Putnam
International Equity
Fund
Semiannual report
12
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31
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12
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Message from the Trustees
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1
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About the fund
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2
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Performance snapshot
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4
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Interview with your fund’s portfolio manager
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5
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Your fund’s performance
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10
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Your fund’s expenses
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12
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Terms and definitions
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14
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Other information for shareholders
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15
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Financial statements
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16
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Consider these risks before investing:
International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Additional risks may be associated with emerging-market securities, including illiquidity and volatility. The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. Derivatives also involve the risk, in the case of many over-the-counter instruments, of the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Growth stocks may be more susceptible to earnings disappointments, and value stocks may fail to rebound. The prices of stocks in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific company or industry.
Message from the Trustees
Dear Fellow Shareholder:
With the uncertainty around the U.S. “fiscal cliff” diminished, investors now have some measure of clarity heading into 2013. Of course, challenges remain, including the upcoming debate over the debt ceiling at the end of March. Still, the significant risks — the fiscal cliff, a “hard landing” in China, and the dissolution of the European Union — have abated in the past few months.
Clarity and greater certainty are positive developments for investors. Markets worldwide are starting to recognize that macroeconomic data are beginning to stabilize and even exhibit nascent signs of growth. As the investment climate slowly improves, it is important for you to rely on the expertise of your financial advisor, who can help you work toward your financial goals.
We would like to take this opportunity to announce the arrival of two new Trustees, Liaquat Ahamed and Katinka Domotorffy, CFA, to your fund’s Board of Trustees. Mr. Ahamed, who in 2010 won the Pulitzer Prize for History with his book,
Lords of Finance: The Bankers Who Broke the World
, also serves on the Board of Aspen Insurance and the Board of the Rohatyn Group, an emerging-market fund complex that manages money for institutional investors.
Ms. Domotorffy, who until year-end 2011 was a Partner, Chief Investment Officer, and Global Head of Quantitative Investment Strategies at Goldman Sachs Asset Management, currently serves as a member of the Anne Ray Charitable Trust’s Investment Committee, Margaret A. Cargill Philanthropies, and director for Reach Out and Read of Greater New York, an organization dedicated to promoting early childhood literacy.
We would also like to extend a welcome to new shareholders of the fund and to thank all of our investors for your continued confidence in Putnam.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would
have been lower. See pages 5 and 10–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
*
Returns for the six-month period are not annualized, but cumulative.
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4
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International Equity Fund
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Interview with your fund’s portfolio manager
The fund’s results exceeded that of the benchmark during the six months ended December 31, 2012. What accounts for this result?
Our stock selection was the key factor that drove this result, and the portfolio’s combination of attractively valued stocks, stocks that we expect to grow over long periods of time, and a core of defensive holdings helped the fund to outperform its benchmark index. International equities generally performed strongly as significant policy support helped drive a rally in European and other non-U.S. equity markets.
The strong results for international stocks occurred despite macro uncertainty in Europe, China, and the United States. Was this a surprise?
Headwinds to markets were definitely present in the form of uncertainty over sovereign debt and fiscal stability issues, so it was something of a surprise that markets were able to make a strong advance. Nevertheless, markets were cheered by the European Central Bank’s [ECB’s] purchases of European sovereign bonds, or outright monetary transactions [OMTs], which were first introduced in June and have enabled the ECB to provide an effective backstop to government debt markets. This had the effect of removing much of the perceived tail
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 12/31/12. See pages 4 and 10–11 for additional fund performance information. Index descriptions can be found on pages 14–15.
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International Equity Fund
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5
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risk of European sovereign defaults, and the market consequently rallied despite other areas of concern, such as the U.S. “fiscal cliff.” European stock markets also sold off sharply prior to the introduction of OMTs, such that valuations reached very cheap levels. This helped boost the market’s performance, as did some better-than-expected economic data from China and the United States.
Do you think the rally in international stocks may continue?
There is a lot of talk now about how fixed-income assets are stretched while equity investments are more attractive by comparison. That has helped funnel some investor capital back into equities. In addition, ongoing recovery in China and in the United States, if national fiscal issues are resolved, will be supportive for markets and could contribute to a better focus on fundamentals. However, while I am positive on the outlook for international equity markets, which have
performed well since mid-June 2012, risks remain. Ongoing fiscal policy debates and issues in the United States will remain sources of uncertainty for markets around the world, and we should not forget Europe’s ability to surprise negatively, either economically or politically.
Were there specific pockets of sector or regional strength or weakness that were especially notable?
With the exception of energy and telecoms, most sectors performed quite well in the period, and the fund’s benchmark-relative results received a strong boost from stock selection across sectors.
Japan’s market rallied forcefully in the wake of the nation’s fall elections, which put the longest-running post-World War II party leader, the conservative Liberal Democratic Party, back into power following a three-year hiatus. With a focus on
Country allocations are shown as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities and the exclusion of as-of trades, if any. Weightings will vary over time.
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6
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International Equity Fund
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increasingly aggressive monetary-easing policy, Prime Minister Shinz
ō
Abe’s election helped drive a decline in the yen versus other currencies.
The sharp depreciation in the yen versus the U.S. dollar, coupled with a sharp appreciation in the Japanese equity market, did not help Putnam International Equity Fund, however, as the portfolio’s holdings were more weighted to companies focused on the Japanese market rather than Japanese exporters, which generally performed well as the yen declined. While some of the fund’s domestic-focused positions performed well — especially among Japanese financials — we are beginning to take steps to adjust that
balance between domestic-oriented and export-oriented stocks, even though the latter have already experienced a sizable run-up toward year-end 2012.
What were the key contributors to the fund’s results?
Barclays
and
Societe Generale
, the U.K and French banks, were the two of the largest contributors. They benefited from the fact that the ECB soothed market fears over a breakup of the eurozone, and because the banks appeared to be repairing their balance sheets and staying on track to meet new regulatory requirements. Investors thus gained a new comfort level with European financials, particularly banking stocks, which had sold off significantly by the middle of 2012, the start of the fund’s fiscal period.
ORIX
is a well-diversified Japanese credit provider that provides leases and other corporate finance, mainly to small and
This table shows the fund’s top 10 holdings by percentage of the fund’s net assets as of 12/31/12.
Short-term holdings are excluded. Holdings will vary over time.
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International Equity Fund
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7
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midsize companies, as well as financing for real-estate developments and investments. This company, like many domestic Japanese financial companies, benefited from rising asset prices and the general commitment of the Japanese government to reflate the economy.
Another notable contributor was
Ezion
, a Singapore-based owner and operator of “lift boats,” which are used to service oil rigs. The company provides support to the offshore oil industry in the Pacific Basin, including supply transportation, logistics support, and rig servicing. The stock appreciated on the strength of higher capital expenditures for offshore drilling and rig maintenance in the region. We believe the stock still has significant valuation upside, and thus we maintained the position in the portfolio.
Which holdings were drags on fund performance?
Detractors from performance for the period included U.K.-based
BG Group
. This integrated natural gas company and global leader in liquefied natural gas production revised its production numbers lower during the period, which caused a significant sell-off in the stock. Although we have trimmed the position, we believe the company has attractive natural gas assets in Brazil, Australia, and the United States, and we expect that it will deliver above-industry growth in the coming quarters.
Mitsubishi UFJ Financial Group
, which rallied in December, proved to be a drag on performance overall. We eliminated the position by the end of the six-month period. By contrast,
Tokyo Gas
performed well relative to other Japanese stocks leading up to December, but then lagged during the year-end rally. It too was a significant detractor from returns, but
This chart shows how the fund’s top weightings have changed over the past six months. Allocations are represented as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, and the use of different classifications of securities for presentation purposes. Holdings and allocations may vary over time.
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8
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International Equity Fund
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we continue to believe this is a high-quality company whose stock is relatively cheap on a relative and historical basis.
What is your outlook for international markets and the fund?
In 2012, markets endured numerous episodes of economic and political uncertainty, but equity markets managed to generate strong returns on the back of accommodative monetary policy, attractive valuations, and improving macro data in the United States and China. For the coming months, we are cautiously optimistic that international equities may continue to perform well, although valuations in aggregate have ticked up since their mid-year 2012 lows. Political and economic risks have not gone away entirely, but on the whole 2013 seems to have a more favorable starting point than 2012 had in this regard.
Given the sharp run-up in equity markets, we believe the investment environment will call for increased investor vigilance and that
stock selection, active management, and the core features of our investment approach will become all the more important. We feel confident that our abilities in these areas will continue to put the fund in good stead.
Thank you, Sam, for this update on the fund.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.
Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.
Portfolio Manager
Simon Davis
is Co-Head of International Equities at Putnam. He has a B.A. from Oxford University. Simon joined Putnam in 2000 and has been in the investment industry since 1988.
IN THE NEWS
The Japanese yen has weakened consider
ably in the past few months and recently
fell to its lowest level since June 2010.
This has led to a robust rally in Japanese stocks as new Japanese Prime Minister Shinz
ō
Abe’s government attempts to “reflate” the country’s moribund economy by adding stimulus and pressing the Bank of Japan to ease monetary policy. In early January, Japan’s new government unveiled a $117 billion economic stimulus package, which includes billions in government spending on public
works and infrastructure programs. The goal of the stimulus program is to boost the real GDP growth rate to 2% and create 600,000 jobs in the world’s third-largest economy. The weaker yen has been particularly beneficial for Japan’s export companies. In the fourth quarter of 2012, Japan’s stock market increased 17.56%, as measured by the MSCI Japan Index, although this outsize gain was offset by the yen’s decline versus major global currencies. As of January 31, 2013, it was up 9.42% year to date.
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International Equity Fund
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9
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Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended December 31, 2012, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, class R5, class R6, and class Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.
Fund performance
Total return for periods ended 12/31/12
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Class A
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Class B
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Class C
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Class M
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Class R
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Class R5
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Class R6
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Class Y
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(inception dates)
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(2/28/91)
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(6/1/94)
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(7/26/99)
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(12/1/94)
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(1/21/03)
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(7/2/12)
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(7/2/12)
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(7/12/96)
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Before
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After
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Before
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After
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Net
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Net
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Net
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Net
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sales
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sales
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Before
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After
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Before
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After
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sales
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sales
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asset
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asset
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asset
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asset
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charge
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charge
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CDSC
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CDSC
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CDSC
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CDSC
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charge
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charge
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value
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value
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value
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value
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Annual average
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(life of fund)
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7.35%
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7.06%
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6.52%
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6.52%
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6.55%
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6.55%
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6.80%
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6.63%
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7.08%
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7.56%
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7.56%
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7.55%
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10 years
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82.30
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71.83
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69.10
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69.10
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69.11
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69.11
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73.50
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67.39
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77.95
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87.14
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87.21
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86.93
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Annual average
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6.19
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5.56
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5.39
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5.39
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5.39
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5.39
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5.66
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5.29
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5.93
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6.47
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6.47
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6.46
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5 years
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–21.79
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–26.29
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–24.68
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–26.08
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–24.66
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–24.66
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–23.67
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–26.34
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–22.75
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–20.72
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–20.69
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–20.81
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Annual average
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–4.80
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–5.92
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–5.51
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–5.86
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–5.51
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–5.51
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–5.26
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–5.93
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–5.03
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–4.54
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–4.53
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–4.56
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3 years
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13.19
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6.70
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10.71
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7.71
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10.73
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10.73
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11.61
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7.69
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12.41
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14.22
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14.27
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14.09
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Annual average
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4.22
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2.19
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3.45
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2.51
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3.46
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3.46
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3.73
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2.50
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3.98
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4.53
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4.55
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4.49
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1 year
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21.73
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14.76
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20.84
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15.84
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20.85
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19.85
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21.19
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16.98
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21.45
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22.19
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22.24
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22.05
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6 months
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15.78
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9.15
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15.39
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10.39
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15.34
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14.34
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15.48
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11.46
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15.64
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16.00
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16.05
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15.88
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R5, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable.
Performance for class R5 and class R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R5 and class R6 shares; had it, returns would have been higher.
Recent performance may have benefitted from one or more legal settlements.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
Class B share performance does not reflect conversion to class A shares.
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10
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International Equity Fund
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Comparative index returns
For periods ended 12/31/12
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Lipper International
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Large-Cap Core Funds
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MSCI EAFE Index (ND)
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category average*
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Annual average (life of fund)
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4.85%
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6.37%
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10 years
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120.21
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116.24
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Annual average
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8.21
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7.94
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5 years
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–17.13
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–15.82
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Annual average
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–3.69
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–3.45
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3 years
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11.06
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11.39
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Annual average
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3.56
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3.64
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1 year
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17.32
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18.03
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6 months
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13.95
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13.88
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Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 6-month, 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 12/31/12, there were 192, 186, 168, 150, 93, and 5 funds, respectively, in this Lipper category.
Fund price and distribution information
For the six-month period ended 12/31/12
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Distributions
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Class A
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Class B
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Class C
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Class M
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Class R
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Class R5
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Class R6
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Class Y
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Number
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1
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1
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1
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1
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1
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1
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1
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1
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Income
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$0.187
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$0.034
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$0.048
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$0.089
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$0.143
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$0.209
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$0.217
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$0.237
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Total
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$0.187
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$0.034
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$0.048
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$0.089
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$0.143
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$0.209
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$0.217
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$0.237
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Before
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After
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Net
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Net
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Before
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After
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Net
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Net
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Net
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Net
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sales
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sales
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asset
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asset
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sales
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sales
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asset
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asset
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asset
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asset
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Share value
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charge
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charge
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value
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value
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charge
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charge
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value
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value
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value
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value
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6/30/12
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$16.78
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$17.80
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$15.95
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$16.22
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$16.34
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$16.93
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$16.52
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—
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—
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$17.00
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7/2/12*
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—
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—
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—
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—
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—
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—
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—
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$17.12
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$17.12
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—
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12/31/12
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19.24
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20.41
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18.37
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18.66
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18.78
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19.46
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18.96
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19.51
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19.51
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19.46
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The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
* Inception date of class R5 and class R6 shares.
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International Equity Fund
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11
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Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
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Class A
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Class B
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Class C
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Class M
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Class R
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Class R5
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Class R6
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Class Y
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Total annual operating expenses for
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the fiscal year ended 6/30/12
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1.36%
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2.11%
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2.11%
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1.86%
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1.61%
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0.94%*
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0.84%*
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1.11%
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Annualized expense ratio for
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the six-month period ended
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12/31/12†‡
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1.34%
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2.09%
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2.09%
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1.84%
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1.59%
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0.95%
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0.85%
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1.09%
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Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report. Expenses are shown as a percentage of average net assets.
* Expenses for class R5 and R6 shares are based on the other expenses of class A shares for the fund’s last fiscal year, adjusted to reflect the lower investor servicing fees applicable to class R5 and R6 shares.
† For the fund’s most recent fiscal half year or, in the case of class R5 and R6 shares, for the period from 7/3/12 (commencement of operations) to 12/31/12.
‡ Includes an increase of 0.02% from annualizing the performance fee adjustment for the six months ended 12/31/12.
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from July 1, 2012, (or, in the case of class R5 and R6 shares, from July 3, 2012 (commencement of operations)) to December 31, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming
actual returns
and expenses.
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Class A
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Class B
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Class C
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Class M
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Class R
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Class R5
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Class R6
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Class Y
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Expenses paid per $1,000*†
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$7.29
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$11.35
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$11.34
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$9.99
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$8.64
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$5.10‡
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$4.56‡
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$5.93
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Ending value (after expenses)
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$1,157.80
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$1,153.90
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$1,153.40
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$1,154.80
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$1,156.40
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$1,151.90
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$1,152.40
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$1,158.80
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* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 12/31/12 (or, in the case of class R5 and R6 shares, the period from 7/3/12 (commencement of operations) to 12/31/12). The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
‡ Had expenses for class R5 and R6 shares been shown for the entire period from 7/1/12 to 12/31/12, they would have been higher.
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12
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International Equity Fund
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Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended December 31, 2012, use the following calculation method. To find the value of your investment on July 1, 2012, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a
hypothetical 5% annualized return
. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
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|
|
|
|
|
|
Class A
|
Class B
|
Class C
|
Class M
|
Class R
|
Class R5
|
Class R6
|
Class Y
|
|
Expenses paid per $1,000*†
|
$6.82
|
$10.61
|
$10.61
|
$9.35
|
$8.08
|
$4.84
|
$4.33
|
$5.55
|
|
Ending value (after expenses)
|
$1,018.45
|
$1,014.67
|
$1,014.67
|
$1,015.93
|
$1,017.19
|
$1,020.42
|
$1,020.92
|
$1,019.71
|
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 12/31/12 (or, in the case of class R5 and R6 shares, the period from 7/3/12 (commencement of operations) to 12/31/12). The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
|
|
International Equity Fund
|
13
|
Terms and definitions
Important terms
Total return
shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.
Before sales charge
, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge
is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC)
is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares
are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares
are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares
are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares
have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares
are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
Class R5 shares
and
class R6 shares
are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are only available to certain defined contribution plans with assets of at least $50 million.
Class Y shares
are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.
Comparative indexes
Barclays U.S. Aggregate Bond Index
is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) Merrill Lynch U.S.
3-Month Treasury Bill Index
is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
MSCI EAFE Index (ND)
is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia.
S&P 500 Index
is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
Lipper
is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value
|
|
14
|
International Equity Fund
|
relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category
assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2012, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and
procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.
Trustee and employee fund ownership
Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of December 31, 2012, Putnam employees had approximately $348,000,000 and the Trustees had approximately $84,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.
|
|
International Equity Fund
|
15
|
Financial statements
A guide to financial statements
These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.
The fund’s portfolio
lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.
Statement of assets and liabilities
shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations
shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as
well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets
shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.
Financial highlights
provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.
|
|
16
|
International Equity Fund
|
The fund’s portfolio
12/31/12 (Unaudited)
|
|
|
COMMON STOCKS (99.4%)*
|
Shares
|
Value
|
|
Australia (3.4%)
|
|
|
Macquarie Group, Ltd.
|
353,878
|
$13,160,889
|
|
Origin Energy, Ltd.
|
682,283
|
8,349,566
|
|
Telstra Corp., Ltd.
|
2,615,818
|
11,916,372
|
|
|
|
33,426,827
|
|
|
|
Austria (0.8%)
|
|
|
Erste Group Bank AG †
|
255,778
|
8,178,638
|
|
|
|
8,178,638
|
|
|
|
Belgium (1.0%)
|
|
|
Solvay SA
|
71,823
|
10,339,000
|
|
|
|
10,339,000
|
|
|
|
Canada (2.1%)
|
|
|
Agrium, Inc.
|
92,860
|
9,255,193
|
|
Suncor Energy, Inc.
|
336,300
|
11,058,986
|
|
|
|
20,314,179
|
|
|
|
China (1.5%)
|
|
|
Brilliance China Automotive Holdings, Inc. †
|
6,088,000
|
7,618,845
|
|
China Communications Construction Co., Ltd.
|
7,020,000
|
6,893,422
|
|
|
|
14,512,267
|
|
|
|
France (11.5%)
|
|
|
Christian Dior SA
|
104,412
|
18,051,325
|
|
Pernod-Ricard SA
|
117,558
|
13,823,268
|
|
Sanofi
|
339,934
|
32,237,714
|
|
Societe Generale SA †
|
380,929
|
14,328,351
|
|
Valeo SA
|
319,808
|
16,216,308
|
|
Vivendi
|
847,528
|
19,086,046
|
|
|
|
113,743,012
|
|
|
|
Germany (14.3%)
|
|
|
Allianz SE
|
107,437
|
14,883,965
|
|
BASF SE
|
145,277
|
13,654,777
|
|
Bayer AG
|
147,998
|
14,054,264
|
|
Continental AG
|
74,688
|
8,641,776
|
|
Deutsche Lufthansa AG
|
565,318
|
10,625,964
|
|
Deutsche Post AG
|
961,519
|
21,083,546
|
|
Henkel AG & Co. KGaA (Preference)
|
99,632
|
8,182,098
|
|
Kabel Deutschland Holding AG
|
179,360
|
13,412,242
|
|
Merck KGaA
|
70,725
|
9,331,308
|
|
MTU Aero Engines Holding AG
|
149,614
|
13,599,325
|
|
Siemens AG
|
127,106
|
13,815,102
|
|
|
|
141,284,367
|
|
|
|
Hong Kong (0.8%)
|
|
|
Sun Hung Kai Properties, Ltd.
|
523,988
|
7,908,642
|
|
|
|
7,908,642
|
|
|
|
India (0.9%)
|
|
|
Housing Development Finance Corp., Ltd. (HDFC) †
|
604,214
|
9,216,526
|
|
|
|
9,216,526
|
|
|
|
Indonesia (0.5%)
|
|
|
PT Indocement Tunggal Prakarsa Tbk
|
2,273,500
|
5,311,473
|
|
|
|
5,311,473
|
|
|
|
Ireland (1.0%)
|
|
|
Kerry Group PLC Class A
|
191,953
|
10,189,057
|
|
|
|
10,189,057
|
|
|
International Equity Fund
|
17
|
|
|
|
COMMON STOCKS (99.4%)*
cont.
|
Shares
|
Value
|
|
Italy (2.8%)
|
|
|
ENI SpA
|
520,778
|
$12,847,354
|
|
Fiat SpA †
S
|
1,228,542
|
6,205,541
|
|
Luxottica Group SpA
|
211,734
|
8,797,782
|
|
|
|
27,850,677
|
|
|
|
Japan (15.2%)
|
|
|
Astellas Pharma, Inc.
|
195,100
|
8,764,143
|
|
Chiyoda Corp.
|
541,000
|
7,746,527
|
|
Daikin Industries, Ltd.
|
213,700
|
7,342,831
|
|
Japan Airlines Co., Ltd. †
|
143,700
|
6,150,653
|
|
Japan Tobacco, Inc.
|
666,000
|
18,775,660
|
|
Lawson, Inc.
|
91,400
|
6,212,765
|
|
Mitsubishi Corp.
|
456,700
|
8,778,558
|
|
Mitsubishi Estate Co., Ltd.
|
487,000
|
11,642,372
|
|
Murata Manufacturing Co., Ltd.
|
123,400
|
7,277,980
|
|
Nippon Telegraph & Telephone (NTT) Corp.
|
229,200
|
9,627,827
|
|
Nissan Motor Co., Ltd.
|
2,155,500
|
20,458,815
|
|
ORIX Corp.
|
195,540
|
22,064,512
|
|
Tokyo Gas Co., Ltd.
|
3,212,000
|
14,685,122
|
|
|
|
149,527,765
|
|
|
|
Mexico (0.6%)
|
|
|
Grupo Financiero Banorte SAB de CV
|
931,500
|
6,015,047
|
|
|
|
6,015,047
|
Netherlands (2.8%)
|
|
|
ASML Holding NV
|
103,715
|
6,714,474
|
|
Gemalto NV
|
64,473
|
5,837,134
|
|
ING Groep NV GDR †
|
1,612,038
|
15,415,424
|
|
|
|
27,967,032
|
|
|
|
Russia (1.8%)
|
|
|
Magnit OJSC GDR
|
194,831
|
7,889,061
|
|
Sberbank of Russia ADR
|
816,385
|
10,147,885
|
|
|
|
18,036,946
|
|
|
|
Singapore (0.7%)
|
|
|
Ezion Holdings, Ltd.
|
5,054,000
|
7,052,236
|
|
|
|
7,052,236
|
|
|
|
South Korea (2.4%)
|
|
|
Samsung Electronics Co., Ltd.
|
10,981
|
15,716,284
|
|
SK Hynix, Inc. †
|
314,690
|
7,634,719
|
|
|
|
23,351,003
|
|
|
|
Spain (1.8%)
|
|
|
Amadeus IT Holding SA Class A
|
335,703
|
8,424,222
|
|
Grifols SA †
S
|
90,889
|
3,197,780
|
|
Grifols SA ADR †
S
|
220,408
|
5,715,169
|
|
|
|
17,337,171
|
|
|
|
Switzerland (1.2%)
|
|
|
UBS AG
|
774,264
|
12,176,210
|
|
|
|
12,176,210
|
|
|
|
Taiwan (1.4%)
|
|
|
Hon Hai Precision Industry Co., Ltd.
|
1,907,000
|
5,878,694
|
|
Pegatron Corp. †
|
5,943,000
|
7,732,241
|
|
|
|
13,610,935
|
|
|
18
|
International Equity Fund
|
|
|
|
COMMON STOCKS (99.4%)*
cont.
|
Shares
|
Value
|
|
United Kingdom (23.5%)
|
|
|
Aggreko PLC
|
161,564
|
$4,633,399
|
|
Associated British Foods PLC
|
539,065
|
13,721,338
|
|
Barclays PLC
|
3,544,806
|
15,307,828
|
|
BG Group PLC
|
757,887
|
12,708,451
|
|
BHP Billiton PLC
|
452,926
|
15,915,594
|
|
Centrica PLC
|
2,697,423
|
14,653,461
|
|
Compass Group PLC
|
1,196,326
|
14,148,661
|
|
Kingfisher PLC
|
2,526,042
|
11,667,505
|
|
Lloyds Banking Group PLC †
|
12,552,918
|
10,058,374
|
|
Prudential PLC
|
1,369,886
|
19,114,404
|
|
Rio Tinto PLC
|
229,754
|
13,388,329
|
|
Royal Dutch Shell PLC Class A
|
695,462
|
24,573,821
|
|
SSE PLC
|
537,573
|
12,423,893
|
|
Telecity Group PLC
|
584,734
|
7,665,498
|
|
Vodafone Group PLC
|
7,031,183
|
17,682,484
|
|
WPP PLC
|
975,912
|
14,187,097
|
|
Xstrata PLC
|
583,748
|
10,382,582
|
|
|
|
232,232,719
|
|
|
|
United States (7.4%)
|
|
|
ACE, Ltd.
|
119,100
|
9,504,180
|
|
Apple, Inc.
|
20,392
|
10,869,548
|
|
Covidien PLC
|
199,000
|
11,490,260
|
|
KKR & Co. LP
|
550,000
|
8,376,500
|
|
Monsanto Co.
|
82,465
|
7,805,312
|
|
Schlumberger, Ltd.
|
104,200
|
7,220,018
|
|
Tyco International, Ltd.
|
338,618
|
9,904,577
|
|
Visa, Inc. Class A
|
51,900
|
7,866,998
|
|
|
|
73,037,393
|
|
|
|
Total common stocks (cost $838,226,927)
|
|
$982,619,122
|
|
|
SHORT-TERM INVESTMENTS (2.4%)*
|
Principal amount/shares
|
Value
|
|
Putnam Cash Collateral Pool, LLC 0.21%
d
|
11,145,968
|
$11,145,968
|
|
Putnam Money Market Liquidity Fund 0.14%
L
|
10,748,212
|
10,748,212
|
|
SSgA Prime Money Market Fund 0.08%
P
|
680,000
|
680,000
|
|
U.S. Treasury Bills with an effective yield of 0.142%,
|
|
|
December 12, 2013 ##
|
$82,000
|
81,888
|
|
U.S. Treasury Bills with effective yields ranging from 0.154%
|
|
|
to 0.177%, October 17, 2013 ##
|
281,000
|
280,703
|
|
U.S. Treasury Bills with an effective yield of 0.156%,
|
|
|
July 25, 2013 ##
|
265,000
|
264,812
|
|
U.S. Treasury Bills with effective yields ranging from 0.154%
|
|
|
to 0.187%, May 2, 2013 ##
|
130,000
|
129,963
|
|
U.S. Treasury Bills with an effective yield of 0.137%,
|
|
|
March 7, 2013 ##
|
15,000
|
14,999
|
|
Total short-term investments (cost $23,346,389)
|
|
$23,346,545
|
|
|
TOTAL INVESTMENTS
|
|
|
|
Total investments (cost $861,573,316)
|
|
$1,005,965,667
|
|
|
International Equity Fund
|
19
|
Key to holding’s abbreviations
|
|
ADR
|
American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
|
|
|
GDR
|
Global Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
|
|
|
OJSC
|
Open Joint Stock Company
|
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from July 1, 2012 through December 31, 2012 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification ASC 820
Fair Value Measurements and Disclosures
.
* Percentages indicated are based on net assets of $988,290,272.
† Non-income-producing security.
## This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period.
d
Affiliated company. See Note 1 to the financial statements regarding securities lending. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
L
Affiliated company (Note 6). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
P
Security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivatives contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period (Note 1).
S
Security on loan, in part or in entirety, at the close of the reporting period (Note 1).
At the close of the reporting period, the fund maintained liquid assets totaling $886,010 to cover certain derivatives contracts.
The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
|
|
Financials
|
21.0%
|
Consumer discretionary
|
14.1
|
Industrials
|
11.2
|
FORWARD CURRENCY CONTRACTS at 12/31/12 (aggregate face value $378,249,801) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Contract
|
Delivery
|
|
Aggregate
|
appreciation/
|
Counterparty
|
Currency
|
type
|
date
|
Value
|
face value
|
(depreciation)
|
|
Bank of America N.A.
|
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
$ 2,976,545
|
$ 2,983,692
|
$ (7,147)
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
2,712,535
|
2,656,340
|
56,195
|
|
Barclays Bank PLC
|
|
|
|
|
|
|
|
British Pound
|
Sell
|
1/16/13
|
1,049,358
|
1,038,837
|
(10,521)
|
|
|
Canadian Dollar
|
Buy
|
1/16/13
|
1,225,759
|
1,225,978
|
(219)
|
|
|
Euro
|
Sell
|
1/16/13
|
10,099,402
|
9,937,423
|
(161,979)
|
|
|
Hong Kong Dollar
|
Buy
|
1/16/13
|
23,191,879
|
23,194,058
|
(2,179)
|
|
|
Hong Kong Dollar
|
Sell
|
1/16/13
|
23,191,879
|
23,193,261
|
1,382
|
|
|
Japanese Yen
|
Buy
|
1/16/13
|
6,758,313
|
7,121,962
|
(363,649)
|
|
|
Norwegian Krone
|
Sell
|
1/16/13
|
5,160,304
|
5,083,241
|
(77,063)
|
|
|
Singapore Dollar
|
Buy
|
1/16/13
|
7,712,920
|
7,746,696
|
(33,776)
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
910,327
|
892,390
|
17,937
|
|
|
Swiss Franc
|
Buy
|
1/16/13
|
23,502,298
|
23,275,638
|
226,660
|
|
|
20 International Equity Fund
|
FORWARD CURRENCY CONTRACTS at 12/31/12 (aggregate face value $378,249,801) (Unaudited)
cont.
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Contract
|
Delivery
|
|
Aggregate
|
appreciation/
|
Counterparty
|
Currency
|
type
|
date
|
Value
|
face value
|
(depreciation)
|
|
Citibank, N.A.
|
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
$3,192,230
|
$3,197,834
|
$(5,604)
|
|
|
Danish Krone
|
Buy
|
1/16/13
|
11,033,783
|
10,959,014
|
74,769
|
|
|
Euro
|
Sell
|
1/16/13
|
14,024,051
|
13,850,114
|
(173,937)
|
|
|
Singapore Dollar
|
Buy
|
1/16/13
|
3,454,033
|
3,466,167
|
(12,134)
|
|
Credit Suisse International
|
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
1,304,696
|
1,306,319
|
(1,623)
|
|
|
British Pound
|
Sell
|
1/16/13
|
109,971
|
109,129
|
(842)
|
|
|
Canadian Dollar
|
Buy
|
1/16/13
|
4,192,162
|
4,190,755
|
1,407
|
|
|
Japanese Yen
|
Buy
|
1/16/13
|
5,911,005
|
5,941,245
|
(30,240)
|
|
|
Norwegian Krone
|
Buy
|
1/16/13
|
5,982,371
|
5,914,950
|
67,421
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
974,646
|
954,381
|
20,265
|
|
|
Swiss Franc
|
Buy
|
1/16/13
|
13,489,344
|
13,340,115
|
149,229
|
|
Deutsche Bank AG
|
|
|
|
|
|
|
|
British Pound
|
Sell
|
1/16/13
|
2,300,465
|
2,277,080
|
(23,385)
|
|
|
Euro
|
Sell
|
1/16/13
|
19,079,758
|
18,826,750
|
(253,008)
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
2,860,188
|
2,803,571
|
56,617
|
|
|
Swiss Franc
|
Buy
|
1/16/13
|
7,663,938
|
7,579,192
|
84,746
|
|
|
Swiss Franc
|
Sell
|
1/16/13
|
7,663,938
|
7,606,751
|
(57,187)
|
|
Goldman Sachs International
|
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
1,354,493
|
1,356,832
|
(2,339)
|
|
|
Australian Dollar
|
Sell
|
1/16/13
|
1,354,493
|
1,370,730
|
16,237
|
|
HSBC Bank USA, National Association
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
2,861,595
|
2,865,129
|
(3,534)
|
|
|
Euro
|
Sell
|
1/16/13
|
10,796,017
|
10,677,335
|
(118,682)
|
|
|
Hong Kong Dollar
|
Buy
|
1/16/13
|
133,903
|
133,912
|
(9)
|
|
|
Hong Kong Dollar
|
Sell
|
1/16/13
|
133,903
|
133,910
|
7
|
|
|
Swiss Franc
|
Buy
|
1/16/13
|
7,836,286
|
7,753,492
|
82,794
|
|
|
Swiss Franc
|
Sell
|
1/16/13
|
7,836,286
|
7,777,561
|
(58,725)
|
|
JPMorgan Chase Bank N.A.
|
|
|
|
|
|
|
|
Euro
|
Sell
|
1/16/13
|
11,816,980
|
11,686,985
|
(129,995)
|
|
|
Hong Kong Dollar
|
Buy
|
1/16/13
|
12,596,803
|
12,598,072
|
(1,269)
|
|
|
Hong Kong Dollar
|
Sell
|
1/16/13
|
12,596,803
|
12,597,466
|
663
|
|
|
Japanese Yen
|
Buy
|
1/16/13
|
3,168,843
|
3,339,241
|
(170,398)
|
|
|
Norwegian Krone
|
Buy
|
1/16/13
|
9,524,114
|
9,386,317
|
137,797
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
5,632,829
|
5,521,579
|
111,250
|
|
|
Swiss Franc
|
Buy
|
1/16/13
|
6,374,385
|
6,304,308
|
70,077
|
|
Royal Bank of Scotland PLC (The)
|
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
186,222
|
186,377
|
(155)
|
|
|
Australian Dollar
|
Sell
|
1/16/13
|
186,222
|
188,462
|
2,240
|
|
|
Canadian Dollar
|
Buy
|
1/16/13
|
2,661,371
|
2,660,879
|
492
|
|
|
|
International Equity Fund
|
21
|
FORWARD CURRENCY CONTRACTS at 12/31/12 (aggregate face value $378,249,801) (Unaudited)
cont.
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Contract
|
Delivery
|
|
Aggregate
|
appreciation/
|
Counterparty
|
Currency
|
type
|
date
|
Value
|
face value
|
(depreciation)
|
|
State Street Bank and Trust Co.
|
|
|
|
|
|
|
|
Australian Dollar
|
Buy
|
1/16/13
|
$6,487,271
|
$6,498,847
|
$(11,576)
|
|
|
Euro
|
Sell
|
1/16/13
|
11,239,306
|
11,114,857
|
(124,449)
|
|
|
Israeli Shekel
|
Buy
|
1/16/13
|
6,095,094
|
5,959,783
|
135,311
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
3,058,846
|
2,998,794
|
60,052
|
|
UBS AG
|
|
|
|
|
|
|
|
|
British Pound
|
Sell
|
1/16/13
|
2,343,187
|
2,344,683
|
1,496
|
|
|
Canadian Dollar
|
Buy
|
1/16/13
|
81,409
|
81,407
|
2
|
|
|
Euro
|
Sell
|
1/16/13
|
12,784,876
|
12,646,034
|
(138,842)
|
|
|
Swedish Krona
|
Buy
|
1/16/13
|
4,106,542
|
4,024,080
|
82,462
|
|
|
Swiss Franc
|
Buy
|
1/16/13
|
7,873,468
|
7,784,503
|
88,965
|
|
WestPac Banking Corp.
|
|
|
|
|
|
|
|
Australian Dollar
|
Sell
|
1/16/13
|
224,296
|
232,650
|
8,354
|
|
|
British Pound
|
Sell
|
1/16/13
|
2,827,581
|
2,798,776
|
(28,805)
|
|
|
Canadian Dollar
|
Sell
|
1/16/13
|
3,894,266
|
3,894,288
|
22
|
|
|
Euro
|
Sell
|
1/16/13
|
10,778,196
|
10,659,629
|
(118,567)
|
|
Total
|
|
|
|
|
|
$(566,989)
|
|
22 International Equity Fund
|
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
|
|
|
|
|
|
Valuation inputs
|
|
|
Investments in securities:
|
Level 1
|
Level 2
|
Level 3
|
|
Common stocks:
|
|
|
|
|
Australia
|
$—
|
$33,426,827
|
$—
|
|
Austria
|
—
|
8,178,638
|
—
|
|
Belgium
|
—
|
10,339,000
|
—
|
|
Canada
|
20,314,179
|
—
|
—
|
|
China
|
—
|
14,512,267
|
—
|
|
France
|
—
|
113,743,012
|
—
|
|
Germany
|
—
|
141,284,367
|
—
|
|
Hong Kong
|
—
|
7,908,642
|
—
|
|
India
|
—
|
9,216,526
|
—
|
|
Indonesia
|
—
|
5,311,473
|
—
|
|
Ireland
|
—
|
10,189,057
|
—
|
|
Italy
|
—
|
27,850,677
|
—
|
|
Japan
|
—
|
149,527,765
|
—
|
|
Mexico
|
6,015,047
|
—
|
—
|
|
Netherlands
|
—
|
27,967,032
|
—
|
|
Russia
|
—
|
18,036,946
|
—
|
|
Singapore
|
—
|
7,052,236
|
—
|
|
South Korea
|
—
|
23,351,003
|
—
|
|
Spain
|
5,715,169
|
11,622,002
|
—
|
|
Switzerland
|
—
|
12,176,210
|
—
|
|
Taiwan
|
—
|
13,610,935
|
—
|
|
United Kingdom
|
—
|
232,232,719
|
—
|
|
United States
|
73,037,393
|
—
|
—
|
|
Total common stocks
|
105,081,788
|
877,537,334
|
—
|
|
|
|
|
Short-term investments
|
11,428,212
|
11,918,333
|
—
|
|
Totals by level
|
$116,510,000
|
$889,455,667
|
$—
|
|
|
|
Valuation inputs
|
|
|
Other financial instruments:
|
Level 1
|
Level 2
|
Level 3
|
|
Forward currency contracts
|
$—
|
$(566,989)
|
$—
|
|
Totals by level
|
$—
|
$(566,989)
|
$—
|
The accompanying notes are an integral part of these financial statements.
|
|
International Equity Fund
|
23
|
Statement of assets and liabilities
12/31/12 (Unaudited)
|
|
ASSETS
|
|
|
Investment in securities, at value, including $10,574,518 of securities on loan (Note 1):
|
|
Unaffiliated issuers (identified cost $839,679,136)
|
$984,071,487
|
Affiliated issuers (identified cost $21,894,180) (Notes 1 and 6)
|
21,894,180
|
|
Foreign currency (cost $350,310) (Note 1)
|
352,661
|
|
Dividends, interest and other receivables
|
1,012,703
|
|
Receivable for shares of the fund sold
|
448,132
|
|
Unrealized appreciation on forward currency contracts (Note 1)
|
1,554,849
|
|
Total assets
|
1,009,334,012
|
|
LIABILITIES
|
|
|
Payable for shares of the fund repurchased
|
4,751,410
|
|
Payable for compensation of Manager (Note 2)
|
610,934
|
|
Payable for custodian fees (Note 2)
|
65,084
|
|
Payable for investor servicing fees (Note 2)
|
243,394
|
|
Payable for Trustee compensation and expenses (Note 2)
|
588,185
|
|
Payable for administrative services (Note 2)
|
10,030
|
|
Payable for distribution fees (Note 2)
|
590,907
|
|
Unrealized depreciation on forward currency contracts (Note 1)
|
2,121,838
|
|
Collateral on securities loaned, at value (Note 1)
|
11,145,968
|
|
Collateral on certain derivative contracts, at value (Note 1)
|
680,000
|
|
Other accrued expenses
|
235,990
|
|
Total liabilities
|
21,043,740
|
|
|
Net assets
|
$988,290,272
|
|
|
REPRESENTED BY
|
|
|
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)
|
$2,329,224,548
|
|
Distributions in excess of net investment income (Note 1)
|
(9,050,018)
|
|
Accumulated net realized loss on investments and foreign currency transactions (Note 1)
|
(1,475,637,108)
|
|
Net unrealized appreciation of investments and assets and liabilities in foreign currencies
|
143,752,850
|
|
Total — Representing net assets applicable to capital shares outstanding
|
$988,290,272
|
(Continued on next page)
|
24 International Equity Fund
|
Statement of assets and liabilities
(Continued)
|
|
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
|
|
|
Net asset value and redemption price per class A share
|
|
($819,984,907 divided by 42,610,548 shares)
|
$19.24
|
|
Offering price per class A share
(100/94.25 of $19.24)*
|
$20.41
|
|
Net asset value and offering price per class B share
($24,945,111 divided by 1,358,070 shares)**
|
$18.37
|
|
Net asset value and offering price per class C share
($56,355,180 divided by 3,019,787 shares)**
|
$18.66
|
|
Net asset value and redemption price per class M share
($17,165,659 divided by 914,230 shares)
|
$18.78
|
|
Offering price per class M share
(100/96.50 of $18.78)*
|
$19.46
|
|
Net asset value, offering price and redemption price per class R share
|
|
($2,539,360 divided by 133,955 shares)
|
$18.96
|
|
Net asset value, offering price and redemption price per class R5 share
|
|
($11,519 divided by 590 shares)†
|
$19.51
|
|
Net asset value, offering price and redemption price per class R6 share
|
|
($11,524 divided by 591 shares)†
|
$19.51
|
|
Net asset value, offering price and redemption price per class Y share
|
|
($67,277,012 divided by 3,456,476 shares)
|
$19.46
|
|
*
On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
**
Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
†
Net asset value may not recalculate due to rounding of fractional shares.
The accompanying notes are an integral part of these financial statements.
|
|
International Equity Fund
|
25
|
Statement of operations
Six months ended 12/31/12 (Unaudited)
|
|
INVESTMENT INCOME
|
|
|
Dividends (net of foreign tax of $456,875)
|
$8,346,250
|
|
Interest (including interest income of $3,873 from investments in affiliated issuers) (Note 6)
|
4,420
|
|
Securities lending (Note 1)
|
28,331
|
|
Total investment income
|
8,379,001
|
|
EXPENSES
|
|
|
Compensation of Manager (Note 2)
|
3,534,531
|
|
Investor servicing fees (Note 2)
|
1,388,855
|
|
Custodian fees (Note 2)
|
54,106
|
|
Trustee compensation and expenses (Note 2)
|
52,366
|
|
Distribution fees (Note 2)
|
1,485,162
|
|
Administrative services (Note 2)
|
17,590
|
|
Other
|
237,569
|
|
Total expenses
|
6,770,179
|
|
|
Expense reduction (Note 2)
|
(911)
|
|
Net expenses
|
6,769,268
|
|
|
Net investment income
|
1,609,733
|
|
|
Net realized gain on investments (Notes 1 and 3)
|
9,503,620
|
|
Net realized gain on foreign currency transactions (Note 1)
|
3,127,323
|
|
Net unrealized depreciation of assets and liabilities in foreign currencies during the period
|
(2,417,982)
|
|
Net unrealized appreciation of investments during the period
|
129,467,779
|
|
Net gain on investments
|
139,680,740
|
|
|
Net increase in net assets resulting from operations
|
$141,290,473
|
|
The accompanying notes are an integral part of these financial statements.
|
26 International Equity Fund
|
Statement of changes in net assets
|
|
|
INCREASE (DECREASE) IN NET ASSETS
|
Six months ended 12/31/12*
|
Year ended 6/30/12
|
|
Operations:
|
|
|
Net investment income
|
$1,609,733
|
$13,626,670
|
|
Net realized gain (loss) on investments
|
|
|
and foreign currency transactions
|
12,630,943
|
(63,334,543)
|
|
Net unrealized appreciation (depreciation) of investments
|
|
|
and assets and liabilities in foreign currencies
|
127,049,797
|
(176,653,017)
|
|
Net increase (decrease) in net assets resulting
|
|
|
from operations
|
141,290,473
|
(226,360,890)
|
|
Distributions to shareholders (Note 1):
|
|
|
From ordinary income
|
|
|
Net investment income
|
|
|
|
Class A
|
(7,958,048)
|
(44,366,500)
|
|
Class B
|
(46,209)
|
(1,361,626)
|
|
Class C
|
(145,320)
|
(2,671,622)
|
|
Class M
|
(80,999)
|
(884,344)
|
|
Class R
|
(19,716)
|
(167,199)
|
|
Class R5
|
(122)
|
—
|
|
Class R6
|
(127)
|
—
|
|
Class Y
|
(811,945)
|
(3,505,220)
|
|
From return of capital
|
|
|
Class A
|
—
|
(3,426,755)
|
|
Class B
|
—
|
(105,169)
|
|
Class C
|
—
|
(206,349)
|
|
Class M
|
—
|
(68,304)
|
|
Class R
|
—
|
(12,914)
|
|
Class Y
|
—
|
(270,734)
|
|
Increase in capital from settlement payments (Note 8)
|
—
|
19,955,701
|
|
Decrease from capital share transactions (Note 4)
|
(86,080,521)
|
(195,228,042)
|
|
Total increase (decrease) in net assets
|
46,147,466
|
(458,679,967)
|
|
NET ASSETS
|
|
|
|
Beginning of period
|
942,142,806
|
1,400,822,773
|
|
End of period
(including distributions in excess of net
|
|
|
investment income of $9,050,018 and $1,597,265, respectively)
|
$988,290,272
|
$942,142,806
|
|
*
Unaudited
The accompanying notes are an integral part of these financial statements.
|
|
International Equity Fund
|
27
|
Financial highlights
(For a common share outstanding throughout the period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT OPERATIONS:
|
|
|
|
LESS DISTRIBUTIONS:
|
|
|
|
|
|
|
RATIOS AND SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
|
|
|
Net asset
|
Net
|
Net realized
|
|
From
|
From
|
|
|
|
|
|
|
|
Ratio
|
of net investment
|
|
|
value,
|
investment
|
and unrealized
|
Total from
|
net
|
net realized
|
From
|
|
|
|
|
|
Net assets,
|
of expenses
|
income (loss)
|
|
|
beginning
|
income
|
gain (loss)
|
investment
|
investment
|
gain
|
return
|
Total
|
Redemption
|
Non-recurring
|
Net asset value,
|
Total return at net
|
end of period
|
to average
|
to average
|
Portfolio
|
Period ended
|
of period
|
(loss)
a
|
on investments
|
operations
|
income
|
on investments
|
of capital
|
distributions
|
fees
|
reimbursements
|
end of period
|
asset value (%)
b
|
(in thousands)
|
net assets (%)
c
|
net assets (%)
|
turnover (%)
|
|
Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**
|
$16.78
|
.04
|
2.61
|
2.65
|
(.19)
|
—
|
—
|
(.19)
|
—
|
—
|
$19.24
|
15.78
*
|
$819,985
|
.67*
|
.19*
|
34*
|
June 30, 2012
|
20.93
|
.23
|
(3.72)
|
(3.49)
|
(.89)
|
—
|
(.07)
|
(.96)
|
—
|
.30
d,e
|
16.78
|
(14.98)
|
785,933
|
1.36
|
1.32
|
67
|
June 30, 2011
|
15.80
|
.21
|
5.28
|
5.49
|
(.41)
|
—
|
—
|
(.41)
|
—
f
|
.05
g,h,i
|
20.93
|
35.21
|
1,159,510
|
1.37
|
1.06
|
80
|
June 30, 2010
|
15.75
|
.19
|
.29
|
.48
|
(.42)
|
—
|
(.01)
|
(.43)
|
—
f
|
—
f,j
|
15.80
|
2.67
|
1,087,233
|
1.42
|
1.07
|
96
|
June 30, 2009
|
24.68
|
.38
|
(9.38)
|
(9.00)
|
—
|
—
|
—
|
—
|
—
f
|
.07
k,l
|
15.75
|
(36.18)
|
1,364,234
|
1.35
m
|
2.27
m
|
82
|
June 30, 2008
|
34.90
|
.48
|
(4.40)
|
(3.92)
|
(1.06)
|
(5.24)
|
—
|
(6.30)
|
—
f
|
—
|
24.68
|
(12.73)
|
3,246,278
|
1.19
m
|
1.63
m
|
74
|
|
Class B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**
|
$15.95
|
(.03)
|
2.48
|
2.45
|
(.03)
|
—
|
—
|
(.03)
|
—
|
—
|
$18.37
|
15.39
*
|
$24,945
|
1.05*
|
(.18)*
|
34*
|
June 30, 2012
|
19.85
|
.08
|
(3.51)
|
(3.43)
|
(.71)
|
—
|
(.05)
|
(.76)
|
—
|
.29
d,e
|
15.95
|
(15.60)
|
25,547
|
2.11
|
.50
|
67
|
June 30, 2011
|
14.96
|
.03
|
5.02
|
5.05
|
(.21)
|
—
|
—
|
(.21)
|
—
f
|
.05
g,h,i
|
19.85
|
34.20
|
50,180
|
2.12
|
.18
|
80
|
June 30, 2010
|
14.91
|
.04
|
.28
|
.32
|
(.26)
|
—
|
(.01)
|
(.27)
|
—
f
|
—
f,j
|
14.96
|
1.89
|
70,933
|
2.17
|
.21
|
96
|
June 30, 2009
|
23.55
|
.24
|
(8.95)
|
(8.71)
|
—
|
—
|
—
|
—
|
—
f
|
.07
k,l
|
14.91
|
(36.69)
|
134,905
|
2.10
m
|
1.45
m
|
82
|
June 30, 2008
|
33.50
|
.18
|
(4.15)
|
(3.97)
|
(.74)
|
(5.24)
|
—
|
(5.98)
|
—
f
|
—
|
23.55
|
(13.38)
|
478,126
|
1.94
m
|
.62
m
|
74
|
|
Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**
|
$16.22
|
(.03)
|
2.52
|
2.49
|
(.05)
|
—
|
—
|
(.05)
|
—
|
—
|
$18.66
|
15.34
*
|
$56,355
|
1.05*
|
(.18)*
|
34*
|
June 30, 2012
|
20.23
|
.10
|
(3.60)
|
(3.50)
|
(.74)
|
—
|
(.06)
|
(.80)
|
—
|
.29
d,e
|
16.22
|
(15.64)
|
53,807
|
2.11
|
.57
|
67
|
June 30, 2011
|
15.27
|
.06
|
5.11
|
5.17
|
(.26)
|
—
|
—
|
(.26)
|
—
f
|
.05
g,h,i
|
20.23
|
34.29
|
80,648
|
2.12
|
.31
|
80
|
June 30, 2010
|
15.24
|
.05
|
.29
|
.34
|
(.30)
|
—
|
(.01)
|
(.31)
|
—
f
|
—
f,j
|
15.27
|
1.92
|
76,281
|
2.17
|
.31
|
96
|
June 30, 2009
|
24.07
|
.25
|
(9.15)
|
(8.90)
|
—
|
—
|
—
|
—
|
—
f
|
.07
k,l
|
15.24
|
(36.68)
|
93,839
|
2.10
m
|
1.56
m
|
82
|
June 30, 2008
|
34.16
|
.24
|
(4.30)
|
(4.06)
|
(.79)
|
(5.24)
|
—
|
(6.03)
|
—
f
|
—
|
24.07
|
(13.39)
|
211,371
|
1.94
m
|
.82
m
|
74
|
|
Class M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**
|
$16.34
|
(.01)
|
2.54
|
2.53
|
(.09)
|
—
|
—
|
(.09)
|
—
|
—
|
$18.78
|
15.48
*
|
$17,166
|
.92*
|
(.06)*
|
34*
|
June 30, 2012
|
20.38
|
.14
|
(3.62)
|
(3.48)
|
(.79)
|
—
|
(.06)
|
(.85)
|
—
|
.29
d,e
|
16.34
|
(15.39)
|
16,826
|
1.86
|
.83
|
67
|
June 30, 2011
|
15.38
|
.10
|
5.16
|
5.26
|
(.31)
|
—
|
—
|
(.31)
|
—
f
|
.05
g,h,i
|
20.38
|
34.65
|
24,507
|
1.87
|
.51
|
80
|
June 30, 2010
|
15.35
|
.10
|
.28
|
.38
|
(.34)
|
—
|
(.01)
|
(.35)
|
—
f
|
—
f,j
|
15.38
|
2.15
|
25,387
|
1.92
|
.57
|
96
|
June 30, 2009
|
24.18
|
.29
|
(9.19)
|
(8.90)
|
—
|
—
|
—
|
—
|
—
f
|
.07
k,l
|
15.35
|
(36.52)
|
29,707
|
1.85
m
|
1.81
m
|
82
|
June 30, 2008
|
34.30
|
.31
|
(4.32)
|
(4.01)
|
(.87)
|
(5.24)
|
—
|
(6.11)
|
—
f
|
—
|
24.18
|
(13.20)
|
66,502
|
1.69
m
|
1.07
m
|
74
|
|
Class R
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**
|
$16.52
|
.01
|
2.57
|
2.58
|
(.14)
|
—
|
—
|
(.14)
|
—
|
—
|
$18.96
|
15.64
*
|
$2,539
|
.80*
|
.07*
|
34*
|
June 30, 2012
|
20.61
|
.16
|
(3.64)
|
(3.48)
|
(.84)
|
—
|
(.07)
|
(.91)
|
—
|
.30
d,e
|
16.52
|
(15.17)
|
2,261
|
1.61
|
.94
|
67
|
June 30, 2011
|
15.57
|
.17
|
5.19
|
5.36
|
(.37)
|
—
|
—
|
(.37)
|
—
f
|
.05
g,h,i
|
20.61
|
34.90
|
4,583
|
1.62
|
.85
|
80
|
June 30, 2010
|
15.52
|
.15
|
.29
|
.44
|
(.38)
|
—
|
(.01)
|
(.39)
|
—
f
|
—
f,j
|
15.57
|
2.46
|
3,537
|
1.67
|
.82
|
96
|
June 30, 2009
|
24.40
|
.35
|
(9.30)
|
(8.95)
|
—
|
—
|
—
|
—
|
—
f
|
.07
k,l
|
15.52
|
(36.39)
|
3,648
|
1.60
m
|
2.18
m
|
82
|
June 30, 2008
|
34.59
|
.42
|
(4.38)
|
(3.96)
|
(.99)
|
(5.24)
|
—
|
(6.23)
|
—
f
|
—
|
24.40
|
(12.96)
|
5,128
|
1.44
m
|
1.45
m
|
74
|
|
Class R5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**†
|
$17.12
|
.07
|
2.53
|
2.60
|
(.21)
|
—
|
—
|
(.21)
|
—
|
—
|
$19.51
|
15.19
*
|
$12
|
.47*
|
.39*
|
34*
|
|
Class R6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**†
|
$17.12
|
.08
|
2.53
|
2.61
|
(.22)
|
—
|
—
|
(.22)
|
—
|
—
|
$19.51
|
15.24
*
|
$12
|
.42*
|
.44*
|
34*
|
|
Class Y
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012**
|
$17.00
|
.06
|
2.64
|
2.70
|
(.24)
|
—
|
—
|
(.24)
|
—
|
—
|
$19.46
|
15.88
*
|
$67,277
|
.55*
|
.31*
|
34*
|
June 30, 2012
|
21.20
|
.28
|
(3.77)
|
(3.49)
|
(.94)
|
—
|
(.07)
|
(1.01)
|
—
|
.30
d,e
|
17.00
|
(14.74)
|
57,769
|
1.11
|
1.56
|
67
|
June 30, 2011
|
16.00
|
.27
|
5.34
|
5.61
|
(.46)
|
—
|
—
|
(.46)
|
—
f
|
.05
g,h,i
|
21.20
|
35.55
|
81,394
|
1.12
|
1.38
|
80
|
June 30, 2010
|
15.94
|
.22
|
.31
|
.53
|
(.46)
|
—
|
(.01)
|
(.47)
|
—
f
|
—
f,j
|
16.00
|
2.95
|
87,194
|
1.17
|
1.21
|
96
|
June 30, 2009
|
24.92
|
.41
|
(9.46)
|
(9.05)
|
—
|
—
|
—
|
—
|
—
f
|
.07
k,l
|
15.94
|
(36.04)
|
127,746
|
1.10
m
|
2.25
m
|
82
|
June 30, 2008
|
35.18
|
.58
|
(4.46)
|
(3.88)
|
(1.14)
|
(5.24)
|
—
|
(6.38)
|
—
f
|
—
|
24.92
|
(12.49)
|
1,312,695
|
.94
m
|
1.94
m
|
74
|
|
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
|
|
|
28 International Equity Fund
|
International Equity Fund
|
29
|
Financial highlights
(Continued)
* Not annualized.
** Unaudited.
† For the period July 3, 2012 (commencement of operations) to December 31, 2012.
a
Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
b
Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
c
Includes amounts paid through expense offset and brokerage/services arrangements (Note 2).
d
Reflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Canadian Imperial Holdings, Inc. and CIBC World Markets Corp. which amounted to $0.03 per share outstanding on November 29, 2011.
e
Reflects a non-recurring reimbursement related to restitution amounts in connection with a distribution plan approved by the SEC, which amounted to the following per share outstanding on July 21, 2011 (Note 8):
|
|
|
Per share
|
|
Class A
|
$0.27
|
|
Class B
|
0.26
|
|
Class C
|
0.26
|
|
Class M
|
0.26
|
|
Class R
|
0.27
|
|
Class Y
|
0.27
|
|
This payment resulted in an increase to total returns of 1.36% for the year ended June 30, 2012.
f
Amount represents less than $0.01 per share.
g
Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Zurich Capital Markets, which amounted to less than $0.01 per share outstanding as of December 21, 2010.
h
Reflects a non-recurring reimbursement related to short-term trading related lawsuits, which amounted to $0.01 per share outstanding on May 11, 2011.
i
Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Prudential Securities, Inc., which amounted to $0.04 per share outstanding as of May 16, 2011.
j
Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Prudential Securities, Inc., which amounted to less than $0.01 per share outstanding as of March 30, 2010.
k
Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Millennium Partners, L.P., Millennium Management, L.L.C., and Millennium International Management, L.L.C., which amounted to $0.04 per share outstanding as of June 23, 2009.
l
Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Bear, Stearns & Co., Inc. and Bear, Stearns Securities Corp., which amounted to $0.03 per share outstanding as of May 21, 2009.
m
Reflects an involuntary contractual expense limitation and/or waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund in effect during the period. As a result of such limitation and/or waivers, the expenses of each class reflect a reduction of the following amounts:
|
|
|
Percentage of
|
|
average net assets
|
|
June 30, 2009
|
0.01%
|
|
June 30, 2008
|
<0.01
|
|
The accompanying notes are an integral part of these financial statements.
|
30 International Equity Fund
|
Notes to financial statements
12/31/12 (Unaudited)
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC. Unless otherwise noted, the “reporting period” represents the period from July 1, 2012 through December 31, 2012.
Putnam International Equity Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The investment objective of the fund is to seek capital appreciation by investing mainly in common stocks (growth or value stocks or both) of large and midsize companies outside the United States that Putnam Management believes have favorable investment potential.
The fund offers class A, class B, class C, class M, class R, class R5, class R6 and class Y shares. The fund began offering class R5 and class R6 shares on July 2, 2012. Class A and class M shares are sold with a maximum front-end sales charge of 5.75% and 3.50%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class R5, class R6 and class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee and in the case of class R5 and class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R5, class R6 and class Y shares are not available to all investors.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
Note 1: Significant accounting policies
The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
Security valuation
Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities. If no sales are reported, as in the case of some securities traded over-the-counter, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange traded funds), if any, which can be classified as Level 1 or Level 2 securities, are based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days,
|
|
International Equity Fund
|
31
|
the fund will fair value foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income
Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, net of any applicable withholding taxes, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.
All premiums/discounts are amortized/accreted on a yield-to-maturity basis.
Foreign currency translation
The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.
Forward currency contracts
The fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to hedge foreign exchange risk.
The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The 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. The fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.
|
32 International Equity Fund
|
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio. For the fund’s average contract amount, see Note 5.
Master agreements
The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern over-the-counter derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund had a net liability position of $949,675 on derivative contracts subject to the Master Agreements. Collateral posted by the fund totaled $772,441.
Securities lending
The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the market value of the securities loaned. The market value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the value of securities loaned amounted to $10,574,518 and the fund received cash collateral of $11,145,968.
Interfund lending
The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit
The fund participates, along with other Putnam funds, in a $315 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.11% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes
It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification ASC 740
Income Taxes
(ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in
|
|
International Equity Fund
|
33
|
the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
At June 30, 2012, the fund had a capital loss carryover of $1,453,647,040 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:
|
|
|
|
|
Loss carryover
|
|
|
Short-term
|
Long-term
|
Total
|
Expiration
|
|
$25,113,693
|
$—
|
$25,113,693
|
*
|
|
453,462,998
|
N/A
|
453,462,998
|
June 30, 2017
|
|
975,070,349
|
N/A
|
975,070,349
|
June 30, 2018
|
|
* Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer certain capital losses of $33,713,150 recognized during the period between November 1, 2011 and June 30, 2012 to its fiscal year ending June 30, 2013.
The aggregate identified cost on a tax basis is $862,481,177, resulting in gross unrealized appreciation and depreciation of $170,642,726 and $27,158,236, respectively, or net unrealized appreciation of $143,484,490.
Distributions to shareholders
Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (base fee) (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
|
|
|
|
|
0.850%
|
of the first $5 billion,
|
|
0.650%
|
of the next $50 billion,
|
|
|
|
0.800%
|
of the next $5 billion,
|
|
0.630%
|
of the next $50 billion,
|
|
|
|
0.750%
|
of the next $10 billion,
|
|
0.620%
|
of the next $100 billion and
|
|
|
|
0.700%
|
of the next $10 billion,
|
|
0.615%
|
of any excess thereafter.
|
|
|
|
In addition, beginning with January 2011, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended or, if shorter, the period from January 1, 2010 to the end of the month for which the fee adjustment is being computed. Each month, the performance adjustment is calculated by
|
34 International Equity Fund
|
multiplying the performance adjustment rate and the fund’s average net assets over the performance period and the result is divided by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the MSCI EAFE Index (Net Dividends), each measured over the performance period. The maximum annualized performance adjustment rates are +/– 0.15%. The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the performance period of up to thirty-six months. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have declined significantly over that period, the negative performance adjustment may exceed the base fee. In this event, Putnam Management would make a payment to the fund.
Because the performance adjustment is based on the fund’s performance relative to its applicable benchmark index, and not its absolute performance, the performance adjustment could increase Putnam Management’s fee even if the fund’s shares lose value during the performance period provided that the fund outperformed its benchmark index, and could decrease Putnam Management’s fee even if the fund’s shares increase in value during the performance period provided that the fund underperformed its benchmark index.
For the reporting period, the base fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.356% of the fund’s average net assets before an increase of $99,264 (0.010% of the fund’s average net assets) based on performance.
Putnam Management has contractually agreed, through June 30, 2013, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.
The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. Putnam Management or PIL, as applicable, pays a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing (except for Class R5 and R6 shares) based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. Class R5 shares pay a monthly fee based on the average net assets of class R5 shares at an annual rate of 0.15%. Class R6 shares pay a monthly fee based on the average net assets of class R6 shares at an annual rate of 0.05%. Investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets. Prior to March 1, 2012, investor servicing fees could not exceed an annual rate of 0.375% of the fund’s average net assets. During the reporting period, the class specific expenses related to investor servicing fees were as follows:
|
|
|
|
|
Class A
|
$1,155,937
|
|
Class R5
|
8
|
|
|
|
Class B
|
36,126
|
|
Class R6
|
2
|
|
|
|
Class C
|
79,397
|
|
Class Y
|
89,518
|
|
|
|
Class M
|
24,338
|
|
Total
|
$1,388,855
|
|
|
|
Class R
|
3,529
|
|
|
|
|
|
|
|
|
International Equity Fund
|
35
|
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $911 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $753, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. During the reporting period, the class specific expenses related to distribution fees were as follows:
|
|
|
|
|
Class A
|
$1,011,068
|
|
Class M
|
63,962
|
|
|
|
Class B
|
126,252
|
|
Class R
|
6,163
|
|
|
|
Class C
|
277,717
|
|
Total
|
$1,485,162
|
|
|
|
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $12,341 and $105 from the sale of class A and class M shares, respectively, and received $6,930 and $147 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $26 and no monies on class A and class M redemptions, respectively.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $322,096,501 and $418,302,933, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
|
36 International Equity Fund
|
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized.
Transactions in capital shares were as follows:
|
|
|
|
|
|
Six months ended 12/31/12
|
Year ended 6/30/12
|
|
Class A
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
745,251
|
$13,456,297
|
2,501,714
|
$43,822,528
|
|
Shares issued in connection with
|
|
|
|
|
reinvestment of distributions
|
388,703
|
7,424,240
|
2,780,776
|
43,964,062
|
|
|
1,133,954
|
20,880,537
|
5,282,490
|
87,786,590
|
|
Shares repurchased
|
(5,349,609)
|
(96,718,237)
|
(13,844,250)
|
(242,879,620)
|
|
Net decrease
|
(4,215,655)
|
$(75,837,700)
|
(8,561,760)
|
$(155,093,030)
|
|
|
|
Six months ended 12/31/12
|
Year ended 6/30/12
|
|
Class B
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
33,659
|
$578,065
|
103,335
|
$1,716,241
|
|
Shares issued in connection with
|
|
|
|
|
reinvestment of distributions
|
2,406
|
43,866
|
91,217
|
1,375,548
|
|
|
36,065
|
621,931
|
194,552
|
3,091,789
|
|
Shares repurchased
|
(279,308)
|
(4,757,534)
|
(1,120,690)
|
(18,957,869)
|
|
Net decrease
|
(243,243)
|
$(4,135,603)
|
(926,138)
|
$(15,866,080)
|
|
|
|
Six months ended 12/31/12
|
Year ended 6/30/12
|
|
Class C
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
37,451
|
$657,637
|
135,756
|
$2,250,135
|
|
Shares issued in connection with
|
|
|
|
|
reinvestment of distributions
|
6,565
|
121,577
|
152,778
|
2,343,619
|
|
|
44,016
|
779,214
|
288,534
|
4,593,754
|
|
Shares repurchased
|
(341,126)
|
(5,965,994)
|
(959,030)
|
(16,263,885)
|
|
Net decrease
|
(297,110)
|
$(5,186,780)
|
(670,496)
|
$(11,670,131)
|
|
|
|
Six months ended 12/31/12
|
Year ended 6/30/12
|
|
Class M
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
25,350
|
$444,833
|
82,556
|
$1,373,694
|
|
Shares issued in connection with
|
|
|
|
|
reinvestment of distributions
|
3,695
|
68,876
|
53,440
|
824,582
|
|
|
29,045
|
513,709
|
135,996
|
2,198,276
|
|
Shares repurchased
|
(144,887)
|
(2,533,792)
|
(308,653)
|
(5,296,478)
|
|
Net decrease
|
(115,842)
|
$(2,020,083)
|
(172,657)
|
$(3,098,202)
|
|
|
|
Six months ended 12/31/12
|
Year ended 6/30/12
|
|
Class R
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
22,435
|
$399,182
|
36,676
|
$627,599
|
|
Shares issued in connection with
|
|
|
|
|
reinvestment of distributions
|
1,037
|
19,497
|
11,449
|
178,369
|
|
|
23,472
|
418,679
|
48,125
|
805,968
|
|
Shares repurchased
|
(26,400)
|
(477,164)
|
(133,602)
|
(2,330,021)
|
|
Net decrease
|
(2,928)
|
$(58,485)
|
(85,477)
|
$(1,524,053)
|
|
|
|
International Equity Fund
|
37
|
|
|
|
|
For the period 7/3/12
|
|
(commencement of operations) to 12/31/12
|
|
Class R5
|
Shares
|
Amount
|
|
Shares sold
|
584
|
$10,000
|
|
Shares issued in connection with
|
|
|
reinvestment of distributions
|
6
|
122
|
|
|
590
|
10,122
|
|
Shares repurchased
|
—
|
—
|
|
Net increase
|
590
|
$10,122
|
|
|
|
For the period 7/3/12
|
|
(commencement of operations) to 12/31/12
|
|
Class R6
|
Shares
|
Amount
|
|
Shares sold
|
584
|
$10,000
|
|
Shares issued in connection with
|
|
|
reinvestment of distributions
|
7
|
127
|
|
|
591
|
10,127
|
|
Shares repurchased
|
—
|
—
|
|
Net increase
|
591
|
$10,127
|
|
|
|
|
|
|
|
Six months ended 12/31/12
|
Year ended 6/30/12
|
|
Class Y
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
343,679
|
$6,342,806
|
850,951
|
$15,781,780
|
|
Shares issued in connection with
|
|
|
|
|
reinvestment of distributions
|
40,203
|
776,721
|
224,235
|
3,585,516
|
|
|
383,882
|
7,119,527
|
1,075,186
|
19,367,296
|
|
Shares repurchased
|
(326,111)
|
(5,981,646)
|
(1,515,506)
|
(27,343,842)
|
|
Net increase (decrease)
|
57,771
|
$1,137,881
|
(440,320)
|
$(7,976,546)
|
|
At the close of the reporting period, Putnam Investments, LLC owned the following class shares of the fund:
|
|
|
|
|
Shares owned
|
Percentage of ownership
|
Value
|
|
Class R5
|
590
|
100%
|
$11,519
|
|
Class R6
|
591
|
100
|
11,524
|
|
Note 5: Summary of derivative activity
The average volume of activity for the reporting period for any derivative type that was held during the period is listed below and was as follows:
|
|
Forward currency contracts (contract amount)
|
$465,900,000
|
|
|
38 International Equity Fund
|
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
|
|
|
|
|
|
Asset derivatives
|
Liability derivatives
|
|
Derivatives not
|
|
|
|
|
accounted for as
|
Statement of
|
|
Statement of
|
|
hedging instruments
|
assets and
|
|
assets and
|
|
under ASC 815
|
liabilities location
|
Market value
|
liabilities location
|
Market value
|
|
Foreign exchange
|
|
|
|
|
contracts
|
Receivables
|
$1,554,849
|
Payables
|
$2,121,838
|
|
Total
|
|
$1,554,849
|
|
$2,121,838
|
|
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
|
|
|
Derivatives not accounted for as hedging
|
Forward currency
|
|
instruments under ASC 815
|
contracts
|
Total
|
|
Foreign exchange contracts
|
$3,207,795
|
$3,207,795
|
|
Total
|
$3,207,795
|
$3,207,795
|
|
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
|
|
|
Derivatives not accounted for as hedging
|
Forward currency
|
|
instruments under ASC 815
|
contracts
|
Total
|
|
Foreign exchange contracts
|
$(2,452,618)
|
$(2,452,618)
|
|
Total
|
$(2,452,618)
|
$(2,452,618)
|
|
Note 6: Investment in Putnam Money Market Liquidity Fund
Transactions during the reporting period with Putnam Money Market Liquidity Fund, which is under common ownership and control, were as follows:
|
|
|
|
|
|
|
Market value at
|
|
|
|
Market value
|
|
the beginning
|
|
|
|
at the end of
|
|
of the reporting
|
|
|
Investment
|
the reporting
|
Name of affiliate
|
period
|
Purchase cost
|
Sale proceeds
|
income
|
period
|
|
Putnam Money Market
|
|
|
|
|
|
Liquidity Fund*
|
$272,325
|
$102,082,334
|
$91,606,447
|
$3,873
|
$10,748,212
|
|
* Management fees charged to Putnam Money Market Liquidity Fund have been waived by Putnam Management.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.
Note 8: Regulatory matters and litigation
In late 2003 and 2004, Putnam Management settled charges brought by the SEC and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. In July 2011, the fund recorded a receivable of $17,870,838 related to restitution amounts in connection with a distribution plan approved by the SEC. This amount, which was received by the fund in December 2011, is reported as part of Increase in capital from settlement payments on the Statement of changes in net assets. Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of this matter.
|
International Equity Fund 39
|
Note 9: New accounting pronouncement
In December 2011, the FASB issued ASU No. 2011–11
“Disclosures about Offsetting Assets and Liabilities”
. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Putnam Management is currently evaluating the application of ASU 2011–11 and its impact, if any, on the fund’s financial statements.
|
40 International Equity Fund
|
Services for shareholders
Investor services
Systematic investment plan
Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange
You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS
You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege
You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege
If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the
fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service
You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging
When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com
A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581
Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
|
|
International Equity Fund
|
41
|
The Putnam family of funds
The following is a list of Putnam’s open-end mutual funds offered to the public.
Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial advisor at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing.
|
|
Growth
|
Income
|
Growth Opportunities Fund
|
American Government Income Fund
|
International Growth Fund
|
Diversified Income Trust
|
Multi-Cap Growth Fund
|
Floating Rate Income Fund
|
Small Cap Growth Fund
|
Global Income Trust
|
Voyager Fund
|
High Yield Advantage Fund
|
|
High Yield Trust
|
Blend
|
Income Fund
|
Asia Pacific Equity Fund
|
Money Market Fund*
|
Capital Opportunities Fund
|
Short Duration Income Fund
|
Capital Spectrum Fund
|
U.S. Government Income Trust
|
Emerging Markets Equity Fund
|
|
Equity Spectrum Fund
|
Tax-free income
|
Europe Equity Fund
|
AMT-Free Municipal Fund
|
Global Equity Fund
|
Tax Exempt Income Fund
|
International Capital Opportunities Fund
|
Tax Exempt Money Market Fund*
|
International Equity Fund
|
Tax-Free High Yield Fund
|
Investors Fund
|
|
Multi-Cap Core Fund
|
State tax-free income funds:
|
Research Fund
|
Arizona, California, Massachusetts, Michigan,
|
|
Minnesota, New Jersey, New York, Ohio,
|
Value
|
and Pennsylvania.
|
Convertible Securities Fund
|
|
Equity Income Fund
|
Absolute Return
|
George Putnam Balanced Fund
|
Absolute Return 100 Fund®
|
The Putnam Fund for Growth and Income
|
Absolute Return 300 Fund®
|
International Value Fund
|
Absolute Return 500 Fund®
|
Multi-Cap Value Fund
|
Absolute Return 700 Fund®
|
Small Cap Value Fund
|
|
*
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 fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
|
42 International Equity Fund
|
|
|
Global Sector
|
Putnam RetirementReady
®
Funds
— portfolios
|
Global Consumer Fund
|
with automatically adjusting allocations to
|
Global Energy Fund
|
stocks, bonds, and money market instruments,
|
Global Financials Fund
|
becoming more conservative over time.
|
Global Health Care Fund
|
|
Global Industrials Fund
|
RetirementReady 2055 Fund
|
Global Natural Resources Fund
|
RetirementReady 2050 Fund
|
Global Sector Fund
|
RetirementReady 2045 Fund
|
Global Technology Fund
|
RetirementReady 2040 Fund
|
Global Telecommunications Fund
|
RetirementReady 2035 Fund
|
Global Utilities Fund
|
RetirementReady 2030 Fund
|
|
RetirementReady 2025 Fund
|
Asset Allocation
|
RetirementReady 2020 Fund
|
Putnam Global Asset Allocation Funds
—
|
RetirementReady 2015 Fund
|
portfolios with allocations to stocks, bonds,
|
|
and money market instruments that are
|
Putnam Retirement Income Lifestyle
|
adjusted dynamically within specified ranges
|
Funds
— portfolios with managed
|
as market conditions change.
|
allocations to stocks, bonds, and money
|
|
market investments to generate
|
Dynamic Asset Allocation Balanced Fund
|
retirement income.
|
Dynamic Asset Allocation
|
|
Conservative Fund
|
Retirement Income Fund Lifestyle 1
|
Dynamic Asset Allocation Growth Fund
|
Retirement Income Fund Lifestyle 2
|
Dynamic Risk Allocation Fund
|
Retirement Income Fund Lifestyle 3
|
|
|
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund's prospectus.
Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.
|
International Equity Fund 43
|
Fund information
Founded 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.
|
|
|
Investment Manager
|
Trustees
|
Robert R. Leveille
|
Putnam Investment
|
Jameson A. Baxter,
Chair
|
Vice President and
|
Management, LLC
|
Liaquat Ahamed
|
Chief Compliance Officer
|
One Post Office Square
|
Ravi Akhoury
|
|
Boston, MA 02109
|
Barbara M. Baumann
|
Michael J. Higgins
|
|
Charles B. Curtis
|
Vice President and Treasurer
|
Investment Sub-Manager
|
Robert J. Darretta
|
|
Putnam Investments Limited
|
Katinka Domotorffy
|
Janet C. Smith
|
57–59 St James’s Street
|
John A. Hill
|
Vice President,
|
London, England SW1A 1LD
|
Paul L. Joskow
|
Principal Accounting Officer,
|
|
Elizabeth T. Kennan
|
and Assistant Treasurer
|
Investment Sub-Advisor
|
Kenneth R. Leibler
|
|
The Putnam Advisory
|
Robert E. Patterson
|
Susan G. Malloy
|
Company, LLC
|
George Putnam, III
|
Vice President and
|
One Post Office Square
|
Robert L. Reynolds
|
Assistant Treasurer
|
Boston, MA 02109
|
W. Thomas Stephens
|
|
|
|
James P. Pappas
|
Marketing Services
|
Officers
|
Vice President
|
Putnam Retail Management
|
Robert L. Reynolds
|
|
One Post Office Square
|
President
|
Mark C. Trenchard
|
Boston, MA 02109
|
|
Vice President and
|
|
Jonathan S. Horwitz
|
BSA Compliance Officer
|
Custodian
|
Executive Vice President,
|
|
State Street Bank
|
Principal Executive Officer, and
|
Judith Cohen
|
and Trust Company
|
Compliance Liaison
|
Vice President, Clerk, and
|
|
|
Associate Treasurer
|
Legal Counsel
|
Steven D. Krichmar
|
|
Ropes & Gray LLP
|
Vice President and
|
Nancy E. Florek
|
|
Principal Financial Officer
|
Vice President, Proxy
|
|
|
Manager, Assistant Clerk, and
|
|
Robert T. Burns
|
Associate Treasurer
|
|
Vice President and
|
|
|
Chief Legal Officer
|
|
|
|
|
This report is for the information of shareholders of Putnam International Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
|
44 International Equity Fund
|