Net increase (decrease)	4,062	$100,661	(114)	$1,940


	Six months ended 12/31/13		Year ended 6/30/13

Class Y	Shares	Amount	Shares	Amount

Shares sold	674,303	$17,201,628	77,133	$1,607,845

Shares issued in connection with
reinvestment of distributions	9,705	251,463	7,083	145,475

	684,008	17,453,091	84,216	1,753,320

Shares repurchased	(39,148)	(975,523)	(65,992)	(1,326,743)

Net increase	644,860	$16,477,568	18,224	$426,577

Note 5: Affiliated transactions

Transactions during the reporting period with Putnam Short Term Investment Fund, which is under common ownership and control, were as follows:


	Fair value at the				Fair value at
	beginning of				the end of
	the reporting			Investment	the reporting
Name of affiliate	period	Purchase cost	Sale proceeds	income	period

Putnam Short Term
Investment Fund*	$5,124,974	$32,236,643	$30,879,024	$1,487	$6,482,593

* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.


42	Europe Equity Fund

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.

Note 7: Offsetting of financial and derivative assets and liabilities

The following table summarizes any derivatives, repurchase agreements, reverse repurchase agreements, securities lending and borrowing transactions, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.


	Goldman Sachs Bank USA	Total

Assets:

Securities on loan**	$2,907,305	$2,907,305

Total Assets	$2,907,305	$2,907,305

Total Financial and Derivative Net Assets	$2,907,305	$2,907,305

Total collateral received (pledged)^##†	$2,907,305	$2,907,305

Net amount	$—	$—

**Included with Investments in securities on the Statement of assets and liabilities

^##Any over-collateralization of total financial and derivative net assets is not shown.

†Additional collateral may be required from certain brokers based on individual agreements.


Europe Equity Fund	43

Services for shareholders

Investor services

Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.

Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.

Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.

Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.

Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.

Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.

Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.

Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.

For more information

Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.


44	Europe Equity Fund

Fund information

Founded over 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.


Investment Manager	Trustees	Robert R. Leveille
Putnam Investment	Jameson A. Baxter, Chair	Vice President and
Management, LLC	Liaquat Ahamed	Chief Compliance Officer
One Post Office Square	Ravi Akhoury
Boston, MA 02109	Barbara M. Baumann	Michael J. Higgins
	Charles B. Curtis	Vice President, Treasurer,
Investment Sub-Manager	Robert J. Darretta	and Clerk
Putnam Investments Limited	Katinka Domotorffy
57–59 St James’s Street	John A. Hill	Janet C. Smith
London, England SW1A 1LD	Paul L. Joskow	Vice President,
	Kenneth R. Leibler	Principal Accounting Officer,
Investment Sub-Advisor	Robert E. Patterson	and Assistant Treasurer
The Putnam Advisory	George Putnam, III
Company, LLC	Robert L. Reynolds	Susan G. Malloy
One Post Office Square	W. Thomas Stephens	Vice President and
Boston, MA 02109		Assistant Treasurer
	Officers
Marketing Services	Robert L. Reynolds	James P. Pappas
Putnam Retail Management	President	Vice President
One Post Office Square
Boston, MA 02109	Jonathan S. Horwitz	Mark C. Trenchard
	Executive Vice President,	Vice President and
Custodian	Principal Executive Officer, and	BSA Compliance Officer
State Street Bank	Compliance Liaison
and Trust Company		Nancy E. Florek
	Steven D. Krichmar	Vice President, Director of
Legal Counsel	Vice President and	Proxy Voting and Corporate
Ropes & Gray LLP	Principal Financial Officer	Governance, Assistant Clerk,
		and Associate Treasurer
	Robert T. Burns
	Vice President and
	Chief Legal Officer

This report is for the information of shareholders of Putnam Europe Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


	Exact name of registrant as specified in charter:	Putnam Europe Equity Fund


	Address of principal executive offices:	One Post Office Square, Boston, Massachusetts 02109


	Name and address of agent for service:	Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109


	Copy to:	John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600


	Registrant’s telephone number, including area code:	(617) 292-1000


	The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:


	The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.


	Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:


	Item 8. Portfolio Managers of Closed-End Investment Companies


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	FORM N-CSR


	Item 1. Report to Stockholders:


	Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:


	Item 10. Submission of Matters to a Vote of Security Holders:


	(b) Changes in internal control over financial reporting: Not applicable


	(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.


	(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.


	/s/Janet C. Smith Janet C. Smith Principal Accounting Officer


	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


	/s/Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer


	/s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer