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425 1 gef.txt PUTNAM GLOBAL EQUITY FUND Putnam 811-7615 Global Equity Fund ANNUAL REPORT ON PERFORMANCE AND OUTLOOK 2-28-02 [SCALE LOGO OMITTED] FROM THE TRUSTEES [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III] Dear Fellow Shareholder: After a year of negative economic and market news, capped by the traumatic events of September 11 and the Enron collapse, Putnam Global Equity Fund closed the books on fiscal 2002 with a loss. The management team will explain in the following pages the reasons for the loss and their expectations for the future. We hope you read the management team's discussion as it will provide you with a good understanding of what has been driving your fund's performance. As you do, you may notice that the team is listed, rather than individual managers. This more accurately reflects the manner in which your fund is managed, as well as Putnam's belief that mutual funds are more effectively overseen by teams. In addition, this economic climate has given Putnam pause and after lengthy discussions and working sessions between Management and the Board of Trustees, your Trustees have agreed to recommend the mergers of several funds. The intent of the mergers is to provide shareholders with more focused products that will play a consistent role in a broader investment plan. Your fund has been proposed for merger -- the details of which are explained on page 5. We know that Putnam Investments values its relationship with you and other shareholders, and appreciates your loyalty through the restructuring of its staff and products to pursue superior investment performance in the future. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds April 11, 2002 REPORT FROM FUND MANAGEMENT This fund is managed by the Putnam Global Core Team Investors crave predictability, so our task as managers of Putnam Global Equity Fund was particularly challenging over the fiscal year ended February 28, 2002. From a severe recession to a massive accounting scandal to the terrorist attacks, the period saw serious traumas to our national sense of well-being. While your fund achieved gains in the last two months of the period, for the fiscal year it still underperformed both its benchmark, the Morgan Stanley Capital International World Index, and the average for its Lipper category. Although it is always a disappointment to report a negative return, we believe that much of this underperformance reflects a market environment that was particularly unfriendly to your fund's focus on undervalued companies. The improvement in performance over the first two months of calendar 2002 indicates that the fund's strategy retains its ability to produce rewarding results given more time and the more favorable environment we anticipate. Total return for 12 months ended 2/28/02 Class A Class B Class C Class M NAV POP NAV CDSC NAV CDSC NAV POP ----------------------------------------------------------------------- -18.44% -23.12% -19.01% -23.06% -19.06% -19.87% -18.80% -21.63% ----------------------------------------------------------------------- Past performance does not indicate future results. Performance information for longer periods and explanation of performance calculation methods begin on page 7. * DEFENSIVE POSTURING HURT FUND Several factors hurt the fund's performance over the fiscal year. Anticipating an economic slowdown and weak earnings, we had positioned the fund defensively at the beginning of the fiscal year. Initially, we concentrated on sectors such as health care and consumer staples that tend to respond well during recessions. We also minimized our holdings in cyclical stocks, such as paper, chemical, and semiconductor concerns, which typically perform poorly during economic downturns. Our concern about these companies' earnings proved to be well founded; we also believed their valuations were unattractive. But after the Federal Reserve Board cut interest rates, many investors, anticipating a recovery, bought cyclicals. The recovery never materialized, but the share prices of cyclicals were still driven higher, causing them to outperform most defensive stocks. Because your fund was underweighted in these stocks relative to its benchmark, its relative performance soon fell behind. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Pharmaceuticals 11.0% Banking 10.2% Oil & gas 6.5% Financial 5.6% Telecommunications 5.6% Footnote reads: *Based on net assets as of 2/28/02. Holdings will vary over time. The various calamities over the past fiscal year had another unanticipated consequence for the market. Our investment approach, which assesses companies on a discounted cash-flow basis,(1) identifies undervalued stocks, with the expectation that a catalyst will propel the value of those stocks over time. Last year, however, investors became increasingly jittery and shortened their time horizons for investments. They were more inclined to sell stocks that were not delivering immediate earnings results and shift into blue-chip companies. We considered many of these companies overvalued; however, their durable franchises were seen as havens during times of turmoil and increased demand drove their prices even higher. In this frenetic environment, patience was not a virtue, and stocks that we believed would deliver excellent returns in the long run have not been rewarded. (1) The value of future cash receipts and expenditures, calculated by applying the cost of capital on cash flows. * SEVERAL INDIVIDUAL STOCKS FALTER The fund was also adversely affected by the underperformance of several stocks. Providian Financial, which represented almost 1% of the fund at the beginning of this reporting period, had a good track record for controlling credit costs, but the firm grew too rapidly and experienced significant credit losses. We eliminated the position, realizing a loss that contributed substantially to the fund's underperformance. Fund Profile Putnam Global Equity Fund seeks capital appreciation by investing mainly in common stocks of companies worldwide. The fund targets stocks that offer a combination of growth potential and attractive valuations. It typically invests in midsize and large multinational companies whose size, scale, and power give them a competitive advantage. Another stock that was punished during the period -- unfairly, in our view -- was Tyco International. It was the fund's largest holding at the start of the fiscal year 2002 and remained a significant holding at year-end. The large conglomerate, which generates significant free cash flow, has been a strong performer over the years. But in February, in the aftermath of Enron's collapse, Tyco's accounting practices were called into question, and the company's creditworthiness was also doubted. Panic selling drove down the stock price from $58 to $22. As this report was being written, the share price had begun to recover, and we believed the company has adequately answered all questions about its operations. We also believe Tyco's proposed breakup will enhance the transparency of its operations and increase shareholder value. * KOREAN STOCKS LIFT RESULTS One major advantage Putnam Global Equity Fund can offer shareholders is the flexibility to own a piece of what we consider the best companies anywhere in the world. This past year, for example, we added a number of companies from Korea, even though Korea is not represented in our benchmark. But we continued to be concerned about the Japanese economy. This is reflected in the fact that the fund has only a 5 percent weighting there, compared to 8.6 percent for its benchmark. Essentially, we moved money from Japan to Korea, where we believe companies are increasingly focused on shareholder value. A Korean company, Samsung Electronics, was one of the best-performing stocks in the portfolio, gaining 75 percent during the past fiscal year. We consider it the most competitive semiconductor company in the world and as a strong player in consumer electronics. In comparison to its benchmark index, which has a 29.1 percent weighting in Europe, your fund remained slightly underweighted (27.9% on a market basis) over the fiscal year. But we found pockets of opportunity. For example, Altadis, a tobacco company forged by a merger between Spanish and French concerns, did quite well, as European tobacco companies do not yet face the same litigation threats as their American counterparts. * CURRENT STRATEGY SEEKS TO REDUCE FUND'S VOLATILITY Our favorite place to invest remains the United States, which represents 56 percent of the benchmark and 58.7 percent of the fund's portfolio based on market value. The United States still has the lowest barriers to capital in the world, and we expect U.S. companies overall to generate the highest returns and to have the most disciplined management teams. For much of the year, the fund was overweighted in the United States relative to the index, though we have reduced these holdings somewhat. Similarly, we tried to bring industry sectors more in line with their benchmarks; thus, we increased our holdings in technology while reducing our exposure to health-care and energy stocks. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS Philip Morris Companies, Inc. Tobacco TotalFinaElf SA Class B (France) Oil & gas Pfizer, Inc. Pharmaceuticals Citigroup, Inc. Financial U.S. Bancorp Banking Microsoft Corp. Software Samsung Electronics Co., Ltd. (South Korea) Electronics AstraZeneca PLC (United Kingdom) Pharmaceuticals Bank of New York Company, Inc. (The) Banking ING Groep NV (Netherlands) Insurance Footnote reads: These holdings represent 25.3% of the fund's net assets as of 2/28/02. Portfolio holdings will vary over time. While the fund's long-term results remain well ahead of its benchmark, we believe that over the short term, performance has been more volatile than it should have been. Going forward, we will be working to reduce the fund's volatility. We believe that the chances for an economic recovery have improved, so the fund's defensive positioning is no longer warranted. We have already made significant shifts in the portfolio's country and sector weightings; going forward, fund performance will hinge on the specific stocks we select. The improved performance of the fund in the first part of the calendar year gives us renewed confidence in those selections. Over the long run, we have demonstrated the ability to identify underpriced companies that grow to realize their full value. That approach should serve us well as the economy continues to recover and we put 2001 behind us. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 2/28/02, there is no guarantee the fund will continue to hold these securities in the future. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. MERGER PROPOSED FOR PUTNAM GLOBAL EQUITY FUND After careful study and lengthy working sessions with Putnam Investment Management, your fund's Trustees have agreed to recommend the merger of Putnam Global Equity Fund into Putnam Global Growth Fund. Completion of the merger is subject to a number of conditions, including final approval by your fund's Trustees. Since this merger also requires the approval of shareholders, proxy materials will be delivered within the next few months so you can submit your vote. Putnam Global Growth Fund is currently transitioning into the blend investment style, which has no bias toward either growth or value stocks. This is the same overall strategy currently used by Putnam Global Equity Fund. If the merger is approved, shareholders are expected to benefit from lower expenses provided by a larger asset base of the merged funds. We encourage you to vote on this important matter by returning your completed proxy material. Once a registration statement relating to a merger has been filed with the SEC and is effective, you may call 1-800-225-1581 or visit www.sec.gov for a free copy of the prospectus/proxy statement. Please read this important information carefully. NEW REPORT COVER REFLECTS "BLEND" INVESTMENT STYLE You may have noticed that the color of this report has changed. Its new color -- blue -- indicates that your fund is managed in what we now refer to as the "blend" investment style. Your fund, like other blend funds, has always had the flexibility to invest in both growth stocks (those of companies with strong potential for above-average growth) and value stocks (those of well-established businesses that are priced attractively). Blend funds search for companies whose long-term business worth is believed to be more than their current stock prices indicate. The blend approach makes it possible for your fund to outperform regardless of whether growth stocks or value stocks are in favor. PUTNAM'S POLICY ON CONFIDENTIALITY In order to conduct business with our shareholders, we must obtain certain personal information such as account holders' addresses, telephone numbers, Social Security numbers, and the names of their financial advisors. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect the confidentiality of your information, whether or not you currently own shares of our funds, and in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. In those cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with our Putnam affiliates to service your account or provide you with information about other Putnam products or services. It is also our policy to share account information with your financial advisor, if you've listed one on your Putnam account. If you would like clarification about our confidentiality policies or have any questions or concerns, please don't hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time. PERFORMANCE SUMMARY This section provides information about your fund's performance, which should always be considered in light of its investment strategy. TOTAL RETURN FOR PERIODS ENDED 2/28/02 Class A Class B Class C Class M (inception dates) (7/1/94) (7/1/94) (2/1/99) (7/3/95) NAV POP NAV CDSC NAV CDSC NAV POP ------------------------------------------------------------------------------ 1 year -18.44% -23.12% -19.01% -23.06% -19.06% -19.87% -18.80% -21.63% ------------------------------------------------------------------------------ 5 years 49.53 40.96 44.59 42.89 44.70 44.70 46.45 41.30 Annual average 8.38 7.11 7.65 7.40 7.67 7.67 7.93 7.16 ------------------------------------------------------------------------------ Life of fund 137.70 124.00 126.72 126.72 126.32 126.32 131.08 122.97 Annual average 11.97 11.11 11.28 11.28 11.26 11.26 11.56 11.04 ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/02 MSCI World Consumer Index price index ------------------------------------------------------------------------------ 1 year -14.32% 1.02% ------------------------------------------------------------------------------ 5 years 21.96 11.39 Annual average 4.05 2.18 ------------------------------------------------------------------------------ Life of fund 73.36 20.27 Annual average 7.44 2.44 ------------------------------------------------------------------------------ Past performance does not indicate 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 assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.75% and 3.50%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, and M shares before their inception are derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and higher operating expenses for such shares. [GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT] GROWTH OF A $10,000 INVESTMENT Cumulative total return of a $10,000 investment since 7/1/94 Fund's class A MSCI World Consumer price Date shares at POP Index index 7/1/94 9,425 10,000 10,000 2/28/95 9,812 10,128 10,203 2/28/96 12,813 12,533 10,480 2/28/97 14,980 14,214 10,797 2/28/98 19,136 17,641 10,953 2/28/99 21,638 19,882 11,135 2/28/00 35,299 23,606 11,493 2/28/01 27,464 20,234 11,905 2/28/02 $22,400 $17,336 $12,027 Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund's class B and class C shares would have been valued at $22,672 and $22,632, respectively, and no contingent deferred sales charges would apply; a $10,000 investment in the fund's class M shares would have been valued at $23,108 ($22,297 at public offering price). See first page of performance section for performance calculation method. PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 2/28/02 Class A Class B Class C Class M ------------------------------------------------------------------------------ Distributions (number) 1 -- -- -- ------------------------------------------------------------------------------ Income $0.010 -- -- -- ------------------------------------------------------------------------------ Capital gains -- -- -- -- ------------------------------------------------------------------------------ Return of capital 1 $0.010 -- -- -- ------------------------------------------------------------------------------ Total $0.020 -- -- -- ------------------------------------------------------------------------------ Share value: NAV POP NAV NAV NAV POP ------------------------------------------------------------------------------ 2/28/01 $12.64 $13.41 $12.31 $12.54 $12.45 $12.90 ------------------------------------------------------------------------------ 2/28/02 10.29 10.92 9.97 10.15 10.11 10.48 ------------------------------------------------------------------------------ 1 See page 32. TOTAL RETURN FOR PERIODS ENDED 3/31/02 (most recent calendar quarter) Class A Class B Class C Class M (inception dates) (7/1/94) (7/1/94) (2/1/99) (7/3/95) NAV POP NAV CDSC NAV CDSC NAV POP ------------------------------------------------------------------------------ 1 year -7.44% -12.75% -8.00% -12.60% -8.02% -8.94% -7.82% -11.03% ------------------------------------------------------------------------------ 5 years 63.51 54.13 58.14 56.28 58.42 58.42 60.18 54.51 Annual average 10.33 9.04 9.60 9.34 9.64 9.64 9.88 9.09 ------------------------------------------------------------------------------ Life of fund 152.25 137.71 140.59 140.59 140.36 140.36 145.25 136.64 Annual average 12.69 11.83 12.00 12.00 11.99 11.99 12.28 11.76 ------------------------------------------------------------------------------ Past performance does not indicate future results. More recent returns may be more or less than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. TERMS AND DEFINITIONS Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. The NAV is calculated by dividing the net value of all the fund's assets by the number of outstanding shares. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund's class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase. Class A shares are generally subject to an initial sales charge and no sales charge on redemption (except on certain redemptions of shares bought without an initial sales charge). Class B shares may be subject to a sales charge upon redemption. Class C shares are not subject to an initial sales charge and are subject to a contingent deferred sales charge 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 sales charge on redemption (except on certain redemptions of shares bought without an initial sales charge). COMPARATIVE BENCHMARKS Morgan Stanley Capital International (MSCI) World Index is an unmanaged index of developed and emerging markets. 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. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. A GUIDE TO THE FINANCIAL STATEMENTS These sections of the report, as well as the accompanying Notes, preceded by the Report of independent accountants, constitute the fund's financial statements. The fund's portfolio lists all the fund's investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification. Statement of assets and liabilities shows how the fund's net assets and share price are determined. All investment and noninvestment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss. This is done by first adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings -- as well as any unrealized gains or losses over the period -- is added to or subtracted from the net investment result to determine the fund's net gain or loss for the fiscal year. Statement of changes in net assets shows how the fund's net assets were affected by distributions to shareholders and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-end funds, a separate table is provided for each share class. REPORT OF INDEPENDENT ACCOUNTANTS The Board of Trustees and Shareholders Putnam Global Equity Fund We have audited the accompanying statement of assets and liabilities of Putnam Global Equity Fund, including the fund's portfolio, as of February 28, 2002, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the years or periods in the three-year period ended February 29, 2000 were audited by other auditors whose report dated April 10, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 28, 2002 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Global Equity Fund as of February 28, 2002, the results of its operations for the year then ended, and changes in its net assets and financial highlights for each of the years in the two-year period then ended in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Boston, Massachusetts April 2, 2002

NOTES TO FINANCIAL STATEMENTS February 28, 2002 Note 1 Significant accounting policies Putnam Global Equity Fund ("the fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks capital appreciation by investing primarily through a diversified portfolio of growth and value stocks issued by companies worldwide. The fund offers class A, class B, class C and class M shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge but pay a higher ongoing distribution fee than class A shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares are subject to the same fees and expenses as class B shares, except that class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class M shares are sold with a maximum front-end sales charge of 3.50% and pay an ongoing distribution fee that is higher than class A shares but lower than class B and class C shares. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if that fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with 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 during the reporting period. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value, which is determined using the last reported sales price on its principal exchange, or if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value. Other investments, including restricted securities, are stated at fair value following procedures approved by the Trustees. B) Joint trading account The fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, LLC ("Putnam Management"), the fund's manager, an indirect wholly-owned subsidiary of Putnam, LLC. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. E) 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 are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when accrued or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. F) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase. The fund may also write options on securities it owns or in which it may invest to increase its current returns. The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as "variation margin". Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. G) Security lending The fund may lend securities, through its agent Citibank N.A., to qualified borrowers in order to earn additional income. The loans are collateralized by cash and/or securities 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 Citibank N.A., 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. At February 28, 2002, the value of securities loaned amounted to $4,303,809. The fund received cash collateral of $6,062,350 which is pooled with collateral of other Putnam funds into 31 issuers of high-grade short-term investments. H) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintains an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the year ended February 28, 2002, the fund had no borrowings against the line of credit. I) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. At February 28, 2002, the fund had a capital loss carryover of approximately $195,427,000 available to the extent allowed by tax law to offset future net capital gain, if any, which will expire on February 28, 2010. J) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and permanent differences of losses on wash sale transactions, foreign currency gains and losses, post-October loss deferrals, nontaxable dividends and realized and unrealized gains and losses on passive foreign investment companies. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended February 28, 2002, the fund reclassified $1,828,362 to decrease distributions in excess of net investment income and $1,828,362 to decrease accumulated net realized gains. The calculation of net investment income per share in the financial highlights table excludes these adjustments. Note 2 Management fee, administrative services and other transactions Compensation of Putnam Management, for management and investment advisory services is paid monthly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.80% of the first $500 million of average net assets, 0.70% of the next $500 million, 0.65% of the next $500 million, 0.60% of the next $5 billion, 0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54% of the next $5 billion, 0.53% of the next $5 billion, 0.52% of the next $5 billion, 0.51% of the next $5 billion, 0.49% of the next $5 billion, 0.48% of the next $8.5 billion and 0.47% thereafter. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam, LLC. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. Under the subcustodian contract between the subcustodian bank and PFTC, the subcustodian bank has a lien on the securities of the fund to the extent permitted by the fund's investment restrictions to cover any advances made by the subcustodian bank for the settlement of securities purchased by the fund. At February 28, 2002, the payable to the subcustodian bank represents the amount due for cash advance for the settlement of a security purchased. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. The fund also reduced expenses through brokerage service arrangements. For the year ended February 28, 2002, the fund's expenses were reduced by $438,950 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $1,166 has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as a Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Compensation of Trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B, class C and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management at an annual rate up to 0.65%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees currently limit payment by the fund to an annual rate of 0.75% of the average net assets attributable to class M shares. The Trustees currently limit payment by the fund to an annual rate of 0.50% of the average net assets attributable to class A for shares outstanding as of July 1, 1995 (except for class A shares for which Putnam Mutual Funds is dealer of record) and 0.25% of such average net asset value of shares acquired after that date (including shares acquired through reinvestment distributions). For the year ended February 28, 2002, Putnam Retail Management, acting as underwriter received net commissions of $125,902 and $11,734 from the sale of class A and class M shares, respectively, and received $479,084 and $7,180 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 year ended February 28, 2002, Putnam Retail Management, acting as underwriter received $23,654 and no monies on class A and class M redemptions, respectively. Note 3 Purchases and sales of securities During the year ended February 28, 2002, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $1,080,838,461 and $1,077,904,474, respectively. There were no purchases and sales of U.S. government obligations. Written option transactions during the year are summarized as follows: Contract Premiums Amounts Received --------------------------------------------------------------------------- Written options outstanding at beginning of year $ -- $ -- Options opened 171,500 339,863 Options expired -- -- Options closed -- -- --------------------------------------------------------------------------- Written options outstanding at end of year $171,500 $339,863 --------------------------------------------------------------------------- Note 4 Capital shares At February 28, 2002, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Year ended February 28, 2002 --------------------------------------------------------------------------- Class A Shares Amount --------------------------------------------------------------------------- Shares sold 54,262,014 $611,269,812 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 100,391 1,065,166 --------------------------------------------------------------------------- 54,362,405 612,334,978 Shares repurchased (47,089,031) (518,221,018) --------------------------------------------------------------------------- Net increase 7,273,374 $ 94,113,960 --------------------------------------------------------------------------- Year ended February 28, 2001 --------------------------------------------------------------------------- Class A Shares Amount --------------------------------------------------------------------------- Shares sold 28,791,051 $478,017,088 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 7,203,942 95,525,469 --------------------------------------------------------------------------- 35,994,993 573,542,557 Shares repurchased (19,207,908) (311,263,186) --------------------------------------------------------------------------- Net increase 16,787,085 $262,279,371 --------------------------------------------------------------------------- Year ended February 28, 2002 --------------------------------------------------------------------------- Class B Shares Amount --------------------------------------------------------------------------- Shares sold 6,071,092 $ 67,050,302 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 6,071,092 67,050,302 Shares repurchased (15,443,395) (167,310,252) --------------------------------------------------------------------------- Net decrease (9,372,303) $(100,259,950) --------------------------------------------------------------------------- Year ended February 28, 2001 --------------------------------------------------------------------------- Class B Shares Amount --------------------------------------------------------------------------- Shares sold 9,843,608 $167,663,544 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 6,025,026 77,904,482 --------------------------------------------------------------------------- 15,868,634 245,568,026 Shares repurchased (15,239,466) (249,451,574) --------------------------------------------------------------------------- Net increase (decrease) 629,168 $ (3,883,548) --------------------------------------------------------------------------- Year ended February 28, 2002 --------------------------------------------------------------------------- Class C Shares Amount --------------------------------------------------------------------------- Shares sold 2,788,231 $30,925,715 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 2,788,231 30,925,715 Shares repurchased (3,155,407) (34,922,875) --------------------------------------------------------------------------- Net decrease (367,176) $(3,997,160) --------------------------------------------------------------------------- Year ended February 28, 2001 --------------------------------------------------------------------------- Class C Shares Amount --------------------------------------------------------------------------- Shares sold 2,546,017 $41,949,383 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 426,742 5,620,704 --------------------------------------------------------------------------- 2,972,759 47,570,087 Shares repurchased (1,070,603) (16,585,420) --------------------------------------------------------------------------- Net increase 1,902,156 $30,984,667 --------------------------------------------------------------------------- Year ended February 28, 2002 --------------------------------------------------------------------------- Class M Shares Amount --------------------------------------------------------------------------- Shares sold 1,929,908 $20,399,841 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- --------------------------------------------------------------------------- 1,929,908 20,399,841 Shares repurchased (2,506,691) (26,991,212) --------------------------------------------------------------------------- Net decrease (576,783) $(6,591,371) --------------------------------------------------------------------------- Year ended February 28, 2001 --------------------------------------------------------------------------- Class M Amount --------------------------------------------------------------------------- Shares sold 1,327,833 $22,501,104 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 589,386 7,709,288 --------------------------------------------------------------------------- 1,917,219 30,210,392 Shares repurchased (1,186,023) (19,709,734) --------------------------------------------------------------------------- Net increase 731,196 $10,500,658 --------------------------------------------------------------------------- Note 5 Actions by Trustees On March 15, 2002, the Trustees approved, in principle, the merger of Putnam Global Equity Fund into Putnam Global Growth Fund. The transaction is scheduled to occur in later 2002. It is subject to a number of conditions and there is no guarantee it will occur. FEDERAL TAX INFORMATION (Unaudited) Pursuant to Section 852 of the Internal Revenue Code, as amended, the fund hereby designates $24,305,195 as long-term capital gain, for its taxable year ended February 28, 2002. For the year ended February 28, 2002, a portion of the Fund's distribution represents a return of capital and is therefore not taxable to shareholders. The return of capital is partly due to foreign currency losses. The fund has designated 100% of the distributions from net investment income as qualifying for the dividends received deduction for corporations. The Form 1099 you receive in January 2003 will show the tax status of all distributions paid to your account in calendar 2002.

PUTNAM IS A LEADER IN GLOBAL MONEY MANAGEMENT Putnam Investments traces its heritage to the early 19th century when ship captains hired trustees to manage their money while they were away at sea. In a landmark 1830 decision that involved one such trustee, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible money management. In 1937, his great-great grandson founded Putnam with The George Putnam Fund of Boston, the first fund to offer a balanced portfolio of stocks and bonds. Today, Putnam Investments is one of the largest investment management firms in the world, and this balanced approach remains the foundation of everything we do. With 65 years of experience, Putnam now has over $339 billion in assets under management, 123 mutual funds, over 14 million shareholder accounts, and nearly 3,000 institutional and 401(k) clients. We're one of the largest mutual fund companies in the United States. Putnam has won the DALBAR award for service ten times in the past eleven years. Putnam offers products in every investment category, including growth, value, and blend as well as international and fixed-income. Teamwork is a cornerstone of Putnam's investment philosophy. Our funds are managed by teams in a collaborative environment that promotes an active exchange of information. Putnam's disciplined investment philosophy is based on style consistency. We aim for less volatility over the short term and strong, consistent performance over time. Our truth in labeling approach ensures that we adhere to every fund's stated objective, style, and risk positioning. We are committed to the role of the financial advisor, who continually provides sound, sensible guidance, information, and expertise to help investors reach their financial goals. SERVICES FOR SHAREHOLDERS HELP YOUR INVESTMENT GROW Set up a program for systematic investing with as little as $25 a month from a Putnam fund or from your own savings or checking account. (Regular investing does not guarantee a profit or protect against loss in a declining market.) SWITCH FUNDS EASILY You can move money from one Putnam fund to another within the same class of shares without a service charge. (This privilege is subject to change or termination.) ACCESS YOUR MONEY EASILY You can have checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. Class B and class C shares carry a sales charge that is applied to certain withdrawals. HOW TO BUY ADDITIONAL SHARES You may buy shares through your financial advisor or directly from Putnam. To open an account by mail, send a check made payable to the name of the fund along with a completed fund application. To add to an existing account, complete the investment slip found at the top of your Confirmation of Activity statement and return it with a check payable to your fund. VISIT US AT WWW.PUTNAMINVESTMENTS.COM A secure section of our Web site 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. USE OUR TOLL-FREE NUMBER 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. VISIT WWW.PUTNAMINVESTMENTS.COM Get up-to-date information about your funds, learn more about investing and retirement planning, and access news and economic outlooks from Putnam's Web site. The site features: * Secure access (with your Social Security number and password) to your account with all of your information, including a record of your balances and transactions, updated daily. * On-line transactions, such as exchanges, additional investments, and address changes. * Complete fund information, daily pricing, and long-term performance. * Instant access to your quarterly statements, and annual and semiannual fund reports. You can also read economic commentary from Putnam senior economic advisor Dr. Robert Goodman, use our glossary to decode investment terms, get our update on the markets, and much more. New enhancements are added to the site regularly. Bookmark us at www.putnaminvestments.com FUND INFORMATION ABOUT PUTNAM INVESTMENTS One of the largest mutual fund families in the United States, Putnam Investments has a heritage of investment leadership dating back to Judge Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and practice since 1830. Founded 65 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 presently manage over 100 mutual funds in growth, value, blend, fixed income, and international. INVESTMENT MANAGER Putnam Investment Management, LLC One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Retail Management One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray INDEPENDENT ACCOUNTANTS KPMG LLP TRUSTEES John A. Hill, Chairman Jameson Adkins Baxter Charles B. Curtis Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam, III President Charles E. Porter Executive Vice President and Treasurer Patricia C. Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President Ian C. Ferguson Vice President Brett C. Browchuk Vice President Justin M. Scott Vice President Paul Warren Vice President Richard G. Leibovitch Vice President Richard A. Monaghan Vice President Michael T. Healy Vice President John R. Verani Vice President This report is for the information of shareholders of Putnam Global Equity Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary and Putnam's Quarterly Ranking Summary. For more information or to request a prospectus, call toll free: 1-800-225-1581. 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. Visit www.putnaminvestments.com or call a representative at 1-800-225-1581. NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 --------------------- PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminvestments.com AN003-79259 522/525/2AF 4/02