N-30D 1 pig.txt PUTNAM INTERNATIONAL GROWTH FUND Putnam International Growth Fund* SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 12-31-02 [GRAPHIC OMITTED: HOTEL STICKER] * Effective April 30, 2003, your fund's name will change to Putnam International Equity Fund. [SCALE LOGO OMITTED] FROM THE TRUSTEES [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III] Dear Fellow Shareholder: International equity markets experienced the same penchant for volatility and resistance to recovery that has characterized the U.S. stock market for the past three years. The effects of this challenging and frustrating environment are reflected in the results of Putnam International Growth Fund for the six months ended December 31, 2002. While the fund had significant negative results during the semiannual period, it is of some comfort to know these returns were better than the average of its Lipper category and of its benchmark index. You will find the details on page 6. In the following report, your fund's management team provides a discussion of the reasons behind these results and offers its outlook for the fiscal year's second half. In difficult environments such as these, it is especially important to look at an investment's long-term results when gauging its prospects going forward. While no one can say for certain what the future holds, we believe that, given the length of the current malaise, history is on the side of a turn for the better in the global marketplace in the months ahead. Meanwhile, we would like you to know how much we appreciate your continued confidence in Putnam, especially as the markets work through this difficult phase. We believe that those who ride out the current turbulence should eventually be rewarded for their patience. 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 19, 2003 REPORT FROM FUND MANAGEMENT This fund is managed by the Putnam International Core Team Putnam International Growth Fund experienced a decline in value during the first half of its 2003 fiscal year, the period from July 1, 2002, to December 31, 2002. This decline was disappointing on an absolute basis, but the fund's return for class A shares at net asset value narrowly outperformed its benchmark, the MSCI EAFE Index, during the period, as well as the average for funds in its peer group, the Lipper International Funds category. Complete performance results are available on page 6 of this report. Your fund achieved these results in a period of considerable volatility in international markets. During the period, economic conditions in many regions of the world remained sluggish, and investors seemed to become increasingly risk averse, as indicated by strong demand for fixed-income securities. Total return for 6 months ended 12/31/02 Class A Class B Class C Class M NAV POP NAV CDSC NAV CDSC NAV POP ----------------------------------------------------------------------- -14.26% -19.19% -14.59% -18.86% -14.58% -15.44% -14.50% -17.51% ----------------------------------------------------------------------- Past performance does not indicate future results. Performance information for longer periods and explanation of performance calculation methods begin on page 6. * SLUGGISH GLOBAL ECONOMY NEGATIVE FOR STOCKS International markets experienced unusual volatility in the first six months of the fund's fiscal period, and results differed widely across regions. In Europe, ups and downs alternated almost monthly. A sharp decline in the summer months was followed by a partial recovery from October to December. A December interest-rate cut by the European Central Bank, intended to promote economic growth, added fuel to the rally. [GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS] TOP COUNTRY ALLOCATIONS* United Kingdom 22.2% Japan 15.8% France 13.4% Switzerland 9.9% South Korea 6.8% Footnote reads: *Based on net assets as of 12/31/02. Holdings will vary over time. Asian markets, by comparison, were less volatile but also headed in different directions. Japan, for example, was relatively stable when most global markets fell during the summer, but then lost ground in October and November while other markets were rising. Japan's economic slump weighed on stock prices and investors again expressed disappointment with the government's efforts to reform the financial sector. Other Asian markets cooled off in the second half of the year after posting solid results in the first half. North Korea's more aggressive behavior had a negative impact on South Korean stocks. Fund Profile Putnam International Growth Fund seeks capital appreciation by investing primarily in common stocks of companies located in international markets. Without a predetermined bias toward growth or value stocks, the fund targets large and midsize companies priced below their worth. It may be suitable for investors seeking capital appreciation and willing to accept the risks of investing in international markets. In Latin America, Brazil's presidential election campaign depressed stock prices, as investors feared the economic consequences of a victory by Luiz Inacio Lula da Silva, the opposition candidate. However, following his election in November, Lula announced policies that reassured investors. Brazil and Mexico both enjoyed a significant rally in the year's final months. * INDIVIDUAL STOCKS LIFT FUND PERFORMANCE We believe the fund's positive showing relative to its Lipper category was due to our selection of individual stocks, rather than the fund's market or sector weightings. With regard to countries, positions in France, Switzerland, and South Korea were slightly overweighted relative to those in the benchmark index. The fund's sector weightings were generally neutral, aside from an underweighting in technology stocks that was helpful to performance. One of the fund's top-performing holdings was also one of its largest: Samsung Electronics of South Korea. We liked Samsung and continue to hold it because we believe it is successfully competing in two major technology industries -- wireless telephones and semiconductors -- yet we believe the stock has been undervalued relative to its competitors in other global markets. "While uncertainty and negative sentiments continue to make financial markets volatile, an economic recovery is gradually taking hold, thanks in part to monetary stimulus in Europe and healthy growth in Asia." -- Steve Oler, Portfolio Member Two top-ten holdings based in France contributed positively to the fund's performance. TotalFinaElf is an energy company that has been successfully managing costs to protect its profit margins, and benefited during the fiscal period from rising oil prices. Sanofi-Synthelabo is one of Europe's leading pharmaceuticals companies. We kept the fund underweight in Japan during the period because we had a negative view of Japanese banks, which still have not resolved their problems with bad loans, and because we avoided companies dependent on the sluggish Japanese economy. However, we still liked several Japanese companies that we believed had strong franchises. Toyota, for example, we consider to be one of the world's best auto companies with a strong global brand. This stock performed well over the period. Another major holding is NTT DoCoMo, a wireless telephone company. While it was not one of the fund's top performers in the period, we believe it still has strong growth potential. Other smaller Japanese holdings include Canon, a leading maker of photocopiers and printers, and Olympus, a dominant brand in cameras and medical instruments. * FINANCIAL HOLDINGS WERE DEALT A HEAVY BLOW July and September were particularly difficult months for the fund when international markets fell broadly. Fund holdings in European insurers ING of the Netherlands and Allianz and Muenchener Rueckversicherungs-Gesellschaft (Munich Re) of Germany faced a special challenge. We liked these stocks for fundamental reasons. With insurance premiums rising, their earnings could grow. However, in an environment of declining stock prices like that which we experienced last summer, European insurance regulators require insurance companies to increase non-equity reserves. The companies were compelled to sell their already depreciated equities to buy bonds. With so many insurers in the same predicament, the sheer volume of selling pushed stock prices down further. The value of insurance stocks tumbled even more than the markets, even though for many of these companies, the regulatory requirements, rather than business fundamentals, were the problem. We sold Allianz, which we considered the least attractive of the three, but we continue to hold ING and Munich Re and we believe they can benefit from a general market recovery. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS TotalFinaElf SA Class B France Oil and gas Vodafone Group PLC United Kingdom Telecommunications Nestle SA Switzerland Food AstraZeneca PLC United Kingdom Pharmaceuticals Samsung Electronics Co., Ltd. South Korea Electronics Shell Transport & Trading Co., PLC United Kingdom Oil and gas Novartis AG Switzerland Pharmaceuticals Toyota Motor Corp. Japan Automotive Sanofi-Synthelabo SA France Pharmaceuticals NTT DoCoMo, Inc. Japan Telecommunications Footnote reads: These holdings represent 30.4% of the fund's net assets as of 12/31/02. Portfolio holdings will vary over time. A few other holdings did not perform as well as we had expected. We selected Ericsson, a Swedish company that is the dominant manufacturer of infrastructure equipment for the wireless telecommunications industry. It performed badly early in the period but more recently has done much better as the telecommunications sector rebounded. That was also true of Vodafone Group, Europe's largest wireless telephone company, which is based in the United Kingdom. * UNCERTAINTY STILL WEIGHS ON MARKETS As we look ahead to the balance of the fund's fiscal year, we expect the volatility to continue because there are a number of factors weighing on markets. We believe the global economy is recovering but not at a fast enough pace to generate broad market enthusiasm. International stocks are not unusually undervalued, because many advanced strongly in the fourth quarter. We are pleased to see governments and central banks trying to stimulate growth, particularly in Europe. We think this reduces the likelihood of any sustained decline in stock prices. Our stance is to continue to maintain generally neutral weightings with regard to markets and sectors, while still trying to identify the companies that are best able to generate strong cash flow in these sluggish conditions. We believe such stocks are likely to have strong growth potential when the global economy improves. 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 12/31/02, 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. Additional risks may be associated with emerging-market securities, including illiquidity and volatility. This fund is managed by the Putnam International Core Team. The members of the team are Omid Kamshad (Portfolio Leader), Joshua Byrne (Portfolio Member), Simon Davis (Portfolio Member), Steve Oler (Portfolio Member), George Stairs (Portfolio Member), Daniel Grana, Pamela Holding, Nicholas Melhuish, and Carmel Peters. The fund's name change to Putnam International Equity Fund, effective April 30, 2003, does not reflect any change in its investment objective. The new name is intended to better reflect the fund's blend management style and further clarify its positioning among Putnam's blend products, which may invest in both growth and value stocks. PERFORMANCE SUMMARY This section provides information about your fund's performance during its semiannual period, which ended December 31, 2002. Performance should always be considered in light of a fund's investment strategy. TOTAL RETURN FOR PERIODS ENDED 12/31/02 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 -14.26% -19.19% -14.59% -18.86% -14.58% -15.44% -14.50% -17.51% ------------------------------------------------------------------------------ 1 year -17.03 -21.80 -17.65 -21.77 -17.60 -18.42 -17.42 -20.32 ------------------------------------------------------------------------------ 5 years 15.79 9.11 11.58 9.65 11.58 11.58 12.98 9.04 Annual average 2.98 1.76 2.22 1.86 2.22 2.22 2.47 1.75 ------------------------------------------------------------------------------ 10 years 160.32 145.45 141.61 141.61 141.72 141.72 148.38 139.64 Annual average 10.04 9.39 9.22 9.22 9.23 9.23 9.52 9.13 ------------------------------------------------------------------------------ Annual average (life of fund) 8.34 7.79 7.48 7.48 7.53 7.53 7.78 7.45 ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/02 MSCI EAFE Consumer Index price index ------------------------------------------------------------------------------ 6 months -14.55% 1.06% ------------------------------------------------------------------------------ 1 year -15.94 2.43 ------------------------------------------------------------------------------ 5 years -13.65 12.24 Annual average -2.89 2.34 ------------------------------------------------------------------------------ 10 years 48.08 27.62 Annual average 4.00 2.47 ------------------------------------------------------------------------------ Annual average (life of fund) 2.08 2.55 ------------------------------------------------------------------------------ Past performance does not indicate future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.75% and 3.50%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, and M shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and higher operating expenses for such shares. For a portion of the period, the fund was offered with limited expenses without which returns would have been lower. A 1% redemption fee on total assets redeemed or exchanged within 90 days of purchase will be imposed for all share classes. LIPPER INFORMATION: The average cumulative return for the 832 funds in the Lipper International Funds category over the 6 months ended 12/31/02 was -15.40%. Over the 1-, 5-, and 10-year periods ended 12/31/02, annualized returns for the category were -16.67%, -2.63%, and 4.76%, respectively. PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 12/31/02 Class A Class B Class C Class M ------------------------------------------------------------------------------ Distributions (number) 1 -- -- -- ------------------------------------------------------------------------------ Income $0.035 -- -- -- ------------------------------------------------------------------------------ Total $0.035 -- -- -- ------------------------------------------------------------------------------ Share value: NAV POP NAV NAV NAV POP ------------------------------------------------------------------------------ 6/30/02 $19.18 $20.35 $18.57 $18.86 $18.90 $19.59 ------------------------------------------------------------------------------ 12/31/02 16.41 17.41 15.86 16.11 16.16 16.75 ------------------------------------------------------------------------------ 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. Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. The NAV is calculated by dividing the net value of all the fund's assets by the number of outstanding shares. 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. Class A shares are generally subject to an initial sales charge and no sales charge on redemption (except on certain redemptions of shares bought without 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 (except on certain redemptions of shares bought without an initial sales charge). 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. Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. Lipper Inc. is a third-party industry ranking entity that ranks funds (without sales charges) with similar current investment styles or objectives as determined by Lipper. 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. A GUIDE TO THE FINANCIAL STATEMENTS These sections of the report, as well as the accompanying Notes, 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. This is done by first adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings -- as well as any unrealized gains or losses over the period -- is added to or subtracted from the net investment result to determine the fund's net gain or loss for the fiscal 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, 2002 (Unaudited) COMMON STOCKS (98.6%) (a) NUMBER OF SHARES VALUE Australia (2.7%) ------------------------------------------------------------------------------------------------------------------- 52,083 Australia & New Zealand Banking Group, Ltd. $508,749 11,905,217 BHP Billiton, Ltd. 68,031,767 7,830,824 Brambles Industries, Ltd. 20,721,143 36,553 Commonwealth Bank of Australia 555,642 279,527 Foster's Brewing Group, Ltd. 708,182 246,815 News Corp., Ltd. (The) 1,595,225 5,660,329 News Corp., Ltd. (The) ADR 148,583,636 2,162,151 Rio Tinto, Ltd. 41,327,030 121,700 Westpac Banking Corp. 942,110 112,877 Woolworths, Ltd. 724,467 ------------- 283,697,951 Belgium (--%) ------------------------------------------------------------------------------------------------------------------- 2,385 Electrabel SA 579,347 Bermuda (1.2%) ------------------------------------------------------------------------------------------------------------------- 1,477,500 ACE, Ltd. 43,349,850 1,054,000 XL Capital, Ltd. Class A 81,421,500 ------------- 124,771,350 Brazil (1.6%) ------------------------------------------------------------------------------------------------------------------- 12,000 Aracruz Celulose SA ADR 222,720 4,460 Banco Itau SA ADR 106,148 2,280,539 Companhia de Bebidas das Americas (AmBev) ADR 35,485,187 1,172,400 Companhia Vale do Rio Doce (CVRD) ADR 33,894,084 933,365 Companhia Vale do Rio Doce (CVRD) SP ADR 25,667,538 4,545,032 Petroleo Brasileiro SA ADR 67,902,778 37,396 Petroleo Brasileiro SA ADR (preference) 501,106 36,000 Unibanco-Uniao de Bancos Brasileiros SA GDR 394,200 ------------- 164,173,761 Canada (1.6%) ------------------------------------------------------------------------------------------------------------------- 4,268,400 Abitibi-Consolidated, Inc. 32,775,649 7,100 Alcan Aluminum, Ltd. 209,592 3,300 Bank of Nova Scotia 110,007 1,327,100 Canadian National Railway Co. 54,833,080 11,536 EnCana Corp. 356,223 3,050 Four Seasons Hotels, Inc. 85,725 1,778,503 National Bank of Canada 36,364,909 9,950 Sun Life Financial Svcs. of Canada, Inc. 168,237 2,785,042 Suncor Energy, Inc. 43,546,583 ------------- 168,450,005 Denmark (1.0%) ------------------------------------------------------------------------------------------------------------------- 6,426,923 Danske Bank A/S 106,249,645 25,233 Novo-Nordisk A/S 729,123 2,700 TDC A/S 65,619 ------------- 107,044,387 Finland (1.8%) ------------------------------------------------------------------------------------------------------------------- 11,156,244 Nokia OYJ 177,349,639 882,764 TietoEnator OYJ 12,041,695 133,458 TietoEnator OYJ 144A 1,820,487 ------------- 191,211,821 France (13.4%) ------------------------------------------------------------------------------------------------------------------- 1,762,948 Accor SA 53,386,998 11,130 Aventis SA 604,957 2,669,189 BNP Paribas SA 108,754,288 3,490,497 Bouygues SA 97,497,840 1,328,920 Compagnie de Saint Gobain 38,988,424 4,485,739 Havas Advertising SA 17,415,478 1,043,987 Lafarge 78,653,709 8,600 Orange SA (NON) 59,468 638,409 Peugeot SA 26,031,636 1,380 Publicis Group SA 29,250 4,347,837 Sanofi-Synthelabo SA 265,747,297 1,228,230 Societe Generale 71,527,387 2,087,579 Societe Television Francaise I 55,770,045 3,403,388 TotalFinaElf SA Class B 486,036,921 4,596,117 Vivendi Environnement 107,160,518 ------------- 1,407,664,216 Germany (3.2%) ------------------------------------------------------------------------------------------------------------------- 3,367,835 BASF AG 126,865,907 2,606,248 Bayerische Motoren Werke (BMW) AG 79,170,608 4,450 Deutsche Lufthansa AG (NON) 42,071 4,206,081 Deutsche Post AG 44,178,542 798,400 Deutsche Post AG 144A 8,385,989 14,650 Deutsche Telekom AG 187,849 16,730 E.On AG 674,104 536,100 Muenchener Rueckversicherungs-Gesellschaft AG 64,072,136 161 Porsche AG - Pfd. 66,899 197,010 SAP AG 15,442,178 ------------- 339,086,283 Greece (--%) ------------------------------------------------------------------------------------------------------------------- 15,850 Hellenic Telecommunication Organization SA 174,630 Hong Kong (1.2%) ------------------------------------------------------------------------------------------------------------------- 10,442,800 Cheung Kong Holdings, Ltd. 67,961,696 801,100 China Mobile, Ltd. (NON) 1,905,644 82,000 CLP Holdings, Ltd. 330,183 15,410,000 Hong Kong Electric Holdings, Ltd. 58,295,610 67,000 Sun Hung Kai Properties, Ltd. 396,943 ------------- 128,890,076 India (--%) ------------------------------------------------------------------------------------------------------------------- 5,360 Infosys Technologies, Ltd. 533,891 Ireland (1.4%) ------------------------------------------------------------------------------------------------------------------- 6,300,078 Allied Irish Banks PLC 85,013,240 18,780 Bank of Ireland 192,723 5,150,541 CRH PLC 63,502,436 ------------- 148,708,399 Israel (0.4%) ------------------------------------------------------------------------------------------------------------------- 30,392 Teva Pharmaceutical Industries, Ltd. 1,135,617 930,200 Teva Pharmaceutical Industries, Ltd. ADR 35,915,022 ------------- 37,050,639 Italy (1.7%) ------------------------------------------------------------------------------------------------------------------- 895,900 ENI SpA 14,242,028 9,152,900 Mediaset SpA 69,726,042 14,122,650 Telecom Italia Mobile SpA 64,462,200 48,550 Telecom Italia SpA 368,322 5,329,100 Telecom Italia SpA-RNC 26,896,676 ------------- 175,695,268 Japan (15.8%) ------------------------------------------------------------------------------------------------------------------- 664,600 Acom Co., Ltd. 21,845,259 320,300 Acom Co., Ltd. 144A 10,528,192 4,800 Advantest Corp. 215,221 84,000 Bridgestone Corp. 1,040,708 4,929,000 Canon, Inc. 185,694,311 7,501 East Japan Railway Co. 37,236,317 2,588,000 Fuji Photo Film Cos., Ltd. 84,412,642 100 Fujisawa Pharmaceutical Co. 2,288 2,125,500 Honda Motor Co., Ltd. 78,642,604 1,099 Japan Tobacco, Inc. 7,354,454 28,600 Kansai Electric Power, Inc. 432,194 3,715,200 KAO Corp. 81,568,445 106,700 Matsushita Electric Works, Ltd. 660,074 7,206 Millea Holdings, Inc. 51,866,195 2,512,000 Mitsui Sumitomo Insurance Co., Ltd. 11,559,646 7,600 Murata Manufacturing Co., Ltd. 297,851 7,965,000 Nikko Securities Co., Ltd. 26,852,086 599,600 Nintendo Co., Ltd. 56,043,523 43,000 Nippon Mitsubishi Oil Corp. 194,977 113,330 Nippon Television Network Corp. 16,906,372 251,000 Nissan Motor Co., Ltd. 1,958,921 60,000 Nomura Securities Co., Ltd. 674,589 134,035 NTT DoCoMo, Inc. 247,397,092 10,118 NTT DoCoMo, Inc. 144A 18,675,449 3,739,000 Olympus Optical Co., Ltd. 60,945,858 628,600 Orix Corp. 40,529,204 13,000 Orix Corp. 144A 838,180 368,600 Rohm Co., Ltd. 46,940,969 1,191,000 SECOM Co., Ltd. 40,854,362 52,000 Seven-Eleven Japan Co., Ltd. 1,586,515 5,700 Shin-Etsu Chemical Co. 186,877 1,637,200 Sony Corp. 68,440,893 767,500 Takeda Chemical Industries, Ltd. 32,084,282 29,000 Tokyo Electric Power Co. 551,159 24,610,000 Tokyo Gas Co., Ltd. 77,159,039 3,101,000 Toppan Printing Co., Ltd. 23,339,174 10,091,200 Toyota Motor Corp. 271,309,971 1,444,100 Yamanouchi Pharmaceutical Co., Ltd. 41,868,555 ------------- 1,648,694,448 Mexico (1.9%) ------------------------------------------------------------------------------------------------------------------- 84,350 America Movil SA de CV ADR Ser. L 1,211,266 2,442,690 Cemex SA de CV ADR 52,542,262 1,132,600 Fomento Economico Mexicano SA de CV ADR 41,249,292 101,000 Grupo Financiero BBVA Bancomer SA de CV (NON) 76,378 157,600 Telefonos de Mexico SA de CV (Telmex) 250,864 3,309,677 Telefonos de Mexico SA de CV (Telmex) ADR Class L 105,843,470 52,200 Wal-Mart de Mexico SA de CV Ser. V 118,772 ------------- 201,292,304 Netherlands (4.4%) ------------------------------------------------------------------------------------------------------------------- 7,839 ABN AMRO Holdings NV 128,153 1,924,443 Akzo-Nobel NV 61,043,984 1,361 Gucci Group NV 124,887 1,088,370 Gucci Group NV ADR 99,694,692 12,573,324 ING Groep NV 212,938,068 1,778,854 Koninklijke (Royal) Philips Electronics NV 31,171,410 1,319,200 Reed Elsevier NV 16,126,356 2,366,293 TPG NV 38,361,597 5,850 VNU NV 152,539 ------------- 459,741,686 New Zealand (0.1%) ------------------------------------------------------------------------------------------------------------------- 4,469,425 Telecom Corp. of New Zealand, Ltd. 144A 10,588,917 Portugal (0.5%) ------------------------------------------------------------------------------------------------------------------- 282,000 Electricidade de Portugal SA 470,485 7,227,440 Portugal Telecom SGPS SA 49,673,581 ------------- 50,144,066 Russia (--%) ------------------------------------------------------------------------------------------------------------------- 7,800 Sibneft ADR (NON) 166,140 186,372 YUKOS 1,751,021 1,250 YUKOS ADR 173,750 ------------- 2,090,911 Singapore (1.5%) ------------------------------------------------------------------------------------------------------------------- 4,583,648 DBS Group Holdings, Ltd. 29,077,352 280,457 Haw Par Corp., Ltd. 527,272 7,754,185 Overseas-Chinese Banking Corp. 43,153,336 3,059,000 Singapore Press Holdings, Ltd. 32,107,151 6,860,000 United Overseas Bank, Ltd. 46,682,814 46,000 Venture Manufacturing, Ltd. 368,743 ------------- 151,916,668 South Africa (--%) ------------------------------------------------------------------------------------------------------------------- 14,648 Sappi, Ltd. 196,049 South Korea (6.8%) ------------------------------------------------------------------------------------------------------------------- 93,677 Kookmin Bank 3,317,958 372,400 Kookmin Bank ADR 13,164,340 5,431,680 Korea Electric Power Corp. 83,596,020 1,790,400 Korea Tobacco & Ginseng Corp. (KT &G) 11,906,160 1,235,334 Korea Tobacco & Ginseng Corp. (KT &G) 144A GDR 8,214,971 258,620 KT Corp. 11,057,543 6,649,651 KT Corp. ADR 143,299,979 156,000 Pohang Iron & Steel Co., Ltd. 15,523,697 1,265,582 POSCO ADR 31,297,843 1,153,148 Samsung Electronics Co., Ltd. 305,353,746 2,970 Samsung Electronics Co., Ltd. - Pfd. 375,696 178,670 SK Telecom Co., Ltd. 34,504,495 2,139,550 SK Telecom Co., Ltd. ADR 45,679,393 ------------- 707,291,841 Spain (2.1%) ------------------------------------------------------------------------------------------------------------------- 2,246,651 Altadis SA 51,250,113 8,010 Banco Popular Espanol 327,539 5,746,702 Iberdrola SA 80,500,692 4,199 Industria de Diseno Textil (Inditex) SA 99,179 9,667,440 Telefonica SA (NON) 86,528,702 ------------- 218,706,225 Sweden (2.2%) ------------------------------------------------------------------------------------------------------------------- 11,193,358 Investor AB Class B 66,852,882 19,700 Nordea AB 86,887 2,065,657 Sandvik AB 46,146,016 3,888,698 Svenska Handelsbanken AB Class A 51,810,598 92,631,557 Telefonaktiebolaget LM Ericsson AB Class B (NON) 64,900,074 ------------- 229,796,457 Switzerland (9.9%) ------------------------------------------------------------------------------------------------------------------- 1,126,148 Ciba Specialty Chemicals AG 78,536,256 2,340,273 Cie Financier Richemont AG 43,680,130 389,074 Holcim, Ltd. Class B 70,648,610 152,409 Julius Baer Holdings, Ltd. AG Class B 33,077,263 1,590,041 Nestle SA 337,033,938 7,469,915 Novartis AG 272,630,552 6,814 Roche Holding AG 474,954 17,565 STMicroelectronics NV 344,290 951,328 Swatch Group AG (The) 16,104,373 482,830 Swatch Group AG (The) Class B 40,168,885 433 Swisscom AG 125,455 6,229 Syngenta AG 360,726 38,107 Synthes-Stratec, Inc. 23,377,513 2,390,594 UBS AG 116,217,838 ------------- 1,032,780,783 Taiwan (--%) ------------------------------------------------------------------------------------------------------------------- 100,000 Asustek Computer, Inc. 175,691 14,200 China Steel Corp. 7,934 172,200 Compal Electronics, Inc. 178,548 16,384 Formosa Chemicals & Fibre Corp. 17,366 27,300 Formosa Plastics Corp. 35,855 104,050 Hon Hai Precision Industry Co., Ltd. 359,620 30,590 Nan Ya Plastic Corp. 26,431 17,515 President Chain Store Corp. 26,484 67,650 Quanta Computer, Inc. 111,061 13 Sinopac Holdings Co. (NON) 5 1,649,712 Taiwan Semiconductor Manufacturing Co., Ltd. (NON) 2,024,128 354,900 United Microelectronics Corp. 215,679 ------------- 3,178,802 Turkey (--%) ------------------------------------------------------------------------------------------------------------------- 51,644,798 Haci Omer Sabanci Holdings 135,743 United Kingdom (22.2%) ------------------------------------------------------------------------------------------------------------------- 208,136 Anglo American PLC 3,090,904 8,823,140 AstraZeneca PLC 315,317,495 6,256,719 BAE Systems PLC 12,489,362 3,062,523 Barclays PLC 18,980,691 6,685,429 BAT Industries PLC 66,779,473 8,641,853 BHP Billiton PLC 46,151,915 10,523 Boots Co. PLC 99,268 152,712 BP PLC 1,049,719 10,635,639 Brambles Industries PLC 26,024,303 55,300 BT Group PLC 173,593 6,345,669 Cadbury Schweppes PLC 39,533,048 6,058,300 Carlton Communications PLC 13,092,934 8,567,036 Diageo PLC 93,090,698 8,003,652 Dixons Group PLC 18,682,205 10,076,155 GlaxoSmithKline PLC 193,349,484 18,645 GUS PLC 173,185 13,173,400 Hilton Group PLC 35,414,921 13,280,561 HSBC Holdings PLC (London Stock Exchange) 146,767,158 3,192,800 HSBC Holdings PLC (Hong Kong Stock Exchange) 34,904,169 8,034 Imperial Tobacco Group PLC 136,445 29,086 Kingfisher Leisure PLC 104,180 4,184,235 Reckitt Benckiser PLC 81,166,167 5,400,500 Reed International PLC 46,250,616 1,279,749 Rio Tinto PLC 25,545,735 1,744,856 Royal Bank of Scotland Group PLC 41,795,974 9,116,986 SABMiller PLC 64,796,854 2,557,700 SABMiller PLC 144A 18,178,257 15,881,224 Scottish Power PLC 92,675,280 46,091,875 Shell Transport & Trading Co. PLC 303,472,685 36,031,558 Tesco PLC 112,526,988 204,444,503 Vodafone Group PLC 372,722,467 25,400 William Morrison Supermarkets PLC 88,320 12,892,197 WPP Group PLC 98,477,064 ------------- 2,323,101,557 United States (--%) ------------------------------------------------------------------------------------------------------------------- 1 Citigroup, Inc. 35 ------------- Total Common Stocks (cost $11,096,118,577) $10,317,388,516 UNITS (0.2%) (a) NUMBER OF UNITS VALUE ------------------------------------------------------------------------------------------------------------------- 118,268 Infosys Technologies, Ltd. 144A Structured Warrants (issued by UBS AG) expiration 4/11/03 $11,780,258 34,660 Nippon Television Network Corp. 144A Structured Warrants (issued by Lehman Brothers Finance S.A.) expiration 9/06/03 5,170,520 508,400 Singapore Press Holdings Structured Call Warrants (issued by Merrill Lynch International & Co., C.V.) expiration 6/10/03 5,336,166 ------------- Total Units (cost $21,612,556) $22,286,944 WARRANTS (--%) (a) (NON) (cost $1) EXPIRATION NUMBER OF WARRANTS DATE VALUE ------------------------------------------------------------------------------------------------------------------- 538,326 Telecomasia Corp. (Rights) 4/3/08 $1 SHORT-TERM INVESTMENTS (3.5%) (a) PRINCIPAL AMOUNT/SHARES VALUE ------------------------------------------------------------------------------------------------------------------- $200,151,395 Short-term investments held as collateral for loaned securities with yields ranging from 1.23% to 1.45% and due dates ranging from January 2, 2003 to February 18, 2003 (d) $200,087,750 161,812,996 Short-term investments held in Putnam commingled cash account with yields ranging from 1.20% to 1.59% and due dates ranging from January 2, 2003 to February 19,2003 (d) 161,812,998 ------------- Total Short-Term Investments (cost $361,900,748) $361,900,748 ------------------------------------------------------------------------------------------------------------------- Total Investments (cost $11,479,631,882) $10,701,576,209 ------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $10,466,765,595. (NON) Non-income-producing security. (d) See Note 1 to the financial statements. 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 custodian bank. The fund had the following industry group concentrations greater than 10% at December 31, 2002 (as a percentage of net assets): Telecommunications 11.4% Pharmaceuticals 11.1 The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 (Unaudited) Assets ------------------------------------------------------------------------------------------- Investments in securities, at value, including $194,457,649 of securities on loan (identified cost $11,479,631,882) (Note 1) $10,701,576,209 ------------------------------------------------------------------------------------------- Foreign currency (cost $455,844) (Note 1) 457,458 ------------------------------------------------------------------------------------------- Dividends, interest and other receivables 31,842,566 ------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 41,399,778 ------------------------------------------------------------------------------------------- Receivable for securities sold 220,024 ------------------------------------------------------------------------------------------- Receivable for closed forward currency contracts (Note 1) 8,727,461 ------------------------------------------------------------------------------------------- Total assets 10,784,223,496 Liabilities ------------------------------------------------------------------------------------------- Payable for securities purchased 31,417,794 ------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 52,231,736 ------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 16,364,921 ------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 2,114,028 ------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 328,400 ------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 4,033 ------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 6,141,958 ------------------------------------------------------------------------------------------- Payable for closed forward currency contracts (Note 1) 8,033,558 ------------------------------------------------------------------------------------------- Collateral on securities loaned, at value (Note 1) 200,087,750 ------------------------------------------------------------------------------------------- Other accrued expenses 733,723 ------------------------------------------------------------------------------------------- Total liabilities 317,457,901 ------------------------------------------------------------------------------------------- Net assets $10,466,765,595 Represented by ------------------------------------------------------------------------------------------- Paid-in capital (Notes 1, 4 and 5) $14,149,737,790 ------------------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (12,135,492) ------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (Note 1) (2,894,658,806) ------------------------------------------------------------------------------------------- Net unrealized depreciation of investments and assets and liabilities in foreign currencies (Note 5) (776,177,897) ------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $10,466,765,595 Computation of net asset value and offering price ------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($6,205,868,697 divided by 378,119,206 shares) $16.41 ------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $16.41)* $17.41 ------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($1,908,367,917 divided by 120,300,013 shares)** $15.86 ------------------------------------------------------------------------------------------- Net asset value and offering price per class C share ($512,887,307 divided by 31,831,120 shares)** $16.11 ------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($196,621,937 divided by 12,165,486 shares) $16.16 ------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $16.16)* $16.75 ------------------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($1,643,019,737 divided by 99,456,443 shares) $16.52 ------------------------------------------------------------------------------------------- * 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, 2002 (Unaudited) Investment income: ------------------------------------------------------------------------------------------- Dividends (net of foreign tax of $9,291,842) $77,929,094 ------------------------------------------------------------------------------------------- Interest 1,320,422 ------------------------------------------------------------------------------------------- Securities lending 331,093 ------------------------------------------------------------------------------------------- Total investment income 79,580,609 Expenses: ------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 32,572,080 ------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 13,892,247 ------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 118,850 ------------------------------------------------------------------------------------------- Administrative services (Note 2) 27,228 ------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 7,871,496 ------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 9,983,832 ------------------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 2,625,270 ------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 794,836 ------------------------------------------------------------------------------------------- Other 4,013,484 ------------------------------------------------------------------------------------------- Total expenses 71,899,323 ------------------------------------------------------------------------------------------- Expense reduction (Note 2) (5,905,056) ------------------------------------------------------------------------------------------- Net expenses 65,994,267 ------------------------------------------------------------------------------------------- Net investment income 13,586,342 ------------------------------------------------------------------------------------------- Net realized loss on investments (Notes 1 and 3) (1,087,330,578) ------------------------------------------------------------------------------------------- Net realized gain on foreign currency transactions (Note 1) 9,228,445 ------------------------------------------------------------------------------------------- Net unrealized depreciation of assets and liabilities in foreign currencies during the period (486,459) ------------------------------------------------------------------------------------------- Net unrealized depreciation of investments during the period (Note 5) (618,778,862) ------------------------------------------------------------------------------------------- Net loss on investments (1,697,367,454) ------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $(1,683,781,112) ------------------------------------------------------------------------------------------- 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 2002* 2002 ------------------------------------------------------------------------------------------------------- Decrease in net assets ------------------------------------------------------------------------------------------------------- Operations: ------------------------------------------------------------------------------------------------------- Net investment income $13,586,342 $74,436,454 ------------------------------------------------------------------------------------------------------- Net realized loss on investments and foreign currency transactions (1,078,102,133) (990,956,274) ------------------------------------------------------------------------------------------------------- Net unrealized depreciation of investments and assets and liabilities in foreign currencies (619,265,321) (268,878,077) ------------------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations (1,683,781,112) (1,185,397,897) ------------------------------------------------------------------------------------------------------- Distributions to shareholders: (Note 1) ------------------------------------------------------------------------------------------------------- From net investment income Class A (13,233,985) -- ------------------------------------------------------------------------------------------------------- Class Y (7,609,608) -- ------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 398,426,641 885,939,292 ------------------------------------------------------------------------------------------------------- Total decrease in net assets (1,306,198,064) (299,458,605) Net assets ------------------------------------------------------------------------------------------------------- Beginning of period 11,772,963,659 12,072,422,264 ------------------------------------------------------------------------------------------------------- End of period (including distributions in excess of net investment income of $12,135,492 and $4,878,241, respectively) $10,466,765,595 $11,772,963,659 ------------------------------------------------------------------------------------------------------- * Unaudited The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS A ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 ------------------------------------------------------------------------------------------------------------------ 2002 2002 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.18 $21.24 $29.92 $21.64 $20.00 $17.58 ------------------------------------------------------------------------------------------------------------------ Investment operations: ------------------------------------------------------------------------------------------------------------------ Net investment income (a) .03 .17 .16 .54 .07 .20 ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (2.76) (2.23) (6.64) 8.87 2.14 3.26 ------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.73) (2.06) (6.48) 9.41 2.21 3.46 ------------------------------------------------------------------------------------------------------------------ Less distributions: ------------------------------------------------------------------------------------------------------------------ From net investment income (.04) -- (.39) (.34) (.21) (.25) ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- (1.81) (.79) (.36) (.79) ------------------------------------------------------------------------------------------------------------------ From return of capital -- -- --(d) -- -- -- ------------------------------------------------------------------------------------------------------------------ Total distributions (.04) -- (2.20) (1.13) (.57) (1.04) ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $16.41 $19.18 $21.24 $29.92 $21.64 $20.00 ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (14.26)* (9.70) (22.43) 44.03 11.57 20.73 ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $6,205,869 $6,930,312 $6,896,924 $7,040,669 $2,928,662 $1,827,331 ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .61* 1.16 1.13 1.14 1.27 1.36 ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) .21* .85 .63 2.01 .38 1.07 ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 23.77*(e) 42.17 73.80 99.53 97.24 93.53 ------------------------------------------------------------------------------------------------------------------ * Not annualized. (a) Per share net investment income 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) Amount represents less than $0.01 per share. (e) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund (Note 5). The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS B ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 ------------------------------------------------------------------------------------------------------------------ 2002 2002 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.57 $20.72 $29.23 $21.20 $19.63 $17.32 ------------------------------------------------------------------------------------------------------------------ Investment operations: ------------------------------------------------------------------------------------------------------------------ Net investment income (loss)(a) (.03) .01 (.04) .35 (.07) .06 ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (2.68) (2.16) (6.46) 8.67 2.10 3.21 ------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.71) (2.15) (6.50) 9.02 2.03 3.27 ------------------------------------------------------------------------------------------------------------------ Less distributions: ------------------------------------------------------------------------------------------------------------------ From net investment income -- -- (.20) (.20) (.10) (.17) ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- (1.81) (.79) (.36) (.79) ------------------------------------------------------------------------------------------------------------------ From return of capital -- -- --(d) -- -- -- ------------------------------------------------------------------------------------------------------------------ Total distributions -- -- (2.01) (.99) (.46) (.96) ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $15.86 $18.57 $20.72 $29.23 $21.20 $19.63 ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (14.59)* (10.38) (23.00) 43.00 10.75 19.87 ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,908,368 $2,326,938 $2,983,524 $3,591,546 $1,821,024 $1,226,917 ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .98* 1.91 1.88 1.89 2.02 2.11 ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.16)* .04 (.16) 1.26 (.38) .31 ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 23.77*(e) 42.17 73.80 99.53 97.24 93.53 ------------------------------------------------------------------------------------------------------------------ * 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) Amount represents less than $0.01 per share. (e) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund (Note 5). The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS C ---------------------------------------------------------------------------------------- Six months ended For the period Per-share December 31 July 26, 1999+ operating performance (Unaudited) Year ended June 30 to June 30 ---------------------------------------------------------------------------------------- 2002 2002 2001 2000 ---------------------------------------------------------------------------------------- Net asset value, beginning of period $18.86 $21.03 $29.74 $21.87 ---------------------------------------------------------------------------------------- Investment operations: ---------------------------------------------------------------------------------------- Net investment income (loss)(a) (.03) .01 (.02) .32 ---------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (2.72) (2.18) (6.59) 8.66 ---------------------------------------------------------------------------------------- Total from investment operations (2.75) (2.17) (6.61) 8.98 ---------------------------------------------------------------------------------------- Less distributions: ---------------------------------------------------------------------------------------- From net investment income -- -- (.29) (.32) ---------------------------------------------------------------------------------------- From net realized gain on investments -- -- (1.81) (.79) ---------------------------------------------------------------------------------------- From return of capital -- -- --(d) -- ---------------------------------------------------------------------------------------- Total distributions -- -- (2.10) (1.11) ---------------------------------------------------------------------------------------- Net asset value, end of period $16.11 $18.86 $21.03 $29.74 ---------------------------------------------------------------------------------------- Total return at net asset value (%)(b) (14.58)* (10.32) (23.01) 41.54* ---------------------------------------------------------------------------------------- Ratios and supplemental data ---------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $512,887 $601,907 $637,547 $439,522 ---------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .98* 1.91 1.88 1.76* ---------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) (.16)* .07 (.07) 1.12* ---------------------------------------------------------------------------------------- Portfolio turnover (%) 23.77*(e) 42.17 73.80 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) Amount represents less than $0.01 per share. (e) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund (Note 5). The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS M ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 ------------------------------------------------------------------------------------------------------------------ 2002 2002 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $18.90 $21.04 $29.61 $21.45 $19.85 $17.48 ------------------------------------------------------------------------------------------------------------------ Investment operations: ------------------------------------------------------------------------------------------------------------------ Net investment income (loss)(a) (.01) .06 .03 .40 (.02) .10 ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (2.73) (2.20) (6.54) 8.79 2.11 3.26 ------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.74) (2.14) (6.51) 9.19 2.09 3.36 ------------------------------------------------------------------------------------------------------------------ Less distributions: ------------------------------------------------------------------------------------------------------------------ From net investment income -- -- (.25) (.24) (.13) (.20) ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- (1.81) (.79) (.36) (.79) ------------------------------------------------------------------------------------------------------------------ From return of capital -- -- --(d) -- -- -- ------------------------------------------------------------------------------------------------------------------ Total distributions -- -- (2.06) (1.03) (.49) (.99) ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $16.16 $18.90 $21.04 $29.61 $21.45 $19.85 ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (14.50)* (10.17) (22.75) 43.32 10.97 20.18 ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $196,622 $248,921 $302,838 $367,638 $208,064 $140,202 ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .86* 1.66 1.63 1.64 1.77 1.86 ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.04)* .30 .11 1.51 (.12) .54 ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 23.77*(e) 42.17 73.80 99.53 97.24 93.53 ------------------------------------------------------------------------------------------------------------------ * 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) Amount represents less than $0.01 per share. (e) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund (Note 5). The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS Y ------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 ------------------------------------------------------------------------------------------------------------------ 2002 2002 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.33 $21.35 $30.07 $21.72 $20.05 $17.60 ------------------------------------------------------------------------------------------------------------------ Investment operations: ------------------------------------------------------------------------------------------------------------------ Net investment income (a) .06 .22 .23 .61 .14 .22 ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (2.79) (2.24) (6.69) 8.92 2.13 3.30 ------------------------------------------------------------------------------------------------------------------ Total from investment operations (2.73) (2.02) (6.46) 9.53 2.27 3.52 ------------------------------------------------------------------------------------------------------------------ Less distributions: ------------------------------------------------------------------------------------------------------------------ From net investment income (.08) -- (.45) (.39) (.24) (.28) ------------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- (1.81) (.79) (.36) (.79) ------------------------------------------------------------------------------------------------------------------ From return of capital -- -- --(d) -- -- -- ------------------------------------------------------------------------------------------------------------------ Total distributions (.08) -- (2.26) (1.18) (.60) (1.07) ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $16.52 $19.33 $21.35 $30.07 $21.72 $20.05 ------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) (14.13)* (9.46) (22.25) 44.43 11.83 21.08 ------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,643,020 $1,664,886 $1,251,589 $1,027,174 $255,867 $151,139 ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .48* .91 .88 .89 1.02 1.11 ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) .33* 1.13 .92 2.26 .70 1.22 ------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 23.77*(e) 42.17 73.80 99.53 97.24 93.53 ------------------------------------------------------------------------------------------------------------------ * Not annualized. (a) Per share net investment income 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) Amount represents less than $0.01 per share. (e) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund (Note 5). The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS December 31, 2002 (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 certain eligible purchasers including participants in defined contribution plans (including corporate IRAs), certain college savings plans, bank trust departments and trust companies, and other defined contribution plans subject to minimum requirements. Effective January 21, 2003, the fund issued class R shares. These shares have no front-end or back-end sales charge, but will have a 0.50% 12b-1 fee. A redemption fee of 1.00% may apply to any shares redeemed (either by selling or exchanging to another fund) within 90 days of purchase. 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 the 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. For foreign investments, if trading or events occurring in other markets after the close of the principal exchange in which the securities are traded are expected to materially affect the value of the investments, then those investments are valued, taking into consideration these events, at their fair value following procedures approved by the Trustees. 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. B) Joint trading account The fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, LLC ("Putnam Management"), the fund's manager, an indirect wholly-owned subsidiary of Putnam, LLC. These balances may be invested in issuers of high-grade short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments. 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, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. 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. Forward currency contracts outstanding at period end are listed after the fund's portfolio. G) Security lending The fund may lend securities, through its agent Citibank N.A., to qualified borrowers in order to earn additional income. The loans are collateralized by cash and/or securities in an amount at least equal to the market value of the securities loaned. The market value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by Citibank N.A.; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending is included in investment income on the Statement of operations. At December 31, 2002, the value of securities loaned amounted to $194,457,649. The fund received cash collateral of $200,087,750, which is pooled with collateral of other Putnam funds into 26 issuers of high-grade short-term investments. H) 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 maintains an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the six months ended December 31, 2002, the fund had no borrowings against the line of credit. I) 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. At June 30, 2002, the fund had a capital loss carryover of approximately $1,155,554,000 available to the extent allowed by tax law to offset future capital gains, if any. The amount of the carryover and the expiration dates are: Loss Carryover Expiration -------------- ------------- $14,121,000 June 30, 2009 1,141,433,000 June 30, 2010 The aggregate identified cost on a tax basis is $11,661,167,766, resulting in gross unrealized appreciation and depreciation of $628,972,565 and $1,588,564,122, respectively, or net unrealized depreciation of $959,591,557. J) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. 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 wholly-owned subsidiary of Putnam, LLC. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. 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. For the six months ended December 31, 2002, the fund's expenses were reduced by $5,905,056 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $6,026 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, a wholly-owned subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., 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 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 December 31, 2002, Putnam Retail Management, acting as underwriter received net commissions of $402,318 and $7,084 from the sale of class A and class M shares, respectively, and received $2,285,326 and $36,782 in contingent deferred sales charges from redemptions of class B and class C shares, respectively. A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the six months ended December 31, 2002, Putnam Retail Management, acting as underwriter received $228,935 and no monies on class A and class M redemptions, respectively. Note 3 Purchases and sales of securities During the six months ended December 31, 2002, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $2,870,667,160 and $2,485,046,278, respectively. There were no purchases and sales of U.S. government obligations. Note 4 Capital shares At December 31, 2002, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended December 31, 2002 --------------------------------------------------------------------------- Class A Shares Amount --------------------------------------------------------------------------- Shares sold 177,624,225 $2,956,131,312 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 722,121 11,785,004 --------------------------------------------------------------------------- Shares issued in connection with the merger of Putnam Asia Pacific Growth and Putnam Emerging Markets Funds 7,587,615 131,447,946 --------------------------------------------------------------------------- 185,933,961 3,099,364,262 Shares repurchased (169,108,488) (2,820,387,348) --------------------------------------------------------------------------- Net increase 16,825,473 $278,976,914 --------------------------------------------------------------------------- Year ended June 30, 2002 --------------------------------------------------------------------------- Class A Shares Amount --------------------------------------------------------------------------- Shares sold 293,619,885 $5,733,822,534 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 293,619,885 5,733,822,534 Shares repurchased (256,975,161) (5,033,826,065) --------------------------------------------------------------------------- Net increase 36,644,724 $699,996,469 --------------------------------------------------------------------------- Six months ended December 31, 2002 --------------------------------------------------------------------------- Class B Shares Amount --------------------------------------------------------------------------- Shares sold 9,769,933 $158,387,785 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- Shares issued in connection with the merger of Putnam Asia Pacific Growth and Putnam Emerging Markets Funds 5,490,252 91,982,910 --------------------------------------------------------------------------- 15,260,185 250,370,695 Shares repurchased (20,270,497) (329,099,541) --------------------------------------------------------------------------- Net decrease (5,010,312) $(78,728,846) --------------------------------------------------------------------------- Year ended June 30, 2002 --------------------------------------------------------------------------- Class B Shares Amount --------------------------------------------------------------------------- Shares sold 26,004,333 $494,743,905 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 26,004,333 494,743,905 Shares repurchased (44,705,698) (847,391,828) --------------------------------------------------------------------------- Net decrease (18,701,365) $(352,647,923) --------------------------------------------------------------------------- Six months ended December 31, 2002 --------------------------------------------------------------------------- Class C Shares Amount --------------------------------------------------------------------------- Shares sold 9,408,487 $154,774,010 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- Shares issued in connection with the merger of Putnam Asia Pacific Growth and Putnam Emerging Markets Funds 275,472 4,687,624 --------------------------------------------------------------------------- 9,683,959 159,461,634 Shares repurchased (9,767,511) (161,356,616) --------------------------------------------------------------------------- Net decrease (83,552) $(1,894,982) --------------------------------------------------------------------------- Year ended June 30, 2002 --------------------------------------------------------------------------- Class C Shares Amount --------------------------------------------------------------------------- Shares sold 22,461,656 $432,620,576 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 22,461,656 432,620,576 Shares repurchased (20,857,249) (402,292,910) --------------------------------------------------------------------------- Net increase 1,604,407 $30,327,666 --------------------------------------------------------------------------- Six months ended December 31, 2002 --------------------------------------------------------------------------- Class M Shares Amount --------------------------------------------------------------------------- Shares sold 6,250,792 $103,549,968 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- Shares issued in connection with the merger of Putnam Asia Pacific Growth and Putnam Emerging Markets Funds 286,835 4,891,301 --------------------------------------------------------------------------- 6,537,627 108,441,269 Shares repurchased (7,545,969) (125,355,650) --------------------------------------------------------------------------- Net decrease (1,008,342) $(16,914,381) --------------------------------------------------------------------------- Year ended June 30, 2002 --------------------------------------------------------------------------- Class M Shares Amount --------------------------------------------------------------------------- Shares sold 12,295,515 $235,623,812 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 12,295,515 235,623,812 Shares repurchased (13,517,203) (259,964,932) --------------------------------------------------------------------------- Net increase (1,221,688) $(24,341,120) --------------------------------------------------------------------------- Six months ended December 31, 2002 --------------------------------------------------------------------------- Class Y Shares Amount --------------------------------------------------------------------------- Shares sold 45,374,880 $754,228,576 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 462,072 7,609,608 --------------------------------------------------------------------------- Shares issued in connection with the merger of Putnam Asia Pacific Growth and Putnam Emerging Markets Funds 345,554 6,034,925 --------------------------------------------------------------------------- 46,182,506 767,873,109 Shares repurchased (32,848,973) (550,885,173) --------------------------------------------------------------------------- Net increase 13,333,533 $216,987,936 --------------------------------------------------------------------------- Year ended June 30, 2002 --------------------------------------------------------------------------- Class Y Shares Amount --------------------------------------------------------------------------- Shares sold 86,557,160 $1,694,183,576 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 86,557,160 1,694,183,576 Shares repurchased (59,049,885) (1,161,579,376) --------------------------------------------------------------------------- Net increase 27,507,275 $532,604,200 --------------------------------------------------------------------------- Note 5 Actions by Trustees Acquisition of Putnam Asia Pacific Growth and Putnam Emerging Markets Funds On August 16, 2002, the fund issued 7,587,615; 5,490,252; 275,472; 286,835; and 345,554 of class A, class B, class C, class M and class Y shares to acquire Putnam Asia Pacific Fund and Putnam Emerging Markets Fund net assets in a tax-free exchange approved by the shareholders. The net assets of the fund, Putnam Asia Pacific Fund and Putnam Emerging Markets Fund on August 16, 2002, valuation date, were $10,713,632,846, $160,983,391 and $78,061,315, respectively. On August 16, 2002, Putnam Asia Pacific Fund and Putnam Emerging Markets Fund had unrealized appreciation of $1,405,114 and $10,106,846, respectively. The aggregate net assets of the fund immediately following the acquisition were $10,952,677,552. [GRAPHIC OMITTED: PHOTO OF SAMUEL PUTNAM] PUTNAM IS A LEADER IN GLOBAL MONEY MANAGEMENT Putnam Investments traces its heritage to the early 19th century when ship captains hired trustees to manage their money while they were away at sea. In a landmark 1830 decision that involved one such trustee, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible money management. In 1937, his great-great grandson founded Putnam with The George Putnam Fund of Boston, the first fund to offer a balanced portfolio of stocks and bonds. Today, Putnam Investments is one of the largest investment management firms in the world, and this balanced approach remains the foundation of everything we do. With over 65 years of experience, Putnam has nearly $251 billion in assets under management, over 100 mutual funds, over 13 million shareholder accounts, and nearly 3,000 institutional and 401(k) clients. (Information as of 12/31/02.) We're one of the largest mutual fund companies in the United States. Putnam has won the DALBAR award for service twelve times in the past thirteen years. Putnam offers products in every investment category, including growth, value, and blend as well as international and fixed income. Teamwork is a cornerstone of Putnam's investment philosophy. Our funds are managed by teams in a collaborative environment that promotes an active exchange of information. Putnam's disciplined investment philosophy is based on style consistency. We aim for less volatility over the short term and strong, consistent performance over time. Our truth in labeling approach helps us adhere to every fund's stated objective, style, and risk positioning. We are committed to helping financial advisors provide sound, sensible guidance, information, and expertise to help investors reach their financial goals. FUND INFORMATION ABOUT PUTNAM INVESTMENTS One of the largest mutual fund families in the United States, Putnam Investments has a heritage of investment leadership dating back to Judge Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and practice since 1830. Founded over 65 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We presently manage over 100 mutual funds in growth, value, blend, fixed income, and international. INVESTMENT MANAGER Putnam Investment Management, LLC One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Retail Management One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES John A. Hill, Chairman Jameson Adkins Baxter Charles B. Curtis 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, Treasurer and Principal Financial Officer Patricia C. Flaherty Senior Vice President Karnig H. Durgarian Vice President and Principal Executive Officer Steven D. Krichmar Vice President and Principal Financial Officer Michael T. Healy Assistant Treasurer and Principal Accounting Officer Brett C. Browchuk Vice President Charles E. Haldeman, Jr. Vice President Lawrence J. Lasser Vice President Richard G. Leibovitch Vice President Beth S. Mazor Vice President Richard A. Monaghan Vice President Stephen M. Oristaglio Vice President Gordon H. Silver Vice President Mark C. Trenchard Vice President Justin M. Scott Vice President Omid Kamshad Vice President Judith Cohen Clerk and Assistant Treasurer 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. The fund's Statement of Additional Information contains additional information about the fund's Trustees and is available without charge upon request by calling 1-800-225-1581. Visit www.putnaminvestments.com or call a representative at 1-800-225-1581. NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 --------------------- PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminvestments.com SA009-84115 841/524/891/2BA 2/03 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] ---------------------------------------------------------------------------- Putnam International Growth Fund Supplement to Semiannual Report dated 12/31/02 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 clients that meet the eligibility requirements specified in the fund's prospectus for such shares. 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 12/31/02 NAV 6 months -14.13% 1 year -16.80 5 years 17.28 Annual average 3.24 10 years 164.74 Annual average 10.23 Life of fund (since class A inception, 2/28/91) Annual average 8.49 Share value: NAV 6/30/02 $19.33 12/31/02 $16.52 ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 1 $0.078 -- $0.078 ---------------------------------------------------------------------------- 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, and are not 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.