N-Q 1 a_europeequity.htm PUTNAM EUROPE EQUITY FUND a_europeequity.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY



Investment Company Act file number: (811-05693)
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:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant's telephone number, including area code: (617) 292-1000
Date of fiscal year end: June 30, 2018
Date of reporting period: September 30, 2017



Item 1. Schedule of Investments:













Putnam Europe Equity Fund

The fund's portfolio
9/30/17 (Unaudited)
COMMON STOCKS (99.2%)(a)
Shares Value
Denmark (2.2%)
Danske Bank A/S 125,284 $5,010,365
5,010,365
Finland (1.7%)
Nokia OYJ 639,917 3,828,482
3,828,482
France (19.1%)
Airbus SE 53,664 5,100,045
Eurazeo SA 34,857 3,115,767
Natixis SA 392,747 3,142,552
Sanofi 72,841 7,232,489
Societe Generale SA 81,154 4,751,196
STMicroelectronics NV 184,321 3,566,189
Total SA 140,546 7,548,931
Valeo SA 63,554 4,715,688
Veolia Environnement SA 183,095 4,230,621
43,403,478
Germany (18.6%)
Adidas AG 15,473 3,500,236
BASF SE 42,094 4,479,572
Bayer AG 53,185 7,247,686
CompuGroup Medical SE 28,041 1,588,149
Delivery Hero Holding GmbH(NON) 36,676 1,452,137
Evonik Industries AG 110,394 3,942,946
Henkel AG & Co. KGaA (Preference) 23,015 3,132,245
KION Group AG 23,937 2,290,734
Rheinmetall AG 37,022 4,172,602
Siemens AG 48,538 6,838,156
Uniper SE 131,540 3,606,838
42,251,301
Ireland (4.9%)
Bank of Ireland Group PLC(NON) 266,484 2,182,656
CRH PLC 97,123 3,704,838
Hibernia REIT PLC(R) 1,248,344 2,250,013
Kerry Group PLC Class A 30,342 2,915,159
11,052,666
Italy (2.8%)
ENI SpA 230,647 3,816,425
Pirelli & C SpA(NON) 190,322 1,462,121
Telecom Italia SpA RSP 1,371,203 1,030,718
6,309,264
Netherlands (11.0%)
Akzo Nobel NV 25,881 2,389,594
Altice NV Class A(NON) 134,695 2,697,577
Heineken NV 36,856 3,643,804
ING Groep NV GDR 343,050 6,325,035
Koninklijke Ahold Delhaize NV 201,185 3,761,690
Unilever NV ADR 106,478 6,297,353
25,115,053
Norway (1.5%)
Norsk Hydro ASA 458,465 3,332,930
3,332,930
Spain (2.2%)
Aena SME SA 15,048 2,716,695
Grifols SA ADR 101,800 2,228,402
4,945,097
Sweden (2.2%)
Com Hem Holding AB 209,963 3,000,613
Securitas AB Class B 118,500 1,984,481
4,985,094
Switzerland (4.7%)
Partners Group Holding AG 4,917 3,336,055
Roche Holding AG 28,914 7,381,154
10,717,209
Turkey (0.7%)
Turkcell Iletisim Hizmetleri AS 478,864 1,705,549
1,705,549
United Kingdom (23.7%)
Associated British Foods PLC 100,563 4,302,707
AstraZeneca PLC 65,146 4,325,497
BAE Systems PLC 277,103 2,344,872
Barclays PLC 1,155,847 2,994,671
Berkeley Group Holdings PLC (The) 67,608 3,367,404
Compass Group PLC 176,452 3,742,933
Diageo PLC 118,126 3,882,823
Dixons Carphone PLC 896,885 2,324,330
Micro Focus International PLC 59,427 1,900,819
Prudential PLC 254,114 6,083,258
Rio Tinto PLC 96,147 4,474,506
Royal Dutch Shell PLC Class A 74,200 2,235,638
RPC Group PLC 231,172 3,068,275
Shire PLC 86,053 4,367,980
St. James's Place PLC 168,605 2,589,165
Virgin Money Holdings UK PLC 514,151 1,973,876
53,978,754
United States (3.9%)
Alphabet, Inc. Class C(NON) 2,224 2,133,061
Amazon.com, Inc.(NON) 2,200 2,114,970
Johnson Controls International PLC 42,800 1,724,412
KKR & Co. LP 146,000 2,968,180
8,940,623
Total common stocks (cost $206,970,693) $225,575,865

SHORT-TERM INVESTMENTS (1.1%)(a)
Principal amount/shares Value
Putnam Short Term Investment Fund 1.17%(AFF) Shares 1,810,299 $1,810,299
U.S. Treasury Bills 1.094%, 2/8/18(SEGSF) $210,000 209,187
U.S. Treasury Bills 1.081%, 2/15/18(SEGSF) 160,000 159,347
U.S. Treasury Bills 1.061%, 2/1/18(SEGSF) 153,000 152,448
U.S. Treasury Bills zero%, 3/1/18(i) 112,000 111,462
U.S. Treasury Bills 1.064%, 11/24/17(SEGSF) 108,000 107,842
Total short-term investments (cost $2,550,592) $2,550,585

TOTAL INVESTMENTS
Total investments (cost $209,521,285) $228,126,450













FORWARD CURRENCY CONTRACTS at 9/30/17 (aggregate face value $35,781,914) (Unaudited)


Unrealized
Contract Delivery Aggregate appreciation/
Counterparty Currency type* date Value face value (depreciation)
Bank of America N.A.
British Pound Buy 12/20/17 $258,300 $250,236 $8,064
Barclays Bank PLC
Swiss Franc Buy 12/20/17 65,819 66,286 (467)
Citibank, N.A.
Danish Krone Buy 12/20/17 8,058 8,109 (51)
Euro Sell 12/20/17 8,442,726 8,510,577 67,851
Goldman Sachs International
British Pound Buy 12/20/17 329,759 332,908 (3,149)
Euro Sell 12/20/17 176,989 179,453 2,464
HSBC Bank USA, National Association
Euro Sell 12/20/17 460,929 464,128 3,199
JPMorgan Chase Bank N.A.
British Pound Sell 12/20/17 8,696,767 8,437,375 (259,392)
Euro Sell 12/20/17 9,021 9,106 85
Norwegian Krone Sell 12/20/17 193,449 196,370 2,921
Swedish Krona Buy 12/20/17 21,067 21,578 (511)
Swiss Franc Buy 12/20/17 16,352,222 16,472,595 (120,373)
State Street Bank and Trust Co.
Euro Sell 12/20/17 380,685 385,508 4,823
Norwegian Krone Buy 12/20/17 2,843 2,913 (70)
Swiss Franc Buy 12/20/17 441,733 444,772 (3,039)
Unrealized appreciation 89,407
Unrealized depreciation (387,052)
Total $(297,645)

* The exchange currency for all contracts listed is the United States Dollar.












Key to holding's abbreviations
ADR American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
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, 2017 through September 30, 2017 (the reporting period). Within the following notes to the portfolio, references to "ASC 820" represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, 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.
(a) Percentages indicated are based on net assets of $227,498,756.
(NON) This security is non-income-producing.
(AFF) Affiliated company. For investments in Putnam Short Term Investment Fund, the rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. Transactions during the period with any company which is under common ownership or control were as follows:

Name of affiliate Fair value as of 6/30/17 Purchase cost Sale proceeds Investment income Shares outstanding and fair value as of 9/30/17
Short-term investments
Putnam Short Term Investment Fund* $4,747,707 $10,681,259 $13,618,667 $8,384 $1,810,299
Total Short-term investments $4,747,707 $10,681,259 $13,618,667 $8,384 $1,810,299
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.

(SEGSF) This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period. Collateral at period end totaled $446,321.
(i) This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts.
At the close of the reporting period, the fund maintained liquid assets totaling $376,100 to cover certain derivative contracts.
Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.
The dates shown on debt obligations are the original maturity dates.
The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
Financials 19.5%
Health care 15.1
Consumer staples 12.3
Industrials 11.9
Materials 11.2
Consumer discretionary 10.5

Security valuation: Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund's assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
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 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 investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.
Many securities markets and exchanges outside the U.S. close prior to the scheduled 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 scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain 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. The foreign equity 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.
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, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. 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.
Forward currency contracts: The fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts were used to hedge foreign exchange risk.
The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. The fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position.
For the fund's average contract amount on forward currency contracts, see the appropriate table at the end of these footnotes.
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 had a net liability position of $378,422 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $446,321 and may include amounts related to unsettled agreements.












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:
    Denmark $5,010,365 $— $—
    Finland 3,828,482 — —
    France 43,403,478 — —
    Germany 42,251,301 — —
    Ireland 11,052,666 — —
    Italy 6,309,264 — —
    Netherlands 25,115,053 — —
    Norway 3,332,930 — —
    Spain 4,945,097 — —
    Sweden 4,985,094 — —
    Switzerland 10,717,209 — —
    Turkey 1,705,549 — —
    United Kingdom 53,978,754 — —
    United States 8,940,623 — —
Total common stocks 225,575,865 — —
Short-term investments 1,810,299 740,286 —
Totals by level $227,386,164 $740,286 $—



Valuation inputs
Other financial instruments: Level 1 Level 2 Level 3
Forward currency contracts $— $(297,645) $—
Totals by level $— $(297,645) $—

During the reporting period, transfers within the fair value hierarchy, if any (other than certain transfers involving non-U.S. equity securities as described in the Security valuation note above), did not represent, in the aggregate, more than 1% of the fund's net assets measured as of the end of the period. Transfers are accounted for using the end of period pricing valuation method.

Fair Value of Derivative Instruments as of the close of the reporting period
Asset derivatives Liability derivatives
Derivatives not accounted for as hedging instruments under ASC 815 Fair value Fair value
Foreign exchange contracts $89,407 $387,052
Total $89,407 $387,052

The volume of activity for the reporting period for any derivative type that was held at the close of the period is listed below and was based on an average of the holdings of that derivative at the end of each fiscal quarter in the reporting period:
Forward currency contracts (contract amount)$35,900,000

For additional information regarding the fund please see the fund's most recent annual or semiannual shareholder report filed on the Securities and Exchange Commission's Web site, www.sec.gov, or visit Putnam's Individual Investor Web site at www.putnaminvestments.com



Item 2. Controls and Procedures:
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting: Not applicable

Item 3. Exhibits:
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.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Putnam Europe Equity Fund
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
Date: November 28, 2017

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.

By (Signature and Title):
/s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer
Date: November 28, 2017

By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer
Date: November 28, 2017