a_interntnlequity.htm

Putnam
International Equity
Fund

Annual report
6 | 30 | 17


Message from the Trustees	1

About the fund	2

Interview with your fund’s portfolio manager	5

Your fund’s performance	10

Your fund’s expenses	12

Terms and definitions	14

Other information for shareholders	15

Important notice regarding Putnam’s privacy policy	16

Trustee approval of management contract	17

Financial statements	22

Federal tax information	54

About the Trustees	55

Officers	57

Consider these risks before investing: International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. Stock prices may fall or fail to rise over time for a variety of reasons, including general financial market conditions and factors related to a specific issuer or industry. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. You can lose money by investing in the fund.

Message from the Trustees

August 10, 2017

Dear Fellow Shareholder:

A fair amount of investor optimism has helped to fuel financial markets in 2017, and global stock and bond markets have generally fared well. At the same time, however, a number of macroeconomic and political risks around the world could disrupt the positive momentum.

While calm markets are generally welcome, we believe investors should continue to remember time-tested strategies: maintain a well-diversified portfolio, keep a long-term view, and speak regularly with your financial advisor. In the following pages, you will find an overview of your fund’s performance for the reporting period as well as an outlook for the coming months.

We would like to take this opportunity to announce some changes to your fund’s Board of Trustees. First, we are pleased to welcome the arrival of Catharine Bond Hill and Manoj P. Singh, who bring extensive professional and directorship experience to their new roles as Putnam Trustees. In addition, we would like to extend our appreciation and best wishes to Robert J. Darretta, John A. Hill, and W. Thomas Stephens, who retired from the Board, effective June 30, 2017. We are grateful for their years of work on behalf of you and your fellow shareholders, and we wish them well in their future endeavors.

Thank you for investing with Putnam.

Sam is Co-Head of Equities at Putnam. He has a B.A. from Oxford University. Sam joined Putnam in 2000 and has been in the investment industry since 1988.

Sam, how would you describe the investment environment for the 12-month reporting period ended June 30, 2017?

Thanks largely to an acceleration in global economic activity, international markets generated above-average results for the 12-month reporting period. As an indication of the better environment, the April 2017 IMF World Economic Outlook anticipated a world growth rate of 3.5% in 2017, an increase from 3.1% in 2016. Even Europe, interestingly, despite ongoing political strain, yielded a number of positive surprises and achieved stronger-than-expected growth. Monetary policies remained generally accommodative outside the United States.

In Asia, Japan continued to grow steadily albeit at a low rate and without generating inflation. The People’s Republic of China [China] maintained high levels of growth, but also continued to exhibit underlying economic problems and its rapid credit creation over a sustained period remained an area of concern.

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How did Putnam International Equity Fund perform in this environment?

The fund underperformed its benchmark, the MSCI EAFE Index [ND], for the period. Although stock selection in France, Australia, and Japan contributed to performance, it did not offset poorer results from the fund’s U.K. holdings.

What were some holdings that contributed to fund performance in the period?

One of the top contributors to relative performance for the period was Nintendo. The company saw better-than-expected sales of Switch, its new gaming console. Nintendo also benefited from increased monetization of its gaming intellectual property into the mobile gaming space.

Another high-performing stock was NSK, a Japanese ball bearing and power steering manufacturer. NSK benefited greatly from the weakening of the yen relative to the dollar, a trend helped along by the election of President Trump, whose announced economic policies helped lift the dollar in the second half of the fund’s reporting period. The same factor helped Yamaha, another major contributor to the fund’s performance during the reporting period. Yamaha’s main business is outdoor motors, and it too has benefited from a weaker yen given a substantial part of its sales are in the U.S. We have since sold Yamaha, believing it had reached fair value.

Outside of Asia, Challenger was a key contributor. Challenger is an Australian insurance company that specializes in annuities. It has been a pioneer in developing investment alternatives in the form of less risky, more predictable retirement annuities. This type of annuity has been an important product for Australians, who often hold equities well into retirement. Challenger has won major distribution deals in its local market and expects to expand into Japan. The stock performed well during the period and continues to be attractive, in our view.

European bank holdings also performed quite well, including ING, Societe Generale, and Natixis, which contributed to fund performance during the period. The success of these banks stemmed from a widespread banking rally that followed from the U.S. presidential election. Trump’s victory generated increased expectations of fiscal stimulus in the United States that impacted the European market via rising long-term bond yields. Banks generally benefit when long yields rise in relation to short-term rates. Stronger-than-expected economic data from Europe also helped these stocks.

What were some holdings that detracted from the fund’s performance during the period?

Stock selection in the United Kingdom, in particular, had a negative impact. Also, relative to the benchmark, the fund had overweight exposure to the U.K. market, which underperformed. An investment tactic we used to mitigate our relative losses was a currency hedge. After the Brexit referendum, we defensively hedged the fund’s exposure to the pound, which protected performance as the pound weakened.

Among U.K. stocks that detracted from fund performance was Shire, a niche biotechnology company. The market reacted negatively when Shire bought Baxalta, a blood and plasma product company. The general market sentiment was that the acquisition was poorly timed because the blood and plasma market was becoming increasingly competitive. We, however, believe that Shire’s stock continues to be attractively valued, so we continue to hold it in the fund’s portfolio.

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Our decision not to hold HSBC, a U.K.-listed global financial services company with major exposure to Asia, also detracted from the fund’s results. HSBC has substantial weight in the benchmark, and it performed well during the period. We chose to avoid this stock because we did not like it from a valuation perspective, but it benefited from increased confidence in the emerging markets where it has operations.

In the last report, politics was a source of uncertainty, with Brexit as a key example. Can you offer your perspective on conditions now?

Political conditions in the United Kingdom continue to be unstable. Theresa May’s loss of the Conservative Party’s majority in the June general election called into question how long she would last as Prime Minister. Her loss also cast doubt on the prospects of a favorable Brexit negotiation. These events have put downward pressure on the British pound and added to a pickup in inflation. Wages have not kept pace, squeezing disposable income and leaving consumption vulnerable, in our view.

In France, the decisive election of Emmanuel Macron and his subsequent, substantial victory in the parliamentary elections suggest labor reform may have the best chance of being passed in many years, in our view. We also believe reform could introduce greater flexibility for businesses and lead to a pick up in investment. Macron also hopes to use reform to attract London-based financial companies to Paris as Brexit moves forward.

As the fund begins a new fiscal year, what is your outlook on the investment environment?

The portfolio remains modestly overweight in the U.K., relative to the benchmark, with holdings there biased toward multinational firms that we believe will benefit from the weaker pound. U.K. gross domestic product growth remained solid during the period, but consumer data began to disappoint. We believe that a recent pickup in inflation may be tolerated by the Bank of England [BOE]. Governor Mark Carney has been historically equivocal over rate rises, while the Monetary Committee has been dovish on this front. Notably, the latest inflation reading was below market expectations, and we expect inflation to peak in the coming months. We believe this would enable the BOE to remain on hold until at least next year.

This chart shows the fund’s largest allocation shifts, by percentage, over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.

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In Asia, we believe that Japan is undervalued and should continue to offer numerous opportunities. We plan to continue focusing on high-quality exporters. At current exchange rates, yen-sensitive exporters promise large upsides, in our view. While China’s underlying credit-tied problems remain a concern, we expect the country to stave off any major crises through its control of key players in the economy, including the major banks. Leading up to the Communist Party plenum in the autumn, we anticipate growth will remain intact.

We also expect the positive surprises we have witnessed in the European economy to continue, although we are aware that the recent strength in the euro will be a headwind at the margin. Following from this projection, we anticipate the European Central Bank will apply a measured withdrawal of stimulus — measured because central banks much prefer inflation to deflation as they know how to control the former. While an inflationary spike remains a risk, we do not anticipate such an event, particularly because a spike in oil prices seems unlikely, in our view.

Potential for improved operating leverage in international markets leads us to believe that non-U.S. stocks remain more attractively valued than U.S. stocks. While the global market has recovered considerably and could cause concern about overvaluation, equities continue to look more attractive than other asset classes, in our view.

Sam, thanks for your time and insights today.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended June 30, 2017, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R5, R6, and Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 6/30/17


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year

Class A (2/28/91)
Before sales charge	7.21%	1.34%	0.13%	54.15%	9.04%	0.41%	0.13%	19.76%

After sales charge	6.97	–4.49	–0.46	45.29	7.76	–5.37	–1.82	12.88

Class B (6/1/94)
Before CDSC	6.95	–4.62	–0.47	48.47	8.22	–1.84	–0.62	18.84

After CDSC	6.95	–4.62	–0.47	46.47	7.93	–4.66	–1.58	13.84

Class C (7/26/99)
Before CDSC	6.41	–6.04	–0.62	48.41	8.22	–1.84	–0.62	18.79

After CDSC	6.41	–6.04	–0.62	48.41	8.22	–1.84	–0.62	17.79

Class M (12/1/94)
Before sales charge	6.67	–3.66	–0.37	50.22	8.48	–1.13	–0.38	19.14

After sales charge	6.53	–7.03	–0.73	44.96	7.71	–4.59	–1.55	14.97

Class R (1/21/03)
Net asset value	6.95	–1.25	–0.13	52.12	8.75	–0.39	–0.13	19.39

Class R5 (7/2/12)
Net asset value	7.45	4.29	0.42	56.59	9.38	1.33	0.44	20.14

Class R6 (7/2/12)
Net asset value	7.47	4.88	0.48	57.47	9.51	1.68	0.56	20.29

Class Y (7/12/96)
Net asset value	7.43	3.90	0.38	56.00	9.30	1.16	0.38	20.07

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R5, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable. Performance for class R5 and R6 shares prior to their inception is derived from the historical performance

10 International Equity Fund

of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R5 and R6 shares; had it, returns would have been higher.

Recent performance may have benefited from one or more legal settlements.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

Class B share performance reflects conversion to class A shares after eight years.

Comparative index returns For periods ended 6/30/17


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year

MSCI EAFE Index (ND)	5.14%	10.74%	1.03%	51.69%	8.69%	3.48%	1.15%	20.27%

Lipper International
Multi-Cap Core Funds	5.63	13.10	1.11	49.57	8.34	4.28	1.38	19.68
category average^*

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

^*Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 6/30/17, there were 444, 354, 293, 183, and 7 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $9,538 and $9,396, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $9,297. A $10,000 investment in the fund’s class R, R5, R6, and Y shares would have been valued at $9,875, $10,429, $10,488, and $10,390, respectively.

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Fund price and distribution information For the 12-month period ended 6/30/17


Distributions	Class A		Class B	Class C	Class M		Class R	Class R5	Class R6	Class Y
Number	1		1	1	1		1	1	1	1

Income	$0.641		$0.458	$0.475	$0.525		$0.597	$0.715	$0.739	$0.703

Capital gains	—		—	—	—		—	—	—	—

Total	$0.641		$0.458	$0.475	$0.525		$0.597	$0.715	$0.739	$0.703

	Before	After	Net	Net	Before	After	Net	Net	Net	Net
	sales	sales	asset	asset	sales	sales	asset	asset	asset	asset
Share value	charge	charge	value	value	charge	charge	value	value	value	value
6/30/16	$20.49	$21.74	$19.51	$19.77	$19.93	$20.65	$20.15	$20.79	$20.82	$20.74

6/30/17	23.80	25.25	22.66	22.94	23.14	23.98	23.37	24.15	24.19	24.09

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Expense ratios


	Class A	Class B	Class C	Class M	Class R	Class R5	Class R6	Class Y

Total annual operating
expenses for the fiscal year
ended 6/30/16^*	1.32%	2.07%	2.07%	1.82%	1.57%	0.96%	0.86%	1.07%

Annualized expense ratio
for the six-month period
ended 6/30/17^†‡	1.23%	1.98%	1.98%	1.73%	1.48%	0.88%	0.78%	0.98%

Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

^*Restated to reflect current fees resulting from a change to the fund’s investor servicing arrangements effective 9/1/16.

^†Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

^‡Includes a decrease of 0.04% from annualizing the performance fee adjustment for the six months ended 6/30/17.

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Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 1/1/17 to 6/30/17. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.


	Class A	Class B	Class C	Class M	Class R	Class R5	Class R6	Class Y

Expenses paid per $1,000^*†	$6.55	$10.52	$10.52	$9.19	$7.87	$4.69	$4.16	$5.22

Ending value (after expenses)	$1,146.40	$1,142.10	$1,141.90	$1,143.30	$1,144.50	$1,147.80	$1,148.60	$1,147.70

^*Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 6/30/17. The expense ratio may differ for each share class.

^†Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 6/30/17, use the following calculation method. To find the value of your investment on 1/1/17, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.


	Class A	Class B	Class C	Class M	Class R	Class R5	Class R6	Class Y

Expenses paid per $1,000^*†	$6.16	$9.89	$9.89	$8.65	$7.40	$4.41	$3.91	$4.91

Ending value (after expenses)	$1,018.70	$1,014.98	$1,014.98	$1,016.22	$1,017.46	$1,020.43	$1,020.93	$1,019.93

^†Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.

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Terms and definitions

Important terms

Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.

Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.

Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/or capital gains reinvestment. They are not subject to an initial sales charge and may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.

Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC.

Class R shares are not subject to an initial sales charge or CDSC and are only available to employer-sponsored retirement plans.

Class R5 and R6 shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are only available to employer-sponsored retirement plans.

Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Comparative indexes

Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.

BofA Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

MSCI EAFE Index (ND) is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.

S&P 500 Index is an unmanaged index of common stock performance.

Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofAML”), used with permission. BofAML permits use of the BofAML indices and related data on an “as is” basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness,

14 International Equity Fund

and/or completeness of the BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.

Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2017, are available in the Individual Investors section of putnam.com, and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of June 30, 2017, Putnam employees had approximately $493,000,000 and the Trustees had approximately $141,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

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Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

16 International Equity Fund

Trustee approval of management contract

General conclusions

The Board of Trustees of The Putnam Funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management, LLC (“Putnam Management”), the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”), and the sub-advisory contract among Putnam Management, PIL, and another affiliate, The Putnam Advisory Company (“PAC”). The Board, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of The Putnam Funds (“Independent Trustees”).

At the outset of the review process, members of the Board’s independent staff and independent legal counsel discussed with representatives of Putnam Management the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review, identifying possible changes in these materials that might be necessary or desirable for the coming year. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2017, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2017, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 2017 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management, sub-management and sub-advisory contracts, effective July 1, 2017. (Because PIL and PAC are affiliates of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL and PAC, the Trustees have not attempted to evaluate PIL or PAC as separate entities, and all subsequent references to Putnam Management below should be deemed to include reference to PIL and PAC as necessary or appropriate in the context.)

The Independent Trustees’ approval was based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the fund, and the continued application of certain reductions and waivers noted below; and

• That the fee schedule in effect for your fund represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and

International Equity Fund 17

discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with some minor exceptions, the funds’ current fee arrangements under the management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to fund shareholders. (In a few instances, funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment strategy, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee structure for your fund would be appropriate at this time.

Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee rates as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

In addition, your fund’s management contract provides that its management fees will be adjusted up or down depending upon whether your fund’s performance is better or worse than the performance of an appropriate index of securities prices specified in the management contract. In the course of reviewing investment performance, the Trustees examined the operation of your fund’s performance fees and concluded that these fees were operating effectively to align further Putnam Management’s economic interests with those of the fund’s shareholders.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations that were in effect during your fund’s fiscal year ending in 2016. These expense limitations were: (i) a contractual expense limitation applicable to specified retail open-end funds, including your fund, of 32 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds, including your fund, had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2016. Putnam Management has agreed to maintain the 32 basis points expense limitation (reduced to 25 basis points effective September 1, 2016) until at least August 31, 2018 and to maintain the 20 basis points expense limitation until at least October 30, 2018. Putnam Management’s support for these expense limitation arrangements was an important factor in the Trustees’ decision to approve the continuance of your fund’s management, sub-management and sub-advisory contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Broadridge Financial Solutions, Inc. (“Broadridge”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fee), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the first quintile in effective management fees (determined for

18 International Equity Fund

your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the third quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2016. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of December 31, 2016 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees in connection with their annual contract review for the Putnam funds included information regarding fees charged by Putnam Management and its affiliates to institutional clients, including defined benefit pension and profit-sharing plans, charities, college endowments, foundations, sub-advised third-party mutual funds, state, local and non-U.S. government entities, and corporations. This information included, in cases where an institutional product’s investment strategy corresponds with a fund’s strategy, comparisons of those fees with fees charged to the Putnam funds, as well as an assessment of the differences in the services provided to these different types of clients as compared to the services provided to the Putnam Funds. The Trustees observed that the differences in fee rates between these clients and the Putnam funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect, among other things, historical competitive forces operating in separate markets. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the investment oversight committees of the Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officers and other senior members of Putnam Management’s Investment Division throughout the year. In addition, in response to a request from the Independent Trustees, Putnam Management provided the Trustees with in-depth presentations regarding each of the equity and fixed income investment teams, including the operation of the teams and their investment approaches. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that 2016 was a challenging year for the performance of the Putnam funds, with generally disappointing results for the international and global equity funds and taxable fixed income funds, mixed results for small-cap equity,

International Equity Fund 19

Spectrum, global asset allocation, equity research and tax exempt fixed income funds, but generally strong results for U.S. equity funds. The Trustees noted, however, that they were encouraged by the positive performance trend since mid-year 2016 across most Putnam Funds. In particular, from May 1, 2016 through April 30, 2017, 51% of Putnam Fund assets were in the top quartile and 87% were above the median of the Putnam Funds’ competitive industry rankings. They noted that the longer-term performance of the Putnam funds generally continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the 5th-best performing mutual fund complex out of 54 complexes for the five-year period ended December 31, 2016. In addition, while the survey ranked the Putnam Funds 52nd out of 61 mutual fund complexes for the one-year period ended 2016, the Putnam Funds have ranked 1st or 2nd in the survey for the one-year period three times since 2009 (most recently in 2013). They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2016 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor closely the performance of those funds, including the effectiveness of any efforts Putnam Management has undertaken to address underperformance and whether additional actions to address areas of underperformance are warranted.

For purposes of the Trustees’ evaluation of the Putnam Funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and, in most cases, comparisons of those returns with the returns of selected investment benchmarks. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper Inc. (“Lipper”) peer group (Lipper International Multi-Cap Core Funds) for the one-year, three-year and five-year periods ended December 31, 2016 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):


One-year period	4th

Three-year period	4th

Five-year period	1st

Over the one-year, three-year and five-year periods ended December 31, 2016, there were 442, 344 and 288 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

The Trustees expressed concern about your fund’s fourth quartile performance over the one-year and three-year periods ended December 31, 2016 and considered the circumstances that may have contributed to this disappointing performance. The Trustees considered Putnam Management’s observation that the fund’s underperformance over the one-year period was due in significant part to poor stock selection as well as the fund’s positioning when the Bank of Japan moved unexpectedly to negative interest rates in January 2016, and its expectation that the U.K. would vote to remain in the European Union (the U.K. instead voted to leave). The Trustees also considered Putnam Management’s observation that the fund’s underperformance over the three-year period was attributable to underperformance in 2014, as well as to its underperformance in 2016.

The Trustees considered that Putnam Management remained confident in the fund’s portfolio manager. The Trustees also considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management continued to strengthen its fundamental research capabilities by adding new investment personnel.

As a general matter, the Trustees believe that cooperative efforts between the Trustees and Putnam Management represent the most effective way to address investment performance concerns that may arise from time to time. The Trustees noted that investors in the Putnam funds have, in effect, placed their trust in the Putnam

20 International Equity Fund

organization, under the oversight of the funds’ Trustees, to make appropriate decisions regarding the management of the funds. Based on Putnam Management’s willingness to take appropriate measures to address fund performance issues and Putnam Management’s responsiveness to Trustee concerns about investment performance, the Trustees concluded that it continues to be advisable to seek change within Putnam Management to address performance shortcomings. In the Trustees’ view, the alternative of engaging a new investment adviser for an underperforming fund would entail significant disruptions and would not likely provide any greater assurance of improved investment performance.

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used predominantly to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. However, the Trustees noted that a portion of available soft dollars continues to be used to pay fund expenses. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee, including any developments with respect to the European Union’s updated Markets in Financial Instruments Directive and its potential impact on PIL’s use of client commissions to obtain investment research. The Trustees also indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management, sub-management and sub-advisory contracts, the Trustees reviewed your fund’s investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”) and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services. Furthermore, the Trustees believed that the services provided were required for the operation of the funds, and that they were of a quality at least equal to those provided by other providers.

International Equity Fund 21

Financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s financial statements.

The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type/and industry sector, country, or state to show areas of concentration and/diversification.

Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)

Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal year.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were/earned.

Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.

22 International Equity Fund

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders
of Putnam International Equity Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam International Equity Fund (the “Fund”) as of June 30, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2017

International Equity Fund 23

The fund’s portfolio 6/30/17


COMMON STOCKS (98.8%)*	Shares	Value

Argentina (1.0%)

Banco Macro SA ADR ^S	103,448	$9,536,871

		9,536,871

Australia (1.8%)

Challenger, Ltd.	1,609,090	16,498,198

		16,498,198

Canada (1.9%)

Cenovus Energy, Inc.	1,115,400	8,222,721

Magna International, Inc.	208,800	9,671,974

		17,894,695

China (2.3%)

Alibaba Group Holding, Ltd. ADR ^†^S	75,700	10,666,130

Tencent Holdings, Ltd.	286,700	10,252,597

		20,918,727

Denmark (1.5%)

Danske Bank A/S	370,311	14,242,840

		14,242,840

Finland (1.4%)

Nokia OYJ	2,093,076	12,830,383

		12,830,383

France (9.3%)

Airbus SE	168,768	13,878,599

Eurazeo SA	104,701	7,855,487

Natixis SA	1,510,363	10,138,181

Sanofi	167,964	16,068,521

SFR Group SA ^†	4	135

Societe Generale SA	263,125	14,157,880

Valeo SA	206,094	13,885,667

Veolia Environnement SA	507,451	10,722,322

		86,706,792

Germany (13.6%)

Adidas AG	58,327	11,175,197

BASF SE	136,133	12,608,219

Bayer AG	166,906	21,579,501

Delivery Hero Holding GmbH ^†	158,551	5,034,273

Evonik Industries AG	365,815	11,692,566

FabFurnish GmbH (acquired various dates from 8/2/13 to 8/31/16,
cost $20) (Private) ^{† ∆∆ F}	30	26

Henkel AG & Co. KGaA (Preference)	102,170	14,061,558

KION Group AG	106,282	8,123,415

New Bigfoot Other Assets GmbH (acquired 8/2/13, cost $20) (Private) ^{† ∆∆ F}	15	13

New Middle East Other Assets GmbH (acquired 8/2/13, cost $8)
(Private) ^{† ∆∆ F}	6	5

Rheinmetall AG	103,267	9,803,702

RWE AG ^†	563,187	11,221,389

Siemens AG	156,086	21,455,224

		126,755,088

24 International Equity Fund


COMMON STOCKS (98.8%)* cont.	Shares	Value

Hong Kong (1.2%)

WH Group, Ltd.	11,359,000	$11,464,552

		11,464,552

Indonesia (0.5%)

Matahari Department Store Tbk PT	4,491,500	4,777,116

		4,777,116

Ireland (3.0%)

Bank of Ireland ^†	28,840,738	7,576,301

CRH PLC	312,851	11,068,070

Kerry Group PLC Class A	110,298	9,489,834

		28,134,205

Italy (2.1%)

ENI SpA	711,921	10,700,664

Telecom Italia SpA RSP	12,545,969	9,242,446

		19,943,110

Japan (19.8%)

Chugai Pharmaceutical Co., Ltd.	269,100	10,060,596

Hoya Corp.	297,000	15,402,543

Isuzu Motors, Ltd.	706,800	8,709,711

Japan Airlines Co., Ltd.	239,900	7,409,759

Komatsu, Ltd.	533,500	13,539,682

Kyudenko Corp.	230,200	8,237,875

LIXIL Group Corp.	488,900	12,210,003

Nintendo Co., Ltd.	38,500	12,897,800

NSK, Ltd.	1,130,700	14,104,220

ORIX Corp.	1,143,300	17,686,970

Rohm Co., Ltd.	108,600	8,332,678

SoftBank Corp.	146,700	11,865,125

Sony Corp.	443,800	16,911,552

Sumitomo Mitsui Financial Group, Inc.	414,700	16,145,555

TDK Corp.	174,100	11,438,978

		184,953,047

Luxembourg (—%)

Global Fashion Group SA (acquired 8/2/13, cost $1,009,308) (Private) ^{† ∆∆ F}	23,826	223,227

		223,227

Netherlands (8.8%)

Akzo Nobel NV	101,851	8,851,480

Altice NV Class A ^†	431,504	9,955,411

Heineken NV	106,514	10,356,484

ING Groep NV GDR	1,238,349	21,357,136

Koninklijke Ahold Delhaize NV	718,939	13,745,816

Unilever NV ADR	326,169	18,000,834

		82,267,161

Norway (1.8%)

Norsk Hydro ASA	1,295,313	7,180,367

Orkla ASA	909,382	9,242,229

		16,422,596

South Korea (1.2%)

SK Hynix, Inc.	195,976	11,544,625

		11,544,625

International Equity Fund 25


COMMON STOCKS (98.8%)* cont.	Shares	Value

Spain (1.0%)

Grifols SA ADR	436,814	$9,229,880

		9,229,880

Sweden (2.2%)

Com Hem Holding AB	780,970	10,845,904

Securitas AB Class B	585,404	9,867,101

		20,713,005

Switzerland (1.0%)

Partners Group Holding AG	14,603	9,053,586

		9,053,586

Taiwan (0.8%)

Taiwan Semiconductor Manufacturing Co., Ltd.	1,153,000	7,902,712

		7,902,712

United Kingdom (19.1%)

Admiral Group PLC	343,966	8,973,408

Associated British Foods PLC	300,096	11,475,648

AstraZeneca PLC	198,980	13,307,939

Barclays PLC	3,554,942	9,387,595

Berkeley Group Holdings PLC (The)	242,278	10,182,956

Compass Group PLC	546,913	11,539,701

Dixons Carphone PLC	2,391,219	8,832,559

Imperial Brands PLC	205,185	9,215,879

Prudential PLC	869,941	19,953,087

Rio Tinto PLC	367,255	15,507,496

Royal Dutch Shell PLC Class A	704,969	18,685,098

RPC Group PLC	882,786	8,646,378

Shire PLC	290,549	16,037,670

Virgin Money Holdings UK PLC	2,275,245	7,912,257

Wolseley PLC	138,556	8,505,184

		178,162,855

United States (3.5%)

Alphabet, Inc. Class C ^†	8,411	7,643,328

Amazon.com, Inc. ^†	8,000	7,744,000

Johnson Controls International PLC	189,500	8,216,720

KKR & Co. LP	480,100	8,929,860

		32,533,908

Total common stocks (cost $834,461,963)		$922,709,179


CONVERTIBLE PREFERRED STOCKS (—%)*	Shares	Value

Global Fashion Group SA zero % cv. pfd. (acquired 7/11/16, cost $121,576)
(Germany) (Private) ^{† ∆∆ F}	16,051	$153,390

Total convertible preferred stocks (cost $121,576)		$153,390


	Principal
U.S. TREASURY OBLIGATIONS (—%)*	amount	Value

U.S. Treasury Notes 0.875%, 05/31/18 ⁱ	$131,000	$130,631

Total U.S. treasury obligations (cost $130,631)		$130,631

26 International Equity Fund


	Principal amount/
SHORT-TERM INVESTMENTS (3.4%)*		shares	Value

Putnam Cash Collateral Pool, LLC 1.24% ^d	Shares	18,354,575	$18,354,575

Putnam Short Term Investment Fund 1.07% ^L	Shares	8,703,302	8,703,302

State Street Institutional U.S. Government Money
Market Fund, Premier Class 0.88% ^P	Shares	849,000	849,000

U.S. Treasury Bills 0.898%, 8/10/17 ^∆		$645,000	644,407

U.S. Treasury Bills 0.885%, 8/3/17		763,000	762,440

U.S. Treasury Bills 0.785%, 7/20/17		1,713,000	1,712,368

U.S. Treasury Bills 0.786%, 7/13/17		210,000	209,955

U.S. Treasury Bills 0.761%, 7/6/17		533,000	532,966

Total short-term investments (cost $31,768,825)			$31,769,013


TOTAL INVESTMENTS

Total investments (cost $866,482,995)			$954,762,213

Key to holding’s abbreviations


ADR	American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
GDR	Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from July 1, 2016 through June 30, 2017 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $933,459,783.

† This security is non-income-producing.

^∆∆This security is restricted with regard to public resale. The total fair value of this security and any other restricted securities (excluding 144A securities), if any, held at the close of the reporting period was $376,661, or less than 0.1% of net assets.

^∆ This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period.

^d Affiliated company. See Notes 1 and 5 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

^F This security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs (Note 1).

ⁱ This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts (Note 1).

^L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

^P This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period (Note 1).

^S Security on loan, in part or in entirety, at the close of the reporting period (Note 1).

At the close of the reporting period, the fund maintained liquid assets totaling $608,858 to cover certain derivative contracts.

The dates shown on debt obligations are the original maturity dates.

International Equity Fund 27

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Financials	21.4%

Industrials	14.5

Consumer discretionary	12.7

Consumer staples	11.5

Health care	10.9

Information technology	10.0


FORWARD CURRENCY CONTRACTS at 6/30/17 (aggregate face value $334,968,363)

						Unrealized
		Contract	Delivery		Aggregate	appreciation/
Counterparty	Currency	type	date	Value	face value	(depreciation)

Bank of America N.A.

	Australian Dollar	Buy	7/19/17	$8,078,281	$7,973,951	$104,330

	British Pound	Sell	9/20/17	15,737,513	15,553,460	(184,053)

	Canadian Dollar	Sell	7/19/17	98,963	111,920	12,957

	Euro	Sell	9/20/17	20,522,791	20,479,026	(43,765)

	Hong Kong Dollar	Buy	8/16/17	185,560	186,293	(733)

Barclays Bank PLC

	Hong Kong Dollar	Sell	8/16/17	898,701	902,489	3,788

	Swiss Franc	Buy	9/20/17	13,689,014	13,549,812	139,202

Citibank, N.A.

	Australian Dollar	Buy	7/19/17	15,982,967	15,640,563	342,404

	British Pound	Sell	9/20/17	12,661,188	12,508,545	(152,643)

	Danish Krone	Buy	9/20/17	2,176,609	2,140,523	36,086

	Euro	Sell	9/20/17	28,898	28,418	(480)

	Japanese Yen	Buy	8/16/17	15,053,227	15,119,786	(66,559)

	New Zealand Dollar	Buy	7/19/17	41,979	39,984	1,995

Credit Suisse International

	Australian Dollar	Buy	7/19/17	7,006,587	6,920,198	86,389

	Euro	Sell	9/20/17	9,390,153	9,233,107	(157,046)

	Swiss Franc	Buy	9/20/17	8,386,596	8,300,652	85,944

Goldman Sachs International

	British Pound	Sell	9/20/17	11,635,310	11,523,447	(111,863)

	Chinese Yuan (Offshore)	Sell	8/16/17	20,484,898	20,019,899	(464,999)

	Euro	Buy	9/20/17	118,689	115,641	3,048

	Japanese Yen	Buy	8/16/17	6,863,039	6,875,228	(12,189)

HSBC Bank USA, National Association

	Australian Dollar	Buy	7/19/17	82,686	82,521	165

	Australian Dollar	Sell	7/19/17	82,686	81,562	(1,124)

	Euro	Sell	9/20/17	18,577,905	18,487,905	(90,000)

	New Zealand Dollar	Buy	7/19/17	1,796,167	1,711,029	85,138

JPMorgan Chase Bank N.A.

	British Pound	Buy	9/20/17	16,188,309	16,253,407	(65,098)

	Canadian Dollar	Buy	7/19/17	3,849,143	3,731,465	117,678

	Euro	Sell	9/20/17	5,309,562	5,223,531	(86,031)

	Japanese Yen	Buy	8/16/17	13,509,854	13,612,255	(102,401)

	Norwegian Krone	Sell	9/20/17	10,436,450	10,298,711	(137,739)

28 International Equity Fund

ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1: Valuations based on quoted prices for identical securities in active markets.

Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


			Valuation inputs

Investments in securities:	Level 1	Level 2		Level 3

Common stocks:

Argentina	$9,536,871	$—		$—

Australia	16,498,198	—		—

Canada	17,894,695	—		—

China	20,918,727	—		—

Denmark	14,242,840	—		—

Finland	12,830,383	—		—

France	86,706,792	—		—

Germany	126,755,044	—		44

Hong Kong	11,464,552	—		—

Indonesia	4,777,116	—		—

Ireland	28,134,205	—		—

Italy	19,943,110	—		—

Japan	184,953,047	—		—

Luxembourg	—	—		223,227

Netherlands	82,267,161	—		—

Norway	16,422,596	—		—

South Korea	11,544,625	—		—

Spain	9,229,880	—		—

Sweden	20,713,005	—		—

Switzerland	9,053,586	—		—

Taiwan	7,902,712	—		—

United Kingdom	178,162,855	—		—

United States	32,533,908	—		—

Total common stocks	922,485,908	—		223,271

Convertible preferred stocks	—	—		153,390

U.S. treasury obligations	—	130,631		—

Short-term investments	9,552,302	22,216,711		—

Totals by level	$932,038,210	$22,347,342		$376,661

30 International Equity Fund

Statement of assets and liabilities 6/30/17


ASSETS

Investment in securities, at value, including $18,178,179 of securities on loan (Note 1):
Unaffiliated issuers (identified cost $839,425,118)	$927,704,336
Affiliated issuers (identified cost $27,057,877) (Notes 1 and 5)	27,057,877

Foreign currency (cost $928,759) (Note 1)	945,494

Dividends, interest and other receivables	1,944,768

Foreign tax reclaim	763,460

Receivable for shares of the fund sold	585,492

Receivable for investments sold	1,611,556

Unrealized appreciation on forward currency contracts (Note 1)	2,310,761

Prepaid assets	58,389

Total assets	962,982,133

LIABILITIES

Payable for investments purchased	4,673,141

Payable for shares of the fund repurchased	1,382,585

Payable for compensation of Manager (Note 2)	514,271

Payable for custodian fees (Note 2)	48,221

Payable for investor servicing fees (Note 2)	345,980

Payable for Trustee compensation and expenses (Note 2)	713,704

Payable for administrative services (Note 2)	3,530

Payable for distribution fees (Note 2)	458,006

Unrealized depreciation on forward currency contracts (Note 1)	1,843,799

Collateral on securities loaned, at value (Note 1)	18,354,575

Collateral on certain derivative contracts, at value (Note 1)	979,631

Other accrued expenses	204,907

Total liabilities	29,522,350

Net assets	$933,459,783


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$1,847,456,447

Distributions in excess of net investment income (Note 1)	(1,944,055)

Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(1,000,860,264)

Net unrealized appreciation of investments and assets and liabilities in foreign currencies	88,807,655

Total — Representing net assets applicable to capital shares outstanding	$933,459,783

(Continued on next page)

32 International Equity Fund

Statement of assets and liabilities cont.


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share
($656,449,905 divided by 27,584,642 shares)	$23.80

Offering price per class A share (100/94.25 of $23.80)^*	$25.25

Net asset value and offering price per class B share ($8,314,719 divided by 366,964 shares)^**	$22.66

Net asset value and offering price per class C share ($41,291,580 divided by 1,799,605 shares)^**	$22.94

Net asset value and redemption price per class M share ($10,977,225 divided by 474,320 shares)	$23.14

Offering price per class M share (100/96.50 of $23.14)^*	$23.98

Net asset value, offering price and redemption price per class R share
($3,671,267 divided by 157,067 shares)	$23.37

Net asset value, offering price and redemption price per class R5 share
($1,451,921 divided by 60,113 shares)	$24.15

Net asset value, offering price and redemption price per class R6 share
($91,019,848 divided by 3,763,226 shares)	$24.19

Net asset value, offering price and redemption price per class Y share
($120,283,318 divided by 4,993,426 shares)	$24.09

^*On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.

^**Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

The accompanying notes are an integral part of these financial statements.

International Equity Fund 33

Statement of operations Year ended 6/30/17


INVESTMENT INCOME

Dividends (net of foreign tax of $2,479,962)	$22,495,279

Interest (including interest income of $64,297 from investments in affiliated issuers) (Note 5)	79,011

Securities lending (net of expenses) (Notes 1 and 5)	80,185

Total investment income	22,654,475


EXPENSES

Compensation of Manager (Note 2)	5,984,562

Investor servicing fees (Note 2)	2,022,543

Custodian fees (Note 2)	93,039

Trustee compensation and expenses (Note 2)	54,931

Distribution fees (Note 2)	2,240,877

Administrative services (Note 2)	26,317

Other	524,404

Total expenses	10,946,673

Expense reduction (Note 2)	(28,517)

Net expenses	10,918,156

Net investment income	11,736,319


Net realized gain on securities from unaffiliated issuers (net of foreign tax of $108,441)
(Notes 1 and 3)	49,360,351

Net realized gain on forward currency contracts (Note 1)	1,541,093

Net realized loss on foreign currency transactions (Note 1)	(200,746)

Net realized gain on futures contracts (Note 1)	603,063

Net realized gain on written options (Notes 1 and 3)	2,790,906

Net unrealized appreciation of securities in unaffiliated issuers during the year	103,884,869

Net unrealized depreciation of forward currency contracts during the year	(4,369,580)

Net unrealized appreciation of assets and liabilities in foreign currencies during the year	198,951

Net unrealized depreciation of futures contracts during the year	(540,721)

Net unrealized depreciation of written options during the year	(2,346,536)

Net gain on investments	150,921,650

Net increase in net assets resulting from operations	$162,657,969

The accompanying notes are an integral part of these financial statements.

34 International Equity Fund

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 6/30/17	Year ended 6/30/16

Operations

Net investment income	$11,736,319	$14,238,055

Net realized gain (loss) on investments
and foreign currency transactions	54,094,667	(62,767,174)

Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies	96,826,983	(91,506,568)

Net increase (decrease) in net assets resulting
from operations	162,657,969	(140,035,687)

Distributions to shareholders (Note 1):
From ordinary income
Net investment income

Class A	(18,512,664)	(19,145,311)

Class B	(198,935)	(231,272)

Class C	(1,021,025)	(1,071,960)

Class M	(245,873)	(279,828)

Class R	(84,963)	(65,021)

Class R5	(555,393)	(567,566)

Class R6	(2,303,336)	(553,438)

Class Y	(3,237,714)	(2,873,661)

Increase in capital from settlement payments	134,616	—

Increase (decrease) from capital share transactions (Note 4)	(97,442,557)	1,277,845

Total increase (decrease) in net assets	39,190,125	(163,545,899)


NET ASSETS

Beginning of year	894,269,658	1,057,815,557

End of year (including distributions in excess of net
investment income of $1,944,055 and undistributed net
investment income of $11,265,370, respectively)	$933,459,783	$894,269,658

The accompanying notes are an integral part of these financial statements.

International Equity Fund 35

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

INVESTMENT OPERATIONS

LESS DISTRIBUTIONS

RATIOS AND SUPPLEMENTAL DATA

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

Non-recurring

Net asset

Total return

Net assets,

of expenses

income (loss)

Portfolio

beginning

Net investment

gain (loss)

investment

From net

Total

reimburse-

value, end

at net asset

end of period

to average

turnover

Period ended

of period

income (loss)^a

on investments

operations

investment income

distributions

ments

of period

value (%)^b

(in thousands)

net assets (%)^c

net assets (%)

(%)

Class A

June 30, 2017

$20.49

.28

3.67

3.95

(.64)

(.64)

—

$23.80

19.76

$656,450

1.23

1.27

June 30, 2016

24.31

.32

(3.55)

(3.23)

(.59)

(.59)

—

20.49

(13.46)

647,864

1.27^e

1.47^e

June 30, 2015

25.33

.29

(1.09)

(.80)

(.22)

(.22)

—

24.31

(3.12)

834,109

1.26

1.19

June 30, 2014

20.26

.20

5.01

5.21

(.17)

(.17)

.03^f

25.33

25.92

919,776

1.30

.83

June 30, 2013

16.78

.20

3.47

3.67

(.19)

(.19)

—

20.26

21.92

800,600

1.32

1.06

Class B

June 30, 2017

$19.51

.10

3.51

3.61

(.46)

(.46)

—

$22.66

18.84

$8,315

1.98

.46

June 30, 2016

23.14

.14

(3.37)

(3.23)

(.40)

(.40)

—

19.51

(14.09)

10,121

2.02^e

.66^e

June 30, 2015

24.08

.09

(1.02)

(.93)

(.01)

(.01)

—

23.14

(3.86)

14,821

2.01

.39

June 30, 2014

19.27

.01

4.77

4.78

—

.03^f

24.08

24.96

20,183

2.05

.03

June 30, 2013

15.95

.05

3.30

3.35

(.03)

(.03)

—

19.27

21.04

21,761

2.07

.27

Class C

June 30, 2017

$19.77

.11

3.54

3.65

(.48)

(.48)

—

$22.94

18.79

$41,292

1.98

.51

June 30, 2016

23.47

.15

(3.42)

(3.27)

(.43)

(.43)

—

19.77

(14.08)

47,141

2.02^e

.72^e

June 30, 2015

24.45

.11

(1.05)

(.94)

(.04)

(.04)

—

23.47

(3.83)

59,397

2.01

.46

June 30, 2014

19.58

.02

4.83

4.85

(.01)

(.01)

.03^f

24.45

24.93

61,686

2.05

.08

June 30, 2013

16.22

.06

3.35

3.41

(.05)

(.05)

—

19.58

21.03

53,981

2.07

.31

Class M

June 30, 2017

$19.93

.17

3.57

3.74

(.53)

(.53)

—

$23.14

19.14

$10,977

1.73

.80

June 30, 2016

23.64

.19

(3.43)

(3.24)

(.47)

(.47)

—

19.93

(13.87)

10,247

1.77^e

.90^e

June 30, 2015

24.64

.15

(1.05)

(.90)

(.10)

(.10)

—

23.64

(3.65)

15,078

1.76

.66

June 30, 2014

19.72

.08

4.88

4.96

(.07)

(.07)

.03^f

24.64

25.30

18,269

1.80

.33

June 30, 2013

16.34

.10

3.37

3.47

(.09)

(.09)

—

19.72

21.26

16,006

1.82

.55

Class R

June 30, 2017

$20.15

.23

3.59

3.82

(.60)

(.60)

—

$23.37

19.39

$3,671

1.48

1.08

June 30, 2016

23.87

.27

(3.49)

(3.22)

(.50)

(.50)

—

20.15

(13.66)

2,962

1.52^e

1.23^e

June 30, 2015

24.90

.23

(1.08)

(.85)

(.18)

(.18)

—

23.87

(3.37)

4,454

1.51

.99

June 30, 2014

19.94

.14

4.92

5.06

(.13)

(.13)

.03^f

24.90

25.57

3,478

1.55

.59

June 30, 2013

16.52

.16

3.40

3.56

(.14)

(.14)

—

19.94

21.62

2,743

1.57

.84

Class R5

June 30, 2017

$20.79

.23^d

3.85

4.08

(.72)

(.72)

—

$24.15

20.14

$1,452

.89

1.07^d

June 30, 2016

24.66

.40

(3.60)

(3.20)

(.67)

(.67)

—

20.79

(13.18)

16,211

.96^e

1.81^e

June 30, 2015

25.72

.44

(1.19)

(.75)

(.31)

(.31)

—

24.66

(2.84)

19,900

.96

1.79

June 30, 2014

20.58

.63^g

4.73

5.36

(.26)

(.26)

.04^f

25.72

26.28

8,002

.98

2.48^g

June 30, 2013^†

17.12

.29

3.38

3.67

(.21)

(.21)

—

20.58

21.51^*

12

.94^*

1.49^*

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.


36 International Equity Fund	International Equity Fund 37

Financial highlights cont.

INVESTMENT OPERATIONS

LESS DISTRIBUTIONS

RATIOS AND SUPPLEMENTAL DATA

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

Non-recurring

Net asset

Total return

Net assets,

of expenses

income (loss)

Portfolio

beginning

Net investment

gain (loss)

investment

From net

Total

reimburse-

value, end

at net asset

end of period

to average

turnover

Period ended

of period

income (loss)^a

on investments

operations

investment income

distributions

ments

of period

value (%)^b

(in thousands)

net assets (%)^c

net assets (%)

(%)

Class R6

June 30, 2017

$20.82

.41

3.70

4.11

(.74)

(.74)

—

$24.19

20.29

$91,020

.79

1.83

June 30, 2016

24.69

.59

(3.77)

(3.18)

(.69)

(.69)

—

20.82

(13.08)

66,136

.86^e

2.75^e

June 30, 2015

25.74

.39

(1.12)

(.73)

(.32)

(.32)

—

24.69

(2.75)

17,443

.86

1.61

June 30, 2014

20.59

.31

5.08

5.39

(.28)

(.28)

.04^f

25.74

26.44

17,762

.88

1.28

June 30, 2013^†

17.12

.56^h

3.13

3.69

(.22)

(.22)

—

20.59

21.62^*

13,856

.84^*

2.63^*h

Class Y

June 30, 2017

$20.74

.36

3.69

4.05

(.70)

(.70)

—

$24.09

20.07

$120,283

.98

1.61

June 30, 2016

24.61

.40

(3.60)

(3.20)

(.67)

(.67)

—

20.74

(13.23)

93,588

1.02^e

1.79^e

June 30, 2015

25.66

.36

(1.12)

(.76)

(.29)

(.29)

—

24.61

(2.91)

92,613

1.01

1.49

June 30, 2014

20.52

.26

5.07

5.33

(.23)

(.23)

.04^f

25.66

26.21

64,196

1.05

1.09

June 30, 2013

17.00

.24

3.52

3.76

(.24)

(.24)

—

20.52

22.19

53,813

1.07

1.27

*Not annualized.

†For the period July 3, 2012 (commencement of operations) to June 30, 2013.

^aPer share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

^bTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.

^cIncludes amounts paid through expense offset and brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

^dThe net investment income ratio and per share amount shown for the period ended June 30, 2017 may not correspond with the expected class specific differences for the period due to the timing of redemptions out of the class.

^eReflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of less than 0.01% as a percentage of average net assets.

^fReflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Morgan Stanley & Co. which amounted to the following per share outstanding on November 27, 2013.


	Per share

Class A	$0.03

Class B	0.03

Class C	0.03

Class M	0.03

Class R	0.03

Class R5	0.04

Class R6	0.04

Class Y	0.04

^gThe net investment income ratio and per share amount shown for the period ended June 30, 2014 may not correspond with the expected class specific differences for the period due to the timing of subscriptions into the class.

^hThe net investment income ratio and per share amount shown for the period ended June 30, 2013 may not correspond with the expected class specific differences for the period due to the timing of subscriptions into the class.

The accompanying notes are an integral part of these financial statements.


38 International Equity Fund	International Equity Fund 39

Notes to financial statements 6/30/17

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from July 1, 2016 through June 30, 2017.

Putnam International Equity Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The goal of the fund is to seek capital appreciation. The fund invests mainly in common stocks (growth or value stocks or both) of large and midsize companies outside the United States that Putnam Management believes have favorable investment potential. For example, the fund may purchase stocks of companies with stock prices that reflect a value lower than that which Putnam Management places on the company. Under normal circumstances, Putnam Management invests at least 80% of the fund’s net assets in equity investments. This policy may be changed only after 60 days’ notice to shareholders. Putnam Management may also consider other factors that it believes will cause the stock price to rise. The fund invests mainly in developed countries, but may invest in emerging markets. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. Putnam Management may also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.

The fund offers class A, class B, class C, class M, class R, class R5, class R6 and class Y shares. The fund registered class T shares in February 2017, however, as of the date of this report, class T shares had not commenced operations and are not available for purchase. Effective April 1, 2017, purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively. Class A shares generally are not subject to a contingent deferred sales charge, and class M, class R, class R5, class R6 and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R5, class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee and in the case of class R5 and class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R5, class R6 and class Y shares are not available to all investors.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the fund’s Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Note 1: Significant accounting policies

The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those

40 International Equity Fund

estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.

Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.

Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.

Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.

Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.

To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of

International Equity Fund 41

the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

Interest income, net of any applicable withholding taxes, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.

All premiums/discounts are amortized/accreted on a yield-to-maturity basis.

Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.

Options contracts The fund uses options contracts to manage downside risks.

The potential risk to the fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.

Exchange-traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. OTC traded options are valued using prices supplied by dealers.

Options on swaps are similar to options on securities except that the premium paid or received is to buy or grant the right to enter into a previously agreed upon interest rate or credit default contract. Forward premium swap option contracts include premiums that have extended settlement dates. The delayed settlement of the premiums is factored into the daily valuation of the option contracts. In the case of interest rate cap and floor contracts, in return for a premium, ongoing payments between two parties are based on interest rates exceeding a specified rate, in the case of a cap contract, or falling below a specified rate in the case of a floor contract.

Written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Futures contracts The fund uses futures contracts to equitize cash.

The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

42 International Equity Fund

Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”

Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Forward currency contracts The fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to hedge foreign exchange risk.

The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. The fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.

Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio.

Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.

Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.

At the close of the reporting period, the fund had a net liability position of $709,364 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $402,597 and may include amounts related to unsettled agreements.

Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The remaining maturities of the securities lending transactions are considered overnight and continuous. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund received cash collateral of $18,354,575 and the value of securities loaned amounted to $18,178,179.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending

International Equity Fund 43

transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the higher of (1) the Federal Funds rate and (2) the overnight LIBOR plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit plus a $25,000 flat fee and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.

The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.

At June 30, 2017, the fund had a capital loss carryover of $1,000,468,014 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:


Loss carryover

Short-term	Long-term	Total	Expiration

$25,397,665	$—	$25,397,665	*

975,070,349	N/A	975,070,349	June 30, 2018

^*Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer $1,670,421 to its fiscal year ending June 30, 2018 late year ordinary losses ((i) ordinary losses recognized between January 1, 2017 and June 30, 2017, and (ii) specified ordinary and currency losses recognized between November 1, 2016 and June 30, 2017).

Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and/or permanent differences from losses on wash sale transactions, from foreign currency gains and losses, from late year loss deferrals, from the expiration of a capital loss carryover and from partnership income. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the

44 International Equity Fund

reporting period, the fund reclassified $1,214,159 to decrease distributions in excess of net investment income, $215,879,327 to decrease paid-in capital and $214,665,168 to decrease accumulated net realized loss.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$122,554,401

Unrealized depreciation	(34,667,433)

Net unrealized appreciation	87,886,968

Capital loss carryforward	(1,000,468,014)

Late year ordinary loss deferral	(1,670,421)

Cost for federal income tax purposes	$866,875,245

Note 2: Management fee, administrative services and other transactions

The fund pays Putnam Management a management fee (base fee) (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:


0.850%	of the first $5 billion,	0.650%	of the next $50 billion,

0.800%	of the next $5 billion,	0.630%	of the next $50 billion,

0.750%	of the next $10 billion,	0.620%	of the next $100 billion and

0.700%	of the next $10 billion,	0.615%	of any excess thereafter.

In addition, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended. Each month, the performance adjustment is calculated by multiplying the performance adjustment rate and the fund’s average net assets over the performance period and dividing the result by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the MSCI EAFE Index (Net Dividends) each measured over the performance period. The maximum annualized performance adjustment rate is +/– 0.15%. The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the performance period of up to thirty-six months. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have declined significantly over that period, the negative performance adjustment may exceed the base fee. In this event, Putnam Management would make a payment to the fund.

Because the performance adjustment is based on the fund’s performance relative to its applicable benchmark index, and not its absolute performance, the performance adjustment could increase Putnam Management’s fee even if the fund’s shares lose value during the performance period provided that the fund outperformed its benchmark index, and could decrease Putnam Management’s fee even if the fund’s shares increase in value during the performance period provided that the fund underperformed its benchmark index.

For the reporting period, the base fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.695% of the fund’s average net assets before a decrease of $286,789 (0.032% of the fund’s average net assets) based on performance.

Putnam Management has contractually agreed, through October 30, 2018, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam

International Equity Fund 45

Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.

The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. PAC did not manage any portion of the assets of the fund during the reporting period. If Putnam Management or PIL were to engage the services of PAC, Putnam Management or PIL, as applicable, would pay a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.

The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.

Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (“retail account”) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

Class R5 shares paid a monthly fee based on the average net assets of class R5 shares at an annual rate of 0.15%.

Class R6 shares paid a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%.

Prior to September 1, 2016, Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that included (1) a per account fee for each retail account of the fund and each of the other funds in its specified category, which was totaled and then allocated to each fund in the category based on its average daily net assets; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Prior to September 1, 2016, Putnam Investor Services, Inc. had agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes would not exceed an annual rate of 0.320% of the fund’s average assets attributable to such accounts.

During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:


Class A	$1,546,200	Class R5	18,409

Class B	21,929	Class R6	36,445

Class C	109,622	Class Y	257,637

Class M	24,917	Total	$2,022,543

Class R	7,384

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $1,080 under the expense offset arrangements and by $27,437 under the brokerage/service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $679, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

46 International Equity Fund

The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.

The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

The fund has adopted distribution plans (the Plans) with respect to the following share classes pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (“Maximum %”) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (“Approved %”) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:


	Maximum %	Approved %	Amount

Class A	0.35%	0.25%	$1,602,517

Class B	1.00%	1.00%	91,110

Class C	1.00%	1.00%	454,563

Class M	1.00%	0.75%	77,385

Class R	1.00%	0.50%	15,302

Total			$2,240,877

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $30,755 and $734 from the sale of class A and class M shares, respectively, and received $9,263 and $486 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $16 on class A redemptions.

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:


	Cost of purchases	Proceeds from sales

Investments in securities (Long-term)	$590,690,477	$681,887,089

U.S. government securities (Long-term)	—	—

Total	$590,690,477	$681,887,089

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

International Equity Fund 47

Written option transactions during the reporting period are summarized as follows:


		Written option	Written option
		contract amounts	premiums

Written options outstanding at the	USD	$—	$—
beginning of the reporting period	GBP	20,734	$2,420,984

	USD	1,326,525	369,922
Options opened	GBP	—	—

	USD	—	—
Options exercised	GBP	—	—

	USD	(1,326,525)	(369,922)
Options expired	GBP	(20,734)	(2,420,984)

	USD	—	—
Options closed	GBP	—	—

Written options outstanding at the	USD	$—	$ —
end of the reporting period	GBP	—	—

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class A	Shares	Amount	Shares	Amount

Shares sold	1,548,372	$34,232,873	2,651,425	$57,907,780

Shares issued in connection with
reinvestment of distributions	837,410	17,275,778	800,781	17,761,326

	2,385,782	51,508,651	3,452,206	75,669,106

Shares repurchased	(6,416,437)	(139,835,095)	(6,150,371)	(134,954,080)

Net decrease	(4,030,655)	$(88,326,444)	(2,698,165)	$(59,284,974)

	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class B	Shares	Amount	Shares	Amount

Shares sold	26,659	$551,109	59,646	$1,250,723

Shares issued in connection with
reinvestment of distributions	9,736	191,995	10,449	221,516

	36,395	743,104	70,095	1,472,239

Shares repurchased	(188,266)	(3,903,921)	(191,835)	(4,012,467)

Net decrease	(151,871)	$(3,160,817)	(121,740)	$(2,540,228)

	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class C	Shares	Amount	Shares	Amount

Shares sold	113,707	$2,391,401	244,047	$5,272,298

Shares issued in connection with
reinvestment of distributions	44,390	886,475	42,774	918,790

	158,097	3,277,876	286,821	6,191,088

Shares repurchased	(743,458)	(15,984,263)	(432,908)	(9,129,863)

Net decrease	(585,361)	$(12,706,387)	(146,087)	$(2,938,775)

48 International Equity Fund


	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class M	Shares	Amount	Shares	Amount

Shares sold	47,189	$1,003,840	47,639	$1,007,032

Shares issued in connection with
reinvestment of distributions	11,588	233,044	12,214	264,196

	58,777	1,236,884	59,853	1,271,228

Shares repurchased	(98,540)	(2,082,987)	(183,476)	(3,866,958)

Net decrease	(39,763)	$(846,103)	(123,623)	$(2,595,730)

	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class R	Shares	Amount	Shares	Amount

Shares sold	62,334	$1,371,404	90,513	$1,939,045

Shares issued in connection with
reinvestment of distributions	3,264	66,226	2,413	52,670

	65,598	1,437,630	92,926	1,991,715

Shares repurchased	(55,575)	(1,178,749)	(132,510)	(2,915,045)

Net increase (decrease)	10,023	$258,881	(39,584)	$(923,330)

	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class R5	Shares	Amount	Shares	Amount

Shares sold	49,994	$1,101,202	119,790	$2,709,241

Shares issued in connection with
reinvestment of distributions	26,574	555,393	25,259	567,566

	76,568	1,656,595	145,049	3,276,807

Shares repurchased	(796,097)	(17,850,204)	(172,318)	(3,762,860)

Net decrease	(719,529)	$(16,193,609)	(27,269)	$(486,053)

	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class R6	Shares	Amount	Shares	Amount

Shares sold	1,244,603	$28,153,818	3,188,189	$67,364,866

Shares issued in connection with
reinvestment of distributions	110,061	2,302,466	24,608	553,438

	1,354,664	30,456,284	3,212,797	67,918,304

Shares repurchased	(767,766)	(16,970,855)	(742,835)	(15,441,184)

Net increase	586,898	$13,485,429	2,469,962	$52,477,120

	YEAR ENDED 6/30/17		YEAR ENDED 6/30/16
Class Y	Shares	Amount	Shares	Amount

Shares sold	2,724,845	$59,825,020	2,910,094	$65,077,533

Shares issued in connection with
reinvestment of distributions	144,269	3,008,009	116,649	2,615,264

	2,869,114	62,833,029	3,026,743	67,692,797

Shares repurchased	(2,387,265)	(52,786,536)	(2,277,789)	(50,122,982)

Net increase	481,849	$10,046,493	748,954	$17,569,815

International Equity Fund 49

At the close of the reporting period, Putnam Investments, LLC owned the following shares of the fund:


	Shares owned	Percentage of ownership	Value

Class R5	644	1.1%	$15,553

Note 5: Affiliated transactions

Transactions during the reporting period with any company which is under common ownership or control were as follows:


					Shares
					outstanding
	Fair value as	Purchase	Sale	Investment	and Fair value
Name of affiliate	of 6/30/16	cost	proceeds	income	as of 6/30/17

Short-term investments

Putnam Cash
Collateral Pool, LLC^*	$18,332,127	$207,037,741	$207,015,293	$127,160	$18,354,575

Putnam Short Term
Investment Fund^**	37,820,197	236,568,320	265,685,215	64,297	8,703,302

Total Short-term
investments	$56,152,324	$443,606,061	$472,700,508	$191,457	$27,057,877

^*No management fees are charged to Putnam Cash Collateral Pool, LLC (Note 1). Investment income shown is included in securities lending income on the Statement of operations. There were no realized or unrealized gains or losses during the period.

^**Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.

Note 6: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.

Note 7: Summary of derivative activity

The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:


Purchased equity option contracts (contract amount)	$2,000

Written equity option contracts (contract amount) (Note 3)	$2,000

Futures contracts (number of contracts)	8

Forward currency contracts (contract amount)	$373,700,000

50 International Equity Fund

The following is a summary of the fair value of derivative instruments as of the close of the reporting period:


Fair value of derivative instruments as of the close of the reporting period

	ASSET DERIVATIVES		LIABILITY DERIVATIVES

Derivatives not
accounted for as	Statement of		Statement of
hedging instruments	assets and		assets and
under ASC 815	liabilities location	Fair value	liabilities location	Fair value

Foreign exchange
contracts	Receivables	$2,310,761	Payables	$1,843,799

Total		$2,310,761		$1,843,799

The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (see Note 1):


Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments

Derivatives not
accounted for as			Forward
hedging instruments			currency
under ASC 815	Options	Futures	contracts	Total

Foreign exchange
contracts	$—	$—	$1,541,093	$1,541,093

Equity contracts	(1,513,129)	603,063	—	$(910,066)

Total	$(1,513,129)	$603,063	$1,541,093	$631,027


Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss)
on investments

Derivatives not
accounted for as			Forward
hedging instruments			currency
under ASC 815	Options	Futures	contracts	Total

Foreign exchange
contracts	$—	$—	$(4,369,580)	$(4,369,580)

Equity contracts	787,179	(540,721)	—	$246,458

Total	$787,179	$(540,721)	$(4,369,580)	$(4,123,122)

International Equity Fund 51

Note 8: Offsetting of financial and derivative assets and liabilities

The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.


	Bank of America N.A.	Barclays Bank PLC	Citibank, N.A.	Credit Suisse International	Goldman Sachs International	HSBC Bank USA, National Association	JPMorgan Chase Bank N.A.	State Street Bank and Trust Co.	UBS AG	WestPac Banking Corp.	Total

Assets:

Forward currency contracts ^#	$117,287	$142,990	$380,485	$172,333	$3,048	$ 85,303	$826,158	$425,091	$158,066	$—	$2,310,761

Total Assets	$117,287	$142,990	$380,485	$172,333	$3,048	$85,303	$826,158	$425,091	$158,066	$—	$2,310,761

Liabilities:

Forward currency contracts ^#	228,551	—	219,682	157,046	589,051	91,124	391,269	160,800	—	6,276	1,843,799

Total Liabilities	$228,551	$—	$219,682	$157,046	$589,051	$91,124	$391,269	$160,800	$—	$6,276	$1,843,799

Total Financial and Derivative Net Assets	$(111,264)	$142,990	$160,803	$15,287	$(586,003)	$(5,821)	$434,889	$264,291	$158,066	$(6,276)	$466,962

Total collateral received (pledged)^†##	$—	$130,631	$120,000	$—	$(402,597)	$—	$309,000	$264,291	$150,000	$—

Net amount	$(111,264)	$12,359	$40,803	$15,287	$(183,406)	$(5,821)	$125,889	$—	$8,066	$(6,276)

^†Additional collateral may be required from certain brokers based on individual agreements.

^#Covered by master netting agreement (Note 1).

^##Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.

Note 9: New pronouncements

In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Putnam Management has evaluated the amendments and its adoption will have no effect on the fund’s net assets or results of operations.


52 International Equity Fund	International Equity Fund 53

Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:


Jonathan S. Horwitz (Born 1955)	Janet C. Smith (Born 1965)
Executive Vice President, Principal Executive Officer,	Vice President, Principal Financial Officer, Principal
and Compliance Liaison	Accounting Officer, and Assistant Treasurer
Since 2004	Since 2007
	Director of Fund Administration Services,
Robert T. Burns (Born 1961)	Putnam Investments and Putnam Management
Vice President and Chief Legal Officer
Since 2011	Susan G. Malloy (Born 1957)
General Counsel, Putnam Investments,	Vice President and Assistant Treasurer
Putnam Management, and Putnam Retail Management	Since 2007
	Director of Accounting & Control Services,
James F. Clark (Born 1974)	Putnam Investments and Putnam Management
Vice President and Chief Compliance Officer
Since 2016	Mark C. Trenchard (Born 1962)
Chief Compliance Officer, Putnam Investments	Vice President and BSA Compliance Officer
and Putnam Management	Since 2002
	Director of Operational Compliance, Putnam
Michael J. Higgins (Born 1976)	Investments and Putnam Retail Management
Vice President, Treasurer, and Clerk
Since 2010	Nancy E. Florek (Born 1957)
	Vice President, Director of Proxy Voting and Corporate
	Governance, Assistant Clerk, and Associate Treasurer
	Since 2000

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is One Post Office Square, Boston, MA 02109.

International Equity Fund 57

Putnam family of funds

The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial advisor or call Putnam Investor Services at 1-800-225-1581. Please read the prospectus carefully before investing.


Growth	Income
Growth Opportunities Fund	American Government Income Fund
International Growth Fund	Diversified Income Trust
Multi-Cap Growth Fund	Emerging Markets Income Fund
Small Cap Growth Fund	Floating Rate Income Fund
	Global Income Trust
Blend	Government Money Market Fund^*
Capital Opportunities Fund	High Yield Fund
Capital Spectrum Fund	Income Fund
Emerging Markets Equity Fund	Money Market Fund^†
Equity Spectrum Fund	Short Duration Income Fund
Europe Equity Fund	U.S. Government Income Trust
Global Equity Fund
International Capital Opportunities Fund	Tax-free Income
International Equity Fund	AMT-Free Municipal Fund
Investors Fund	Intermediate-Term Municipal Income Fund
Low Volatility Equity Fund	Short-Term Municipal Income Fund
Multi-Cap Core Fund	Tax Exempt Income Fund
Research Fund	Tax-Free High Yield Fund

Value	State tax-free income funds^‡:
Convertible Securities Fund	California, Massachusetts, Minnesota,
Equity Income Fund	New Jersey, New York, Ohio, and Pennsylvania.
International Value Fund
Multi-Cap Value Fund
Small Cap Value Fund

58 International Equity Fund


Absolute Return	Retirement Income Fund Lifestyle 1 — a portfolio
Absolute Return 100 Fund^®	with managed allocations to stocks, bonds,
Absolute Return 300 Fund^®	and money market investments to generate
Absolute Return 500 Fund^®	retirement income.
Absolute Return 700 Fund^®
	RetirementReady^® Funds — portfolios with
Global Sector	adjusting allocations to stocks, bonds, and
Global Consumer Fund	money market instruments, becoming more
Global Financials Fund	conservative over time.
Global Health Care Fund
Global Industrials Fund	RetirementReady^® 2060 Fund
Global Natural Resources Fund	RetirementReady^® 2055 Fund
Global Sector Fund	RetirementReady^® 2050 Fund
Global Technology Fund	RetirementReady^® 2045 Fund
Global Telecommunications Fund	RetirementReady^® 2040 Fund
Global Utilities Fund	RetirementReady^® 2035 Fund
	RetirementReady^® 2030 Fund
Asset Allocation	RetirementReady^® 2025 Fund
George Putnam Balanced Fund	RetirementReady^® 2020 Fund

Global Asset Allocation Funds — four
investment portfolios that spread your money
across a variety of stocks, bonds, and money
market instruments.

Dynamic Asset Allocation Balanced Fund
Dynamic Asset Allocation Conservative Fund
Dynamic Asset Allocation Growth Fund
Dynamic Risk Allocation Fund

^*You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

^†You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

^‡Not available in all states.

Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.

International Equity Fund 59

Services for shareholders

Investor services

Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.

Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.

Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.

Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.

Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.

Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.

Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.

Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.

For more information

Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

60 International Equity Fund

Fund information

Founded over 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.


Investment Manager	Trustees	James F. Clark
Putnam Investment	Jameson A. Baxter, Chair	Vice President and
Management, LLC	Kenneth R. Leibler, Vice Chair	Chief Compliance Officer
One Post Office Square	Liaquat Ahamed
Boston, MA 02109	Ravi Akhoury	Michael J. Higgins
	Barbara M. Baumann	Vice President, Treasurer,
Investment Sub-Advisors	Katinka Domotorffy	and Clerk
Putnam Investments Limited	Catharine Bond Hill
57–59 St James’s Street	Paul L. Joskow	Janet C. Smith
London, England SW1A 1LD	Robert E. Patterson	Vice President,
	George Putnam, III	Principal Financial Officer,
The Putnam Advisory Company, LLC	Robert L. Reynolds	Principal Accounting Officer,
One Post Office Square	Manoj P. Singh	and Assistant Treasurer
Boston, MA 02109
	Officers
Marketing Services	Robert L. Reynolds
Putnam Retail Management	President
One Post Office Square
Boston, MA 02109	Jonathan S. Horwitz
	Executive Vice President,
Custodian	Principal Executive Officer,
State Street Bank	and Compliance Liaison
and Trust Company
	Robert T. Burns
Legal Counsel	Vice President and
Ropes & Gray LLP	Chief Legal Officer

Independent Registered Public
Accounting Firm
PricewaterhouseCoopers LLP

This report is for the information of shareholders of Putnam International Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.


Fiscal year ended	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees


June 30, 2017	$88,691	$ —	$28,961	$ —
June 30, 2016	$84,373	$ —	$13,108	$ —


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


	Exact name of registrant as specified in charter:	Putnam International Equity Fund


	Address of principal executive offices:	One Post Office Square, Boston, Massachusetts 02109


	Name and address of agent for service:	Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109


	Copy to:	Bryan Chegwidden, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036


	Registrant's telephone number, including area code:	(617) 292-1000


	The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:


			Valuation inputs

Other financial instruments:	Level 1	Level 2		Level 3

Forward currency contracts	$—	$466,962		$—

Totals by level	$—	$466,962		$—


	The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor:


	For the fiscal years ended June 30, 2017 and June 30, 2016, the fund's independent auditor billed aggregate non-audit fees in the amounts of $380,854 and $643,544 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	FORM N-CSR


	Item 1. Report to Stockholders:


	Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.


	Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.


	Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.


	Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.


	The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.


	Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:


	Item 8. Portfolio Managers of Closed-End Investment Companies


	Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:


	Item 10. Submission of Matters to a Vote of Security Holders:


	(b) Changes in internal control over financial reporting: Not applicable


	(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.


	(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.


	(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.


	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	/s/ Janet C. Smith Janet C. Smith Principal Accounting Officer


	/s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer