Putnam

497 1 atwfns1.htm PUTNAM INTERNATIONAL EQUITY FUND Putnam

Putnam

International

Equity Fund

10 | 30 | 05

Prospectus

CONTENTS

Fund summary 2

Goal 2

Main investment strategies 2

Main risks 2

Performance information 3

Fees and expenses 4

What are the fund's main investment

strategies and related risks? 6

Who manages the fund? 11

How does the fund price its shares? 17

How do I buy fund shares? 18

How do I sell fund shares? 24

How do I exchange fund shares? 27

Policy on excessive short-term trading 28

Fund distributions and taxes 31

Financial highlights 32

Class A, B, C, M and R shares

Investment Category: Blend

This prospectus explains what you should know about this mutual fund

before you invest. Please read it carefully.

Putnam Investment Management, LLC (Putnam Management), which has managed

mutual funds since 1937, manages the fund.

These securities have not been approved or disapproved by the Securities

and Exchange Commission nor has the Commission passed upon the accuracy or

adequacy of this prospectus. Any statement to the contrary is a crime.

You may qualify for sales charge discounts on class A or class M shares.

Please notify your financial advisor of other accounts that may help you

obtain a sales charge discount. See "How do I buy fund shares?" for

details.

Fund summary

GOAL

The fund seeks capital appreciation.

MAIN INVESTMENT STRATEGIES -- INTERNATIONAL STOCKS

We invest mainly in common stocks of companies outside the United States

that we believe have favorable investment potential. For example, we may

purchase stocks of companies with stock prices that reflect a value lower

than that which we place on the company. We also consider other factors we

believe will cause the stock price to rise. Under normal circumstances, we

invest at least 80% of the fund's net assets in equity investments. We

invest mainly in midsized and large companies, although we can invest in

companies of any size. Although we emphasize investments in developed

countries, we may also invest in companies located in developing (also

known as emerging) markets.

MAIN RISKS

The main risks that could adversely affect the value of the fund's shares

and the total return on your investment include:

* The risks of investing outside the United States, such as currency

fluctuations, economic or financial instability, lack of timely or reliable

financial information or unfavorable political or legal developments. These

risks are increased for investments in emerging markets.

* The risk that the stock price of one or more of the companies in the

fund's portfolio will fall, or will fail to rise. Many factors can adversely

affect a stock's performance, including both general financial market

conditions and factors related to a specific company or industry. This risk

is generally greater for small and midsized companies, which tend to be more

vulnerable to adverse developments.

* The risk that movements in financial markets will adversely affect the

price of the fund's investments, regardless of how well the companies in

which we invest perform.

You can lose money by investing in the fund. The fund may not achieve its

goal, and is not intended as a complete investment program. An investment

in the fund is not a deposit in a bank and is not insured or guaranteed by

the Federal Deposit Insurance Corporation or any other government agency.

PERFORMANCE INFORMATION

The following information provides some indication of the fund's risks. The

chart shows year-to-year changes in the performance of one of the fund's

classes of shares, class A shares. The table following the chart compares

the fund's performance to that of a broad measure of market performance. Of

course, a fund's past performance is not an indication of future

performance.

[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS A

SHARES]

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES

1995 13.97%

1996 16.12%

1997 17.78%

1998 18.95%

1999 60.77%

2000 -9.06%

2001 -19.76%

2002 -17.03%

2003 28.14%

2004 16.18%

Performance figures in the bar chart do not reflect the impact of sales

charges. If they did, performance would be less than that shown.

Year-to-date performance through 9/30/05 was 9.51%. During the periods

shown in the bar chart, the highest return for a quarter was 35.66%

(quarter ending 12/31/99) and the lowest return for a quarter was -20.70%

(quarter ending 9/30/02).

Average Annual Total Returns (for periods ending 12/31/04)

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Past Past Past

1 year 5 years 10 years

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Class A before taxes 10.11% -3.10% 9.80%

Class A after taxes on distributions 10.65% -3.44% 9.04%

Class A after taxes on distributions

and sale of fund shares 7.63% -2.63% 8.36%

Class B before taxes 10.30% -3.14% 9.57%

Class C before taxes 14.32% -2.78% 9.57%

Class M before taxes 11.86% -3.18% 9.50%

Class R before taxes 15.89% -2.29% 10.12%

Morgan Stanley Capital International

(MSCI) EAFE Index

(no deduction for fees,

expenses or taxes) 20.25% -1.13% 5.62%

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Unlike the bar chart, this performance information reflects the impact of

sales charges. Class A and class M share performance reflects the current

maximum initial sales charges (which for class A shares reflects a

reduction that took effect after 12/31/03 and for class M shares reflects a

reduction that took effect after 12/31/04); class B and class C share

performance reflects the maximum applicable deferred sales charge if shares

had been redeemed on 12/31/04 and, for class B shares, does not assume

conversion to class A shares after eight years. For periods before the

inception of class C shares (7/26/99) and class R shares (1/21/03),

performance shown for these classes in the table is based on the

performance of the fund's class A shares, adjusted to reflect the

appropriate sales charge and the higher 12b-1 fees paid by the class C and

class R shares. The fund's performance for portions of the period benefited

from Putnam Management's agreement to limit the fund's expenses.

The fund's performance is compared to the Morgan Stanley Capital

International (MSCI) EAFE Index, an unmanaged index of equity securities

from developed countries in Western Europe, the Far East, and Australasia.

After-tax returns reflect the highest individual federal income tax rates

and do not reflect state and local taxes. Actual after-tax returns depend

on an investor's tax situation and may differ from those shown. After-tax

returns are shown for class A shares only and will vary for other classes.

After-tax returns are not relevant to those investing through 401(k) plans,

IRAs or other tax-deferred arrangements.

FEES AND EXPENSES

This table summarizes the fees and expenses you may pay if you invest in

the fund. Expenses are based on the fund's last fiscal year.

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Shareholder Fees (fees paid directly from your investment)*

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Class A Class B Class C Class M Class R

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Maximum Sales

Charge (Load)

Imposed on

Purchases (as a

percentage of the

offering price) 5.25% NONE NONE 3.25% NONE

Maximum Deferred

Sales Charge

(Load) (as a

percentage of the

original purchase

price or redemption

proceeds, whichever

is lower) NONE** 5.00% 1.00% NONE** NONE

Maximum Redemption Fee***

(as a percentage

of total redemption

proceeds) 2.00% 2.00% 2.00% 2.00% 2.00%

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Annual Fund Operating Expenses + <>

(expenses that are deducted from fund assets)

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Total Annual

Management Distribution Other Fund Operating

Fees (12b-1) Fees Expenses Expenses

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Class A 0.63% 0.25% 0.42% 1.30%

Class B 0.63% 1.00% 0.42% 2.05%

Class C 0.63% 1.00% 0.42% 2.05%

Class M 0.63% 0.75% 0.42% 1.80%

Class R 0.63% 0.50% 0.42% 1.55%

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** Certain investments in class A and class M shares may qualify for

discounts on applicable sales charges. See "How do I buy fund shares?"

for details.

** A deferred sales charge of 1.00% on class A shares and of 0.65% on class M

shares may be imposed on certain redemptions of shares bought without an

initial sales charge.

*** A 2.00% redemption fee (also referred to as a "short-term trading fee")

may apply to any shares that are redeemed (either by selling or

exchanging into another fund) within 5 days of purchase, and a 1.00%

short-term trading fee may apply to any shares that are redeemed (either

by selling or exchanging into another fund) within 6 to 90 days of

purchase.

+ See the section "Who manages the fund?" for a discussion of regulatory

matters and litigation.

<> Does not reflect the waiver of certain fund expenses by Putnam Management

through December 31, 2004. Had such waivers been reflected, the fund's

expenses as a percentage of net assets would have been 0.06% lower.

EXAMPLE

The example translates the expenses shown in the preceding table into

dollar amounts. By doing this, you can more easily compare the cost of

investing in the fund to the cost of investing in other mutual funds. The

example makes certain assumptions. It assumes that you invest $10,000 in

the fund for the time periods shown and then, except as shown for class B

shares and class C shares, redeem all your shares at the end of those

periods. It also assumes a 5.00% return on your investment each year and

that the fund's operating expenses remain the same. The example is

hypothetical; your actual costs and returns may be higher or lower.

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1 year 3 years 5 years 10 years

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Class A $650 $915 $1,200 $2,010

Class B $708 $943 $1,303 $2,187*

Class B (no redemption) $208 $643 $1,103 $2,187*

Class C $308 $643 $1,103 $2,379

Class C (no redemption) $208 $643 $1,103 $2,379

Class M $502 $873 $1,268 $2,372

Class R $158 $490 $845 $1,845

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* Reflects conversion of class B shares to class A shares, which pay lower

12b-1 fees. Conversion occurs eight years after purchase.

What are the fund's main investment strategies and related risks?

Any investment carries with it some level of risk that generally reflects

its potential for reward. We pursue the fund's goal by investing mainly in

stocks issued by companies outside the United States. To determine whether

a company is located outside of the United States, we look at the following

factors: where the company's securities trade, where the company is located

or organized, or where the company derives its revenues or profits. We will

consider, among other factors, a company's valuation, financial strength,

competitive position in its industry, projected future earnings, cash flows

and dividends when deciding whether to buy or sell investments. A

description of the risks associated with the fund's main investment

strategies follows.

* Common stocks. Common stock represents an ownership interest in a company.

The value of a company's stock may fall as a result of factors directly

relating to that company, such as decisions made by its management or

lower demand for the company's products or services. A stock's value may

also fall because of factors affecting not just the company, but also

companies in the same industry or in a number of different industries,

such as increases in production costs. The value of a company's stock

may also be affected by changes in financial markets that are relatively

unrelated to the company or its industry, such as changes in interest

rates or currency exchange rates. In addition, a company's stock

generally pays dividends only after the company invests in its own

business and makes required payments to holders of its bonds and other

debt. For this reason, the value of a company's stock will usually react

more strongly than its bonds and other debt to actual or perceived

changes in the company's financial condition or prospects. Stocks of

smaller companies may be more vulnerable to adverse developments than

those of larger companies.

Stocks of companies we believe are fast-growing may trade at a higher

multiple of current earnings than other stocks. The value of such stocks

may be more sensitive to changes in current or expected earnings than the

values of other stocks. If our assessment of the prospects for a company's

earnings growth is wrong, or if our judgment of how other investors will

value the company's earnings growth is wrong, then the price of the

company's stock may fall or not approach the value that we have placed on

it. Seeking earnings growth may result in significant investments in the

technology sector, which may be subject to greater volatility than other

sectors of the economy.

Companies we believe are undergoing positive change and whose stock we

believe is undervalued by the market may have experienced adverse business

developments or may be subject to special risks that have caused their

stocks to be out of favor. If our assessment of a company's prospects is

wrong, or if other investors do not similarly recognize the value of the

company, then the price of the company's stock may fall or may not approach

the value that we have placed on it.

* Foreign investments. Foreign investments involve certain special

risks, including:

* Unfavorable changes in currency exchange rates: Foreign investments are

typically issued and traded in foreign currencies. As a result, their

values may be affected by changes in exchange rates between foreign

currencies and the U.S. dollar.

* Political and economic developments: Foreign investments may be

subject to the risks of seizure by a foreign government, imposition

of restrictions on the exchange or export of foreign currency, and

tax increases.

* Unreliable or untimely information: There may be less information publicly

available about a foreign company than about most U.S. companies, and

foreign companies are usually not subject to accounting, auditing and

financial reporting standards and practices as stringent as those in the

United States.

* Limited legal recourse: Legal remedies for investors may be more limited

than the remedies available in the United States.

* Limited markets: Certain foreign investments may be less liquid (harder to

buy and sell) and more volatile than most U.S. investments, which means

we may at times be unable to sell these foreign investments at desirable

prices. For the same reason, we may at times find it difficult to value

the fund's foreign investments.

* Trading practices: Brokerage commissions and other fees are generally

higher for foreign investments than for U.S. investments. The procedures

and rules governing foreign transactions and custody may also involve

delays in payment, delivery or recovery of money or investments.

* Lower yield: Common stocks of foreign companies have historically offered

lower dividends than stocks of comparable U.S. companies. Foreign

withholding taxes may further reduce the amount of income available to

distribute to shareholders of the fund.

The risks of foreign investments are typically increased in less developed

countries, which are sometimes referred to as emerging markets. For

example, political and economic structures in these countries may be

changing rapidly, which can cause instability. These countries are also

more likely to experience high levels of inflation, deflation or currency

devaluation, which could hurt their economies and securities markets. For

these and other reasons, investments in emerging markets are often

considered speculative.

Certain of these risks may also apply to some extent to U.S.-traded

investments that are denominated in foreign currencies, investments in U.S.

companies that are traded in foreign markets or investments in U.S.

companies that have significant foreign operations. Special U.S. tax

considerations may apply to the fund's foreign investments.

* Derivatives. We may engage in a variety of transactions involving

derivatives, such as futures, options, warrants and swap contracts.

Derivatives are financial instruments whose value depends upon, or is

derived from, the value of something else, such as one or more

underlying investments, pools of investments, indexes or currencies. We

may use derivatives both for hedging and non-hedging purposes. However,

we may also choose not to use derivatives, based on our evaluation of

market conditions or the availability of suitable derivatives.

Investments in derivatives may be applied toward meeting a requirement

to invest in a particular kind of investment if the derivatives have

economic characteristics similar to that investment.

Derivatives involve special risks and may result in losses. The successful

use of derivatives depends on our ability to manage these sophisticated

instruments. The prices of derivatives may move in unexpected ways due to

the use of leverage or other factors, especially in unusual market

conditions, and may result in increased volatility. The use of derivatives

may also increase the amount of taxes payable by shareholders.

Other risks arise from our potential inability to terminate or sell

derivatives positions. A liquid secondary market may not always exist for

the fund's derivatives positions at any time. In fact, many

over-the-counter instruments (investments not traded on an exchange) will

not be liquid. Over-the-counter instruments also involve the risk that the

other party to the derivative transaction will not meet its obligations.

For further information about the risks of derivatives, see the statement

of additional information (SAI).

* Other investments. In addition to the main investment strategies described

above, we may make other types of investments, such as investments in

U.S. companies, preferred stocks, convertible securities and debt

instruments, which may be subject to other risks, as described in the

SAI.

* Alternative strategies. Under normal market conditions, we keep the fund's

portfolio fully invested, with minimal cash holdings. However, at times

we may judge that market conditions make pursuing the fund's usual

investment strategies inconsistent with the best interests of its

shareholders. We then may temporarily use alternative strategies that

are mainly designed to limit losses, including investing solely in the

United States. However, we may choose not to use these strategies for a

variety of reasons, even in very volatile market conditions. These

strategies may cause the fund to miss out on investment opportunities,

and may prevent the fund from achieving its goal.

* Changes in policies. The Trustees may change the fund's goal, investment

strategies and other policies without shareholder approval, except as

otherwise indicated.

* Portfolio transactions and portfolio turnover rate. Transactions on stock

exchanges, commodities markets and futures markets involve the payment

by the fund of brokerage commissions. The fund paid $15,595,367 in

brokerage commissions during the last fiscal year, representing 0.24% of

the fund's average net assets. Of this amount, $5,172,516, representing

0.08% of the fund's average net assets, was paid to brokers who also

provided research services. Additional information regarding Putnam's

brokerage selection procedures is included in the SAI.

Although brokerage commissions and other portfolio transaction costs are

not reflected in the fund's Total Annual Fund Operating Expenses ratio (as

shown in the Annual Fund Operating Expenses table in the section "Fees and

expenses"), they are reflected in the fund's total return. Combining the

brokerage commissions paid by the fund during the last fiscal year (as a

percentage of the fund's average net assets) with the fund's Total Annual

Fund Operating Expenses ratio for class A shares results in a "combined

cost ratio" of 1.54% of the fund's average net assets for class A shares

for the last fiscal year.

Investors should exercise caution in comparing brokerage commissions and

combined cost ratios for different types of funds. For example, while

brokerage commissions represent one component of the fund's transaction

costs, they do not reflect any undisclosed amount of profit or "mark-up"

included in the price paid by the fund for principal transactions

(transactions made directly with a dealer or other counterparty), including

most fixed income securities and certain derivatives. In addition,

brokerage commissions do not reflect other elements of transaction costs,

including the extent to which the fund's purchase and sale transactions may

change the market price for an investment (the "market impact").

Another factor in transaction costs is the fund's portfolio turnover rate,

which measures how frequently the fund buys and sells investments. During

the past five years, the fund's fiscal year portfolio turnover rate and the

average turnover rate for the fund's Lipper category were as follows.

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Turnover Comparison

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2005 2004 2003 2002 2001

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Putnam International

Equity Fund 75% 69% 53%* 42% 74%

Lipper International

Large-Cap Core Funds Average** 62% 62% 70% 68% 71%

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* Portfolio turnover excludes impact of assets received from the

acquisition of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund.

** Average portfolio turnover rate of funds viewed by Lipper Inc. as having

the same investment classification or objective as the fund. The Lipper

category average portfolio turnover rate is calculated using the portfolio

turnover rate for the fiscal year end of each fund in the Lipper category.

Fiscal years may 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 the last fiscal year is based on information

available as of June 30, 2005.

Both the fund's portfolio turnover rate and the amount of brokerage

commissions it pays will vary over time based on market conditions. High

turnover may lead to increased costs and decreased performance and, for

investors in taxable accounts, increased taxes.

Putnam Management is not permitted to consider sales of shares of the fund

(or of the other Putnam funds) as a factor in the selection of

broker-dealers to execute portfolio transactions for the fund.

* Portfolio holdings. The SAI includes a description of the fund's policies

with respect to the disclosure of its portfolio holdings. For

information on the fund's portfolio, you may visit the Putnam

Investments website, www.putnam.com/individual, where the fund's top 10

holdings and related portfolio information may be viewed monthly

beginning approximately 15 days after the end of each month, and full

portfolio holdings may be viewed beginning on the last business day of

the month after the end of each calendar quarter. This information will

remain available on the website until the fund files a Form N-CSR or N-Q

with the Securities and Exchange Commission (SEC) for the period that

includes the date of the information.

Who manages the fund?

The fund's Trustees oversee the general conduct of the fund's business. The

Trustees have retained Putnam Management to be the fund's investment

manager, responsible for making investment decisions for the

fund and managing the fund's other affairs and business. The basis

for the Trustees' approval of the fund's management contract and the

sub-management contract described below is discussed in the fund's annual

report to shareholders dated 6/30/05. The fund pays Putnam Management a

quarterly management fee for these services based on the fund's average net

assets. The fund paid Putnam Management a management fee (after applicable

waivers) of 0.57% of average net assets for the fund's last fiscal year.

Putnam Management's address is One Post Office Square, Boston, MA 02109.

Putnam Management has retained its affiliate, Putnam Investments Limited

("PIL"), to manage a separate portion of the assets of the fund. Subject to

the supervision of Putnam Management, PIL is responsible for making

investment decisions for the portion of the assets of the fund that it

manages.

PIL provides a full range of international investment advisory services to

institutional and retail clients.

Putnam Management (and not the fund) pays a quarterly sub-management fee to

PIL for its services at the annual rate of 0.35% of the average aggregate

net asset value of the portion of the assets of the fund managed by PIL.

PIL's address is Cassini House, 57-59 St. James's Street, London, England,

SW1A 1LD.

* Investment management teams. Putnam Management and PIL's investment

professionals are organized into investment management teams, with a

particular team dedicated to a specific asset class. The members of the

International Core Team manage the fund's investments. The names of all

team members can be found at www.putnam.com.

The team members identified as the fund's Portfolio Leaders and Portfolio

Member coordinate the team's efforts related to the fund and are primarily

responsible for the day-to-day management of the fund's portfolio. In

addition to these individuals, the team also includes other investment

professionals, whose analysis, recommendations and research inform

investment decisions made for the fund.

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Joined Positions Over

Portfolio Leaders Fund Employer Past Five Years

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Joshua Byrne 2000 Putnam Management Co-Chief Investment Officer,

1992 - Present International Core Team;

Previously, Senior Portfolio

Manager

Simon Davis 2000 Putnam Investments Co-Chief Investment Officer,

Limited International Core Team;

2000 - Present Previously, Director, International

Equity Team; Senior Portfolio

Manager

Deutsche Asset Portfolio Manager

Management

Prior to

September 2000

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Joined Positions Over

Portfolio Member Fund Employer Past Five Years

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Mark Pollard 2004 Putnam Investments Chief Investment Officer,

Limited European Equities

2004 - Present

Jura Capital LLP Managing Partner

Prior to

May 2004

Lazard Asset Head of European Equities

Management

Prior to

February 2002

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* Other funds managed by the Portfolio Leaders and Portfolio Member. As of

the fund's fiscal year-end, Joshua Byrne and Mark Pollard were Portfolio

Members of Putnam Europe Equity Fund. Joshua Byrne, Simon Davis and Mark

Pollard may also manage other accounts and variable trust funds managed

by Putnam Management or an affiliate. The SAI provides additional

information about other accounts managed by these individuals.

* Changes in the fund's Portfolio Leaders and Portfolio Members. During the

fiscal year ended June 30, 2005, Stephen Oler and George Stairs left the

fund's management team. Other individuals who have served as Portfolio

Leader of the fund since May 2002, when Putnam Management introduced this

designation, include Omid Kamshad (May 2002 to October 2003).

* Fund ownership. The following table shows the dollar ranges of shares of

the fund owned by the professionals listed above at the end of the fund's

last two fiscal years, including investments by their immediate family

members and amounts invested through retirement and deferred compensation

plans.

Fund Portfolio Leaders and Portfolio Member

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$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

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Joshua Byrne 2005 *

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Portfolio Leader 2004 *

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Simon Davis 2005 *

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Portfolio Leader 2004 *

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Mark Pollard 2005 *

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Portfolio Member N/A

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N/A indicates the individual was not a Portfolio Leader or Portfolio Member

as of 6/30/04.

* Investment in the fund by Putnam employees and the Trustees.

As of June 30, 2005, all of the 12 Trustees of the Putnam funds owned

fund shares. The table shows the approximate value of investments in the

fund and all Putnam funds as of that date by Putnam employees and the

fund's Trustees, including in each case investments by their immediate

family members and amounts invested through retirement and deferred

compensation plans.

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Fund All Putnam funds

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Putnam employees $18,000,000 $457,000,000

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Trustees $804,000 $49,000,000

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The following table shows how much the members of Putnam's Executive Board

have invested in the fund (in dollar ranges). Information shown is for June

30, 2005 and June 30, 2004.

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Putnam Executive Board

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$1 - $10,001 - $50,001- $100,001

Year $0 $10,000 $50,000 $100,000 and over

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Philippe Bibi 2005 *

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Chief Technology Officer 2004 *

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Joshua Brooks 2005 *

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Deputy Head of Investments N/A

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William Connolly N/A

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Head of Retail Management N/A

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Kevin Cronin 2005 *

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Head of Investments 2004 *

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Charles Haldeman, Jr. 2005 *

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President and CEO 2004 *

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Amrit Kanwal 2005 *

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Chief Financial Officer 2004 *

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Steven Krichmar 2005 *

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Chief of Operations 2004 *

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Francis McNamara, III 2005 *

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General Counsel 2004 *

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Richard Robie, III 2005 *

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Chief Administrative Officer 2004 *

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Edward Shadek 2005 *

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Deputy Head of Investments N/A

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Sandra Whiston N/A

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Head of Institutional Management N/A

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N/A indicates the individual became a member of Putnam's Executive Board

after the reporting date.

* Compensation of investment professionals. Putnam Management believes that

its investment management teams should be compensated primarily based on

their success in helping investors achieve their goals. The portion of

Putnam Investments' total incentive compensation pool that is available

to Putnam Management's Investment Division is based primarily on its

delivery, across all of the portfolios it manages, of consistent,

dependable and superior performance over time. The peer group for the

fund, International Large-Cap Core Funds, is its broad investment

category as determined by Lipper Inc. The portion of the incentive

compensation pool available to your investment management team varies

based primarily on its delivery, across all of the portfolios it manages,

of consistent, dependable and superior performance over time on a

before-tax basis.

* Consistent performance means being above median over one year.

* Dependable performance means not being in the 4th quartile of the peer

group over one, three or five years.

* Superior performance (which is the largest component of Putnam Management's

incentive compensation program) means being in the top third of the peer

group over three and five years.

In determining an investment management team's portion of the incentive

compensation pool and allocating that portion to individual team members,

Putnam Management retains discretion to reward or penalize teams or

individuals, including the fund's Portfolio Leaders and Portfolio Member,

as it deems appropriate, based on other factors. The size of the overall

incentive compensation pool each year is determined by Putnam Management's

parent company, Marsh & McLennan Companies, Inc., and depends in large part

on Putnam's profitability for the year, which is influenced by assets under

management. Incentive compensation is generally paid as cash bonuses, but a

portion of incentive compensation may instead be paid as grants of

restricted stock, options or other forms of compensation, based on the

factors described above. In addition to incentive compensation, investment

team members receive annual salaries that are typically based on seniority

and experience. Incentive compensation generally represents at least 70% of

the total compensation paid to investment team members.

* Regulatory matters and litigation. Putnam Management has entered into

agreements with the Securities and Exchange Commission and the

Massachusetts Securities Division settling charges connected 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. Pursuant to these

settlement agreements, Putnam Management will pay a total of $193.5

million in penalties and restitution, with $153.5 million being paid to

shareholders and the funds. The restitution amount will be allocated to

shareholders pursuant to a plan developed by an independent consultant,

with payments to shareholders following approval of the plan by the SEC

and the Massachusetts Securities Division.

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 will

bear any costs incurred by Putnam funds in connection with these lawsuits.

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.

How does the fund price its shares?

The price of the fund's shares is based on its net asset value (NAV). The

NAV per share of each class equals the total value of its assets, less its

liabilities, divided by the number of its outstanding shares. Shares are

only valued as of the close of regular trading on the New York Stock

Exchange (NYSE) each day the exchange is open.

The fund values its investments for which market quotations are readily

available at market value. It values short-term investments that will

mature within 60 days at amortized cost, which approximates market value.

It values all other investments and assets at their fair value, which may

differ from recent market prices. For example, the fund may value a stock

at its fair value when the relevant exchange closes early or trading in the

stock is suspended. It may also value a stock at fair value if recent

transactions in the stock have been very limited or material information

about the issuer becomes available after the close of the relevant market.

The fund translates prices for its investments quoted in foreign currencies

into U.S. dollars at current exchange rates, which are generally determined

as of 11:00 a.m. Eastern time each day the NYSE is open. As a result,

changes in the value of those currencies in relation to the U.S. dollar may

affect the fund's NAV. If there has been a movement in the U.S. currency

market that exceeds a specified threshold that may change from time to

time, the fund will generally use exchange rates determined as of 3:00 p.m.

Eastern time. Because foreign markets may be open at different times than

the NYSE, the value of the fund's shares may change on days when

shareholders are not able to buy or sell them. Many securities markets and

exchanges outside the U.S. close prior to the close of the NYSE 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 NYSE. As a result, the fund has adopted fair value

pricing procedures, which, among other things, require the fund to fair

value foreign equity securities if there has been a movement in the U.S.

market that exceeds a specified threshold. Although the threshold may

be revised from time to time and the number of days on which fair value

prices will be used will depend on market activity, it is possible that

fair value prices will be used by the fund to a significant extent. The

value determined for an investment using the fund's fair value pricing

procedures may differ from recent market prices for the investment.

How do I buy fund shares?

You can open a fund account with as little as $500 and make additional

investments at any time with as little as $50 ($25 through systematic

investing). The fund sells its shares at the offering price, which is the

NAV plus any applicable sales charge. Your financial advisor or Putnam

Investor Services generally must receive your completed buy order before

the close of regular trading on the NYSE for your shares to be bought at

that day's offering price.

You can buy shares:

* Through a financial advisor. Your advisor will be responsible for

furnishing all necessary documents to Putnam Investor Services, and may

charge you for his or her services.

* Through systematic investing. You can make regular investments of $25

or more weekly, semi-monthly or monthly through automatic deductions

from your bank checking or savings account. Application forms are

available through your advisor or Putnam Investor Services at

1-800-225-1581.

* Subsequent investments via the Internet. If you have an existing Putnam

fund account and you have completed and returned an Electronic

Investment Authorization Form, you can buy additional shares online at

www.putnam.com. For more information, contact your advisor or Putnam

Investor Services at 1-800-225-1581.

You may also complete an order form and write a check for the amount you

wish to invest, payable to the fund. Return the check and completed form to

Putnam Investor Services.

Mutual funds must obtain and verify information that identifies investors

opening new accounts. If the fund is unable to collect the required

information, Putnam Investor Services may not be able to open your fund

account. Investors must provide their full name, residential or business

address, Social Security or tax identification number, and date of birth.

Entities, such as trusts, estates, corporations and partnerships, must also

provide other identifying information. Putnam Investor Services may share

identifying information with third parties for the purpose of verification.

If Putnam Investor Services cannot verify identifying information after

opening your account, the fund reserves the right to close your account.

The fund may periodically close to new purchases of shares or refuse any

order to buy shares if the fund determines that doing so would be in the

best interests of the fund and its shareholders.

WHICH CLASS OF SHARES IS BEST FOR ME?

This prospectus offers you a choice of four classes of fund shares: A, B, C

and M. Qualified employee-benefit plans may also choose class R shares.

This allows you to choose among different types of sales charges and

different levels of ongoing operating expenses, as illustrated in the "Fees

and expenses" section. The class of shares that is best for you depends on

a number of factors, including the amount you plan to invest and how long

you plan to hold the shares. Please consult your financial advisor as to

which share class is most appropriate for you. Here is a summary of the

differences among the classes of shares:

Class A shares

* Initial sales charge of up to 5.25%

* Lower sales charges available for investments of $50,000 or more

* No deferred sales charge (except on certain redemptions of shares bought

without an initial sales charge)

* Lower annual expenses, and higher dividends, than class B, C or M shares

because of lower 12b-1 fees

Class B shares

* No initial sales charge; your entire investment goes to work immediately

* Deferred sales charge of up to 5.00% if shares are sold within six years

of purchase

* Higher annual expenses, and lower dividends, than class A or M shares

because of higher 12b-1 fees

* Convert automatically to class A shares after eight years, thereby reducing

the future 12b-1 fees

* Orders for class B shares of one or more Putnam funds will be refused when

the total value of the purchase, plus existing account balances that are

eligible to be linked under a right of accumulation for purchases of

class A shares (as described below), is $100,000 or more. Investors

considering cumulative purchases of $100,000 or more should consider

whether class A shares would be more advantageous and consult their

financial advisor.

Class C shares

* No initial sales charge; your entire investment goes to work immediately

* Deferred sales charge of 1.00% if shares are sold within one year of purchase

* Higher annual expenses, and lower dividends, than class A or M shares

because of higher 12b-1 fees

* No conversion to class A shares, so future 12b-1 fees do not decline over

time

* Orders for class C shares of one or more Putnam funds will be refused when

the total value of the purchase, plus existing account balances that are

eligible to be linked under a right of accumulation for purchases of

class A shares (as described below), is $1,000,000 or more. Investors

considering cumulative purchases of $1,000,000 or more should consider

whether class A shares would be more advantageous and consult their

financial advisor.

Class M shares

* Initial sales charge of up to 3.25%

* Lower sales charges available for investments of $50,000 or more

* No deferred sales charge (except on certain redemptions of shares bought

without an initial sales charge)

* Lower annual expenses, and higher dividends, than class B or C shares

because of lower 12b-1 fees

* Higher annual expenses, and lower dividends, than class A shares because of

higher 12b-1 fees

* No conversion to class A shares, so future 12b-1 fees do not decline over

time

* Orders for class M shares of one or more Putnam funds, other than class M

shares sold to qualified employee-benefit plans, will be refused when the

total value of the purchase, plus existing account balances that are

eligible to be linked under a right of accumulation for purchases of

class M shares (as described below), is $1,000,000 or more. Investors

considering cumulative purchases of $1,000,000 or more should consider

whether class A shares would be more advantageous and consult their

financial advisor.

Class R shares (available to qualified plans only)

* No initial sales charge; your entire investment goes to work immediately

* No deferred sales charge

* Lower annual expenses, and higher dividends, than class B, C or M shares

because of lower 12b-1 fees

* Higher annual expenses, and lower dividends, than class A shares because of

higher 12b-1 fees

* No conversion to class A shares, so future 12b-1 fees do not decline over

time

-----------------------------------------------------------------------------

Initial sales charges for class A and M shares

-----------------------------------------------------------------------------

Class A sales charge Class M sales charge

as a percentage of*: as a percentage of*:

-----------------------------------------------------------------------------

Amount of purchase Net amount Offering Net amount Offering

at offering price ($) invested price** invested price**

-----------------------------------------------------------------------------

Under 50,000 5.54% 5.25% 3.36% 3.25%

50,000 but under 100,000 4.17 4.00 2.30 2.25

100,000 but under 250,000 3.09 3.00 1.27 1.25

250,000 but under 500,000 2.30 2.25 1.01 1.00

500,000 but under 1,000,000 2.04 2.00 1.01 1.00

1,000,000 and above NONE NONE NONE NONE

-----------------------------------------------------------------------------

* Because of rounding in the calculation of offering price and the number

of shares purchased, actual sales charges you pay may be more or less than

these percentages.

** Offering price includes sales charge.

The fund offers two principal ways for you to qualify for discounts on

initial sales charges on class A and class M shares, often referred to as

"breakpoint discounts:"

* Right of accumulation. You can add the amount of your current purchases of

class A or class M shares of the fund and other Putnam funds to the

value of your existing accounts in the fund and other Putnam funds.

Individuals can also include purchases by, and accounts owned by, their

spouse and minor children, including accounts established through

different financial advisors. For your current purchases, you will pay

the initial sales charge applicable to the total value of the linked

accounts and purchases, which may be lower than the sales charge

otherwise applicable to each of your current purchases. Shares of Putnam

money market funds, other than money market fund shares acquired by

exchange from other Putnam funds, are not included for purposes of the

right of accumulation.

To calculate the total value of your existing accounts and any linked

accounts, the fund will use the current maximum public offering price of

those shares.

* Statement of intention. A statement of intention is a document in which

you agree to make purchases of class A or class M shares in a specified

amount within a period of 13 months. For each purchase you make under

the statement of intention you will pay the initial sales charge

applicable to the total amount you have agreed to purchase. While a

statement of intention is not a binding obligation on you, if you do not

purchase the full amount of shares within 13 months, the fund will

redeem shares from your account in an amount equal to the higher initial

sales charge you would have paid in the absence of the statement of

intention.

Account types that may be linked with each other to obtain breakpoint

discounts using the methods described above include:

* Individual accounts

* Joint accounts

* Accounts established as part of a retirement plan and IRA accounts

(some restrictions may apply)

* Shares of Putnam funds owned through accounts in the name of your dealer

or other financial intermediary (with documentation identifying beneficial

ownership of shares)

* Accounts held as part of a Section 529 college savings plan managed by

Putnam Management (some restrictions may apply)

In order to obtain a breakpoint discount, you should inform your financial

advisor at the time you purchase shares of the existence of other accounts

or purchases that are eligible to be linked for the purpose of calculating

the initial sales charge. The fund or your financial advisor may ask you

for records or other information about other shares held in your accounts

and linked accounts, including accounts opened with a different financial

advisor. Restrictions may apply to certain accounts and transactions.

Further details about breakpoint discounts can be found on Putnam

Management's website at www.putnam.com/individual by selecting "Mutual

Funds," and in the SAI.

Deferred sales charges for class B, class C and certain class A and class M

If you sell (redeem) class B shares within six years of purchase, you will

generally pay a deferred sales charge according to the following schedule.

Year after purchase 1 2 3 4 5 6 7+

-------------------------------------------------------------------------

Charge 5% 4% 3% 3% 2% 1% 0%

A deferred sales charge of 1.00% will apply to class C shares if redeemed

within one year of purchase. Unless otherwise agreed with Putnam Retail

Management, class A shares purchased on or after October 3, 2005 that are

part of a purchase of $1 million or more (other than by a qualified

retirement plan) will be subject to a 1.00% deferred sales charge if

redeemed within 18 months of purchase. A different CDSC may apply to class

A shares purchased before October 3, 2005 and redeemed within two years of

purchase. Please see the SAI for more information. A deferred sales charge

of 0.65% may apply to class M shares purchased without a sales charge for

certain rollover IRA accounts if redeemed within one year of purchase.

Deferred sales charges will be based on the lower of the shares' cost and

current NAV. Shares not subject to any charge will be redeemed first,

followed by shares held longest. You may sell shares acquired by

reinvestment of distributions without a charge at any time.

* You may be eligible for reductions and waivers of sales charges. In

addition to the breakpoint discount methods described above, sales

charges may be reduced or waived under certain circumstances and for

certain categories of investors. Information about reductions and

waivers of sales charges, including deferred sales charges, is included

in the SAI. You may consult your financial advisor or Putnam Retail

Management for assistance.

* Distribution (12b-1) plans. The fund has adopted distribution plans to

pay for the marketing of fund shares and for services provided to

shareholders. The plans provide for payments at annual rates (based on

average net assets) of up to 0.35% on class A shares and 1.00% on class

B, class C, class M and class R shares. The Trustees currently limit

payments on class A, class M and class R shares to 0.25%, 0.75% and

0.50% of average net assets, respectively. Because these fees are paid

out of the fund's assets on an ongoing basis, they will increase the

cost of your investment. The higher fees for class B, class C, class M

and class R shares may cost you more than paying the initial sales

charge for class A shares. Because class C and class M shares, unlike

class B shares, do not convert to class A shares, class C and class M

shares may cost you more over time than class B shares. Class R shares

will generally be less expensive than class B shares for shareholders

who are eligible to purchase either class.

* Payments to dealers. If you purchase your shares through a dealer (the

term "dealer" includes any broker, dealer, bank, bank trust department,

registered investment advisor, financial planner, retirement plan

administrator and any other institution having a selling, services or

any similar agreement with Putnam Retail Management or one of its

affiliates), your dealer generally receives payments from Putnam Retail

Management representing some or all of the sales charges and

distribution (12b-1) fees, if any, shown in the tables under the heading

"Fees and Expenses" at the front of this prospectus.

Putnam Retail Management and its affiliates also pay additional

compensation to selected dealers in recognition of their marketing support

and/or program servicing (each of which is described in more detail below).

These payments may create an incentive for a dealer firm or its

representatives to recommend or offer shares of the fund or other Putnam

funds to its customers. These additional payments are made by Putnam Retail

Management and its affiliates and do not increase the amount paid by you or

the fund as shown under the heading "Fees and Expenses."

The additional payments to dealers by Putnam Retail Management and its

affiliates are generally based on one or more of the following factors:

average net assets of a fund attributable to that dealer, sales of a fund

attributable to that dealer, or reimbursement of ticket charges (fees that

a dealer firm charges its representatives for effecting transactions in

fund shares), or on the basis of a negotiated lump sum payment for services

provided.

Marketing support payments, which are generally available to most dealers

engaging in significant sales of Putnam fund shares, are not expected, with

certain limited exceptions, to exceed 0.085% of the average net assets of

Putnam's retail mutual funds attributable to that dealer on an annual

basis.

Program servicing payments, which are paid in some instances to third

parties in connection with investments in the fund by retirement plans and

other investment programs, are not expected, with certain limited

exceptions, to exceed 0.15% of the total assets in the program on an

annual basis.

Putnam Retail Management and its affiliates may make other payments or

allow other promotional incentives to dealers to the extent permitted by

SEC and NASD rules and by other applicable laws and regulations. Certain

dealers also receive payments in recognition of subaccounting or other

services they provide to shareholders or plan participants who invest in

the fund or other Putnam funds through their retirement plan. See the

discussion in the SAI under the heading "Management -- Investor Servicing

Agent and Custodian" for more details.

You can find more details in the SAI about the payments made by Putnam

Retail Management and its affiliates and the services provided by your

dealer. Your dealer may charge you fees or commissions in addition to

those disclosed in this prospectus. You can also ask your dealer about any

payments it receives from Putnam Retail Management and its affiliates and

any services your dealer provides, as well as about fees and/or

commissions it charges.

How do I sell fund shares?

You can sell your shares back to the fund any day the NYSE is open, either

through your financial advisor or directly to the fund. Payment for

redemption may be delayed until the fund collects the purchase price of

shares, which may be up to 10 calendar days after the purchase date.

The fund will impose a short-term trading fee of 2.00% of the total

redemption amount (calculated at market value) if you sell or exchange your

shares after holding them for 5 days or less (including if you purchased the

shares by exchange). A short-term trading fee of 1.00% of the total

redemption amount (calculated at market value) will apply to any shares sold

or exchanged within 6 to 90 days of purchase (including purchases by

exchange). In the case of defined contribution plans administered by Putnam

or a Putnam affiliate, the 1.00% short-term trading fee will apply to sales

or exchanges of shares purchased by exchange that occur within 6 to 90 days

of purchase and the 2.00% short-term trading fee will apply to sales or

exchanges of shares purchased by exchange that are held in a plan

participant's account for 5 days or less. The short-term trading fee is paid

directly to the fund and is designed to offset brokerage commissions, market

impact and other costs associated with short-term trading. The short-term

trading fee will not apply in certain circumstances, such as redemptions in

the event of shareholder death or post-purchase disability, redemptions from

certain omnibus accounts, redemptions made as part of a systematic

withdrawal plan, and redemptions in connection with periodic portfolio

rebalancings of certain wrap accounts or automatic rebalancing arrangements.

In addition, for investors in defined contribution plans administered by

Putnam or a Putnam affiliate, the short-term trading fee will not apply to

redemptions to pay distributions or loans from such plans, redemptions of

shares purchased directly with contributions by a plan participant or

sponsor and redemptions of shares purchased in connection with loan

repayments. These exceptions may also apply to defined contribution plans

administered by third parties that assess the fund's short-term trading fee.

For purposes of determining whether the short-term trading fee applies, the

shares that were held the longest will be redeemed first. Some financial

intermediaries, retirement plan sponsors or recordkeepers that hold omnibus

accounts with the fund are currently unable or unwilling to assess the

fund's short-term trading fee. Some of these firms use different systems or

criteria to assess fees that are currently higher than, and in some cases in

addition to, the fund's short-term trading fee.

* Selling shares through your financial advisor. Your advisor must receive

your request in proper form before the close of regular trading on the

NYSE for you to receive that day's NAV, less any applicable deferred

sales charge and short-term trading fee. Your advisor will be

responsible for furnishing all necessary documents to Putnam Investor

Services on a timely basis and may charge you for his or her services.

* Selling shares directly to the fund. Putnam Investor Services must receive

your request in proper form before the close of regular trading on the

NYSE in order to receive that day's NAV, less any applicable sales

charge and short-term trading fee.

By mail. Send a letter of instruction signed by all registered owners or

their legal representatives to Putnam Investor Services. If you have

certificates for the shares you want to sell, you must include them along

with completed stock power forms.

By telephone. You may use Putnam's telephone redemption privilege to redeem

shares valued at less than $100,000 unless you have notified Putnam

Investor Services of an address change within the preceding 15 days, in

which case other requirements may apply. Unless you indicate otherwise on

the account application, Putnam Investor Services will be authorized to

accept redemption instructions received by telephone.

The telephone redemption privilege is not available if there are

certificates for your shares. The telephone redemption privilege may be

modified or terminated without notice.

* Additional requirements. In certain situations, for example, if you sell

shares with a value of $100,000 or more, the signatures of all

registered owners or their legal representatives must be guaranteed by a

bank, broker-dealer or certain other financial institutions. In

addition, Putnam Investor Services usually requires additional documents

for the sale of shares by a corporation, partnership, agent or

fiduciary, or surviving joint owner. For more information concerning

Putnam's signature guarantee and documentation requirements, contact

Putnam Investor Services.

* Payment information. The fund generally sends you payment for your shares

the business day after your request is received. Under unusual

circumstances, the fund may suspend redemptions, or postpone payment for

more than seven days, as permitted by federal securities law.

* Redemption by the fund. If you own fewer shares than the minimum set by

the Trustees (presently 20 shares), the fund may redeem your shares

without your permission and send you the proceeds. To the extent

permitted by applicable law, the fund may also redeem shares if you own

more than a maximum amount set by the Trustees. There is presently no

maximum, but the Trustees could set a maximum that would apply to both

present and future shareholders.

How do I exchange fund shares?

If you want to switch your investment from one Putnam fund to another, you

can exchange your fund shares for shares of the same class of another

Putnam fund at NAV. Not all Putnam funds offer all classes of shares or are

open to new investors. If you exchange shares subject to a deferred sales

charge, the transaction will not be subject to the deferred sales charge.

When you redeem the shares acquired through the exchange, the redemption

may be subject to the deferred sales charge, depending upon when you

originally purchased the shares. The deferred sales charge will be computed

using the schedule of any fund into or from which you have exchanged your

shares that would result in your paying the highest deferred sales charge

applicable to your class of shares. For purposes of computing the deferred

sales charge, the length of time you have owned your shares will be

measured from the date of original purchase and will not be affected by any

subsequent exchanges among funds.

To exchange your shares, complete and return an Exchange Authorization

Form, which is available from Putnam Investor Services. A telephone

exchange privilege is currently available for amounts up to $500,000.

The telephone exchange privilege is not available if the fund issued

certificates for your shares. You may also exchange shares via the Internet

at www.putnam.com. Ask your financial advisor or Putnam Investor Services

for prospectuses of other Putnam funds. Some Putnam funds are not available

in all states.

The exchange privilege is not intended as a vehicle for short-term trading.

In order to discourage excessive exchange activity and otherwise to promote

the best interests of the fund, the fund will impose a short-term trading

fee of 2.00% of the total exchange amount (calculated at market value) on

exchanges of shares held for 5 days or less (including shares purchased by

exchange). A short-term trading fee of 1.00% of the total exchange amount

(calculated at market value) will apply to any shares that are exchanged

within 6 to 90 days of purchase (including purchases by exchange). In the

case of defined contribution plans administered by Putnam or a Putnam

affiliate, the 1.00% short-term trading fee will apply to exchanges of

shares purchased by exchange that occur within 6 to 90 days of purchase and

the 2.00% short-term trading fee will apply to exchanges of shares

purchased by exchange that are held in a plan participant's account for 5

days or less. The short-term trading fee will not apply in certain

circumstances, such as exchanges in connection with periodic portfolio

rebalancings of certain wrap accounts or automatic rebalancing

arrangements. Some financial intermediaries, retirement plan sponsors or

recordkeepers that hold omnibus accounts with the fund are currently unable

or unwilling to assess the fund's short-term trading fee. Some of these

firms use different systems or criteria to assess fees that are currently

higher than, and in some cases in addition to, the fund's short-term

trading fee.

The fund also reserves the right to revise or terminate the exchange

privilege, limit the amount or number of exchanges or reject any exchange.

The fund into which you would like to exchange may also reject your

exchange. These actions may apply to all shareholders or only to those

shareholders whose exchanges Putnam Management determines are likely to

have a negative effect on the fund or other Putnam funds. Consult Putnam

Investor Services before requesting an exchange.

Policy on excessive short-term trading

* Risks of excessive short-term trading. Excessive short-term trading

activity may reduce the fund's performance and harm all fund

shareholders by interfering with portfolio management, increasing the

fund's expenses and diluting the fund's net asset value. Depending on

the size and frequency of short-term trades in the fund's shares, the

fund may experience increased cash volatility, which could require the

fund to maintain undesirably large cash positions or buy or sell

portfolio securities it would not have bought or sold. The need to

execute additional portfolio transactions due to these cash flows may

also increase the fund's brokerage and administrative costs and, for

investors in taxable accounts, may increase the taxable distributions

received from the fund.

Because the fund invests primarily in foreign securities, its performance

may be adversely impacted and the interests of longer-term shareholders

may be diluted as a result of time-zone arbitrage, a short-term trading

practice that seeks to exploit changes in the value of the fund's

investments that result from events occurring after the close of the

foreign markets on which the investments trade, but prior to the later

close of trading on the NYSE, the time as of which the fund determines its

net asset value. If an arbitrageur is successful, he or she may dilute the

interests of other shareholders by trading shares at prices that do not

fully reflect their fair value.

Because the fund invests in securities that may trade infrequently or may

be more difficult to value, such as securities of smaller companies, it

may be susceptible to trading by short-term traders who seek to exploit

perceived price inefficiencies in the fund's investments. In addition, the

market for securities of smaller companies may at times show "market

momentum," in which positive or negative performance may continue from one

day to the next for reasons unrelated to the fundamentals of the issuer.

Short-term traders may seek to capture this momentum by trading frequently

in the fund's shares, which will reduce the fund's performance and may

dilute the interests of other shareholders. Because securities of smaller

companies may be less liquid than securities of larger companies, the fund

may also be unable to buy or sell these securities at desirable prices

when the need arises (for example, in response to volatile cash flows

caused by short-term trading). Similar risks may apply if the fund holds

other types of less liquid securities, including below investment grade

bonds.

* Fund policies. In order to protect the interests of long-term shareholders

of the fund, Putnam Management and the fund's Trustees have adopted

policies and procedures intended to discourage excessive short-term

trading. The fund seeks to discourage excessive short-term trading by

imposing short-term trading fees and using fair value pricing procedures

to value investments under some circumstances. In addition, Putnam

Management monitors activity in shareholder accounts about which it

possesses the necessary information in order to detect excessive

short-term trading patterns and takes steps to deter excessive

short-term traders.

Putnam Management's Compliance Department currently uses multiple reporting

tools to monitor activity in retail customer accounts for which Putnam

Investor Services maintains records. This review is based on the fund's

internal parameters for detecting excessive short-term trading, which

consider the number of "round trip" transactions above a specified dollar

amount within a specified period of time. These parameters may change from

time to time. If a monitored account engages in short-term trading that

Putnam Management or the fund considers to be excessive

or inappropriate, Putnam Management will issue the investor and the

financial intermediary involved in the activity, if any, a written warning.

Continued excessive short-term trading activity by an investor or

intermediary that has received a warning may lead to the termination of the

exchange privilege. The fund also reserves the right to terminate the

exchange privilege without a warning. In addition, Putnam Management will

also communicate instances of excessive short-term trading to the

compliance staff of an investor's broker, if one is identified.

In addition to enforcing these exchange parameters, Putnam Management and

the fund reserve the right to reject or restrict purchases or exchanges for

any reason. Putnam Management or the fund may determine that an investor's

trading activity is excessive or otherwise potentially harmful based on

various factors, including an investor's or financial intermediary's

trading history in the fund, other Putnam funds or other investment

products, and may aggregate activity in multiple accounts under common

ownership or control. If the fund identifies an investor or intermediary as

a potential excessive trader, it may, among other things, require further

trades to be submitted by mail rather than by phone or over the Internet,

impose limitations on the amount, number, or frequency of future purchases

or exchanges, or temporarily or permanently bar the investor or

intermediary from investing in the fund or other Putnam funds. The fund may

take these steps in its discretion even if the investor's activity may not

have been detected by the fund's current monitoring parameters.

* Limitations on the fund's policies. There is no guarantee that the fund

will be able to detect excessive short-term trading in all accounts. For

example, Putnam Management currently does not have access to sufficient

information to identify each investor's trading history, and in certain

circumstances there are operational or technological constraints on its

ability to enforce the fund's policies. In addition, even when Putnam

Management has sufficient information, its detection methods may not

capture all excessive short-term trading.

In particular, many purchase, redemption and exchange orders are received

from financial intermediaries that hold omnibus accounts with the fund.

Omnibus accounts, in which shares are held in the name of an intermediary

on behalf of multiple beneficial owners, are a common form of holding

shares among retirement plans and financial intermediaries such as brokers,

advisers and third-party administrators. The fund is generally not able to

identify trading by a particular beneficial owner within an omnibus

account, which makes it difficult or impossible to determine if a

particular shareholder is engaging in excessive short-term trading. Putnam

Management monitors aggregate cash flows in omnibus accounts on an ongoing

basis. If high cash flows or other information indicate that excessive

short-term trading may be taking place, Putnam Management will contact the

financial intermediary, plan sponsor or recordkeeper that maintains

accounts for the underlying beneficial owner and attempt to identify and

remedy any excessive trading. However, the fund's ability to monitor and

deter excessive short-term traders in omnibus accounts ultimately depends

on the capabilities and cooperation of these third-party financial firms.

The fund's policies on exchanges may also be modified for accounts held by

certain retirement plans to conform to plan exchange limits or Department

of Labor requirements. A financial intermediary or plan sponsor may impose

different or additional limits on short-term trading.

* Blackout periods for Putnam employees. Putnam Investments imposes blackout

periods on investments in the Putnam funds (other than money market

funds) by its employees and certain family members. Employees of Putnam

Investments and covered family members may not make a purchase followed

by a sale, or a sale followed by a purchase, in any non-money market

Putnam fund within any 90-calendar day period. Members of Putnam

Management's Investment Division, certain senior executives, and certain

other employees with access to investment information, as well as their

covered family members, are subject to a blackout period of one year.

These blackout periods are subject to limited exceptions.

Fund distributions and taxes

The fund normally distributes any net investment income and any net

realized capital gains annually. You may choose to:

* reinvest all distributions in additional shares;

* receive any distributions from net investment income in cash while

reinvesting capital gains distributions in additional shares; or

* receive all distributions in cash.

If you do not select an option when you open your account, all

distributions will be reinvested. If you do not cash a distribution check

within a specified period or notify Putnam Investor Services to issue a new

check, the distribution will be reinvested in the fund. You will not

receive any interest on uncashed distribution or redemption checks.

Similarly, if any correspondence sent by the fund or Putnam Investor

Services is returned as "undeliverable," fund distributions will

automatically be reinvested in the fund or in another Putnam fund.

For federal income tax purposes, distributions of investment income are

taxable as ordinary income. Taxes on distributions of capital gains are

determined by how long the fund owned the investments that generated them,

rather than how long you have owned your shares. Distributions are taxable

to you even if they are paid from income or gains earned by the fund before

your investment (and thus were included in the price you paid). Properly

designated distributions of gains from investments that the fund owned for

more than one year are taxable as long-term capital gains. Distributions of

gains from investments that the fund owned for one year or less are taxable

as ordinary income. Properly designated distributions of "qualified

dividend income" are taxable at the rate applicable to long-term capital

gains provided that both you and the fund meet certain holding period and

other requirements. Distributions are taxable whether you receive them in

cash or reinvest them in additional shares.

Distributions by the fund to retirement plans that qualify for tax-exempt

treatment under federal income tax laws will not be taxable. Special tax

rules apply to investments through such plans. You should consult your tax

advisor to determine the suitability of the fund as an investment through

such a plan and the tax treatment of distributions (including distributions

of amounts attributable to an investment in the fund) from such a plan.

The fund's investments in foreign securities may be subject to foreign

withholding taxes. In that case, the fund's return on those investments

would be decreased. Shareholders generally will be entitled to claim a

credit or deduction with respect to foreign taxes. In addition, the fund's

investment in foreign securities or foreign currencies may increase or

accelerate the fund's recognition of ordinary income and may affect the

timing or amount of the fund's distributions.

Any gain resulting from the sale or exchange of your shares will generally

also be subject to tax. You should consult your tax advisor for more

information on your own tax situation, including possible foreign, state

and local taxes.

Financial highlights

The financial highlights tables are intended to help you understand the

fund's recent financial performance. Certain information reflects financial

results for a single fund share. The total returns represent the rate that

an investor would have earned or lost on an investment in the fund,

assuming reinvestment of all dividends and distributions. This information

has been derived from the fund's financial statements, which have been

audited by PricewaterhouseCoopers LLP. Its report and the fund's financial

statements are included in the fund's annual report to shareholders, which

is available upon request.

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

CLASS A

------------------------------------------------------------------------------------------------------

PER-SHARE OPERATING PERFORMANCE

------------------------------------------------------------------------------------------------------

Year ended

6/30/05 6/30/04 6/30/03 6/30/02 6/30/01

------------------------------------------------------------------------------------------------------

Net asset value,

beginning of period $20.86 $17.43 $19.18 $21.24 $29.92

------------------------------------------------------------------------------------------------------

Investment operations:

Net investment income (a) .25 (d,e) .15 (d) .22 .17 .16

------------------------------------------------------------------------------------------------------

Net realized and unrealized

gain (loss) on investments 2.61 3.63 (1.93) (2.23) (6.64)

------------------------------------------------------------------------------------------------------

Total from investment operations 2.86 3.78 (1.71) (2.06) (6.48)

------------------------------------------------------------------------------------------------------

Less distributions:

From net investment income (.33) (.35) (.04) -- (.39)

------------------------------------------------------------------------------------------------------

From net realized gain on investments -- -- -- -- (1.81)

------------------------------------------------------------------------------------------------------

From return of capital -- -- -- -- -- (f)

------------------------------------------------------------------------------------------------------

Total distributions (.33) (.35) (.04) -- (2.20)

------------------------------------------------------------------------------------------------------

Redemption fees -- (f) -- (f) -- -- --

------------------------------------------------------------------------------------------------------

Net asset value, end of period $23.39 $20.86 $17.43 $19.18 $21.24

------------------------------------------------------------------------------------------------------

Total return at net asset value (%)(b) 13.71 21.81 (8.93) (9.70) (22.43)

RATIOS AND SUPPLEMENTAL DATA

------------------------------------------------------------------------------------------------------

Net assets, end of period

(in thousands) $3,137,593 $3,677,492 $6,855,608 $6,930,312 $6,896,924

------------------------------------------------------------------------------------------------------

Ratio of expenses to

average net assets (%) (c) 1.24 (d) 1.23 (d) 1.22 1.16 1.13

------------------------------------------------------------------------------------------------------

Ratio of net investment income

to average net assets (%) 1.11 (d,e) .74 (d) 1.33 .85 .63

------------------------------------------------------------------------------------------------------

Portfolio turnover (%) 74.79 69.27 53.11 (g) 42.17 73.80

(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.

arrangements.

(d) Reflects an involuntary contractual expense limitation and waiver of

certain fund expenses in connection with investments in Putnam Prime

Money Market Fund in effect during the period. As a result of such

limitation and waivers, expenses of the fund for the periods ended

June 30, 2004 and June 30, 2005 reflect a reduction of 0.03% and 0.06%,

respectively, based on average net assets for class A shares.

(e) Reflects a non-recurring accrual related to Putnam Management' s

settlement with the SEC regarding brokerage allocation practices,

which amounted to less than $0.01 per share and 0.02% of average net

assets for class A shares.

(f) Amount represents less than $0.01 per share.

(g) Portfolio turnover excludes impact of assets received from the acquisition

of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund.

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

CLASS B

------------------------------------------------------------------------------------------------------

PER-SHARE OPERATING PERFORMANCE

------------------------------------------------------------------------------------------------------

Year ended

6/30/05 6/30/04 6/30/03 6/30/02 6/30/01

------------------------------------------------------------------------------------------------------

Net asset value,

beginning of period $20.07 $16.79 $18.57 $20.72 $29.23

------------------------------------------------------------------------------------------------------

Investment operations:

Net investment income (loss) (a) .07 (d,e) .02 (d) .08 .01 (.04)

------------------------------------------------------------------------------------------------------

Net realized and unrealized

gain (loss) on investments 2.51 3.47 (1.86) (2.16) (6.46)

------------------------------------------------------------------------------------------------------

Total from

investment operations 2.58 3.49 (1.78) (2.15) (6.50)

------------------------------------------------------------------------------------------------------

Less distributions:

From net investment income (.16) (.21) -- -- (.20)

------------------------------------------------------------------------------------------------------

From net realized gain on investments -- -- -- -- (1.81)

------------------------------------------------------------------------------------------------------

From return of capital -- -- -- -- -- (f)

------------------------------------------------------------------------------------------------------

Total distributions (.16) (.21) -- -- (2.01)

------------------------------------------------------------------------------------------------------

Redemption fees -- (f) -- (f) -- -- --

------------------------------------------------------------------------------------------------------

Net asset value, end of period $22.49 $20.07 $16.79 $18.57 $20.72

------------------------------------------------------------------------------------------------------

Total return at net asset value (%)(b) 12.86 20.84 (9.59) (10.38) (23.00)

RATIOS AND SUPPLEMENTAL DATA

------------------------------------------------------------------------------------------------------

Net assets, end of period

(in thousands) $1,344,142 $1,577,583 $1,892,054 $2,326,938 $2,983,524

------------------------------------------------------------------------------------------------------

Ratio of expenses to

average net assets (%) (c) 1.99 (d) 1.98 (d) 1.97 1.91 1.88

------------------------------------------------------------------------------------------------------

Ratio of net investment income (loss)

to average net assets (%) .35 (d,e) .12 (d) .51 .04 (.16)

------------------------------------------------------------------------------------------------------

Portfolio turnover (%) 74.79 69.27 53.11 (g) 42.17 73.80

(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.

arrangements.

(d) Reflects an involuntary contractual expense limitation and waiver of

certain fund expenses in connection with investments in Putnam Prime

Money Market Fund in effect during the period. As a result of such

limitation and waivers, expenses of the fund for the periods ended

June 30, 2004 and June 30, 2005 reflect a reduction of 0.03% and

0.06%, respectively, based on average net assets for class B shares.

(e) Reflects a non-recurring accrual related to Putnam Management's

settlement with the SEC regarding brokerage allocation practices,

which amounted to less than $0.01 per share and 0.02% of average net

assets for class B shares.

(f) Amount represents less than $0.01 per share.

(g) Portfolio turnover excludes impact of assets received from the acquisition

of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund.

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

CLASS C

------------------------------------------------------------------------------------------------------

PER-SHARE OPERATING PERFORMANCE

------------------------------------------------------------------------------------------------------

Year ended

6/30/05 6/30/04 6/30/03 6/30/02 6/30/01

------------------------------------------------------------------------------------------------------

Net asset value,

beginning of period $20.44 $17.05 $18.86 $21.03 $29.74

------------------------------------------------------------------------------------------------------

Investment operations:

Net investment income (loss) (a) .08 (d,e) -- (d)(f) .09 .01 (.02)

------------------------------------------------------------------------------------------------------

Net realized and unrealized

gain (loss) on investments 2.55 3.55 (1.90) (2.18) (6.59)

------------------------------------------------------------------------------------------------------

Total from

investment operations 2.63 3.55 (1.81) (2.17) (6.61)

------------------------------------------------------------------------------------------------------

Less distributions:

From net investment income (.14) (.16) -- -- (.29)

------------------------------------------------------------------------------------------------------

From net realized gain on investments -- -- -- -- (1.81)

------------------------------------------------------------------------------------------------------

From return of capital -- -- -- -- -- (f)

------------------------------------------------------------------------------------------------------

Total distributions (.14) (.16) -- -- (2.10)

------------------------------------------------------------------------------------------------------

Redemption fees -- (f) -- (f) -- -- --

------------------------------------------------------------------------------------------------------

Net asset value, end of period $22.93 $20.44 $17.05 $18.86 $21.03

------------------------------------------------------------------------------------------------------

Total return at net asset value (%)(b) 12.87 20.86 (9.60) (10.32) (23.01)

RATIOS AND SUPPLEMENTAL DATA

------------------------------------------------------------------------------------------------------

Net assets, end of period

(in thousands) $259,993 $313,496 $534,933 $601,907 $637,547

------------------------------------------------------------------------------------------------------

Ratio of expenses to

average net assets (%) (c) 1.99 (d) 1.98 (d) 1.97 1.91 1.88

------------------------------------------------------------------------------------------------------

Ratio of net investment income (loss)

to average net assets (%) .34 (d,e) .02 (d) .54 .07 (.07)

------------------------------------------------------------------------------------------------------

Portfolio turnover (%) 74.79 69.27 53.11 (g) 42.17 73.80

(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.

arrangements.

(d) Reflects an involuntary contractual expense limitation and waiver of

certain fund expenses in connection with investments in Putnam Prime

Money Market Fund in effect during the period. As a result of such

limitation and waivers, expenses of the fund for the periods ended

June 30, 2004 and June 30, 2005 reflect a reduction of 0.03% and 0.06%,

respectively, based on average net assets for class C shares.

(e) Reflects a non-recurring accrual related to Putnam Management's

settlement with the SEC regarding brokerage allocation practices, which

amounted to less than $0.01 per share and 0.02% of average net assets

for class C shares.

(f) Amount represents less than $0.01 per share.

(g) Portfolio turnover excludes impact of assets received from the acquisition

of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund.

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

CLASS M

------------------------------------------------------------------------------------------------------

PER-SHARE OPERATING PERFORMANCE

------------------------------------------------------------------------------------------------------

Year ended

6/30/05 6/30/04 6/30/03 6/30/02 6/30/01

------------------------------------------------------------------------------------------------------

Net asset value,

beginning of period $20.51 $17.13 $18.90 $21.04 $29.61

------------------------------------------------------------------------------------------------------

Investment operations:

Net investment income (loss) (a) .13 (d,e) .05 (d) .11 .06 .03

------------------------------------------------------------------------------------------------------

Net realized and unrealized

gain (loss) on investments 2.56 3.56 (1.88) (2.20) (6.54)

------------------------------------------------------------------------------------------------------

Total from

investment operations 2.69 3.61 (1.77) (2.14) (6.51)

------------------------------------------------------------------------------------------------------

Less distributions:

From net investment income (.20) (.23) -- -- (.25)

------------------------------------------------------------------------------------------------------

From net realized gain on investments -- -- -- -- (1.81)

------------------------------------------------------------------------------------------------------

From return of capital -- -- -- -- -- (f)

------------------------------------------------------------------------------------------------------

Total distributions (.20) (.23) -- -- (2.06)

------------------------------------------------------------------------------------------------------

Redemption fees -- (f) -- (f) -- -- --

------------------------------------------------------------------------------------------------------

Net asset value, end of period $23.00 $20.51 $17.13 $18.90 $21.04

------------------------------------------------------------------------------------------------------

Total return at net asset value (%)(b) 13.13 21.13 (9.37) (10.17) (22.75)

RATIOS AND SUPPLEMENTAL DATA

------------------------------------------------------------------------------------------------------

Net assets, end of period

(in thousands) $90,499 $109,648 $187,266 $248,921 $302,838

------------------------------------------------------------------------------------------------------

Ratio of expenses to

average net assets (%) (c) 1.74 (d) 1.73 (d) 1.72 1.66 1.63

------------------------------------------------------------------------------------------------------

Ratio of net investment income (loss)

to average net assets (%) .60 (d,e) .28 (d) .73 .30 .11

------------------------------------------------------------------------------------------------------

Portfolio turnover (%) 74.79 69.27 53.11 (g) 42.17 73.80

(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.

arrangements.

(d) Reflects an involuntary contractual expense limitation and waiver of

certain fund expenses in connection with investments in Putnam Prime

Money Market Fund in effect during the period. As a result of such

limitation and waivers, expenses of the fund for the periods ended

June 30, 2004 and June 30, 2005 reflect a reduction of 0.03% and 0.06%,

respectively, based on average net assets for class M shares.

(e) Reflects a non-recurring accrual related to Putnam Management's

settlement with the SEC regarding brokerage allocation practices,

which amounted to less than $0.01 per share and 0.02% of average net

assets for class M shares.

(f) Amount represents less than $0.01 per share.

(g) Portfolio turnover excludes impact of assets received from the acquisition

of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund.

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

CLASS R

------------------------------------------------------------------------------------------------------

PER-SHARE OPERATING PERFORMANCE

------------------------------------------------------------------------------------------------------

Period

Year ended 1/21/03+ -

6/30/05 6/30/04 6/30/03

------------------------------------------------------------------------------------------------------

Net asset value,

beginning of period $20.77 $17.42 $16.52

------------------------------------------------------------------------------------------------------

Investment operations:

Net investment income (a) .26 (d,e) .18 (d) .08

------------------------------------------------------------------------------------------------------

Net realized and unrealized

gain on investments 2.52 3.55 .82

------------------------------------------------------------------------------------------------------

Total from

investment operations 2.78 3.73 .90

------------------------------------------------------------------------------------------------------

Less distributions:

From net investment income (.30) (.38) --

------------------------------------------------------------------------------------------------------

From net realized gain on investments -- -- --

------------------------------------------------------------------------------------------------------

Total distributions (.30) (.38) --

------------------------------------------------------------------------------------------------------

Redemption fees -- (f) -- (f) --

------------------------------------------------------------------------------------------------------

Net asset value, end of period $23.25 $20.77 $17.42

------------------------------------------------------------------------------------------------------

Total return at net asset value (%)(b) 13.38 21.50 5.45 *

RATIOS AND SUPPLEMENTAL DATA

------------------------------------------------------------------------------------------------------

Net assets, end of period

(in thousands) $1,125 $559 $1

------------------------------------------------------------------------------------------------------

Ratio of expenses to average net assets (%)(c) 1.49 (d) 1.48 (d) .65 *

------------------------------------------------------------------------------------------------------

Ratio of net investment income

to average net assets (%) 1.17 (d,e) .84 (d) .47 *

------------------------------------------------------------------------------------------------------

Portfolio turnover (%) 74.79 69.27 53.11 (g)

+ 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.

arrangements.

(d) Reflects an involuntary contractual expense limitation and waiver of

certain fund expenses in connection with investments in Putnam Prime

Money Market Fund in effect during the period. As a result of such

limitation and waivers, expenses of the fund for the periods ended

June 30, 2004 and June 30, 2005 reflect a reduction of 0.03% and 0.06%,

respectively, based on average net assets for class R shares.

(e) Reflects a non-recurring accrual related to Putnam Management's settlement

with the SEC regarding brokerage allocation practices, which amounted

to less than $0.01 per share and 0.02% of average net assets for class

R shares.

(f) Amount represents less than $0.01 per share.

(g) Portfolio turnover excludes impact of assets received from the acquisition

of Putnam Asia Pacific Fund and Putnam Emerging Markets Fund.

Make the most of your Putnam privileges

As a Putnam mutual fund shareholder, you have access to a number of

services that can help you build a more effective and flexible financial

program. Here are some of the ways you can use these privileges to make

the most of your Putnam mutual fund investment.

* SYSTEMATIC INVESTMENT PLAN

Invest as much as you wish ($25 or more). The amount you choose will be

automatically transferred weekly, semi-monthly or monthly from your

checking or savings account.

* SYSTEMATIC WITHDRAWAL

Make regular withdrawals of $50 or more monthly, quarterly, semiannually,

or annually from your Putnam mutual fund account valued at $5,000 or more.

* SYSTEMATIC EXCHANGE

Transfer assets automatically from one Putnam account to another on a

regular, prearranged basis.

* EXCHANGE PRIVILEGE

Exchange money between Putnam funds in the same class of shares. The

exchange privilege allows you to adjust your investments as your objectives

change. A signature guarantee is required for exchanges of more than

$500,000 and shares of all Putnam funds may not be available to all

investors.

A 2.00% short-term trading fee will apply to exchanges of shares from

Putnam funds (other than money market funds) held for 5 days or less. A

separate 1.00% short-term trading fee may apply to exchanges of shares of

certain Putnam funds that occur within 6 to 90 days of purchase. Please

read the prospectus of the applicable fund for more details.

Investors may not maintain, within the same fund, simultaneous plans for

systematic investment or exchange (into the fund) and system atic

withdrawal or exchange (out of the fund). These privileges are subject to

change or termination.

* DIVIDENDS PLUS

Diversify your portfolio by investing dividends and other distributions

from one Putnam fund automatically into another at net asset value.

* STATEMENT OF INTENTION

To reduce a front-end sales charge, you may agree to invest a minimum

dollar amount over 13 months. Depending on your fund, the minimum is

$50,000 or $100,000. Whenever you make an investment under this arrangement,

you or your financial advisor should notify Putnam Investor Services that a

Statement of Intention is in effect.

Many of these services can be accessed online at www.putnam.com.

For more information about any of these services and privileges, call your

financial advisor or a Putnam customer service representative toll free at

1-800-225-1581.

For more information

about Putnam International

Equity Fund

The fund's SAI and annual and semi-annual reports to shareholders include

additional information about the fund. The SAI, and the independent

registered public accounting firm's report and the financial statements

included in the fund's most recent annual report to its shareholders, are

incorporated by reference into this prospectus, which means they are part

of this prospectus for legal purposes. The fund's annual report discusses

the market conditions and investment strategies that significantly

affected the fund's performance during its last fiscal year. You may get

free copies of these materials, request other information about any Putnam

fund, or make shareholder inquiries, by contacting your financial advisor,

by visiting Putnam's website at www.putnam.com/individual, or by calling

Putnam toll-free at 1-800-225-1581.

You may review and copy information about a fund, including its SAI, at

the Securities and Exchange Commission's Public Reference Room in

Washington, D.C. You may call the Commission at 1-202-942-8090 for

information about the operation of the Public Reference Room. You may also

access reports and other information about the fund on the EDGAR Database

on the Commission's Internet site at http://www.sec.gov. You may get

copies of this information, with payment of a duplication fee, by

electronic request at the following E-mail address: publicinfo@sec.gov, or

by writing the Commission's Public Reference Section, Washington, D.C.

20549-0102. You may need to refer to the fund's file number.

Communications from Putnam other than those included with the prospectus

in this package are provided in the English language.

PUTNAM INVESTMENTS

One Post Office Square

Boston, Massachusetts 02109

1-800-225-1581

Address correspondence to

Putnam Investor Services

P.O. Box 41203

Providence, Rhode Island 02940-1203

www.putnam.com

File No. 811-06190 228444 10/05

Prospectus

10/30/05

Putnam International Equity Fund

Class A shares -- for eligible retirement plans

Investment Category: Blend

This prospectus explains what you should know about this mutual fund

before you invest. Please read it carefully. This prospectus only offers

class A shares of the fund without a sales charge to eligible retirement

plans.

Putnam Investment Management, LLC (Putnam Management), which has managed

mutual funds since 1937, manages the fund.

These securities have not been approved or disapproved by the Securities

and Exchange Commission nor has the Commission passed upon the accuracy or

adequacy of this prospectus. Any statement to the contrary is a crime.

CONTENTS

2 Fund summary

2 Goal

2 Main investment strategies

2 Main risks

2 Performance information

3 Fees and expenses

4 What are the fund's main investment strategies and related risks?

9 Who manages the fund?

13 How does the fund price its shares?

14 How do I buy fund shares?

16 How do I sell fund shares?

18 How do I exchange fund shares?

18 Policy on excessive short-term trading

21 Fund distributions and taxes

21 Financial highlights

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