-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P+zuEqoE4Q57z03MNkNBb9zFhhc+dMfUQa4IonxbOxu+GkCtl7YKPSsoZAxC0GM0 PEyY9gwlsxY53De80+Jiuw== 0000928816-01-000071.txt : 20010224 0000928816-01-000071.hdr.sgml : 20010224 ACCESSION NUMBER: 0000928816-01-000071 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND /MA/ CENTRAL INDEX KEY: 0000868648 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046661045 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06190 FILM NUMBER: 1549753 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921471 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM OVERSEAS GROWTH FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND DATE OF NAME CHANGE: 19901107 N-30D 1 0001.txt PUTNAM INTERNATIONAL GROWTH FUND Putnam International Growth Fund SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 12-31-00 [SCALE LOGO OMITTED] FROM THE TRUSTEES [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III] Dear Shareholder: The latter half of 2000 certainly tested the mettle of investors in most of the world's equity markets. The year that had begun with great optimism closed with most of these markets lower or only marginally higher. Despite astute stock selection by fund managers Omid Kamshad, Paul Warren, and the rest of the management team, Putnam International Growth Fund's performance reflects this unfavorable environment. Seasoned long-term investors have come to understand that all markets experience occasional periods of turbulence. They have also learned that from such adversity often comes opportunity. As the fund managers note in the following report, they are continually seeking out such opportunities that they believe represent potential future value for your fund. It is likely that we may be in for a bit more turbulence before global equity investors become convinced that the world's key economies are not headed for recession. However, investor perceptions are known for their tendency to turn on a dime, and we believe that in the months ahead, a change of sentiment is likely to occur. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds February 21, 2001 REPORT FROM FUND MANAGEMENT Omid Kamshad Joshua L. Byrne Stephen P. Oler Paul C. Warren Justin M. Scott Simon Davis The second half of 2000, which corresponded to the first half of Putnam International Growth Fund's 2001 fiscal year, was a difficult period for international stocks. As global economic growth slowed, it appeared that growth stocks that had led international markets higher in 1999 would be unable to meet their earnings expectations, a scenario similar to what took place in U.S. markets over the same period. As markets worldwide adjusted their expectations, volatility remained high. Total return for 6 months ended 12/31/00 Class A Class B Class C Class M NAV POP NAV CDSC NAV CDSC NAV POP - ----------------------------------------------------------------------- -9.79% -14.99% -10.15% -14.28% -10.13% -10.95% -9.98% -13.11 - ----------------------------------------------------------------------- Past performance is not indicative of future results. Performance information for longer periods and explanation of performance calculation methods begin on page 7. * REGIONAL EXPOSURES ADJUSTED FOR CHANGING CONDITIONS Faced with this turbulent environment, investors turned to issues better able to meet their earnings targets, and, as a result, undervalued stocks that had long been out of favor achieved healthy gains. Your fund experienced a decline over the period but performed well on a relative basis. The fund's ability to avoid traditional biases toward either a growth or value style, focusing instead on our disciplined proprietary valuation process, helped the fund avoid many growth stocks that had exceeded reasonable valuations and subsequently experienced sharp declines. Meanwhile, the fund was able to discover many undervalued stocks with defensive characteristics such as steady earnings. The fund's sector and regional positioning also helped to limit losses. As is typically the case in international investing, business conditions varied across sectors and from region to region during the past six months. Your fund benefited from maintaining a significant exposure to financial, energy, and pharmaceutical stocks. These stocks had attractive valuations because they had been ignored in 1999 while technology and telecommunication stocks soared. Your fund was underweight in the two latter sectors, which helped cushion performance as former market leaders gave back many of the gains they had achieved in 1999. [GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS] TOP COUNTRY ALLOCATIONS* United Kingdom 21.6% France 13.9% Japan 10.2% Netherlands 8.5% Switzerland 8.2% Footnote reads: *Based on net assets as of 12/31/00. Holdings will vary over time. From a global perspective, Europe offered some of the best combinations of relative valuations and market conditions, and the fund's performance benefited from our decision to favor European over Japanese equities. Economic growth on the European Continent remained strong, but in late summer, as demand for fuel outpaced supplies, protests from truckers in France, Germany, and the United Kingdom briefly disrupted fuel distribution. For investors, the protests mattered less than incoherent policy responses from European governments. One result was that confidence in the euro eroded, contributing to the currency's skid. It sank to record lows for months and hurt the fund's returns before recovering modestly in December. Outside Europe, we reduced our Japanese exposure while favoring Canada. Japan's economy flirted with recession in the second half of the year, so we lowered the assumptions in our valuation models and steered clear of Japanese banks, retailers, and consumer-oriented stocks. We also avoided overvalued Japanese technology stocks. Instead, we favored Japanese export companies that could benefit from the weak yen, including Sony and Honda. In Canada, holdings such as BCE and Sun Life offered attractive valuations and contributed gains for the period. Although these holdings, as well as others mentioned in this report, were viewed favorably at the end of the period, all are subject to review and adjustment in accordance with the fund's strategy. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS TotalFinaElf SA, class B France Oil and gas Internationale Nederlanden Groep (ING) Netherlands Insurance Vodafone Group PLC United Kingdom Telecommunications Shell Transportation & Trading PLC United Kingdom Oil and gas Nokia OYJ AB, class A Finland Communications equipment Ente Nazionale Idrocarburi (ENI) SpA Italy Oil and gas Aventis SA France Pharmaceuticals Nestle SA Switzerland Food Sanofi-Synthelabo SA France Pharmaceuticals AstraZeneca Group PLC United Kingdom Pharmaceuticals Footnote reads: These holdings represent 28.6% of the fund's net assets as of 12/31/00. Portfolio holdings will vary over time. * RESEARCH HELPED TO PROVIDE AN EDGE IN STOCK SELECTION Several of the fund's top-performing holdings in the period were insurance companies. We added substantial exposure to this sector when our research revealed that the insurance industry was experiencing an upswing after several quarters of difficulty. Consolidation and internal cost controls have increased returns on capital for several companies in the industry. Return on capital is a key driver in our core valuation models. The fund's top holdings include Zurich Financial Services in Switzerland and Muenchener Rueckversicherung (Munich Re), a German insurance broker that specializes in helping other insurance companies to manage potential risks. We were highly selective in choosing banking stocks. Falling stock prices worldwide have depressed investment banking and venture capital operations, and we avoided major banks that had international exposure in these business areas. Instead, the fund favored regional players achieving strong returns as asset-gatherers, including Internationale Nederlanden Groep (ING) in the Netherlands and Fortis, a German-Dutch asset manager. In the pharmaceuticals industry, we favored midsize companies over larger businesses. This sector in general provided strong gains in the period, since many drug companies achieved solid earnings performance at a time when numerous growth stocks disappointed investors. The fund's top holdings were Sanofi-Synthelabo in France and Aventis, a Franco-German company that is the result of a 1999 merger. Both of these companies have strong portfolios of pharmaceutical products allowing us to calculate in our valuation models a long period of competitive advantage and above average returns on capital. Aventis is shifting its focus to patented pharmaceuticals with high profit margins and has recently found a buyer for its less profitable industrial gases division. THE CHANGING IMPACT OF HIGHER ENERGY PRICES The rising price of oil, which approached $40 per barrel in the course of 2000, contributed to slowing economic growth in the global economy. But there is a silver lining to this dark cloud in international markets. Europe and Japan, in particular, have succeeded in reducing their overall dependency on petroleum in the quarter century since the major oil-price shocks of the 1970s. Policymakers in Europe and Japan took steps to insulate their economies from the risks of sharp price increases by levying fuel taxes to encourage conservation. Although Japan is beset by other economic problems, Europe is poised to grow faster than the United States in 2001, though OPEC in January announced a production cut to support prices. Oil companies, including your fund's holdings, also have managed the situation prudently by avoiding profligate investments in new oil exploration that can drive down the value of existing reserves. * MARKET UNCERTAINTY CREATES OPPORTUNITIES As international markets have struggled to set new expectations for a variety of stocks and sectors, our research has helped us identify opportunities and avoid risks. We look for companies with stocks priced below their underlying fundamental worth. Recently we have found many stocks with attractive valuations. Our research has focused on anticipating which of these companies are most likely to outperform market expectations. We have recently added to positions in the media sector. Stocks in this sector were beaten down in 2000 because investors anticipated a downturn in the advertising cycle. In response to this price weakness, we have been adding to positions in what we consider the best companies, those that are capable of maintaining profitability in a downturn and of taking advantage of a possible re- acceleration of growth late in 2001. These holdings include Television Francaise and Havas, France's leading television network and advertising agency, respectively. We also favor Granada Compass, a broadcasting and catering conglomerate in the United Kingdom. Reflecting its long-term capital appreciation, Lipper ranks Putnam International Growth Fund class A share returns in the top 4% (12 out of 300) of international funds for five-year performance as of December 31, 2000. Past performance is no guarantee of future results. Lipper Inc. is an industry research firm whose rankings are based on total return performance, vary over time, and do not reflect the effects of sales charges. Performance of other share classes will vary. The fund was ranked 142 out of 696 (top 21%) for the one-year period and 29 out of 502 (top 6%) for the three-year period. Similarly, while there is some concern that the oil price cycle has peaked, we remain confident in several of the fund's oil stocks, including Shell and BP Amoco of the United Kingdom, and TotalFinaElf, a Franco-Belgian company. BP Amoco and TotalFinaElf, both the results of mergers in the past few years, have strengthened their market positions while reducing costs and have shown great discipline in capital spending on exploration. We believe the stocks of all three of these companies are selling at prices lower than their true underlying valuations and can perform well even if the price of oil falls below the most pessimistic forecasts. * VOLATILITY MAY GIVE WAY TO RALLY We anticipate that international market volatility may continue for the coming two quarters. As economic growth slows in many regions analysts are still trying to establish a consensus on the outlook for earnings for many leading companies. When compared with earnings of one year ago, current corporate earnings results might look decidedly unfavorable. A more positive factor is the recent decision of the U.S. Federal Reserve Board to reduce interest rates, which increases the likelihood of similar rate cuts in Europe and Asia. Such a trend may encourage optimism and lead to a more favorable earnings outlook a year from now. For U.S.-based investors, international markets also may be especially attractive now, since economic growth in Europe and certain Asian markets now exceeds growth in the United States. In addition, currencies that weakened versus the U.S. dollar in 2000 may be poised to rally. At the end of the first half of its 2001 fiscal year, your fund is positioned to take advantage of the fundamental strengths in international markets and improving market sentiment. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 12/31/00, there is no guarantee the fund will continue to hold these securities in the future. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. A NOTE ABOUT DUPLICATE MAILINGS In response to investors' requests, the SEC has modified mailing regulations for semiannual and annual reports and prospectuses. Putnam is now able to send a single copy of these materials to customers who share the same address. This change will automatically apply to all shareholders except those who notify us. If you prefer to receive your own copy, please call Putnam at 1-800-225-1581. PERFORMANCE SUMMARY This section provides information about your fund's performance, which should always be considered in light of its investment strategy. Putnam International Growth Fund is designed for investors seeking capital appreciation primarily through equity securities of issuers located outside the United States. TOTAL RETURN FOR PERIODS ENDED 12/31/00 Class A Class B Class C Class M (inception dates) (2/28/91) (6/1/94) (7/26/99) (12/1/94) NAV POP NAV CDSC NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months -9.79% -14.99% -10.15% -14.28% -10.13% -10.95% -9.98% -13.11% - ------------------------------------------------------------------------------ 1 year -9.06 -14.29 -9.74 -13.90 -9.74 -10.56 -9.48 -12.66 - ------------------------------------------------------------------------------ 5 years 137.86 124.19 129.03 127.03 129.05 129.05 132.02 123.83 Annual average 18.92 17.52 18.03 17.82 18.03 18.03 18.33 17.49 - ------------------------------------------------------------------------------ Life of fund 287.46 265.04 258.15 258.15 259.87 259.87 268.09 255.23 Annual average 14.76 14.06 13.84 13.84 13.90 13.90 14.16 13.75 - ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/00 MSCI EAFE Consumer Index price index - ---------------------------------------------------------------------------- 6 months -10.53% 1.22% - ---------------------------------------------------------------------------- 1 year -14.17 3.38 - ---------------------------------------------------------------------------- 5 years 41.14 13.24 Annual average 7.13 2.52 - ---------------------------------------------------------------------------- Life of fund 93.21 29.45 Annual average 6.92 2.66 - ---------------------------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. Returns for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1- and 5-year and life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and class M shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each class and in the case of class B and class M shares the higher operating expenses applicable to such shares. For class C shares, returns for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the CDSC currently applicable to class C shares, which is 1% for the first year and is eliminated thereafter, and the higher operating expenses applicable to class C shares. All returns assume reinvestment of distributions at NAV. 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. Performance data reflect an expense limitation currently or previously in effect. Without the expense limitation, total returns would have been lower. PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 12/31/00 Class A Class B Class C Class M - ------------------------------------------------------------------------------ Distributions (number) 1 1 1 1 - ------------------------------------------------------------------------------ Income $0.393 $0.195 $0.285 $0.245 - ------------------------------------------------------------------------------ Capital gains Long-term 0.861 0.861 0.861 0.861 - ------------------------------------------------------------------------------ Short-term 0.945 0.945 0.945 0.945 - ------------------------------------------------------------------------------ Total $2.199 $2.001 $2.091 $2.051 - ------------------------------------------------------------------------------ Share value: NAV POP NAV NAV NAV POP - ------------------------------------------------------------------------------ 6/30/00 $29.92 $31.75 $29.23 $29.74 $29.61 $30.68 - ------------------------------------------------------------------------------ 12/31/00 24.70 26.21 24.18 24.55 24.52 25.41 - ------------------------------------------------------------------------------ TERMS AND DEFINITIONS 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. Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class C shares are not subject to an initial sales charge and are subject to a contingent deferred sales charge 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 sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP 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 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 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. COMPARATIVE BENCHMARKS Morgan Stanley Capital International EAFE Index (MSCI EAFE) is an unmanaged list of equity securities from Europe, Australasia, and the Far East, with all values expressed in U.S. dollars. Securities indexes assume reinvestment of all distributions and interest payments and do not take into account brokerage fees or taxes. Securities in the fund do not match those in the indexes and performance of the fund will differ. It is not possible to invest directly in an index. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. A GUIDE TO THE FINANCIAL STATEMENTS These sections of the report 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 noninvestment 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 net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss for the reporting period. This is determined by adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses. This statement also lists any net gain or loss the fund realized on the sales of its holdings and -- for holdings that remain in the portfolio -- any change in unrealized gains or losses over the period. Statement of changes in net assets shows how the fund's net assets were affected 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 highlight table also includes the current reporting period. For open-end funds, a separate table is provided for each share class.
THE FUND'S PORTFOLIO December 31, 2000 (Unaudited) COMMON STOCKS (95.4%) (a) NUMBER OF SHARES VALUE Australia (0.8%) - ------------------------------------------------------------------------------------------------------------------- 470,100 AMP, Ltd. $ 5,279,572 2,691,580 News Corp., Ltd. ADR 86,803,455 656,700 Rio Tinto, Ltd. 10,736,592 ------------- 102,819,619 Belgium (0.3%) - ------------------------------------------------------------------------------------------------------------------- 224,500 Dexia 40,773,488 Brazil (0.7%) - ------------------------------------------------------------------------------------------------------------------- 1,436,800 Companhia de Bebidas das Americas ADR (AmBev) 36,997,600 1,953,500 Petroleo Brasileiro ADR (NON) 49,325,875 ------------- 86,323,475 Canada (4.4%) - ------------------------------------------------------------------------------------------------------------------- 3,029,005 Bank of Nova Scotia 87,148,196 2,680,036 BCE, Inc. 77,553,542 2,603,722 BCE, Inc. 75,085,689 2,759,100 Nortel Networks Corp. 88,662,388 4,139,300 Sun Life Financial Services of Canada, Inc. 110,271,062 2,176,405 Suncor Energy, Inc. 55,515,359 2,513,800 Toronto-Dominion Bank 72,743,663 ------------- 566,979,899 Denmark (0.1%) - ------------------------------------------------------------------------------------------------------------------- 719,100 Danske Bank A/S 12,938,172 Finland (3.7%) - ------------------------------------------------------------------------------------------------------------------- 8,896,121 Nokia OYJ AB, Class A 396,620,211 5,579,793 Stora Enso OYJ, Class A 65,988,641 309,750 Stora Enso OYJ, Class R 3,738,805 ------------- 466,347,657 France (13.9%) - ------------------------------------------------------------------------------------------------------------------- 3,150,447 Aventis SA 276,480,393 367,235 Axa SA 53,081,763 283,840 Bouygues SA 12,854,390 553,973 Groupe Danone 83,505,425 1,619,425 Havas Advertising ADR (NON) 22,874,378 3,875,989 Havas Advertising SA 56,025,250 1,215,155 Lafarge SA 101,850,622 1,539,601 Publicis SA 52,008,051 3,766,633 Sanofi-Synthelabo SA 251,010,683 1,648,115 Societe Television Francaise 88,947,942 3,833,965 TotalFinaElf SA Class B 570,011,833 2,992,483 Vivendi Universal SA ADR 195,446,546 ------------- 1,764,097,276 Germany (6.6%) - ------------------------------------------------------------------------------------------------------------------- 378,378 Allianz Versicherungs AG 142,306,838 4,865,336 Bayerische Motoren Werke (BMW) AG 158,917,832 1,273,904 Bayerische Hypo-und Vereinsbank AG 71,502,040 1,560,000 Deutsche Post AG (NON) 33,545,189 798,400 Deutsche Post AG 144A (NON) 17,168,255 1,164,691 Metro AG 53,565,770 433,196 Muenchener Rueckversicherungs-Gesellschaft (Munich Re) AG 154,507,151 30,600 Muenchener Rueckversicherungs-Gesellschaft (Munich Re) AG 144A (NON) 10,914,041 2,425,904 ProSieben SAT.1 Media AG 71,724,035 588,978 SAG AG - Vorzug 83,364,464 367,172 SAG AG 42,664,902 ------------- 840,180,517 Hong Kong (2.3%) - ------------------------------------------------------------------------------------------------------------------- 14,180,000 Cheung Kong Infrastructure Holdings 181,354,335 10,285,000 China Telecom, Ltd. (NON) 56,176,244 11,976,000 Hong Kong and China Gas Co., Ltd. 17,581,506 11,643,000 Hong Kong Electric Holdings, Ltd. 42,992,846 ------------- 298,104,931 Ireland (1.8%) - ------------------------------------------------------------------------------------------------------------------- 7,243,509 CRH PLC 134,751,375 1,856,415 Elan Corp. PLC ADR (NON) 90,257,932 ------------- 225,009,307 Italy (3.7%) - ------------------------------------------------------------------------------------------------------------------- 1,943,756 Banca Commerciale Italiana SpA 13,318,188 25,312,599 Banca Intesa SpA 121,643,036 1,752,560 Bulgari SpA 21,548,882 44,511,403 Ente Nazionale Idrocarburi (ENI) SpA 284,093,139 2,842,431 Mediaset SpA 33,909,082 ------------- 474,512,327 Japan (9.8%) - ------------------------------------------------------------------------------------------------------------------- 125,100 Acom Co., Ltd. 9,238,660 166,500 Aiful Corp. 13,608,804 342,700 Asatsu-DK, Inc. 8,256,023 70 Circle K Japan Co., Ltd. 2,465 2,284,000 Eisai Co., Ltd. 80,035,042 125,600 Fast Retailing Co., Ltd. 24,624,862 908 Fuji Television Network, Inc. 6,331,739 960,000 Fujisawa Pharmaceutical Co. 31,789,750 400 Fujitsu, Ltd. 5,901 1,448,000 Honda Motor Co., Ltd. 54,038,371 400 Mitsumi Electric Co., Ltd. 6,654 200,100 Murata Manufacturing Co., Ltd. 23,489,619 1,819,946 NEC Corp. 33,321,832 26,762,000 Nikko Securities Co., Ltd. 207,484,625 388,900 Nintendo Co., Ltd. 61,290,504 33,659 Nippon Telegraph and Telephone Corp. 242,675,050 157,080 Nippon Television Network Corp. 53,254,455 4,937 NTT DoCoMo 85,202,716 1,956,800 Sankyo Co., Ltd. 46,970,057 500 Sharp Corp. 6,036 1,180,000 Shinogi & Co., Ltd. 24,085,852 3,102,000 Shiseido Co., Ltd. 34,647,832 1,285,000 Sony Corp. 88,931,231 5,195,000 Sumitomo Corp. 37,409,461 1,218,000 Takeda Chemical Industries 72,130,355 69,600 Takefuji Corp. 4,390,013 56,000 Tokyo Broadcasting System, Inc. 1,658,169 ------------- 1,244,886,078 Mexico (0.6%) - ------------------------------------------------------------------------------------------------------------------- 911,744 Grupo Televisa SA GDR (NON) 40,971,496 809,639 Telefonos de Mexico SA de CV ADR, Series L 36,534,960 ------------- 77,506,456 Netherlands (8.5%) - ------------------------------------------------------------------------------------------------------------------- 1,487,930 Aegon NV 61,532,923 2,537,179 Akzo-Nobel NV 136,215,863 2,961,080 Fortis Amev NV 96,162,731 1,467,508 Fortis B 47,658,144 1,242,170 Gucci Group NV 109,932,045 6,079,621 Internationale Nederlanden Groep (ING) NV 485,494,750 2,654,557 Koninklijke (Royal) Philips Electronics NV 97,220,952 1,813,416 Wolters Kluwer NV 49,428,178 ------------- 1,083,645,586 Singapore (0.8%) - ------------------------------------------------------------------------------------------------------------------- 870,000 Chartered Semiconductor Manufacturing (NON) 2,379,573 4,681,648 DBS Group Holdings, Ltd. 52,948,818 4,828,685 Overseas-Chinese Banking Corp. 35,943,472 742,000 Singapore Press Holdings, Ltd. 10,960,877 832,000 Venture Manufacturing, Ltd. 5,569,071 ------------- 107,801,811 South Korea (1.9%) - ------------------------------------------------------------------------------------------------------------------- 3,106,490 Korea Electric Power Corp. 58,046,844 1,706,097 Korea Telecom Corp. ADR 52,889,007 1,531,700 Pohang Iron & Steel Company, Ltd. ADR 23,837,081 876,589 Samsung Electronics Co. 109,660,382 ------------- 244,433,314 Spain (1.4%) - ------------------------------------------------------------------------------------------------------------------- 1,164,584 Banco Popular Espanol SA 40,553,214 4,178,192 Iberdola SA 52,354,041 4,798,138 Telefonica SA (NON) 79,262,169 ------------- 172,169,424 Sweden (2.4%) - ------------------------------------------------------------------------------------------------------------------- 11,838,941 Investor AB 177,009,775 2,840,137 Sandvik AB 68,364,466 3,586,606 Svenska Handelsbanken AB, Class A 61,421,650 ------------- 306,795,891 Switzerland (8.2%) - ------------------------------------------------------------------------------------------------------------------- 149,264 Ares-Serono Group, Class B 143,735,704 54,721 Compagnie Financiere Richemont AG, Class A 146,429,343 24,925 Julius Baer Holding, Ltd. AG, Class B 136,472,068 114,011 Nestle SA 266,025,667 96,868 Swatch Group AG (The), Class A 25,293,311 59,516 Swatch Group AG (The), Class B 74,395,000 32,637 Swiss Reinsurance Co. 78,268,361 278,398 Zurich Financial Services AG 167,898,053 ------------- 1,038,517,507 Taiwan (0.4%) - ------------------------------------------------------------------------------------------------------------------- 20,569,160 Taiwan Semiconductor Manufacturing Co. (NON) 49,434,633 United Kingdom (21.6%) - ------------------------------------------------------------------------------------------------------------------- 7,354,479 Aegis Group PLC 15,157,802 2,823,600 ARM Holdings PLC (NON) 21,338,256 4,956,711 AstraZeneca Group PLC 249,846,116 343,000 Barclays PLC 10,614,245 8,125,976 BOC Group PLC 123,424,596 26,751,985 BP Amoco PLC 215,752,084 5,303,300 British Aerospace PLC 30,256,228 6,752,142 Cable & Wireless PLC 91,061,446 11,774,592 Carlton Communications PLC 107,446,508 6,178,987 Chubb PLC (NON) 14,580,741 565,920 Diageo PLC 6,339,011 2,126,345 EMAP PLC 27,088,689 2,742,049 EMI Group PLC 22,523,876 740,109 GlaxoSmithKline PLC (NON) 20,891,168 19,452,486 Granada Compass PLC 211,645,917 310,900 Granada Media PLC (NON) 1,973,399 1,419,262 Granada Media PLC 144A (NON) 9,008,588 2,177,800 Imperial Chemical Industries PLC 17,954,045 12,847,600 Invensys PLC 30,029,049 6,178,987 Kidde PLC (NON) 6,644,388 8,850,485 Misys PLC 87,240,116 2,038,091 Rio Tinto PLC 35,857,011 3,422,252 Royal Bank of Scotland Group PLC 80,858,130 14,467,232 Scottish Power PLC 114,300,030 49,617,311 Shell Transportation & Trading PLC 406,827,959 2,079,500 Smith & Nephew PLC 9,627,773 3,702,543 Smiths Industries PLC 44,680,364 28,356,492 Tesco PLC 115,510,773 3,601,300 United Business Media PLC 45,717,603 125,630,482 Vodafone Group PLC 460,629,502 8,758,871 WPP Group PLC 114,069,580 ------------- 2,748,894,993 United States (1.5%) - ------------------------------------------------------------------------------------------------------------------- 2,755,000 MTR Corp. 144A (NON) 4,821,621 3,118,404 Pharmacia Corp. 190,222,644 --------------- 195,044,265 --------------- Total Common Stocks (cost $10,762,482,248) $12,147,216,626 UNITS (1.2%) (a) NUMBER OF UNITS VALUE - ------------------------------------------------------------------------------------------------------------------- 49,100 Nippon Television Network Corp. Structured Call Warrants (Issued by Lehman Brothers Finance S.A., Exp. 8/6/01) (Japan) $ 16,544,736 9,200 Nippon Television Network Corp. Structured Call Warrants (Issued by Merrill Lynch International & Co., C.V.) 2001 (Japan) 3,110,966 1,600,000 Pharmacia Corp. Structured Warrants (Issued by Merrill Lynch International & Co., C.V., Exp. 3/15/01) 96,845,600 484,000 Tokyo Broadcasting System, Inc. Structured Call Warrants (Issued by Lehman Brothers Finance S.A., Exp. 9/17/01) (Japan) 14,258,640 701,000 Tokyo Broadcasting System, Inc. Structured Notes (Issued by UBS AG) 3.35%, 2000 (Japan) 21,519,578 --------------- Total Units (cost $169,955,653) $ 152,279,520 WARRANTS (--%) (a) (NON) (cost $--) EXPIRATION NUMBER OF WARRANTS DATE VALUE - ------------------------------------------------------------------------------------------------------------------- 116,703 Publicis SA (France) 3/7/02 $ 239,887 SHORT-TERM INVESTMENTS (0.9%) (a) (cost $114,765,000) PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------- $114,765,000 Interest in $900,000,000 joint repurchase agreement dated December 29, 2000 with S.B.C. Warburg, Inc. due January 2, 2001 with respect to various U.S. Government obligations -- maturity value of $114,846,611 for an effective yield of 6.40% $ 114,765,000 - ------------------------------------------------------------------------------------------------------------------- Total Investments (cost $11,047,202,901) (b) $12,414,501,033 - ------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $12,731,806,312. (b) The aggregate identified cost on a tax basis is $11,183,840,770, resulting in gross unrealized appreciation and depreciation of $2,013,489,078 and $782,828,815, respectively, or net unrealized appreciation of $1,230,660,263. (NON) Non-income-producing security. 144A after the name of a security represents those 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. ADR or GDR after the name of a foreign holding stands for American Depositary Receipts or Global Depositary Receipts, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank. The fund had the following industry group concentrations greater than 10% at December 31, 2000 (as a percentage of net assets): Oil and gas 12.4% Pharmaceuticals 11.6 The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 (Unaudited) Assets - ------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $11,047,202,901) (Note1) $12,414,501,033 - ------------------------------------------------------------------------------------------------- Foreign currency, at value (cost $479,997,204) 504,756,012 - ------------------------------------------------------------------------------------------------- Dividends, interest and other receivables 13,507,614 - ------------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 70,337,491 - ------------------------------------------------------------------------------------------------- Receivable for securities sold 29,840,367 - ------------------------------------------------------------------------------------------------- Total assets 13,032,942,517 Liabilities - ------------------------------------------------------------------------------------------------- Payable to subcustodian (Note 2) 383 - ------------------------------------------------------------------------------------------------- Payable for securities purchased 191,237,771 - ------------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 73,042,388 - ------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 18,590,313 - ------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 9,390,312 - ------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 58,557 - ------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 19,688 - ------------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 7,915,602 - ------------------------------------------------------------------------------------------------- Other accrued expenses 881,191 - ------------------------------------------------------------------------------------------------- Total liabilities 301,136,205 - ------------------------------------------------------------------------------------------------- Net assets $12,731,806,312 Represented by - ------------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $11,691,868,026 - ------------------------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (123,516,048) - ------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (Note 1) (228,613,721) - ------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 1,392,068,055 - ------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $12,731,806,312 Computation of net asset value and offering price - ------------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($7,153,811,910 divided by 289,582,300 shares) $24.70 - ------------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $24.70)* $26.21 - ------------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($3,465,936,422 divided by 143,328,698 shares)** $24.18 - ------------------------------------------------------------------------------------------------- Net asset value and offering price per class C share ($612,097,235 divided by 24,929,204 shares)** $24.55 - ------------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($335,279,770 divided by 13,675,529 shares) $24.52 - ------------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $24.52)* $25.41 - ------------------------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($1,164,680,975 divided by 46,965,615 shares) $24.80 - ------------------------------------------------------------------------------------------------- * 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. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS Six months ended December 31, 2000 (Unaudited) Investment income: - ------------------------------------------------------------------------------------------- Dividend (net of foreign tax of $8,143,395) $ 51,856,875 - ------------------------------------------------------------------------------------------- Interest 15,661,764 - ------------------------------------------------------------------------------------------- Total investment income 67,518,639 Expenses: - ------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 37,794,148 - ------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 15,418,797 - ------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 39,637 - ------------------------------------------------------------------------------------------- Administrative services (Note 2) 29,232 - ------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 8,823,283 - ------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 17,552,362 - ------------------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 2,686,170 - ------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 1,239,122 - ------------------------------------------------------------------------------------------- Other 2,615,355 - ------------------------------------------------------------------------------------------- Total expenses 86,198,106 - ------------------------------------------------------------------------------------------- Expense reduction (Note 2) (2,582,862) - ------------------------------------------------------------------------------------------- Net expenses 83,615,244 - ------------------------------------------------------------------------------------------- Net investment loss (16,096,605) - ------------------------------------------------------------------------------------------- Net realized loss on investments (Notes 1 and 3) (127,749,452) - ------------------------------------------------------------------------------------------- Net realized loss on foreign currency transactions (Note 1) (71,026,029) - ------------------------------------------------------------------------------------------- Net unrealized appreciation of assets and liabilities in foreign currencies during the period 30,702,366 - ------------------------------------------------------------------------------------------- Net unrealized depreciation of investments during the period (1,122,615,863) - ------------------------------------------------------------------------------------------- Net loss on investments (1,290,688,978) - ------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $(1,306,785,583) - ------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS Six months ended Year ended December 31 June 30 2000* 2000 - -------------------------------------------------------------------------------------------------- Increase in net assets - -------------------------------------------------------------------------------------------------- Operations: - -------------------------------------------------------------------------------------------------- Net investment income (loss) $ (16,096,605) $ 152,990,461 - -------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments and foreign currency transactions (198,775,481) 972,879,381 - -------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments and assets and liabilities in foreign currencies (1,091,913,497) 1,552,938,705 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,306,785,583) 2,678,808,547 - -------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------- From net investment income Class A (103,610,364) (53,779,843) - -------------------------------------------------------------------------------------------------- Class B (25,832,398) (19,094,099) - -------------------------------------------------------------------------------------------------- Class C (6,477,132) (806,547) - -------------------------------------------------------------------------------------------------- Class M (3,093,332) (2,507,298) - -------------------------------------------------------------------------------------------------- Class Y (19,362,002) (7,728,554) - -------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (476,133,121) (125,327,657) - -------------------------------------------------------------------------------------------------- Class B (239,247,747) (76,570,245) - -------------------------------------------------------------------------------------------------- Class C (41,044,566) (2,022,769) - -------------------------------------------------------------------------------------------------- Class M (22,802,279) (8,287,723) - -------------------------------------------------------------------------------------------------- Class Y (76,683,718) (15,858,592) - -------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 2,586,329,917 4,886,106,169 - -------------------------------------------------------------------------------------------------- Total increase in net assets 265,257,675 7,252,931,389 Net assets - -------------------------------------------------------------------------------------------------- Beginning of period 12,466,548,637 5,213,617,248 - -------------------------------------------------------------------------------------------------- End of period (including distributions in excess of net investment income and undistributed net investment income of $123,516,048 and $50,955,785, respectively) $12,731,806,312 $12,466,548,637 - -------------------------------------------------------------------------------------------------- *Unaudited The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 - ------------------------------------------------------------------------------------------------------------------ 2000 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $29.92 $21.64 $20.00 $17.58 $14.25 $12.10 - ------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------ Net investment income (loss)(a) -- (d) .54 .07 .20 .15 .13 - ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (3.02) 8.87 2.14 3.26 3.39 2.29 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations (3.02) 9.41 2.21 3.46 3.54 2.42 - ------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------ From net investment income (.39) (.34) (.21) (.25) (.15) (.26) - ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.81) (.79) (.36) (.79) (.06) (.01) - ------------------------------------------------------------------------------------------------------------------ Total distributions (2.20) (1.13) (.57) (1.04) (.21) (.27) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $24.70 $29.92 $21.64 $20.00 $17.58 $14.25 - ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (9.79)* 44.03 11.57 20.73 25.13 20.21 - ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $7,153,812 $7,040,669 $2,928,662 $1,827,331 $728,849 $151,088 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .57* 1.14 1.27 1.36 1.59 1.74 - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.01)* 2.01 .38 1.07 .98 .99 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 32.57* 99.53 97.24 93.53 86.40 44.14 - ------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2). (d) Net investment income was less than $0.01 per share.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS B - ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 - ------------------------------------------------------------------------------------------------------------------ 2000 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $29.23 $21.20 $19.63 $17.32 $14.10 $12.00 - ------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------ Net investment income (loss)(a) (.10) .35 (.07) .06 .03 .04 - ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (2.95) 8.67 2.10 3.21 3.34 2.26 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations (3.05) 9.02 2.03 3.27 3.37 2.30 - ------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------ From net investment income (.19) (.20) (.10) (.17) (.09) (.19) - ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.81) (.79) (.36) (.79) (.06) (.01) - ------------------------------------------------------------------------------------------------------------------ Total distributions (2.00) (.99) (.46) (.96) (.15) (.20) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $24.18 $29.23 $21.20 $19.63 $17.32 $14.10 - ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (10.15)* 43.00 10.75 19.87 24.09 19.35 - ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $3,465,936 $3,591,546 $1,821,024 $1,226,917 $472,663 $132,013 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .95* 1.89 2.02 2.11 2.34 2.49 - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.38)* 1.26 (.38) .31 .18 .32 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 32.57* 99.53 97.24 93.53 86.40 44.14 - ------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2). (d) Net investment income was less than $0.01 per share.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS C - -------------------------------------------------------------- Six months ended For the period Per-share Dec. 31 July 26, 1999+ operating performance (Unaudited) to June 30 - -------------------------------------------------------------- 2000 2000 - -------------------------------------------------------------- Net asset value, beginning of period $29.74 $21.87 - -------------------------------------------------------------- Investment operations - -------------------------------------------------------------- Net investment income (loss)(a) (.11) .32 - -------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (2.99) 8.66 - -------------------------------------------------------------- Total from investment operations (3.10) 8.98 - -------------------------------------------------------------- Less distributions: - -------------------------------------------------------------- From net investment income (.28) (.32) - -------------------------------------------------------------- From net realized gain on investments (1.81) (.79) - -------------------------------------------------------------- Total distributions (2.09) (1.11) - -------------------------------------------------------------- Net asset value, end of period $24.55 $29.74 - -------------------------------------------------------------- Total return at net asset value (%)(b) (10.13)* 41.54* - -------------------------------------------------------------- Ratios and supplemental data - -------------------------------------------------------------- Net assets, end of period (in thousands) $612,097 $439,522 - -------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .95* 1.76* - -------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) (.40)* 1.12* - -------------------------------------------------------------- Portfolio turnover (%) 32.57* 99.53 - -------------------------------------------------------------- + Commencement of operations. * Not annualized (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2). (d) Net investment income was less than $0.01 per share.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 - ------------------------------------------------------------------------------------------------------------------ 2000 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $29.61 $21.45 $19.85 $17.48 $14.22 $12.09 - ------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------ Net investment income (loss)(a) (.06) .40 (.02) .10 .07 .08 - ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (2.98) 8.79 2.11 3.26 3.36 2.28 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations (3.04) 9.19 2.09 3.36 3.43 2.36 - ------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------ From net investment income (.24) (.24) (.13) (.20) (.11) (.22) - ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.81) (.79) (.36) (.79) (.06) (.01) - ------------------------------------------------------------------------------------------------------------------ Total distributions (2.05) (1.03) (.49) (.99) (.17) (.23) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $24.52 $29.61 $21.45 $19.85 $17.48 $14.22 - ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (9.98)* 43.32 10.97 20.18 24.40 19.71 - ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $335,280 $367,638 $208,064 $140,202 $58,471 $14,309 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .82* 1.64 1.77 1.86 2.09 2.25 - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.26)* 1.51 (.12) .54 .44 .61 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 32.57* 99.53 97.24 93.53 86.40 44.14 - ------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2). (d) Net investment income was less than $0.01 per share.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS Y - ----------------------------------------------------------------------------------------------------- Six months ended For the period Per-share December 31 July 12, 1996+ operating performance (Unaudited) Year ended June 30 to June 30 - ----------------------------------------------------------------------------------------------------- 2000 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $30.07 $21.72 $20.05 $17.60 $13.88 - ----------------------------------------------------------------------------------------------------- Investment operations - ----------------------------------------------------------------------------------------------------- Net investment income (a) .03 .61 .14 .22 .20 - ----------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (3.04) 8.92 2.13 3.30 3.75 - ----------------------------------------------------------------------------------------------------- Total from investment operations (3.01) 9.53 2.27 3.52 3.95 - ----------------------------------------------------------------------------------------------------- Less distributions: - ----------------------------------------------------------------------------------------------------- From net investment income (.45) (.39) (.24) (.28) (.17) - ----------------------------------------------------------------------------------------------------- From net realized gain on investments (1.81) (.79) (.36) (.79) (.06) - ----------------------------------------------------------------------------------------------------- Total distributions (2.26) (1.18) (.60) (1.07) (.23) - ----------------------------------------------------------------------------------------------------- Net asset value, end of period $24.80 $30.07 $21.72 $20.05 $17.60 - ----------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) (9.69)* 44.43 11.83 21.08 25.44* - ----------------------------------------------------------------------------------------------------- Ratios and supplemental data - ----------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,164,681 $1,027,174 $255,867 $151,139 $96,375 - ----------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .45* .89 1.02 1.11 1.30* - ----------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .11* 2.26 .70 1.22 1.26* - ----------------------------------------------------------------------------------------------------- Portfolio turnover (%) 32.57* 99.53 97.24 93.53 86.40 - ----------------------------------------------------------------------------------------------------- + Commencement of operations. * Not annualized (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2). (d) Net investment income was less than $0.01 per share.
NOTES TO FINANCIAL STATEMENTS December 31, 2000 (Unaudited) Note 1 Significant accounting policies Putnam International Growth Fund ("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 the United States. The fund offers class A, class B, class C, class M and class Y shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge but pay a higher ongoing distribution fee than class A shares, 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 the same fees and expenses as class B shares, except that class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class M shares are sold with a maximum front-end sales charge of 3.50% and pay an ongoing distribution fee that is higher than class A shares but lower than class B and class C shares. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C and class M shares, but do not bear a distribution fee. Class Y shares are sold to defined contribution plans that invest at least $150 million in a combination of Putnam funds and other accounts managed by affiliates of Putnam Investment Management, LLC ("Putnam Management"), the fund's manager, a wholly-owned subsidiary of Putnam Investments, LLC. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). 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. Shares of each class would receive their pro-rata share of the net assets of the fund, if that fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. 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 during the reporting period. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sales price on its principal exchange, or if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value. Other investments, including restricted securities, are stated at fair value following procedures approved by the Trustees. Market quotations are not considered to be readily available for certain debt obligations; such investments are stated at fair value on the basis of valuations furnished by an independent pricing service or dealers, approved by the Trustees, which determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and variable relationships between securities that are generally recognized by institutional traders. 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 and certain other accounts managed by Putnam Management. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, 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. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam management 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). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. 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. Non-cash dividends, if any, are recorded at the fair market value of the securities received. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are 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 accrued or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. F) Forward currency contracts The fund may engage in 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 protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short-term investments). The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. 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 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 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. G) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintain an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the six months ended December 31, 2000, the fund had no borrowings against the line of credit. H) Federal taxes It is the policy of the fund to distribute all of its taxable 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, as amended. Therefore, 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. I) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, 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. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. Note 2 Management fee, administrative services and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 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, 0.60% of the next $5 billion, 0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54% of the next $5 billion, and 0.53% thereafter. 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 Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, LLC. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. Under the subcustodian contract between the subcustodian bank and PFTC, the subcustodian bank 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 bank for the settlement of securities purchased by the fund. At December 31, 2000, the payable to the subcustodian bank represents the amount due for cash advance for the settlement of a security purchased. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. The fund also reduced expenses through brokerage service arrangements. For the six months ended December 31, 2000, the fund's expenses were reduced by $2,582,862 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $4,525 has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings. 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. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Compensation of Trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B, class C and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, Inc., a wholly-owned subsidiary of Putnam Investments LLC, for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management, Inc. at an annual rate up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of the average net assets attributable to class A, class B, class C and class M shares, respectively. For the six months ended December 31, 2000, Putnam Retail Management, Inc., acting as underwriter received net commissions of $1,392,099 and $61,212 from the sale of class A and class M shares, respectively, and received $1,731,574 and $103,445 in contingent deferred sales charges from redemptions of class B and class C shares, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the six months ended December 31, 2000, Putnam Retail Management, Inc., acting as underwriter received $188,350 on class A redemptions. Note 3 Purchases and sales of securities During the six months ended December 31, 2000, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $5,443,320,466 and $3,922,293,509, respectively. There were no purchases and sales of U.S. government obligations. NOTE 4 Capital shares At December 31, 2000, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended December 31, 2000 - --------------------------------------------------------------------------- Class A Shares Amount - --------------------------------------------------------------------------- Shares sold 107,728,372 $ 2,981,838,878 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 22,565,283 535,022,972 - --------------------------------------------------------------------------- 130,293,655 3,516,861,850 Shares repurchased (75,992,688) (2,100,412,876) - --------------------------------------------------------------------------- Net increase 54,300,967 $ 1,416,448,974 - --------------------------------------------------------------------------- Year ended June 30, 2000 - --------------------------------------------------------------------------- Class A Shares Amount - --------------------------------------------------------------------------- Shares sold 271,600,422 $ 7,332,945,195 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 6,124,845 165,921,249 - --------------------------------------------------------------------------- 277,725,267 7,498,866,444 Shares repurchased (177,792,621) (4,715,016,742) - --------------------------------------------------------------------------- Net increase 99,932,646 $ 2,783,849,702 - --------------------------------------------------------------------------- Six months ended December 31, 2000 - --------------------------------------------------------------------------- Class B Shares Amount - --------------------------------------------------------------------------- Shares sold 21,810,818 $ 587,037,285 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 9,658,035 224,162,978 - --------------------------------------------------------------------------- 31,468,853 811,200,263 Shares repurchased (11,030,350) (292,205,664) - --------------------------------------------------------------------------- Net increase 20,438,503 $ 518,994,599 - --------------------------------------------------------------------------- Year ended June 30, 2000 - --------------------------------------------------------------------------- Class B Shares Amount - --------------------------------------------------------------------------- Shares sold 54,543,779 $1,471,243,178 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 3,074,114 81,679,684 - --------------------------------------------------------------------------- 57,617,893 1,552,922,862 Shares repurchased (20,631,231) (549,799,728) - --------------------------------------------------------------------------- Net increase 36,986,662 $1,003,123,134 - --------------------------------------------------------------------------- Six months ended December 31, 2000 - --------------------------------------------------------------------------- Class C Shares Amount - --------------------------------------------------------------------------- Shares sold 12,430,989 $ 339,423,096 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,553,098 36,606,620 - --------------------------------------------------------------------------- 13,984,087 376,029,716 Shares repurchased (3,831,477) (102,173,257) - --------------------------------------------------------------------------- Net increase 10,152,610 $ 273,856,459 - --------------------------------------------------------------------------- For the period July 26, 1999 (commencement of operations) to June 30, 2000 - --------------------------------------------------------------------------- Class C Shares Amount - --------------------------------------------------------------------------- Shares sold 16,176,087 $462,505,811 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 75,039 2,029,056 - --------------------------------------------------------------------------- 16,251,126 464,534,867 Shares repurchased (1,474,532) (43,027,757) - --------------------------------------------------------------------------- Net increase 14,776,594 $421,507,110 - --------------------------------------------------------------------------- Six months ended December 31, 2000 - --------------------------------------------------------------------------- Class M Shares Amount - --------------------------------------------------------------------------- Shares sold 2,615,304 $ 71,658,538 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,036,761 24,395,022 - --------------------------------------------------------------------------- 3,652,065 96,053,560 Shares repurchased (2,393,338) (64,943,661) - --------------------------------------------------------------------------- Net increase 1,258,727 $ 31,109,899 - --------------------------------------------------------------------------- Year ended June 30, 2000 - --------------------------------------------------------------------------- Class M Shares Amount - --------------------------------------------------------------------------- Shares sold 10,591,150 $ 286,010,819 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 380,914 10,242,696 - --------------------------------------------------------------------------- 10,972,064 296,253,515 Shares repurchased (8,253,206) (223,214,024) - --------------------------------------------------------------------------- Net increase 2,718,858 $ 73,039,491 - --------------------------------------------------------------------------- Six months ended December 31, 2000 - --------------------------------------------------------------------------- Class Y Shares Amount - --------------------------------------------------------------------------- Shares sold 20,648,584 $ 580,715,474 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,035,539 96,045,720 - --------------------------------------------------------------------------- 24,684,123 676,761,194 Shares repurchased (11,881,944) (330,841,208) - --------------------------------------------------------------------------- Net increase 12,802,179 $ 345,919,986 - --------------------------------------------------------------------------- Year ended June 30, 2000 - --------------------------------------------------------------------------- Class Y Shares Amount - --------------------------------------------------------------------------- Shares sold 38,621,878 $1,074,181,482 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 867,505 23,587,146 - --------------------------------------------------------------------------- 39,489,383 1,097,768,628 Shares repurchased (17,103,610) (493,181,896) - --------------------------------------------------------------------------- Net increase 22,385,773 $ 604,586,732 - --------------------------------------------------------------------------- Note 5 New accounting pronouncement In November 2000, the AICPA issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after December 15, 2000. The revised Guide will require the fund to amortize premium and accrete discount on all fixed-income securities, and classify as interest income gains and losses realized on paydowns on mortgage-backed securities which are presently included in realized gain/loss. Adopting these accounting principles will not affect the fund's net asset value, but will change the classification of certain amounts between interest income and realized and unrealized gain/loss in the Statement of operations. The adoption of this principle will not be material to the financial statements. OUR COMMITMENT TO QUALITY SERVICE * CHOOSE AWARD-WINNING SERVICE Putnam has won the DALBAR Service Award 10 times in the past 11 years. In 1997, 1998 and 2000, Putnam won all 3 DALBAR awards -- for service to investors, to financial advisors and to variable annuity contract holders.* * HELP YOUR INVESTMENTS GROW Set up a systematic program for investing with as little as $25 a month from a Putnam money market fund or from your checking or savings account.+ * SWITCH FUNDS EASILY Within the same class of shares, you can move money from one account to another without a service charge. (This privilege is subject to change or termination.) * ACCESS YOUR MONEY QUICKLY You can get checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. For details about any of these or other services, contact your financial advisor or call the toll-free number shown below and speak with a helpful Putnam representative. To learn more about Putnam, visit our Web site. www.putnaminvestments.com To make an additional investment in this or any other Putnam fund, contact your financial advisor or call our toll-free number. 1-800-225-1581 * DALBAR, Inc., an independent research firm, presents the awards to financial services firms that provide consistently excellent service. + Regular investing, of course, does not guarantee a profit or protect against a loss in a declining market. WELCOME TO WWW.PUTNAMINVESTMENTS.COM Now you can use your PC to get up-to-date information about your funds, learn more about investing and retirement planning, and access market news and economic outlooks from Putnam. VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR: * the benefits of investing with Putnam * Putnam's money management philosophy * complete fund information, daily pricing and long-term performance * your current account value, portfolio value and transaction history * the latest on new funds and other Putnam news You can also read Putnam economist Dr. Robert Goodman's commentary and Putnam's Capital Markets outlook, search for a particular fund by name or objective, use our glossary to decode investment terms . . . and much more. The site can be accessed through any of the major online services (America Online, CompuServe, Prodigy) that offer web access. Of course, you can also access it via Netscape or Microsoft Internet Explorer, using an independent Internet service provider. New features will be added to the site regularly. So be sure to bookmark us at http://www.putnaminvestments.com FUND INFORMATION WEB SITE www.putnaminvestments.com INVESTMENT MANAGER Putnam Investment Management, LLC One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Retail Management, Inc. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES John A. Hill, Chairman Jameson Adkins Baxter Hans H. Estin Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam, III President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Ian C. Ferguson Vice President Brett C. Browchuk Vice President John J. Morgan, Jr. Vice President Justin M. Scott Vice President and Fund Manager Omid Kamshad Vice President and Fund Manager Paul C. Warren Vice President and Fund Manager Joshua L. Byrne Vice President and Fund Manager Stephen S. Oler Vice President and Fund Manager Simon Davis Vice President and Fund Manager Richard A. Monaghan Vice President Richard G. Leibovitch Vice President John R. Verani Vice President This report is for the information of shareholders of Putnam International 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, and the most recent copy of Putnam's Quarterly Performance Summary and Putnam's Quarterly Ranking Summary. For more information or to request a prospectus, call toll-free 1-800-225-1581. You also can learn more at Putnam Investments' Web site: www.putnaminvestments.com. NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - --------------------- PRST STD U.S. POSTAGE PAID PUTNAM INVESTMENTS - --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminvestments.com SA009-68399 841/524/891/2BA 2/01 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - ---------------------------------------------------------------------------- Putnam International Growth Fund Supplement to semiannual Report dated 12/31/00 The following information has been prepared to provide class Y shareholders with a performance overview specific to their holdings. Class Y shares are offered exclusively to defined contribution plans investing $150 million or more in one or more of Putnam's funds or private accounts. Performance of class Y shares, which incur neither a front-end load, distribution fee, nor contingent deferred sales charge, will differ from performance of class A, B, C, and M shares, which are discussed more extensively in the annual report. SEMIANNUAL RESULTS AT A GLANCE - ---------------------------------------------------------------------------- Total return for periods ended 12/31/00 NAV 6 months -9.69% 1 year -8.84 5 years 140.64 Annual average 19.20 Life of fund (since class A inception, 2/28/91) 291.98 Annual average 14.89 Share value: NAV 6/30/00 $30.07 12/31/00 $24.80 - ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 1 $0.456 $1.806 $2.262 - ---------------------------------------------------------------------------- Please note that past performance is not indicative of future results. More recent returns may be more or less than those shown. Returns shown for class Y shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect the initial sales charge currently applicable to class A shares. These returns have not been adjusted to reflect differences in operating expenses which, for class Y shares, typically are lower than the operating expenses applicable to class A shares. All returns assume reinvestment of distributions at net asset value. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. If you have questions, please consult your fund prospectus or call Putnam toll free at 1-800-752-9894. -----END PRIVACY-ENHANCED MESSAGE-----