a_sustainableleaders.htm

Putnam
Sustainable Leaders
Fund

Annual report
6 | 30 | 20


Message from the Trustees	1
About the fund	2
Interview with your fund’s portfolio managers	5
Your fund’s performance	10
Your fund’s expenses	12
Consider these risks before investing	14
Terms and definitions	15
Other information for shareholders	16
Important notice regarding Putnam’s privacy policy	17
Trustee approval of management contract	18
Audited financial statements	23
Report of Independent Registered Public Accounting Firm	24
Federal tax information	48
About the Trustees	49
Officers	51

IMPORTANT NOTICE: Delivery of paper fund reports

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

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

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Message from the Trustees

August 11, 2020

Dear Fellow Shareholder:

Financial markets worldwide continue to be challenged by economic uncertainty and high unemployment due to the COVID-19 pandemic. In addition, our nation is struggling with confusion, anger, and grief over horrific acts of racism and brutality in our country and with the overall issue of systemic racial injustice. Your Board of Trustees and Putnam Investments stand united against oppression and racism. We will work to support thoughtful and resourceful actions to elevate both our workplace and society.

Also, we would like to take this opportunity to thank Robert E. Patterson, who retired as a Trustee on June 30, 2020, for his 36 years of service. We will miss Bob’s experienced judgment and insights, and we wish him well. We are also pleased to welcome Mona K. Sutphen to the Board. Ms. Sutphen brings extensive professional and directorship experience to her role as a Trustee.

As always, thank you for investing with 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 below and pages 10–12 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.

Before March 21, 2018 the fund was managed with a materially different investment strategy and may have achieved materially different performance results under its current investment strategy from that shown for periods before this date.

* As of August 1, 2019, the S&P 500 Index replaced the Russell 3000 Growth Index as the benchmark for this fund because, in Putnam Management’s opinion, the securities tracked by the S&P 500 Index more accurately reflect the types of securities that generally are held by the fund.

† The Russell 3000 Growth–S&P 500 Linked Benchmark represents performance of the Russell 3000 Growth Index from the inception date of the fund, August 31, 1990, through July 31, 2019 and performance of the S&P 500 Index from August 1, 2019, and thereafter.

‡ Source: Lipper, a Refinitiv company.

This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 6/30/20. See above and pages 10–12 for additional fund performance information. Index descriptions can be found on pages 15–16.

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Remind us about the forces driving the stock market in the reporting period?

STEPHANIE For the first seven months of the period, stocks advanced with occasional bouts of volatility. In late February 2020, however, conditions changed dramatically due to the onset of the COVID-19 pandemic. At this time, we entered a very difficult period in terms of human suffering and sizeable drawdowns in the stock market. The health crisis and shelter-in-place orders had an unprecedented economic impact. Like all segments of the global financial markets, the fund encountered significant challenges. However, despite the steep market decline in the first quarter of 2020, the fund outperformed its primary benchmark. This was the result of our continued focus on high-quality, well-managed companies that exhibit excellent sustainability performance.

When the period began in July 2019, stock performance was tumultuous due to investor concerns over an escalating global trade conflict. The Federal Reserve [Fed] cut short-term interest rates for the first time since 2008, and stocks continued to struggle through August. The remainder of 2019 was generally much better for investors, and stocks advanced

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after the Fed lowered short-term interest rates two more times. In December 2019, the Fed noted a favorable economic outlook for 2020, and all three major U.S. stock market indexes set new record highs.

After a relatively calm start to 2020, financial markets became unusually volatile as COVID-19 began to spread globally. Manufacturing and service activities paused around the globe as businesses closed and stay-at-home orders went into effect. A breakdown in Saudi Arabia–Russia oil output negotiations also contributed to losses. It was one of several issues that caused oil prices to plummet.

All three major U.S. stock indexes fell into bear market territory, which is defined as a 20% drop from a previous high. At the close of March, the S&P 500 Index posted its sharpest quarterly decline since 2008. After those double-digit losses in March, however, stocks experienced a historic turnaround in April, when indexes recorded double-digit gains. Although markets remained volatile, the final three months of the period brought a strong rebound for U.S. stocks. The S&P 500 Index posted its best quarterly return in over 20 years. The Fed held interest rates steady and vowed to act appropriately to support the economy. It also introduced several programs to support liquidity and stability in funding markets. However, worries persisted about the COVID-19 pandemic. Stock market returns were modest in the final month of the period as coronavirus cases began to surge again.

How did the fund perform in this environment?

KATHERINE For the 12-month reporting period, the fund delivered a gain of 13.30%, outperforming its primary benchmark, the S&P 500 Index, which returned 7.51%. However, the fund underperformed its Lipper peer group, Multi-Cap Growth Funds, which delivered an average return of 17.46% for the period.

What were some holdings that contributed to performance during the period?

KATHERINE The top contributor was our investment in DocuSign, a company that allows customers to manage electronic agreements through e-signatures and other services. DocuSign’s services provide important benefits to customers on multiple dimensions, including time, cost, security, and convenience. For example, 82% percent of DocuSign transactions are completed in less than 24 hours, and many are completed in less than one hour. The financial cost of digital signature processes is just pennies, and the environmental cost of digital solutions is meaningfully less than paper-based systems. Additionally, the company has invested heavily in security and compliance, so that it is able to partner even with customers in complicated and highly regulated settings, like financial services. Finally, the convenience of e-signature services has become even more important over this more recent time period as many transactions have had to be completed remotely. In our view, all of these elements have created a compelling product with growing customer demand, which has in turn resulted in strong performance for DocuSign’s stock.

STEPHANIE Two other contributors to performance during the period were Vertex Pharmaceuticals and Chipotle Mexican Grill. Vertex’s treatments for cystic fibrosis continued to fuel strong growth for the company, and we believe the longer-term pipeline potential remains robust. Chipotle’s focus on real food, safe preparation, and improved customer experience, such as digital ordering capabilities, led to strong growth in the business throughout the period. For both Vertex and Chipotle, the business growth contributed to positive stock performance.

Could you discuss some holdings that detracted from the fund’s performance during the period?

KATHERINE Among the top detractors was Hilton Worldwide Holdings, owner and operator of the Hilton, Hampton Inn, Embassy Suites,

Sustainable Leaders Fund 7

and Tru hotel brands. Hilton, along with the rest of the travel and tourism industry, has struggled amid the COVID-19 pandemic as consumers worldwide cancel travel plans and occupancy rates decline. As this crisis subsides, we expect there will be opportunities for leaders like Hilton to gain share and further improve their long-term business prospects. We see great prospects for Hilton’s LightStay initiative, which helps hotel operators track data and improve performance on metrics such as water and energy use, which in turn, can help reduce costs. Hilton’s activity has already had an impact on standards and programs for the broader hotel and hospitality industry, and we believe there is potential for its influence to be even greater in the future.

STEPHANIE Two other detractors from performance in this period were Hasbro and Bank of America. Hasbro’s shares suffered due to a combination of challenges: the extended liquidation process for Toys R Us, concerns over the economic health of U.S. consumers, and questions about the company’s recent acquisition of eOne, an entertainment company.

Throughout these challenges, Hasbro has continued to invest in key brands and in its ability to create products across multiple formats, with an ongoing focus on “safe and fair” play. Bank of America’s shares have been affected by general macroeconomic concerns, which intensified as the COVID-19 crisis deepened. We expect that Bank of America’s longstanding focus on “responsible growth” will show in positive credit, growth, and profitability results through this cycle when compared with peers.

What are some key sustainability issues in the current environment?

KATHERINE As with any crisis, there is a mix of short-term and long-term impacts. One set of consequences is within health care. Demand for diagnostics, treatment, and new approaches to caregiving is evident. In some cases, these needs were clear since the first COVID-19 cases.

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

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In other areas, implications for product and service delivery are likely to persist for years to come.

On the environmental front, in the short term, we are seeing dramatic shifts in travel and commuting patterns and in the need for certain single-use products. At the same time, in some parts of the world there have been meaningful economic stimulus plans tied to infrastructure spending on projects that generate improved environmental outcomes.

STEPHANIE We believe the current environment also has important implications for the social component of ESG. Beyond the obvious and deeply concerning effects of COVID-19 on patients and caregivers, there is a growing focus on broader social challenges. Essential issues include longstanding racial inequity and injustice, treatment of contract workers, support for individuals whose work cannot be done remotely, impact of current conditions on mental health and other aspects of well-being, and access to care. We believe corporations can address some of these issues, and we are already seeing some notable responses from company leadership teams.

As the fund enters a new fiscal year, what is your outlook?

KATHERINE We are experiencing the intersection of four related systems in simultaneous crisis. The health crisis and related economic turmoil have illuminated the long-term reality of racial injustice and the ongoing climate crisis in new and profound ways. These conditions have caused widespread suffering in many dimensions, and at the same time they have reminded us of what is constant. Now more than ever, we believe sustainable companies could prove to be more financially resilient and more beneficial than others over the long term, creating meaningful value. While highlighting current fragilities, this period, in our view, will also reveal new opportunities and solutions that contribute to a thriving society, planet, and economy.

STEPHANIE We are identifying new investment ideas in three main categories: companies that are providing solutions to our current challenges; stocks with a mismatch between their current valuations and the long-term fundamental prospects of the business; and companies that are becoming stronger during this period due to accelerating secular trends and investments in their businesses.

Thank you both for your time and for bringing us up to date.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice. Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

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Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended June 30, 2020, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 6/30/20


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year
Class A (8/31/90)
Before sales charge	11.87%	328.62%	15.67%	88.93%	13.57%	57.18%	16.27%	13.30%
After sales charge	11.65	303.98	14.98	78.07	12.23	48.14	14.00	6.78
Class B (3/1/93)
Before CDSC	11.64	303.65	14.97	81.96	12.72	53.68	15.40	12.45
After CDSC	11.64	303.65	14.97	79.96	12.47	50.68	14.64	7.45
Class C (7/26/99)
Before CDSC	11.59	297.74	14.80	81.97	12.72	53.71	15.41	12.47
After CDSC	11.59	297.74	14.80	81.97	12.72	53.71	15.41	11.47
Class R (1/21/03)
Net asset value	11.60	318.03	15.38	86.58	13.29	56.01	15.98	13.01
Class R6 (5/22/18)
Net asset value	12.13	340.65	15.99	91.80	13.91	58.77	16.66	13.71
Class Y (7/19/94)
Net asset value	12.12	339.55	15.96	91.32	13.86	58.37	16.56	13.59

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A shares reflect the deduction of the maximum 5.75% sales charge 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, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, 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 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 R6 shares; had it, returns would have been higher.

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

The fund has had performance fee adjustments that may have had a positive or negative impact on returns.

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

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

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Comparative index returns For periods ended 6/30/20


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year
S&P 500 Index^*	10.15%	270.31%	13.99%	66.45%	10.73%	35.77%	10.73%	7.51%
Russell 3000
Growth – S&P 500	9.98	324.10	15.54	80.40	12.52	46.67	13.62	8.28
Linked Benchmark^†
Lipper Multi-Cap
Growth Funds	10.46	309.36	14.82	81.32	12.26	57.53	16.00	17.46
category average^‡

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

^*Effective August 1, 2019, the fund’s benchmark changed to the S&P 500 Index.

^†The Russell 3000 Growth – S&P 500 Linked Benchmark represents performance of the Russell 3000 Growth Index from the inception date of the fund, August 31, 1990, through July 31, 2019 and performance of the S&P 500 Index from August 1, 2019, and thereafter.

^‡Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended, there were 545, 493, 424, 297, and 27 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $40,365 and $39,774, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class R, R6, and Y shares would have been valued at $41,803, $44,065 and $43,955, respectively.

^*As of August 1, 2019, the S&P 500 Index replaced the Russell 3000 Growth Index as the benchmark for this fund because, in Putnam Management’s opinion, the securities tracked by the S&P 500 Index more accurately reflect the types of securities that generally are held by the fund.

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Fund price and distribution information For the 12-month period ended 6/30/20


Distributions	Class A		Class B	Class C	Class R	Class R6	Class Y
Number	1		1	1	1	1	1
Income	$0.311		—	—	$0.108	$0.643	$0.532
Capital gains
Long-term gains	5.892		$5.892	$5.892	5.892	5.892	5.892
Short-term gains	0.520		0.520	0.520	0.520	0.520	0.520
Total	$6.723		$6.412	$6.412	$6.520	$7.055	$6.944
	Before	After
	sales	sales	Net asset	Net asset	Net asset	Net asset	Net asset
Share value	charge	charge	value	value	value	value	value
6/30/19	$92.99	$98.66	$68.68	$76.05	$89.28	$100.88	$100.64
6/30/20	98.08	104.06	70.32	78.62	93.85	107.06	106.79

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A 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) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

Your fund’s expenses

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

Expense ratios


	Class A	Class B	Class C	Class R	Class R6	Class Y
Total annual operating expenses for the
fiscal year ended 6/30/19	1.04%	1.79%	1.79%	1.29%	0.67%	0.79%
Annualized expense ratio for the
six-month period ended 6/30/20^*†	1.04%	1.79%	1.79%	1.29%	0.68%	0.79%

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.

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

^†Includes an increase of 0.04% from annualizing the performance fee adjustment for the six months ended 6/30/20.

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Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 1/1/20 to 6/30/20. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.


	Class A	Class B	Class C	Class R	Class R6	Class Y
Expenses paid per $1,000^*†	$5.28	$9.07	$9.07	$6.54	$3.45	$4.01
Ending value (after expenses)	$1,041.40	$1,037.50	$1,037.60	$1,040.10	$1,043.40	$1,042.80

^*Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 6/30/20. The expense ratio may differ for each share class.

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

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 6/30/20, use the following calculation method. To find the value of your investment on 1/1/20, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

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


	Class A	Class B	Class C	Class R	Class R6	Class Y
Expenses paid per $1,000^*†	$5.22	$8.97	$8.97	$6.47	$3.42	$3.97
Ending value (after expenses)	$1,019.69	$1,015.96	$1,015.96	$1,018.45	$1,021.48	$1,020.93

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

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Consider these risks before investing

The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Growth stocks may be more susceptible to earnings disappointments, and the market may not favor growth-style investing. Investments in small and/or midsize companies increase the risk of greater price fluctuations. International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. The fund’s investment strategy of investing in companies that exhibit a commitment to sustainable business practices may result in the fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds that do not invest with a sustainable focus. From time to time, the fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those industries or sectors. In evaluating an investment opportunity, we may make investment decisions based on information and data that is incomplete or inaccurate. Due to changes in the products or services of the companies in which the fund invests, the fund may temporarily hold securities that are inconsistent with its sustainable investment criteria. You can lose money by investing in the fund.

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Terms and definitions

Important terms

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

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

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

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

Share classes

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

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

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

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

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

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

Comparative indexes

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

ICE BofA (Intercontinental Exchange Bank of America) 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.

Russell 3000 Growth Index is an unmanaged index of those companies in the broad-market Russell 3000 Index chosen for their growth orientation.

Russell 3000 Growth – S&P 500 Linked Benchmark represents performance of the Russell 3000 Growth Index from the inception date of the fund, August 31, 1990, through July 31, 2019 and performance of the S&P 500 Index from August 1, 2019, and thereafter.

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.

ICE Data Indices, LLC (“ICE BofA”), used with permission. ICE BofA permits use of the ICE BofA indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

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Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.

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

Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2019, are available in the Individual Investors section of putnam.com and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.

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

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of June 30, 2020, Putnam employees had approximately $464,000,000 and the Trustees had approximately $75,000,000 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.

Liquidity risk management program

Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the first annual report on the program to the Trustees in April 2020. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from December 2018 through March 2020. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2019. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. The report also included a discussion of liquidity monitoring during the period, including during the market liquidity challenges caused by the COVID-19 pandemic, and the impact those challenges had on the liquidity of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.

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Important notice regarding Putnam’s privacy policy

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

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

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

Sustainable Leaders Fund 17

Trustee approval of management contract

General conclusions

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

At the outset of the review process, members of the Board’s independent staff and independent legal counsel considered any possible changes to the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review and, as applicable, identified those changes to Putnam Management. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2020, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for The Putnam Funds and the Independent Trustees.

In May 2020, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 2020 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management and sub-management contracts, effective July 1, 2020. (Because PIL is an affiliate of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL, the Trustees have not attempted to evaluate PIL as a separate entity, and all subsequent references to Putnam Management below should be deemed to include reference to PIL as necessary or appropriate in the context.)

The Trustees also considered that, at their April meeting, they had approved a new management contract with Putnam Management, effective August 1, 2019. The Trustees noted that the new management contract differed in substance from the existing management contract only in that the new management contract provided for a new index of securities prices for use, prospectively, in calculating performance adjustments to the fund’s base management fee.

The Independent Trustees’ approval of the continuance of your fund’s management and sub-management contracts was based on the following conclusions:

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

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

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated

18 Sustainable Leaders Fund

the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with certain exceptions primarily involving newly launched or repositioned funds, the current fee arrangements under the vast majority of the funds’ management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

Management fee schedules and total expenses

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

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

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

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

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management and the funds’ investor servicing agent, Putnam Investor Services, Inc. (“PSERV”), have implemented expense limitations that were in effect during your fund’s fiscal year ending in 2019. These expense limitations were: (i) a contractual expense limitation applicable to specified open-end funds, including your fund, of 25 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds, including your fund, had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2019. Putnam Management and PSERV have agreed to maintain these expense limitations until at least October 30, 2021. The support of Putnam Management and PSERV for these expense limitation arrangements was an important factor in the Trustees’ decision to approve the continuance of your fund’s management and sub-management contracts.

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

Sustainable Leaders Fund 19

group, your fund ranked in the second quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the third quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2019. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of December 31, 2019 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

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

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

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of Putnam Management’s investment process and performance by the work of the investment oversight committees of the Trustees and the full Board of Trustees, which meet on a regular basis with individual portfolio managers and with senior management of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that, in the aggregate, 2019 was a strong year of performance for The Putnam Funds, with the Putnam funds, on an asset-weighted basis, ranking in the top quartile of their Lipper Inc. (“Lipper”) peers for the year ended December 31, 2019. For those funds that are evaluated based on their total returns versus selected investment benchmarks, the Trustees observed that the funds, on an asset-weighted-basis, delivered a gross return

20 Sustainable Leaders Fund

that was 2.3% ahead of their benchmarks in 2019. In addition to the performance of the individual Putnam funds, the Trustees considered, as they had in prior years, the performance of The Putnam Fund complex versus competitor fund complexes. In this regard, the Trustees observed that The Putnam Funds’ relative performance, as reported in the Barron’s/Lipper Fund Families survey, was exceptionally strong over both the short and long term, with The Putnam Funds ranking as the 8th best performing mutual fund complex out of 55 complexes for the one-year period ended December 31, 2019 and the 8th best performing mutual fund complex out of 45 complexes for the ten-year period, with 2019 marking the third consecutive year that The Putnam Funds have ranked in the top ten fund complexes for the ten-year period. The Trustees also noted that The Putnam Funds ranked 26th out of 52 complexes for the five-year period ended December 31, 2019. In addition to the Barron’s/Lipper Fund Families Survey, the Trustees also considered the funds’ ratings assigned by Morningstar Inc., noting that 22 of the funds were four- or five-star rated at the end of 2019 and that this included five funds that had achieved a five-star rating. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2019 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor closely the performance of those funds, including the effectiveness of any efforts Putnam Management has undertaken to address underperformance and whether additional actions to address areas of underperformance are warranted.

For purposes of the Trustees’ evaluation of the Putnam funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and comparisons of those returns with the returns of selected investment benchmarks. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper peer group (Lipper Multi-Cap Growth Funds) for the one-year, three-year and five-year periods ended December 31, 2019 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):


One-year period	1st
Three-year period	1st
Five-year period	1st

Over the one-year, three-year and five-year periods ended December 31, 2019, there were 549, 493 and 434 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

The Trustees considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management had made selective hires and internal promotions in 2019 to strengthen its investment team.

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used predominantly to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. The Trustees noted that, in 2019, they had approved the elimination of a fund expense recapture program, whereby a portion of available soft dollars were used to pay fund

Sustainable Leaders Fund 21

expenses, and that the amount of commissions allocated to that program were instead used to increase, by a corresponding amount, the budget allocated for execution services. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee. In addition, with the assistance of their Brokerage Committee, the Trustees indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

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

22 Sustainable Leaders Fund

Audited financial statements

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

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

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

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

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

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

Sustainable Leaders Fund 23

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Sustainable Leaders Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam Sustainable Leaders Fund (the “Fund”) as of June 30, 2020, the related statement of operations for the year ended June 30, 2020, the statement of changes in net assets for each of the two years in the period ended June 30, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of June 30, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended June 30, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of June 30, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 2020

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

24 Sustainable Leaders Fund

The fund’s portfolio 6/30/20


COMMON STOCKS (96.8%)*	Shares	Value
Airlines (0.7%)
JetBlue Airways Corp. ^{† S}	3,051,400	$33,260,260
		33,260,260
Banks (3.4%)
Bank of America Corp.	4,950,700	117,579,125
First Republic Bank ^S	465,900	49,380,741
		166,959,866
Beverages (0.8%)
Heineken NV (Netherlands)	427,246	39,345,876
		39,345,876
Biotechnology (3.1%)
Amgen, Inc.	361,100	85,169,046
Vertex Pharmaceuticals, Inc. ^†	244,300	70,922,733
		156,091,779
Building products (1.2%)
Johnson Controls International PLC	1,776,300	60,642,882
		60,642,882
Capital markets (2.4%)
BlackRock, Inc.	217,997	118,609,988
		118,609,988
Chemicals (5.2%)
Ecolab, Inc.	271,600	54,034,820
Koninklijke DSM NV (Netherlands)	528,560	73,059,090
Linde PLC ^S	380,200	80,644,222
Novozymes A/S Class B (Denmark)	851,129	49,186,052
		256,924,184
Commercial services and supplies (1.2%)
GFL Environmental, Inc. (Canada) ^S	3,072,655	57,673,734
		57,673,734
Containers and packaging (1.3%)
Ball Corp.	896,900	62,325,581
		62,325,581
Electric utilities (2.1%)
NextEra Energy, Inc.	224,800	53,990,216
Orsted A/S (Denmark)	432,106	49,834,685
		103,824,901
Equity real estate investment trusts (REITs) (1.7%)
American Tower Corp. ^R	177,200	45,813,288
Boston Properties, Inc. ^R	452,100	40,860,798
		86,674,086
Food and staples retail (1.7%)
Walmart, Inc.	712,000	85,283,360
		85,283,360
Food products (1.7%)
Barry Callebaut AG (Switzerland)	19,806	37,747,861
McCormick & Co., Inc. (non-voting shares) ^S	259,800	46,610,718
		84,358,579

Sustainable Leaders Fund 25


COMMON STOCKS (96.8%)* cont.	Shares	Value
Health-care equipment and supplies (5.0%)
Baxter International, Inc.	747,500	$64,359,750
Cooper Cos., Inc. (The) ^S	164,300	46,602,052
Danaher Corp.	767,800	135,770,074
		246,731,876
Hotels, restaurants, and leisure (3.4%)
Chipotle Mexican Grill, Inc. ^†	84,400	88,819,184
Hilton Worldwide Holdings, Inc. ^S	689,436	50,639,074
Vail Resorts, Inc.	158,700	28,907,205
		168,365,463
Household durables (—%)
HC Brillant Services GmbH (acquired 8/2/13, cost $69) (Private)
(Germany) ^{† ∆∆ F}	104	88
		88
Independent power and renewable electricity producers (1.9%)
AES Corp. (The)	6,573,700	95,252,913
		95,252,913
Industrial conglomerates (2.3%)
Honeywell International, Inc.	358,053	51,770,883
Roper Technologies, Inc.	162,400	63,053,424
		114,824,307
Insurance (2.8%)
AXA SA (France) ^†	3,525,410	73,572,161
Prudential PLC (United Kingdom)	4,375,794	65,897,998
		139,470,159
Interactive media and services (2.6%)
Alphabet, Inc. Class A ^†	36,900	52,326,045
Alphabet, Inc. Class C ^†	55,260	78,116,089
		130,442,134
Internet and direct marketing retail (5.7%)
Amazon.com, Inc. ^†	89,377	246,575,055
Etsy, Inc. ^†	332,755	35,348,564
		281,923,619
IT Services (5.6%)
Fidelity National Information Services, Inc.	796,500	106,802,685
Okta, Inc. ^{† S}	266,930	53,447,394
Visa, Inc. Class A ^S	617,800	119,340,426
		279,590,505
Leisure products (1.4%)
Hasbro, Inc. ^S	900,441	67,488,053
		67,488,053
Life sciences tools and services (2.3%)
Thermo Fisher Scientific, Inc.	309,200	112,035,528
		112,035,528
Machinery (0.9%)
Stanley Black & Decker, Inc.	336,400	46,887,432
		46,887,432
Multi-utilities (0.5%)
Ameren Corp.	357,900	25,181,844
		25,181,844

26 Sustainable Leaders Fund


COMMON STOCKS (96.8%)* cont.	Shares	Value
Multiline retail (1.5%)
Target Corp.	602,000	$72,197,860
		72,197,860
Personal products (1.8%)
Unilever NV (Netherlands)	1,699,270	90,121,375
		90,121,375
Pharmaceuticals (3.4%)
AstraZeneca PLC (United Kingdom)	371,912	38,770,590
Merck & Co., Inc.	1,119,100	86,540,003
Roche Holding AG (Switzerland)	129,331	44,778,473
		170,089,066
Road and rail (1.2%)
Union Pacific Corp.	358,800	60,662,316
		60,662,316
Semiconductors and semiconductor equipment (4.3%)
ASML Holding NV (Netherlands)	201,400	74,121,242
First Solar Inc. ^{† S}	427,107	21,141,797
NXP Semiconductors NV	473,700	54,020,748
Texas Instruments, Inc.	520,500	66,087,885
		215,371,672
Software (15.2%)
Adobe, Inc. ^†	337,500	146,917,125
DocuSign, Inc. ^{† S}	426,200	73,395,902
Microsoft Corp.	1,893,500	385,346,182
Salesforce.com, Inc. ^†	513,600	96,212,688
Talend SA ADR ^†	1,292,750	44,806,715
		746,678,612
Specialty retail (2.0%)
Home Depot, Inc. (The)	385,900	96,671,809
		96,671,809
Technology hardware, storage, and peripherals (5.9%)
Apple, Inc. ^S	806,032	294,040,474
		294,040,474
Textiles, apparel, and luxury goods (0.6%)
Levi Strauss & Co. Class A ^S	2,304,342	30,878,183
		30,878,183
Total common stocks (cost $3,134,742,780)		$4,796,880,364


CONVERTIBLE PREFERRED STOCKS (0.6%)*	Shares	Value
Becton Dickinson and Co. $3.00 cv. pfd. ^†	578,278	$30,764,390
UNEXT.com, LLC $0.00 cv. pfd. (acquired 4/14/00, cost $10,451,238)
(Private) ^{† ∆∆ F}	125,000	—
Total convertible preferred stocks (cost $39,449,198)		$30,764,390


	Principal
U.S. TREASURY OBLIGATIONS (—%)*	amount	Value
U.S. Treasury Bonds
3.00%, 11/15/45 ⁱ	$123,000	$166,248
2.875%, 8/15/45 ⁱ	87,000	115,562
U.S. Treasury Notes 1.50%, 10/31/24 ⁱ	91,000	96,119
Total U.S. treasury obligations (cost $377,929)		$377,929

Sustainable Leaders Fund 27


	Expiration	Strike
WARRANTS (—%)* ^†	date	price	Warrants	Value
Neuralstem, Inc. Ser. K, (acquired 4/20/17,
cost $—) ^∆∆	1/9/22	$42.00	55,497	$—
Total warrants (cost $—)				$—


	Principal amount/
SHORT-TERM INVESTMENTS (8.2%)*		shares	Value
Putnam Cash Collateral Pool, LLC 0.27% ^d	Shares	270,949,625	$270,949,625
Putnam Short Term Investment Fund 0.41% ^L	Shares	133,724,785	133,724,785
U.S. Treasury Bills 0.152%, 9/8/20		$551,000	550,863
U.S. Treasury Cash Management Bills 0.158%, 9/15/20 ^∆		1,442,000	1,441,574
Total short-term investments (cost $406,666,779)			$406,666,847


TOTAL INVESTMENTS
Total investments (cost $3,581,236,686)	$5,234,689,530

Key to holding’s abbreviations


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

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from July 1, 2019 through June 30, 2020 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures.

^*Percentages indicated are based on net assets of $4,956,305,285.

^†This security is non-income-producing.

^∆∆This security is restricted with regard to public resale. The total fair value of this security and any other restricted securities (excluding 144A securities), if any, held at the close of the reporting period was $88, or less than 0.1% of net assets.

^∆This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period. Collateral at period end totaled $111,966 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).

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

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

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

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

^RReal Estate Investment Trust.

^SSecurity 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 $272,055 to cover certain derivative contracts.

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

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

28 Sustainable Leaders 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^*:
Communication services	$130,442,134	$—		$—
Consumer discretionary	717,524,987	—		88
Consumer staples	131,894,078	167,215,112		—
Financials	285,569,854	139,470,159		—
Health care	601,399,186	83,549,063		—
Industrials	373,950,931	—		—
Information technology	1,535,681,263	—		—
Materials	197,004,623	122,245,142		—
Real estate	86,674,086	—		—
Utilities	174,424,973	49,834,685		—
Total common stocks	4,234,566,115	562,314,161		88

Convertible preferred stocks	—	30,764,390		—
U.S. treasury obligations	—	377,929		—
Warrants	—	—		—
Short-term investments	133,724,785	272,942,062		—
Totals by level	$4,368,290,900	$866,398,542		$88

			Valuation inputs
Other financial instruments:	Level 1	Level 2		Level 3
Forward currency contracts	$—	$(19,515)		$—
Totals by level	$—	$(19,515)		$—

^*Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.

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

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

30 Sustainable Leaders Fund

Statement of assets and liabilities 6/30/20


ASSETS
Investment in securities, at value, including $266,017,957 of securities on loan (Notes 1 and 8):
Unaffiliated issuers (identified cost $3,176,562,276)	$4,830,015,120
Affiliated issuers (identified cost $404,674,410) (Notes 1 and 5)	404,674,410
Foreign currency (cost $44) (Note 1)	44
Dividends, interest and other receivables	3,855,450
Foreign tax reclaim	955,718
Receivable for shares of the fund sold	951,843
Unrealized appreciation on forward currency contracts (Note 1)	274,841
Prepaid assets	52,083
Total assets	5,240,779,509

LIABILITIES
Payable for shares of the fund repurchased	3,777,683
Payable for compensation of Manager (Note 2)	2,507,952
Payable for custodian fees (Note 2)	82,851
Payable for investor servicing fees (Note 2)	1,242,867
Payable for Trustee compensation and expenses (Note 2)	1,971,709
Payable for administrative services (Note 2)	17,336
Payable for distribution fees (Note 2)	2,687,791
Unrealized depreciation on forward currency contracts (Note 1)	294,356
Collateral on securities loaned, at value (Note 1)	270,949,625
Collateral on certain derivative contracts, at value (Notes 1 and 8)	377,929
Other accrued expenses	564,125
Total liabilities	284,474,224

Net assets	$4,956,305,285

REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$2,972,342,284
Total distributable earnings (Note 1)	1,983,963,001
Total — Representing net assets applicable to capital shares outstanding	$4,956,305,285

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per class A share
($4,535,812,040 divided by 46,243,861 shares)	$98.08
Offering price per class A share (100/94.25 of $98.08)^*	$104.06
Net asset value and offering price per class B share ($33,751,647 divided by 479,939 shares)^**	$70.32
Net asset value and offering price per class C share ($38,033,152 divided by 483,770 shares)^**	$78.62
Net asset value, offering price and redemption price per class R share
($8,166,797 divided by 87,016 shares)	$93.85
Net asset value, offering price and redemption price per class R6 share
($74,725,412 divided by 697,990 shares)	$107.06
Net asset value, offering price and redemption price per class Y share
($265,816,237 divided by 2,489,123 shares)	$106.79

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

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

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

Sustainable Leaders Fund 31

Statement of operations Year ended 6/30/20


INVESTMENT INCOME
Dividends (net of foreign tax of $1,189,986)	$56,623,258
Interest (including interest income of $2,270,060 from investments in affiliated issuers) (Note 5)	2,290,512
Securities lending (net of expenses) (Notes 1 and 5)	524,957
Total investment income	59,438,727

EXPENSES
Compensation of Manager (Note 2)	27,002,746
Investor servicing fees (Note 2)	7,512,916
Custodian fees (Note 2)	91,878
Trustee compensation and expenses (Note 2)	177,616
Distribution fees (Note 2)	11,701,153
Administrative services (Note 2)	129,541
Other	1,343,378
Total expenses	47,959,228
Expense reduction (Note 2)	(94,765)
Net expenses	47,864,463

Net investment income	11,574,264

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities from unaffiliated issuers (Notes 1 and 3)	323,452,603
Foreign currency transactions (Note 1)	(27,955)
Forward currency contracts (Note 1)	4,090,229
Total net realized gain	327,514,877
Change in net unrealized appreciation (depreciation) on:
Securities from unaffiliated issuers	249,571,708
Assets and liabilities in foreign currencies	(1,644)
Forward currency contracts	1,282,272
Total change in net unrealized appreciation	250,852,336

Net gain on investments	578,367,213

Net increase in net assets resulting from operations	$589,941,477

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

32 Sustainable Leaders Fund

Statement of changes in net assets


INCREASE IN NET ASSETS	Year ended 6/30/20	Year ended 6/30/19
Operations
Net investment income	$11,574,264	$6,690,085
Net realized gain on investments
and foreign currency transactions	327,514,877	326,675,620
Change in net unrealized appreciation of investments
and assets and liabilities in foreign currencies	250,852,336	310,174,581
Net increase in net assets resulting from operations	589,941,477	643,540,286
Distributions to shareholders (Note 1):
From ordinary income
Net investment income
Class A	(14,107,553)	(1,656,389)
Class R	(10,179)	—
Class R6	(441,234)	(120,890)
Class Y	(1,118,028)	(502,095)
Net realized short-term gain on investments
Class A	(23,588,192)	(65,888,230)
Class B	(290,263)	(992,612)
Class C	(247,753)	(684,579)
Class M	—	(1,053,476)
Class R	(49,012)	(141,574)
Class R6	(356,830)	(931,833)
Class Y	(1,092,809)	(2,888,838)
From net realized long-term gain on investments
Class A	(267,272,358)	(548,904,999)
Class B	(3,288,903)	(8,269,301)
Class C	(2,807,237)	(5,703,126)
Class M	—	(8,776,353)
Class R	(555,340)	(1,179,432)
Class R6	(4,043,155)	(7,762,958)
Class Y	(12,382,366)	(24,066,481)
Increase in capital from settlement payments	—	10,987
Increase (decrease) from capital share transactions (Note 4)	(26,970,876)	287,709,158
Total increase in net assets	231,319,389	251,737,265

NET ASSETS
Beginning of year	4,724,985,896	4,473,248,631
End of year	$4,956,305,285	$4,724,985,896

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

Sustainable Leaders Fund 33

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


	INVESTMENT OPERATIONS				LESS DISTRIBUTIONS							RATIOS AND SUPPLEMENTAL DATA
														Ratio of net
	Net asset	Net	Net realized			From							Ratio of	investment
	value,	investment	and unrealized	Total from	From net	net realized			Non-recurring	Net asset	Total return	Net assets,	expenses	income (loss)
	beginning	income	gain (loss) on	investment	investment	gain on	From	Total	reimburse-	value, end	at net asset	end of period	to average	to average	Portfolio
Period ended	of period	(loss)^a	investments	operations	income	investments	return of capital	distributions	ments	of period	value (%)^b	(in thousands)	net assets (%)^c	net assets (%)	turnover (%)
Class A
June 30, 2020	$92.99	.23	11.58	11.81	(.31)	(6.41)	—	(6.72)	—	$98.08	13.30	$4,535,812	1.03	.25	44
June 30, 2019	95.86	.14	12.06	12.20	(.04)	(15.03)	—	(15.07)	—^g	92.99	15.46	4,298,012	1.04	.16	30
June 30, 2018	83.77	.04	16.44	16.48	(.45)	(3.94)	—	(4.39)	—	95.86	20.16	4,085,165	.99	.04	87
June 30, 2017	67.21	.30^e	16.26	16.56	—	—	—	—	—	83.77	24.64	3,648,574	1.01	.40^e	76
June 30, 2016	78.35	.05	(2.64)	(2.59)	(.39)	(8.11)	(.05)	(8.55)	—	67.21	(3.56)	3,221,906	1.03^d	.07^d	58
Class B
June 30, 2020	$68.68	(.35)	8.40	8.05	—	(6.41)	—	(6.41)	—	$70.32	12.45	$33,752	1.78	(.52)	44
June 30, 2019	75.26	(.41)	8.86	8.45	—	(15.03)	—	(15.03)	—^g	68.68	14.60	43,671	1.79	(.60)	30
June 30, 2018	66.70	(.52)	13.02	12.50	—	(3.94)	—	(3.94)	—	75.26	19.26	51,481	1.74	(.72)	87
June 30, 2017	53.91	(.21)^e	13.00	12.79	—	—	—	—	—	66.70	23.72	57,979	1.76	(.35)^e	76
June 30, 2016	64.63	(.39)	(2.17)	(2.56)	—	(8.11)	(.05)	(8.16)	—	53.91	(4.30)	63,183	1.78^d	(.68)^d	58
Class C
June 30, 2020	$76.05	(.38)	9.36	8.98	—	(6.41)	—	(6.41)	—	$78.62	12.47	$38,033	1.78	(.51)	44
June 30, 2019	81.69	(.45)	9.84	9.39	—	(15.03)	—	(15.03)	—^g	76.05	14.60	38,196	1.79	(.59)	30
June 30, 2018	72.09	(.58)	14.12	13.54	—	(3.94)	—	(3.94)	—	81.69	19.26	34,733	1.74	(.74)	87
June 30, 2017	58.28	(.23)^e	14.04	13.81	—	—	—	—	—	72.09	23.70	66,307	1.76	(.35)^e	76
June 30, 2016	69.19	(.41)	(2.34)	(2.75)	—	(8.11)	(.05)	(8.16)	—	58.28	(4.29)	60,469	1.78^d	(.68)^d	58
Class R
June 30, 2020	$89.28	(.01)	11.10	11.09	(.11)	(6.41)	—	(6.52)	—	$93.85	13.01	$8,167	1.28	(.02)	44
June 30, 2019	92.81	(.08)	11.58	11.50	—	(15.03)	—	(15.03)	—^g	89.28	15.18	8,443	1.29	(.10)	30
June 30, 2018	81.27	(.19)	15.94	15.75	(.27)	(3.94)	—	(4.21)	—	92.81	19.85	8,210	1.24	(.22)	87
June 30, 2017	65.36	.11^e	15.80	15.91	—	—	—	—	—	81.27	24.34	7,930	1.26	.15^e	76
June 30, 2016	76.43	(.12)	(2.59)	(2.71)	(.20)	(8.11)	(.05)	(8.36)	—	65.36	(3.82)	6,378	1.28^d	(.17)^d	58
Class R6
June 30, 2020	$100.88	.61	12.62	13.23	(.64)	(6.41)	—	(7.05)	—	$107.06	13.71	$74,725	.66	.61	44
June 30, 2019	102.51	.52	13.09	13.61	(.21)	(15.03)	—	(15.24)	—^g	100.88	15.89	68,654	.67	.53	30
June 30, 2018^†	103.52	.01	(1.02)	(1.01)	—	—	—	—	—	102.51	(.98)^*	58,846	.07^*	-^f*	87
Class Y
June 30, 2020	$100.64	.50	12.59	13.09	(.53)	(6.41)	—	(6.94)	—	$106.79	13.59	$265,816	.78	.51	44
June 30, 2019	102.50	.40	13.05	13.45	(.28)	(15.03)	—	(15.31)	—^g	100.64	15.74	208,467	.79	.41	30
June 30, 2018	89.27	.29	17.55	17.84	(.67)	(3.94)	—	(4.61)	—	102.50	20.46	178,886	.74	.30	87
June 30, 2017	71.44	.52^e	17.31	17.83	—	—	—	—	—	89.27	24.96	199,737	.76	.64^e	76
June 30, 2016	82.75	.24	(2.80)	(2.56)	(.59)	(8.11)	(.05)	(8.75)	—	71.44	(3.32)	142,456	.78^d	.32^d	58

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

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


34 Sustainable Leaders Fund	Sustainable Leaders Fund 35

Financial highlights cont.

Before March 21, 2018, the fund was managed with a materially different investment strategy and may have achieved materially different performance results under its current investment strategy from that shown for periods before that date.

^*Not annualized.

^†For the period May 22, 2018 (commencement of operations) to June 30, 2018.

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

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

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

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

^eReflects a dividend received by the fund from a single issuer which amounted to the following amounts:


	Per share	Percentage of average net assets
Class A	$0.22	0.29%
Class B	0.18	0.30
Class C	0.19	0.29
Class R	0.21	0.28
Class Y	0.22	0.27

^fAmount represents less than 0.01%.

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

36 Sustainable Leaders Fund

Notes to financial statements 6/30/20

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from July 1, 2019 through June 30, 2020.

Putnam Sustainable Leaders Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The goal of the fund is to seek long-term capital appreciation. The fund invests mainly in common stocks of U.S. companies of any size, with a focus on companies that Putnam Management believes exhibit a commitment to sustainable business practices. Stocks of companies that exhibit a commitment to sustainable business practices are typically, but not always, considered to be growth stocks. Growth stocks are stocks of companies whose earnings are expected to grow faster than those of similar firms, and whose business growth and other characteristics may lead to an increase in stock price. Putnam Management considers, among other factors, a company’s sustainable business practices (as described below), valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The fund may also invest in non-U.S. companies. Sustainable investing. Putnam Management believes that companies that exhibit leadership in sustainable business practices also often exhibit more profitable, durable financial returns with lower risk profiles. Accordingly, in selecting investments, the fund focuses on companies that Putnam Management believes have a demonstrated commitment to sustainable business practices. This commitment may be reflected through environmental, social and/or corporate governance (ESG) policies, practices or outcomes.

The fund offers class A, class B, class C, class R, class R6 and class Y shares. Effective November 25, 2019, all class M shares were converted to class A shares and are no longer available for purchase. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class A shares generally are not subject to a contingent deferred sales charge, and class R, class R6 and class Y shares are not subject to a contingent deferred sales charge. Prior to November 25, 2019, class M shares were sold with a maximum front-end-sales charge of 3.50% and were not subject to a contingent differed sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and generally convert to class A shares after approximately ten years. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. 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 and class R shares, but do not bear a distribution fee, and in the case of class R6 shares, bear a lower investor servicing fee, which is identified in Note 2. Class R6 and class Y shares are not available to all investors.

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

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

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

Note 1: Significant accounting policies

The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates

Sustainable Leaders Fund 37

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

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

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

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

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

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

To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably

38 Sustainable Leaders Fund

available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

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

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

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

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

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

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

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

Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case,

Sustainable Leaders Fund 39

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 $294,356 on open derivative contracts subject to the Master Agreements. Collateral posted by the fund at period end for these agreements totaled $111,966 and may include amounts related to unsettled agreements.

Securities lending The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The remaining maturities of the securities lending transactions are considered overnight and continuous. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund received cash collateral of $270,949,625 and the value of securities loaned amounted to $266,017,957.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

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

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

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

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

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.

40 Sustainable Leaders Fund

These differences include temporary and/or permanent differences from losses on wash sale transactions and foreign currency gains and losses. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the reporting period, the fund reclassified $4,062,274 to increase undistributed net investment income and $4,062,274 to decrease accumulated net realized gain.

Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$1,754,044,298
Unrealized depreciation	(126,793,982)
Net unrealized appreciation	1,627,250,316
Undistributed ordinary income	16,625,570
Undistributed long-term gain	339,380,061
Undistributed short-term gain	711,757
Cost for federal income tax purposes	$3,607,419,699

Note 2: Management fee, administrative services and other transactions

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


0.710%	of the first $5 billion,	0.510%	of the next $50 billion,
0.660%	of the next $5 billion,	0.490%	of the next $50 billion,
0.610%	of the next $10 billion,	0.480%	of the next $100 billion and
0.560%	of the next $10 billion,	0.475%	of any excess thereafter.

In addition, the monthly management fee consists of the monthly base fee plus or minus a performance adjustment for the month. The performance adjustment is determined based on performance over the thirty-six month period then ended. Each month, the performance adjustment is calculated by multiplying the performance adjustment rate and the fund’s average net assets over the performance period and dividing the result by twelve. The resulting dollar amount is added to, or subtracted from the base fee for that month. The performance adjustment rate is equal to 0.03 multiplied by the difference between the fund’s annualized performance (measured by the fund’s class A shares) and the annualized performance of the benchmark indices described below each measured over the performance period. The maximum annualized performance adjustment rate is +/–0.12% The monthly base fee is determined based on the fund’s average net assets for the month, while the performance adjustment is determined based on the fund’s average net assets over the thirty-six month performance period. This means it is possible that, if the fund underperforms significantly over the performance period, and the fund’s assets have 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.

Effective August 1, 2019, the fund’s benchmark index is the S&P 500 Index. Before August 1, 2019, the fund’s benchmark index was the Russell 3000 Growth Index. Because the performance adjustment is based on a rolling thirty-six-month performance period, there is a transition period during which the fund’s performance is compared to a composite index that reflects the performance of the Russell 3000 Growth Index for the portion of the performance period before August 1, 2019, and the performance of the S&P 500 Index for the remainder of the period.

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.

Sustainable Leaders Fund 41

For the reporting period, the management fee represented an effective rate (excluding the impact of any expense waiver in effect) of 0.576% of the fund’s average net assets, which included an effective base fee of 0.549% and an increase of 0.027% ($1,280,431) based on performance.

Putnam Management has contractually agreed, through October 30, 2021, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay 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 fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.

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

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M, class R and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (retail account) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts. Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.

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

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


Class A	$6,946,277	Class R	13,236
Class B	61,423	Class R6	35,639
Class C	60,060	Class Y	357,108
Class M	39,173	Total	$7,512,916

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $39,945 under the expense offset arrangements and by $54,820 under the brokerage/service arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $3,318, 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.

42 Sustainable Leaders Fund

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

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


	Maximum %	Approved %	Amount
Class A	0.35%	0.25%	$10,728,699
Class B	1.00%	1.00%	379,781
Class C	1.00%	1.00%	371,299
ClassM ^*	1.00%	0.75%	180,475
Class R	1.00%	0.50%	40,899
Total			$11,701,153

^*Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $237,423 and $795 from the sale of class A and class M shares, respectively, and received $10,133 and $976 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $77 on class A redemptions.

Note 3: Purchases and sales of securities

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


	Cost of purchases	Proceeds from sales
Investments in securities (Long-term)	$1,982,564,665	$2,264,549,452
U.S. government securities (Long-term)	—	—
Total	$1,982,564,665	$2,264,549,452

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

Sustainable Leaders Fund 43

Note 4: Capital shares

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


	YEAR ENDED 6/30/20		YEAR ENDED 6/30/19
Class A	Shares	Amount	Shares	Amount
Shares sold	1,539,127	$144,405,024	1,084,952	$94,494,517
Shares issued in connection with
reinvestment of distributions	3,176,055	287,841,981	7,329,698	580,805,189
	4,715,182	432,247,005	8,414,650	675,299,706
Shares repurchased	(4,690,680)	(428,582,779)	(4,811,342)	(432,544,222)
Net increase	24,502	$3,664,226	3,603,308	$242,755,484

	YEAR ENDED 6/30/20		YEAR ENDED 6/30/19
Class B	Shares	Amount	Shares	Amount
Shares sold	10,051	$654,905	24,306	$1,749,813
Shares issued in connection with
reinvestment of distributions	54,365	3,547,322	155,925	9,163,732
	64,416	4,202,227	180,231	10,913,545
Shares repurchased	(220,338)	(14,574,867)	(228,393)	(15,471,400)
Net decrease	(155,922)	$(10,372,640)	(48,162)	$(4,557,855)

	YEAR ENDED 6/30/20		YEAR ENDED 6/30/19
Class C	Shares	Amount	Shares	Amount
Shares sold	110,622	$8,208,240	103,818	$7,751,310
Shares issued in connection with
reinvestment of distributions	40,595	2,961,391	94,649	6,159,738
	151,217	11,169,631	198,467	13,911,048
Shares repurchased	(169,667)	(12,566,320)	(121,412)	(8,868,178)
Net increase (decrease)	(18,450)	$(1,396,689)	77,055	$5,042,870

	YEAR ENDED 6/30/20^*		YEAR ENDED 6/30/19
Class M	Shares	Amount	Shares	Amount
Shares sold	3,163	$248,225	13,046	$979,699
Shares issued in connection with
reinvestment of distributions	—	—	144,654	9,644,094
	3,163	248,225	157,700	10,623,793
Shares repurchased	(766,326)	(62,447,659)	(66,534)	(5,029,283)
Net increase (decrease)	(763,163)	$(62,199,434)	91,166	$5,594,510

	YEAR ENDED 6/30/20		YEAR ENDED 6/30/19
Class R	Shares	Amount	Shares	Amount
Shares sold	19,347	$1,671,060	12,314	$1,106,440
Shares issued in connection with
reinvestment of distributions	7,071	614,082	17,327	1,319,970
	26,418	2,285,142	29,641	2,426,410
Shares repurchased	(33,975)	(3,023,076)	(23,526)	(1,964,919)
Net increase (decrease)	(7,557)	$(737,934)	6,115	$461,491

44 Sustainable Leaders Fund


	YEAR ENDED 6/30/20		YEAR ENDED 6/30/19
Class R6	Shares	Amount	Shares	Amount
Shares sold	146,610	$14,681,376	64,937	$6,391,285
Shares issued in connection with
reinvestment of distributions	49,045	4,841,219	102,771	8,815,681
	195,655	19,522,595	167,708	15,206,966
Shares repurchased	(178,235)	(17,650,129)	(61,197)	(5,979,730)
Net increase	17,420	$1,872,466	106,511	$9,227,236

	YEAR ENDED 6/30/20		YEAR ENDED 6/30/19
Class Y	Shares	Amount	Shares	Amount
Shares sold	782,097	$77,788,340	511,106	$50,119,143
Shares issued in connection with
reinvestment of distributions	144,198	14,207,822	309,380	26,495,292
	926,295	91,996,162	820,486	76,614,435
Shares repurchased	(508,482)	(49,797,033)	(494,453)	(47,429,013)
Net increase	417,813	$42,199,129	326,033	$29,185,422

^*Effective November 25, 2019, the fund converted all of its class M shares to class A shares and class M shares were no longer able to be purchased.

Note 5: Affiliated transactions

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


					Shares
					outstanding
					and fair
	Fair value as	Purchase	Sale	Investment	value as
Name of affiliate	of 6/30/19	cost	proceeds	income	of 6/30/20
Short-term investments
Putnam Cash Collateral
Pool, LLC^*	$154,042,280	$1,505,015,584	$1,388,108,239	$2,352,966	$270,949,625
Putnam Short Term
Investment Fund^**	210,401,383	1,199,111,315	1,275,787,913	2,270,060	133,724,785
Total Short-term
investments	$364,443,663	$2,704,126,899	$2,663,896,152	$4,623,026	$404,674,410

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

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

Note 6: Market, credit and other risks

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

Beginning in January 2020, global financial markets have experienced, and may continue to experience, significant volatility resulting from the spread of a virus known as COVID–19. The outbreak of COVID–19 has

Sustainable Leaders Fund 45

resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand, and general market uncertainty. The effects of COVID–19 have adversely affected, and may continue to adversely affect, the global economy, the economies of certain nations, and individual issuers, all of which may negatively impact the fund’s performance.

Note 7: Summary of derivative activity

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


Forward currency contracts (contract amount)	$140,800,000
Warrants (number of warrants)	55,000

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


Fair value of derivative instruments as of the close of the reporting period
	ASSET DERIVATIVES		LIABILITY DERIVATIVES
Derivatives not
accounted for as	Statement of		Statement of
hedging instruments	assets and		assets and
under ASC 815	liabilities location	Fair value	liabilities location	Fair value
Foreign exchange
contracts	Receivables	$274,841	Payables	$294,356
Equity contracts	Investments	—	Payables	—
Total		$274,841		$294,356

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


Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
Derivatives not accounted for as	Forward currency
hedging instruments under ASC 815	contracts	Total
Foreign exchange contracts	$4,090,229	$4,090,229
Total	$4,090,229	$4,090,229


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	Warrants	contracts	Total
Foreign exchange contracts	$—	$1,282,272	$1,282,272
Equity contracts	—	—	—
Total	$—	$1,282,272	$1,282,272

46 Sustainable Leaders Fund

Note 8: Offsetting of financial and derivative assets and liabilities

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


	Bank of America N.A.	Barclays Bank PLC	HSBC Bank USA, National Association	JPMorgan Chase Bank N.A.	State Street Bank and Trust Co.	UBS AG	Total
Assets:
Forward currency	$236,406	$—	$35,638	$—	$2,797	$—	$274,841
contracts^#
Total Assets	$236,406	$—	$35,638	$—	$2,797	$—	$274,841
Liabilities:
Forward currency	—	49,888	—	146,462	—	98,006	294,356
contracts^#
Total Liabilities	$—	$49,888	$—	$146,462	$—	$98,006	$294,356
Total Financial
and Derivative	$236,406	$(49,888)	$35,638	$(146,462)	$2,797	$(98,006)	$(19,515)
Net Assets
Total collateral
received	$236,406	$—	$—	$(61,981)	$—	$(49,985)
(pledged)^†##
Net amount	$—	$(49,888)	$35,638	$(84,481)	$2,797	$(48,021)
Controlled collateral
received (including	$377,929	$—	$—	$—	$—	$—	$377,929
TBA commitments)^**
Uncontrolled
collateral received	$—	$—	$—	$—	$—	$—	$—
Collateral (pledged)
(including TBA	$—	$—	$—	$(61,981)	$—	$(49,985)	$(111,966)
commitments)^**

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

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

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

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

Sustainable Leaders Fund 47

Federal tax information (Unaudited)

Pursuant to §852 of the Internal Revenue Code, as amended, the fund hereby designates $379,385,911 as a capital gain dividend with respect to the taxable year ended June 30, 2020, or, if subsequently determined to be different, the net capital gain of such year.

The fund designated 100% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

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

For the reporting period, pursuant to §871(k) of the Internal Revenue Code, the fund hereby designates $901,427 of distributions paid as qualifying to be taxed as interest-related dividends, and no amount to be taxed as short-term capital gain dividends for nonresident alien shareholders.

The Form 1099 that will be mailed to you in January 2021 will show the tax status of all distributions paid to your account in calendar 2020.

48 Sustainable Leaders Fund

Officers

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


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

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

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is 100 Federal Street, Boston, MA 02110.

Sustainable Leaders Fund 51

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.

52 Sustainable Leaders Fund

Fund information

Founded over 80 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage funds across income, value, blend, growth, sustainable, asset allocation, absolute return, and global sector categories.


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

This report is for the information of shareholders of Putnam Sustainable Leaders 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.


FORWARD CURRENCY CONTRACTS at 6/30/20 (aggregate face value $122,828,393)
						Unrealized
		Contract	Delivery		Aggregate	appreciation/
Counterparty	Currency	type^*	date	Value	face value	(depreciation)
Bank of America N.A.
	British Pound	Sell	9/16/20	$14,571,821	$14,808,227	$236,406
Barclays Bank PLC
	British Pound	Buy	9/16/20	3,112,634	3,162,522	(49,888)
HSBC Bank USA, National Association
	British Pound	Sell	9/16/20	2,242,400	2,278,038	35,638
JPMorgan Chase Bank N.A.
	Euro	Sell	9/16/20	53,449,077	53,302,615	(146,462)
State Street Bank and Trust Co.
	Euro	Buy	9/16/20	1,293,398	1,290,601	2,797
UBS AG
	Euro	Sell	9/16/20	48,084,396	47,986,390	(98,006)
Unrealized appreciation						274,841
Unrealized (depreciation)						(294,356)
Total						$(19,515)


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


June 30, 2020	$240,618	$ —	$6,293	$ —
June 30, 2019	$207,674	$ —	$6,293	$ —


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

June 30, 2020	$ —	$283,716	$ —	$ —
June 30, 2019	$ —	$546,984	$ —	$ —


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


	Exact name of registrant as specified in charter:	Putnam Sustainable Leaders Fund


	Address of principal executive offices:	100 Federal Street, Boston, Massachusetts 02110


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


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


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


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


	(c) In October 2019, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Employee notification to the Code of Ethics Officer before acting as a public official for any government entity (ii) Clarifying changes to the Insider Trading provisions and to the rules for trading in securities issued by Great-West Lifeco.


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


	For the fiscal years ended June 30, 2020 and June 30, 2019, the fund's independent auditor billed aggregate non-audit fees in the amounts of $290,009 and $553,277 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	Washington, D.C. 20549


	FORM N-CSR


	Item 1. Report to Stockholders:


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


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


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


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


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


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


	Item 8. Portfolio Managers of Closed-End Investment Companies


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


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


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


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


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


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


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


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


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


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