a_europeequity.htm

Putnam
Europe Equity
Fund

Annual report
6 | 30 | 18


Message from the Trustees	1
About the fund	2
Interview with your fund’s portfolio manager	5
Your fund’s performance	9
Your fund’s expenses	11
Terms and definitions	13
Other information for shareholders	14
Important notice regarding Putnam’s privacy policy	15
Trustee approval of management contract	16
Financial statements	21
Federal tax information	48
About the Trustees	49
Officers	51

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

Message from the Trustees

August 8, 2018

Dear Fellow Shareholder:

During the first half of 2018, conditions became more challenging for global financial markets. After an extended period of record advances and low volatility, a downturn early in the year pushed stocks into a brief correction. The market has since rallied, but both stocks and bonds have been more volatile, due in part to uncertainty surrounding trade policy and interest rates. Fortunately, navigating a change in market trends is nothing new to Putnam’s experienced investment professionals, who continue to monitor risks and seek opportunities.

We would like to take this opportunity to extend our thanks to Jameson A. Baxter, who retired from her position as Chair of your Board of Trustees on June 30, 2018. It is hard to express in a few words the extent of Jamie’s commitment to protecting the interests of Putnam shareholders like you. In addition to her professional and directorship experience, Jamie brought intelligence, insight, and compassion to a board she served for decades. Jamie began as a Trustee in 1994, served as Vice Chair for six years, and became Chair in 2011. We are also pleased to announce the appointment of Kenneth R. Leibler as your new Board of Trustees Chair. Ken became a Trustee in 2006, has served as Vice Chair since 2016, and now leads the Board in overseeing your fund and protecting your interests.

Thank you for investing with Putnam.

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

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

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

Diversification does not guarantee a profit or ensure against loss. It is possible to lose money in a diversified portfolio.

2 Europe Equity Fund

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

In-depth analysis is key to successful stock selection.

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

Valuation

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

Cash flow

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

Quality

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

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Sam, how did European stock markets perform during the reporting period?

Stocks of European companies were up and down during the reporting period. The markets rallied consistently during the first half of the reporting period through the end of January 2018 before a sharp selloff. Global growth, which was synchronized for much of the second half of 2017, started to diverge during the first few months of the year. European growth lagged that of the United States partly due to a stronger euro, which raised investor concerns around exporters’ profitability and top-line growth. The euro had appreciated throughout 2017, and listed companies in Europe are very sensitive to the currency’s movement. Fortunately, stock performance was supported during much of the full 12-month period by continued stimulus from the European Central Bank [ECB].

Markets in Europe also struggled due to political concerns, including the United Kingdom’s negotiations to exit the European Union, and the Italian elections and the subsequent uncertainty about the formation of a new coalition government. In addition, the Trump administration’s approach to trade, including an escalation in trade disputes with the EU and

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China, have rattled global financial markets and businesses. The markets stabilized in late March and rallied through April and into May 2018 as investors gained confidence in the durability and sustainability of the macroeconomic recovery in Europe and globally. A weaker euro since April also pointed to better corporate profitability. The ECB said in June it plans to wind down its bond purchase program by the end of 2018. That said, the ECB remained dovish on rate policy and does not expect to raise interest rates, which are at historic lows, until the fall of 2019 at the earliest.

How did the fund perform?

For the annual period, the fund returned 3.70%, underperforming the 5.28% return of its benchmark, the MSCI Europe Index [ND], and the 5.58% average return for funds in its Lipper peer group.

Could you discuss some stocks that contributed to the fund’s performance?

The top contributor to performance was Uniper, a German power generation and energy trading company formed in 2016 as a spin-off from energy company E.ON. Uniper stock performed well during the period as power prices increased on the back of an economic recovery in Germany. Also helping Uniper’s share price was the announcement that E.ON would sell its 47% stake in Uniper to Finland’s Fortum. At the end of June 2018, Fortum closed the acquisition and became Uniper’s largest shareholder.

Airbus, the European aerospace company, was another top performer. We believe the stock of the France-based company is very attractive in terms of its likely cash flow generation. Air traffic growth continues to improve, Airbus has a record bookorder for the delivery of new aircraft, and the euro’s slide against the U.S. dollar will also provide support for margins, in our view. Airbus, the world’s second-largest plane maker after Boeing, also reported a large increase in free cash flow in 2018 on the back of record plane deliveries. The company has made good progress in resolving issues in the production programs for its major aircraft types, which should lead to improved financial performance, in our view.

What were some stocks that detracted from the fund’s return for the period?

The top detractor was Altice, a Netherlands-based telecommunications company. The stock declined as the company’s subsidiary, SFR Group, a French telecom operator, underperformed and concerns grew over mounting competition for its U.S. cable operation from Netflix and other streaming services. Investors also became increasingly concerned about Altice’s debt levels and plans for additional acquisitions. The company has begun to make changes to decrease its leverage, and it announced plans to spin off its U.S.-based cable-television business, Altice USA. Netflix and other streaming services in the United States have lowered the number of subscribers for traditional cable operators. We did not hold Altice’s stock in the portfolio at the close of the period.

Micro Focus International, a United Kingdom-based software and consultancy firm, was another detractor for the period. Shares of the company depreciated following integration issues related to the firm’s $8.8 billion takeover of Hewlett Packard’s software business, as well as the resignation of Micro Focus’s chief executive officer. The company’s EBITDA [earnings before interest, tax, debt, and amortization] and cash flow have underperformed expectations. By the close of the period, we had sold our position in the company due to its deteriorating outlook.

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How did the fund use derivatives?

The fund used foreign currency contracts in an effort to hedge foreign currency risk.

What is your outlook for the next year?

We are mindful of risks for the European equity markets, particularly after the high levels of volatility thus far in 2018. One of the big stories in the first half of this year was the deceleration in the eurozone’s growth. Economic growth slowed to 0.4% in the first quarter — the weakest in six quarters — after expanding 0.7% at the end of 2017. Since then, growth indicators have stabilized, the euro has weakened, and Europe is showing better corporate profitability, in our view. We believe that, if trade wars are averted, the outlook for global growth remains favorable. The ECB has indicated that it will continue to provide monetary stimulus over the next 6 to 12 months, and that is positive for the region.

Major risks on the horizon include the long-feared trade wars, higher U.S. interest rates, rising oil prices, and geopolitical tensions. The Federal Reserve raised rates in March 2018 and in June 2018 and signaled that two additional rate increases in 2018 are likely. The political turmoil in Italy — the eurozone’s third-largest economy — is likely to complicate the ECB’s policy decisions this year. The populist government in Italy also complicates the outlook for the EU; their economic proposals, if enacted, would raise Italy’s fiscal deficit, lower potential growth, and worsen the country’s public debt, in our view.

If trade frictions abate, we expect markets to recover and perform well going forward. Relative to other asset classes, such as bonds, stocks still appear to be an attractive choice for investors, in our view. While many global markets are relatively attractive, Europe is among the most interesting to me because its economic cycle is delayed relative to that of other regions.

Sam, thanks for your time and insights today.

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

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

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

8 Europe Equity Fund

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended June 30, 2018, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 6/30/18


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year
Class A (9/7/90)
Before sales charge	7.56%	35.12%	3.06%	31.62%	5.65%	5.68%	1.86%	3.70%
After sales charge	7.34	27.35	2.45	24.06	4.41	–0.40	–0.13	–2.27
Class B (2/1/94)
Before CDSC	7.33	27.19	2.43	26.81	4.87	3.31	1.09	2.91
After CDSC	7.33	27.19	2.43	24.81	4.53	0.31	0.10	–2.09
Class C (7/26/99)
Before CDSC	7.27	25.41	2.29	26.82	4.87	3.31	1.09	2.93
After CDSC	7.27	25.41	2.29	26.82	4.87	3.31	1.09	1.93
Class M (12/1/94)
Before sales charge	7.05	28.54	2.54	28.42	5.13	4.12	1.35	3.20
After sales charge	6.91	24.04	2.18	23.93	4.38	0.48	0.16	–0.41
Class R (12/1/03)
Net asset value	7.31	31.87	2.81	30.07	5.40	4.93	1.62	3.47
Class R6 (5/22/18)
Net asset value	7.69	38.53	3.31	33.28	5.91	6.48	2.12	3.94
Class Y (10/4/05)
Net asset value	7.69	38.53	3.31	33.28	5.91	6.48	2.12	3.94

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable. Performance for class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R6 shares; had it, returns would have been higher.

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

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

Europe Equity Fund 9

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

Class C share performance reflects conversion to class A shares after 10 years.

Comparative index returns For periods ended 6/30/18


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year
MSCI Europe Index (ND)	7.64%	26.27%	2.36%	35.14%	6.21%	13.20%	4.22%	5.28%
Lipper European Region
Funds category average^*	7.75	33.01	2.73	39.30	6.71	15.40	4.78	5.58

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

^*Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 6/30/18, there were 159,133, 96, 66, and 8 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $12,719 and $12,541, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $12,404. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $13,187, $13,853, and $13,853, respectively.


10 Europe Equity Fund

Fund price and distribution information For the 12-month period ended 6/30/18


Distributions	Class A		Class B	Class C	Class M		Class R	ClassR6	Class Y
Number	1		—	—	1		1	—	1
Income	$0.132		—	—	$0.002		$0.082	—	$0.200
Capital gains	—		—	—	—		—	—	—
Total	$0.132		—	—	$0.002		$0.082	—	$0.200
	Before	After	Net	Net	Before	After	Net	Net	Net
	sales	sales	asset	asset	sales	sales	asset	asset	asset
Share value	charge	charge	value	value	charge	charge	value	value	value
6/30/17	$25.96	$27.54	$24.77	$25.23	$25.69	$26.62	$25.66	—	$26.07
5/22/18^*	—	—	—	—	—	—	—	$28.18	—
6/30/18	26.79	28.42	25.49	25.97	26.51	27.47	26.47	26.90	26.90

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

^*Inception date of class R6 shares.

Your fund’s expenses

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

Expense ratios


	Class A	Class B	Class C	Class M	Class R	Class R6	Class Y
Total annual operating expenses for the
fiscal year ended 6/30/17	1.29%	2.04%	2.04%	1.79%	1.54%	0.88%^*	1.04%
Annualized expense ratio for the
six-month period ended 6/30/18^†‡	1.24%	1.99%	1.99%	1.74%	1.49%	0.83%	0.99%

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

Expenses are shown as a percentage of average net assets.

^*Other expenses are based on expenses of class A shares for the fund’s last fiscal year, restated to reflect the lower investor servicing fees applicable to class R6 shares.

^†Expense ratios for each class, except for those that started up during the six-month period, are for the fund’s most recent fiscal half year. For a new class, the ratio is for the period from the inception date of the class to 6/30/18. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

^‡Includes a decrease of 0.07% from annualizing the performance fee adjustment for the six months ended 6/30/18.

Europe Equity Fund 11

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class from 1/1/18 to 6/30/18. For a new class, the expenses shown are for the period from the inception date of the class to 6/30/18. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section. The table also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.


	Class A	Class B	Class C	Class M	Class R	Class R6	Class Y
Expenses paid per $1,000 ^*†	$6.08	$9.73	$9.73	$8.52	$7.30	$0.89‡	$4.85
Ending value (after expenses)	$976.30	$972.90	$972.70	$974.30	$975.30	$954.60	$977.50

^*Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 6/30/18, or in the case of a new class, the average net assets of the class from the inception date for the class to 6/30/18. Class inception dates can be found in the Fund performance table on the first page of the Your fund’s performance section.

The expense ratio may differ for each share class.

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

^‡Had expenses for shares of any new class been shown for the entire period from 1/1/18 to 6/30/18, they would have been higher.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 6/30/18, use the following calculation method. To find the value of your investment on 1/1/18, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

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


	Class A	Class B	Class C	Class M	Class R	Class R6	Class Y
Expenses paid per $1,000 ^*†	$6.21	$9.94	$9.94	$8.70	$7.45	$4.16	$4.96
Ending value (after expenses)	$1,018.65	$1,014.93	$1,014.93	$1,016.17	$1,017.41	$1,020.68	$1,019.89

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


12 Europe Equity Fund

Terms and definitions

Important terms

Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.

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

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.

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

Share classes

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

Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/ or capital gains reinvestment. They are not subject to an initial sales charge and 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.

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

Class R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.

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

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

ICE BofAML (Intercontinental Exchange Bank of America 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. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.

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

ICE Data Indices, LLC (“ICE BofAML”), used with permission. ICE BofAML permits use of the ICE BofAML indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom; assumes no liability in

Europe Equity Fund 13

connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

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.

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, 2018, 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 Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form 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, 2018, Putnam employees had approximately $514,000,000 and the Trustees had approximately $80,000,000 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.


14 Europe Equity Fund

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.

Europe Equity Fund 15

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, 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 discussed with representatives of Putnam Management the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review, identifying 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 and its affiliates 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 2018, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2018, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’

June 2018 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 recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2018. (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 provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the fund, and the application of certain reductions and waivers noted below; 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


16 Europe Equity Fund

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 funds’ current fee arrangements under the management contracts were first 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.

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 fund shareholders. (In a few instances, funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)

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 strategy, 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 indicate that changes to the management fee structure for your fund would be appropriate at this time.

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 rates as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

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

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations that were in effect during your fund’s fiscal year ending in 2017. These expense limitations were: (i) a contractual expense limitation applicable to all open-end funds of 25 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds, including your fund, had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2017. Putnam Management has agreed to maintain these expense limitations until at least October 30, 2019. 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 Broadridge Financial Solutions, Inc. (“Broadridge”). 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 first quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2017. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of

Europe Equity Fund 17

December 31, 2017 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

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

The information examined by the Trustees in connection with their annual contract review for the Putnam funds included information regarding fees charged by Putnam Management and its affiliates to institutional clients, including defined benefit pension and profit-sharing plans and sub-advised mutual funds. This information included, in cases where an institutional product’s investment strategy corresponds with a fund’s strategy, 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 as compared to the services provided to the Putnam funds.

The Trustees observed that the differences in fee rates between these clients and the Putnam 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, among other things, 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 other 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 and the full Board of Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officers 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 2017 was a strong year for the performance of the Putnam funds, with generally favorable results for most asset classes, including U.S. equity, international and global equity, taxable and tax exempt fixed income, and global asset allocation Funds. In this regard, the Trustees considered that, for the one-year period ended December 31, 2017, the Putnam open-end Funds’ performance, on an asset-weighted basis, ranked in the 32nd percentile of their Lipper peers (excluding those Putnam funds that are evaluated based on their total returns and/or comparisons of those returns versus selected investment benchmarks or targeted annual returns). The Trustees observed that this strong performance has continued a positive trend that began in mid-year 2016 across most Putnam funds. They noted that the longer-term performance of the Putnam funds continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the

18 Europe Equity Fund

7th-best performing mutual fund complex out of 55 complexes for the five-year period ended December 31, 2017 and the 9th-best performing mutual fund complex out of 50 complexes for the ten-year period ended 2017. In addition, the survey ranked the Putnam funds 7th out of 59 mutual fund complexes for the one-year period ended 2017; the Putnam funds have ranked 1st or 2nd in the survey for the one-year period three times since 2009 (most recently in 2013). They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2017 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 closely the performance of those funds, including the effectiveness of any efforts Putnam Management has undertaken to address underperformance and whether additional actions to address areas of underperformance are warranted.

For purposes of the Trustees’ evaluation of the Putnam Funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and, in most cases, comparisons of those returns with the returns of selected investment 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 Inc. (“Lipper”) peer group (Lipper European Region Funds) for the one-year, three-year and five-year periods ended December 31, 2017 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):


One-year period	3rd
Three-year period	3rd
Five-year period	3rd

Over the one-year, three-year and five-year periods ended December 31, 2017, there were 158, 131 and 99 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.)

The Trustees considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management continued to strengthen its fundamental research capabilities by adding new investment personnel.

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 predominantly to acquire brokerage and research services (including third-party research and market data) 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. The Trustees 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

Europe Equity Fund 19

Financial statements

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.

Europe Equity Fund 21

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Europe Equity Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam Europe Equity Fund (the “Fund”) as of June 30, 2018, the related statement of operations for the year ended June 30, 2018, the statement of changes in net assets for each of the two years in the period ended June 30, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of June 30, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended June 30, 2018 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of June 30, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
August 8, 2018

We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not determined the specific year we began serving as auditor.


22 Europe Equity Fund

The fund’s portfolio 6/30/18


COMMON STOCKS (98.4%)*	Shares	Value
Canada (1.1%)
Magna International, Inc.	36,600	$2,128,655
		2,128,655
Denmark (2.2%)
Danske Bank A/S	139,020	4,345,059
		4,345,059
Finland (1.5%)
Fortum OYJ	123,519	2,946,240
		2,946,240
France (19.0%)
Airbus SE	44,587	5,211,261
Eurazeo SA	44,175	3,347,034
Natixis SA	514,556	3,643,221
Pernod Ricard SA	16,436	2,682,601
Societe Generale SA	87,417	3,680,940
STMicroelectronics NV	164,919	3,664,490
TOTAL SA	129,672	7,885,528
Valeo SA	21,274	1,161,198
Veolia Environnement SA	180,606	3,863,819
Vinci SA	27,887	2,678,409
		37,818,501
Germany (16.0%)
adidas AG	16,176	3,532,459
BASF SE	41,473	3,964,619
Bayer AG	51,191	5,640,047
Delivery Hero Holding GmbH ^†	31,684	1,686,227
Evonik Industries AG	92,053	3,151,254
KION Group AG	34,007	2,443,656
Rheinmetall AG	30,100	3,323,954
Siemens AG	33,442	4,419,332
Uniper SE	123,712	3,688,045
		31,849,593
Ireland (4.3%)
Bank of Ireland Group PLC	259,072	2,019,347
CRH PLC	105,905	3,742,838
Kerry Group PLC Class A	26,055	2,721,276
		8,483,461
Italy (1.2%)
Pirelli & C SpA ^†	282,565	2,356,711
		2,356,711
Luxembourg (1.2%)
Orion Engineered Carbons SA	76,134	2,348,734
		2,348,734
Netherlands (11.2%)
ASML Holding NV	23,443	4,623,453
Heineken NV	30,873	3,095,360
ING Groep NV	257,077	3,688,883
Koninklijke Ahold Delhaize NV	198,530	4,749,660
Unilever NV ADR	112,172	6,252,979
		22,410,335

Europe Equity Fund 23


COMMON STOCKS (98.4%)* cont.	Shares	Value
Poland (0.8%)
Wizz Air Holdings PLC ^†	33,412	$1,585,198
		1,585,198
Spain (1.9%)
CaixaBank SA	471,549	2,036,979
Cellnex Telecom, SA 144A	72,260	1,818,339
		3,855,318
Sweden (1.4%)
Assa Abloy AB Class B	126,287	2,687,655
		2,687,655
Switzerland (5.6%)
Novartis AG	100,753	7,631,490
Partners Group Holding AG	4,906	3,598,596
		11,230,086
United Kingdom (25.3%)
Ashtead Group PLC	109,074	3,248,910
Associated British Foods PLC	107,647	3,881,241
AstraZeneca PLC	61,316	4,245,225
BAE Systems PLC	269,396	2,298,932
BP PLC	534,832	4,072,328
Burford Capital, Ltd.	115,954	2,286,042
Cairn Energy PLC ^†	715,309	2,358,952
Clinigen Group PLC	156,648	1,894,444
Compass Group PLC	174,080	3,708,638
Nomad Foods, Ltd. ^†	90,300	1,732,857
Persimmon PLC	55,450	1,853,151
Prudential PLC	220,914	5,047,598
Quilter PLC ^†	743,538	1,422,078
Rio Tinto PLC	98,495	5,432,281
St. James’s Place PLC	124,447	1,883,958
Virgin Money Holdings UK PLC	419,386	2,030,301
Wolseley PLC	37,956	3,079,892
		50,476,828
United States (5.7%)
Amazon.com, Inc. ^†	1,200	2,039,760
KKR & Co., Inc.	143,800	3,573,430
NXP Semiconductor NV ^†	20,200	2,207,254
Talend SA ADR ^†	28,400	1,768,752
Visa, Inc. Class A	12,700	1,682,114
		11,271,310
Total common stocks (cost $183,764,889)		$195,793,684

	Principal
U.S. TREASURY OBLIGATIONS (0.1%)*	amount	Value
U.S. Treasury Notes
1.125%, 7/31/21 ⁱ	$16,000	$15,366
1.125%, 1/31/19 ⁱ	121,000	120,821
Total U.S. treasury obligations (cost $136,187)		$136,187


24 Europe Equity Fund


	Principal amount/
SHORT-TERM INVESTMENTS (0.9%)*		shares	Value
Putnam Short Term Investment Fund 2.04% ^L	Shares	660,755	$660,755
U.S. Treasury Bills 1.640%, 7/5/18		$153,000	152,979
U.S. Treasury Bills 1.806%, 7/19/18		365,000	364,701
U.S. Treasury Bills 1.830%, 7/26/18		31,000	30,964
U.S. Treasury Bills 1.846%, 8/2/18		233,000	232,637
U.S. Treasury Bills 1.854%, 8/9/18 ^∆		211,000	210,594
U.S. Treasury Bills 1.921%, 9/6/18 ^∆		122,000	121,580
U.S. Treasury Bills 1.931%, 9/20/18		21,000	20,913
Total short-term investments (cost $1,795,055)			$1,795,123

TOTAL INVESTMENTS
Total investments (cost $185,696,131)			$197,724,994

Key to holding’s abbreviations

ADR American 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 June 30, 2018 (the reporting period). Within the following notes to the portfolio, 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 “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.

^*Percentages indicated are based on net assets of $199,069,846.

^†This security is non-income-producing.

^∆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 $176,577 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).

ⁱThis security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts (Note 1).

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

At the close of the reporting period, the fund maintained liquid assets totaling $144,559 to cover certain derivative contracts.

Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.

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

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	21.4%
Industrials	15.6
Consumer staples	12.6

Europe Equity Fund 25


FORWARD CURRENCY CONTRACTS at 6/30/18 (aggregate face value $31,266,493)
						Unrealized
		Contract	Delivery		Aggregate	appreciation/
Counterparty	Currency	type^*	date	Value	face value	(depreciation)
Bank of America N.A.
	British Pound	Buy	9/19/18	$259,033	$261,979	$(2,946)
	Canadian Dollar	Sell	7/18/18	294,152	300,903	6,751
	Euro	Buy	9/19/18	131,557	132,378	(821)
Barclays Bank PLC
	British Pound	Sell	9/19/18	21,188	21,252	64
	Swiss Franc	Buy	9/19/18	148,925	149,692	(767)
Citibank, N.A.
	Danish Krone	Buy	9/19/18	37,013	37,121	(108)
	Euro	Sell	9/19/18	12,119,208	12,147,200	27,992
Credit Suisse International
	Swedish Krona	Buy	9/19/18	235,410	239,656	(4,246)
Goldman Sachs International
	British Pound	Buy	9/19/18	120,379	121,752	(1,373)
	Canadian Dollar	Sell	7/18/18	39,946	41,011	1,065
	Euro	Buy	9/19/18	440,128	439,987	141
HSBC Bank USA, National Association
	Euro	Sell	9/19/18	782,998	784,752	1,754
JPMorgan Chase Bank N.A.
	British Pound	Buy	9/19/18	3,021,919	3,060,924	(39,005)
Norwegian Krone		Buy	9/19/18	105,169	104,930	239
	Swiss Franc	Buy	9/19/18	12,526,086	12,590,479	(64,393)
NatWest Markets PLC
	Swedish Krona	Buy	9/19/18	168,396	171,450	(3,054)
State Street Bank and Trust Co.
	British Pound	Buy	9/19/18	257,311	260,322	(3,011)
	Canadian Dollar	Sell	7/18/18	22,141	23,189	1,048
	Euro	Sell	9/19/18	376,699	377,516	817
Unrealized appreciation						39,871
Unrealized (depreciation)						(119,724)
Total						$(79,853)

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


26 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:
Canada	$2,128,655	$—	$—
Denmark	—	4,345,059	—
Finland	—	2,946,240	—
France	—	37,818,501	—
Germany	—	31,849,593	—
Ireland	—	8,483,461	—
Italy	—	2,356,711	—
Luxembourg	2,348,734	—	—
Netherlands	—	22,410,335	—
Poland	—	1,585,198	—
Spain	—	3,855,318	—
Sweden	—	2,687,655	—
Switzerland	—	11,230,086	—
United Kingdom	3,154,935	47,321,893	—
United States	11,271,310	—	—
Total common stocks	18,903,634	176,890,050	—
U.S. treasury obligations	—	136,187	—
Short-term investments	660,755	1,134,368	—
Totals by level	$19,564,389	$178,160,605	$—

		Valuation inputs
Other financial instruments:	Level 1	Level 2	Level 3
Forward currency contracts	$—	$(79,853)	$—
Totals by level	$—	$(79,853)	$—

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 Note 1), 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.

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

Europe Equity Fund 27

Statement of assets and liabilities 6/30/18


ASSETS
Investment in securities, at value (Notes 1 and 8):
Unaffiliated issuers (identified cost $185,035,376)	$197,064,239
Affiliated issuers (identified cost $660,755) (Notes 1 and 5)	660,755
Foreign currency (cost $5,013) (Note 1)	4,947
Dividends, interest and other receivables	896,433
Receivable for shares of the fund sold	53,956
Receivable for investments sold	3,884,013
Unrealized appreciation on forward currency contracts (Note 1)	39,871
Prepaid assets	50,470
Total assets	202,654,684

LIABILITIES
Payable for investments purchased	2,563,406
Payable for shares of the fund repurchased	191,395
Payable for compensation of Manager (Note 2)	88,236
Payable for custodian fees (Note 2)	16,469
Payable for investor servicing fees (Note 2)	70,541
Payable for Trustee compensation and expenses (Note 2)	178,117
Payable for administrative services (Note 2)	793
Payable for distribution fees (Note 2)	108,119
Unrealized depreciation on forward currency contracts (Note 1)	119,724
Collateral on certain derivative contracts, at value (Notes 1 and 8)	136,187
Other accrued expenses	111,851
Total liabilities	3,584,838

Net assets	$199,069,846

REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$203,629,096
Undistributed net investment income (Note 1)	401,932
Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(16,907,075)
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	11,945,893
Total — Representing net assets applicable to capital shares outstanding	$199,069,846

(Continued on next page)


28 Europe Equity Fund

Statement of assets and liabilities cont.


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per class A share
($139,284,147 divided by 5,198,713 shares)	$26.79
Offering price per class A share (100/94.25 of $26.79)^*	$28.42
Net asset value and offering price per class B share ($3,347,156 divided by 131,311 shares)^**	$25.49
Net asset value and offering price per class C share ($14,956,018 divided by 575,872 shares)^**	$25.97
Net asset value and redemption price per class M share ($2,495,195 divided by 94,125 shares)	$26.51
Offering price per class M share (100/96.50 of $26.51)^*	$27.47
Net asset value, offering price and redemption price per class R share
($246,039 divided by 9,297 shares)^†	$26.47
Net asset value, offering price and redemption price per class R6 share
($4,038,816 divided by 150,124 shares)	$26.90
Net asset value, offering price and redemption price per class Y share
($34,702,475 divided by 1,289,889 shares)	$26.90

^*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.

^†Net asset value may not recalculate due to rounding of fractional shares.

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

Europe Equity Fund 29

Statement of operations Year ended 6/30/18


INVESTMENT INCOME
Dividends (net of foreign tax of $636,539)	$5,685,494
Interest (including interest income of $46,818 from investments in affiliated issuers) (Note 5)	54,537
Securities lending (net of expenses) (Notes 1 and 5)	6,383
Total investment income	5,746,414

EXPENSES
Compensation of Manager (Note 2)	1,419,665
Investor servicing fees (Note 2)	446,578
Custodian fees (Note 2)	41,373
Trustee compensation and expenses (Note 2)	5,788
Distribution fees (Note 2)	603,918
Administrative services (Note 2)	6,455
Other	257,890
Total expenses	2,781,667

Expense reduction (Note 2)	(592)
Net expenses	2,781,075

Net investment income	2,965,339

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities from unaffiliated issuers (Notes 1 and 3)	530,866
Foreign currency transactions (Note 1)	12,075
Forward currency contracts (Note (1)	(1,589,760)
Total net realized loss	(1,046,819)
Change in net unrealized appreciation (depreciation) on:
Securities from unaffiliated issuers	6,773,403
Assets and liabilities in foreign currencies	(25,019)
Forward currency contracts	(22,021)
Total change in net unrealized appreciation	6,726,363
Net gain on investments	5,679,544

Net increase in net assets resulting from operations	8,644,883

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


30 Europe Equity Fund

Statement of changes in net assets


DECREASE IN NET ASSETS	Year ended 6/30/18	Year ended 6/30/17
Operations
Net investment income	$2,965,339	$2,905,589
Net realized gain (loss) on investments
and foreign currency transactions	(1,046,819)	223,981
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies	6,726,363	32,916,398
Net increase in net assets resulting from operations	8,644,883	36,045,968
Distributions to shareholders (Note 1):
From ordinary income
Net investment income
Class A	(727,940)	(3,962,423)
Class B	—	(72,260)
Class C	—	(301,810)
Class M	(199)	(54,062)
Class R	(1,187)	(8,045)
Class R6	—	—
Class Y	(333,376)	(1,272,117)
From return of capital
Class A	—	(94,004)
Class B	—	(1,714)
Class C	—	(7,160)
Class M	—	(1,283)
Class R	—	(191)
Class R6	—	—
Class Y	—	(30,180)
Decrease from capital share transactions (Note 4)	(27,746,902)	(73,263,624)
Total decrease in net assets	(20,164,721)	(43,022,905)

NET ASSETS
Beginning of year	219,234,567	262,257,472
End of year (including undistributed net investment
income of $401,932 and distributions in excess of net
investment income of $63,990, respectively)	$199,069,846	$219,234,567

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

Europe Equity Fund 31

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


	INVESTMENT OPERATIONS				LESS DISTRIBUTIONS						RATIOS AND SUPPLEMENTAL DATA
												Ratio of	Ratio of net
	Net asset		Net realized									expenses	investment
	value,		and unrealized	Total from	From	From		Non-recurring	Net asset	Total return	Net assets,	to average	income (loss)	Portfolio
	beginning	Net investment	gain (loss) on	investment	net investment	return of	Total	reimburse-	value, end	at net asset	end of period	net assets	to average	turnover
Period ended	of period	income (loss) ^a	investments	operations	income	capital	distributions	ments	of period	value (%) ^b	(in thousands)	(%) ^c	net assets (%)	(%)
Class A
June 30, 2018	$25.96	.38	.58	.96	(.13)	—	(.13)	—	$26.79	3.70	$139,284	1.25	1.40	53
June 30, 2017	22.65	.31	3.62	3.93	(.61)	(.01)	(.62)	—	25.96	17.79	149,643	1.29	1.29	47
June 30, 2016	26.46	.40	(3.95)	(3.55)	(.26)	—	(.26)	—	22.65	(13.48)	180,729	1.31^d	1.64^d	66
June 30, 2015	27.57	.29	(1.04)	(.75)	(.36)	—	(.36)	—	26.46	(2.64)	233,407	1.30	1.11	62
June 30, 2014	21.73	.31	5.74	6.05	(.22)	—	(.22)	.01^e	27.57	27.93	226,016	1.41	1.20	64
Class B
June 30, 2018	$24.77	.16	.56	.72	—	—	—	—	$25.49	2.91	$3,347	2.00	.62	53
June 30, 2017	21.62	.14	3.46	3.60	(.44)	(.01)	(.45)	—	24.77	16.94	3,816	2.04	.60	47
June 30, 2016	25.29	.22	(3.79)	(3.57)	(.10)	—	(.10)	—	21.62	(14.15)	4,003	2.06^d	.96^d	66
June 30, 2015	26.37	.09	(.99)	(.90)	(.18)	—	(.18)	—	25.29	(3.36)	4,488	2.05	.38	62
June 30, 2014	20.80	.09	5.52	5.61	(.05)	—	(.05)	.01^e	26.37	27.01	4,358	2.16	.38	64
Class C
June 30, 2018	$25.23	.16	.58	.74	—	—	—	—	$25.97	2.93	$14,956	2.00	.62	53
June 30, 2017	21.99	.14	3.52	3.66	(.41)	(.01)	(.42)	—	25.23	16.93	17,066	2.04	.59	47
June 30, 2016	25.74	.18	(3.82)	(3.64)	(.11)	—	(.11)	—	21.99	(14.17)	18,798	2.06^d	.76^d	66
June 30, 2015	26.83	.12	(1.03)	(.91)	(.18)	—	(.18)	—	25.74	(3.35)	25,408	2.05	.49	62
June 30, 2014	21.28	.22	5.50	5.72	(.18)	—	(.18)	.01^e	26.83	27.00	19,165	2.16	.85	64
Class M
June 30, 2018	$25.69	.25	.57	.82	— f	—	— ^f	—	$26.51	3.20	$2,495	1.75	.92	53
June 30, 2017	22.42	.21	3.57	3.78	(.50)	(.01)	(.51)	—	25.69	17.19	2,607	1.79	.89	47
June 30, 2016	26.18	.28	(3.91)	(3.63)	(.13)	—	(.13)	—	22.42	(13.91)	2,627	1.81^d	1.16^d	66
June 30, 2015	27.26	.16	(1.03)	(.87)	(.21)	—	(.21)	—	26.18	(3.12)	3,394	1.80	.63	62
June 30, 2014	21.49	.15	5.70	5.85	(.09)	—	(.09)	.01^e	27.26	27.32	3,294	1.91	.59	64
Class R
June 30, 2018	$25.66	.29	.60	.89	(.08)	—	(.08)	—	$26.47	3.47	$246	1.50	1.06	53
June 30, 2017	22.40	.28	3.55	3.83	(.56)	(.01)	(.57)	—	25.66	17.52	389	1.54	1.18	47
June 30, 2016	26.09	.32	(3.89)	(3.57)	(.12)	—	(.12)	—	22.40	(13.71)	282	1.56^d	1.32^d	66
June 30, 2015	27.19	.25	(1.05)	(.80)	(.30)	—	(.30)	—	26.09	(2.88)	691	1.55	.98	62
June 30, 2014	21.46	.32	5.59	5.91	(.19)	—	(.19)	.01^e	27.19	27.64	546	1.66	1.22	64
Class R6
June 30, 2018^†	$28.18	(.01)	(1.27)	(1.28)	—	—	—	—	$26.90	(4.54)^*	$4,039	.09^*	(.03)^*	53
Class Y
June 30, 2018	$26.07	.44	.59	1.03	(.20)	—	(.20)	—	$26.90	3.94	$34,702	1.00	1.60	53
June 30, 2017	22.75	.36	3.66	4.02	(.68)	(.02)	(.70)	—	26.07	18.13	45,713	1.04	1.52	47
June 30, 2016	26.58	.43	(3.94)	(3.51)	(.32)	—	(.32)	—	22.75	(13.27)	55,817	1.06^d	1.73^d	66
June 30, 2015	27.70	.40	(1.10)	(.70)	(.42)	—	(.42)	—	26.58	(2.42)	86,334	1.05	1.53	62
June 30, 2014	21.82	.53	5.61	6.14	(.27)	—	(.27)	.01^e	27.70	28.28	60,579	1.16	1.96	64

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

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


32 Europe Equity Fund	Europe Equity Fund 33

Financial highlights cont.

^*Not annualized

^†For the period May 22, 2018 (commencement of operations) to June 30, 2018.

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

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

^cIncludes amounts paid through expense offset and brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

^dReflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waiver, the expenses of each class reflect a reduction of less than 0.01% as a percentage of average net assets.

^eReflects 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.

^fAmount represents less than $0.01 per share.

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


34 Europe Equity Fund

Notes to financial statements 6/30/18

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, 2017 through June 30, 2018.

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 goal of the fund is to seek capital appreciation. The fund invests mainly in common stocks (growth or value stocks or both) of large and midsize European companies that Putnam Management believes have favorable investment potential. For example, the fund may purchase stocks of companies with stock prices that reflect a value lower than that which Putnam Management places on the company. Putnam Management may also consider other factors that it believes will cause the stock price to rise. Under normal circumstances, the fund invests at least 85% of the fund’s net assets in European companies and at least 80% of the fund’s net assets in equity investments. This policy may be changed only after 60 days’ notice to shareholders. Putnam Management considers a company to be European if the company’s securities trade in Europe, if the company is headquartered or organized in Europe, or if the company derives a majority of its revenues or profits from Europe. The fund invests mainly in developed countries, but may invest in emerging markets, such as those in Eastern Europe. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The fund may also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.

The fund offers class A, class B, class C, class M, class R, class R6 and class Y shares. The fund began offering class R6 shares on May 22, 2018. The fund registered class T shares in February 2017, however, as of the date of this report, class T shares had not commenced operations and are not available for purchase. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively. Class A shares generally are not subject to a contingent deferred sales charge, and class M, class R, class R6 and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to 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 are subject to a one-year 1.00% contingent deferred sales charge and generally convert to class A shares after approximately ten years. Prior to April 1, 2018, class C shares did 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 R6 and 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, and in the case of class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R6 and 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.

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the fund’s Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Europe Equity Fund 35

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.

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 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 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 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. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

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

36 Europe Equity Fund

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.

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

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

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on 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 assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.

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 are 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. Risks may exceed amounts recognized on the Statement of assets and liabilities.

Forward currency contracts outstanding 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

Europe Equity Fund 37

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 $112,475 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $176,577 and may include amounts related to unsettled 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 remaining maturities of the securities lending transactions are considered overnight and continuous. 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, net of expenses, 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 had no securities out on loan.

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.

Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR 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% of the committed line of credit plus a $25,000 flat fee and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% 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.


38 Europe Equity Fund

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At June 30, 2018, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:


	Loss carryover
Short-term	Long-term	Total
$14,830,135	$1,890,329	$16,720,464

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 foreign currency gains and losses, from the expiration of a capital loss carryover, and from unrealized gains and losses on passive foreign investment companies. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the reporting period, the fund reclassified $1,436,715 to decrease undistributed net investment income, $46,797,567 to decrease paid-in capital and $48,234,282 to decrease accumulated net realized loss.

Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. 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	$20,025,171
Unrealized depreciation	(8,174,287)
Net unrealized appreciation	11,850,884
Undistributed ordinary income	313,446
Capital loss carryforward	(16,720,464)
Cost for federal income tax purposes	$185,794,257

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 all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:


0.850%	of the first $5 billion,	0.650%	of the next $50 billion,
0.800%	of the next $5 billion,	0.630%	of the next $50 billion,
0.750%	of the next $10 billion,	0.620%	of the next $100 billion and
0.700%	of the next $10 billion,	0.615%	of any excess thereafter.

In addition, 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 dividing the result 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 rate is +/– 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

Europe Equity Fund 39

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 0.693% of the fund’s average net assets before a decrease of $92,727 (0.042% of the fund’s average net assets) based on performance.

Putnam Management has contractually agreed, through October 30, 2019, to waive fees and/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.

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. PAC did not manage any portion of the assets of the fund during the reporting period. If Putnam Management or PIL were to engage the services of PAC, Putnam Management or PIL, as applicable, would pay 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 for class A, class B, class C, class M, class R, and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.

During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:


Class A	$307,530	Class R	773
Class B	7,609	Class R6	114
Class C	34,683	Class Y	90,421
Class M	5,448	Total	$446,578

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 $592 under the expense offset arrangements.

40 Europe Equity Fund

Each Independent Trustee of the fund receives an annual Trustee fee, of which $159, 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 the following share classes 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 payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (Maximum %) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (Approved %) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:


	Maximum %	Approved %	Amount
Class A	0.35%	0.25%	$375,483
Class B	1.00%	1.00%	37,164
Class C	1.00%	1.00%	169,425
Class M	1.00%	0.75%	19,956
Class R	1.00%	0.50%	1,890
Total			$603,918

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $13,598 and $173 from the sale of class A and class M shares, respectively, and received $4,333 and $148 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $8 on class A redemptions.

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:


	Cost of purchases	Proceeds from sales
Investments in securities (Long-term)	$112,643,077	$139,881,897
U.S. government securities (Long-term)	—	—
Total	$112,643,077	$139,881,897

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

Europe Equity Fund 41

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:


	YEAR ENDED 6/30/18		YEAR ENDED 6/30/17
Class A	Shares	Amount	Shares	Amount
Shares sold	271,361	$7,423,875	359,040	$8,763,376
Shares issued in connection with
reinvestment of distributions	24,289	663,080	158,904	3,580,118
	295,650	8,086,955	517,944	12,343,494
Shares repurchased	(861,088)	(23,540,716)	(2,733,603)	(64,588,133)
Net decrease	(565,438)	$(15,453,761)	(2,215,659)	$(52,244,639)

	YEAR ENDED 6/30/18		YEAR ENDED 6/30/17
Class B	Shares	Amount	Shares	Amount
Shares sold	6,216	$164,782	15,592	$352,308
Shares issued in connection with
reinvestment of distributions	—	—	3,068	66,206
	6,216	164,782	18,660	418,514
Shares repurchased	(28,989)	(754,439)	(49,745)	(1,114,092)
Net decrease	(22,773)	$(589,657)	(31,085)	$(695,578)

	YEAR ENDED 6/30/18		YEAR ENDED 6/30/17
Class C	Shares	Amount	Shares	Amount
Shares sold	66,895	$1,774,129	124,722	$2,913,266
Shares issued in connection with
reinvestment of distributions	—	—	12,552	275,889
	66,895	1,774,129	137,274	3,189,155
Shares repurchased	(167,366)	(4,437,559)	(315,658)	(7,276,599)
Net decrease	(100,471)	$(2,663,430)	(178,384)	$(4,087,444)

	YEAR ENDED 6/30/18		YEAR ENDED 6/30/17
Class M	Shares	Amount	Shares	Amount
Shares sold	3,858	$104,718	1,020	$24,498
Shares issued in connection with
reinvestment of distributions	5	141	1,671	37,346
	3,863	104,859	2,691	61,844
Shares repurchased	(11,207)	(303,932)	(18,400)	(436,607)
Net decrease	(7,344)	$(199,073)	(15,709)	$(374,763)


42 Europe Equity Fund


	YEAR ENDED 6/30/18		YEAR ENDED 6/30/17
Class R	Shares	Amount	Shares	Amount
Shares sold	4,114	$111,059	7,807	$187,231
Shares issued in connection with
reinvestment of distributions	34	920	264	5,889
	4,148	111,979	8,071	193,120
Shares repurchased	(10,024)	(272,212)	(5,506)	(131,198)
Net increase (decrease)	(5,876)	$(160,233)	2,565	$61,922


	FOR THE PERIOD 5/22/18 (COMMENCEMENT OF
	OPERATIONS) TO 6/30/18
Class R6	Shares	Amount
Shares sold	151,343	$4,235,884
Shares issued in connection with reinvestment of distributions	—	—
	151,343	4,235,884
Shares repurchased	(1,219)	(33,512)
Net increase (decrease)	150,124	$4,202,372


	YEAR ENDED 6/30/18		YEAR ENDED 6/30/17
Class Y	Shares	Amount	Shares	Amount
Shares sold	387,409	$10,613,702	809,485	$19,640,746
Shares issued in connection with
reinvestment of distributions	10,157	278,095	50,273	1,135,674
	397,566	10,891,797	859,758	20,776,420
Shares repurchased	(861,299)	(23,774,917)	(1,559,147)	(36,699,542)
Net decrease	(463,733)	$(12,883,120)	(699,389)	$(15,923,122)

At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:


		Percentage
	Shares owned	of ownership	Value
Class R6	355	0.2%	$9,550

Europe Equity Fund 43

Note 5: Affiliated transactions

Transactions during the reporting period with any company which is under common ownership or control were as follows:


					Shares
					outstanding
					and fair
	Fair value as	Purchase	Sale	Investment	value as
Name of affiliate	of 6/30/17	cost	proceeds	income	of 6/30/18
Short-term investments
Putnam Cash Collateral
Pool, LLC^*	$—	$11,493,088	$11,493,088	$7,879	$—
Putnam Short Term
Investment Fund^**	4,747,707	54,606,497	58,693,449	46,818	660,755
Total Short-term
investments	$4,747,707	$66,099,585	$70,186,537	$54,697	$660,755

^*No management fees are charged to Putnam Cash Collateral Pool, LLC (Note 1). Investment income shown is included in securities lending income on the Statement of operations. There were no realized or unrealized gains or losses during the period.

^**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.

Note 6: Market, credit and other risks

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

Note 7: 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 based on an average of the holdings at the end of each fiscal quarter:


Forward currency contracts (contract amount)	$35,400,000

The following is a summary of the fair value of derivative instruments as of the close of the reporting period:


Fair value of derivative instruments as of the close of the reporting period
	ASSET DERIVATIVES		LIABILITY DERIVATIVES
Derivatives not
accounted for as	Statement of		Statement of
hedging instruments	assets and		assets and
under ASC 815	liabilities location	Fair value	liabilities location	Fair value
Foreign exchange
contracts	Receivables	$39,871	Payables	$119,724
Total		$39,871		$119,724

44 Europe Equity Fund

Note 8: Offsetting of financial and derivative assets and liabilities

The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.


	Bank of America N.A.	Barclays Bank PLC	Citibank, N.A.	Credit Suisse International	Goldman Sachs International	HSBC Bank USA, National Association	JPMorgan Chase Bank N.A.	NatWest Markets PLC	State Street Bank and Trust Co.	Total
Assets:
Forward currency contracts ^#	$6,751	$64	$27,992	$—	$1,206	$1,754	$239	$—	$1,865	$39,871
Total Assets	$6,751	$64	$27,992	$—	$1,206	$1,754	$239	$—	$1,865	$39,871
Liabilities:
Forward currency contracts ^#	3,767	767	108	4,246	1,373	—	103,398	3,054	3,011	119,724
Total Liabilities	$3,767	$767	$108	$4,246	$1,373	$—	$103,398	$3,054	$3,011	$119,724
Total Financial and Derivative
Net Assets	$2,984	$(703)	$27,884	$(4,246)	$(167)	$1,754	$(103,159)	$(3,054)	$(1,146)	$(79,853)
Total collateral received (pledged)^†##	$—	$—	$27,884	$—	$—	$—	$(103,159)	$—	$—
Net amount	$2,984	$(703)	$—	$(4,246)	$(167)	$1,754	$—	$(3,054)	$(1,146)
Controlled collateral received (including TBA
commitments)^**	$—	$—	$136,187	$—	$—	$—	$—	$—	$—	$136,187
Uncontrolled collateral received	$—	$—	$—	$—	$—	$—	$—	$—	$—	$—
Collateral (pledged) (including
TBA commitments)^**	$—	$—	$—	$—	$—	$—	$(176,577)	$—	$—	$(176,577)

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

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

^#Covered by master netting agreement (Note 1).

^##Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.


46 Europe Equity Fund	Europe Equity Fund 47

Federal tax information (Unaudited)

For the reporting period, total interest and dividend income from foreign countries were $6,184,612, or $0.83 per share (for all classes of shares). Taxes paid to foreign countries were $636,539, or $0.09 per share (for all classes of shares).

The fund designated 1.89% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For the reporting period, the fund hereby designates 100.00%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

For the reporting period, pursuant to §871(k) of the Internal Revenue Code, the fund hereby designates $9,883 of distributions paid as qualifying to be taxed as interest-related dividends, and no monies to be taxed as short-term capital gain dividends for nonresident alien shareholders.

The Form 1099 that will be mailed to you in January 2019 will show the tax status of all distributions paid to your account in calendar 2018.


48 Europe Equity Fund

Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:


Jonathan S. Horwitz (Born 1955)	Susan G. Malloy (Born 1957)
Executive Vice President, Principal Executive Officer,	Vice President and Assistant Treasurer
and Compliance Liaison	Since 2007
Since 2004	Head of Accounting, Middle Office, & Control Services,
	Putnam Investments and Putnam Management
Robert T. Burns (Born 1961)
Vice President and Chief Legal Officer	Mark C. Trenchard (Born 1962)
Since 2011	Vice President and BSA Compliance Officer
General Counsel, Putnam Investments,	Since 2002
Putnam Management, and Putnam Retail Management	Director of Operational Compliance, Putnam
	Investments and Putnam Retail Management
James F. Clark (Born 1974)
Vice President and Chief Compliance Officer	Nancy E. Florek (Born 1957)
Since 2016	Vice President, Director of Proxy Voting and Corporate
Chief Compliance Officer, Putnam Investments	Governance, Assistant Clerk, and Assistant Treasurer
and Putnam Management	Since 2000

Michael J. Higgins (Born 1976)	Denere P. Poulack (Born 1968)
Vice President, Treasurer, and Clerk	Assistant Vice President, Assistant Clerk,
Since 2010	and Assistant Treasurer
	Since 2004
Janet C. Smith (Born 1965)
Vice President, Principal Financial Officer, Principal
Accounting Officer, and Assistant Treasurer
Since 2007
Head of Fund Administration Services,
Putnam Investments and Putnam Management

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is One Post Office Square, Boston, MA 02109.

Europe Equity Fund 51

Services for shareholders

Investor services

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

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

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

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

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

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

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

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

For more information

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

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


52 Europe Equity Fund

Fund information

Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.


Investment Manager	Trustees	Michael J. Higgins
Putnam Investment	Kenneth R. Leibler, Chair	Vice President, Treasurer,
Management, LLC	Liaquat Ahamed	and Clerk
One Post Office Square	Ravi Akhoury
Boston, MA 02109	Barbara M. Baumann	Janet C. Smith
	Katinka Domotorffy	Vice President, Principal Financial
Investment Sub-Advisors	Catharine Bond Hill	Officer,
Putnam Investments Limited	Paul L. Joskow	Principal Accounting Officer, and
16 St James’s Street	Robert E. Patterson	Assistant Treasurer
London, England SW1A 1ER	George Putnam, III
	Robert L. Reynolds	Susan G. Malloy
The Putnam Advisory Company, LLC	Manoj P. Singh	Vice President and
One Post Office Square		Assistant Treasurer
Boston, MA 02109	Officers
	Robert L. Reynolds	Mark C. Trenchard
Marketing Services	President	Vice President and
Putnam Retail Management		BSA Compliance Officer
One Post Office Square	Jonathan S. Horwitz
Boston, MA 02109	Executive Vice President,	Nancy E. Florek
	Principal Executive Officer,	Vice President, Director of
Custodian	and Compliance Liaison	Proxy Voting and Corporate
State Street Bank		Governance, Assistant Clerk,
and Trust Company	Robert T. Burns	and Assistant Treasurer
	Vice President and
Legal Counsel	Chief Legal Officer	Denere P. Poulack
Ropes & Gray LLP		Assistant Vice President, Assistant
	James F. Clark	Clerk, and Assistant Treasurer
Independent Registered Public	Vice President and
Accounting Firm	Chief Compliance Officer
PricewaterhouseCoopers LLP

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


Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
Derivatives not accounted for as	Forward currency
hedging instruments under ASC 815	contracts	Total
Foreign exchange contracts	$(1,589,760)	$(1,589,760)
Total	$(1,589,760)	$(1,589,760)

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss)
on investments
Derivatives not accounted for as	Forward currency
hedging instruments under ASC 815	contracts	Total
Foreign exchange contracts	$(22,021)	$(22,021)
Total	$(22,021)	$(22,021)


Fiscal year ended	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees


June 30, 2018	$71,264	$ —	$9,286	$299
June 30, 2017	$68,820	$ —	$9,104	$ —


Fiscal year ended	Audit-Related Fees	Tax Fees	All Other Fees	Total Non-Audit Fees


June 30, 2018	$ —	$600,294	$ —	$ —
June 30, 2017	$ —	$351,893	$ —	$ —


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


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


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


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


	Copy to:	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


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


	The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor:


	For the fiscal years ended June 30, 2018 and June 30, 2017, the fund's independent auditor billed aggregate non-audit fees in the amounts of $609,133 and $360,997 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.


	Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	FORM N-CSR


	Item 1. Report to Stockholders:


	Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.


	Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.


	All Other Fees represent fees billed for services relating to an analysis of fund profitability


	Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.


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


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


	Item 8. Portfolio Managers of Closed-End Investment Companies


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


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


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


	(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.


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


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


	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.


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


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