-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, L1pwOE3p095Dood2QdXx/5M516Wz2yr1s7T94Qteeu/qiDpPYY9FUnOCZGA3IdI9 fGRfVMs4OtgriiQyNtPCtA== 0000868648-94-000002.txt : 19940304 0000868648-94-000002.hdr.sgml : 19940304 ACCESSION NUMBER: 0000868648-94-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM OVERSEAS GROWTH FUND CENTRAL INDEX KEY: 0000868648 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 046661045 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 40 SEC FILE NUMBER: 811-06190 FILM NUMBER: 94514469 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921471 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND DATE OF NAME CHANGE: 19901107 N-30D 1 SEMI-ANNUAL REPORT (logo) Putnam Overseas Growth Fund Semiannual Report December 31, 1993 For investors seeking capital appreciation through equity securities of issuers located outside North America Contents 2 How your fund performed 3 From the Chairman 4 Report from Putnam Management Semiannual Report 6 Portfolio of investments owned 9 Financial statements 15 Fund performance supplement A member of the Putnam Family of Funds How your fund performed For period ended December 31, 1993 Morgan Stanley Fund Capital International S&P 500 Total return* NAV POP EAFE Index Price Index 6 months 26.55% 19.33% 7.73% 4.95% 1 year 43.99 35.76 32.86 10.04 Life-of-fund 42.69 34.43 15.35 38.72 (since 2/28/91) annualized 13.33 10.98 5.16 12.22 Share data NAV POP June 30, 1993 $9.58 $10.16 December 31, 1993 $11.90 $12.63 Distributions Investment Capital 6 months ended Number income gains Total December 31, 1993 1 -- $0.215 $0.215 * Performance data represent past results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Terms you need to know Total return is the change in value of an investment from the beginning to the end of a period, assuming the reinvestment of all distributions. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not reflecting any sales charge. Public offering price (POP) is the price of a mutual fund share plus the fund's 5.75% maximum sales charge levied at the time of purchase. Please see the fund performance supplement on page 15 for additional information about performance comparisons. From the Chairman Dear Shareholder: I am very pleased to report that Putnam Overseas Growth Fund turned in a strong performance during the six months ended December 31, 1993. Overseas markets were substantially stronger than the U.S. market. As a result, your fund significantly outperformed the Standard & Poor's 500 Index, which most investors use as a measure of U.S. equity portfolio performance. Your fund also outpaced the Morgan Stanley Capital International EAFE Index, which is used as a measure of international equity performance. Your fund is designed to provide you with potential capital appreciation by investing primarily in a diversified portfolio of stocks in companies located outside North America. Holdings are diversified across a minimum of eight countries, with an emphasis on undervalued stocks. Putnam Management remains optimistic about the long-term growth prospects for overseas stocks. Your Fund Manager, Justin Scott, expects that lower interest rates outside the U.S., eventual economic recovery in Europe, and continued growth in the emerging Pacific Basin markets will provide further opportunities for growth in the international arena. Aided by a combination of quantitative and fundamental analysis, Justin will continue to monitor economic conditions worldwide to take advantage of attractive buying opportunities as they arise. The combination of careful stock selection, country diversification, and currency hedging should serve your fund well during the second half of fiscal 1993 and beyond. Respectfully yours, George Putnam Chairman of the Trustees February 16, 1994 Report from Putnam Management Putnam Overseas Growth Fund's stellar performance for the six months ended December 31, 1993, helps bring home the point that for investors seeking long-term growth opportunities, looking overseas can be invaluable to investment success. During the period your fund returned 26.55% at net asset value and 19.33% at public offering price. By comparison, the Morgan Stanley EAFE Index, an unmanaged index of stocks, returned 7.73% during the same period. Country and sector strategies Returns in Southeast Asia were spectacular, especially during December, when overseas investors charged into the region boosting demand -- and, consequently, stock prices. The returns in Hong Kong, Malaysia, and Thailand were exceptional by any standards, and your fund's overweighting in these stock markets, combined with an underweighting in Japan, was the dominant contributor to its superior performance. While European markets did not match the returns of the smaller Southeast Asia market, their performance during the period was still quite rewarding, with returns typically ranging from 15% to 30%. Markets in Europe were primarily driven by falling interest rates as individual countries took advantage of the widening of the Exchange Rate Mechanism (ERM) currency guidelines. The wider trading bands gave ERM countries the freedom to lower interest rates -- and thus relieve pressure on their currencies -- without waiting for Germany's Bundesbank to take the lead. The U.S. dollar strengthened against most currencies during the period. To help protect the value of your investment, currency hedges were kept in place against a portion of the fund's investments in France, the Netherlands, and Switzerland. Global economic overview The sluggish pattern of economic recovery we have experienced in the U.S. has also characterized rebounds in the U.K., Canada, and Australia. We expect the same trends to occur elsewhere in countries not yet visibly on the mend. Just as 0% or negative real interest rates were necessary to generate a rebound in the U.S., a similar interest-rate scenario will probably be required in other countries. We believe that policies favoring lower official interest rates will eventually be adopted almost everywhere. Therefore, we should ultimately see the unfolding of classic economic recovery patterns, beginning with improvement in the housing sector and followed by gains in motor vehicles and capital goods. Even so, initial recoveries are apt to be slow. Europe Germany is making progress against inflation, which we believe is soon likely to fall to under 3% annualized. This will allow the Bundesbank to accommodate a significant further reduction in interest rates. Both interest rate and currency developments in Germany should provide welcome relief to France and Germany's other partners in the European Union. The sputtering British recovery should persist, but we do not expect it to gain much steam until the rest of Europe starts to recover. Interest rates in the U.K. should fall from current levels but less so than in Germany. Likewise, any decline of the pound against the U.S. dollar should be less than that of the deutschemark. Far East Japan's economy has deteriorated markedly since the summer. Industrial production fell a sharp 5.5% month-to-month in October. Meanwhile, capital spending has continued to fall, business and consumer sentiment are at new lows and recurrent governmental crises have created a semiparalysis under which serious economic problems remain unaddressed. Among the world's major economies, Japan is perhaps the most threatened by deflation. Japanese export industries have lost competitiveness with the yen at current levels, and the nation's trade surplus is poised to shrink substantially. It seems evident that Japan must find a way to revive consumer spending, and perhaps only a massive tax cut has the potential to accomplish this. Interest rates, although already low, remain well above inflation, suggesting the potential for further declines. The Southeast Asian region remains an island of prosperity and rapid growth accompanied by low inflation. Conditions are less favorable in China, where an austerity program has had only limited success in restraining runaway economic growth and accelerating inflation. Signals are mixed as to whether China's policy of restraint will continue, and developments there must be monitored very closely. Australia is showing only moderate economic improvement, subpar even by recent U.S. standards. The worst is undoubtedly over, but conditions -- especially in key commodity markets -- will improve only slowly. The outlook for Australian interest rates is one of relative stability. Investment outlook The economic recovery in continental Europe is still very fragile, but eventually, we believe lower interest rates and improved demand from the U.S. will stimulate activity there. Investors are now looking to 1995, and the potential for recovery in corporate profits in the next 12 to 18 months should be attractive enough to encourage a positive trend in European stock markets. We expect to emphasize the selection of companies that have implemented sufficiently aggressive cost-reduction policies to ensure improved profitability in a business environment that will remain very price-competitive. International stock market returns in 1993 were the best since the mid-1980s. We are not prepared to predict a repeat of this strong performance in 1994, but conditions are favorable enough to justify optimism for satisfyingly positive results. Portfolio of investments owned December 31, 1993 (Unaudited) Common Stocks (97.2%) (a)(b) Number of Shares Value Japan (17.2%) 1,000 Aoyama Trading Co. Ltd. $ 57,245 4,000 Asahi Organic Chemical Ind. 28,229 124 Chain Store Okuwa Co., Ltd. 1,886 5,000 Daiwa Securities Ltd. 55,904 1,000 Hirose Electric Co. Ltd. 54,115 1,000 Ito Yokado Ltd. 45,617 2,000 Kurita Water Ltd. 40,608 5,000 Matsushita Electric Ind. Ltd. 66,637 7,000 Mitsubishi Cable Ind. Ltd. 44,768 3,000 Mitsui Fudosan Co., Ltd. 30,322 1,000 Murata Manufacturing Co. Ltd. 33,810 400 SEGA Enterprises Ltd. 31,020 2,000 Sankyo Co., Ltd. 39,535 1,000 Santen Pharmaceutical 25,403 4,000 Sonton Food Ind. Co. Ltd. 54,383 5,000 Suzuki Motor Corp. 46,959 6,000 Toho Bank 35,635 2,000 Tostem Corp. 66,190 758,266 United Kingdom (15.6%) 4,000 Associated British Ports 32,323 5,700 BAT Industries PLC 46,608 7,000 Baird (William) PLC 23,888 6,000 British Telecommunications PLC 19,057 3,000 Burmah Oil 37,007 5,500 East Midlands Electric PLC 52,814 8,500 General Electric Co. (The) PLC 42,883 3,200 Guinness PLC 22,573 4,900 Molins PLC 41,623 4,961 North West Water Group PLC 42,947 5,000 Pearson PLC 44,910 5,300 Rothmans International PLC 37,504 5,100 Royal Insurance Holdings PLC 25,616 10,000 Scotia Holdings PLC(c) 42,103 2,850 Securicor Group PLC Class A 36,461 29,000 Senior Engineering Group PLC 54,195 1,200 SmithKline Beecham PLC ADR 32,850 5,000 South Western Electric PLC 51,336 686,698 Common Stocks Number of Shares Value Singapore (7.7%) 4,000 Asia Pacific Breweries $ 42,288 6,000 Clipsal Industries (Holdings) Ltd. 34,500 5,000 Genting Berhad 69,612 14,000 Informatics Holdings Ltd.(d) 18,805 5,000 Jurong Shipyard Ltd. 45,087 5,000 Singapore Airlines Ltd. 41,978 18,000 Singapore Ind. Leasing(d) 24,179 4,750 United Overseas Bank Ltd. (Foreign Register) 46,378 7,000 Venture Manufacturing Inc. 16,542 339,369 France (7.5%) 100 Alcatel Alsthom CGE S.A. 14,229 80 Alcatel Cable 10,112 630 Credit Local de France 52,146 350 Docks de France 42,940 132 Financiere et Industrielle Gaz et Eaux 46,889 785 Pechiney International 27,221 350 Societe Generale D'Enterprises 45,306 200 Societe Generale D'Enterprises 9,463 60 Sommer-Allibert 20,573 125 Sovac 41,487 52 ZODIAC 18,814 329,180 Hong Kong (7.3%) 9,000 Cheung Kong Holdings Ltd. 55,034 500 Dao Heng Bank Group Ltd. 2,168 10,000 Guoco Group Ltd. 49,825 2,800 HSBC Holdings PLC 41,672 13,000 Hong Kong Land Co. Ltd. (The) 46,098 5,000 New World Development Co. Ltd. 26,531 6,000 Swire Pacific Ltd. Class A 53,966 32,000 Varitronix International Ltd. 44,726 320,020 Common Stocks Number of Shares Value Switzerland (7.1%) 35 Baer Holdings AG $ 42,302 100 Ciba-Geigy AG (Registered) 60,431 40 Nestle S.A. (Registered) 34,459 20 Rieter Holding AG (Registered) 21,084 40 SMH Bearer(d) 27,933 40 Sulzer PC 21,755 110 Swiss Bank Corp. (Registered) 17,136 71 Swiss Reinsurance Co. (Registered) 35,040 60 Union Bank of Switzerland (Bearer) 54,549 314,689 Netherlands (4.9%) 580 ABN AMRO Holding N.V. 21,323 725 Aegon N.V.(Bearer) 39,325 450 Akzo N.V. 43,496 1,736 Getronics Electric N.V. 39,004 1,500 IHC Caland N.V. 30,000 700 Wolters Kluwer N.V. 44,159 217,307 Mexico (4.6%) 1,200 Grupo Embotellador de Mexico (Gemex) ADR(c)(d) 43,500 2,750 Grupo Financiero Banacci (Registered) 23,913 137 Grupo Financiero Banacci (Registered), Class L 1,055 600 Grupo Financiero Banacci ADS 25,050 700 Grupo Financiero Serfin ADR 20,650 500 Grupo Televisa S.A. ADS(c) 32,250 500 Telefonos de Mexico S.A., Ser. L, ADR 33,750 1,750 Tolmex S.A. De C.V. 24,376 204,544 Malaysia (3.9%) 19,000 Development & Commercial Bank 45,146 15,000 Maruichi Malaysia Steel Tube BHD 38,148 20,500 Pilecon Engineering Berhad 47,187 8,000 United Engineers 42,473 172,954 Common Stocks Number of Shares Value Ireland (2.9%) 7,000 Allied Irish Banks PLC $ 30,018 4,600 Bank of Ireland 19,532 11,639 CRH PLC 61,040 4,000 Greencore PLC 19,403 129,993 Spain (2.7%) 300 Argentaria ADS 12,667 1,000 Hidrolectrica del Cantabrico 30,409 1,300 Inmobiliaria Metropolitana Vasco Central 47,074 900 Repsol S.A. 27,997 118,147 Australia (2.0%) 7,271 Amcor, Ltd. 48,199 1,600 CRA Ltd. 19,954 10,128 MIM Holdings Ltd. 18,261 115 Western Mining Holdings, Ltd. 548 86,962 Thailand (1.9%) 6,000 Bangkok Bank Co. Ltd. 59,294 1,500 Siam City Cement 25,529 84,823 Portugal (1.9%) 2,300 Banco Commercial Portugues, S.A. ADR 35,075 400 Banco Commercial Portugues, S.A. ADR 6,016 2,295 Banco Totta and Acores (BTA) Nationalisert 42,576 83,667 Germany (1.8%) 65 Deutsche Bank AG 32,967 195 Spar Preferred Handels AG 44,741 77,708 Argentina (1.6%) 1,000 Baesa (Registered) ADS 45,000 500 Ciadea(d) 26,500 71,500 Sweden (1.5%) 30,000 Foreningsbanken AB(d) 67,416 Austria (1.0%) 1,000 Austria Mikro Systeme(c) 42,494 Common Stocks Number of Shares Value Greece (0.9%) 3,500 Greek Progress Fund-Units $ 38,998 Belgium (0.8%) 60 Bekaert S.A. 34,619 Italy (0.7%) 9,000 Credito Italiano S.A. 12,144 1,750 Danieli & Co. 11,222 2,500 Danieli & Co. (Savings Shares) 8,439 31,805 Denmark (0.7%) 750 NKT Holdings 29,639 Norway (0.6%) 1,500 Christiana Bank Kreditkass ADR(c) 26,625 Canada (0.4%) 500 Imperial Oil Ltd. 16,932 Total Common Stocks (cost $3,471,444) $4,284,355 Warrants (0.1%)(a)(b)(d) Number of Warrants Expiration Date Value 1,600 Clipsal Industries 8/12/98 $ 4,320 32 Sulzer PC, Ser. A 7/29/94 172 30 Sulzer PC, Ser. B 7/29/94 149 65 Swiss Reinsurance Co., Ser. A 10/14/94 502 65 Swiss Reinsurance Co., Ser. B 6/30/95 447 Total Warrants (cost $1,362) $ 5,590 Short-Term Investments (13.9%)(a)(cost $610,000) Principal Amount Value $ 610,000 Interest in $402,391,000 joint repurchase agreement dated December 31, 1993, with Kidder Peabody due January 3, 1994, with respect to various U.S. Treasury obligations-- maturity value of $610,000 for an effective yield of 3.15% $ 610,000 Total Investments (cost $4,082,806)(e) $4,899,945 Notes (a) Percentages indicated are based on total net assets of $4,407,513, which correspond to a net asset value per share of $11.90. (b) Securities whose value is determined or significantly influenced by trading on exchanges not in the United States or Canada. ADR or ADS after the name of a foreign holding stands for American Depository Receipt or American Depository Shares, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank. (c) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30,1993, these securities amounted to $186,972 or 4.2% of net assets. (d) Non-income-producing security. (e) The aggregate identified cost on a tax basis is $4,117,878, resulting in gross unrealized appreciation and depreciation of $937,535 and $155,469, respectively, or net unrealized appreciation of $782,067. CAPTION> Forward Currency Contracts Outstanding at December 31, 1993 Contracts Market Aggregate Delivery Unrealized Value Face Date Appreciation/ Value (Depreciation) French Francs (Sell) $201,960 $201,444 2/14/94 ($ 516) Dutch Guilders (Sell) 158,939 161,956 2/14/94 3,017 Swiss Francs (Sell) 100,590 99,960 2/14/94 ( 630) $1,871 /TABLE Statement of assets and liabilities December 31, 1993 (Unaudited) Assets Investments in securities, at value (identified cost $3,472,806) (Note 1) 4,289,945 Repurchase Agreement, at value (cost $610,000) 610,000 Total investments, at value (identified cost $4,082,806) $4,899,945 Dividends, and interest receivable 3,655 Receivable for foreign tax 9,596 Receivable for securities sold 181,537 Receivable for open forward currency contracts 3,017 Unamortized organization expenses (Note 1) 6,135 Total assets 5,103,885 Liabilities Payable for securities purchased $ 503,017 Payable for compensation of Manager (Note 2)2,213 Payable for compensation of Trustees (Note 2) 133 Payable for investor servicing and custodian (Note 2) 4,147 Payable for distribution fees (Note 2) 2,150 Payable for administrative services (Note 2) 10 Payable to subcustodian (Note 2) 180,766 Payable for open forward currency contracts 1,146 Other accrued expenses 2,790 Total liabilities 696,372 Net assets $4,407,513 Represented by Paid-in capital (Note 4) $3,388,649 Undistributed net investment income 11,251 Accumulated net realized gain on investment transactions 189,255 Net unrealized foreign currency translation loss (652) Net unrealized appreciation of investments and forward currency contracts 819,010 Total -- Representing net assets applicable to capital shares outstanding $4,407,513 Computation of net asset value and offering price Net asset value and redemption price per share ($4,407,513 divided by 370,458 shares) $11.90 Offering price per share (100/94.25 of $11.90)* $12.63 *On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the offering price is reduced. Statement of operations Six months ended December 31, 1993 (Unaudited) Investment income Dividends (net of foreign tax of $2,460) $27,850 Interest 216 Total investment income 28,066 Expenses: Compensation of Manager (Note 2) 13,281 Investor servicing and custodian fees (Note 2) 12,305 Compensation of Trustees (Note 2) 791 Administrative fees (Note 2) 20 Auditing 6,194 Legal 4,552 Distribution fees (Note 2) 7,467 Amortization of organization expenses (Note 1) 1,389 Reports to shareholders 327 Postage14 Other expenses 530 Fees waived by Manager (Note 2) (6,971) Total expenses 39,899 Net investment loss (11,833) Net realized gain on investments (Notes 1 and 3) 434,956 Net realized gain on foreign currency (Note 1) 440 Net realized gain on forward currency contracts (Note 1) 22,068 Net unrealized foreign currency translation loss (161) Net unrealized appreciation of investments and forward currency contracts during the year 358,906 Net gain on investment transactions 816,209 Net increase in net assets resulting from operations $804,376 Statement of changes in net assets Six months ended Year ended December 31 June 30 1993* 1993 Increase in net assets Operations: Net investment income (loss) $(11,833) $ 20,199 Net realized gain (loss) on investments 434,956 (71,834) Net realized gain (loss) on foreign currency 440 (303) Net realized gain (loss) on forward currency contracts 22,068 (26,175) Net unrealized foreign currency translation (loss) (161) (1,153) Net unrealized appreciation of investments 358,906 305,046 Net increase in net assets resulting from operations 804,376 225,780 Distributions to shareholders from net gain on investments (70,167) -- Increase from capital share transactions (Note 4) 814,522 130,947 Total increase in net assets 1,548,731 356,727 Net assets Beginning of period 2,858,782 2,502,055 End of period (including distributions in excess of net investment income undistributed net investment income of $63,269 and $23,084, respectively) $4,407,513 $2,858,782 *Unaudited.
Financial highlights* (For a share outstanding throughout the period) For the period February 28, 1991 Six months (commencement ended Year ended of operations) to December 31 June 30 June 30 1993** 1993 1992 1991 Net Asset Value, Beginning of Period $9.58 $8.82 $8.18 $8.63 Investment Operations: Net Investment Income (loss)(.05)(b) .07(b) .06 .07(b) Net Realized and Unrealized Gain (Loss) on Investments 2.59 .69 .71 (.52) Total from Investment Operations2.54 .76 .77 (.45) Less Distributions from: From Net Investment Income -- -- (.13) -- From Net Realized Gain on Investments (.22) -- -- -- Total Distributions (.22) -- (.13) -- Net Asset Value, End of Period$11.90 $9.58 $8.82 $8.18 Total Investment Return at Net Asset Value (%)(a) 53.10(d) 8.62 9.52 (15.32)(d) Net Assets, End of Period (in thousands) $4,408 $2,859 $2,502 $2,054 Ratio of Expenses to Average Net Assets (%) 2.40(b)(d) 1.80(b) 1.98 2.33(b)(d) Ratio of Net Investment Income (loss) to Average Net Assets(%) (0.71)(b)(d) .81(b) .76 2.57(b)(d) Portfolio Turnover (%) 75.99(c) 80.92 82.45 14.54(c) * Financial Highlights for periods ended through June 30, 1992, have been restated to conform with requirements issued by the SEC in April 1993. ** Unaudited. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Reflects a voluntary expense limitation during the period. As a result of such limitation, expenses of the Fund for the periods ended December 31, 1993, June 30, 1993, and June 30, 1991, reflect a per-share reduction of approximately $0.03, $0.05 and $0.10 respectively. (c) Not annualized. (d) Annualized. /TABLE Notes to financial statements December 31, 1993 (Unaudited) Note 1 Significant accounting policies The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund seeks capital appreciation by investing primarily in equity securities of companies located outside North America. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sale price on the principal market in which the securities are traded, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price, except that certain U.S. government obligations are stated at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair value following procedures approved by the Trustees. (See Section D of Note 1 with respect to valuation of options and forward currency contracts.) Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Gains and losses that arise from changes in exchange rates are not segregated from gains and losses that arise from changes in market prices of investments. The effects on net investment income arising from changes in exchange rates are also not segregated. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund may transfer uninvested cash balances into a joint trading account, along with the cash of other registered investment companies managed by Putnam Investment Management, Inc. (formerly known as The Putnam Management Company, Inc.), the Fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. (formerly known as The Putnam Companies, Inc.), and certain accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The Fund, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. The Fund's Manager is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Foreign currency-denominated receivables and payables are "marked-to-market" using the current exchange rate. The fluctuation between the original exchange rate and the current exchange rate is recorded as unrealized translation gain or loss. Upon receipt or payment, the Fund realizes a gain or loss amounting to the difference between the original value and the ending value of the receivable or payable. Foreign currency gains and losses related to interest receivable are reported as part of interest income. E) Option accounting principles The premium paid by the Fund for the purchase of a call or put option is included in the Fund's "Statement of assets and liabilities" as an investment and subsequently "marked-to-market" to reflect the current market value of the option. If an option which the Fund has purchased expires on the stipulated expiration date, the Fund realizes a loss in the amount of the cost of the option. If the Fund enters into a closing sale transaction, the Fund realizes a gain or loss, depending on whether proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a call option, the cost of the securities or currencies acquired by exercising the call is increased by the premium paid to buy the call. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are decreased by the premium originally paid. Options on foreign currencies The Fund writes and purchases put and call options on foreign currencies. The accounting principles and risks involved are similar to those described above relating to options on securities. The amount of potential loss to the Fund upon exercise of a written call option is the value (in U.S. dollars) of the currency sold, converted at the spot price, less the value of U.S. dollars received in exchange. The amount of potential loss to the Fund upon exercise of a written put option is the value (in U.S. dollars) of the currency received converted at the spot price, less the value of the U.S. dollars paid in exchange. Forward currency contracts A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is "marked-to-market" daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The maximum potential loss from forward currency contracts is that the aggregate face value in U.S. dollars at the time the contract was opened; however, management believes the likelihood of such a loss to be remote. F) Federal taxes It is the policy of the Fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the Fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation of securities held and excise tax on income and capital gains. G) Distributions to shareholders Distributions to shareholders are recorded by the Fund on the ex-dividend date. H) Unamortized organization expenses Expenses incurred by the Fund in connection with its organization, its registration with the Securities and Exchange Commission and with various states and the initial public offering of its shares were $14,123. These expenses are being amortized on a straight-line basis over a five-year period. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Investment Management, Inc. (formerly known as Putnam Management), the Fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. (formerly known as The Putnam Companies, Inc.), for management and investment advisory services is paid quarterly based on the average net assets of the Fund for the quarter. Such fee is at an annual rate of 0.80% of the first $500 million of average net assets, 0.70% of the next $500 million, 0.65% of the next $500 million and 0.60% of any amount over $1.5 billion, subject to reduction in any year by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of the Manager on the Fund's portfolio transactions. Until further notice, the Manager has voluntarily agreed to reduce its compensation, and to the extent necessary absorb certain Fund expenses, to the extent that expenses of the Fund exceed an annual rate of 1.90% of average net assets. The Fund's expenses subject to this limitation are exclusive of brokerage, interest, taxes, deferred organizational and extraordinary expenses, and payments required under the Fund's Distribution Plan. This limitation is accomplished by a reduction of the compensation payable under the management contract to the Manager and, if necessary, payment of additional Fund expenses by the Manager. For the six months ended December 31, 1993, the Fund's expenses were reduced by $6,971. For the purpose of determining any such reduction in Putnam Management's compensation, expenses of the Fund shall not reflect the application of commissions or cash management credits that may reduce designated Fund expenses. The Fund also reimburses the Manager 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. For the six months ended December 31, 1993, the Fund incurred $20 in fees for these services. Trustees of the Fund receive an annual Trustee's fee of $100 and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of the Manager and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. Custodial functions for the Fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. Fees paid for these investor servicing and custodial functions for the six months ended December 31, 1993, amounted to $12,305. Investor servicing and custodian fees reported in the Statement of operations for the six months ended December 31, 1993, have been reduced by credits allowed by PFTC. As part of the custodian contract between Putnam Fiduciary Trust Company and the subcustodian bank, the subcustodian has a lien on the securities of the Fund to the extent permitted by the Fund's investment restrictions to cover any advances made by the subcustodian for the settlement of securities purchased by the Fund. At December 31, 1993, the payable to subcustodian represents the amount due for cash advanced for the settlement of a security purchase. Pursuant to the Fund's underwriting agreement and to a distribution plan adopted under Rule 12b-1 of the Investment Company Act of 1940. The purpose of the plan is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc. for services provided and expenses incurred by it in distributing shares of the Fund. The Trustees have approved payment by the Fund to Putnam Mutual Funds Corp. at an annual rate of 0.25% of average net asset value of shares of the Fund attributable to qualifying investment dealers of record for Fund shareholders. For the six months ended December 31, 1993, the Fund incurred distribution fees of $7,467. During the six months ended December 31, 1993, Putnam Mutual Funds Corp., acting as an underwriter, received no commissions from the sale of shares of the Fund. At December 31, 1993, Putnam Investments, Inc. owned 239,995 shares outstanding of the Fund, valued at $2,855,941. Note 3 Purchases and sales of securities During the six months ended December 31, 1993, purchases and sales of investment securities other than short-term investments aggregated $3,412,880 and $2,152,328, respectively. There were no purchases or sales of U.S. government obligations during the period. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Transactions in forward currency contracts during the year are summarized as follows: Sales of Forward Currency Contracts Number of Aggregate Contracts Face Value Contracts open at the beginning of period 1,769 $ 576,226 Contracts opened 3,320 914,991 5,089 1,491,217 Contracts closed (3,429) (1,027,857) Contracts open at end of period 1,660 $ 463,360
Note 4 Capital Shares At December 31, 1993, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended Year ended December 31 June 30 1993 1993 Shares Amount Shares Amount Shares sold 92,790 $1,025,550 15,778 $138,604 Shares issued in connection with reinvestment of distributions 6,133 70,167 -- -- 98,923 1,095,717 15,778 138604 Shares repurchased (26,963) (281,195) (911) (7,657) Net increase 71,960 $814,522 14,867 $130,947
Note 5 Reclassification of Capital Account Effective July 1, 1993, Putnam Overseas Growth Fund has adopted the provisions of Statement of Position 93-2 "Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain and Return of Capital Distributions by Investment Companies (SOP)." The purpose of this SOP is to report the accumulated net investment income (loss) and accumulated net realized gain (loss) accounts in such a manner as to approximate amounts available for future distributions (or to offset future realized capital gains) and to achieve uniformity in the presentation of distributions by investment companies. As a result of the SOP, the Fund has reclassified $ to increase undistributed net investment income and $ to decrease accumulated net realized gain with a decrease of $ to additional paid in capital. These adjustments represent the cumulative amounts necessary to report these balances through June 30, 1993, the close of the Fund's most recent fiscal year-end, for financial reporting and tax purposes. Fund performance supplement Overseas Growth Fund is a portfolio managed for capital appreciation through investments in common stocks and other securities of companies located outside North America. The Europe, Australia, and the Far East (EAFE) component of the Morgan Stanley Capital International World Index is an unmanaged list of international equity securities, excluding U.S., with all values expressed in U.S. dollars. Standard & Poor's 500 Index is an unmanaged list of U.S. large-capitalization common stocks; it assumes reinvestment of all distributions. The indexes do not take into account brokerage commissions or other costs. The fund's portfolio contains securities that do not match those in the indexes, especially with respect to the S&P 500 index. Fund performance data do not take into account any adjustment for taxes that may have been payable. The fund performance supplement has been prepared by Putnam Management to provide additional information about the fund and the indexes used for performance comparisons. The information is not part of the portfolio of investments owned or the financial statements. Putnam Overseas Growth Fund Fund information Investment manager Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 Marketing services Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 Investor servicing agent Putnam Investor Services Mailing address:P.O. Box 41203 Providence, RI 02940-1203 1-800-225-1581 Custodian Putnam Fiduciary Trust Company Legal counsel Ropes & Gray (DALBAR logo) Putnam Investor Services has received the DALBAR award each year since the award's 1990 inception. In more than 10,000 tests of 38 shareholder service components, Putnam outperformed the industry standard in every category. 10469 Officers George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President John R. Verani Vice President Anthony W. Regan Vice President Justin M. Scott Vice President and Fund Manager William N. Shiebler Vice President John D. Hughes Vice President and Treasurer Beverly Marcus Clerk and Assistant Treasurer Trustees George Putnam, Chairman William F. Pounds, Vice Chairman Hans H. Estin, John A. Hill, Elizabeth T. Kennan, Lawrence J. Lasser, Robert E. Patterson, Donald S. Perkins George Putnam, III, A.J.C. Smith W. Nicholas Thorndike This report is for the information of shareholders of Putnam Overseas Growth Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives and operating policies of the fund. APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND EDGAR-FILED TEXTS: (1) Rule lines for tables are omitted. (2) Boldface and italic typefaces are displayed in normal type. (3) Headers (e.g, the name of the fund) and footers (e.g., page numbers and "The accompanying notes are an integral part of these financial statements") are omitted. (4) Because the printed page breaks are not reflected, certain tabular and columnar headings and symbols are displayed differently in this filing. (5) Bullet points and similar graphic signals are omitted. (6) Page numbering is different. -----END PRIVACY-ENHANCED MESSAGE-----