-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nx/BhQR+RZYnOrx0++vDzelrle2GPZ8cV5zE2jNLht6pb0AXdMMp5EYaI7VhxeXd jpvhF0wz0eT0uYUe+mOPXQ== 0000928816-05-000320.txt : 20050228 0000928816-05-000320.hdr.sgml : 20050228 20050228164338 ACCESSION NUMBER: 0000928816-05-000320 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050228 DATE AS OF CHANGE: 20050228 EFFECTIVENESS DATE: 20050228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INTERNATIONAL EQUITY FUND /MA/ CENTRAL INDEX KEY: 0000868648 IRS NUMBER: 046661045 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06190 FILM NUMBER: 05646180 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921471 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND /MA/ DATE OF NAME CHANGE: 19960805 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM OVERSEAS GROWTH FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND DATE OF NAME CHANGE: 19901107 N-CSR 1 peif1.txt PUTNAM INTERNATIONAL EQUITY FUND Putnam International Equity Fund Item 1. Report to Stockholders: - ------------------------------- The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 12-31-04 [GRAPHIC OMITTED: HOTEL STICKER] [SCALE LOGO OMITTED] From the Trustees [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III] John A. Hill and George Putnam, III Dear Fellow Shareholder: During the past several months, Putnam has introduced a number of reforms for the benefit of shareholders, including enhancing the disclosure about your fund. We are now including in this report portfolio turnover information for your fund, which explains how the rate at which a fund buys and sells portfolio securities might affect its return and its taxable distributions to shareholders. We are also including additional disclosure about your fund's management team. Following the Outlook for Your Fund, we list any changes in your fund's Portfolio Leaders and Portfolio Members during the prior year period, as well as information about these individuals' other fund management responsibilities at Putnam. We also show how much these individuals have invested in the fund (in dollar ranges), and fund ownership (in dollar ranges) is also shown for the members of Putnam's Executive Board. In equity fund reports, we now list the largest brokerage relationships of your fund following the Notes to the Financial Statements. Finally, on page 18, we provide certain information about the most recent approval of your fund's management contract with Putnam by the Trustees. We are also pleased to announce that three new Trustees have joined your fund's Board of Trustees. Nominated by your fund's independent Trustees, these individuals have had outstanding careers as leaders in the investment management industry. Myra R. Drucker is a Vice Chair of the Board of Trustees of Sarah Lawrence College and serves as ex-officio member and past Chair of the New York Stock Exchange (NYSE) Pension Managers Advisory Committee and as a Trustee of Commonfund, a not-for-profit asset management firm. Richard B. Worley is Managing Partner of Permit Capital LLC, an investment management firm. Both Ms. Drucker and Mr. Worley are independent Trustees (i.e., Trustees who are not "interested persons" of your fund or its investment advisor). Charles E. Haldeman, Jr., the third new Trustee, is President and Chief Executive Officer of Putnam Investments. We also announce the retirement of one of your fund's Trustees, A.J.C. Smith, formerly Chairman of Putnam Investments and Consultant to Marsh & McLennan Companies, Inc. In the following pages, your fund's management team discusses performance, strategy, and its outlook for the remainder of fiscal 2005. 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 16, 2005 Report from Fund Management Fund highlights * For the six months ended December 31, 2004, Putnam International Equity Fund's class A shares had a total return of 15.07% without sales charges and 9.01% with maximum sales charges reflected. * The fund's benchmark, the Morgan Stanley Capital International EAFE Index, returned 15.00% for the period. * The average return for the fund's Lipper category, International Large-Cap Core funds, was 13.26%. * See the Performance Summary beginning on page 10 for additional fund performance, comparative performance, and Lipper data. Performance commentary During the first half of fiscal 2005, a favorable period for international stock markets, your fund was in line with its benchmark index and outperformed the average for its Lipper peer group, based on results at net asset value (NAV). We believe our successful stock selection accounted for much of these relative results. Our decisions about sector and market weightings did not contribute to the same extent. However, these positioning decisions gave the portfolio exposure to particularly strong currencies that proved helpful to returns as the U.S. dollar weakened. We continue to anticipate attractive results from international stocks and, as of the end of the semiannual period, believe they offer significant advantages over U.S. stocks. - -------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 12/31/04 - -------------------------------------------------- Class A (inception 2/28/91) NAV POP - -------------------------------------------------- 6 months 15.07% 9.01% - -------------------------------------------------- 1 year 16.18 10.11 - -------------------------------------------------- 5 years -9.86 -14.58 Annual average -2.05 -3.10 - -------------------------------------------------- 10 years 168.70 154.62 Annual average 10.39 9.80 - -------------------------------------------------- Annual average (life of fund) 10.22 9.79 - -------------------------------------------------- Data is historical. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns at NAV do not reflect a sales charge of 5.25%. For the most recent month-end performance, visit www.putnaminvestments.com. For a portion of the period, this fund limited expenses, without which returns would have been lower. A short-term trading fee of up to 2% may apply. FUND PROFILE Putnam International Equity Fund seeks capital appreciation by investing primarily in common stocks of companies outside the United States. Without a predetermined bias toward growth or value stocks, the fund targets large and midsize companies priced below what we believe they are worth. It may be suitable for investors seeking capital appreciation and willing to accept the risks of investing in international markets. Market overview International markets performed well and outperformed the U.S. market from July 1 through December 31. Overall, the global economy shifted to a lower gear, though conditions varied across regions. Among developed markets, Continental Europe had modest, but slightly accelerating economic growth while the United Kingdom and Japan slowed. Among developing markets, South Korea began to slow from a 5% pace of economic growth. China's monetary authorities moderated the country's breakneck expansion, but it still achieved a growth rate of 9.5% in the final months of 2004. Other Asian markets, including India, as well as much of Latin America, continued to expand at a healthy pace. Most non-U.S. economies, both developed and developing, are also in quite stable condition in terms of trade and current account balances. The somewhat slower pace of global growth influenced the performance of different sectors. As demand for energy and construction materials peaked, stocks in the basic materials and energy sectors benefited from higher commodity prices, but may have also reached their peak levels for this phase of the global economic cycle. Financial stocks, which tend to be hurt by rising inflationary pressures, performed well as inflation and interest rates turned out to be fairly stable during the period. Consumer cyclical stocks underperformed as consumer spending subsided, particularly in Europe and North America. - ------------------------------------------------------------------------------- MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 12/31/04 - ------------------------------------------------------------------------------- Equities - ------------------------------------------------------------------------------- MSCI EAFE Index (international stocks) 15.00% - ------------------------------------------------------------------------------- Russell 1000 Index (large-company stocks) 7.81% - ------------------------------------------------------------------------------- Russell 2000 Index (stocks of small and midsize companies) 10.83% - ------------------------------------------------------------------------------- S&P 500 Index (broad stock market) 7.19% - ------------------------------------------------------------------------------- Bonds - ------------------------------------------------------------------------------- Lehman Aggregate Bond Index (broad bond market) 4.18% - ------------------------------------------------------------------------------- Lehman Government Bond Index (U.S. Treasury and agency securities) 3.61% - ------------------------------------------------------------------------------- JP Morgan Global High Yield Index (global high-yield corporate bonds) 9.06% - ------------------------------------------------------------------------------- Citigroup World Government Bond Index (global government bonds) 12.06% - ------------------------------------------------------------------------------- These indexes provide an overview of performance in different market sectors for the six months ended 12/31/04. - ------------------------------------------------------------------------------- Strategy overview In constructing the portfolio, we emphasized what we considered to be high-quality companies we believed could generate high levels of free cash flow. In our opinion, these companies' excellent cost controls will enable them to maintain their earnings growth as rising interest rates squeeze corporate finances, even as consumer spending slackens. During the period, interest-rate increases by the U.S. Federal Reserve Board began to slow global growth, primarily because higher rates depress growth in U.S. demand for imports. We had few strong views about markets and sectors from a top-down perspective, but our stock selection resulted in several noteworthy overweights and underweights relative to the benchmark index. The fund had underweight exposure to the United Kingdom and Japan, which are the two largest country weightings in our benchmark. Our research convinced us that most stocks in these markets had valuations that already reflected their earnings potential. In particular, we considered many British and Japanese financial stocks to be fairly expensive. A byproduct of avoiding these stocks was the portfolio's underweight exposure to the financial sector. In France we found companies across many industries that are taking steps to cut costs; by owning many of these we kept an overweight to France. The portfolio was overweight in Switzerland relative to the benchmark because of our positive view of Swiss pharmaceutical stocks. Developing economies, especially India and South Korea, were also overweighted because of our positive view of their potential. [GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY WEIGHTINGS COMPARED] TOP COUNTRY WEIGHTINGS COMPARED as of 6/30/04 as of 12/31/04 Japan 19.5% 20.8% United Kingdom 20.3% 16.6% Switzerland 14.9% 12.7% France 10.4% 12.0% Germany 4.7% 4.2% Footnote reads: This chart shows how the fund's top weightings have changed over the last six months. Weightings are shown as a percentage of net assets. Holdings will vary over time. How fund holdings affected performance The fund's position in Vodafone Group of the United Kingdom significantly contributed to results. This stock, and the European telecommunications sector in general, have been recovering from depressed levels reached earlier this year when investors lowered their estimates for growth in wireless telephone service. These concerns have eased recently. We favor Vodafone because it is uniquely positioned with operations across all of Europe, North America, and Asia. It is well managed and generates significant amounts of cash. One of the fund's largest positions in the energy sector, Total, a French oil and petrochemicals company, also shares a combination of excellent management and strong cash flow. It performed in line with the overall market. While it remains a large fund holding, we took profits on a portion of the position during the period because we forecast a lower price for oil in the coming year. Taking the profits before this decline occurs should help to lower the fund's risk exposure, in our view. The South Korean diversified electronics manufacturer Samsung Electronics had disappointing results in the period. We have discussed Samsung in previous reports. We believe it is a top competitor in many areas, such as semiconductors, liquid crystal display screens, and wireless handsets, and is more attractively valued than its global competitors. Nevertheless, the stock could not resist the negative effects of weakness in the semiconductor industry and a downturn in the Korean market. We trimmed the fund's position in the stock, noting that it might come under pressure. We continue to hold a position because we still regard Samsung as an attractive company for the long term, but it could be vulnerable to declines in the short term. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS AS OF 12/31/04] TOP INDUSTRY WEIGHTINGS AS OF 12/31/04 Banking 14.6% Telecommunications 9.5% Pharmaceuticals 7.7% Oil and gas 7.1% Automotive 5.9% Footnote reads: This chart shows how the fund's top weightings have changed over the last six months. Weightings are shown as a percentage of net assets. Holdings will vary over time. We added to an existing position in Toyota Motors of Japan during the period. The stock's price has been flat over the past six months because the U.S. dollar was weak, which reduces the company's earnings from sales in the United States. We saw this as an opportunity to build a larger position while the stock remained attractively valued. In our analysis, Toyota is a dominant global competitor in the auto industry and continues to expand its market share, which will help its future earnings and cash flow. [GRAPHIC OMITTED: TOP HOLDINGS] TOP HOLDINGS (Percent of fund's net assets as of 12/31/04) 1 Vodafone Group PLC (4.0%) United Kingdom Telecommunications 2 Total SA (3.6%) France Oil and gas 3 Toyota Motor Corp. (3.1%) Japan Automotive 4 Barclays PLC (2.2%) United Kingdom Banking 5 Novartis AG (2.1%) Switzerland Pharmaceuticals 6 Canon, Inc. (2.0%) Japan Office equipment and supplies 7 Roche Holding AG (2.0%) Switzerland Pharmaceuticals 8 Royal Bank of Scotland Group PLC (1.8%) United Kingdom Banking 9 UBS AG (1.7%) Switzerland Investment banking/brokerage 10 Diageo PLC (1.6%) United Kingdom Beverage Footnote reads: The fund's holdings will change over time. In Switzerland, the portfolio held two pharmaceutical stocks, Roche and Novartis, which advanced during the period but lagged the fund's benchmark. Drug companies around the world struggled during the semiannual period when two large U.S. companies, Merck and Pfizer (which the fund does not own), both announced major problems with profitable products. We believe that the fact that Roche and Novartis both advanced for the period reflects their higher quality. European pharmaceutical companies are better positioned than their U.S. counterparts, in our view, because they have invested more heavily in new drug development recently. As a result, they have better product pipelines and fewer drugs facing near-term patent expirations. Please note that all holdings discussed in this report are subject to review in accordance with the fund's investment strategy and may vary in the future. The outlook for your fund The following commentary reflects anticipated developments that could affect your fund over the next six months, as well as your management team's plans for responding to them. As we begin the second half of the fund's 2005 fiscal year, we see greater challenges facing stocks, but still believe that international markets offer some of the best opportunities currently available. Since international stocks generally have attractive valuations, we believe that they have room to appreciate. We also see much less chance of rising interest rates in international markets than we do in the United States. However, we plan to continue emphasizing high-quality companies that can manage their costs to achieve earnings as growth opportunities narrow. Economic conditions are sluggish in Europe and Japan. Exports to the United States are under pressure because the dollar is weak, U.S. interest rates are increasing, and U.S. consumers are heavily in debt. Since Japan has underperformed in recent months as China, its fastest-growing trading partner, has been experiencing slower growth, we have been adding selectively to Japanese stocks with attractive valuations. We also continue to find promising economic conditions in emerging markets, where growth is solid and financial conditions, such as government budgets, international trade, and current accounts, remain balanced. The portfolio has overweight exposure to several of the emerging markets where we have found stocks with attractive relative valuations. In terms of sectors, we are finding the most opportunities in health care, industrials, and select financials. We expect once again to see our stock selections, rather than country or sector weightings, be the main driver of performance. We believe that the large, high-quality companies the fund favors have the potential to outperform as interest rates increase and put pressure on companies with weaker business models. The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice. 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. The fund invests some or all of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Your fund's management Your fund is managed by the members of the Putnam International Core Team. Joshua Byrne and Simon Davis are the Portfolio Leaders, and Stephen Oler, Mark Pollard, and George Stairs are Portfolio Members of your fund. The Portfolio Leaders and Portfolio Members coordinate the team's management of the fund. For a complete listing of the members of the Putnam International Core Team, including those who are not Portfolio Leaders or Portfolio Members of your fund, visit Putnam's Individual Investor Web site at www.putnaminvestments.com. Fund ownership The table below shows how much the fund's current Portfolio Leaders and Portfolio Members have invested in the fund (in dollar ranges). Information shown is for the current and prior year ended December 31.
- ------------------------------------------------------------------------------------------------------------- FUND PORTFOLIO LEADERS AND PORTFOLIO MEMBERS - ------------------------------------------------------------------------------------------------------------- $1 - $10,001 - $50,001- $100,001 - $500,001 - $1,000,001 Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over - ------------------------------------------------------------------------------------------------------------- Joshua Byrne 2004 * - ------------------------------------------------------------------------------------------------------------- Portfolio Leader 2003 * - ------------------------------------------------------------------------------------------------------------- Simon Davis 2004 * - ------------------------------------------------------------------------------------------------------------- Portfolio Leader 2003 * - ------------------------------------------------------------------------------------------------------------- Stephen Oler 2004 * - ------------------------------------------------------------------------------------------------------------- Portfolio Member 2003 * - ------------------------------------------------------------------------------------------------------------- Mark Pollard 2004 * - ------------------------------------------------------------------------------------------------------------- Portfolio Member N/A - ------------------------------------------------------------------------------------------------------------- George Stairs 2004 * - ------------------------------------------------------------------------------------------------------------- Portfolio Member 2003 * - ------------------------------------------------------------------------------------------------------------- N/A indicates the individual was not a Portfolio Leader or Portfolio Member as of 12/31/03.
Other Putnam funds managed by the Portfolio Leaders and Portfolio Members Joshua Byrne is also a Portfolio Member of Putnam Europe Equity Fund. Mark Pollard is also a Portfolio Leader of Putnam Europe Equity Fund. George Stairs is also a Portfolio Member of Putnam International Growth and Income Fund. Joshua Byrne, Simon Davis, Stephen Oler, Mark Pollard, and George Stairs may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate. Changes in your fund's Portfolio Leaders and Portfolio Members During the year ended December 31, 2004, Joshua Byrne and Simon Davis became Portfolio Leaders of your fund, and Portfolio Member Mark Pollard joined your fund's management team. Fund ownership The table below shows how much the members of Putnam Investments' Executive Board have invested in the fund (in dollar ranges). Information shown is for the current and prior year ended December 31.
- -------------------------------------------------------------------------------------------------- PUTNAM EXECUTIVE BOARD - -------------------------------------------------------------------------------------------------- $1 - $10,001 - $50,001- $100,001 Year $0 $10,000 $50,000 $100,000 and over - -------------------------------------------------------------------------------------------------- Philippe Bibi 2004 * - -------------------------------------------------------------------------------------------------- Chief Technology Officer 2003 * - -------------------------------------------------------------------------------------------------- John Boneparth 2004 * - -------------------------------------------------------------------------------------------------- Head of Global Institutional Mgmt 2003 * - -------------------------------------------------------------------------------------------------- Kevin Cronin 2004 * - -------------------------------------------------------------------------------------------------- Deputy Head of Investments N/A - -------------------------------------------------------------------------------------------------- Charles Haldeman, Jr. 2004 * - -------------------------------------------------------------------------------------------------- President and CEO 2003 * - -------------------------------------------------------------------------------------------------- Amrit Kanwal 2004 * - -------------------------------------------------------------------------------------------------- Chief Financial Officer N/A - -------------------------------------------------------------------------------------------------- Steven Krichmar 2004 * - -------------------------------------------------------------------------------------------------- Chief of Operations N/A - -------------------------------------------------------------------------------------------------- Francis McNamara, III 2004 * - -------------------------------------------------------------------------------------------------- General Counsel N/A - -------------------------------------------------------------------------------------------------- Richard Monaghan 2004 * - -------------------------------------------------------------------------------------------------- Head of Retail Management 2003 * - -------------------------------------------------------------------------------------------------- Stephen Oristaglio 2004 * - -------------------------------------------------------------------------------------------------- Head of Investments 2003 * - -------------------------------------------------------------------------------------------------- Richard Robie, III 2004 * - -------------------------------------------------------------------------------------------------- Chief Administrative Officer N/A - -------------------------------------------------------------------------------------------------- N/A indicates the individual was not a member of Putnam's Executive Board as of 12/31/03.
Performance summary This section shows your fund's performance during the first half of its fiscal year, which ended December 31, 2004. Performance should always be considered in light of a fund's investment strategy. Data represents past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. For the most recent month-end performance, please visit www.putnaminvestments.com.
- --------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 12/31/04 - --------------------------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R (inception dates) (2/28/91) (6/1/94) (7/26/99) (12/1/94) (1/21/03) - --------------------------------------------------------------------------------------------------------------------------- NAV POP NAV CDSC NAV CDSC NAV POP NAV - --------------------------------------------------------------------------------------------------------------------------- 6 months 15.07% 9.01% 14.67% 9.67% 14.64% 13.64% 14.80% 10.80% 14.94% - --------------------------------------------------------------------------------------------------------------------------- 1 year 16.18 10.11 15.30 10.30 15.32 14.32 15.59 11.54 15.89 - --------------------------------------------------------------------------------------------------------------------------- 5 years -9.86 -14.58 -13.16 -14.73 -13.14 -13.14 -12.06 -15.15 -10.92 Annual average -2.05 -3.10 -2.78 -3.14 -2.78 -2.78 -2.54 -3.23 -2.29 - --------------------------------------------------------------------------------------------------------------------------- 10 years 168.70 154.62 149.48 149.48 149.39 149.39 156.16 147.12 162.21 Annual average 10.39 9.80 9.57 9.57 9.57 9.57 9.86 9.47 10.12 - --------------------------------------------------------------------------------------------------------------------------- Annual average (life of fund) 10.22 9.79 9.36 9.36 9.40 9.40 9.65 9.37 9.95 - ---------------------------------------------------------------------------------------------------------------------------
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 5.25% 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. Class R share returns have no initial sales charge or CDSC. Performance for class B, C, M, and R 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. A 2% short-term trading fee may be applied to shares exchanged or sold within 5 days of purchase. For a portion of the period, this fund limited expenses, without which returns would have been lower. - --------------------------------------------------------------------- COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/04 - --------------------------------------------------------------------- Lipper International Large-Cap Core MSCI EAFE Funds category Index average* - --------------------------------------------------------------------- 6 months 15.00% 13.26% - --------------------------------------------------------------------- 1 year 20.25 15.82 - --------------------------------------------------------------------- 5 years -5.55 -17.19 Annual average -1.13 -3.89 - --------------------------------------------------------------------- 10 years 72.73 78.52 Annual average 5.62 5.74 - --------------------------------------------------------------------- Annual average (life of fund) 5.60 6.93 - --------------------------------------------------------------------- Index and Lipper results should be compared to fund performance at net asset value. * Over the 6-month and 1-, 5-, and 10-year periods ended 12/31/04, there were 201, 200, 127, and 45 funds, respectively, in this Lipper category.
- ----------------------------------------------------------------------------------------------- PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 12/31/04 - ----------------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R - ----------------------------------------------------------------------------------------------- Distributions (number) 1 1 1 1 1 - ----------------------------------------------------------------------------------------------- Income $0.325 $0.159 $0.139 $0.200 $0.296 - ----------------------------------------------------------------------------------------------- Capital gains -- -- -- -- -- - ----------------------------------------------------------------------------------------------- Total $0.325 $0.159 $0.139 $0.200 $0.296 - ----------------------------------------------------------------------------------------------- Share value: NAV POP NAV NAV NAV POP NAV - ----------------------------------------------------------------------------------------------- 6/30/04 $20.86 $22.02 $20.07 $20.44 $20.51 $21.25 $20.77 - ----------------------------------------------------------------------------------------------- 12/31/04 23.67 24.98 22.85 23.29 23.34 24.19 23.57 - -----------------------------------------------------------------------------------------------
Understanding your fund's expenses As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund limited these expenses; had it not done so, expenses would have been higher. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund's prospectus or talk to your financial advisor. Review your fund's expenses The table below shows the expenses you would have paid on a $1,000 investment in Putnam International Equity Fund from July 1, 2004, to December 31, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
- ----------------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming actual returns for the 6 months ended 12/31/04 - ----------------------------------------------------------------------------------- Class A Class B Class C Class M Class R - ----------------------------------------------------------------------------------- Expenses paid per $1,000* $6.56 $10.61 $10.60 $9.26 $7.91 - ----------------------------------------------------------------------------------- Ending value (after expenses) $1,150.70 $1,146.70 $1,146.40 $1,148.00 $1,149.40 - ----------------------------------------------------------------------------------- * Expenses for each share class are calculated using the fund's annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 12/31/04. The expense ratio may differ for each share class (see the table at the bottom of the next page). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Estimate the expenses you paid To estimate the ongoing expenses you paid for the six months ended December 31, 2004, use the calculation method below. To find the value of your investment on July 21, 2004, go to www.putnaminvestments.com and log on to your account. Click on the "Transaction History" tab in your Daily Statement and enter 07/01/2004 in both the "from" and "to" fields. Alternatively, call Putnam at 1-800-225-1581. - ----------------------------------------------------------------------------- HOW TO CALCULATE THE EXPENSES YOU PAID - ----------------------------------------------------------------------------- Total Value of your Expenses paid expenses investment on 7/1/04 [DIV] $1,000 X per $1,000 = paid - ----------------------------------------------------------------------------- Example Based on a $10,000 investment in class A shares of your fund. - ----------------------------------------------------------------------------- $10,000 [DIV] $1,000 X $6.56 (see table above) = $65.60 - ----------------------------------------------------------------------------- Comparing your fund's expenses with those of other funds Using the SEC's method to compare expenses The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund's expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period. - ------------------------------------------------------------------------------ EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming a hypothetical 5% annualized return for the 6 months ended 12/31/04 - ------------------------------------------------------------------------------ Class A Class B Class C Class M Class R - ------------------------------------------------------------------------------ Expenses paid per $1,000* $6.16 $9.96 $9.96 $8.69 $7.43 - ------------------------------------------------------------------------------ Ending value (after expenses) $1,019.11 $1,015.32 $1,015.32 $1,016.59 $1,017.85 - ------------------------------------------------------------------------------ * Expenses for each share class are calculated using the fund's annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 12/31/04. The expense ratio may differ for each share class (see the table at the bottom of this page). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year. Using industry averages to compare expenses You can also compare your fund's expenses with industry averages, as determined by Lipper, an independent fund-rating agency that ranks funds relative to others that Lipper considers to have similar investment styles or objectives. The expense ratio for each share class shown below indicates how much of your fund's net assets have been used to pay ongoing expenses during the period. - ------------------------------------------------------------------------------ EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA - ------------------------------------------------------------------------------ Class A Class B Class C Class M Class R - ------------------------------------------------------------------------------ Your fund's annualized expense ratio 1.21% 1.96% 1.96% 1.71% 1.46% - ------------------------------------------------------------------------------ Average annualized expense ratio for Lipper peer group+ 1.66% 2.41% 2.41% 2.16% 1.91% - ------------------------------------------------------------------------------ + Average of the expenses of front-end load funds viewed by Lipper as having the same investment classification or objective as the fund, as of 12/31/04, calculated in accordance with Lipper's standard reporting methodology for comparing expenses within a given universe (excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses). To facilitate comparison, Putnam has adjusted this average to reflect the 12b-1 fees carried by each class of shares. The peer group may include funds that are significantly larger or smaller than the fund, which may limit the comparability of the fund's expenses to the Lipper average. Understanding your fund's portfolio turnover Putnam funds are actively managed by teams of experts who buy and sell securities based on intensive analysis of companies, industries, economies, and markets. Portfolio turnover is a measure of how often a fund's managers buy and sell securities for your fund. A portfolio turnover of 100%, for example, means that the managers sold and replaced securities valued at 100% of a fund's assets within a one-year period. Funds with high turnover may be more likely to generate capital gains and dividends that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transaction costs, which may detract from performance. - ------------------------------------------------------------------------------ TURNOVER COMPARISONS percentage of holdings that change every year - ------------------------------------------------------------------------------ 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------ Putnam International Equity Fund 69% 53% 42% 74% 100% - ------------------------------------------------------------------------------ Lipper International Large-Cap Core Funds category average 83% 89% 77% 85% 79% - ------------------------------------------------------------------------------ Turnover data for the fund is calculated based on the fund's fiscal-year period, which ends on June 30. Turnover data for the fund's Lipper category is calculated based on the average of the turnover of each fund in the category for its fiscal year ended during the indicated year. Fiscal years vary across funds in the Lipper category, which may limit the comparability of the fund's portfolio turnover rate to the Lipper average. Comparative data for 2004 is based on information available as of 12/31/04. Risk comparison As part of new initiatives to enhance disclosure, we are including a risk comparison to help you understand how your fund compares with other funds. The comparison utilizes a risk measure developed by Morningstar, an independent fund-rating agency. This risk measure is referred to as the fund's Overall Morningstar Risk. [GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK] MORNINGSTAR [REGISTRATION MARK] RISK Fund's Overall Morningstar Risk 2.80 Int'l stock fund average 3.48 0% INCREASING RISK 100% Your fund's Overall Morningstar Risk is shown alongside that of the average fund in its broad asset class, as determined by Morningstar. The risk bar broadens the comparison by translating the fund's Overall Morningstar Risk into a percentile, which is based on the fund's ranking among all funds rated by Morningstar as of December 31, 2004. A higher Overall Morningstar Risk generally indicates that a fund's monthly returns have varied more widely. Morningstar determines a fund's Overall Morningstar Risk by assessing variations in the fund's monthly returns -- with an emphasis on downside variations over 3-, 5-, and 10-year periods, if available. Those measures are weighted and averaged to produce the fund's Overall Morningstar Risk. The information shown is provided for the fund's class A shares only; information for other classes may vary. Overall Morningstar Risk is based on historical data and does not indicate future results. Morningstar does not purport to measure the risk associated with a current investment in a fund, either on an absolute basis or on a relative basis. Low Overall Morningstar Risk does not mean that you cannot lose money on an investment in a fund. Copyright 2004 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. 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. NAV is calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class. 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 5.25% 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). Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans. Comparative indexes Citigroup World Government Bond Index is an unmanaged index of government bonds from 14 countries. JP Morgan Global High Yield Index is an unmanaged index used to mirror the investable universe of the U.S. dollar global high-yield corporate debt market of both developed and emerging markets. Lehman Aggregate Bond Index is an unmanaged index used as a general measure of U.S. fixed-income securities. Lehman Government Bond Index is an unmanaged index of U.S. Treasury and agency securities. Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged index of international stocks from Europe, Australasia, and the Far East. Russell 1000 Index is an unmanaged index of the largest 1,000 companies in the Russell 3000 Index. Russell 2000 Index is an unmanaged index of common stocks that generally measure performance of small to midsize companies within the Russell 3000 Index. S&P 500 Index is an unmanaged index of common stock performance. Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index. Lipper is a third-party industry ranking entity that ranks funds (without sales charges) with similar current investment styles or objectives as determined by Lipper. Lipper category averages reflect performance trends for funds within a category and are based on results at net asset value. Trustee approval of management contract General conclusions The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of each fund's management contract with Putnam Management. In this regard the Board of Trustees, with the assistance of its Contract Committee consisting solely of Independent Trustees, requests and evaluates all information it deems reasonably necessary in the circumstances. Over the course of several months beginning in March and ending in June of 2004, the Contract Committee reviewed the information provided by Putnam Management and other information developed with the assistance of the Board's independent counsel and independent staff. The Contract Committee reviewed and discussed key aspects of this information with all of the Independent Trustees. Upon completion of this review, the Contract Committee recommended and the Independent Trustees approved the continuance of your fund's contract, effective July 1, 2004. This approval was based on the following conclusions: * That the fee schedule currently in effect for your fund represents reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such service, and * That such fee schedule represents an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels. These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees' deliberations are described below. Model fee schedules and categories; total expenses The Trustees, working in cooperation with Putnam Management, have developed and implemented a series of model fee schedules for the Putnam funds designed to ensure that each fund's management fee is consistent with the fees for similar funds in the Putnam complex and compares favorably with fees paid by competitive funds sponsored by other advisors. The Trustees reviewed the model fee schedule currently in effect for the fund, including fee levels and breakpoints, and the assignment of the fund to a particular fee category under this structure. The Trustees also reviewed comparative fee and expense information for competitive funds. The Trustees concluded that no changes should be made in the fund's current fee schedule at this time. The Trustees noted that expense ratios for a number of Putnam funds had been increasing recently as a result of declining net assets and the natural operation of fee breakpoints. They noted that such expense ratio increases were currently being controlled by expense limitations implemented in January 2004. They also noted that the competitive landscape regarding mutual fund fees may be changing as a result of fee reductions accepted by various other fund groups in connection with recent regulatory settlements and greater focus on fees and expenses in the mutual fund industry generally. The Trustees indicated an intention to monitor these developments closely. Economies of scale As noted above, the Trustees concluded that the fee schedule currently in effect for your fund represents an appropriate sharing of economies of scale at current asset levels. The Trustees indicated their intention to continue their ongoing consideration of economies of scale and in particular to consider further the possible operation of such economies in the event that a significant recovery in the equity markets or net fund sales were to raise asset levels substantially above current levels. In this regard, the Trustees noted that they had reviewed data relating to the substantial increase in asset levels of the Putnam funds that occurred during the years leading up to the market peak in 2000, the subsequent decline in assets and the resulting impact on revenues and expenses of Putnam Management. The Trustees also noted that recent declines in net assets in many Putnam funds, together with significant changes in the cost structure of Putnam Management have altered the economics of Putnam Management's business in significant ways. The Trustees concluded that they would monitor these changes carefully and evaluate the resulting impact on Putnam Management's economics and the sharing of economies of scale between the parties. Investment performance The quality of the investment process provided by Putnam Management represented a major factor in the Trustees' evaluation of the quality of services provided by Putnam Management under the Management Contracts. The Trustees recognized that a high quality investment process -- as measured by the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel -- does not guarantee favorable investment results for every fund in every time period. The Trustees considered the investment performance of each fund over multiple time periods and considered information comparing the fund's performance with various benchmarks and with the performance of competitive funds. The Trustees noted the satisfactory investment performance of many Putnam funds. They also noted the disappointing investment performance of certain funds in recent years and continued to discuss with senior management of Putnam Management the factors contributing to such under-performance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes in its investment personnel and processes and in the fund product line in an effort to address areas of underperformance. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these changes and to evaluate whether additional remedial changes are warranted. As a general matter, the Trustees concluded that consultation between the Trustees and Putnam Management represents the most effective way to address investment performance problems. The Trustees believe that investors in the Putnam funds and their financial advisors have, as a general matter, effectively placed their trust in the Putnam organization, under the supervision of the funds' Trustees, to make appropriate decisions regarding the management of the funds. The Trustees believe that the termination of the Management Contract and engagement of a new investment adviser for under-performing funds, with all the attendant disruptions, would not serve the interests of fund shareholders at this time and would not necessarily provide any greater assurance of improved investment performance. Brokerage and soft-dollar allocations; other benefits The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the Management Contract with your fund. These include principally benefits related to brokerage and soft-dollar allocations, which pertain mainly to funds investing in equity securities. The Trustees believe that soft-dollar credits and other potential benefits associated with the allocation of fund brokerage represent assets of the funds that should be used for the benefit of fund shareholders. The Trustees noted recent trends in the allocation of fund brokerage, including commission costs, the allocation of brokerage to firms that provide research services to Putnam Management, and the sources and application of available soft-dollar credits. Effective December 31, 2003, reflecting a decision made by the Trustees earlier that year, Putnam Management ceased allocating brokerage in connection with the sale of fund shares. In addition, in preparing its budget for commission allocations in 2004, Putnam Management voluntarily reduced substantially the allocation of brokerage commissions to acquire research services from third-party service providers. In light of evolving best practices in the mutual fund industry, the Trustees concluded that this practice should be further curtailed and possibly eliminated in the near future. The Trustees indicated that they would continue to monitor the allocation of the funds' brokerage to ensure that the principle of "best price and execution" remains paramount in the portfolio trading process. Comparison of retail and institutional fee schedules The information examined by the Trustees as part of the annual contract reviews included information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans and college endowments. This information included comparison of such fees with fees charged to the Putnam funds, as well as a detailed assessment of the differences in the services provided to these two types of clients. The Trustees devoted special attention to these issues and reviewed recent articles by critics of mutual fund fees, articles by the ICI defending such fee differences, and relevant guidance provided by decisions of the courts. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflects to a substantial degree historical competitive forces operating in separate market places. In reaching their conclusions, the Trustees considered the fact that fee rates across all asset sectors are higher on average for mutual funds than for institutional clients, and also considered the differences between the services that Putnam provides to the Putnam funds and those that it provides to institutional clients of the firm. Settlement of regulatory charges related to market timing Finally, in reaching their conclusions, the Trustees considered all matters pertinent to the administrative charges filed against Putnam Management by the SEC and the Commonwealth of Massachusetts in October 2003 relating to market timing, the firm's settlement of those charges, and the conclusions and recommendations of the Trustees' Audit and Pricing Committee based on its review of these matters. The Trustees considered the actions taken by the owner of Putnam Management and its new senior management to terminate or discipline the individuals involved, to implement new compliance systems, to indemnify the funds against all costs and liabilities related to these matters, and otherwise to ensure that the interests of the funds and their shareholders are fully protected. The Trustees noted that, in addition to the settlements of the regulatory charges which will provide comprehensive restitution for any losses suffered by shareholders, the new senior management of Putnam Management has moved aggressively to control expense ratios of funds affected by market timing, to reduce charges to new investors, to improve disclosure of fees and expenses, and to emphasize the paramount role of investment performance in achieving shareholders' investment goals. Other information for shareholders A note about duplicate mailings In response to investors' requests, the SEC has modified mailing regulations for proxy statements, 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 would prefer to receive your own copy, please call Putnam at 1-800-225-1581. Proxy voting Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds' proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004, are available on the Putnam Individual Investor Web site, www.putnaminvestments.com/individual, and on the SEC's Web site, www.sec.gov. If you have questions about finding forms on the SEC's Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds' proxy voting guidelines and procedures at no charge by calling Putnam's Shareholder Services at 1-800-225-1581. Fund portfolio holdings For periods ending on or after July 9, 2004, the fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In addition, the fund's Forms N-Q may be reviewed and copied at the SEC's public reference room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC's Web site or the operation of the public reference room. 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 the fund's net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the 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, 2004 (Unaudited) Common stocks (98.0%) (a) Number of shares Value Australia (1.0%) - ------------------------------------------------------------------------------- 3,560,661 Amcor, Ltd. $20,510,102 478,501 Australia & New Zealand Banking Group, Ltd. 7,721,275 26,964 Macquarie Bank, Ltd. 982,623 27,691 Publishing & Broadcasting, Ltd. 379,775 496,261 QBE Insurance Group, Ltd. 5,969,918 55,848 Rinker Group, Ltd. 466,130 126,809 Rio Tinto, Ltd. 3,887,754 584,898 Virgin Blue Holdings, Ltd. (NON) 852,595 238,571 Westpac Banking Corp. 3,644,008 1,833,200 Woolworths, Ltd. 21,564,549 -------------- 65,978,729 Austria (0.6%) - ------------------------------------------------------------------------------- 1,558,666 Telekom Austria AG 29,551,442 640,920 Telekom Austria AG 144A 12,151,487 -------------- 41,702,929 Belgium (0.6%) - ------------------------------------------------------------------------------- 941,915 Interbrew SA 36,535,672 53,087 KBC Bancassurance Holdings 4,076,506 24,068 Umicore 2,265,224 -------------- 42,877,402 Bermuda (--%) - ------------------------------------------------------------------------------- 326,000 Yue Yuen Industrial (Hldgs.), Ltd. 897,563 Brazil (1.3%) - ------------------------------------------------------------------------------- 309,095 Banco Itau SA ADR (S) 23,234,671 3,025 Bradespar SA 144A (Preference) 99,694 19,020 Companhia Vale do Rio Doce (CVRD) ADR 551,770 1,344,555 Petroleo Brasileiro SA ADR 53,486,398 293,105 Tele Norte Leste Participacoes SA ADR 4,944,681 129,391 Unibanco-Uniao de Bancos Brasileiros SA GDR (S) 4,104,283 -------------- 86,421,497 Canada (1.2%) - ------------------------------------------------------------------------------- 20,237 ATI Technologies, Inc. (NON) 392,948 17,550 Bank of Montreal 846,221 19,500 Barrick Gold Corp. 472,076 32,005 Canadian Imperial Bank of Commerce 1,929,811 567,322 Canadian National Railway Co. 34,605,742 823,032 Canadian Natural Resources, Ltd. 35,211,946 26,076 Celestica, Inc. (NON) 367,881 10,676 CI Fund Management, Inc. 160,510 15,878 Dofasco, Inc. 601,771 15,209 Imperial Oil, Ltd. (Toronto Exchange) 903,348 1,530 ING Canada, Inc. 144A (NON) 37,436 5,319 Magna International, Inc. Class A 437,677 30,311 Manulife Financial Corp. 1,401,811 5,477 National Bank of Canada 226,597 11,718 PetroKazakhstan Inc. Class A 435,598 13,262 Power Financial Corp. 354,163 4,547 Precision Drilling Corp. (NON) 286,660 3,520 Shell Canada, Ltd. 235,049 29,136 Shoppers Drug Mart Corp. (NON) 906,502 26,655 Sun Life Financial Services of Canada, Inc. 893,395 5,977 Teck Corp. 184,215 42,403 Telus Corp. 1,229,719 22,700 Western Oil Sands, Inc. (NON) 793,050 -------------- 82,914,126 Cayman Islands (0.6%) - ------------------------------------------------------------------------------- 141,000 Hutchinson Telecommunications International, Ltd. (NON) 126,985 544,836 XL Capital, Ltd. Class A 42,306,515 -------------- 42,433,500 China (0.6%) - ------------------------------------------------------------------------------- 100,246,000 China Telecom Corp., Ltd. 36,757,469 834,000 Shanghai Forte Land Co., Ltd. 292,393 -------------- 37,049,862 Denmark (0.7%) - ------------------------------------------------------------------------------- 1,640,140 Danske Bank A/S 50,283,918 Egypt (--%) - ------------------------------------------------------------------------------- 11,655 Orascom Telecom Holding SAE (NON) 246,154 19,128 Orascom Telecom Holding SAE 144A (NON) 403,983 -------------- 650,137 Finland (0.2%) - ------------------------------------------------------------------------------- 242,494 Nokia OYJ 3,829,645 93,569 Orion-Yhtymae OYJ Class B 1,514,590 490,102 Sampo OYJ Class A 6,767,552 -------------- 12,111,787 France (12.0%) - ------------------------------------------------------------------------------- 472,584 Accor SA 20,688,126 16,198 Air Liquide 2,993,999 40,557 Autoroutes du Sud de la France (ASF) 2,039,478 1,075,821 BNP Paribas SA 77,932,506 32,508 Christian Dior SA 2,211,290 2,579,887 Credit Agricole SA 77,840,402 1,337,622 France Telecom SA 44,285,556 1,271,582 France Telecom SA 144A 42,099,125 26,768 Groupe Danone 2,472,047 130,588 Lagardere SCA 9,424,302 208,430 LVMH Moet Hennessy Louis Vuitton SA 15,962,671 25,355 Pernod-Ricard SA 3,883,640 596,992 Renault SA 49,939,936 18,261 Sanofi-Synthelabo SA 1,459,329 46,891 Schneider Electric SA 3,262,953 891,217 Societe Television Francaise I 29,009,510 331,446 Societes Des Autoroutes Paris-Rhin-Rhone (NON) 20,023,314 61,805 Societes Des Autoroutes Paris-Rhin-Rhone 144A (NON) 3,733,763 9,650 Thales SA 463,233 1,099,239 Total SA 240,081,899 1,658,721 Veolia Environnement 60,033,812 5,956 Vinci SA 799,766 2,469,397 Vivendi Universal SA (NON) 78,836,139 589,042 Vivendi Universal SA 144A 18,805,318 -------------- 808,282,114 Germany (4.2%) - ------------------------------------------------------------------------------- 6,238 Adidas-Salomon AG 1,010,246 313,600 Allianz AG 41,406,667 1,212,041 BASF AG 87,174,318 538,100 Bayerische Motoren Werke (BMW) AG 24,243,646 62,400 Commerzbank AG (NON) 1,286,535 30,950 Deutsche Lufthansa AG (NON) 442,515 361,199 Deutsche Telekom AG (NON) 8,168,669 40,098 E.On AG 3,661,121 494,300 Linde AG 30,842,482 69,934 Metro AG 3,845,614 26,535 Porsche AG (Preferred) 16,830,937 7,967 SAP AG 1,420,627 45,618 Schwarz Pharma AG 2,061,481 734,131 Siemens AG 62,220,154 24,700 ThyssenKrupp AG 543,830 -------------- 285,158,842 Greece (0.8%) - ------------------------------------------------------------------------------- 84,240 EFG Eurobank Ergasias SA 2,894,322 254,146 Hellenic Telecommunication Organization (OTE) SA 4,566,318 745,044 National Bank of Greece SA 24,585,668 459,470 National Bank of Greece SA 144A 15,162,027 133,458 Titan Cement Co. SA 3,954,144 -------------- 51,162,479 Hong Kong (0.5%) - ------------------------------------------------------------------------------- 18,310,500 China Netcom Group Corp. Hong Kong, Ltd. (NON) 24,853,431 507,000 CNOOC, Ltd. 272,332 116,000 Esprit Holdings, Ltd. 701,438 176,000 Hong Kong Electric Holdings, Ltd. 803,849 110,000 Orient Overseas International, Ltd. 416,785 239,000 Swire Pacific, Ltd. 1,998,688 240,500 Wing Hang Bank, Ltd. 1,686,340 -------------- 30,732,863 Hungary (0.1%) - ------------------------------------------------------------------------------- 11,125 MOL Magyar Olaj- es Gazipari Right 783,442 240,051 OTP Bank Rt. 7,408,325 -------------- 8,191,767 India (1.1%) - ------------------------------------------------------------------------------- 1,861,507 Housing Development Finance Corp., Ltd. 32,844,323 37,940 Infosys Technologies, Ltd. 1,825,349 16,993 Ranbaxy Laboratories, Ltd. 489,752 3,149,236 Reliance Industries, Ltd. 38,716,310 84,641 Satyam Computer Services., Ltd. 799,041 -------------- 74,674,775 Ireland (2.1%) - ------------------------------------------------------------------------------- 1,491,603 Allied Irish Banks PLC 31,118,098 2,382,658 Bank of Ireland 39,668,813 2,096,027 CRH PLC 56,119,593 131,282 Depfa Bank PLC 2,207,122 3,988,834 Eircom Group PLC 9,378,718 -------------- 138,492,344 Israel (--%) - ------------------------------------------------------------------------------- 14,109 Teva Pharmaceutical Industries, Ltd. 420,818 14,500 Teva Pharmaceutical Industries, Ltd. ADR 432,970 -------------- 853,788 Italy (4.1%) - ------------------------------------------------------------------------------- 1,021,482 Banca Intesa SPA 4,387,016 3,851,844 ENI SpA 96,429,459 498,379 IntesaBCI SpA 2,397,808 4,970,259 Mediaset SpA 63,024,887 18,638,000 Telecom Italia SpA 76,246,026 5,902,042 UniCredito Italiano SpA 33,930,798 -------------- 276,415,994 Japan (20.8%) - ------------------------------------------------------------------------------- 854,610 Acom Co., Ltd. 63,981,051 1,643,400 Aeon Co., Ltd. 27,430,102 118,400 Aeon Co., Ltd. 144A 1,976,223 43,000 Asahi Glass Co., Ltd. 474,280 88,000 Bridgestone Corp. 1,752,269 92,000 Brother Industries, Ltd. 782,157 2,553,500 Canon, Inc. 137,831,674 11,200 Citizen Electronics Co., Ltd. 590,337 1,176,600 Credit Saison Co., Ltd. 42,837,657 2,927,000 Dai Nippon Printing Co., Ltd. 46,969,136 38,000 Daito Trust Construction Co., Ltd. 1,806,345 122,000 Dowa Mining Co., Ltd. 794,280 12,333 East Japan Railway Co. 68,616,984 50,800 Fuji Photo Film Cos., Ltd. 1,854,485 357 Fuji Television Network, Inc. 773,587 26,400 FUNAI Electric Co., Ltd. 3,277,775 6,100 Hirose Electric Co., Ltd. 713,304 730,000 Hitachi, Ltd. 5,059,053 13,200 Hogy Medical Co., Ltd. 621,025 1,133,300 Honda Motor Co., Ltd. 58,739,122 13,300 Hoya Corp. 1,502,011 5,998 Japan Tobacco, Inc. 68,498,389 31,000 JFE Holdings, Inc. 885,066 967,000 JGC Corp. 8,844,109 391,000 Joyo Bank, Ltd. (The) 1,908,248 37,300 Kansai Electric Power, Inc. 757,286 27,000 KAO Corp. 690,483 2,926 KDDI Corp. 15,765,271 16,300 Kose Corp. 715,959 558,000 Kubota Corp. 2,766,852 848,300 Lawson, Inc. 31,298,917 313,000 Matsushita Electric Industrial Co. 4,967,672 174,000 Mitsubishi Corp. 2,248,668 7,806 Mitsubishi Tokyo Finance Group, Inc. 79,240,996 2,183,000 Mitsui & Co., Ltd. 19,582,011 126,000 Mitsui Sumitomo Insurance Co., Ltd. 1,094,583 6,245 Mizuho Financial Group, Inc. 31,453,587 23,700 Nidec Corp. 2,889,341 42,000 Nippon Express Co., Ltd. 207,028 294 Nippon Telegraph & Telephone (NTT) Corp. 1,320,059 346,000 Nissan Motor Co., Ltd. 3,762,265 167,700 Nomura Research Institute, Ltd. 15,714,202 5,953,000 Nomura Securities Co., Ltd. 86,810,952 15,800 Noritz Corp. 246,755 8,679 NTT DoCoMo, Inc. 16,011,040 752,400 Omron Corp. 17,956,252 193,000 Onward Kashiyama Co., Ltd. 2,808,814 185,500 Orix Corp. 25,204,100 140,300 Rohm Co., Ltd. 14,516,154 140,000 Sankyo Co., Ltd. 3,163,494 31,500 SECOM Co., Ltd. 1,260,615 172,000 Sekisui House, Ltd. 2,004,568 89,000 Sharp Corp. 1,453,363 503,000 Shin-Etsu Chemical Co. 20,620,791 218,785 SMC Corp. 25,049,761 44,100 Sony Corp. 1,704,597 908,000 Taisho Pharmaceutical Co., Ltd. 19,764,178 118,400 Takeda Chemical Industries, Ltd. 5,963,338 387,920 Takefuji Corp. 26,239,977 61,600 Tokyo Electric Power Co. 1,512,191 12,273,000 Tokyo Gas Co., Ltd. 50,313,909 260,000 TonenGeneral Sekiyu KK 2,367,789 89,000 Toto, Ltd. 849,605 51,000 Toyo Suisan Kaisha, Ltd. 751,684 5,193,500 Toyota Motor Corp. 211,389,898 440,400 Uni-Charm Corp. 21,106,530 6,900 Yamada Denki Co., Ltd. 295,666 2,089,100 Yamanouchi Pharmaceutical Co., Ltd. 81,361,728 -------------- 1,403,721,598 Kenya (--%) - ------------------------------------------------------------------------------- 194,700 Theta Group, Ltd. 633,008 Luxembourg (--%) - ------------------------------------------------------------------------------- 26,936 Arcelor 621,250 Malaysia (--%) - ------------------------------------------------------------------------------- 156,000 Telekom Malaysia Berhad 476,211 Mexico (0.7%) - ------------------------------------------------------------------------------- 11,400 America Movil SA de CV ADR Ser. L 596,790 12,100 Cemex SA de CV ADR 440,682 8,700 Grupo Televisa SA de CV ADR 526,350 1,197,964 Telefonos de Mexico SA de CV (Telmex) ADR Ser. L 45,905,980 113,300 Wal-Mart de Mexico SA de CV Ser. V 389,358 -------------- 47,859,160 Morocco (--%) - ------------------------------------------------------------------------------- 37,660 Maroc Telecom 144A (Casablanca Stock Exchange) (NON) 430,455 Netherlands (2.5%) - ------------------------------------------------------------------------------- 59,385 ASML Holding NV (NON) 953,187 29,524 European Aeronautic Defense and Space Co. 858,297 145,240 IHC Caland NV 9,226,274 336,342 ING Groep NV 10,175,545 681,407 Koninklijke (Royal) KPN NV 6,473,441 658,149 Koninklijke (Royal) Philips Electronics NV 17,451,506 1,023,664 Koninklijke Ahold NV (NON) 7,930,192 389,515 Royal Dutch Petroleum Co. 22,419,660 95,074 Royal Numico NV (NON) 3,428,076 2,568,830 TPG NV 69,756,111 744,407 VNU NV 21,984,753 -------------- 170,657,042 New Zealand (0.1%) - ------------------------------------------------------------------------------- 1,318,859 Telecom Corp. of New Zealand, Ltd. 5,856,130 Norway (0.4%) - ------------------------------------------------------------------------------- 326,540 Norsk Hydro ASA 25,734,751 Poland (0.1%) - ------------------------------------------------------------------------------- 689,722 Powszechna Kasa Oszczednosci Bank Polski SA (NON) 6,406,586 17,300 Powszechna Kasa Oszczednosci Bank Polski SA 144A (NON) 160,694 -------------- 6,567,280 Portugal (--%) - ------------------------------------------------------------------------------- 560,532 Electricidade de Portugal SA 1,698,856 Russia (--%) - ------------------------------------------------------------------------------- 15,100 Lukoil 458,285 1,408 Sberbank RF 691,328 13,016 Unified Energy Systems ADR 361,194 14,300 Vimpel-Communications ADR (NON) 516,802 4,200 Wimm-Bill-Dann Foods ADR (NON) 60,102 -------------- 2,087,711 Singapore (2.3%) - ------------------------------------------------------------------------------- 6,498,648 DBS Group Holdings, Ltd. 64,106,509 4,044,000 Overseas-Chinese Banking Corp. 33,450,156 157,000 SembCorp Industries, Ltd. 155,836 5,961,000 Singapore Airlines, Ltd. 41,636,787 4,828,500 Singapore Press Holdings, Ltd. 13,608,909 -------------- 152,958,197 South Africa (--%) - ------------------------------------------------------------------------------- 45,106 Sappi, Ltd. 665,127 75,474 Standard Bank Investment Corp., Ltd. 882,298 -------------- 1,547,425 South Korea (2.7%) - ------------------------------------------------------------------------------- 11,520 Hyundai Motor Co. 617,679 1,329,761 Hyundai Motor Co. GDR 144A 34,573,786 606,137 Kookmin Bank (NON) 23,716,113 17,710 Korea Electric Power Corp. 459,389 2,670 KT Freetel Co., Ltd. 63,713 20,920 KT&G Corp. 625,518 395,560 LG Electronics, Inc. 24,495,600 2,640 Pohang Iron & Steel Co., Ltd. 476,939 208,166 Samsung Electronics Co., Ltd. 90,598,766 2,138 Samsung Electronics Co., Ltd. GDR 468,222 153,768 SK Telecom Co., Ltd. ADR (S) 3,421,338 -------------- 179,517,063 Spain (2.6%) - ------------------------------------------------------------------------------- 1,599,543 Altadis SA 73,261,741 210,856 Banco Bilbao Vizcaya Argentaria SA 3,739,796 9,170 Cintra Concesiones de Infraestructuras de Transporte SA 144A (NON) 100,701 32,056 Gas Natural SDG SA 991,592 292,730 Gestevision Telecinco SA (NON) 6,039,353 1,140 Gestevision Telecinco SA 144A (NON) 23,520 3,376,034 Iberdrola SA 85,802,478 81,739 Indra Sistemas SA Class A 1,396,420 246,350 Telefonica SA 4,640,526 -------------- 175,996,127 Sweden (3.4%) - ------------------------------------------------------------------------------- 2,324,840 Assa Abloy AB Class B 39,729,187 1,479,652 Hennes & Mauritz AB Class B 51,574,061 1,142,459 Nordea AB 11,524,874 16,495 Sandvik AB 665,592 66,988 Securitas AB Class B 1,149,801 1,404,007 SKF AB Class B 62,572,244 34,771 Svenska Cellulosa AB (SCA) Class B 1,484,195 17,931,990 Telefonaktiebolaget LM Ericsson AB Class B (NON) 57,238,085 14,700 Volvo AB Class B 583,202 29,000 Vostok Nafta Investment, Ltd. (NON) 515,230 -------------- 227,036,471 Switzerland (12.7%) - ------------------------------------------------------------------------------- 35,348 ABB, Ltd. (NON) 197,449 17,499 Adecco SA 881,261 743,135 Ciba Specialty Chemicals AG 56,545,723 2,306,077 Credit Suisse Group (NON) 96,965,588 159,427 Nestle SA 41,721,967 2,847,636 Novartis AG 143,534,081 1,192,810 Roche Holding AG 137,349,427 898,900 Swatch Group AG (The) 26,726,619 346,085 Swatch Group AG (The) Class B 50,810,685 1,448,358 Swiss Re 103,326,736 171,705 Synthes-Stratec, Inc. (NON) 19,257,906 1,362,867 UBS AG 114,311,549 397,763 Zurich Financial Services AG 66,340,486 -------------- 857,969,477 Taiwan (1.3%) - ------------------------------------------------------------------------------- 7,967,082 Acer, Inc. 13,219,716 909,000 Cathay Financial Holding Co., Ltd. 1,867,415 11,746,000 Fubon Financial Holding Co., Ltd. 12,065,265 1,792,825 Fubon Financial Holding Co., Ltd. GDR 18,017,891 321,000 Hon Hai Precision Industry Co., Ltd. 1,491,372 317,000 Nan Ya Plastic Corp. 486,922 306,000 Novatek Microelectronics Corp., Ltd. 1,073,515 23,201,940 Taiwan Semiconductor Manufacturing Co., Ltd. 37,032,174 -------------- 85,254,270 Thailand (--%) - ------------------------------------------------------------------------------- 174,800 Bangkok Bank Public Co., Ltd. 513,985 1,254,744 Thai Airways International 1,569,644 -------------- 2,083,629 Turkey (--%) - ------------------------------------------------------------------------------- 201,374 Akbank TAS 625,080 294,692 Dogan Yayin Holding (NON) 668,258 -------------- 1,293,338 United Kingdom (16.6%) - ------------------------------------------------------------------------------- 98,516 3i Group PLC 1,259,547 13,386,773 Aggregate Industries PLC 26,855,025 2,284,893 AstraZeneca PLC (London Exchange) 82,857,379 166,011 BAE Systems PLC 734,583 12,939,036 Barclays PLC 145,556,935 3,723,513 BHP Billiton PLC 43,638,705 150,228 Brambles Industries PLC 750,542 100,532 British Airways PLC (NON) 453,530 174,229 British Sky Broadcasting PLC 1,879,707 366,029 Burberry Group PLC 2,817,690 31,914 Carnival PLC 1,947,011 129,750 Compass Group PLC 613,362 7,782,399 Diageo PLC 111,003,244 1,790,170 GlaxoSmithKline PLC 41,995,122 352,220 Hilton Group PLC 1,923,666 492,358 HSBC Holdings PLC 8,308,129 1,361,356 International Power PLC (NON) 4,037,695 12,506,834 ITV PLC 25,269,861 906,306 John Wood Group PLC 2,331,380 142,987 Peninsular and Oriental Steam Navigation Co. 816,614 1,186,016 Reckitt Benckiser PLC 35,836,752 1,473,973 Rio Tinto PLC 43,377,553 3,688,315 Royal Bank of Scotland Group PLC 124,049,630 1,343,265 Royal Bank of Scotland Group PLC 144A 45,178,225 409,954 Sage Group (The) PLC 1,591,685 137,442 Scottish and Southern Energy PLC 2,302,069 184,277 Scottish Power PLC 1,426,523 38,908 Severn Trent PLC 722,269 517,951 Shell Transport & Trading Co. PLC 4,414,739 5,438,656 Tesco PLC 33,592,592 98,865,809 Vodafone Group PLC 268,082,180 4,998,464 WPP Group PLC 54,982,509 -------------- 1,120,606,453 United States (0.1%) - ------------------------------------------------------------------------------- 416,894 News Corp., Ltd. (The) Class B (S) 8,004,365 -------------- Total Common stocks (cost $5,514,990,006) $6,615,896,683 Warrants (0.1%) (a) (NON) (cost $3,973,041) Expiration Number of warrants date Value - ------------------------------------------------------------------------------- 1,553,122 Singapore Press Holdings 144A 6/9/05 $4,377,474 Short-term investments (5.2%) (a) Principal amount Value - ------------------------------------------------------------------------------- $50,000,000 Danske Corp. 2.34s, January 3, 2005 (Denmark) $49,993,500 50,000,000 J.P. Morgan Chase & Co. 2.22s, January 3, 2005 49,993,833 11,500,000 U.S. Treasury Bills zero %, March 31, 2005 11,438,729 17,317,790 Short-term investments held as collateral for loaned securities with yields ranging from 2.15% to 2.50% and due dates ranging from January 3, 2005 to February 2, 2005 (d) 17,302,295 144,701,000 Interest in $700,000,000 joint tri-party repurchase agreement dated December 31, 2004 with Goldman Sachs & Co. due January 3, 2005 with respect to various U.S. Government obligations -- maturity value of $144,728,614 for an effective yield of 2.29% (collateralized by Fannie Mae with yields ranging from 5.11% to 7.66% and due dates ranging from January 1, 2009 to November 1, 2034, valued at $714,000,000) 144,701,000 76,203,727 Putnam Prime Money Market Fund (e) 76,203,727 -------------- Total Short-term investments (cost $349,632,092) $349,633,084 - ------------------------------------------------------------------------------- Total Investments (cost $5,868,595,139) $6,969,907,241 - ------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $6,753,866,341. (NON) Non-income-producing security. (S) Securities on loan, in part or in entirety, at December 31, 2004. (d) See Note 1 to the financial statements. (e) See Note 5 to the financial statements regarding investments in Putnam Prime Money Market Fund. 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 and Global Depositary Receipts, respectively, representing ownership of foreign securities on deposit with a custodian bank. The fund had the following industry group concentration greater than 10% at December 30, 2004, (as a percentage of net assets): Banking 14.6% Forward currency contracts to buy at December 31, 2004 (aggregate face value $1,632,005,648) Aggregate Delivery Unrealized Value face value date appreciation - -------------------------------------------------------------------------- Australian Dollar $317,755,088 $315,445,145 4/20/05 $2,309,943 British Pound 919,237,729 913,076,544 3/16/05 6,161,185 Euro 357,853,741 351,253,816 3/16/05 6,599,925 Japanese Yen 15,511,643 15,507,410 5/18/05 4,233 Norwegian Krone 37,369,151 36,722,733 3/16/05 646,418 - -------------------------------------------------------------------------- $15,721,704 - -------------------------------------------------------------------------- Forward currency contracts to sell at December 31, 2004 (aggregate face value $1,043,160,292) Unrealized Aggregate Delivery appreciation/ Value face value date (depreciation) - -------------------------------------------------------------------------- British Pound $30,201,789 $30,531,607 3/16/05 $329,818 Canadian Dollar 93,378,376 93,781,104 4/20/05 402,728 Euro 139,073,077 137,472,141 3/16/05 (1,600,936) Japanese Yen 255,527,613 255,007,727 5/18/05 (519,886) Swiss Franc 445,532,233 445,211,711 3/16/05 (320,522) Swedish Krona 82,254,356 81,156,002 3/16/05 (1,098,354) - -------------------------------------------------------------------------- $(2,807,152) - -------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Statement of assets and liabilities December 31, 2004 (Unaudited) Assets - ------------------------------------------------------------------------------- Investment in securities, at value, including $16,698,728 of securities on loan (Note 1): - ------------------------------------------------------------------------------- Unaffiliated issuers (identified cost $5,792,391,412) $6,893,703,514 - ------------------------------------------------------------------------------- Affiliated issuers (identified cost $76,203,727) (Note 5) 76,203,727 - ------------------------------------------------------------------------------- Cash 4,534 - ------------------------------------------------------------------------------- Foreign currency (cost $6,482,475) (Note 1) 6,553,947 - ------------------------------------------------------------------------------- Dividends, interest and other receivables 11,152,879 - ------------------------------------------------------------------------------- Receivable for shares of the fund sold 29,601,466 - ------------------------------------------------------------------------------- Receivable for securities sold 23,069,943 - ------------------------------------------------------------------------------- Receivable for variation margin (Note 1) 848,156 - ------------------------------------------------------------------------------- Receivable for open forward currency contracts (Note 1) 17,947,419 - ------------------------------------------------------------------------------- Receivable for closed forward currency contracts (Note 1) 7,386,403 - ------------------------------------------------------------------------------- Total assets $7,066,471,988 Liabilities - ------------------------------------------------------------------------------- Distributions payable to shareholders 1,029 - ------------------------------------------------------------------------------- Payable for securities purchased 12,812,886 - ------------------------------------------------------------------------------- Payable for shares of the fund repurchased 257,891,882 - ------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 9,003,999 - ------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 1,915,316 - ------------------------------------------------------------------------------- Payable for Trustee compensation and expenses (Note 2) 427,873 - ------------------------------------------------------------------------------- Payable for administrative services (Note 2) 5,659 - ------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 3,822,627 - ------------------------------------------------------------------------------- Payable for open forward currency contracts (Note 1) 5,032,867 - ------------------------------------------------------------------------------- Payable for closed forward currency contracts (Note 1) 3,388,323 - ------------------------------------------------------------------------------- Collateral on securities loaned, at value (Note 1) 17,302,295 - ------------------------------------------------------------------------------- Other accrued expenses 1,000,891 - ------------------------------------------------------------------------------- Total liabilities 312,605,647 - ------------------------------------------------------------------------------- Net assets $6,753,866,341 Represented by - ------------------------------------------------------------------------------- Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $7,027,355,806 - ------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (4,033,819) - ------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (Note 1) (1,384,466,684) - ------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 1,115,011,038 - ------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $6,753,866,341 Computation of net asset value and offering price - ------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($3,544,805,583 divided by 149,754,313 shares) $23.67 - ------------------------------------------------------------------------------- Offering price per class A share (100/94.75 of $23.67)* $24.98 - ------------------------------------------------------------------------------- Net asset value and offering price per class B share ($1,589,058,404 divided by 69,553,385 shares)** $22.85 - ------------------------------------------------------------------------------- Net asset value and offering price per class C share ($301,627,545 divided by 12,949,511 shares)** $23.29 - ------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($103,933,406 divided by 4,452,754 shares) $23.34 - ------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $23.34)* $24.19 - ------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class R share ($773,714 divided by 32,833 shares) $23.57 - ------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($1,213,667,689 divided by 50,981,114 shares) $23.81 - ------------------------------------------------------------------------------- * 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, 2004 (Unaudited) Investment income: - ------------------------------------------------------------------------------- Dividends (net of foreign tax of $5,137,553) $44,589,826 - ------------------------------------------------------------------------------- Interest (including interest income of $321,062 from investments in affiliated issuers) (Note 5) 433,092 - ------------------------------------------------------------------------------- Securities lending 134,852 - ------------------------------------------------------------------------------- Total investment income 45,157,770 Expenses: - ------------------------------------------------------------------------------- Compensation of Manager (Note 2) 20,963,747 - ------------------------------------------------------------------------------- Investor servicing fees (Note 2) 10,276,063 - ------------------------------------------------------------------------------- Custodian fees (Note 2) 3,160,232 - ------------------------------------------------------------------------------- Trustee compensation and expenses (Note 2) 65,679 - ------------------------------------------------------------------------------- Administrative services (Note 2) 48,659 - ------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 4,322,489 - ------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 7,653,123 - ------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 1,479,487 - ------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 381,719 - ------------------------------------------------------------------------------- Distribution fees -- Class R (Note 2) 1,613 - ------------------------------------------------------------------------------- Other 1,349,353 - ------------------------------------------------------------------------------- Non-recurring costs (Note 6) 188,557 - ------------------------------------------------------------------------------- Costs assumed by manager (Note 6) (188,557) - ------------------------------------------------------------------------------- Fees waived and reimbursed by Manager (Notes 2 and 5) (3,732,930) - ------------------------------------------------------------------------------- Total expenses 45,969,234 - ------------------------------------------------------------------------------- Expense reduction (Note 2) (2,731,691) - ------------------------------------------------------------------------------- Net expenses 43,237,543 - ------------------------------------------------------------------------------- Net investment income 1,920,227 - ------------------------------------------------------------------------------- Net realized gain on investments (net of foreign tax of $567,073) (Notes 1 and 3) 318,659,530 - ------------------------------------------------------------------------------- Net realized loss on futures contracts (Note 1) (3,055,550) - ------------------------------------------------------------------------------- Net realized gain on foreign currency transactions (Note 1) 29,917,495 - ------------------------------------------------------------------------------- Net unrealized appreciation of assets and liabilities in foreign currencies during the period 15,961,509 - ------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 562,842,577 - ------------------------------------------------------------------------------- Net gain on investments 924,325,561 - ------------------------------------------------------------------------------- Net increase in net assets resulting from operations $926,245,788 - ------------------------------------------------------------------------------- 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 Decrease in net assets 2004* 2004 - ------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------- Net investment income $1,920,227 $61,370,398 - ------------------------------------------------------------------------------- Net realized gain on investments and foreign currency transactions 345,521,475 1,942,476,471 - ------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 578,804,086 152,013,685 - ------------------------------------------------------------------------------- Net increase in net assets resulting from operations 926,245,788 2,155,860,554 - ------------------------------------------------------------------------------- Distributions to shareholders: (Note 1) - ------------------------------------------------------------------------------- From net investment income - ------------------------------------------------------------------------------- Class A (48,773,597) (89,583,495) - ------------------------------------------------------------------------------- Class B (11,127,164) (18,719,523) - ------------------------------------------------------------------------------- Class C (1,810,078) (3,170,988) - ------------------------------------------------------------------------------- Class M (906,794) (1,644,581) - ------------------------------------------------------------------------------- Class R (9,386) (9,020) - ------------------------------------------------------------------------------- Class Y (22,229,449) (37,173,530) - ------------------------------------------------------------------------------- Redemption fees (Note 1) 48,193 800,297 - ------------------------------------------------------------------------------- Decrease from capital share transactions (Note 4) (1,048,360,922) (6,484,427,258) - ------------------------------------------------------------------------------- Total decrease in net assets (206,923,409) (4,478,067,544) Net assets - ------------------------------------------------------------------------------- Beginning of period 6,960,789,750 11,438,857,294 - ------------------------------------------------------------------------------- End of period (including distributions in excess of net investment income of $4,033,819 and undistributed net investment income of $78,902,422, respectively) $6,753,866,341 $6,960,789,750 - ------------------------------------------------------------------------------- * 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 December 31 Per-share (Unaudited) Year ended June 30 operating performance 2004 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $20.86 $17.43 $19.18 $21.24 $29.92 $21.64 - --------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------- Net investment income (a) .02 (d) .15 (d) .22 .17 .16 .54 - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 3.12 3.63 (1.93) (2.23) (6.64) 8.87 - --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.14 3.78 (1.71) (2.06) (6.48) 9.41 - --------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------- From net investment income (.33) (.35) (.04) -- (.39) (.34) - --------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- -- (1.81) (.79) - --------------------------------------------------------------------------------------------------------------------------- From return of capital -- -- -- -- -- (e) -- - --------------------------------------------------------------------------------------------------------------------------- Total distributions (.33) (.35) (.04) -- (2.20) (1.13) - --------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $23.67 $20.86 $17.43 $19.18 $21.24 $29.92 - --------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 15.07* 21.81 (8.93) (9.70) (22.43) 44.03 - --------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $3,544,806 $3,677,492 $6,855,608 $6,930,312 $6,896,924 $7,040,669 - --------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .61* (d) 1.23 (d) 1.22 1.16 1.13 1.14 - --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .11* (d) .74 (d) 1.33 .85 .63 2.01 - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 34.56* 69.27 53.11 (f) 42.17 73.80 99.53 - ---------------------------------------------------------------------------------------------------------------------------
* 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) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, expenses of the fund for the periods ended December 31, 2004 and June 30, 2004 reflect a reduction of 0.06% and 0.03%, respectively, based on average net assets for class A shares (Notes 2 and 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund. 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 December 31 Per-share (Unaudited) Year ended June 30 operating performance 2004 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $20.07 $16.79 $18.57 $20.72 $29.23 $21.20 - ----------------------------------------------------------------------------------------------------------------------------- Investment operations: - ----------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) (.05) (d) .02 (d) .08 .01 (.04) .35 - ----------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 2.99 3.47 (1.86) (2.16) (6.46) 8.67 - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.94 3.49 (1.78) (2.15) (6.50) 9.02 - ----------------------------------------------------------------------------------------------------------------------------- Less distributions: - ----------------------------------------------------------------------------------------------------------------------------- From net investment income (.16) (.21) -- -- (.20) (.20) - ----------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- -- (1.81) (.79) - ----------------------------------------------------------------------------------------------------------------------------- From return of capital -- -- -- -- -- (e) -- - ----------------------------------------------------------------------------------------------------------------------------- Total distributions (.16) (.21) -- -- (2.01) (.99) - ----------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $22.85 $20.07 $16.79 $18.57 $20.72 $29.23 - ----------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 14.67* 20.84 (9.59) (10.38) (23.00) 43.00 - ----------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - ----------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,589,058 $1,577,583 $1,892,054 $2,326,938 $2,983,524 $3,591,546 - ----------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .99* (d) 1.98 (d) 1.97 1.91 1.88 1.89 - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) (.27)* (d) .12 (d) .51 .04 (.16) 1.26 - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 34.56* 69.27 53.11 (f) 42.17 73.80 99.53 - -----------------------------------------------------------------------------------------------------------------------------
* 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) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, expenses of the fund for the periods ended December 31, 2004 and June 30, 2004 reflect a reduction of 0.06% and 0.03%, respectively, based on average net assets for class B shares (Notes 2 and 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund. 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 December 31 July 26, 1999+ Per-share (Unaudited) Year ended June 30 to June 30 operating performance 2004 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $20.44 $17.05 $18.86 $21.03 $29.74 $21.87 - ------------------------------------------------------------------------------------------------------------------------------ Investment operations: - ------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) (a) (.06) (d) -- (d)(e) .09 .01 (.02) .32 - ------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 3.05 3.55 (1.90) (2.18) (6.59) 8.66 - ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.99 3.55 (1.81) (2.17) (6.61) 8.98 - ------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------ From net investment income (.14) (.16) -- -- (.29) (.32) - ------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments -- -- -- -- (1.81) (.79) - ------------------------------------------------------------------------------------------------------------------------------ From return of capital -- -- -- -- -- (e) -- - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (.14) (.16) -- -- (2.10) (1.11) - ------------------------------------------------------------------------------------------------------------------------------ Redemption fees -- (e) -- (e) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $23.29 $20.44 $17.05 $18.86 $21.03 $29.74 - ------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(b) 14.64* 20.86 (9.60) (10.32) (23.01) 41.54* - ------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $301,628 $313,496 $534,933 $601,907 $637,547 $439,522 - ------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(c) .99* (d) 1.98 (d) 1.97 1.91 1.88 1.76* - ------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.27)* (d) .02 (d) .54 .07 (.07) 1.12* - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 34.56* 69.27 53.11 (f) 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) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, expenses of the fund for the periods ended December 31, 2004 and June 30, 2004 reflect a reduction of 0.06% and 0.03%, respectively, based on average net assets for class C shares (Notes 2 and 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund. 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 December 31 Per-share (Unaudited) Year ended June 30 operating performance 2004 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $20.51 $17.13 $18.90 $21.04 $29.61 $21.45 - --------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) (.03) (d) .05 (d) .11 .06 .03 .40 - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 3.06 3.56 (1.88) (2.20) (6.54) 8.79 - --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.03 3.61 (1.77) (2.14) (6.51) 9.19 - --------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------- From net investment income (.20) (.23) -- -- (.25) (.24) - --------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- -- (1.81) (.79) - --------------------------------------------------------------------------------------------------------------------------- From return of capital -- -- -- -- -- (e) -- - --------------------------------------------------------------------------------------------------------------------------- Total distributions (.20) (.23) -- -- (2.06) (1.03) - --------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $23.34 $20.51 $17.13 $18.90 $21.04 $29.61 - --------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 14.80* 21.13 (9.37) (10.17) (22.75) 43.32 - --------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $103,933 $109,648 $187,266 $248,921 $302,838 $367,638 - --------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .86* (d) 1.73 (d) 1.72 1.66 1.63 1.64 - --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) (.14)* (d) .28 (d) .73 .30 .11 1.51 - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 34.56* 69.27 53.11 (f) 42.17 73.80 99.53 - ---------------------------------------------------------------------------------------------------------------------------
* 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) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, expenses of the fund for the periods ended December 31, 2004 and June 30, 2004 reflect a reduction of 0.06% and 0.03%, respectively, based on average net assets for class M shares (Notes 2 and 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS R - ------------------------------------------------------------------------------------------- Six months For the ended Year period Dec. 31 ended Jan. 21, 2003+ Per-share (Unaudited) June 30 to June 30 operating performance 2004 2004 2003 - ------------------------------------------------------------------------------------------- Net asset value, beginning of period $20.77 $17.42 $16.52 - ------------------------------------------------------------------------------------------- Investment operations: - ------------------------------------------------------------------------------------------- Net investment income (a) -- (d) .18 (d) .08 - ------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments 3.10 3.55 .82 - ------------------------------------------------------------------------------------------- Total from investment operations 3.10 3.73 .90 - ------------------------------------------------------------------------------------------- Less distributions: - ------------------------------------------------------------------------------------------- From net investment income (.30) (.38) -- - ------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- - ------------------------------------------------------------------------------------------- Total distributions (.30) (.38) -- - ------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- - ------------------------------------------------------------------------------------------- Net asset value, end of period $23.57 $20.77 $17.42 - ------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 14.94* 21.50 5.45* - ------------------------------------------------------------------------------------------- Ratios and supplemental data - ------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $774 $559 $1 - ------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .74* (d) 1.48 (d) .65* - ------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) (.02)* (d) .84 (d) .47* - ------------------------------------------------------------------------------------------- Portfolio turnover (%) 34.56* 69.27 53.11 (f) - ------------------------------------------------------------------------------------------- + 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) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, expenses of the fund for the periods ended December 31, 2004 and June 30, 2004 reflect a reduction of 0.06% and 0.03%, respectively, based on average net assets for class R shares (Notes 2 and 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund. 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 December 31 Per-share (Unaudited) Year ended June 30 operating performance 2004 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $21.01 $17.57 $19.33 $21.35 $30.07 $21.72 - --------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------- Net investment income (a) .05 (d) .19 (d) .28 .22 .23 .61 - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 3.14 3.67 (1.96) (2.24) (6.69) 8.92 - --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.19 3.86 (1.68) (2.02) (6.46) 9.53 - --------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------- From net investment income (.39) (.42) (.08) -- (.45) (.39) - --------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- -- (1.81) (.79) - --------------------------------------------------------------------------------------------------------------------------- From return of capital -- -- -- -- -- (e) -- - --------------------------------------------------------------------------------------------------------------------------- Total distributions (.39) (.42) (.08) -- (2.26) (1.18) - --------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $23.81 $21.01 $17.57 $19.33 $21.35 $30.07 - --------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 15.24* 22.07 (8.67) (9.46) (22.25) 44.43 - --------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,213,668 $1,282,011 $1,968,996 $1,664,886 $1,251,589 $1,027,174 - --------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .48* (d) .98 (d) .97 .91 .88 .89 - --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .24* (d) .98 (d) 1.64 1.13 .92 2.26 - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 34.56* 69.27 53.11 (f) 42.17 73.80 99.53 - ---------------------------------------------------------------------------------------------------------------------------
* 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) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, expenses of the fund for the periods ended December 31, 2004 and June 30, 2004 reflect a reduction of 0.06% and 0.03%, respectively, based on average net assets for class Y shares (Notes 2 and 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes impact of assets received from the acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund. The accompanying notes are an integral part of these financial statements. Notes to financial statements December 31, 2004 (Unaudited) Note 1 Significant accounting policies Putnam International Equity Fund ("the fund"), a Massachusetts business trust, 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, class R and class Y shares. Class A shares are sold with a maximum front-end sales charge of 5.25%. 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, class M and class R 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 and class R shares but lower than class B and class C shares. Class R shares are sold without a front-end sales charge and pay an ongoing distribution fee that is higher than class A shares, but lower than class B, class C and class M shares. Class R shares are offered to qualified employee-benefit plans. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are sold to certain eligible purchasers including certain defined contribution plans (including corporate IRAs), bank trust departments and trust companies. Prior to April 19, 2004, a redemption fee of 1.00% which is retained by the fund, applied to shares of any class redeemed (either by selling or by exchanging to another fund) within 90 days of purchase. Effective April 19, 2004 (May 3, 2004 for defined contribution plans administered by Putnam), a 2.00% redemption fee may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. A 1.00% redemption fee would apply to any shares that are redeemed (either by selling or exchanging into another fund) within 6-90 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital. Prior year redemption fee balances have been reclassified to conform with current year financial statement presentation. Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. 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 valued at the last reported sales price on their principal exchange, or official closing price for certain markets. If no sales are reported-- as in the case of some securities traded over-the-counter-- a security is valued at its last reported bid price. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign securities taking into account multiple factors, including movements in the U.S. securities markets. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. B) Joint trading account Pursuant to an exemptive order from the Securities and Exchange Commission, 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 recorded 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, net of applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities are recognized 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 earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on 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. The fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gain earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. F) Forward currency contracts The fund may buy and sell 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. Risks may exceed amounts recognized on the statement of assets and liabilities. Forward currency contracts outstanding at period end, if any, are listed after the fund's portfolio. G) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase. The fund may also write options on securities it owns or in which it may invest to increase its current returns. The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. Risks may exceed amounts recognized on the statement of assets and liabilities. 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. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as an addition to the cost of investments. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as "variation margin." Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. Futures and written option contracts outstanding at period end, if any, are listed after the fund's portfolio. H) Security lending The fund may lend securities, through its agents, 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 the fund's agents; 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, 2004, the value of securities loaned amounted to $16,698,728. The fund received cash collateral of $17,302,295 which is pooled with collateral of other Putnam funds into 25 issues of high grade short-term investments. 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 of 1986 (the "Code") applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code, 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, 2004 the fund had a capital loss carryover of $1,672,618,590 available to the extent allowed by the Code to offset future net capital gain, if any. The amount of the carryover and the expiration dates are: Loss Carryover Expiration - -------------------------------- $11,737,095 June 30, 2005 4,817,122 June 30, 2007 30,394,163 June 30, 2009 215,499,906 June 30, 2010 1,410,170,304 June 30, 2011 The aggregate identified cost on a tax basis is $5,928,426,541, resulting in gross unrealized appreciation and depreciation of $1,134,253,213 and $92,772,513, respectively, or net unrealized appreciation of $1,041,480,700. 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 Putnam Management is paid for management and investment advisory services 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. Putnam Management has agreed to limit its compensation (and, to the extent necessary, bear other expenses) through December 31, 2004, at which time the Lipper limit will become effective, to the extent that expenses of the fund (exclusive of brokerage commissions, interest, taxes, and extraordinary expenses, credits from Putnam Fiduciary Trust Company ("PFTC"), a subsidiary of Putnam, LLC, and payments under the fund's distribution plan) would exceed an annual rate of 0.96% of the fund's average net assets. For the period ended December 31, 2004, Putnam Management waived $3,703,939 of its management fee from the fund. Effective January 3, 2005, Putnam Management has agreed to waive fees and reimburse expenses of the fund through June 30, 2005 to the extent necessary to ensure that the fund's expenses do not exceed the average expenses of the front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The expense reimbursement is based on a comparison of the fund's expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund's last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses. For the period ended December 31, 2004, Putnam Management has assumed $188,557 of legal, shareholder servicing and communication, audit and Trustee fees incurred by the fund in connection with certain legal and regulatory matters (including those described in Note 6). Effective July 15, 2004, Putnam Investments Limited ("PIL"), an affiliate of Putnam Management is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company ("PFTC"), a subsidiary of Putnam, LLC. Putnam Investor Services, a division of PFTC, provides investor servicing agent functions to the fund. During the six months ended December 31, 2004, the fund paid PFTC $13,073,022 for these services. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. The fund also reduced expenses through brokerage service arrangements. For the six months ended December 31, 2004, the fund's expenses were reduced by $2,731,691 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $5,361 as a quarterly retainer, 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 Trustee compensation and expenses in the statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B, class C, class M and class R 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 in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. For the six months ended December 31, 2004, Putnam Retail Management, acting as underwriter, received net commissions of $54,629 and $1,305 from the sale of class A and class M shares, respectively, and received $1,241,661 and $6,881 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, 2004, Putnam Retail Management, acting as underwriter, received $10,431 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, 2004, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $2,251,101,300 and $3,371,850,829, respectively. There were no purchases or sales of U.S. government securities. Note 4 Capital shares At December 31, 2004, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended December 31, 2004 - ---------------------------------------------------------------- Class A Shares Amount - ---------------------------------------------------------------- Shares sold 13,936,534 $299,686,823 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,987,363 45,808,678 - ---------------------------------------------------------------- 15,923,897 345,495,501 Shares repurchased (42,478,645) (906,604,585) - ---------------------------------------------------------------- Net decrease (26,554,748) $(561,109,084) - ---------------------------------------------------------------- Year ended June 30, 2004 - ---------------------------------------------------------------- Class A Shares Amount - ---------------------------------------------------------------- Shares sold 104,479,477 $1,995,472,831 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,229,286 84,205,067 - ---------------------------------------------------------------- 108,708,763 2,079,677,898 Shares repurchased (325,649,680) (6,424,417,016) - ---------------------------------------------------------------- Net decrease (216,940,917) $(4,344,739,118) - ---------------------------------------------------------------- Six months ended December 31, 2004 - ---------------------------------------------------------------- Class B Shares Amount - ---------------------------------------------------------------- Shares sold 1,449,312 $30,017,880 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 439,072 9,769,355 - ---------------------------------------------------------------- 1,888,384 39,787,235 Shares repurchased (10,939,200) (225,600,235) - ---------------------------------------------------------------- Net decrease (9,050,816) $(185,813,000) - ---------------------------------------------------------------- Year ended June 30, 2004 - ---------------------------------------------------------------- Class B Shares Amount - ---------------------------------------------------------------- Shares sold 5,667,778 $106,956,438 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 850,561 16,356,276 - ---------------------------------------------------------------- 6,518,339 123,312,714 Shares repurchased (40,613,856) (774,379,357) - ---------------------------------------------------------------- Net decrease (34,095,517) $(651,066,643) - ---------------------------------------------------------------- Six months ended December 31, 2004 - ---------------------------------------------------------------- Class C Shares Amount - ---------------------------------------------------------------- Shares sold 313,927 $6,605,446 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 61,828 1,402,876 - ---------------------------------------------------------------- 375,755 8,008,322 Shares repurchased (2,763,391) (57,735,200) - ---------------------------------------------------------------- Net decrease (2,387,636) $(49,726,878) - ---------------------------------------------------------------- Year ended June 30, 2004 - ---------------------------------------------------------------- Class C Shares Amount - ---------------------------------------------------------------- Shares sold 2,726,099 $50,793,496 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 124,841 2,445,652 - ---------------------------------------------------------------- 2,850,940 53,239,148 Shares repurchased (18,884,766) (364,919,447) - ---------------------------------------------------------------- Net decrease (16,033,826) $(311,680,299) - ---------------------------------------------------------------- Six months ended December 31, 2004 - ---------------------------------------------------------------- Class M Shares Amount - ---------------------------------------------------------------- Shares sold 309,307 $6,530,166 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 38,150 867,147 - ---------------------------------------------------------------- 347,457 7,397,313 Shares repurchased (1,240,551) (25,949,767) - ---------------------------------------------------------------- Net decrease (893,094) $(18,552,454) - ---------------------------------------------------------------- Year ended June 30, 2004 - ---------------------------------------------------------------- Class M Shares Amount - ---------------------------------------------------------------- Shares sold 1,506,951 $29,186,510 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 79,905 1,568,546 - ---------------------------------------------------------------- 1,586,856 30,755,056 Shares repurchased (7,175,461) (139,750,584) - ---------------------------------------------------------------- Net decrease (5,588,605) $(108,995,528) - ---------------------------------------------------------------- Six months ended December 31, 2004 - ---------------------------------------------------------------- Class R Shares Amount - ---------------------------------------------------------------- Shares sold 9,018 $192,608 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 388 8,910 - ---------------------------------------------------------------- 9,406 201,518 Shares repurchased (3,485) (76,729) - ---------------------------------------------------------------- Net increase 5,921 $124,789 - ---------------------------------------------------------------- Year ended June 30, 2004 - ---------------------------------------------------------------- Class R Shares Amount - ---------------------------------------------------------------- Shares sold 44,854 $836,446 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 427 8,477 - ---------------------------------------------------------------- 45,281 844,923 Shares repurchased (18,430) (351,306) - ---------------------------------------------------------------- Net increase 26,851 $493,617 - ---------------------------------------------------------------- Six months ended December 31, 2004 - ---------------------------------------------------------------- Class Y Shares Amount - ---------------------------------------------------------------- Shares sold 8,515,507 $185,691,924 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 958,992 22,229,449 - ---------------------------------------------------------------- 9,474,499 207,921,373 Shares repurchased (19,513,479) (441,205,668) - ---------------------------------------------------------------- Net decrease (10,038,980) $(233,284,295) - ---------------------------------------------------------------- Year ended June 30, 2004 - ---------------------------------------------------------------- Class Y Shares Amount - ---------------------------------------------------------------- Shares sold 56,910,506 $1,090,959,624 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,855,858 37,173,530 - ---------------------------------------------------------------- 58,766,364 1,128,133,154 Shares repurchased (109,821,728) (2,196,572,441) - ---------------------------------------------------------------- Net decrease (51,055,364) $(1,068,439,287) - ---------------------------------------------------------------- Note 5 Investment in Putnam Prime Money Market Fund Pursuant to an exemptive order from the Securities and Exchange Commission, the fund invests in Putnam Prime Money Market Fund, an open-end management investment company managed by Putnam Management. Management fees paid by the fund are reduced by an amount equal to the management fees paid by Putnam Prime Money Market Fund with respect to assets invested by the fund in Putnam Prime Money Market Fund. For the year ended December 30, 2004, management fees paid were reduced by $28,991 relating to the fund's investment in Putnam Prime Money Market Fund. Income distributions earned by the fund are recorded as income in the statement of operations and totaled $321,062 for the period ended December 31, 2004. Note 6 Regulatory matters and litigation On April 8, 2004, Putnam Management entered into agreements with the Securities and Exchange Commission ("SEC") and the Massachusetts Securities Division representing a final settlement of all charges brought against Putnam Management by those agencies on October 28, 2003 in connection with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. The settlement with the SEC requires Putnam Management to pay $5 million in disgorgement plus a civil monetary penalty of $50 million, and the settlement with the Massachusetts Securities Division requires Putnam Management to pay $5 million in restitution and an administrative fine of $50 million. The settlements also leave intact the process established under an earlier partial settlement with the SEC under which Putnam Management agreed to pay the amount of restitution determined by an independent consultant, which may exceed the disgorgement and restitution amounts specified above, pursuant to a plan to be developed by the independent consultant. Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees stemming from both of these proceedings. The SEC's and Massachusetts Securities Division's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management has agreed to bear any costs incurred by Putnam funds in connection with these lawsuits. Based on currently available information, Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds. The fund may experience increased redemptions as a result of these matters, which could result in increased transaction costs and operating expenses. In connection with its investigation of certain brokerage matters, the staff of the Philadelphia district office of the SEC has raised the question whether, in years prior to 2004, Putnam Management fully and effectively disclosed its practices relating to the allocation of brokerage on mutual fund portfolio transactions to broker-dealers who sold shares of the funds. Putnam Management ceased directing brokerage to broker-dealers in connection with the sale of fund shares as of January 1, 2004. Putnam Management and the Philadelphia office negotiated an offer of settlement under which Putnam Management would pay a civil penalty in the amount of $40 million and disgorgement in the amount of $1, and the total amount would be distributed to certain Putnam funds. The offer of settlement is subject to final documentation and approval by the Commissioners and the staff of the SEC. Discussions with the staff with respect to the offer of settlement are ongoing. Results of November 11, 2004 and January 10, 2005 shareholder meetings (Unaudited) A special meeting of shareholders of the fund was held on November 11, 2004. At that meeting consideration of certain proposals was adjourned to a final meeting held on January 10, 2005. November 11, 2004 meeting At the meeting, each of the nominees for Trustees was elected, as follows: Votes Votes for withheld - ---------------------------------------------------------------- Jameson A. Baxter 163,597,273 5,533,247 Charles B. Curtis 163,572,449 5,558,071 Myra R. Drucker 165,011,946 4,118,574 Charles E. Haldeman, Jr. 164,492,814 4,637,706 John A. Hill 163,556,357 5,574,163 Ronald J. Jackson 163,620,413 5,510,107 Paul L. Joskow 163,550,619 5,579,901 Elizabeth T. Kennan 163,517,040 5,613,480 John H. Mullin, III 163,514,817 5,615,703 Robert E. Patterson 163,594,414 5,536,106 George Putnam, III 163,401,185 5,729,335 A.J.C. Smith* 163,402,416 5,728,104 W. Thomas Stephens 163,594,855 5,535,665 Richard B. Worley 165,050,333 4,080,187 * Mr. Smith resigned from the Board of Trustees on January 21, 2005. January 10, 2005 meeting A proposal to amend fund's fundamental investment restriction with respect to borrowing to allow the fund the investments flexibility permitted by the Investment Company Act was defeated as follows: Votes Votes for against Abstentions - ---------------------------------------------------------------- 113,467,261 9,853,254 4,843,777 A proposal to amend the fund's fundamental investment restriction with respect to making loans to enhance the fund's ability to participate in an interfund borrowing and lending program was defeated as follows: Votes Votes for against Abstentions - ---------------------------------------------------------------- 114,103,299 9,611,613 4,449,381 A proposal to amend the fund's fundamental investment restriction with respect to diversification of investments to enhance the fund's ability to invest in registered investment companies such as Putnam Prime Money Market was defeated as follows: Votes Votes for against Abstentions - ---------------------------------------------------------------- 118,153,085 5,723,881 4,287,326 A proposal to amend the fund's Agreement and Declaration of Trust to permit the fund to satisfy redemption requests other than in cash was defeated as follows: Votes Votes for against Abstentions - ---------------------------------------------------------------- 114,784,161 7,974,771 5,405,361 All tabulations are rounded to nearest whole number. Brokerage commissions (Unaudited) Brokerage commissions are paid to firms that execute trades on behalf of your fund. When choosing these firms, Putnam is required by law to seek the best execution of the trades, taking all relevant factors into consideration, including expected quality of execution and commission rate. Listed below are the largest relationships based upon brokerage commissions for your fund and the other funds in Putnam's International group for the year ended December 31, 2004. The other Putnam mutual funds in this group are Putnam Europe Equity Fund, Putnam Global Equity Fund, Putnam International Capital Opportunities Fund, Putnam International Growth and Income Fund, Putnam International New Opportunities Fund, Putnam VT Global Equity Fund, Putnam VT International Equity Fund, Putnam VT International Growth and Income Fund, and Putnam VT International New Opportunities Fund. The top five firms that received brokerage commissions for trades executed for the International group are (in descending order) Goldman Sachs, Union Bank of Switzerland, Merrill Lynch, Citigroup, and Credit Suisse First Boston. Commissions paid to these firms together represented approximately 51% of the total brokerage commissions paid for the year ended December 31, 2004. Commissions paid to the next 10 firms together represented approximately 35% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) ABN AMRO, Bear Stearns, Deutsche Bank, Dresdner, Hong Kong Shanghai Banking Corp, JP Morgan, Lehman Brothers, Morgan Stanley, Royal Bank of Canada, and Sanford Bernstein. Additional information about brokerage commissions is available on the Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam funds disclose commissions by firm to the SEC in semiannual filings on form N-SAR. Putnam puts your interests first In January 2004, Putnam announced a number of voluntary initiatives designed to reduce fund expenses, provide investors with more useful information, and help safeguard the interests of all Putnam investors. Visit www.putnaminvestments.com for details. Cost-cutting initiatives Reduced sales charges The maximum sales charge for class A shares has been reduced to 5.25% for equity funds (formerly 5.75%) and 4.50% for most income funds (formerly 4.75%).* Lower class B purchase limit To help ensure that investors are in the most cost-effective share class, the maximum amount that can be invested in class B shares has been reduced to $100,000. (Larger trades or accumulated amounts will be directed to class A shares.) Ongoing expenses will be limited During calendar 2004, total ongoing expenses, including management fees for all funds, will be maintained at or below the average of each fund's industry peers in its Lipper load-fund universe. information, please see the Statement of Additional information. Additional measures are being taken to reduce expenses for shareholders in the six global and international funds that had short-term trading issues. Improved disclosure Putnam fund prospectuses and shareholder reports are being revised to disclose additional information that will help shareholders compare funds and weigh their costs and risks along with their potential benefits. Shareholders will find easy-to-understand information about fund expense ratios, portfolio manager compensation, risk comparisons, brokerage commissions, and employee and trustee ownership of Putnam funds. Disclosure of breakpoint discounts is also being enhanced to alert investors to potential cost savings. Protecting investors' interests New short-term trading fee introduced To discourage short-term trading, which can interfere with a fund's long-term strategy, a 2% short-term trading fee will be imposed on any Putnam fund shares redeemed or exchanged within five calendar days of purchase. * The maximum sales charge for class A shares of Putnam Limited Duration Government Income Fund (formerly Putnam Intermediate U.S. Government Income Fund) and Putnam Floating Rate Income Fund remains 3.25%. Fund information 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 Investment Sub-Manager Putnam Investments Limited 57-59 St. James Street London, England SW1A 1LD Marketing Services Putnam Retail Management One Post Office Square Boston, MA 02109 Custodian Putnam Fiduciary Trust Company Legal Counsel Ropes & Gray LLP Trustees John A. Hill, Chairman Jameson Adkins Baxter Charles B. Curtis Myra R. Drucker Charles E. Haldeman, Jr. Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan John H. Mullin, III Robert E. Patterson George Putnam, III W. Thomas Stephens Richard B. Worley Officers George Putnam, III President Charles E. Porter Executive Vice President, Associate Treasurer and Principal Executive Officer Jonathan S. Horwitz Senior Vice President and Treasurer Steven D. Krichmar Vice President and Principal Financial Officer Michael T. Healy Assistant Treasurer and Principal Accounting Officer Daniel T. Gallagher Vice President and Legal and Compliance Liaison Officer Beth S. Mazor Vice President James P. Pappas Vice President Richard S. Robie, III Vice President Mark C. Trenchard Vice President and BSA Compliance Officer Francis J. McNamara, III Vice President and Chief Legal Officer Charles A. Ruys de Perez Vice President and Chief Compliance Officer Judith Cohen Clerk and Assistant Treasurer This report is for the information of shareholders of Putnam International Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam's Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary. For more recent performance, please visit www.putnaminvestments.com. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund's Statement of Additional Information contains additional information about the fund's Trustees and is available without charge upon request by calling 1-800-225-1581. [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com. SA009-216567 2/05 Not FDIC Insured May Lose Value No Bank Guarantee PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - ---------------------------------------------------------------------------- Putnam International Equity Fund Supplement to Semiannual Report dated 12/31/04 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 do not incur a front-end load, a distribution fee, or a contingent deferred sales charge, will differ from the performance of class A, B, C, M, and R shares, which are discussed more extensively in the annual report. RESULTS AT A GLANCE - ---------------------------------------------------------------------------- Total return for periods ended 12/31/04 NAV 6 months 15.24% 1 year 16.46 5 years -8.72 Annual average -1.81 10 years 174.63 Annual average 10.63 Life of fund (since class A inception, 2/28/91) Annual average 10.39 Share value: NAV 6/30/04 $21.01 12/31/04 $23.81 - ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 1 $0.391 -- $0.391 - ---------------------------------------------------------------------------- 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 (7/12/96) 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, 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. Please see page 12 of the accompanying shareholder report for a discussion of the information appearing in the tables below: - ---------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming actual returns for the 6 months ended 12/31/04 Class Y Expenses paid per $1,000* $5.21 Ending value (after expenses) $1,152.40 - ---------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming a hypothetical 5% annualized return for the 6 months ended 12/31/04 Class Y Expenses paid per $1,000* $4.89 Ending value (after expenses) $1,020.37 - ---------------------------------------------------------------------------- EXPENSE RATIO COMPARISON USING ANNUALIZED DATA Your fund's annualized expense ratio 0.96% Average annualized expense ratio for Lipper peer group+ 1.41% - ---------------------------------------------------------------------------- Item 2. Code of Ethics: - ----------------------- Not applicable Item 3. Audit Committee Financial Expert: - ----------------------------------------- Not applicable Item 4. Principal Accountant Fees and Services: - ----------------------------------------------- Not applicable Item 5. Audit Committee: Not applicable - ------------------------- Item 6. Schedule of Investments: Not applicable - -------------------------------- Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End - ------------------------------------------------------------------------- Management Investment Companies: Not applicable -------------------------------- Item 8. Purchases of Equity Securities by Closed-End Management Investment - -------------------------------------------------------------------------- Companies and Affiliated Purchasers: Not applicable ------------------------------------ Item 9. Submission of Matters to a Vote of Security Holders: - ------------------------------------------------------------ Not applicable Item 10. Controls and Procedures: - --------------------------------- (a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. (b) Changes in internal control over financial reporting: Not applicable Item 11. Exhibits: - ------------------ (a) Not applicable (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Investment Company Act of 1940, as amended, and the officer certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NAME OF REGISTRANT By (Signature and Title): /s/Michael T. Healy -------------------------- Michael T. Healy Principal Accounting Officer Date: February 28, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title): /s/Charles E. Porter --------------------------- Charles E. Porter Principal Executive Officer Date: February 28, 2005 By (Signature and Title): /s/Steven D. Krichmar --------------------------- Steven D. Krichmar Principal Financial Officer Date: February 28, 2005 EX-99.CERT 2 exnn2.txt EX-99.CERT Certifications - -------------- I, Charles E. Porter, a Principal Executive Officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of each report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal control over financial reporting. /s/Charles E. Porter Date: February 28, 2005 - ---------------------- ----------------------- Charles E. Porter, Principal Executive Officer Certifications - -------------- I, Steven D. Krichmar, the Principal Financial Officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of each report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal control over financial reporting. /s/Steven D. Krichmar Date: February 28, 2005 - ---------------------- ----------------------- Steven D. Krichmar, Principal Financial Officer Attachment A - ------------ Period(s) ended December 31, 2004 057 Putnam Europe Equity Fund 2CE Putnam International Growth and Income Fund 2HF Putnam Small Cap Growth Fund 377 Putnam Discovery Growth Fund 841 Putnam International Equity Fund 852 Putnam New Opportunities Fund Putnam Variable Trust includes: 2PX Putnam VT American Government Income Fund 2TP Putnam VT Capital Appreciation Fund 961 Putnam VT Diversified Income Fund 2IS Putnam VT The George Putnam Fund of Boston 070 Putnam VT Global Asset Allocation Fund 016 Putnam VT Global Equity Fund 066 Putnam VT Growth and Income Fund 2PU Putnam VT Growth Opportunities Fund 2IW Putnam VT Health Sciences Fund 067 Putnam VT High Yield Fund 068 Putnam VT Income Fund 2DO Putnam VT International Equity Fund 2DN Putnam VT International Growth and Income Fund 2DP Putnam VT International New Opportunities Fund 2IO Putnam VT Investors Fund 069 Putnam VT Money Market Fund 098 Putnam VT New Opportunities Fund 2DR Putnam VT New Value Fund 2IP Putnam VT OTC & Emerging Growth Fund 2LA Putnam VT Research Fund 2MJ Putnam VT Small Cap Value Fund 152 Putnam VT Utilities Growth and Income Fund 2DQ Putnam VT Vista Fund 065 Putnam VT Voyager Fund 2TJ Putnam VT Discovery Growth 23N Putnam VT Equity Income Fund 23K Putnam VT Capital Opportunities Fund 23H Putnam VT Mid Cap Value Fund EX-99.906 CERT 3 exnnos3.txt EX-99.906 CERT Section 906 Certifications - --------------------------- I, Charles E. Porter, a Principal Executive Officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended December 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended December 31, 2004 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Charles E. Porter Date: February 28, 2005 - ---------------------- ----------------------- Charles E. Porter, Principal Executive Officer Section 906 Certifications - --------------------------- I, Steven D. Krichmar, a Principal Financial Officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended December 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended December 31, 2004 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Steven D. Krichmar Date: February 28, 2005 - ---------------------- ----------------------- Steven D. Krichmar, Principal Financial Officer Attachment A - ------------ Period(s) ended December 31, 2004 057 Putnam Europe Equity Fund 2CE Putnam International Growth and Income Fund 2HF Putnam Small Cap Growth Fund 377 Putnam Discovery Growth Fund 841 Putnam International Equity Fund 852 Putnam New Opportunities Fund Putnam Variable Trust includes: 2PX Putnam VT American Government Income Fund 2TP Putnam VT Capital Appreciation Fund 961 Putnam VT Diversified Income Fund 2IS Putnam VT The George Putnam Fund of Boston 070 Putnam VT Global Asset Allocation Fund 016 Putnam VT Global Equity Fund 066 Putnam VT Growth and Income Fund 2PU Putnam VT Growth Opportunities Fund 2IW Putnam VT Health Sciences Fund 067 Putnam VT High Yield Fund 068 Putnam VT Income Fund 2DO Putnam VT International Equity Fund 2DN Putnam VT International Growth and Income Fund 2DP Putnam VT International New Opportunities Fund 2IO Putnam VT Investors Fund 069 Putnam VT Money Market Fund 098 Putnam VT New Opportunities Fund 2DR Putnam VT New Value Fund 2IP Putnam VT OTC & Emerging Growth Fund 2LA Putnam VT Research Fund 2MJ Putnam VT Small Cap Value Fund 152 Putnam VT Utilities Growth and Income Fund 2DQ Putnam VT Vista Fund 065 Putnam VT Voyager Fund 2TJ Putnam VT Discovery Growth 23N Putnam VT Equity Income Fund 23K Putnam VT Capital Opportunities Fund 23H Putnam VT Mid Cap Value Fund -----END PRIVACY-ENHANCED MESSAGE-----