a_internatequity.htm

Putnam
International Equity
Fund

Annual report
6 | 30 | 19


Message from the Trustees	1
Interview with your fund’s portfolio manager	3
Your fund’s performance	8
Your fund’s expenses	10
Consider these risks before investing	12
Terms and definitions	13
Other information for shareholders	14
Important notice regarding Putnam’s privacy policy	15
Trustee approval of management contracts	16
Financial statements	26
Federal tax information	56
About the Trustees	57
Officers	59

IMPORTANT NOTICE: Delivery of paper fund reports

In accordance with regulations adopted by the Securities and Exchange Commission, beginning on January 1, 2021, reports like this one will no longer be sent by mail unless you specifically request it. Instead, they will be on Putnam’s website, and you will be notified by mail whenever a new one is available, and provided with a website link to access the report.

If you wish to stop receiving paper reports sooner, or if you wish to continue to receive paper reports free of charge after January 1, 2021, please see the back cover or insert for instructions. If you invest through a bank or broker, your choice will apply to all funds held in your account. If you invest directly with Putnam, your choice will apply to all Putnam funds in your account.

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Message from the Trustees

August 9, 2019

Dear Fellow Shareholder:

If there is any lesson to be learned from constantly changing financial markets, it is the importance of positioning your investment portfolio for your long-term goals. We believe that one strategy is to diversify across different asset classes and investment approaches.

We also believe your mutual fund investment offers a number of advantages, including constant monitoring by experienced investment professionals who maintain a long-term perspective. Putnam’s portfolio managers and analysts take a research-intensive approach that includes risk management strategies designed to serve you through changing conditions.

Another key strategy, in our view, is seeking the counsel of a financial advisor. For over 80 years, Putnam has recognized the importance of professional investment advice. Your financial advisor can help in many ways, including defining and planning for goals such as retirement, evaluating the level of risk appropriate for you, and reviewing your investments on a regular basis and making adjustments as necessary.

As always, your fund’s Board of Trustees remains committed to protecting the interests of Putnam shareholders like you, and we thank you for investing with Putnam.

Vivek holds an MBA from Xavier School of Management and a Bachelor’s degree in Computer Science from the National Institute of Technology, Bhopal, both in India. He joined Putnam in 1999 and has been in the investment industry since 1994.

Vivek, how would you describe the global investing environment during the 12-month reporting period ended June 30, 2019?

The reporting period began in July 2018 against a backdrop of rising U.S. interest rates and slowing economic growth in China and the eurozone. A number of geopolitical uncertainties, including the U.S.–China trade dispute and delays in final Brexit negotiations, further reduced investor appetite for stocks. During the first half of the reporting period, market volatility returned in bouts, leading up to a brief, but sharp, decline across global stock markets in December 2018. Major stock indexes lost 20% or more of their value, and many reported their worst annual performance since 2008.

After a difficult end to 2018, global stocks rebounded dramatically in the early months of 2019. A dovish pivot by the U.S. Federal Reserve to halt interest-rate hikes, along with progress in U.S.–China trade negotiations, helped boost investor sentiment. In January 2019, global stock markets recorded their best monthly performance in 30 years. For the remainder of the second half of the reporting period, the U.S. economy held steady, buoyed by record-low

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unemployment, positive corporate earnings, and government tax cuts.

At the same time, international economies softened. Japan downgraded its economic outlook as exports fell against renewed fears of a global trade war. The euro and other non-U.S. currencies depreciated against a strengthening U.S. dollar. Many international companies that trade in U.S. dollars reported declining profit margins over the period. For the 12-month period, U.S. stocks posted a return of 10.42% as measured by the S&P 500 Index, while international stocks posted a return of 1.08% as measured by the MSCI EAFE Index [ND].

How did the fund perform against this backdrop?

The fund’s class A shares posted a return of –3.04%, underperforming its benchmark, the MSCI EAFE Index [ND], which posted a return of 1.08% for the period.

What were some specific stocks that contributed to fund performance during the reporting period?

The fund’s top contributor was German sportswear manufacturer adidas. Sales of the firm’s shoes and athleisure clothing [trendy workout apparel] rose, as consumers in China and other emerging markets demonstrated a growing interest in health and fitness. During the period, adidas also pursued new channel and sourcing efficiencies that helped to lower operational costs and increase profit margins, improvements, which helped drive up interest in the stock.

Another highlight for the period was Hoya Corp., a Japanese technology and med-tech company with core expertise in optical products. The firm holds dominant market share in niche information technology end markets, including 3.5-inch glass substrates that are increasingly being adopted for use in high-capacity data-center hard disk drives. It is also the only producer of mask blanks used in the production of the latest generation of semiconductor chips. Hoya also has consumer-facing businesses where it is a scale player, including eyeglasses, contacts, and medical endoscopes. Investors were impressed by Hoya’s ability to grow revenues and profits with a focus on high-margin product lines.

Novartis AG, the Swiss drug maker, was another top contributor. During the period, Novartis laid out plans to streamline its worldwide production and boost operating margins to offset drug pricing declines in the United States. Investors were also encouraged by Novartis’ plans to cut jobs in Switzerland over the next four years to consolidate production and boost profitability. Shares of Novartis appreciated further on the news that it would spin off its Alcon eye-care business into a standalone entity, which was completed in April 2019.

What were some specific detractors to fund performance during the reporting period?

The fund’s top detractor was Bayer AG, a German chemicals and pharmaceutical company. After its $63 billion takeover of Monsanto Co., Bayer saw its shares drop due to concerns over the company’s exposure to lawsuits involving Roundup, a weed killer made by Monsanto. Bayer downgraded its earnings forecast for Monsanto and announced it would slash thousands of jobs as part of a corporate overhaul following the acquisition. As a result, we sold our position in Bayer during the period.

Natixis, the French investment banking firm, also detracted from results. We were initially encouraged by the firm’s merger with U.S.-based asset manager Loomis Sayles, which boosted its total assets under management and added new research and technology resources. However, another, smaller portion

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of Natixis’ business — London subsidiary H20 Asset Management — faced reputational issues over the period due to poor internal controls. Investors subsequently sold off shares of the stock. By period-end, we reduced our position in Natixis.

Kyudenko, a Japanese electrical contractor, also dampened results. Contract growth slowed as demand for large infrastructure projects declined amid the country’s weaker economic outlook. Servicing existing contracts also proved difficult as Kyudenko underestimated the tightness of the skilled labor market. Due to delays in hiring staff, the company reported declining profit margins, which negatively impacted stock performance during the period. We sold our position in Kyudendko before period-end.

Can you discuss any changes to the fund’s strategy or management over the period?

Simon Davis, the fund’s former Portfolio Manager, retired from Putnam in February 2019. My position as Assistant Portfolio Manager transitioned to Portfolio Manager following his departure. In terms of the fund’s strategy, I have focused on making investments in what we perceive are high-quality companies, primarily in developed markets, that stand to benefit from opportunities outside the United States. I look for companies that I believe have a wide moat [competitive advantage], good industry structure [a measure of industry profitability], experienced management, strong corporate governance, and growth potential. These companies also generally have a higher return on capital, better margins, and stronger cash flows relative to their peers. The fund maintains the flexibility to invest across sectors and investment styles.

What is your outlook for international equities and the fund?

In general, we remain constructive on the future growth of international equities. International companies have made fundamental changes that we believe will make them more attractive to investors going forward. International companies have focused more on ESG [environmental, social, and governance] factors and serving the interests of their shareholders. Overtime, we believe these measures can improve the duration of corporate growth, lead to above-average market returns, and attract positive analyst ratings for these companies. We have been encouraged by the number of Japanese companies that have adopted

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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corporate governance programs to create greater transparency and accountability for their shareholders. Additionally, we have seen both a rise in the value and number of share buyback programs among non-U.S. companies. Buying back shares can reduce the overall cost of capital for a firm and generally increases shareholder value, in our view.

We are also mindful of the risks associated with international investing. Therefore, due diligence remains the cornerstone of the fund’s active stock selection strategies. We will continue to evaluate high-quality companies against a number of risks, including currency-exchange fluctuations, geopolitical threats, technology disruptions, and macroeconomic trends. While we anticipate a slowdown across most international economies for the remainder of 2019, we believe the risks of a recession will remain low.

Thank you, Vivek, for this update on the fund.

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, 2019, 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 6/30/19


	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	6.82%	88.59%	6.55%	4.07%	0.80%	24.14%	7.47%	–3.04%
After sales charge	6.60	77.75	5.92	–1.91	–0.39	17.00	5.37	–8.62
Class B (6/1/94)
Before CDSC	6.58	77.59	5.91	0.23	0.05	21.35	6.66	–3.79
After CDSC	6.58	77.59	5.91	–1.59	–0.32	18.35	5.78	–8.34
Class C (7/26/99)
Before CDSC	6.54	75.01	5.76	0.25	0.05	21.33	6.66	–3.78
After CDSC	6.54	75.01	5.76	0.25	0.05	21.33	6.66	–4.70
Class M (12/1/94)
Before sales charge	6.28	79.45	6.02	1.48	0.29	22.28	6.94	–3.53
After sales charge	6.15	73.17	5.64	–2.07	–0.42	18.00	5.67	–6.91
Class R (1/21/03)
Net asset value	6.56	84.03	6.29	2.77	0.55	23.18	7.20	–3.26
Class R5 (7/2/12)
Net asset value	7.06	94.45	6.88	5.76	1.13	25.39	7.83	–2.73
Class R6 (7/2/12)
Net asset value	7.09	95.90	6.96	6.32	1.23	25.78	7.95	–2.60
Class Y (7/12/96)
Net asset value	7.04	93.36	6.82	5.38	1.05	25.08	7.75	–2.81

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 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.

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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.

Class C share performance reflects conversion to class A shares after 10 years.

Comparative index returns For periods ended 6/30/19


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year
MSCI EAFE Index (ND)	5.05%	94.91%	6.90%	11.75%	2.25%	29.88%	9.11%	1.08%
Lipper International
Multi-Cap Core Funds	5.45	89.91	6.52	9.61	1.80	25.27	7.76	–0.66
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 6/30/19, there were 402, 349, 265, 181, and 4 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 $17,759 and $17,501, 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 $17,317. A $10,000 investment in the fund’s class R, R5, R6, and Y shares would have been valued at $18,403, $19,445, $19,590 and $19,336, respectively.

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Fund price and distribution information For the 12-month period ended 6/30/19


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	$0.435000		$0.213000	$0.029000	$0.298000		$0.344000	$0.522000	$0.549000	$0.500000
Capital gains
Long-term
gains	0.795997		0.795997	0.795997	0.795997		0.795997	0.795997	0.795997	0.795997
Short-term
gains	—		—	—	—		—	—	—	—
Return
of capital^*	0.040003		0.040003	0.040003	0.040003		0.040003	0.040003	0.040003	0.040003
Total	$1.271000		$1.049000	$0.865000	$1.134000		$1.180000	$1.358000	$1.385000	$1.336000
	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
6/30/18	$25.36	$26.91	$24.05	$24.35	$24.62	$25.51	$24.88	$25.81	$25.78	$25.67
6/30/19	23.07	24.48	21.89	22.40	22.40	23.21	22.66	23.48	23.45	23.35

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.

^*See page 56.

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 6/30/18	1.22%	1.97%	1.97%	1.72%	1.47%	0.89%	0.79%	0.97%
Annualized expense ratio
for the six-month period
ended 6/30/19^*†‡	1.26%	2.01%	2.01%	1.76%	1.51%	0.91%	0.81%	1.01%

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.

^*Includes one time annualized merger costs of 0.06%.

^†Expense ratios for each share 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 0.09% from annualizing the performance fee adjustment for the six months ended 6/30/19.

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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 1/1/19 to 6/30/19. 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^*†	$6.76	$10.77	$10.77	$9.44	$8.10	$4.89	$4.35	$5.42
Ending value (after expenses)	$1,165.20	$1,160.70	$1,160.60	$1,162.40	$1,163.80	$1,167.00	$1,167.80	$1,166.30

^*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 6/30/19. 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 6/30/19, use the following calculation method. To find the value of your investment on 1/1/19, 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^*†	$6.31	$10.04	$10.04	$8.80	$7.55	$4.56	$4.06	$5.06
Ending value (after expenses)	$1,018.55	$1,014.83	$1,014.83	$1,016.07	$1,017.31	$1,020.28	$1,020.78	$1,019.79

^†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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Consider these risks before investing

International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Investments focused in a single region may be affected by common economic forces and other factors. In addition, events in any one country within the region may impact the other countries or the region as a whole. Because the fund currently, and may in the future, invest significantly in European companies, the fund is particularly susceptible to economic, political, regulatory, or other events or conditions affecting issuers in Europe. European financial markets have in recent years experienced increased volatility due to concerns with some countries’ high levels of sovereign debt, budget deficits, and unemployment. 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. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. 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.

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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 available only to employer-sponsored retirement plans.

Class R5 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 R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.

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.

ICE BofAML (Intercontinental Exchange Bank of America 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.

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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.

ICE Data Indices, LLC (“ICE BofAML”), used with permission. ICE BofAML permits use of the ICE BofAML indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE 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, 2018, 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-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.

Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.

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, 2019, Putnam employees had approximately $478,000,000 and the Trustees had approximately $71,000,000 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.

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Trustee approval of management contracts

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 2019, 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 2019, 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 2019 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, 2019. (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 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.

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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. (Two 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. In considering the operation of your fund’s performance fees, the Trustees considered that they had approved, at their meeting on January 25, 2019, an amended and restated management contract in connection with the proposed merger (which subsequently closed on June 24, 2019) of Putnam Europe Equity Fund, another mutual fund managed by Putnam Management, with and into your fund. The amended and restated management contract provided that, effective upon the closing of the merger, the performance adjustment calculation for your fund would take into account the net assets of Putnam Europe Equity Fund for periods before the consummation of the merger, except that if the use of combined assets would result in a higher management fee, only the assets of your fund would be used. The Trustees considered that the amended and restated management contract may reduce your fund’s management fees.

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 and the funds’ investor servicing agent, Putnam Investor Services, Inc. (“PSERV”), have implemented expense limitations that were in effect during your fund’s fiscal year ending in 2018. These expense limitations were: (i) a contractual expense limitation applicable to all open-end funds of 25 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 had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2018. However, in the case of your fund, the first of the expense limitations applied during its fiscal year ending in 2018. Putnam Management and PSERV have agreed to maintain these expense limitations until at

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least October 30, 2020. The support of Putnam Management and PSERV 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 fees), 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 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 second quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2018. 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, 2018 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 and sub-advised mutual funds. 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, and the Trustees also considered 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 and the full Board of 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. 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

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personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that, after a strong start to the year, 2018 was a mixed year for the Putnam funds, with the Putnam open-end Funds’ performance, on an asset-weighted basis, ranking in the 54th percentile of their Lipper Inc. (“Lipper”) peers (excluding those Putnam funds that are evaluated based on their total returns versus selected investment benchmarks). The Trustees also noted that The Putnam Funds were ranked by the Barron’s/Lipper Fund Families survey as the 41st-best performing mutual fund complex out of 57 complexes for the one-year period ended December 31, 2018 and the 29th-best performing mutual fund complex out of 55 complexes for the five-year period ended December 31, 2018. The Trustees observed that The Putnam Funds’ performance over the longer-term continued to be strong, ranking 6th out of 49 mutual fund complexes in the survey over the ten-year period ended 2018. In addition, the Trustees noted that 22 of the Funds were four- or five-star rated by Morningstar Inc. at the end of 2018. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2018 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 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 peer group (Lipper International Multi-Cap Core Funds) for the one-year, three-year and five-year periods ended December 31, 2018 (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	4th

Over the one-year, three-year and five-year periods ended December 31, 2018, there were 385, 337 and 247 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, three-year and five-year periods ended December 31, 2018 and considered the circumstances that may have contributed to this disappointing performance. The Trustees noted Putnam Management’s observation that 2018 was a difficult year for the international equity markets in light of factors such as the strength of the U.S. dollar, slowing global growth, rising interest rates and concerns regarding U.S. trade and economic policies. The Trustees also considered Putnam Management’s observation that security selection within certain countries and sectors (largely, cyclical and smaller-cap companies) and country allocation (an overweight allocation to China and underweight allocations to the U.K. and Australia) detracted from the fund’s performance. The Trustees additionally noted Putnam Management’s view that the fund’s underperformance over the three-year and five-year periods was affected by the fund’s underperformance in 2016, due partly to the fund’s exposure to export-oriented Japanese companies (which floundered when the Bank of Japan’s interest rates reached negative levels and the yen strengthened) and partly to the fund’s exposure to certain U.K.-focused holdings (which Putnam Management had positioned based on an expectation that the U.K. would not vote to leave the European Union).

The Trustees considered Putnam Management’s continued efforts to support fund performance through the appointment in February 2018 of an additional portfolio manager, who has been leading the fund since February 2019, and through initiatives including structuring compensation for portfolio managers and research analysts to

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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 considered that Putnam Management had made selective hires in 2018 to strengthen its investment team and noted further that Putnam Management was confident in the fund’s new portfolio manager.

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 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, with all the attendant risks and disruptions, 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. 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 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 fair and 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 were of the view 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.

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Trustee approval of management contracts

Consideration of an amended and restated management contract

At their meeting on January 25, 2019, the Trustees of the fund, including all of the Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended) of The Putnam Funds (the “Independent Trustees”), approved an amended and restated management contract with respect to your fund with Putnam Investment Management, LLC (“Putnam Management”). In substance, the amended and restated management contract differed from the existing management contract only in that it revised the calculation of the performance adjustment to the fund’s base management fee to take into account the expected merger on June 24, 2019 of Putnam Europe Equity Fund, another mutual fund managed by Putnam Management, with and into your fund. The performance adjustment calculation for your fund was revised to include the net assets of Putnam Europe Equity Fund for periods before the consummation of the merger, except that if the use of combined assets would result in a higher management fee, only the assets of your fund would be used.

In considering whether to approve the amended and restated management contract, the Trustees considered information provided by Putnam Management about the revised calculation of the performance adjustment. The Trustees also took into account that they had most recently approved the annual continuation of the fund’s existing management contract with Putnam Management in June 2018. Because, other than the revised calculation of the performance adjustment, the amended and restated management contract was identical to the fund’s existing management contract, the Trustees relied to a considerable extent on their previous approval of the continuance of the fund’s existing management contract, which is described below.

After considering the factors described above relating to the revised calculation of the performance adjustment under the amended and restated management contract, and taking into account all of the factors considered, as described below, as part of the approval of the continuance of the fund’s current management contract in June 2018, the Trustees, including the Independent Trustees, approved the amended and restated management contract.

General conclusions in connection with the Trustees’ previous approval of the continuance of the fund’s existing management contract

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 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 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 2018, 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 2018, the Contract Committee met in executive session to discuss and consider its

International Equity Fund 21

recommendations with respect to the continuance of the contracts. At the Trustees’ June 2018 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, 2018. (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:

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 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.)

22 International Equity Fund

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 2017. These expense limitations were: (i) a contractual expense limitation applicable to all open-end funds of 25 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 had sufficiently low expenses that these expense limitations were not operative. However, in the case of your fund, the first of the expense limitations applied during its fiscal year ending in 2017. Putnam Management has agreed to maintain these expense limitations until at least October 30, 2019. 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 fees), 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 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 second quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2017. 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, 2017 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

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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 Trustees considered that 2017 was a strong year for the performance of the Putnam funds, with generally favorable results for most asset classes, including U.S. equity, international and global equity, taxable and tax exempt fixed income, and global asset allocation Funds. In this regard, the Trustees considered that, for the one-year period ended December 31, 2017, the Putnam open-end Funds’ performance, on an asset-weighted basis, ranked in the 32nd percentile of their Lipper peers (excluding those Putnam funds that are evaluated based on their total returns and/or comparisons of those returns versus selected investment benchmarks or targeted annual returns). The Trustees observed that this strong performance has continued a positive trend that began in mid-year 2016 across most Putnam funds. They noted that the longer-term performance of the Putnam funds continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the 7th-best performing mutual fund complex out of 55 complexes for the five-year period ended December 31, 2017 and the 9th-best performing mutual fund complex out of 50 complexes for the ten-year period ended 2017. In addition, the survey ranked the Putnam funds 7th out of 59 mutual fund complexes for the one-year period ended 2017; 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, 2017 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, 2017 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):


One-year period	2nd
Three-year period	3rd
Five-year period	2nd

Over the one-year, three-year and five-year periods ended December 31, 2017, there were 433, 343 and 283 funds, respectively, in your fund’s Lipper peer group. (When considering

24 International Equity Fund

performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

The Trustees 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.

Brokerage and soft-dollar allocations; investor servicing

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 fair and 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 were of the view 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.

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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.

26 International Equity Fund

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam International Equity Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam International Equity Fund (the “Fund”) as of June 30, 2019, the related statement of operations for the year ended June 30, 2019, the statement of changes in net assets for each of the two years in the period ended June 30, 2019, including the related notes, and the financial highlights for each of the five years in the period ended June 30, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of June 30, 2019, 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 ended June 30, 2019 and the financial highlights for each of the five years in the period ended June 30, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of June 30, 2019 by correspondence with the custodian, transfer agent 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 9, 2019

We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.

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The fund’s portfolio 6/30/19


COMMON STOCKS (98.7%)*	Shares	Value
Australia (2.1%)
Qantas Airways, Ltd.	2,305,344	$8,749,106
QBE Insurance Group, Ltd.	1,374,797	11,441,179
		20,190,285
China (1.1%)
Yum China Holdings, Inc.	218,867	10,111,655
		10,111,655
Finland (1.1%)
Fortum OYJ	463,844	10,250,740
		10,250,740
France (15.8%)
Airbus SE	170,114	24,117,682
AXA SA	963,456	25,307,112
Dassault Systemes SA	81,519	13,005,146
Eurazeo SA	112,683	7,854,483
Kering SA	32,074	18,968,750
Natixis SA	1,218,547	4,903,674
TOTAL SA	343,189	19,229,089
Veolia Environnement SA	852,321	20,759,715
Vinci SA	131,317	13,447,811
		147,593,462
Germany (5.4%)
adidas AG	58,542	18,073,244
Deutsche Boerse AG	107,375	15,188,759
HC Brillant Services GmbH (acquired various dates from
8/2/13 to 8/31/16, cost $20) (Private) ^†^{∆∆ F}	30	26
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	139,903	17,125,363
		50,387,410
Hong Kong (4.8%)
AIA Group, Ltd.	2,740,400	29,625,488
Hong Kong Exchanges and Clearing, Ltd.	427,200	15,099,773
		44,725,261
India (2.1%)
HDFC Bank, Ltd. ADR	112,394	14,615,716
Nestle India, Ltd.	26,873	4,642,283
		19,257,999
Ireland (4.6%)
Bank of Ireland Group PLC	1,815,162	9,486,241
CRH PLC	610,616	19,920,372
Kerry Group PLC Class A	110,195	13,156,789
		42,563,402
Italy (0.8%)
Pirelli & C. SpA	1,265,833	7,481,892
		7,481,892

28 International Equity Fund


COMMON STOCKS (98.7%)* cont.	Shares	Value
Japan (15.2%)
Asahi Group Holdings, Ltd.	371,100	$16,722,969
Daikin Industries, Ltd.	80,700	10,562,803
Hoya Corp.	237,900	18,273,811
MinebeaMitsumi, Inc.	343,500	5,842,622
Mitsubishi Corp.	398,400	10,517,372
Seven & i Holdings Co., Ltd.	217,600	7,375,615
SoftBank Group Corp.	277,800	13,386,830
Sony Corp.	408,500	21,343,691
Sumitomo Mitsui Financial Group, Inc.	536,300	18,990,369
Toyota Motor Corp.	295,900	18,391,667
		141,407,749
Luxembourg (—%)
Global Fashion Group SA (acquired 8/2/13, cost $1,009,308) (Private) ^†^{∆∆ F}	23,826	109,725
		109,725
Netherlands (6.7%)
Heineken NV	141,309	15,769,379
Koninklijke Ahold Delhaize NV	457,289	10,284,232
Koninklijke DSM NV	105,924	13,092,502
Unilever NV ADR	382,667	23,305,601
		62,451,714
South Korea (1.4%)
Samsung Electronics Co., Ltd. (Preference)	405,484	13,426,150
		13,426,150
Spain (1.3%)
Cellnex Telecom, SA 144A	325,246	12,034,505
		12,034,505
Sweden (1.3%)
ASSA ABLOY AB Class B	530,642	11,994,396
		11,994,396
Switzerland (12.4%)
Alcon, Inc. ^†	242,687	14,985,835
Barry Callebaut AG	7,044	14,128,408
Coca-Cola HBC AG	489,543	18,476,769
Lonza Group AG	34,032	11,483,447
Nestle SA	119,471	12,368,100
Novartis AG	379,347	34,662,725
SIG Combibloc Group AG	802,110	9,219,089
		115,324,373
United Kingdom (20.1%)
Anglo American PLC	437,758	12,477,859
Ashtead Group PLC	587,454	16,815,669
Associated British Foods PLC	368,181	11,516,278
AstraZeneca PLC	279,012	22,811,836
BP PLC	3,026,560	21,085,868
Compass Group PLC	627,229	15,030,880
Imperial Brands PLC	483,436	11,338,229
Lloyds Banking Group PLC	16,770,639	12,052,460
Prudential PLC	1,558,709	33,967,901
Quilter PLC	3,786,517	6,750,432

International Equity Fund 29


COMMON STOCKS (98.7%)* cont.	Shares	Value
United Kingdom cont.
SSE PLC	708,819	$10,099,842
Vodafone Group PLC	8,350,015	13,713,217
		187,660,471
United States (2.5%)
Linde PLC	62,154	12,484,796
NXP Semiconductors NV	114,083	11,135,642
		23,620,438
Total common stocks (cost $861,048,784)		$920,591,627

	Principal
U.S. TREASURY OBLIGATIONS (0.1%)*	amount	Value
U.S. Treasury Notes
2.125%, 9/30/21 ⁱ	$141,000	$142,935
1.75%, 9/30/19 ⁱ	271,000	271,879
1.50%, 10/31/19 ⁱ	333,000	333,110
Total U.S. treasury obligations (cost $747,924)		$747,924

CONVERTIBLE PREFERRED STOCKS (—%)*	Shares	Value
Global Fashion Group SA zero % cv. pfd. (acquired various dates from
7/11/16 to 9/14/17, cost $121,606) (Luxembourg) (Private) ^†^{∆∆ F}	18,499	$85,193
Total convertible preferred stocks (cost $121,606)		$85,193


	Principal amount/
SHORT-TERM INVESTMENTS (0.7%)*		shares	Value
Putnam Short Term Investment Fund 2.46% ^L	Shares	3,901,482	$3,901,482
State Street Institutional U.S. Government Money Market Fund,
Premier Class 2.31% ^P	Shares	1,134,000	1,134,000
U.S. Treasury Bills 2.451%, 7/11/19		$63,000	62,966
U.S. Treasury Bills 2.118%, 7/18/19 ^∆		1,088,000	1,086,946
U.S. Treasury Bills 2.473%, 7/25/19		112,000	111,854
U.S. Treasury Bills zero%, 8/8/19		118,000	117,743
U.S. Treasury Bills 2.504%, 8/15/19		113,000	112,704
U.S. Treasury Bills 2.459%, 8/1/19		98,000	97,832
Total short-term investments (cost $6,625,196)			$6,625,527

TOTAL INVESTMENTS
Total investments (cost $868,543,510)			$928,050,271

Key to holding’s abbreviations


ADR	American 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, 2018 through June 30, 2019 (the reporting period). Within the following notes to the portfolio, 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 “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.

^*Percentages indicated are based on net assets of $932,372,767.

^†This security is non-income-producing.

30 International Equity Fund

^∆∆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 $194,962, 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. Collateral at period end totaled $644,226 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).

^FThis security is valued by Putnam Management at fair value following procedures approved by the Trustees. Securities are classified as Level 3 for ASC 820 based on the securities’ valuation inputs. At the close of the reporting period, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).

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

^LAffiliated 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.

^PThis 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.

At the close of the reporting period, the fund maintained liquid assets totaling $757,276 to cover certain derivative contracts.

Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.

144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

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

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


Financials	22.0%
Consumer staples	17.1
Industrials	12.8
Consumer discretionary	11.8
Health care	11.0


FORWARD CURRENCY CONTRACTS at 6/30/19 (aggregate face value $258,224,505)
						Unrealized
		Contract	Delivery		Aggregate	appreciation/
Counterparty	Currency	type^*	date	Value	face value	(depreciation)
Bank of America N.A.
	Australian Dollar	Buy	7/17/19	$5,221,508	$5,422,763	$(201,255)
	British Pound	Sell	9/18/19	14,249,318	14,257,516	8,198
	Canadian Dollar	Buy	7/17/19	3,145,041	3,124,374	20,667
	Euro	Buy	9/18/19	1,328,931	1,252,398	76,533
	Japanese Yen	Buy	8/21/19	30,677,012	30,685,800	(8,788)
Barclays Bank PLC
	Australian Dollar	Buy	7/17/19	101,359	102,037	(678)
	British Pound	Buy	9/18/19	351,085	349,990	1,095
	Euro	Sell	9/18/19	5,457,127	5,373,554	(83,573)
	Hong Kong Dollar	Sell	8/21/19	19,612,051	19,579,376	(32,675)
	Japanese Yen	Buy	8/21/19	709,891	687,974	21,917
	Swiss Franc	Sell	9/18/19	22,855,272	22,441,348	(413,924)

International Equity Fund 31


FORWARD CURRENCY CONTRACTS at 6/30/19 (aggregate face value $258,224,505) cont.
						Unrealized
		Contract	Delivery		Aggregate	appreciation/
Counterparty	Currency	type^*	date	Value	face value	(depreciation)
Citibank, N.A.
	Australian Dollar	Buy	7/17/19	$4,597,127	$4,747,867	$(150,740)
	British Pound	Sell	9/18/19	10,814,933	10,710,280	(104,653)
	Canadian Dollar	Buy	7/17/19	12,533,720	12,214,131	319,589
	Danish Krone	Buy	9/18/19	16,103,023	15,945,544	157,479
	Japanese Yen	Buy	8/21/19	11,199,257	10,804,662	394,595
	New Zealand Dollar	Buy	7/17/19	38,508	39,220	(712)
Goldman Sachs International
	British Pound	Buy	9/18/19	21,919	21,850	69
	Japanese Yen	Sell	8/21/19	117,967	116,394	(1,573)
	New Taiwan Dollar	Buy	8/21/19	19,299	31,096	(11,797)
HSBC Bank USA, National Association
	Australian Dollar	Buy	7/17/19	85,906	87,330	(1,424)
	Chinese Yuan (Offshore)	Sell	8/21/19	7,291,394	7,418,637	127,243
	Euro	Sell	9/18/19	9,508,787	9,382,836	(125,951)
	New Zealand Dollar	Buy	7/17/19	1,647,624	1,677,877	(30,253)
JPMorgan Chase Bank N.A.
	Australian Dollar	Buy	7/17/19	173,146	172,016	1,130
	Japanese Yen	Buy	8/21/19	6,044,360	5,862,061	182,299
	Norwegian Krone	Buy	9/18/19	6,583,898	6,448,852	135,046
	Singapore Dollar	Buy	8/21/19	10,491,613	10,424,675	66,938
	South Korean Won	Sell	8/21/19	11,243,933	11,209,088	(34,845)
	Swedish Krona	Buy	9/18/19	9,456,776	9,296,874	159,902
	Swiss Franc	Sell	9/18/19	1,306,048	1,350,470	44,422
NatWest Markets PLC
	Swiss Franc	Buy	9/18/19	182,069	178,596	3,473
State Street Bank and Trust Co.
	Australian Dollar	Buy	7/17/19	354,722	360,518	(5,796)
	Israeli Shekel	Buy	7/17/19	4,753,083	4,710,769	42,314
	Japanese Yen	Buy	8/21/19	21,989,912	21,334,560	655,352
UBS AG
	Australian Dollar	Buy	7/17/19	7,336,565	7,387,208	(50,643)
WestPac Banking Corp.
	Canadian Dollar	Buy	7/17/19	3,065,906	3,013,964	51,942
Unrealized appreciation						2,470,203
Unrealized (depreciation)						(1,259,280)
Total						$1,210,923

^*The exchange currency for all contracts listed is the United States Dollar.

32 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:
Australia	$—	$20,190,285		$—
China	10,111,655	—		—
Finland	10,250,740	—		—
France	147,593,462	—		—
Germany	50,387,366	—		44
Hong Kong	—	44,725,261		—
India	14,615,716	4,642,283		—
Ireland	42,563,402	—		—
Italy	7,481,892	—		—
Japan	—	141,407,749		—
Luxembourg	—	—		109,725
Netherlands	62,451,714	—		—
South Korea	—	13,426,150		—
Spain	12,034,505	—		—
Sweden	11,994,396	—		—
Switzerland	115,324,373	—		—
United Kingdom	187,660,471	—		—
United States	23,620,438	—		—
Total common stocks	696,090,130	224,391,728		109,769

Convertible preferred stocks	—	—		85,193
U.S. treasury obligations	—	747,924		—
Short-term investments	5,035,482	1,590,045		—
Totals by level	$701,125,612	$226,729,697		$194,962

			Valuation inputs
Other financial instruments:	Level 1	Level 2		Level 3
Forward currency contracts	$—	$1,210,923		$—
Totals by level	$—	$1,210,923		$—

At the start and close of the reporting period, Level 3 investments in securities represented less than 1% of the fund’s net assets and were not considered a significant portion of the fund’s portfolio.

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

International Equity Fund 33

Statement of assets and liabilities 6/30/19


ASSETS
Investment in securities, at value (Notes 1 and 8):
Unaffiliated issuers (identified cost $864,642,028)	$924,148,789
Affiliated issuers (identified cost $3,901,482) (Notes 1 and 5)	3,901,482
Foreign currency (cost $794,500) (Note 1)	796,854
Cash	2,567,402
Dividends, interest and other receivables	1,331,188
Foreign tax reclaim	2,027,134
Receivable for shares of the fund sold	374,627
Receivable for investments sold	1,413,147
Unrealized appreciation on forward currency contracts (Note 1)	2,470,203
Prepaid assets	55,043
Total assets	939,085,869

LIABILITIES
Payable for shares of the fund repurchased	891,439
Payable for compensation of Manager (Note 2)	498,476
Payable for custodian fees (Note 2)	130,412
Payable for investor servicing fees (Note 2)	340,549
Payable for Trustee compensation and expenses (Note 2)	742,980
Payable for administrative services (Note 2)	3,885
Payable for distribution fees (Note 2)	446,106
Unrealized depreciation on forward currency contracts (Note 1)	1,259,280
Collateral on certain derivative contracts, at value (Notes 1 and 8)	1,881,924
Other accrued expenses	518,051
Total liabilities	6,713,102

Net assets	$932,372,767

REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1, 4 and 9)	$915,761,881
Total distributable earnings (Notes 1 and 9)	16,610,886
Total — Representing net assets applicable to capital shares outstanding	$932,372,767

(Continued on next page)

34 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
($673,425,351 divided by 29,191,352 shares)	$23.07
Offering price per class A share (100/94.25 of $23.07)^*	$24.48
Net asset value and offering price per class B share ($7,041,434 divided by 321,698 shares)^**	$21.89
Net asset value and offering price per class C share ($20,888,281 divided by 932,501 shares)^**	$22.40
Net asset value and redemption price per class M share ($8,740,134 divided by 390,146 shares)	$22.40
Offering price per class M share (100/96.50 of $22.40)^*	$23.21
Net asset value, offering price and redemption price per class R share
($2,796,199 divided by 123,423 shares)	$22.66
Net asset value, offering price and redemption price per class R5 share
($1,641,494 divided by 69,914 shares)	$23.48
Net asset value, offering price and redemption price per class R6 share
($96,660,766 divided by 4,122,533 shares)	$23.45
Net asset value, offering price and redemption price per class Y share
($121,179,108 divided by 5,190,119 shares)	$23.35

^*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 35

Statement of operations Year ended 6/30/19


INVESTMENT INCOME
Dividends (net of foreign tax of $2,017,539)	$22,976,657
Interest (including interest income of $229,371 from investments in affiliated issuers) (Note 5)	265,570
Securities lending (net of expenses) (Notes 1 and 5)	5,565
Total investment income	23,247,792

EXPENSES
Compensation of Manager (Note 2)	5,158,880
Investor servicing fees (Note 2)	1,864,265
Custodian fees (Note 2)	167,134
Trustee compensation and expenses (Note 2)	39,852
Distribution fees (Note 2)	1,712,113
Administrative services (Note 2)	25,629
Other	729,852
Total expenses	9,697,725
Expense reduction (Note 2)	(7,132)
Net expenses	9,690,593

Net investment income	13,557,199

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities from unaffiliated issuers (Notes 1 and 3)	(22,479,751)
Foreign currency transactions (Note 1)	17,226
Forward currency contracts (Note 1)	(882,842)
Total net realized loss	(23,345,367)
Change in net unrealized appreciation (depreciation) on:
Securities from unaffiliated issuers	(29,442,531)
Assets and liabilities in foreign currencies	87,551
Forward currency contracts	(23,338)
Total change in net unrealized depreciation	(29,378,318)

Net loss on investments	(52,723,685)

Net decrease in net assets resulting from operations	$(39,166,486)

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

36 International Equity Fund

Statement of changes in net assets


INCREASE/(DECREASE) IN NET ASSETS	Year ended 6/30/19	Year ended 6/30/18
Operations
Net investment income	$13,557,199	$12,219,425
Net realized gain (loss) on investments
and foreign currency transactions	(23,345,367)	56,470,303
Change in net unrealized depreciation of investments
and assets and liabilities in foreign currencies	(29,378,318)	(4,101,139)
Net increase (decrease) in net assets resulting
from operations	(39,166,486)	64,588,589
Distributions to shareholders (Note 1):
From ordinary income
Net investment income
Class A	(10,737,282)	(2,249,729)
Class B	(49,849)	—
Class C	(15,759)	—
Class M	(118,064)	—
Class R	(41,239)	(7,637)
Class R5	(37,977)	(7,843)
Class R6	(2,136,558)	(754,986)
Class Y	(3,164,037)	(934,387)
From return of capital
Class A	(987,371)	—
Class B	(9,362)	—
Class C	(21,738)	—
Class M	(15,849)	—
Class R	(4,796)	—
Class R5	(2,910)	—
Class R6	(155,680)	—
Class Y	(253,141)	—
From net realized long-term gain on investments
Class A	(19,647,216)	—
Class B	(186,290)	—
Class C	(432,555)	—
Class M	(315,365)	—
Class R	(95,425)	—
Class R5	(57,912)	—
Class R6	(3,097,803)	—
Class Y	(5,037,129)	—
Increase in capital from settlement payments	20,847	—
Increase (decrease) from capital share transactions
(Notes 4 and 9)	27,627,546	(3,581,623)
Total increase (decrease) in net assets	(58,139,400)	57,052,384

NET ASSETS
Beginning of year	990,512,167	933,459,783
End of year (Note 1)	$932,372,767	$990,512,167

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

International Equity Fund 37

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


	INVESTMENT OPERATIONS				LESS DISTRIBUTIONS							RATIOS AND SUPPLEMENTAL DATA
														Ratio of net
	Net asset	Net	Net realized			From							Ratio of	investment
	value,	investment	and unrealized	Total from	From net	net realized			Non-recurring	Net asset	Total return	Net assets,	expenses	income (loss)
	beginning	income	gain (loss) on	investment	investment	gain on	From return	Total	reimburse-	value, end	at net asset	end of period	to average	to average	Portfolio
Period ended	of period	(loss)^a	investments	operations	income	investments	of capital	distributions	ments	of period	value (%)^b	(in thousands)	net assets (%)^c	net assets (%)	turnover (%)
Class A
June 30, 2019	$25.36	.35	(1.36)	(1.01)	(.44)	(.80)	(.04)	(1.28)	—^d	$23.07	(3.04)	$673,425	1.21^e	1.55	77
June 30, 2018	23.80	.30	1.35	1.65	(.09)	—	—	(.09)	—	25.36	6.90	663,773	1.22	1.15	61
June 30, 2017	20.49	.28	3.67	3.95	(.64)	—	—	(.64)	—	23.80	19.76	656,450	1.23	1.27	67
June 30, 2016	24.31	.32	(3.55)	(3.23)	(.59)	—	—	(.59)	—	20.49	(13.46)	647,864	1.27^h	1.47^h	77
June 30, 2015	25.33	.29	(1.09)	(.80)	(.22)	—	—	(.22)	—	24.31	(3.12)	834,109	1.26	1.19	69
Class B
June 30, 2019	$24.05	.16	(1.27)	(1.11)	(.21)	(.80)	(.04)	(1.05)	—^d	$21.89	(3.79)	$7,041	1.96^e	.73	77
June 30, 2018	22.66	.08	1.31	1.39	—	—	—	—	—	24.05	6.13	6,606	1.97	.33	61
June 30, 2017	19.51	.10	3.51	3.61	(.46)	—	—	(.46)	—	22.66	18.84	8,315	1.98	.46	67
June 30, 2016	23.14	.14	(3.37)	(3.23)	(.40)	—	—	(.40)	—	19.51	(14.09)	10,121	2.02^h	.66^h	77
June 30, 2015	24.08	.09	(1.02)	(.93)	(.01)	—	—	(.01)	—	23.14	(3.86)	14,821	2.01	.39	69
Class C
June 30, 2019	$24.35	.16	(1.24)	(1.08)	(.03)	(.80)	(.04)	(.87)	—^d	$22.40	(3.78)	$20,888	1.96^e	.72	77
June 30, 2018	22.94	.03^f	1.38	1.41	—	—	—	—	—	24.35	6.15	15,737	1.97	.12^f	61
June 30, 2017	19.77	.11	3.54	3.65	(.48)	—	—	(.48)	—	22.94	18.79	41,292	1.98	.51	67
June 30, 2016	23.47	.15	(3.42)	(3.27)	(.43)	—	—	(.43)	—	19.77	(14.08)	47,141	2.02^h	.72^h	77
June 30, 2015	24.45	.11	(1.05)	(.94)	(.04)	—	—	(.04)	—	23.47	(3.83)	59,397	2.01	.46	69
Class M
June 30, 2019	$24.62	.24	(1.32)	(1.08)	(.30)	(.80)	(.04)	(1.14)	—^d	$22.40	(3.53)	$8,740	1.71^e	1.05	77
June 30, 2018	23.14	.16	1.32	1.48	—	—	—	—	—	24.62	6.40	10,634	1.72	.65	61
June 30, 2017	19.93	.17	3.57	3.74	(.53)	—	—	(.53)	—	23.14	19.14	10,977	1.73	.80	67
June 30, 2016	23.64	.19	(3.43)	(3.24)	(.47)	—	—	(.47)	—	19.93	(13.87)	10,247	1.77^h	.90^h	77
June 30, 2015	24.64	.15	(1.05)	(.90)	(.10)	—	—	(.10)	—	23.64	(3.65)	15,078	1.76	.66	69
Class R
June 30, 2019	$24.88	.28	(1.32)	(1.04)	(.34)	(.80)	(.04)	(1.18)	—^d	$22.66	(3.26)	$2,796	1.46^e	1.25	77
June 30, 2018	23.37	.22	1.34	1.56	(.05)	—	—	(.05)	—	24.88	6.66	3,446	1.47	.87	61
June 30, 2017	20.15	.23	3.59	3.82	(.60)	—	—	(.60)	—	23.37	19.39	3,671	1.48	1.08	67
June 30, 2016	23.87	.27	(3.49)	(3.22)	(.50)	—	—	(.50)	—	20.15	(13.66)	2,962	1.52^h	1.23^h	77
June 30, 2015	24.90	.23	(1.08)	(.85)	(.18)	—	—	(.18)	—	23.87	(3.37)	4,454	1.51	.99	69
Class R5
June 30, 2019	$25.81	.45	(1.42)	(.97)	(.52)	(.80)	(.04)	(1.36)	—^d	$23.48	(2.73)	$1,641	.87^e	1.93	77
June 30, 2018	24.15	.41	1.36	1.77	(.11)	—	—	(.11)	—	25.81	7.30	1,946	.89	1.57	61
June 30, 2017	20.79	.23^g	3.85	4.08	(.72)	—	—	(.72)	—	24.15	20.14	1,452	.89	1.07^g	67
June 30, 2016	24.66	.40	(3.60)	(3.20)	(.67)	—	—	(.67)	—	20.79	(13.18)	16,211	.96^h	1.81^h	77
June 30, 2015	25.72	.44	(1.19)	(.75)	(.31)	—	—	(.31)	—	24.66	(2.84)	19,900	.96	1.79	69

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

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


38 International Equity Fund	International Equity Fund 39

Financial highlights cont.

INVESTMENT OPERATIONS

LESS DISTRIBUTIONS

RATIOS AND SUPPLEMENTAL DATA

Ratio of net

Net asset

Net

Net realized

From

Ratio of

investment

value,

investment

and unrealized

Total from

From net

net realized

Non-recurring

Net asset

Total return

Net assets,

expenses

income (loss)

beginning

income

gain (loss) on

investment

investment

gain on

From return

Total

reimburse-

value, end

at net asset

end of period

to average

Portfolio

Period ended

of period

(loss)^a

investments

operations

income

investments

of capital

distributions

ments

of period

value (%)^b

(in thousands)

net assets (%)^c

net assets (%)

turnover (%)

Class R6

June 30, 2019

$25.78

.47

(1.41)

(.94)

(.55)

(.80)

(.04)

(1.39)

—^d

$23.45

(2.60)

$96,661

.77^e

2.01

June 30, 2018

24.19

.43

1.36

1.79

(.20)

—

(.20)

—

25.78

7.36

107,395

.79

1.64

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^h

2.75^h

June 30, 2015

25.74

.39

(1.12)

(.73)

(.32)

—

(.32)

—

24.69

(2.75)

17,443

.86

1.61

Class Y

June 30, 2019

$25.67

.39

(1.37)

(.98)

(.50)

(.80)

(.04)

(1.34)

—^d

$23.35

(2.81)

$121,179

.96^e

1.66

June 30, 2018

24.09

.40

1.34

1.74

(.16)

—

(.16)

—

25.67

7.19

180,977

.97

1.53

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^h

1.79^h

June 30, 2015

25.66

.36

(1.12)

(.76)

(.29)

—

(.29)

—

24.61

(2.91)

92,613

1.01

1.49

^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.

^dReflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Canadian Imperial Holdings, Inc. and CIBC World Markets Corp., which amounted to less than $0.01 per share outstanding on March 6, 2019.

^eIncludes one time merger costs of 0.03%.

^fThe net investment income ratio and per share amount shown for the period ended June 30, 2018 may not correspond with the expected class specific differences for the period due to the timing of redemptions out of the class.

^gThe 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.

^hReflects 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.

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


40 International Equity Fund	International Equity Fund 41

Notes to financial statements 6/30/19

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, 2018 through June 30, 2019.

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. 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 generally convert to class A shares after approximately ten years. 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 Amended and Restated Agreement and 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 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.

42 International Equity Fund

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. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. 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 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.

International Equity Fund 43

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 and including amortization and accretion of premiums and discounts on debt securities, 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.

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.

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.

44 International Equity Fund

At the close of the reporting period, the fund had a net liability position of $706,812 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $644,226 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 had no securities out on loan.

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 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 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR 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 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.

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At June 30, 2019, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:


	Loss carryover
Short-term	Long-term	Total
$40,302,835	$1,501,835	$41,804,670

International Equity Fund 45

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer $791,299 to its fiscal year ending June 30, 2020, a portion of which could be subject to limitations imposed by the Code, of late year ordinary losses ((i) ordinary losses recognized between January 1, 2019 and June 30, 2019, and (ii) specified ordinary and currency losses recognized between November 1, 2018 and June 30, 2019.

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 a redesignation of taxable distributions, from distributions in excess, from a return of capital due to distributions which exceed those required under the excise rules, from non-deductible merger expenses and from activity related to the merger as disclosed in Note 9. 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 reporting period, the fund reclassified $1,783,977 to increase distributions in excess of net investment income, $27,475,386 to decrease paid-in capital and $29,259,363 to decrease accumulated net realized loss.

Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. 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	$97,371,297
Unrealized depreciation	(38,205,505)
Net unrealized appreciation	59,165,792
Capital loss carryforward	(41,804,670)
Late year ordinary loss deferral	(791,299)
Cost for federal income tax purposes	$870,095,402

For the fiscal year ended June 30, 2018, the fund had undistributed net investment income of $5,127,769.

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) 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 thirty-six-month performance period. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have

46 International Equity Fund

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.

In connection with the merger of Putnam Europe Equity Fund (“acquired fund”) into the fund on June 24, 2019, the management contract has been amended such that the combined fund’s performance adjustment is calculated based on the combined assets of the fund and the acquired fund for any portion of a performance period that is prior to the merger, unless the use of the combined assets results in a fee payable by the fund under the amended management contract that is higher than the management fee that would have been paid under the fund’s current management contract. Under those circumstances, Putnam Management has agreed to reduce its management fee to reflect the lower amount that would have been payable under the fund’s current fee schedule, which would only take into account the assets of the fund for the period prior to the closing of the mergers. As a result of these management contract changes, the fund’s shareholders may pay a lower management fee, but would never pay a higher management fee, under the amended management contract than they would have paid under the fund’s current management contract.

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 management fee represented an effective rate (excluding the impact of any expense waiver in effect) of 0.608% of the fund’s average net assets, which included an effective base fee of 0.691% and a decrease of 0.083% ($700,248) based on performance.

Putnam Management has contractually agreed, through October 30, 2020, to waive fees and/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 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%.

International Equity Fund 47

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


Class A	$1,401,149	Class R5	2,606
Class B	12,647	Class R6	46,839
Class C	30,557	Class Y	341,833
Class M	21,834	Total	$1,864,265
Class R	6,800

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 $7,132 under the expense offset arrangements and by no monies under the brokerage/service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $577, 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.

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%	$1,451,715
Class B	1.00%	1.00%	52,493
Class C	1.00%	1.00%	126,882
Class M	1.00%	0.75%	66,898
Class R	1.00%	0.50%	14,125
Total			$1,712,113

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $22,331 and $152 from the sale of class A and class M shares, respectively, and received $932 and $145 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 $14 on class A redemptions.

48 International Equity Fund

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)	$648,253,617	$755,061,054
U.S. government securities (Long-term)	—	—
Total	$648,253,617	$755,061,054

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.

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions, including, if applicable, direct exchanges pursuant to share conversions, in capital shares were as follows:


	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class A	Shares	Amount	Shares	Amount
Shares sold	775,313	$17,439,750	2,389,913	$61,901,346
Shares issued in connection with
reinvestment of distributions	1,527,204	29,490,324	80,670	2,099,835
Shares issued in connection with the
merger of Putnam Europe Equity Fund	4,760,840	109,400,759	—	—
	7,063,357	156,330,833	2,470,583	64,001,181
Shares repurchased	(4,043,089)	(91,427,651)	(3,884,141)	(100,526,450)
Net increase (decrease)	3,020,268	$64,903,182	(1,413,558)	$(36,525,269)

	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class B	Shares	Amount	Shares	Amount
Shares sold	5,214	$109,291	19,044	$465,092
Shares issued in connection with
reinvestment of distributions	12,888	237,018	—	—
Shares issued in connection with the
merger of Putnam Europe Equity Fund	113,672	2,478,764	—	—
	131,774	2,825,073	19,044	465,092
Shares repurchased	(84,786)	(1,841,330)	(111,298)	(2,718,144)
Net increase (decrease)	46,988	$983,743	(92,254)	$(2,253,052)

	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class C	Shares	Amount	Shares	Amount
Shares sold	54,870	$1,199,367	175,026	$4,416,226
Shares issued in connection with
reinvestment of distributions	24,068	452,953	—	—
Shares issued in connection with the
merger of Putnam Europe Equity Fund	432,503	9,651,813	—	—
	511,441	11,304,133	175,026	4,416,226
Shares repurchased	(225,213)	(4,931,420)	(1,328,358)	(33,345,000)
Net increase (decrease)	286,228	$6,372,713	(1,153,332)	$(28,928,774)

International Equity Fund 49


	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class M	Shares	Amount	Shares	Amount
Shares sold	20,479	$443,121	40,551	$1,016,268
Shares issued in connection with
reinvestment of distributions	23,220	436,540	—	—
	43,699	879,661	40,551	1,016,268
Shares repurchased	(85,443)	(1,855,814)	(82,981)	(2,057,904)
Net decrease	(41,744)	$(976,153)	(42,430)	$(1,041,636)

	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class R	Shares	Amount	Shares	Amount
Shares sold	21,541	$470,562	36,437	$924,053
Shares issued in connection with
reinvestment of distributions	5,316	100,950	194	4,951
Shares issued in connection with the
merger of Putnam Europe Equity Fund	8,881	200,434	—	—
	35,738	771,946	36,631	929,004
Shares repurchased	(50,788)	(1,133,955)	(55,225)	(1,430,820)
Net decrease	(15,050)	$(362,009)	(18,594)	$(501,816)

	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class R5	Shares	Amount	Shares	Amount
Shares sold	4,504	$102,740	51,805	$1,352,724
Shares issued in connection with
reinvestment of distributions	5,036	98,799	297	7,843
	9,540	201,539	52,102	1,360,567
Shares repurchased	(15,017)	(344,525)	(36,824)	(967,800)
Net increase (decrease)	(5,477)	$(142,986)	15,278	$392,767

	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class R6	Shares	Amount	Shares	Amount
Shares sold	715,430	$16,610,011	932,340	$24,856,990
Shares issued in connection with
reinvestment of distributions	275,194	5,388,300	28,589	754,742
Shares issued in connection with the
merger of Putnam Europe Equity Fund	145,730	3,403,291	—	—
	1,136,354	25,401,602	960,929	25,611,732
Shares repurchased	(1,179,188)	(27,427,356)	(558,788)	(14,701,232)
Net increase (decrease)	(42,834)	$(2,025,754)	402,141	$10,910,500

50 International Equity Fund


	YEAR ENDED 6/30/19		YEAR ENDED 6/30/18
Class Y	Shares	Amount	Shares	Amount
Shares sold	1,691,837	$39,005,798	3,409,447	$89,711,734
Shares issued in connection with
reinvestment of distributions	402,506	7,856,912	32,314	849,860
Shares issued in connection with the
merger of Putnam Europe Equity Fund	943,384	21,939,143	—	—
	3,037,727	68,801,853	3,441,761	90,561,594
Shares repurchased	(4,898,323)	(109,927,043)	(1,384,472)	(36,195,937)
Net increase (decrease)	(1,860,596)	$(41,125,190)	2,057,289	$54,365,657

Note 5: Affiliated transactions

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


					Shares
					outstanding
					and fair
	Fair value as	Purchase	Sale	Investment	value as
Name of affiliate	of 6/30/18	cost	proceeds	income	of 6/30/19
Short-term investments
Putnam Cash Collateral
Pool, LLC^*	$7,440,075	$13,568,925	$21,009,000	$36,141	$—
Putnam Short Term
Investment Fund^**	11,123,170	384,951,324	392,173,012	229,371	3,901,482
Total Short-term
investments	$18,563,245	$398,520,249	$413,182,012	$265,512	$3,901,482

^*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:


Forward currency contracts (contract amount)	$334,300,000

International Equity Fund 51

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	$2,470,203	Payables	$1,259,280
Total		$2,470,203		$1,259,280

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 (Note 1):


Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
Derivatives not accounted for as	Forward currency
hedging instruments under ASC 815	contracts	Total
Foreign exchange contracts	$(882,842)	$(882,842)
Total	$(882,842)	$(882,842)

Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss)
on investments
Derivatives not accounted for as	Forward currency
hedging instruments under ASC 815	contracts	Total
Foreign exchange contracts	$(23,338)	$(23,338)
Total	$(23,338)	$(23,338)

52 International Equity Fund

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.	Goldman Sachs International	HSBC Bank USA, National Association	JPMorgan Chase Bank N.A.	NatWest Markets PLC	State Street Bank and Trust Co.	UBS AG	WestPac Banking Corp.	Total
Assets:
Forward currency contracts^#	$105,398	$23,012	$871,663	$69	$127,243	$589,737	$3,473	$697,666	$—	$51,942	$2,470,203
Total Assets	$105,398	$23,012	$871,663	$69	$127,243	$589,737	$3,473	$697,666	$—	$51,942	$2,470,203
Liabilities:
Forward currency contracts^#	210,043	530,850	256,105	13,370	157,628	34,845	—	5,796	50,643	—	1,259,280
Total Liabilities	$210,043	$530,850	$256,105	$13,370	$157,628	$34,845	$—	$5,796	$50,643	$—	$1,259,280
Total Financial and Derivative Net Assets	$(104,645)	$(507,838)	$615,558	$(13,301)	$(30,385)	$554,892	$3,473	$691,870	$(50,643)	$51,942	$1,210,923
Total collateral received (pledged)^†##	$—	$(507,838)	$530,000	$—	$—	$554,892	$—	$691,870	$(50,643)	$—
Net amount	$(104,645)	$—	$85,558	$(13,301)	$(30,385)	$—	$3,473	$—	$—	$51,942
Controlled collateral received (including
TBA commitments)**	$—	$—	$530,000	$—	$—	$604,000	$—	$747,924	$—	$—	$1,881,924
Uncontrolled collateral received	$—	$—	$—	$—	$—	$—	$—	$—	$—	$—	$—
Collateral (pledged) (including TBA commitments)**	$—	$(513,383)	$—	$—	$—	$—	$—	$—	$(130,843)	$—	$(644,226)

^**Included with Investments in securities on the Statement of assets and liabilities.

^†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: Acquisition of Putnam Europe Equity Fund

On June 24, 2019, the fund issued 4,760,840, 113,672, 432,503, 8,881, 145,730 and 943,384 class A, class B, class C, class R, class R6 and class Y shares, respectively, for 4,299,930, 101,951, 388,772, 7,953, 133,310 and 860,228 class A, class B, class C, class R, class R6 and class Y shares of Putnam Europe Equity Fund to acquire that fund’s net assets in a tax-free exchange approved by the shareholders. The purpose of the transaction was to combine two Putnam funds with substantially similar investment objectives and investment strategies into a single Putnam fund with a larger asset base and therefore potentially lower expenses for fund shareholders. The investment portfolio of Putnam Europe Equity Fund, with a fair value of $114,321,793 and an identified cost of $108,885,656 at June 21, 2019, was the principal asset acquired by the fund. The net assets of the fund and Putnam Europe Equity Fund on June 21, 2019, were $784,077,607 and $147,074,204, respectively. On June 21, 2019, Putnam Europe Equity Fund had undistributed net investment (loss) of $2,422,503, accumulated net realized (loss) of $18,863,089 and unrealized appreciation of $5,430,551. The aggregate net assets of the fund immediately following the acquisition were $931,151,811.

Assuming the acquisition had been completed on July 1, 2018, the fund’s pro forma results of operations for the reporting period are as follows (unaudited):


Net investment Income	$16,492,536
Net (loss) on investments	$(61,325,391)
Net (decrease) in net assets resulting from operations	$(44,832,855)

Because the combined investment portfolios have been managed as a single portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of Putnam Europe Equity Fund that have been included in the fund’s Statement of operations for the current fiscal period.


54 International Equity Fund	International Equity Fund 55

Federal tax information (Unaudited)

For the reporting period, a portion of the fund’s distribution represents a return of capital and is therefore not taxable to shareholders.

Pursuant to §852 of the Internal Revenue Code, as amended, the fund hereby designates $30,320,541 as a capital gain dividend with respect to the taxable year ended June 30, 2019, or, if subsequently determined to be different, the net capital gain of such year.

For the reporting period, total interest and dividend income from foreign countries were $24,729,410, or $0.61 per share (for all classes of shares). Taxes paid to foreign countries were $2,017,539, or $0.05 per share (for all classes of shares).

The fund designated 1.67% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For the reporting period, the fund hereby designates 100%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

For the reporting period, pursuant to §871(k) of the Internal Revenue Code, the fund hereby designates $303,384 of distributions paid as qualifying to be taxed as interest-related dividends, and no monies to be taxed as short-term capital gain dividends for nonresident alien shareholders.

The Form 1099 that will be mailed to you in January 2020 will show the tax status of all distributions paid to your account in calendar 2019.

56 International Equity Fund

Officers

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


Robert T. Burns (Born 1961)	Richard T. Kircher (Born 1962)
Vice President and Chief Legal Officer	Vice President and BSA Compliance Officer
Since 2011	Since 2019
General Counsel, Putnam Investments,	Assistant Director, Operational Compliance, Putnam
Putnam Management, and Putnam Retail Management	Investments and Putnam Retail Management

James F. Clark (Born 1974)	Susan G. Malloy (Born 1957)
Vice President and Chief Compliance Officer	Vice President and Assistant Treasurer
Since 2016	Since 2007
Chief Compliance Officer and Chief Risk Officer,	Head of Accounting and Middle Office Services,
Putnam Investments and Chief Compliance Officer,	Putnam Investments and Putnam Management
Putnam Management
	Denere P. Poulack (Born 1968)
Nancy E. Florek (Born 1957)	Assistant Vice President, Assistant Clerk,
Vice President, Director of Proxy Voting and Corporate	and Assistant Treasurer
Governance, Assistant Clerk, and Assistant Treasurer	Since 2004
Since 2000
	Janet C. Smith (Born 1965)
Michael J. Higgins (Born 1976)	Vice President, Principal Financial Officer, Principal
Vice President, Treasurer, and Clerk	Accounting Officer, and Assistant Treasurer
Since 2010	Since 2007
	Head of Fund Administration Services,
Jonathan S. Horwitz (Born 1955)	Putnam Investments and Putnam Management
Executive Vice President, Principal Executive Officer,
and Compliance Liaison	Mark C. Trenchard (Born 1962)
Since 2004	Vice President
	Since 2002
	Director of Operational Compliance, Putnam
	Investments and Putnam Retail Management

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 100 Federal Street, Boston, MA 02110.

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 80 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 funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.


Investment Manager	Trustees	Michael J. Higgins
Putnam Investment	Kenneth R. Leibler, Chair	Vice President, Treasurer,
Management, LLC	Liaquat Ahamed	and Clerk
100 Federal Street	Ravi Akhoury
Boston, MA 02110	Barbara M. Baumann	Jonathan S. Horwitz
	Katinka Domotorffy	Executive Vice President,
Investment Sub-Advisors	Catharine Bond Hill	Principal Executive Officer,
Putnam Investments Limited	Paul L. Joskow	and Compliance Liaison
16 St James’s Street	Robert E. Patterson
London, England SW1A 1ER	George Putnam, III	Richard T. Kircher
	Robert L. Reynolds	Vice President and BSA
The Putnam Advisory Company, LLC	Manoj P. Singh	Compliance Officer
100 Federal Street
Boston, MA 02110	Officers	Susan G. Malloy
	Robert L. Reynolds	Vice President and
Marketing Services	President	Assistant Treasurer
Putnam Retail Management
100 Federal Street	Robert T. Burns	Denere P. Poulack
Boston, MA 02110	Vice President and	Assistant Vice President, Assistant
	Chief Legal Officer	Clerk, and Assistant Treasurer
Custodian
State Street Bank	James F. Clark	Janet C. Smith
and Trust Company	Vice President, Chief Compliance	Vice President,
	Officer, and Chief Risk Officer	Principal Financial Officer,
Legal Counsel		Principal Accounting Officer,
Ropes & Gray LLP	Nancy E. Florek	and Assistant Treasurer
	Vice President, Director of
Independent Registered Public	Proxy Voting and Corporate	Mark C. Trenchard
Accounting Firm	Governance, Assistant Clerk,	Vice President
PricewaterhouseCoopers LLP	and Assistant Treasurer

This report is for the information of shareholders of Putnam International Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit 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, 2019	$93,817	$31,000*	$16,406	$ —
June 30, 2018	$90,474	$ —	$15,976	$1,363


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

June 30, 2019	$ —	$546,984	$ —	$ —
June 30, 2018	$ —	$600,294	$ —	$ —


	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:	100 Federal Street, Boston, Massachusetts 02110


	Name and address of agent for service:	Robert T. Burns, Vice President 100 Federal Street Boston, Massachusetts 02110


	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:


	(c) In February 2018, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Prohibition of investing in public coin offerings or token offerings, (ii) Removal of monetary fines as available sanctions for violations of the Code of Ethics, and (iii) Expanded definition of “Immediate Family Member”.


	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, 2019 and June 30, 2018, the fund's independent auditor billed aggregate non-audit fees in the amounts of $594,390 and $613,402 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


	Washington, D.C. 20549


	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.


	All Other Fees represent fees billed for services relating to an analysis of fund profitability


	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


	Item 12. Disclosures of Securities Lending Activities for Closed-End Management Investment Companies:


	(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