-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AOpZ5NxL82PCNEhkNFJQKtbnCeRyJoT/jnCY4JbFNGkDDKkas2N3TS+o+tOx0OuU WcOUS2K6C/684D7gMCaXvQ== 0000928816-99-000258.txt : 19990823 0000928816-99-000258.hdr.sgml : 19990823 ACCESSION NUMBER: 0000928816-99-000258 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND /MA/ CENTRAL INDEX KEY: 0000868648 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046661045 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06190 FILM NUMBER: 99696477 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921471 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM OVERSEAS GROWTH FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM INTERNATIONAL GROWTH FUND DATE OF NAME CHANGE: 19901107 N-30D 1 PUTNAM INTERNATIONAL GROWTH FUND Putnam International Growth Fund ANNUAL REPORT ON PERFORMANCE AND OUTLOOK 6-30-99 [LOGO: BOSTON * LONDON * TOKYO] From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] [copyright] Karsh, Ottawa Dear Shareholder: After nearly a decade of ennui, the Japanese economy and stock market finally have begun showing signs of renewal in recent months. The managers of Putnam International Growth Fund, who have long been watching closely for such signals, have responded by identifying and acting upon what they regard as some potentially promising opportunities there. Meanwhile, other Asian economies, more recent casualties of market turmoil, have similarly rebounded along with other emerging markets. The managers also see future potential in Europe's currently lackluster equity markets. Such has been the environment in which your fund's management team operated during the fiscal year that ended on June 30, 1999. In the following report, the managers review the fund's strategy and performance during the period and offer their insights into prospects for the new fiscal year. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees August 18, 1999 Report from the Fund Managers Omid Kamshad Mark D. Pollard Justin M. Scott Paul Warren In the 1990s, international investors often envied the dominance of the U.S. market while lamenting the Japanese market's inability to mount any sustainable gains. The inefficiencies of Japan's economy and companies held it back for much of the decade. However, during Putnam International Growth Fund's fiscal year that ended June 30, 1999, genuine corporate restructuring began to emerge in Japan and international investors were finally able to benefit from a sustained rally in Japanese equities. Unfortunately, over this period, European markets did not echo Japan's optimistic mood. Although there was a rally in the major markets after the sharp global market correction in the second half of 1998, European markets turned in a flat performance in the first half of calendar 1999, due in part to the depreciation of the new euro -- down about 15% relative to the U.S. dollar at fiscal year's end. Nevertheless, in this up-and-down market atmosphere, your fund's results at net asset value for the period were well ahead of the 7.62% provided by the fund's benchmark, the Morgan Stanley Capital International Europe, Australasia, Far East Index. In general, your fund's showing was the result of strong stock picking in Japan, France, and Germany and a fortuitous shift into industrial sectors that are now benefiting from the uptick in world economic growth. Total return for 12 months ended 6/30/99 Class A Class B Class M NAV POP NAV CDSC NAV POP - ---------------------------------------------------------------- 11.57% 5.15% 10.75% 5.75% 10.97% 7.09% - ---------------------------------------------------------------- Past performance is no indication of future results. Performance information for longer periods begins on page 7. [GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS] TOP COUNTRY ALLOCATIONS* Japan 18.2% United Kingdom 16.1% France 11.3% Germany 7.5% The Netherlands 6.1% Footnote reads: *Based on net assets as of 6/30/99. Holdings will vary over time. * MOVE TO JAPANESE STOCKS REFLECTS IMPROVED INVESTOR SENTIMENT We believe the most significant development over the fiscal year was our decision to increase the fund's weighting in Japanese stocks. It reflects the fact that Japanese companies are finally beginning to respond to the country's poor economic environment by increasing restructuring efforts, focusing on return on equity and profitability, and attempting to add value for shareholders. A number of major companies such as Sony, Toshiba, and NEC have announced plans to reduce staff and costs dramatically. At the same time, merger and acquisition activity has increased substantially. According to the July 13, 1999, edition of the Financial Times, the value of Japanese M&A activity rose 177% in the first half of 1999 to $57 billion. Cross border deals also tripled to $17 billion. This combination of restructuring and M&A activity is creating attractive investment opportunities. We took advantage of these opportunities primarily through positions in Japanese technology and telecommunications companies. We've found the managers at many of these companies to be younger, more entrepreneurial, and more willing to think globally than many of their older counterparts. Companies such as Fujitsu, Nippon Telephone and Telegraph, and Murata Manufacturing not only are strong players in surging global industries but they are also taking the steps necessary to raise shareholder value. We've also targeted Japanese financial companies such as Nikko Securities that offer strong growth potential and that are shareholder-friendly. Like an increasing number of other Japanese companies, Nikko has initiated far-reaching plans to boost revenues, setting three-year targets of 15% return on equity (an important measure of profitability and efficiency) and planning staff reductions of 20%. Citigroup's 15% stake in the company also contributed to the stock's recent rally. While these holdings, along with others discussed in this report, were viewed favorably at the end of the period, all are subject to review and adjustment in accordance with the fund's investment strategy and may vary in the future. * EUROPEAN MARKETS RECORD FLAT PERFORMANCE BUT EXUDE POTENTIAL Europe's much-anticipated Economic and Monetary Union (EMU) and its new euro got off to a smooth start at the beginning of the year. As the year progressed, however, economic indicators revealed increasing weakness in the Continent's industrial sectors and political infighting indicated a lack of coordination among European policymakers. Furthermore, there appeared to be a lack of monetary policy direction on the part of the new European Central Bank. All three factors served to drive the value of the euro down about 15% relative to the U.S. dollar. The resulting weakness in the euro served to hurt the returns of dollar-based investments such as your fund and resulted in a flat performance from the European markets. Morningstar gave Putnam International Growth Fund's class A shares its highest ranking of 5 stars for 3-year performance as of June 30, 1999. This rating put the fund among the top 10% of the 987 international equity funds rated. Past performance is not indicative of future results. Morningstar ratings reflect risk-adjusted performance through 6/30/99 and are subject to change every month. Morningstar ratings are calculated from a fund's 3-, 5-, and 10-year returns (with fee adjustments) in excess of 90-day Treasury bill returns and a risk factor that reflects performance below 90-day Treasury bill returns. For the 5-year performance, the fund received 4 stars. There were 498 international equity funds rated. The top 10% of the funds in an investment category receive 5 stars; the next 22.5% receive 4 stars. Performance of other share classes will vary. Our strategy in Europe was to identify companies that are undergoing corporate restructuring and those with pricing power within their industries. In addition, we also began to seek large, exporting industrial companies that stand to benefit from the weakness of the euro as well as the growing world economy. Some examples include oil giant Elf Aquitaine (which following the close of the period was subject to a takeover attempt from fellow French oil firm TotalFina) and U.S./German automaker DaimlerChrysler. Mergers and hostile takeovers are reshaping corporate Europe Mergers and acquisitions activity involving European companies continues to grow at an astounding pace and your fund has benefited in several instances. According to Morgan Stanley Dean Witter and JP Morgan, the $654 billion in European M&A activity in the first half of 1999 could not only break last year's level of $870 billion, but also surpass the record of $1.3 trillion. Shareholders should realize that this level of M&A activity, as well as the presence of once unknown tactics like hostile takeovers, is truly unprecedented in Europe. Your fund was a shareholder in Telecom Italia (sold prior to the end of the period), won by Olivetti after a long and often dramatic hostile takeover fight that involved German giant Deutsche Telecom. In this well publicized battle, fund holding Mannesmann of Germany was able to enhance its development of a formidable fixed and cellular telecommunications franchise with the purchase of Olivetti's fixed and cellular businesses, which Olivetti sold during its attempts to acquire Telecom Italia. Another large European company that epitomized our investment themes during the reporting period was Hoechst in Germany. The company is remaking itself from a diversified chemical company into a pure life sciences company, i.e., focusing more on biotechnology and pharmaceuticals and away from industrial chemicals. This move has unleashed great value for Hoechst's shareholders in that its life sciences business is priced at a fraction of the values assigned to other pure life sciences companies. In addition, Hoechst plans to merge with Rhone-Poulenc of France to form the world's largest life sciences company. We also focused on advertising and media companies, whose revenues tend to rise as economies strengthen. In this regard, we targeted companies such as leading French broadcaster TF-1, U.K.-based global advertising agency WPP Group, and French agency Publicis. * EMERGING MARKETS MAKE COMEBACK As interest rates began to fall and liquidity flowed back into world markets, the world's battered emerging markets showed some signs of recovery. After a Brazilian currency devaluation in January produced no lasting impact on the markets, stocks in Asia and Latin America surged. Signs of restructuring and repair in Asian economies and companies added to investors' growing optimism about the world's emerging economies. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS Mannesmann AG (Germany) Telecommunications British Telecommunications plc ADR (United Kingdom) Telecommunications Fujitsu Ltd. (Japan) Electronics and electrical equipment Elf Aquitaine S.A. (France) Oil and gas Hoechst AG (Germany) Chemicals Nikko Securities Co. Ltd. (Japan) Insurance and finance Pharmacia & Upjohn, Inc. (Sweden) Pharmaceuticals Telefonaktiebolaget LM Ericsson Class B (Sweden) Telecommunications Ente Nazionale Idrocarburi (ENI) SpA (Italy) Oil and gas Internationale Nederlanden Groep (ING) (Netherlands) Insurance and finance Footnote reads: These holdings represent 20.5% of the fund's net assets as of 6/30/99. Portfolio holdings will vary over time. In particular, we looked for companies in Mexico, Brazil, and South Korea in the technology and telecommunications areas. Companies such as Telefonos de Mexico and Telesp Celular in Brazil are valued at significant discounts to telecommunications companies in larger markets at the same time, they offer much higher growth rates based on the greater potential for growth in fixed and wireline businesses in emerging-markets countries. This same rationale applies to mainland China operator China Telecom. In South Korea, stocks have outperformed their counterparts in other Asian markets based on evidence of real corporate restructuring occurring at many South Korean companies. At the end of the period, the fund had positions in blue-chip South Korean companies such as Samsung, Korea Electric Power, and Korea Telecom. * CONTINUED FOCUS ON COMPANIES BENEFITING FROM GROWING GLOBAL ECONOMY For the near future, we expect to continue to target growing multinational companies that are benefiting from an expanding global economy. More specifically we believe this strategy will lead us to add to the fund's European holdings as exporting companies benefit from the continued weakness of the euro. Generally, when a company's home currency is weak, foreign demand for its goods rises and the company benefits when its foreign earnings are repatriated to its home currency. We are pleased by the progress many of the Asian markets have made and we believe there is ample evidence that many of the economies in the region have bottomed and are on the mend. Additionally we are heartened by some of the restructuring programs and the merger and acquisition activity we are observing in Japan. You should understand that the mere discussion of these topics represents a fundamental change in Japanese corporate governance. Of course, we are aware we are dealing with an extremely complex and fluid situation in Japan. Therefore, we will continue to focus on the merits of individual companies and, as always, place a strong emphasis on fundamental research. While the performance of undervalued, cyclical stocks has improved in line with increasing evidence of an uptick in worldwide demand, we believe companies in commodity-based areas, such as steel and commodity chemicals, still have little or no pricing power. Instead, we believe that better investments can be found by identifying companies that offer both growth and attractive valuations. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 6/30/99, there is no guarantee the fund will continue to hold these securities in the future. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Performance summary This section provides information about your fund's performance, which should always be considered in light of its investment strategy. Putnam International Growth Fund is designed for investors seeking capital appreciation primarily through equity securities of issuers located outside the United States. TOTAL RETURN FOR PERIODS ENDED 6/30/99 Class A Class B Class M (inception dates) (2/28/91) (6/1/94) (12/1/94) NAV POP NAV CDSC NAV POP - ---------------------------------------------------------------------- 1 year 11.57% 5.15% 10.75% 5.75% 10.97% 7.09% - ---------------------------------------------------------------------- 5 years 110.24 98.18 102.49 100.49 105.39 98.20 Annual average 16.02 14.66 15.15 14.93 15.48 14.66 - ---------------------------------------------------------------------- Life of fund 198.22 180.96 178.74 178.74 185.27 175.31 Annual average 14.02 13.20 13.10 13.10 13.41 12.93 - ---------------------------------------------------------------------- COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/99 MSCI Consumer EAFE Index price index - ---------------------------------------------------------------------- 1 year 7.62% 1.96% - ---------------------------------------------------------------------- 5 years 48.36 12.30 Annual average 8.21 2.35 - ---------------------------------------------------------------------- Life of fund 84.33 23.29 Annual average 7.61 2.54 - ---------------------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. Returns for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1-year and life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and class M shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each class and in the case of class B and class M shares the higher operating expenses applicable to such shares. All returns assume reinvestment of distributions at NAV. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. Performance data reflects an expense limitation previously in effect. Without it, total returns would have been lower. [GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT] GROWTH OF A $10,000 INVESTMENT Cumulative total return of a $10,000 investment since 2/28/91 Fund's class A MSCI EAFE Consumer price Date shares at POP Index index 2/28/91 9,421 10,000 10,000 6/30/91 8,930 8,887 10,089 6/30/92 9,780 8,829 10,401 6/30/93 10,622 10,619 10,712 6/30/94 13,364 12,425 10,979 6/30/95 13,867 12,630 11,313 6/30/96 16,669 14,308 11,625 6/30/97 20,858 16,144 11,892 6/30/98 25,183 17,129 12,092 6/30/99 $28,096 $18,433 $12,329 Footnote reads: Past performance is no assurance of future results. At the end of the same time period, a $10,000 investment in the fund's class B shares would have been valued at $27,874 and no contingent deferred sales charges would apply; a $10,000 investment in the fund's class M shares would have been valued at $28,527 ($27,531 at public offering price). See first page of performance section for performance calculation method. PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 6/30/99 Class A Class B Class M - --------------------------------------------------------------------- Distributions (number) 1 1 1 - --------------------------------------------------------------------- Income $0.211 $0.099 $0.131 - --------------------------------------------------------------------- Capital gains Long-term 0.360 0.360 0.360 - --------------------------------------------------------------------- Total $0.571 $0.459 $0.491 - --------------------------------------------------------------------- Share value: NAV POP NAV NAV POP - --------------------------------------------------------------------- 6/30/98 $20.00 $21.22 $19.63 $19.85 $20.57 - --------------------------------------------------------------------- 6/30/99 21.64 22.96 21.20 21.45 22.23 - --------------------------------------------------------------------- Terms and definitions Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B shares and assumes redemption at the end of the period. Your fund's class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. Comparative benchmarks Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged list of equity securities from Europe, Australasia, and the Far East, with all values expressed in U.S. dollars. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. Securities indexes assume reinvestment of all distributions and interest payments and do not take in account brokerage fees or taxes. Securities in the fund do not match those in the indexes and performance of the fund will differ. It is not possible to invest directly in an index. A guide to the financial statements These sections of the report, preceded by the Report of independent accountants, 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 is 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 net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss for the reporting period. This is determined by adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses. This statement also lists any net gain or loss the fund realized on the sales of its holdings and -- for holdings that remain in the portfolio -- any change in unrealized gains or losses over the period. Statement of changes in net assets shows how the fund's net assets were affected by distributions to shareholders and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-ended funds, a separate table is provided for each share class. Report of independent accountants For the fiscal year ended June 30, 1999 To the Trustees and Shareholders of Putnam International Growth Fund In our opinion, the accompanying statement of assets and liabilities, including the fund's portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam International Growth Fund (the "fund") at June 30, 1999, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at June 30, 1999 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts August 12, 1999
The fund's portfolio June 30, 1999 COMMON STOCKS (94.2%) (a) NUMBER OF SHARES VALUE Australia (2.4%) - -------------------------------------------------------------------------------------------------------------------------- 2,360,600 Cable & Wireless Optus Ltd. $ 5,404,169 4,996,661 Coles Myer Ltd. 29,229,193 2,597,147 News Corp. Ltd. ADR 91,711,753 -------------- 126,345,115 Brazil (2.2%) - -------------------------------------------------------------------------------------------------------------------------- 1,080,200 Companhia Energetica de Minas Gerais ADR 22,144,100 465,625 Tele Centro Sul Participacoes S.A. 25,842,188 1,132,720 Telesp Celular Participacoes S.A. ADR 30,300,260 1,662,582 Telesp Participacoes S.A. ADR 38,031,563 -------------- 116,318,111 Canada (4.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,119,055 Abitibi-Consolodated Inc. (NON) 12,910,116 1,161,167 Bank of Nova Scotia (NON) 25,365,106 726,929 BCE Mobile Communications, Inc. (NON) 22,330,401 26,400 BCE Mobile Communications, Inc. 144A (NON) 810,977 1,925,532 BCE, Inc. 94,311,503 998,887 Bombardier, Inc. (NON) 15,342,315 1 Nortel Networks Corp. 52 984,100 Toronto-Dominion Bank (NON) 44,841,747 -------------- 215,912,217 Finland (1.6%) - -------------------------------------------------------------------------------------------------------------------------- 94,875 Huhtamaki I Free 3,464,631 846,006 Oy Nokia AB Class A 74,391,423 179,600 Sampo Insurance Co., Ltd. Class A 5,220,873 -------------- 83,076,927 France (11.3%) - -------------------------------------------------------------------------------------------------------------------------- 372,900 Aerospatiale Marta (NON) 8,621,849 39,100 Aerospatiale Marta 144A (NON) 904,034 346,617 Axa S.A. 42,419,456 422,327 Banque Nationale de Paris 35,301,300 194,573 Bouygues S.A. Rights 519,317 194,573 Bouygues S.A. (NON) 51,589,542 731,270 Elf Aquitaine S.A. 107,649,781 305,851 France Telecom S.A. 23,176,509 96,427 Groupe Danone 24,938,433 4,760 Havas Advertising SA 1,028,670 425,220 Lafarge Coppee 40,557,866 60,000 Publicis S.A. 12,724,350 933,286 Sanofi-Synthelabo SA (NON) 39,729,682 189,586 Societe Generale 33,518,056 1,084,180 STMicroelectronics N.V. ADR 75,214,988 221,656 Television Francaise I 51,822,508 478,430 Vivendi 38,877,210 -------------- 588,593,551 Germany (7.5%) - -------------------------------------------------------------------------------------------------------------------------- 38,210 Bayerische Motoren Werke (BMW) AG 26,365,339 866,291 DaimlerChrysler AG 75,278,955 2,331,320 Hoechst AG 105,875,849 871,205 Mannesmann AG 130,412,550 728,338 Volkswagen AG 46,790,218 110,882 Volkswagen AG (pfd) 4,112,261 -------------- 388,835,172 Greece (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 685,333 Hellenic Telecommunication Organization S.A. 14,757,386 174,781 Hellenic Telecommunication Organization SA ADR 1,933,515 -------------- 16,690,901 Hong Kong (2.6%) - -------------------------------------------------------------------------------------------------------------------------- 31,008,000 China Telecom Ltd. (NON) 86,131,113 23,600,000 First Pacific Co., Ltd. 20,076,822 2,724,000 Henderson Land Development Co. Ltd. (R) 15,659,612 1,404,000 Hutchison Whampoa, Ltd. 12,713,129 -------------- 134,580,676 Ireland (1.7%) - -------------------------------------------------------------------------------------------------------------------------- 1,142,811 Allied Irish Banks plc 15,073,534 715,002 Bank of Ireland 12,056,613 3,367,757 CRH plc 59,923,847 -------------- 87,053,994 Italy (1.9%) - -------------------------------------------------------------------------------------------------------------------------- 16,115,419 Ente Nazionale Idrocarburi SpA 96,527,412 450,500 Mediaset SPA 4,017,284 -------------- 100,544,696 Japan (18.2%) - -------------------------------------------------------------------------------------------------------------------------- 293,800 Advantest Corp. 32,307,072 182,300 Benesse Corp. 19,820,132 207,000 Canon, Inc. 5,955,850 902,100 Chubu Electric Power, Inc. 15,028,785 70 Circle K Japan Co. Ltd. 2,917 9,770 DDI Corp. 60,825,217 866,000 Eisai Co. Ltd. 17,076,561 5,561,000 Fujitsu Ltd. 111,955,643 608,000 Honda Motor Co., Ltd. 25,787,846 256,100 Mabuchi Motor 23,820,794 3,730,000 Matsushita Electric Industrial Co. 72,472,090 400 Mitsumi Electric Company, Ltd. 11,178 331,000 Murata Manufacturing Co. Ltd. 21,783,878 16,122,000 Nikko Securities Co. Ltd. 104,103,200 7,423 Nippon Telephone and Telegraph Corp. 86,535,180 73,720 Nippon Television Network Corp. 30,475,403 723,900 Promise Co., Ltd. 42,793,592 165,000 Rohm Co. Ltd. 25,851,592 176,000 Shin-Etsu Chemical Co. 5,893,344 3,418,000 Shiseido Co., Ltd. 51,262,935 601,500 Sony Corp. 64,904,430 137,200 Takefuji Corp. 14,190,757 163,000 TDK Corp. 14,918,644 1,371,600 Tokyo Electric Power Co. 28,974,270 1,852,000 Yamanouchi Pharmaceutical Co., Ltd. 70,895,081 -------------- 947,646,391 Mexico (2.6%) - -------------------------------------------------------------------------------------------------------------------------- 2,388,100 Carso Global Telecom 15,202,556 568,387 Coca-Cola Femsa S.A. ADR 11,012,498 5,467,400 Fomento Economico Mexicano, S.A. de C.V. 21,979,205 789,392 Grupo Televisa S.A.GDR 35,374,629 640,759 Telefonos de Mexico S.A. ADR Class L (NON) 51,781,337 -------------- 135,350,225 Netherlands (6.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,909,230 ABN AMRO Holding N.V. 41,477,067 1,815,463 Akzo-Nobel N.V. 76,626,336 501,788 Gucci Group N.V. 35,125,160 1,739,548 Internationale Nederlanden Groep 94,477,026 296,924 Koninklijke Ahold N.V. 10,259,407 696,360 Laurasia Resources Ltd. 16,208,640 747,500 Libertel NV 14,692,486 421,006 TNT Post Group N.V. 10,082,536 531,006 Vedior NV 9,063,874 315,082 Vendex International N.V. 8,442,165 -------------- 316,454,697 Portugal (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 952,250 Portugal Telecom S.A. 38,862,299 Singapore (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 477,000 Development Bank of Singapore Ltd. 5,836,235 2,273,700 Overseas Chinese Banking Corp. 18,992,082 2,001,000 United Overseas Bank Ltd. 14,007,000 -------------- 38,835,317 South Korea (1.5%) - -------------------------------------------------------------------------------------------------------------------------- 785,349 Korea Electric Power Corp. 32,635,237 618,800 Korea Telecom Corp. 24,752,000 111,829 Samsung Electronics Co. 12,269,791 442,200 Shinhan Bank 144A GDR 9,728,400 -------------- 79,385,428 Spain (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 1,037,480 Telfonica S.A. 50,132,575 Sweden (5.1%) - -------------------------------------------------------------------------------------------------------------------------- 2,181,971 Investor AB 24,513,629 1,854,949 Pharmacia & Upjohn, Inc. 103,101,470 247,270 Sandvik AB Class A 5,424,383 205,820 Sandvik AB Class B 4,575,941 2,403,630 Svenska Handelsbanken 28,993,645 3,058,430 Telefonaktiebolaget LM Ericsson Class B 98,559,860 -------------- 265,168,928 Switzerland (5.6%) - -------------------------------------------------------------------------------------------------------------------------- 42,695 Cie Finance Richemont 82,519,748 16,321 Julius Baer Holdings AG 46,736,930 18,791 Novartis AG ADR 27,573,090 61,830 Publicitas Holding S.A. 33,972,527 172,572 Swisscom AG ADR 65,258,319 118,195 United Bank of Switzerland (UBS) AG 35,450,860 -------------- 291,511,474 United Kingdom (16.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,230,299 Allied Zurich AG 15,474,910 1,764,988 Anglian Water plc 19,527,930 931,377 Bass plc 13,521,847 4,501,397 British Airways plc 31,078,514 6,823,370 British Telecommunications plc ADR 114,398,133 4,075,025 Cable & Wireless plc (NON) 51,963,341 6,415,082 Diageo plc 67,030,871 6,332,973 EMI Group plc 50,840,778 3,488,023 Granada Group plc 64,750,417 275,300 Hanson plc 2,446,735 2,546,950 National Westminster Bancorp Inc. 54,029,316 1,675,300 Orange plc ADR (NON) 24,573,233 1,602,535 Peninsular and Oriental Steam Navigation Co. 24,074,611 3,839,400 Scottish Power plc 33,184,149 3,906,565 Securicor Group plc 34,288,382 8,154,848 Shell Transportation & Trading 61,190,138 3,182,600 Siebe plc 15,071,339 1,565,205 Smithkline Beecham plc ADR 20,353,948 2,222,332 Smiths Industries plc 29,372,420 23,904,200 Tesco plc 61,548,032 5,897,978 WPP Group plc 49,906,791 -------------- 838,625,835 United States (1.0%) - -------------------------------------------------------------------------------------------------------------------------- 1,736,000 Monte Dei Paschi NY Branch 7,722,336 6,095,000 Toshiba Corp. 43,488,921 -------------- 51,211,257 -------------- Total Common Stocks (cost $4,015,342,762) $4,911,135,786 UNITS (1.8%) (a) NUMBER OF UNITS VALUE - -------------------------------------------------------------------------------------------------------------------------- 417,000 Development Bank Of Singapore Structured Note (Issued by Merrill Lynch & Co., Inc.) 3%, 2000 (Singapore) $ 4,522,490 804,000 Development Bank Of Singapore Structured Note (Issued by Credit Suisse First Boston) zero %, 2000 (Singapore) 8,578,680 427,100 Overseas Chinese Banking Corp. Structured Note (Issued by Credit Suisse First Boston) zero %, 2000 (Singapore) 3,254,502 569,800 Overseas Chinese Banking Corp. ser. D Structured Note (Issued by Credit Suisse First Boston) zero %, 2000 (Singapore) 4,341,876 1,321,000 Overseas Chinese Banking Corp. Structured Note (Issued by Merrill Lynch & Co., Inc.) 3%, 2000 (Singapore) 10,266,416 162,100 Pohang Iron & Steel Company, Ltd. Structured Warrants (Issued by Lehman Brothers Finance S.A. Exp. 4/17/00) (South Korea) 19,186,156 3,779,100 Singapore Airlines Ltd. Structured Warrants (Issued by Lehman Brothers Finance S.A. Exp. 4/10/00) (Singapore) 32,909,914 8,940 SK Telecom Co., Ltd. Structured Note (Issued by Merrill Lynch & Co., Inc.) 3%, 2000 (South Korea) 13,165,133 -------------- Total Units (cost $61,344,113) $ 96,225,167 SHORT-TERM INVESTMENTS (3.8%) (a) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- $ 25,000,000 Ciesco L.P., effective yield of 4.84%, July 20, 1999 $ 24,936,139 25,000,000 Corporate Receivables Co., effective yield of 5.30%, July 6, 1999 24,981,597 25,000,000 Federal Home Loan Mortgage, effective yield of 4.77%, July 7, 1999 24,956,667 57,917,000 Interest in $500,000,000 joint tri-party repurchase agreement dated June 30, 1999 with Goldman Sachs, Inc. due July 1, 1999 with respect to various U.S. Treasury obligations -- maturity value of $57,924,803 for an effective yield of 4.85% 57,917,000 65,728,000 Interest in $250,000,000 joint repurchase agreement dated June 30, 1999 with Lehman Brothers Inc. due July 1, 1999 with respect to various U.S. Treasury obligations -- maturity value of $65,736,946 for an effective yield of 4.90% 65,728,000 -------------- Total Short-Term Investments (cost $198,519,403) $ 198,519,403 - -------------------------------------------------------------------------------------------------------------------------- Total Investments (cost $4,275,206,278) (b) $5,205,880,356 - -------------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $5,213,617,248. (b) The aggregate identified cost on a tax basis is $4,351,892,880, resulting in gross unrealized appreciation and depreciation of $964,827,194 and $110,839,718, respectively, or net unrealized appreciation of $853,987,476. (NON) Non-income-producing security. (R) Real Estate Investment Trust. 144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. ADR and GDR after the name of a foreign holding stands for American Depository Receipts and Global Depository Receipts, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank. The fund had the following industry group concentrations greater than 10% at June 30, 1999 (as a percentage of net assets): Telecommunications 18.0% Insurance and Finance 14.1 The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities June 30, 1999 Assets - ----------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $4,275,206,278) (Note 1) $5,205,880,356 - ----------------------------------------------------------------------------------------------- Cash 374 - ----------------------------------------------------------------------------------------------- Foreign currency, at value (cost $51,899,158) 51,982,342 - ----------------------------------------------------------------------------------------------- Dividends, interest and other receivable 14,081,098 - ----------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 54,782,042 - ----------------------------------------------------------------------------------------------- Receivable for securities sold 53,383,339 - ----------------------------------------------------------------------------------------------- Total assets 5,380,109,551 Liabilities - ----------------------------------------------------------------------------------------------- Payable for securities purchased 136,888,030 - ----------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 15,753,443 - ----------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 7,657,857 - ----------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 1,320,161 - ----------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 30,022 - ----------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 8,763 - ----------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 3,496,231 - ----------------------------------------------------------------------------------------------- Payable for closed forward currency contracts 701,853 - ----------------------------------------------------------------------------------------------- Other accrued expenses 635,943 - ----------------------------------------------------------------------------------------------- Total liabilities 166,492,303 - ----------------------------------------------------------------------------------------------- Net assets $5,213,617,248 Represented by - ----------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $4,219,431,940 - ----------------------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (33,621,782) - ----------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions (Note 1) 96,764,243 - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 931,042,847 - ----------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $5,213,617,248 Computation of net asset value and offering price - ----------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($2,928,662,438 divided by 135,348,687 shares) $21.64 - ----------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $21.64)* $22.96 - ----------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($1,821,024,316 divided by 85,903,533 shares)** $21.20 - ----------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($208,063,855 divided by 9,697,944 shares) $21.45 - ----------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $21.45)* $22.23 - ----------------------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($255,866,639 divided by 11,777,663 shares) $21.72 - ----------------------------------------------------------------------------------------------- * On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the offering price is reduced. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements.
Statement of operations Year ended June 30, 1999 Investment income: - ----------------------------------------------------------------------------------------------- Dividends (net of foreign tax of $7,850,334) $ 56,968,412 - ----------------------------------------------------------------------------------------------- Interest 7,572,349 - ----------------------------------------------------------------------------------------------- Total investment income 64,540,761 Expenses: - ----------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 25,491,780 - ----------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 12,754,517 - ----------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 70,492 - ----------------------------------------------------------------------------------------------- Administrative services (Note 2) 34,036 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 5,523,918 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 14,457,442 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 1,218,290 - ----------------------------------------------------------------------------------------------- Reports to shareholders 166,667 - ----------------------------------------------------------------------------------------------- Registration fees 426,260 - ----------------------------------------------------------------------------------------------- Auditing 80,730 - ----------------------------------------------------------------------------------------------- Legal 25,160 - ----------------------------------------------------------------------------------------------- Postage 722,312 - ----------------------------------------------------------------------------------------------- Other 733,594 - ----------------------------------------------------------------------------------------------- Total expenses 61,705,198 - ----------------------------------------------------------------------------------------------- Expense reduction (Note 2) (1,097,722) - ----------------------------------------------------------------------------------------------- Net expenses 60,607,476 - ----------------------------------------------------------------------------------------------- Net investment income 3,933,285 - ----------------------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 103,747,034 - ----------------------------------------------------------------------------------------------- Net realized loss on foreign currency transactions (Note 1) (30,854,317) - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of assets and liabilities in foreign currencies during the year 5,986,432 - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the year 454,305,807 - ----------------------------------------------------------------------------------------------- Net gain on investments 533,184,956 - ----------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $537,118,241 - ----------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets Year ended June 30 ------------------------------- 1999 1998 - --------------------------------------------------------------------------------------------------------------- Increase in net assets - --------------------------------------------------------------------------------------------------------------- Operations: - --------------------------------------------------------------------------------------------------------------- Net investment income $ 3,933,285 $ 17,525,968 - --------------------------------------------------------------------------------------------------------------- Net realized gain on investments and foreign currency transactions 72,892,717 129,006,993 - --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 460,292,239 307,884,420 - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 537,118,241 454,417,381 - --------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - --------------------------------------------------------------------------------------------------------------- From net investment income Class A (22,568,753) (14,955,356) - --------------------------------------------------------------------------------------------------------------- Class B (7,287,243) (7,467,011) - --------------------------------------------------------------------------------------------------------------- Class M (1,060,968) (988,741) - --------------------------------------------------------------------------------------------------------------- Class Y (1,891,655) (1,576,368) - --------------------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (38,505,930) (47,508,780) - --------------------------------------------------------------------------------------------------------------- Class B (26,499,065) (34,141,073) - --------------------------------------------------------------------------------------------------------------- Class M (2,915,639) (4,010,737) - --------------------------------------------------------------------------------------------------------------- Class Y (2,723,694) (4,501,470) - --------------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 1,434,362,924 1,649,963,229 - --------------------------------------------------------------------------------------------------------------- Total increase in net assets 1,868,028,218 1,989,231,074 Net assets - --------------------------------------------------------------------------------------------------------------- Beginning of year 3,345,589,030 1,356,357,956 - --------------------------------------------------------------------------------------------------------------- End of year (including distributions in excess of net investment income and undistributed net investment income of $33,621,782 and $23,677,636, respectively) $5,213,617,248 $3,345,589,030 - --------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $20.00 $17.58 $14.25 $12.10 $11.83 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) .07(c) .20(c) .15(c) .13(c) .08(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.14 3.26 3.39 2.29 .36 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.21 3.46 3.54 2.42 .44 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.21) (.25) (.15) (.26) -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (.36) (.79) (.06) (.01) (.11) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gain on investments -- -- -- -- (.06) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.57) (1.04) (.21) (.27) (.17) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $21.64 $20.00 $17.58 $14.25 $12.10 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 11.57 20.73 25.13 20.21 3.76 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $2,928,662 $1,827,331 $728,849 $151,088 $32,856 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%) (b) 1.27 1.36 1.59 1.74 1.61(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) .38 1.07 .98 .99 .97(d) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 97.24 93.53 86.40 44.14 25.83 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2). (c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
Financial highlights (For a share outstanding throughout the period) CLASS B - ------------------------------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.63 $17.32 $14.10 $12.00 $11.82 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) (.07)(c) .06(c) .03(c) .04(c) .01(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.10 3.21 3.34 2.26 .34 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.03 3.27 3.37 2.30 .35 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.10) (.17) (.09) (.19) -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (.36) (.79) (.06) (.01) (.11) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gain on investments -- -- -- (.06) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.46) (.96) (.15) (.20) (.17) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $21.20 $19.63 $17.32 $14.10 $12.00 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 10.75 19.87 24.09 19.35 3.00 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $1,821,024 $1,226,917 $472,663 $132,013 $25,892 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%) (b) 2.02 2.11 2.34 2.49 2.41(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.38) .31 .18 .32 .23(d) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 97.24 93.53 86.40 44.14 25.83 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2). (c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
Financial highlights (For a share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------------------------------ For the period Per-share Dec. 1, 1994+ operating performance Year ended June 30 to June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $19.85 $17.48 $14.22 $12.09 $11.87 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) (.02)(c) .10(c) .07(c) .08(c) .03(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.11 3.26 3.36 2.28 .36 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.09 3.36 3.43 2.36 .39 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.13) (.20) (.11) (.22) -- - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (.36) (.79) (.06) (.01) (.11) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gain on investments -- -- -- -- (.06) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.49) (.99) (.17) (.23) (.17) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $21.45 $19.85 $17.48 $14.22 $12.09 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 10.97 20.18 24.40 19.71 3.33* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $208,064 $140,202 $58,471 $14,309 $1,777 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%) (b) 1.77 1.86 2.09 2.25 1.61(d)* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) (.12) .54 .44 .61 .58(d)* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 97.24 93.53 86.40 44.14 25.83 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2). (c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
Financial highlights (For a share outstanding throughout the period) CLASS Y - ------------------------------------------------------------------------------------------------------------------------------------ For the period Per-share July 12, 1996+ operating performance Year ended June 30 to June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $20.05 $17.60 $13.88 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (loss) .14(c) .22 (c) .20(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.13 3.30 3.75 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.27 3.52 3.95 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income (.24) (.28) (.17) - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (.36) (.79) (.06) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gain on investments -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.60) (1.07) (.23) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $21.72 $20.05 $17.60 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at net asset value (%)(a) 11.83 21.08 25.44* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $255,867 $151,139 $96,375 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%) (b) 1.02 1.11 1.30* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets (%) .70 1.22 1.26* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 97.24 93.53 86.40 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized (a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended June 30, 1996 and thereafter includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2). (c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding for the period. (d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A, B and M shares for the period ended June 30, 1995 reflect a reduction of less than $0.01 per share.
Notes to financial statements June 30, 1999 Note 1 Significant accounting policies Putnam International Growth Fund ("the fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks capital appreciation by investing primarily in equity securities of companies located outside the United States. The fund offers class A, class B, class M and class Y shares. Effective July 26, 1999, the fund will begin offering class C shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge but pay a higher ongoing distribution fee than class A shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class M shares are sold with a maximum front end sales charge of 3.50% and pay an ongoing distribution fee that is higher than class A shares but lower than class B shares. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, and class M shares, but do not bear a distribution fee. Class Y shares are sold to defined contribution plans that invest at least $150 million in a combination of Putnam Funds and other accounts managed by affiliates of Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if that fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sale price on the principal market in which the securities are traded, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair value following procedures approved by the Trustees. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when accrued or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net exchange gains or losses on closed forward currency contracts, disposition of foreign currencies and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. F) Forward currency contracts The fund may engage in forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date, to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short-term investments). The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is "marked to market" daily and the change in market value is recorded as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. G) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintain an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the year ended June 30, 1999, the fund had no borrowings against the line of credit. H) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. I) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, 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 losses on wash sale transactions, treatment of of realized gains and losses on forward foreign currency contracts, foreign taxes, and realized and unrealized gains and losses on passive foreign investment companies. 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. For the year ended June 30, 1999, the fund reclassified $28,424,084 to increase distributions in excess of net investment income, with an increase to accumulated net realized gain on investments of $28,424,084. The calculation of net investment income per share in the financial highlights table excludes these adjustments. Note 2 Management fee, administrative services and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.80% of the first $500 million of average net assets, 0.70% of the next $500 million, 0.65% of the next $500 million, 0.60% of the next $5 billion, 0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54% of the next $5 billion, and 0.53% thereafter. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the year ended June 30, 1999, fund expenses were reduced by $1,097,722 under expense offset arrangements with PFTC and brokerage service arrangements. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. Each Trustee of the fund receives an annual Trustee fee, of which $3,020 has been allocated to the fund, and an additional fee for each Trustee's meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Compensation of trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%, and 1.00% of the average net assets attributable to class A, class B and class M shares, respectively. The Trustees currently limit payment by the fund to an annual rate of 0.25%, 1.00%, and 0.75% of the average net assets attributable to class A, class B, and class M shares respectively. For the year ended June 30, 1999, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $1,479,337 and $145,913 from the sale of class A and class M shares, respectively and received $2,286,647 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the year ended June 30, 1999, Putnam Mutual Funds Corp., acting as underwriter received $119,903 on class A redemptions. Note 3 Purchases and sales of securities During the year ended June 30, 1999, purchases and sales of investment securities other than short-term investments aggregated $5,064,706,961 and $3,745,839,520, respectively. There were no purchases and sales of U.S. government obligations. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Capital shares At June 30, 1999, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Year ended June 30, 1999 - ----------------------------------------------------------------------------- Class A Shares Amount - ----------------------------------------------------------------------------- Shares sold 217,110,664 $4,256,867,643 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 3,117,893 57,181,946 - ----------------------------------------------------------------------------- 220,228,557 4,314,049,589 Shares repurchased (176,253,908) (3,467,222,878) - ----------------------------------------------------------------------------- Net increase 43,974,649 $ 846,826,711 - ----------------------------------------------------------------------------- Year ended June 30, 1998 - ----------------------------------------------------------------------------- Class A Shares Amount - ----------------------------------------------------------------------------- Shares sold 123,266,783 $2,252,767,517 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 3,480,561 59,099,849 - ----------------------------------------------------------------------------- 126,747,344 2,311,867,366 Shares repurchased (76,840,446) (1,405,944,518) - ----------------------------------------------------------------------------- Net increase 49,906,898 $ 905,922,848 - ----------------------------------------------------------------------------- Year ended June 30, 1999 - ----------------------------------------------------------------------------- Class B Shares Amount - ----------------------------------------------------------------------------- Shares sold 39,583,994 $ 758,304,651 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,608,670 29,020,279 - ----------------------------------------------------------------------------- 41,192,664 787,324,930 Shares repurchased (17,794,641) (337,422,833) - ----------------------------------------------------------------------------- Net increase 23,398,023 $ 449,902,097 - ----------------------------------------------------------------------------- Year ended June 30, 1998 - ----------------------------------------------------------------------------- Class B Shares Amount - ----------------------------------------------------------------------------- Shares sold 46,843,691 $847,319,199 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 2,153,109 36,043,044 - ----------------------------------------------------------------------------- 48,966,800 883,362,243 Shares repurchased (13,778,805) (245,963,625) - ----------------------------------------------------------------------------- Net increase 35,217,995 $637,398,618 - ----------------------------------------------------------------------------- Year ended June 30, 1999 - ----------------------------------------------------------------------------- Class M Shares Amount - ----------------------------------------------------------------------------- Shares sold 6,415,962 $125,270,005 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 208,034 3,791,905 - ----------------------------------------------------------------------------- 6,623,996 129,061,910 Shares repurchased (3,990,008) (77,706,579) - ----------------------------------------------------------------------------- Net increase 2,633,988 $ 51,355,331 - ----------------------------------------------------------------------------- Year ended June 30, 1998 - ----------------------------------------------------------------------------- Class M Shares Amount - ----------------------------------------------------------------------------- Shares sold 5,937,401 $108,032,817 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 286,746 4,846,002 - ----------------------------------------------------------------------------- 6,224,147 112,878,819 Shares repurchased (2,504,865) (45,375,018) - ----------------------------------------------------------------------------- Net increase 3,719,282 $ 67,503,801 - ----------------------------------------------------------------------------- Year ended June 30, 1999 - ----------------------------------------------------------------------------- Class Y Shares Amount - ----------------------------------------------------------------------------- Shares sold 7,133,724 $142,964,956 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 245,487 4,615,349 - ----------------------------------------------------------------------------- 7,379,211 147,580,305 Shares repurchased (3,139,377) (61,301,520) - ----------------------------------------------------------------------------- Net increase 4,239,834 $ 86,278,785 - ----------------------------------------------------------------------------- Year ended June 30, 1998 - ----------------------------------------------------------------------------- Class Y Shares Amount - ----------------------------------------------------------------------------- Shares sold 3,562,355 $66,835,897 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 357,524 6,077,838 - ----------------------------------------------------------------------------- 3,919,879 72,913,735 Shares repurchased (1,857,165) (33,775,773) - ----------------------------------------------------------------------------- Net increase 2,062,714 $39,137,962 - ----------------------------------------------------------------------------- Federal tax information (Unaudited) Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund hereby designates $109,318,596 as a 20% capital gain, for its taxable year ended June 30, 1999. For the period, interest and dividends from foreign countries were $54,323,532 or $.223 per share (for all share classes). Taxes paid to foreign countries were $7,850,334 or $.032 per share (for all classes of shares). The fund has designated 8.57% of the distributions from net investment income as qualifying for the dividends received deduction for corporations. The Form 1099 you receive in January 2000 will show the tax status of all distributions paid to your account in calendar 1999. The Putnam family of funds The following is a complete list of Putnam's open-end mutual funds. Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Please read it carefully before you invest or send money. GROWTH FUNDS Asia Pacific Growth Fund Capital Appreciation Fund [DBL. DAGGER] Capital Opportunities Fund Diversified Equity Trust Europe Growth Fund Global Growth Fund Global Natural Resources Fund Growth Opportunities Fund Health Sciences Trust International Growth Fund International New Opportunities Fund Investors Fund New Opportunities Fund [DBL. DAGGER] OTC & Emerging Growth Fund Research Fund Vista Fund Voyager Fund Voyager Fund II GROWTH AND INCOME FUNDS Balanced Retirement Fund Convertible Income-Growth Trust Equity Income Fund The George Putnam Fund of Boston Global Growth and Income Fund The Putnam Fund for Growth and Income Growth and Income Fund II International Growth and Income Fund New Value Fund Utilities Growth and Income Fund INCOME FUNDS American Government Income Fund Diversified Income Trust Global Governmental Income Trust High Yield Advantage Fund [DBL. DAGGER] High Yield Trust [DBL. DAGGER] High Yield Trust II Income Fund Intermediate U.S. Government Income Fund Money Market Fund ** Preferred Income Fund Strategic Income Fund * U.S. Government Income Trust TAX-FREE INCOME FUNDS Municipal Income Fund Tax Exempt Income Fund Tax Exempt Money Market Fund** Tax-Free High Yield Fund Tax-Free Insured Fund State tax-free income funds [SECTION MARK] Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio and Pennsylvania State tax-free money market funds [SECTION MARK] ** California, New York ASSET ALLOCATION FUNDS Putnam Asset Allocation Funds--three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments. The three portfolios: Asset Allocation: Balanced Portfolio Asset Allocation: Conservative Portfolio Asset Allocation: Growth Portfolio * Formerly Putnam Diversified Income Trust II [DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact Putnam for details. [SECTION MARK] Not available in all states. ** An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund. Check your account balances and current performance at www.putnaminv.com. Fund information WEB SITE www.putnaminv.com INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman John A. Hill, Vice Chairman Jameson Adkins Baxter Hans H. Estin Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Ian C. Ferguson Vice President Brett C. Browchuk Vice President Justin M. Scott Vice President and Fund Manager Omid Kamshad Vice President and Fund Manager Paul Warren Vice President and Fund Manager Mark D. Pollard Vice President and Fund Manager Richard A. Monaghan Vice President John R. Verani Vice President This report is for the information of shareholders of Putnam International Growth Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary. For more information or to request a prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam Investments' Web site: www.putnaminv.com. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency; and involve risk, including the possible loss of the principal amount invested. [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - --------------------- BULK RATE U.S. POSTAGE PAID PUTNAM INVESTMENTS - --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminv.com 841/524/891/2BA 8/99 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - ---------------------------------------------------------------------------- Putnam International Growth Fund Supplement to Annual Report dated 6/30/99 The following information has been prepared to provide class Y shareholders with a performance overview specific to their holdings. Class Y shares are offered exclusively to defined contribution plans investing $250 million or more in one or more of Putnam's funds or private accounts. Performance of class Y shares, which incur neither a front-end load, distribution fee, nor contingent deferred sales charge, will differ from performance of class A, B, and M shares, which are discussed more extensively in the annual report. ANNUAL RESULTS AT A GLANCE - ---------------------------------------------------------------------------- Total return: NAV One year ended 6/30/99 11.83% 5 years 111.86 Annual average 16.20 Life of class (since 2/28/91) 200.52 Annual average 14.12 - ---------------------------------------------------------------------------- Share value: NAV 6/30/98 $20.05 6/30/99 21.72 - ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 2 $0.240 $0.360 $0.60 - ---------------------------------------------------------------------------- Please note that past performance does not indicate future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. If you have questions, please consult your fund prospectus or call Putnam toll free at 1-800-752-9894. -----END PRIVACY-ENHANCED MESSAGE-----