Europe Equity Fund     15

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 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.

16     Europe Equity Fund

Other information for shareholders

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, 2014, are available in the Individual Investors section of putnam.com, and on the Securities and Exchange Commission (SEC) 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 June 30, 2014, Putnam employees had approximately $476,000,000 and the Trustees had approximately $115,000,000 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.

Europe Equity Fund     17

Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

18     Europe Equity Fund

Trustee approval of management contract

General conclusions

The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”), the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”), and the sub-advisory contract among Putnam Management, PIL, and another affiliate, The Putnam Advisory Company (“PAC”). The Board of Trustees, 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 Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Putnam funds (“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 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 2014, 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, as well as supplemental information provided in response to additional requests made by the Contract Committee. 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 2014, 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, 2014 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other 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, 2014. (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 attempted to evaluate 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’ 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

Europe Equity Fund     19

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 in effect for your fund 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 under the management contracts for the Putnam funds were implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders. Shareholders also voted overwhelmingly to approve these fee arrangements again in early 2014, when they were asked to approve new management contracts (with the same fees and substantially identical other provisions) following the possible termination of the previous management contracts as a result of the death of the Honorable Paul G. Desmarais. (Mr. Desmarais, both directly and through holding companies, controlled a majority of the voting shares of Power Corporation of Canada, which (directly and indirectly) is the majority owner of Putnam Management. Mr. Desmarais’ voting control of shares of Power Corporation of Canada was transferred to The Desmarais Family Residuary Trust upon his death and this transfer, as a technical matter, may have constituted an “assignment” within the meaning of the 1940 Act, causing the Putnam funds’ management contracts to terminate automatically.)

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.

20     Europe Equity Fund

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 during its fiscal year ending in 2013. Putnam Management’s support for these expense limitation arrangements 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. (“Lipper”). 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 fourth quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2013 (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, 2013 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

Europe Equity Fund     21

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 Putnam 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.

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 2013 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 second-best performing mutual fund complex for both 2013 and the five-year period ended December 31, 2013. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2013 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 for which meaningful competitive performance rankings are not considered available, the Trustees evaluated performance based on comparisons of their returns with the returns of selected investment

22     Europe Equity Fund

benchmarks. 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 peer group (Lipper European Region Funds) for the one-year, three-year and five-year periods ended December 31, 2013 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):

One-year period	1st
Three-year period	1st
Five-year period	2nd

Over the one-year, three-year and five-year periods ended December 31, 2013, there were 119, 100 and 87 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 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 note about your fund’s auditors

During your fund’s fiscal year, between July 18, 2013, and December 16, 2013, a non-U.S. member firm in PricewaterhouseCoopers LLP’s (“PwC”) global network of firms had an investment in certain non-U.S. funds that became affiliated with Putnam Investments as a result of the acquisition of the funds’ advisor by Putnam’s parent company, Great-West Lifeco Inc. The investment consisted of pension plan assets for the benefit of the member firm’s personnel. This investment is inconsistent with the SEC’s independence rules applicable to auditors. Although upon the disposition of the investment by the member firm on December 16, 2013, PwC and its affiliates took all necessary steps to eliminate this issue, the requirements of the SEC’s independence rules were not met for your fund’s fiscal year because the SEC’s rules require an audit firm to be independent for the entire fiscal year under audit. Based on its knowledge of the facts and its experience with PwC, the Audit and Compliance Committee of your fund’s Board of Trustees concluded that the investment by the PwC member firm would not affect PwC’s ability to render an objective audit opinion to your fund. Based on this conclusion and consideration of the potential risks that the disruption of a change of auditor could present, the Audit and Compliance Committee determined that PwC should continue to act as auditor for your fund.

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, 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 year.

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.

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

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Europe Equity Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Europe Equity Fund (the “fund”) at June 30, 2014, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at June 30, 2014 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
August 7, 2014

Europe Equity Fund     25

The fund’s portfolio 6/30/14

	COMMON STOCKS (97.7%)*	Shares	Value
	Austria (1.5%)
	voestalpine AG S	99,458	$4,733,209
			4,733,209
	Belgium (4.1%)
	Anheuser-Busch InBev NV	78,021	8,963,388
	Solvay SA	22,531	3,878,059
			12,841,447
	Czech Republic (0.8%)
	Erste Group Bank AG	76,694	2,480,504
			2,480,504
	France (15.4%)
	Airbus Group NV	80,548	5,397,808
	Alcatel-Lucent † S	571,651	2,041,443
	Alstom SA	53,885	1,964,519
	BNP Paribas SA	56,646	3,842,977
	Eurazeo SA	21,081	1,753,623
	Faurecia	61,796	2,332,052
	Gaztransport Et Technigaz SA	41,480	2,704,180
	Iliad SA	10,815	3,269,083
	Natixis	788,745	5,056,695
	Numericable Group SA † S	54,320	3,235,547
	Renault SA	32,247	2,915,609
	Sanofi	97,299	10,336,104
	Veolia Environnement SA	185,538	3,535,206
			48,384,846
	Germany (12.3%)
	BASF SE	27,970	3,256,592
	Biotest AG-Vorzugsaktien (Preference) S	17,609	2,281,719
	Daimler AG (Registered Shares)	62,861	5,887,570
	Deutsche Post AG	180,900	6,541,927
	HeidelbergCement AG	28,927	2,468,876
	Henkel AG & Co. KGaA (Preference)	58,508	6,764,111
	Siemens AG	66,258	8,750,629
	Wacker Chemie AG	20,402	2,355,882
	Zalando AG (acquired 9/30/13, cost $313,871) (Private) † ΔΔ F	14	312,980
			38,620,286
	Ireland (3.2%)
	Bank of Ireland †	8,072,578	2,730,285
	Hibernia REIT PLC † R	1,585,480	2,409,808
	Kerry Group PLC Class A	65,032	4,884,301
			10,024,394
	Italy (5.4%)
	Banca Popolare di Milano Scarl †	3,188,109	2,859,388
	Beni Stabili SpA R	2,335,115	2,142,307
	Luxottica Group SpA	45,974	2,660,990
	Mediaset SpA †	527,088	2,569,401
	Telecom Italia SpA RSP	2,493,377	2,463,332
	UniCredit SpA	503,252	4,213,866
			16,909,284

26     Europe Equity Fund

	COMMON STOCKS (97.7%)* cont.	Shares	Value
	Netherlands (2.4%)
	ING Groep NV GDR †	527,444	$7,410,072
			7,410,072
	Norway (1.9%)
	DNB ASA	332,467	6,081,466
			6,081,466
	Portugal (0.7%)
	Banco Espirito Santo SA † S	2,683,940	2,212,422
			2,212,422
	Spain (2.9%)
	Atresmedia Corporacion de Medios de Comunicacion SA S	186,982	2,678,121
	Banco de Sabadell SA	1,058,341	3,611,373
	International Consolidated Airlines Group SA †	472,839	2,998,147
			9,287,641
	Sweden (2.5%)
	Assa Abloy AB Class B	61,762	3,142,846
	Com Hem Holding AB †	175,605	1,655,771
	Intrum Justita AB	98,537	2,940,677
			7,739,294
	Switzerland (4.9%)
	Barry Callebaut AG	1,970	2,676,872
	Compagnie Financiere Richemont SA	45,603	4,785,024
	Nestle SA	64,701	5,012,358
	Partners Group Holding AG	10,339	2,826,087
			15,300,341
	United Kingdom (38.5%)
	Admiral Group PLC	93,841	2,487,686
	Associated British Foods PLC	97,400	5,082,384
	AstraZeneca PLC	119,434	8,871,953
	Barclays PLC	578,663	2,107,409
	BG Group PLC	258,582	5,465,334
	BHP Billiton PLC	181,935	5,883,214
	Britvic PLC	280,452	3,491,749
	BT Group PLC	753,843	4,965,698
	Compass Group PLC	276,137	4,806,147
	Experian PLC	130,336	2,203,803
	Genel Energy PLC †	174,196	3,025,908
	HSBC Holdings PLC	149,157	1,513,480
	Kingfisher PLC	700,953	4,306,603
	Liberty Global PLC Ser. C	53,600	2,267,816
	Metro Bank PLC (acquired 1/15/14, cost $611,361) (Private) † ΔΔ F	28,721	613,556
	Persimmon PLC †	203,957	4,443,432
	Prudential PLC	297,138	6,819,279
	Regus PLC	748,260	2,326,799
	Royal Dutch Shell PLC Class A	383,157	15,858,947
	Serco Group PLC	44,363	277,498
	Shire PLC	89,501	6,999,960
	St James’s Place PLC	165,500	2,158,263
	Telecity Group PLC	330,003	4,258,344
	Thomas Cook Group PLC †	1,002,793	2,291,100
	TSB Banking Group PLC 144A †	650,382	3,133,274
	TUI Travel PLC	591,252	4,027,237

Europe Equity Fund     27

	COMMON STOCKS (97.7%)* cont.	Shares	Value
	United Kingdom cont.
	Vodafone Group PLC	1,379,541	$4,603,845
	WPP PLC	300,091	6,542,954
			120,833,672
	United States (1.2%)
	Google, Inc. Class C †	3,214	1,848,950
	Monsanto Co.	16,400	2,045,736
			3,894,686
	Total common stocks (cost $266,323,547)		$306,753,564

	SHORT-TERM INVESTMENTS (5.8%)*	Shares	Value
	Putnam Cash Collateral Pool, LLC 0.18% d	9,689,036	$9,689,036
	Putnam Short Term Investment Fund 0.07% L	8,379,233	8,379,233
	Total short-term investments (cost $18,068,269)		$18,068,269

	TOTAL INVESTMENTS
	Total investments (cost $284,391,816)	$324,821,833

	Key to holding’s abbreviations
	GDR	Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank

	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 June 30, 2014 (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 $313,958,378.
†	Non-income-producing security.
ΔΔ	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 $926,536 or 0.3% of net assets.
d	Affiliated 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.
F	Security is 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.
L	Affiliated 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.
R	Real Estate Investment Trust.
S	Security 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	21.8%
	Consumer discretionary	17.9
	Consumer staples	11.7
	Industrials	11.6

28     Europe Equity Fund

	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	$4,733,209	$—	$—
	Belgium	12,841,447	—	—
	Czech Republic	2,480,504	—	—
	France	48,384,846	—	—
	Germany	38,307,306	—	312,980
	Ireland	10,024,394	—	—
	Italy	16,909,284	—	—
	Netherlands	7,410,072	—	—
	Norway	6,081,466	—	—
	Portugal	2,212,422	—	—
	Spain	9,287,641	—	—
	Sweden	7,739,294	—	—
	Switzerland	15,300,341	—	—
	United Kingdom	120,220,116	—	613,556
	United States	3,894,686	—	—
	Total common stocks	305,827,028	—	926,536
	Short-term investments	8,379,233	9,689,036	—
	Totals by level	$314,206,261	$9,689,036	$926,536
	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.

Europe Equity Fund     29

	Statement of assets and liabilities 6/30/14
	ASSETS
	Investment in securities, at value, including $9,123,963 of securities on loan (Note 1):
	Unaffiliated issuers (identified cost $266,323,547)	$306,753,564
	Affiliated issuers (identified cost $18,068,269) (Notes 1 and 5)	18,068,269
	Foreign currency (cost $112,661) (Note 1)	112,661
	Dividends, interest and other receivables	552,112
	Foreign tax reclaim	98,346
	Receivable for shares of the fund sold	1,164,612
	Receivable for investments sold	4,035,278
	Prepaid assets	40,228
	Total assets	330,825,070
	LIABILITIES
	Payable for investments purchased	6,062,838
	Payable for shares of the fund repurchased	298,572
	Payable for compensation of Manager (Note 2)	188,434
	Payable for custodian fees (Note 2)	11,339
	Payable for investor servicing fees (Note 2)	103,693
	Payable for Trustee compensation and expenses (Note 2)	185,485
	Payable for administrative services (Note 2)	497
	Payable for distribution fees (Note 2)	157,831
	Collateral on securities loaned, at value (Note 1)	9,689,036
	Other accrued expenses	168,967
	Total liabilities	16,866,692
	Net assets	$313,958,378
	REPRESENTED BY
	Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$331,204,414
	Undistributed net investment income (Note 1)	1,676,995
	Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(59,369,113)
	Net unrealized appreciation of investments and assets and liabilities in foreign currencies	40,446,082
	Total — Representing net assets applicable to capital shares outstanding	$313,958,378
	(Continued on next page)

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

30     Europe Equity Fund

	Statement of assets and liabilities (Continued)
	COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
	Net asset value and redemption price per class A share ($226,015,982 divided by 8,197,528 shares)	$27.57
	Offering price per class A share (100/94.25 of $27.57)*	$29.25
	Net asset value and offering price per class B share ($4,357,682 divided by 165,262 shares)**	$26.37
	Net asset value and offering price per class C share ($19,165,468 divided by 714,303 shares)**	$26.83
	Net asset value and redemption price per class M share ($3,293,941 divided by 120,814 shares)	$27.26
	Offering price per class M share (100/96.50 of $27.26)*	$28.25
	Net asset value, offering price and redemption price per class R share ($545,884 divided by 20,073 shares)	$27.19
	Net asset value, offering price and redemption price per class Y share ($60,579,421 divided by 2,186,915 shares)	$27.70
*	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     31

	Statement of operations Year ended 6/30/14
	INVESTMENT INCOME
	Dividends (net of foreign tax of $528,175)	$6,119,815
	Interest (including interest income of $4,036 from investments in affiliated issuers) (Note 5)	4,082
	Securities lending (Note 1)	203,899
	Total investment income	6,327,796
	EXPENSES
	Compensation of Manager (Note 2)	1,813,437
	Investor servicing fees (Note 2)	520,759
	Custodian fees (Note 2)	47,926
	Trustee compensation and expenses (Note 2)	15,366
	Distribution fees (Note 2)	635,797
	Administrative services (Note 2)	6,117
	Other	317,741
	Total expenses	3,357,143
	Expense reduction (Note 2)	(917)
	Net expenses	3,356,226
	Net investment income	2,971,570
	Net realized gain on investments (Notes 1 and 3)	23,093,051
	Net realized gain on swap contracts (Note 1)	829,215
	Net realized gain on foreign currency transactions (Note 1)	6,150
	Net unrealized appreciation of assets and liabilities in foreign currencies during the year	26,625
	Net unrealized appreciation of investments and when-issued securities during the year	22,312,979
	Net gain on investments	46,268,020
	Net increase in net assets resulting from operations	$49,239,590

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

32     Europe Equity Fund

	Statement of changes in net assets
	INCREASE IN NET ASSETS	Year ended 6/30/14	Year ended 6/30/13
	Operations:
	Net investment income	$2,971,570	$2,237,479
	Net realized gain on investments and foreign currency transactions	23,928,416	18,439,271
	Net unrealized appreciation of investments and assets and liabilities in foreign currencies	22,339,604	15,290,410
	Net increase in net assets resulting from operations	49,239,590	35,967,160
	Distributions to shareholders (Note 1):
	From ordinary income
	Net investment income
	Class A	(1,479,046)	(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	(271,466)	(148,088)
	Increase in capital from settlement payments	56,290	—
	Redemption fees (Note 1)	—	1,786
	Increase (decrease) from capital share transactions (Note 4)	105,090,212	(17,515,780)
	Total increase in net assets	152,533,612	16,153,293
	NET ASSETS
	Beginning of year	161,424,766	145,271,473
	End of year (including undistributed net investment income of $1,676,995 and distributions in excess of net investment income of $2,690, respectively)	$313,958,378	$161,424,766

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

Europe Equity Fund     33

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

INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:							RATIOS AND SUPPLEMENTAL DATA:
Period ended	Net asset value, beginning of period	Net investment income (loss)a	Net realized and unrealized gain (loss) on investments	Total from investment operations	From net investment income	From return of capital	Total distributions	Redemption fees	Non-recurring reimbursements	Net asset value, end of period	Total return at net asset value (%)b	Net assets, end of period (in thousands)	Ratio of expenses to average net assets (%)c	Ratio of net investment income (loss) to average net assets (%)	Portfolio turnover (%)
Class A
June 30, 2014	$21.73	.31	5.74	6.05	(.22)	—	(.22)	—	.01e	$27.57	27.93	$226,016	1.41	1.20	64
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	.43f,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	.01i,j	21.50	38.36	177,369	1.43	1.54	70
June 30, 2010	15.12	.23	.49	.72	(.09)	—	(.09)	—d	.08k	15.83	5.20	151,329	1.52l	1.25l	113
Class B
June 30, 2014	$20.80	.09	5.52	5.61	(.05)	—	(.05)	—	.01e	$26.37	27.01	$4,358	2.16	.38	64
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	.41f,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	.01i,j	20.55	37.29	5,580	2.18	.65	70
June 30, 2010	14.48	.06	.50	.56	—	—	—	—d	.08k	15.12	4.42	6,671	2.27l	.37l	113
Class C
June 30, 2014	$21.28	.22	5.50	5.72	(.18)	—	(.18)	—	.01e	$26.83	27.00	$19,165	2.16	.85	64
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	.42f,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	.01i,j	21.05	37.32	2,217	2.18	.80	70
June 30, 2010	14.84	.09	.49	.58	—	—	—	—d	.08k	15.50	4.45	1,859	2.27l	.48l	113
Class M
June 30, 2014	$21.49	.15	5.70	5.85	(.09)	—	(.09)	—	.01e	$27.26	27.32	$3,294	1.91	.59	64
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	.42f,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	.01i,j	21.26	37.72	3,751	1.93	1.06	70
June 30, 2010	14.96	.13	.49	.62	(.01)	—	(.01)	—d	.08k	15.65	4.64	3,250	2.02l	.75l	113
Class R
June 30, 2014	$21.46	.32	5.59	5.91	(.19)	—	(.19)	—	.01e	$27.19	27.64	$546	1.66	1.22	64
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	.43f,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	.01i,j	21.25	38.00	219	1.68	1.49	70
June 30, 2010	14.97	.21	.46	.67	(.06)	—	(.06)	—d	.08k	15.66	4.97	133	1.77l	1.20l	113
Class Y
June 30, 2014	$21.82	.53	5.61	6.14	(.27)	—	(.27)	—	.01e	$27.70	28.28	$60,579	1.16	1.96	64
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	.43f,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	.01i,j	21.60	38.73	9,947	1.18	1.84	70
June 30, 2010	15.19	.27	.49	.76	(.13)	—	(.13)	—d	.08k	15.90	5.41	8,356	1.27l	1.52l	113

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

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

34

Europe Equity Fund

Europe Equity Fund

35

Financial highlights (Continued)

^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 brokerage/service arrangements (Note 2). Also excludes acquired fund fees and expenses, if any.

^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.

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

36     Europe Equity Fund

Financial highlights (Continued)

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.

^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. As a result of such limitation, the expenses of each class reflect a reduction of 0.02% of average net assets as of June 30, 2010.

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

Europe Equity Fund     37

Notes to financial statements 6/30/14

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 June 30, 2014.

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

38     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. 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.

Securities purchased or sold on a when-issued basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.

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.

Total return swap contracts The fund entered into OTC total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount, to manage exposure to specific securities.

Europe Equity Fund     39

To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between the fund and the counterparty. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.

OTC total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio.

Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.

Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.

At the close of the reporting period, the fund did not have a net liability position on open derivative contracts subject to the Master Agreements.

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 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 fund received cash collateral of $9,689,036 and the value of securities loaned amounted to $9,123,963.

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.

40     Europe Equity Fund

Lines of credit The fund participates, along with other Putnam funds, in a $392.5 million ($315 million prior to June 27, 2014) unsecured committed line of credit and a $235.5 million ($185 million prior to June 27, 2014) 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 0.04% (0.02% prior to June 27, 2014) of the committed line of credit and 0.04% ($50,000 prior to June 27, 2014) of 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, 2014, the fund had a capital loss carryover of $59,168,743 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
$795,075	N/A	$795,075	June 30, 2017
58,373,668	N/A	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.

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. These differences include temporary and/or permanent differences from losses on wash sale transactions and from income on swap contracts. 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. At the close of the reporting period, the fund reclassified $560,595 to increase undistributed net investment income, $56,307 to decrease paid-in-capital and $504,288 to increase accumulated net realized loss.

Europe Equity Fund     41

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:

Unrealized appreciation	$47,825,425
Unrealized depreciation	(7,595,778)
Net unrealized appreciation	40,229,647
Undistributed ordinary income	1,688,023
Capital loss carryforward	(59,168,743)
Cost for federal income tax purposes	$284,592,186

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,
0.800%	of the next $5 billion,
0.750%	of the next $10 billion,
0.700%	of the next $10 billion,
0.650%	of the next $50 billion,
0.630%	of the next $50 billion,
0.620%	of the next $100 billion and
0.615%	of any excess thereafter.

The fund’s shareholders approved the fund’s current management contract with Putnam Management effective February 27, 2014. Shareholders were asked to approve the fund’s management contract following the death on October 8, 2013 of The Honourable Paul G. Desmarais, who had controlled directly and indirectly a majority of the voting shares of Power Corporation of Canada, the ultimate parent company of Putnam Management. The substantive terms of the management contract, including terms relating to fees, are identical to the terms of the fund’s previous management contract and reflect the rates provided in the table above.

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.

For the reporting period, the base fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.695% of the fund’s average net assets before an increase of $181,426 (0.077% of the fund’s average net assets) based on performance.

Putnam Management has contractually agreed, through June 30, 2015, 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. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

42     Europe Equity Fund

Putnam Investments Limited (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.

The Putnam Advisory Company, LLC (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	$413,395
Class B	7,974
Class C	23,746
Class M	7,172
Class R	785
Class Y	67,687
Total	$520,759

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 $917 under the expense offset arrangements.

Each independent Trustee of the fund receives an annual Trustee fee, of which $168, 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.

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

Europe Equity Fund     43

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	$464,778
Class B	35,808
Class C	109,336
Class M	24,092
Class R	1,783
Total	$635,797

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $63,236 and $68 from the sale of class A and class M shares, respectively, and received $1,649 and $1,228 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 $250,747,754 and $146,978,419, 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:

	Year ended 6/30/14		Year ended 6/30/13
Class A	Shares	Amount	Shares	Amount
Shares sold	2,724,826	$72,375,021	282,501	$6,002,923
Shares issued in connection with reinvestment of distributions	53,617	1,384,383	94,381	1,932,922
	2,778,443	73,759,404	376,882	7,935,845
Shares repurchased	(1,168,095)	(30,599,359)	(1,262,088)	(25,424,919)
Net increase (decrease)	1,610,348	$43,160,045	(885,206)	$(17,489,074)

	Year ended 6/30/14		Year ended 6/30/13
Class B	Shares	Amount	Shares	Amount
Shares sold	67,034	$1,694,423	11,423	$224,554
Shares issued in connection with reinvestment of distributions	256	6,337	1,232	24,244
	67,290	1,700,760	12,655	248,798
Shares repurchased	(41,763)	(1,028,572)	(59,893)	(1,163,837)
Net increase (decrease)	25,527	$672,188	(47,238)	$(915,039)

	Year ended 6/30/14		Year ended 6/30/13
Class C	Shares	Amount	Shares	Amount
Shares sold	652,371	$16,634,655	45,764	$981,129
Shares issued in connection with reinvestment of distributions	2,859	72,132	618	12,447
	655,230	16,706,787	46,382	993,576
Shares repurchased	(66,831)	(1,726,857)	(8,232)	(165,162)
Net increase	588,399	$14,979,930	38,150	$828,414

44     Europe Equity Fund

	Year ended 6/30/14		Year ended 6/30/13
Class M	Shares	Amount	Shares	Amount
Shares sold	3,777	$102,291	391	$7,885
Shares issued in connection with reinvestment of distributions	312	7,987	976	19,824
	4,089	110,278	1,367	27,709
Shares repurchased	(13,316)	(343,992)	(19,788)	(396,307)
Net decrease	(9,227)	$(233,714)	(18,421)	$(368,598)

	Year ended 6/30/14		Year ended 6/30/13
Class R	Shares	Amount	Shares	Amount
Shares sold	15,444	$402,732	3,417	$70,723
Shares issued in connection with reinvestment of distributions	98	2,492	94	1,914
	15,542	405,224	3,511	72,637
Shares repurchased	(5,084)	(130,715)	(3,625)	(70,697)
Net increase (decrease)	10,458	$274,509	(114)	$1,940

	Year ended 6/30/14		Year ended 6/30/13
Class Y	Shares	Amount	Shares	Amount
Shares sold	2,039,574	$54,286,368	77,133	$1,607,845
Shares issued in connection with reinvestment of distributions	9,705	251,463	7,083	145,475
	2,049,279	54,537,831	84,216	1,753,320
Shares repurchased	(307,556)	(8,300,577)	(65,992)	(1,326,743)
Net increase	1,741,723	$46,237,254	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:

Name of affiliate	Fair value at the beginning of the reporting period	Purchase cost	Sale proceeds	Investment income	Fair value at the end of the reporting period
Putnam Short Term Investment Fund*	$5,124,974	$107,603,160	$104,348,901	$4,036	$8,379,233

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

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.

Europe Equity Fund     45

Note 7: Summary of derivative activity

The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was as follows based on an average of the holdings at the end of each fiscal quarter:

OTC total return swap contracts (notional)

$—*

*For the reporting period, the transactions were minimal.

As of the close of the reporting period, the fund did not hold any derivative instruments.

The following is a summary of realized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1) (there were no unrealized gains or losses on derivative instruments):

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments

Derivatives not accounted for as hedging instruments under ASC 815	Swaps	Total
Equity contracts	$829,215	$829,215
Total	$829,215	$829,215

46     Europe Equity Fund