Putnam
International
Growth and
Income Fund
ANNUAL REPORT
June 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam International Growth and Income Fund was born with a silver
portfolio in its mouth. This young fund enjoys advantages that most
offerings have to develop over time."
-- Morningstar, June 6, 1997
* "Those investing abroad are benefiting from a new concept in many
foreign countries: shareholder friendliness."
-- Investor's Business Daily, July 10, 1997
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
18 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Putnam International Growth and Income Fund successfully targeted stocks
of attractively valued companies with the potential for positive change
from more than two dozen countries outside the United States to deliver
a solid double-digit total return during its first fiscal year, which
ended on June 30, 1997. All of these holdings were carefully selected for
their individual merits rather than for their country of origin.
Following the lead taken by U.S. corporations a number of years ago,
companies headquartered elsewhere continue to restructure into leaner,
more efficient -- and more profitable -- entities. This ongoing process
provides a steady stream of attractive investment opportunities for your
fund's management team to seek out.
In the following report, the managers comment on fiscal 1997 performance
and prospects for the year ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
August 20, 1997
Report from the Fund Managers
Justin M. Scott
George W. Stairs
Mark D. Pollard
Almost a year ago, Putnam International Growth and Income Fund entered
the overseas investing arena with a mission of finding undervalued
companies possessing the potential for positive change. We are pleased
to report that our quest for cheapness and change has proved not only
successful but unusually timely; many overseas companies are currently
embracing the concept of creating value for their shareholders, rebuilding
their businesses through aggressive corporate restructuring programs,
and increasing their competitive positioning in order to attract
global capital.
For the period from August 1, 1996, through June 30, 1997, your fund's
class A shares provided a total return of 26.73% at net asset value and
19.45% at public offering price. These results are significantly higher
than those delivered by the benchmark Morgan Stanley Capital International
EAFE Index, which rose 16.23%. For performance of different share classes,
please turn to page 9.
* VARIETY OF FACTORS COME TOGETHER TO HELP CONTINENTAL EUROPE
Despite a Socialist victory in the French elections and continued concern
about the feasibility of European Monetary Union (EMU), Continental Europe
proved a solid foundation for the fund's portfolio. In general, European
equities benefited from low interest rates, varying degrees of economic
recovery, and an increasing level of corporate restructuring. Additionally
a strong dollar contributed to the profitability of European exporters.
We took advantage of this environment in Europe on a stock-by-stock basis.
For example, stocks of French oil companies Elf Aquitaine and Total were
hurt by the underperformance of the French stock market at different times
during the year, and yet both companies were engaged in aggressive
restructuring efforts that we believed would favorably impact their
businesses. As always, we took advantage of market declines and added
to the fund's positions in these companies -- both of which have since
appreciated in value.
Other fund holdings on the Continent also demonstrated the rewards of
corporate-wide change. Philips Electronics of the Netherlands brought on
a new CEO who spearheaded an aggressive cost-cutting program. Union Bank
of Switzerland (UBS) has moved away from pure domestic operations and
expanded into more profitable international fee-based businesses such
as investment banking. German steel producer Thyssen divested more
than $5 billion of unprofitable assets and then announced the merger
of its steel operations with another German steel company, Krupp-Hoesch.
Electronics company Siemens of Germany also benefited from a well-received
restructuring and divestiture program. While these holdings, along with
others discussed in this report, were viewed favorably at the end of the
fiscal period, all are subject to review and adjustment in accordance
with the fund's investment strategy and may vary in the future.
[GRAPHIC OMITTED: horizontal bar chart COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
United Kingdom 20.2%
Japan 13.9%
France 12.4%
Germany 11.2%
The Netherlands 7.9%
Switzerland 5.9%
Sweden 4.5%
Ireland 3.8%
Footnote reads:
*Based on net assets as of 6/30/97. Allocations will vary over time.
* UNITED KINGDOM STOCKS OFFER MIXED RESULTS
Investors' uncertainties about the policies of the new Labor majority in
the United Kingdom and of new Prime Minister Tony Blair were quickly
assuaged when the new government took some positive first steps in
monetary policy. The U.K. market cooled somewhat, however, as interest
rates rose slightly during the period.
Despite the mixed performance of the British market overall, we found
several attractive stocks. Pharmaceutical company Glaxo Wellcome appeared
quite undervalued by the market and yet had a sound pipeline of new
products. Consumer products company Unilever sold its non-core chemicals
business for $8 billion. Finally, oil company Shell Transport & Trading,
which is co-owner of the Royal Dutch/Shell Group, shifted its focus
toward increasing return on capital as many other major oil companies
have done.
Unfortunately it often takes time before some companies that we believe
hold the most value fulfill their potential. One British company that
underperformed the market was BTR. The diversified industrial equipment
manufacturer's restructuring program and management shakeup have yet to
bear fruit. Rolls-Royce also remained an undervalued opportunity. Not
only does the company have the products to meet demand in that resurgent
aircraft engine industry, but it is also completing an aggressive
cost-reduction program and recently divested its underperforming
electrical power generation equipment operations.
* JAPAN SHOWS SIGNS OF RECOVERY
As investors digest the effects of Prime Minister Ryutaro Hashimoto's big
bang economic reform policies, the once moribund Japanese economy has
begun to show some signs of life. More importantly, after six years of
recession, some Japanese companies are having to break long-standing
business customs and make themselves attractive to global investors in
order to raise their profitability. One company, Matsushita Electric
Works, announced a share buy-back program of about 6% of equity
outstanding. Such programs, new to Japan, are on the upswing. At the
beginning of 1997, there were 20 Japanese companies with stock
repurchase programs, but by the end of your fund's fiscal year, there
were 60.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
BAT Industries (United Kingdom)
Tobacco products
General Electric Co. (United Kingdom)
Electronics and electrical equipment
Akzo-Nobel (The Netherlands)
Chemicals
Canon, Inc. (Japan)
Office equipment and services
Compagnie Generale des Eaux (France)
Environmental control
Bayer AG (Germany)
Chemicals
Shell Transport & Trading Co. (United Kingdom)
Oil and gas
Ente Nazionale Idrocarburi SPA (Italy)
Electric utility
Pharmacia & Upjohn (Sweden)
Pharmaceuticals
CRH PLC (Ireland)
Building and construction
Footnote reads:
These holdings represented 20.0% of the fund's assets as of 6/30/97.
Portfolio holdings will vary over time.
For most of the period, the stock market was led by large, export-oriented
companies able to profit from the weak yen. We also targeted Japanese
companies with improving fundamentals and those that could benefit from
the economic uptick. For example, Sony offered tremendous potential for
positive change when it revamped its product line. The result so far has
been consistent revenue growth. Another example is Promise, a consumer
finance company that may benefit from the Japanese consumer's increased
spending. (Unlike U.S. consumers, the Japanese rarely use credit cards to
buy their products and instead borrow money from consumer finance companies
rather than banks.) The fund also targeted some cyclical stocks -- such as
Tokyo-based Kawasaki Steel -- that tend to perform well when the
economy expands.
* STOCK-BY-STOCK APPROACH TO FINDING VALUE
International markets often get caught up in the macroeconomic and
political issues of a particular country or region. Such events, however,
do not play a large role in the investment decisions that drive your fund.
Although it is possible that certain economic or social policies could
affect an individual company, we believe they are unlikely to have a great
impact on the value of the underlying business. We also believe that by
using a more bottom-up, value-oriented, stock-by-stock approach to
investing, we can best find undervalued stocks and better utilize
Putnam's extensive global research capabilities.
As for the near future, we believe companies in Europe and parts of Asia
will continue to restructure and cut costs as a way to improve
competitiveness. We will also begin to invest on a selective basis in the
emerging markets, particularly in Latin America, as their product markets
become more open and competitive and their stock markets become more
accessible to international investors.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 6/30/97, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks not present with domestic investments, including
currency fluctuations, political instability, and economic developments.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
International Growth and Income Fund is designed for investors seeking
long-term growth of capital. Current income is a secondary objective.
TOTAL RETURN FOR PERIOD ENDED 6/30/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (8/1/96) (8/1/96) (8/1/96)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------------
Life of fund 26.73% 19.45% 25.80% 20.80% 26.17% 21.75%
- -----------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 6/30/97
Consumer
MSCI EAFE Price Index
- -----------------------------------------------------------------------------
Life of fund 16.23% 2.10%
- -----------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
for the period 8/1/96 to 6/30/97
Class A Class B Class M
- -----------------------------------------------------------------------------
Distributions (number) 3 2 3
- -----------------------------------------------------------------------------
Income $0.045 $0.009 $0.020
- -----------------------------------------------------------------------------
Capital gains -- -- --
- -----------------------------------------------------------------------------
Total $0.045 $0.009 $0.020
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------------
8/1/96 $8.53 $9.05 $ 8.53 $ 8.53 $8.84
(commencement of
operations)
- -----------------------------------------------------------------------------
6/30/97 $10.76 $11.42 $10.72 $10.74 $11.13
- -----------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
Class A and class M share performance is shown at public offering price
and reflects the current maximum sales charge of 5.75% for class A shares
and 3.50% for class M shares. Class B share performance reflects the
applicable contingent deferred sales charge (CDSC), the maximum being 5%
in the first year, declining to 1% in the sixth year, and eliminated
thereafter. All returns assume reinvestment of distributions at NAV and
represent past performance; they do not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance data do not take into account any adjustments for taxes
payable on reinvested distributions.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 8/1/96
Fund's class A shares at POP $11,945
MSCI EAFE Index $11,623
Consumer Price Index $10,210
Fund's
class A MSCI Consumer
shares EAFE Price
at POP Index Index
-------- ----- --------
8/1/96 9425 10000 10000
8/31/96 9403 10022 10019
9/30/96 9569 10288 10051
10/31/96 9646 10183 10083
11/30/96 10166 10588 10102
12/31/96 10238 10452 10102
1/31/97 10293 10086 10134
2/28/97 10625 10251 10166
3/31/97 10808 10288 10191
4/30/97 10842 10343 10204
5/31/97 11440 11016 10197
6/30/97 11945 11623 10210
6/30/97 11945 11623 10210
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $12,580 ($12,080 with a redemption at the end of the period)
and a $10,000 investment in the fund's class M shares would have been valued
at $12,617 at net asset value at 6/30/97 ($12,175 at public offering price).
See first page of performance section for performance calculation method.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Europe, Australia, and the Far East (EAFE) component of the Morgan Stanley
Capital International World Index is an unmanaged list of international
equity securities, excluding U.S., with all values expressed in U.S.
dollars. Performance figures reflect changes in market prices and
reinvestment of distributions net of withholding taxes. Securities in the
fund do not match those in the index and performance of the fund will
differ. It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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Report of independent accountants
To the Trustees and Shareholders of
Putnam International Growth and Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam
International Growth and Income Fund (the "fund") at June 30, 1997, and the
results of its operations, the changes in its net assets and the financial
highlights for the period from August 1, 1996 (commencement of operations)
through June 30, 1997, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of investments owned at June 30, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
August 13, 1997
Portfolio of investments owned
June 30, 1997
<TABLE>
<CAPTION>
COMMON STOCKS (93.6%) *
NUMBER OF SHARES VALUE
Argentina (0.1%)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6,400 YPF S.A. ADR $ 196,800
Australia (1.1%)
- -------------------------------------------------------------------------------------------------------------------
618,000 Westpac Banking Corp. 3,711,334
Belgium (0.8%)
- -------------------------------------------------------------------------------------------------------------------
6,881 Kredietbank, NPV 2,773,826
Brazil (0.4%)
- -------------------------------------------------------------------------------------------------------------------
38,400 Uniao de Bancos Brasileiros S.A. GDR + 1,425,600
Canada (2.6%)
- -------------------------------------------------------------------------------------------------------------------
125,020 Bank of Nova Scotia 5,478,964
277,500 National Bank of Canada 3,477,544
--------------
8,956,508
France (12.4%)
- -------------------------------------------------------------------------------------------------------------------
54,616 Compagnie Generale des Eaux 6,999,549
37,450 Credit Locale de France S.A. 3,645,885
54,389 Elf Aquitaine S.A. 5,868,884
53,206 Lafarge S.A. 3,309,811
85,752 Michelin Corp. Class B 5,150,520
63,297 Scor 2,548,901
47,140 SGS-Thomson Microelectronics ADR + 3,722,740
32,804 Societe Generale 3,662,569
35,927 Television Francaise 1 3,210,225
53,303 Total Corp. S.A. Class B 5,388,815
--------------
43,507,899
Germany (11.2%)
- -------------------------------------------------------------------------------------------------------------------
3,305 Altana AG 3,525,839
181,798 Bayer AG ADR 6,988,300
6,531 Bayerische Motoren Werke (BMW) AG 5,405,353
194,200 Deutsche Telekom AG 4,678,176
82,300 Deutsche Telekom AG ADR 1,985,488
142,029 Dresdner Bank AG 4,912,159
71,400 Siemens AG 4,240,591
14,027 Thyssen AG 3,322,713
72,970 Veba AG 4,101,554
--------------
39,160,173
Hong Kong (2.0%)
- -------------------------------------------------------------------------------------------------------------------
634,000 Dao Heng Bank Group Ltd. $ 3,470,161
669,000 Guoco Group Ltd. 3,523,553
23,181 Hong Kong Land Holdings Ltd. 61,661
--------------
7,055,375
Ireland (3.8%)
- -------------------------------------------------------------------------------------------------------------------
842,220 Allied Irish Banks PLC 6,462,071
640,159 CRH PLC 6,700,667
--------------
13,162,738
Italy (1.9%)
- -------------------------------------------------------------------------------------------------------------------
1,201,500 Ente Nazionale Idrocarburi SPA (ENI) 6,812,611
Japan (13.9%)
- -------------------------------------------------------------------------------------------------------------------
259,000 Canon, Inc. 7,057,464
87,000 Fuji Photo Film Co. 3,502,793
62,000 Ito-Yokado Co., Ltd. 3,600,872
377,000 KAO Corp. 5,235,194
551,000 Kawasaki Steel Corp. 1,794,960
302,000 Matsushita Electric Works 3,428,819
353,000 NEC Corp. 4,932,749
9,000 Promise Co. Ltd. 515,633
164,000 Sankyo Co., Ltd. 5,514,408
172,800 Santen Pharmaceutical Co., Ltd. 3,486,182
58,700 Sony Corp. 5,121,508
96,000 Taisho Pharmaceutical Co. 2,590,741
25,000 TDK Corp. 1,836,244
--------------
48,617,567
Mexico (1.1%)
- -------------------------------------------------------------------------------------------------------------------
612,400 Cemex S.A. de C.V. 2,626,668
216,300 Fomento Economico Mexicano, S.A. de C.V. Class B 1,290,651
--------------
3,917,319
Netherlands (7.8%)
- -------------------------------------------------------------------------------------------------------------------
176,183 ABN AMRO Holding N.V. 3,287,600
52,270 Akzo-Nobel N.V. 7,168,670
112,471 Internationale Nederlanden Groep 5,189,470
90,080 K.L.M. Royal Dutch Airlines N.V. 2,778,546
79,907 Philips Electronics N.V. 5,728,013
84,572 Royal PTT ADR 3,320,100
--------------
27,472,399
Norway (1.5%)
- -------------------------------------------------------------------------------------------------------------------
1,320,835 Den Norske Bank A.S.A. 5,180,878
Portugal (1.1%)
- -------------------------------------------------------------------------------------------------------------------
23,600 Electricidade de Portugal S.A. + $ 433,360
88,084 Portugal Telecom S.A. 3,555,410
--------------
3,988,770
Sweden (4.5%)
- -------------------------------------------------------------------------------------------------------------------
24,209 Electrolux AB 1,751,296
201,238 Pharmacia & Upjohn Inc. ADS 6,809,246
10,110 Sandvik AB Class A 287,696
147,784 Sandvik AB Class B 4,205,430
125,192 Svenska Cellulosa AB Class B 2,669,875
--------------
15,723,543
Switzerland (5.9%)
- -------------------------------------------------------------------------------------------------------------------
947 Julius Baer Holdings AG 1,448,795
1,491 Baloise Holding Ltd. + 3,551,701
57,263 Ciba Specialty Chemicals AG + 5,291,604
4,551 Nestle AG 5,999,881
3,657 Union Bank of Switzerland 4,180,430
--------------
20,472,411
United Kingdom (20.2%)
- -------------------------------------------------------------------------------------------------------------------
998,322 B A T Industries PLC 8,931,137
371,597 British Petroleum Co. PLC 4,616,998
1,024,400 BTR Ltd. PLC 3,503,798
1,241,470 General Electric Co. PLC 7,418,027
250,813 Glaxo Wellcome PLC 5,176,419
115,779 HSBC Holdings PLC 3,562,107
262,313 Imperial Chemical Industries PLC 3,647,741
398,868 National Westminster Bank PLC 5,360,798
261,600 Norwich Union PLC 144A 1,388,948
256,244 Rio Tinto PLC 4,463,244
878,432 Rolls-Royce PLC 3,355,433
568,328 Scottish Power PLC 3,698,567
1,007,286 Shell Transportation & Trading Co. 6,865,377
822,144 Tomkins PLC 3,557,772
183,184 Unilever PLC 5,248,706
--------------
70,795,072
United States (1.3%)
- -------------------------------------------------------------------------------------------------------------------
122,184 MCI Communications Corp. 4,677,356
--------------
Total Common Stocks (cost $301,612,387) $ 327,608,179
PREFERRED STOCKS (0.5%) * (cost $2,075,947)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
53,700 Uniao de Bancos Brasileiros S.A. BRC
.6034 pfd. (Brazil) $ 1,870,819
WARRANTS (--) * (cost $21,838) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
28,630 Compagnie Generale des Eaux + 5/2/97 $ 17,152
SHORT-TERM INVESTMENTS (8.4%) * (cost $29,316,804)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
$29,312,000 Interest in $293,634,000 joint repurchase agreement
dated June 30, 1997 with UBS Securities due
July 1, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $29,316,804 for an
effective yield of 5.90% $ 29,316,804
- -------------------------------------------------------------------------------------------------------------------
Total Investments (cost $333,026,976) *** $ 358,812,954
- -------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $349,895,353.
*** The aggregate identified cost on a tax basis is $333,258,460,
resulting in gross unrealized appreciation and depreciation of
$29,428,534 and $3,874,040, respectively, or net unrealized appreciation
of $25,554,494.
+ Non-income-producing security.
ADR, ADS or GDR after the name of a foreign holding stands for
American Depository Receipts, American Depository Shares, or Global
Depository Receipts, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration
normally to qualified institutional buyers.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy at June 30, 1997
(aggregate face value $3,433,911)
Aggregate Face Delivery Unrealized
Market Value Value Date Depreciation
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Swiss Francs 3,284,459 3,433,911 8/6/97 (149,452)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at June 30, 1997
(aggregate face value $46,586,434)
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- -----------------------------------------------------------------------------------------------
Deutschemark $ 9,787,477 $ 9,939,819 7/30/97 152,342
French Francs 32,549,385 33,338,443 8/13/97 789,058
Swiss Francs 3,284,460 3,308,172 8/6/97 23,712
- -----------------------------------------------------------------------------------------------
965,112
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $333,026,976) (Note 1) $358,812,954
- ---------------------------------------------------------------------------------------------------------
Cash 1,387,175
- ---------------------------------------------------------------------------------------------------------
Foreign currency, at value (identified cost $1,049,615) 1,049,615
- ---------------------------------------------------------------------------------------------------------
Dividends and interest receivable 951,102
- ---------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 6,366,955
- ---------------------------------------------------------------------------------------------------------
Receivable for securities sold 1,436,589
- ---------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 965,112
- ---------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 63,422
- ---------------------------------------------------------------------------------------------------------
Total assets 371,032,924
Liabilities
- ---------------------------------------------------------------------------------------------------------
Payable for securities purchased 17,674,076
- ---------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,652,443
- ---------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 938,532
- ---------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 124,648
- ---------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,949
- ---------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,030
- ---------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 231,611
- ---------------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 64,834
- ---------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 149,452
- ---------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 152,198
- ---------------------------------------------------------------------------------------------------------
Other accrued expenses 144,798
- ---------------------------------------------------------------------------------------------------------
Total liabilities 21,137,571
- ---------------------------------------------------------------------------------------------------------
Net assets $349,895,353
Represented by
- ---------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $310,802,846
- ---------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,165,273
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 8,321,322
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 26,605,912
- ---------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $349,895,353
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($157,989,883 divided by 14,681,589 shares) $10.76
- ---------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.76)* $11.42
- ---------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($174,800,792 divided by 16,300,621 shares)** $10.72
- ---------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($17,104,678 divided by 1,592,773 shares) $10.74
- ---------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.74)* $11.13
- ---------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
For the period August 1, 1996 (commencement of operations)
to June 30, 1997
<S> <C>
Investment income:
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $349,717) $ 3,570,431
- ---------------------------------------------------------------------------------------------------------
Interest 437,767
- ---------------------------------------------------------------------------------------------------------
Total investment income 4,008,198
Expenses:
Compensation of Manager (Note 2) 945,314
- ---------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 512,178
- ---------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,063
- ---------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,425
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 138,470
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 565,938
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 44,012
- ---------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,412
- ---------------------------------------------------------------------------------------------------------
Reports to shareholders 28,659
- ---------------------------------------------------------------------------------------------------------
Registration fees 94,275
- ---------------------------------------------------------------------------------------------------------
Auditing 31,785
- ---------------------------------------------------------------------------------------------------------
Legal 7,298
- ---------------------------------------------------------------------------------------------------------
Postage 28,913
- ---------------------------------------------------------------------------------------------------------
Other 2,093
- ---------------------------------------------------------------------------------------------------------
Total expenses 2,414,835
- ---------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (102,249)
- ---------------------------------------------------------------------------------------------------------
Net expenses 2,312,586
- ---------------------------------------------------------------------------------------------------------
Net investment income 1,695,612
- ---------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 8,321,323
- ---------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Notes 1 and 3) 2,950,745
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 819,934
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 25,785,978
- ---------------------------------------------------------------------------------------------------------
Net gain on investments 37,877,980
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $39,573,592
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
August 1, 1996
(commencement
of operations)
to June 30
1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,695,612
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 11,272,068
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 26,605,912
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 39,573,592
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (416,988)
- ----------------------------------------------------------------------------------------------------------------------
Class B (54,244)
- ----------------------------------------------------------------------------------------------------------------------
Class M (18,125)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 307,811,118
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 346,895,353
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 3,000,000
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $4,165,273) $349,895,353
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
For the period
August 1, 1996+
Per-share operating performance to June 30
- ----------------------------------------------------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.53
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income .15 (d)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.13
- ----------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.28
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------
From net
investment income (.05)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (.05)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.76
- ----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%) (a) 26.73 *
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $157,990
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.52 *
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.61 *
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.25 *
- ----------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $.0302
- ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of
sales charges.
(b) The ratio of expenses to average net assets for the period includes amounts paid through expense
offset arrangements. (Note 2)
(c) Average commission rate paid on security trades.
(d) Per share net investment income has been determined on the basis of weighted average number of
shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
For the period
Per-share August 1, 1996+
operating performance to June 30
- ----------------------------------------------------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.53
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income .10 (d)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.10
- ----------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.20
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------
From net
investment income (.01)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (.01)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.72
- ----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%) (a) 25.80 *
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $174,801
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 2.21 *
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.03 *
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.25 *
- ----------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $.0302
- ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of
sales charges.
(b) The ratio of expenses to average net assets for the period includes amounts paid through expense
offset arrangements. (Note 2)
(c) Average commission rate paid on security trades.
(d) Per share net investment income has been determined on the basis of weighted average number of
shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
For the period
Per-share August 1, 1996+
operating performance to June 30
- ----------------------------------------------------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.53
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income .12 (d)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.11
- ----------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.23
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------
From net
investment income (.02)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (.02)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.74
- ----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%) (a) 26.17 *
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $17,105
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.98 *
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.19 *
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.25 *
- ----------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $.0302
- ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of
sales charges.
(b) The ratio of expenses to average net assets for the period includes amounts paid through expense
offset arrangements. (Note 2)
(c) Average commission rate paid on security trades.
(d) Per share net investment income has been determined on the basis of weighted average number of
shares outstanding during the period.
</TABLE>
Notes to financial statements
June 30, 1997
Note 1
Significant accounting policies
Putnam International Growth and Income Fund ("the fund") is one in a series of
Putnam Funds Trust (the "Trust") which is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The fund invests primarily in common stocks that offer
potential for capital growth and may invest in stocks that offer potential for
current income.
The fund offers class A, class B and class M shares. The fund commenced
operations of class A, class B and class M shares on August 1, 1996. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years, do
not pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class M shares are
sold with a maximum front-end sales charge of 3.50% and pay an ongoing
distribution fee that is lower than class B shares and higher than class A
shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at fair market value, which is determined using the last
reported sale price, or, if no sales are reported -- as is the case of some
securities traded over-the-counter -- the last reported bid price. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60 days
or less are valued at amortized cost, which approximates market value. All
other investments are stated at fair value following procedures approved by
the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date except that certain dividends from foreign
securities are recorded as soon as the fund is informed of the ex-dividend
date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, other assets and liabilities are recorded in the books and records
of the fund after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange
rates when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the foreign
exchange rate on investments from fluctuations arising from changes in the
market prices of the securities. Such fluctuations are included with the net
realized and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or losses
on closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign withholding
taxes recorded on the fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized gains and losses on foreign currency
transactions arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the period end,
resulting from changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. The fund could be exposed to
risk if the value of the currency changes unfavorably, if the counterparties
to the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include treatment
of realized gains and losses on forward foreign currency contracts, and
organization expenses. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations. For the year
ended June 30, 1997, the fund reclassified $2,959,018 to increase undistributed
net investment income and $8,272 to decrease paid-in-capital, with a decrease
to accumulated net realized gain on investments of $2,950,746. The calculation
of net investment income per share in the financial highlights table excludes
these adjustments.
I) Expenses of the trust Expenses directly charged or attributable to any fund
will be paid from the assets of that fund. Generally, expenses of the trust
will be allocated among and charged to the assets of each fund on a basis that
the Trustees deem fair and equitable, which may be based on the relative
assets of each fund or the nature of the services performed and relative
applicability to each fund.
J) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public offering of
its shares were $64,834. These expenses are being amortized on projected net
asset levels over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund for the
quarter. Such fee is based on the following annual rates: 0.80% of the first
$500 million of average net assets, 0.70% of the next $500 million, 0.65% of
the next $500 million, 0.60% of the next $5 billion, 0.575% of the next $5
billion, 0.555% of the next $5 billion, 0.54 % of the next $5 billion and
0.53% of any excess thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through July 1, 1997, to the extent that
expenses of the fund (exclusive of brokerage, interest, taxes, deferred
organizational and extraordinary expense, credits from Putnam Fiduciary Trust
Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. and
payments under the Trust's distribution plan) would exceed an annual rate of
1.45% of the fund's average net assets.
The fund reimburses Putnam Management 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.
Trustees of the fund receive an annual Trustees fee of $800 and an additional
fee for each Trustee's meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees. The
deferred fees remain in the fund and are invested in certain Putnam funds
until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the period ended June 30, 1997, fund expenses were reduced by $102,249
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments,
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%
and 0.75% of the average net assets attributable to class A, class B and class
M shares, respectively.
For the period ended June 30, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $511,071 and $22,722 from the sale of
class A and class M shares, respectively and received $89,610 in contingent
deferred sales charges from redemptions of class B. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the period
ended June 30, 1997, Putnam Mutual Funds Corp., acting as underwriter received
no monies on class A redemptions.
Note 3
Purchases and sales of securities
During the period ended June 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $391,653,891 and
$96,265,042, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
Note 4
Capital shares
At June 30, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
For the period
August 1, 1996
(commencement of
operations) to
June 30, 1997
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 20,872,053 $202,737,613
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 38,584 385,337
- ----------------------------------------------------------------
20,910,637 203,122,950
Shares
repurchased (6,572,947) (66,331,720)
- ----------------------------------------------------------------
Net increase 14,337,690 $136,791,230
- ----------------------------------------------------------------
For the period
August 1, 1996
(commencement of
operations) to
June 30, 1997
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 17,252,796 $165,297,667
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,352 49,363
- ----------------------------------------------------------------
17,258,148 165,347,030
Shares
repurchased (961,449) (9,446,786)
- ----------------------------------------------------------------
Net increase 16,296,699 $155,900,244
- ----------------------------------------------------------------
For the period
August 1, 1996
(commencement of
operations) to
June 30, 1997
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 1,700,518 $16,188,983
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,550 15,209
- ----------------------------------------------------------------
1,702,068 16,204,192
Shares
repurchased (113,217) (1,084,548)
- ----------------------------------------------------------------
Net increase 1,588,851 $15,119,644
- ----------------------------------------------------------------
Note 5
Initial capitalization and offering of shares
The trust was established as a Massachusetts business trust on January
22, 1996. During the period January 22, 1996 to August 1, 1996 the fund had no
operations other than those related to organizational matters, including the
initial capital contributions of $33,334, $33,333, and $33,333 for class A,
class B and class M, respectively, and the issuance of 3,922 shares for each
class to Putnam Mutual Funds Corp. on July 2, 1996. On August 1, 1996, Putnam
Mutual Funds Corp. made a subsequent capital contribution of $2,900,000 to
class A and received 339,977 shares.
Federal tax information
(Unaudited)
For the period, dividends from foreign countries were $3,920,000 or $.120
per share (for all share classes). Taxes paid to foreign countries were
$350,000 or $.011 per share (for all classes of shares).
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar 1997.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC & Emerging Growth Fund [DBL. DAGGERS]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGE[SM] FUND
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS**
Putnam money market funds: ++
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [2 DBL. DAGGERS]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** Relative to above.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed
to maintain a price of $1.00 per share, although there is no
assurance that this price will be maintained in the future.
[2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured up
to certain limits by federal/state agencies. Savings
accounts may also be insured up to certain limits. Please
call your financial advisor or Putnam at 1-800-225-1581 to
obtain a prospectus for any Putnam fund. It contains more
complete information, including charges and expenses. Please
read it carefully before you invest or send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Anthony W. Regan
Vice President
Justin M. Scott
Vice President and Fund Manager
George W. Stairs
Vice President and Fund Manager
Mark D. Pollard
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam International
Growth and Income Fund. It may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and the
most recent copy of Putnam's Quarterly Performance Summary. For more
information, or to request a prospectus, call toll free: 1-800-225-1581. You
can also learn more at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
35075-2CE/2CG/2CH 8/97
