Putnam
International
Growth and
Income Fund
SEMIANNUAL REPORT
December 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
*Putnam International Growth and Income Fund has delivered strong
competitive results, as evidenced by the rankings of international
funds tracked by Lipper Analytical Services. For the 1-year period
ended December 31, 1997, the fund's class A shares ranked in the
top 3% of Lipper's international funds category, or 9 out of
421 funds.*
* "By maintaining this discipline, the fund has avoided the value
traps (cheap stocks that stay cheap) that can hamper deep-value
strategies."
--Morningstar Mutual Funds, November 7, 1997
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
18 Financial statements
* Lipper is an industry research firm whose rankings are based on total
return performance, vary over time, and do not reflect the effects of
sales charges. The fund was not ranked over longer periods. Performance
of other share classes will vary. Past performance is not indicative of
future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The far-ranging search for undervalued stocks of dividend-paying companies
experiencing positive change paid off handsomely during the first half of
Putnam International Growth and Income Fund's fiscal 1998. Not only did the
quest lead your fund's managers to some of the most promising investments in
the world, but it steered them away from many that would be among the hardest
hit in the aftermath of the Asian currency crisis.
Thus, when equity markets around the world were thrown into turbulence by
events in Asia, your fund was positioned to benefit doubly from its strategy
of investing mainly in the stocks of large, established companies. These
stocks, already in favor because of their resilience in uncertain markets,
were accorded even greater regard as newly cautious investors searched for
stability.
In the following report, your fund's managers provide the details of the
fiscal year's first-half performance and discuss prospects for its second
half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
February 18, 1998
Report from the Fund Managers
George W. Stairs
Justin M. Scott
Mark D. Pollard
The Asian financial crisis that dominated the news from global stock markets
from June through December 1997 did not cause significant troubles for Putnam
International Growth and Income Fund. Generally speaking, our focus on
undervalued, dividend-paying companies undertaking positive changes means that
we avoid the higher-priced issues and rapidly growing companies that tend to
be most vulnerable in punishing times. In addition, our preference for
dividend-paying stocks means that the portfolio holds exactly the sorts of
stocks that investors favor when markets slump.
Furthermore, in this particular case, the fund's emphasis on value had led us
to favor European stocks and reduce Asian holdings well before the turmoil
began. The fund had less than 0.25% of its assets invested in the five
countries most affected by the crisis -- Thailand, Malaysia, Indonesia, South
Korea, and the Philippines.
For the six months ended December 31, 1997, returns for the fund's class A
shares were 3.30% at net asset value and - 2.67% at public offering price.
These results dramatically exceeded the returns of the fund's benchmark, the
Morgan Stanley Capital International Europe, Australia, and Far East Index,
which fell 8.48%. For complete performance information, including returns for
other share classes, see the tables that begin on page 9.
* "CHEAPNESS AND CHANGE" FOCUS HELPS FUND MAINTAIN RELATIVE STABILITY
We believe our quest for stocks that exhibit qualities of cheapness and change
results in a portfolio with greater resiliency than a broader-focused fund.
Our research efforts concentrate on large, well-established companies with
attractive dividend records and inexpensive stock prices. These companies tend
to be stable performers for two primary reasons: they have developed
revenue-generating businesses capable of weathering short-term uncertainty,
and their low price multiples reflect the fact that many investors have
already sold the stock and the remaining owners are holding on for better
times.
Cheapness represents only half of our requirements, however. We also seek out
companies undertaking positive changes intended to improve financial
performance. These changes can take a variety of forms ranging from
privatization to strategic restructuring. Privatization of state-run
enterprises, we believe, makes companies more responsive to shareholders and
the marketplace. Several of the fund's European and Latin American holdings
are in the midst of this kind of transition.
Stock repurchase programs also catch our eye. With these programs corporations
buy their own shares in the market, thereby reducing their outstanding equity
shares and strengthening certain qualities that investors seek, such as
earnings per share. Finally, we also favor companies engaged in business
restructurings designed to improve their financial health and earnings
outlook. Examples of these measures include cost cutting, rationalizing
product lines by selling off noncore subsidiaries, developing new products,
and expanding production and distribution capabilities in areas where profit
margins are attractive.
[GRAPHIC OMITTED: horizontal bar chart COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
United Kingdom 22.9%
France 12.8%
Germany 10.9%
Japan 10.7%
Netherlands 7.5%
Footnote reads:
*Based on net assets as of 12/31/97. Holdings will vary over time.
* COMPANIES EMBRACE CHANGE IN MARKETS AROUND GLOBE
In the midst of the international turbulence in the second half of 1997, most
of the companies represented in the fund's portfolio were going about their
efforts to improve from within. For example, Akzo-Nobel, a diversified
chemical and pharmaceutical company, has been successfully slashing costs in
its fiber business. It has also introduced promising new products: Remeron, an
antidepressant drug, and Peuregon, a medicine that treats infertility. The
launches of both products have been successful so far. While this holding,
along with others discussed in this report, was 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.
Merger activity in European banks continued during the fiscal period. As
Europe's financial industry prepares for pending Economic and Monetary Union,
two Swiss Banks held by the fund - UBS and SBC - have joined in one of the
largest financial mergers in history. By combining operations, the newly
merged bank should achieve significant cost reductions and enhanced
profitability. The expectation of even more mergers has also boosted the
prices of several other of the fund's European bank holdings, such as
Germany's Deutsche Bank.
We discovered entirely new opportunities in two leisure companies involved in
the beverage industry. This industry has experienced a number of corporate
reorganizations in recent years. During the last fiscal period we built a
position in a British company, Bass, as well as a Mexican corporation, Femsa.
Bass, well known as a brewer of ales, has been in the process of selling off
underperforming subsidiaries, including a chain of betting shops, to focus on
its drinks distribution and its international chain of Holiday Inn hotels.
Femsa's story is a bit different. A leading bottler and distributor of both
beer and soft drinks in Mexico, Femsa has recently restructured its beer
business. By repositioning its 4 major beer brands, it reduced marketing costs
while increasing its market share and corporate earnings. In its soft drinks
division, Femsa has acquired a new Coca-Cola distributor in Buenos Aires,
Argentina, to apply its competitive strengths in a new region.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
BAT Industries (United Kingdom)
Tobacco products
Pharmacia & UpJohn ADR (Sweden)
Pharmaceuticals
Compagnie Generale des Eaux (France)
Environmental control
Bayer AG ADR (Germany)
Chemicals
Allied Irish Banks PLC (Ireland)
Banks
Akzo-Nobel NV (Netherlands)
Chemicals
Elf Aquitaine SA (France)
Oil and gas
Philips Electronics NV (Netherlands)
Electronics
Nestle AG (Switzerland)
Food and beverages
General Electric Co. PLC (United Kingdom)
Electronics and electrical equipment
Footnote reads:
These holdings represent 22.3% of the fund's net assets as of 12/31/97.
Portfolio holdings will vary over time.
* INTERNATIONAL TURMOIL GENERATES BUYING OPPORTUNITIES
Macroeconomic conditions such as the problems that have afflicted Asian
markets are, for the most part, only a small factor in our investment
decisions. We monitor these conditions in an effort to control risk, but our
purchase and sale decisions are based chiefly on company-specific criteria.
During the recent volatility, we seized opportunities to buy good companies
that the market undervalued.
An example is SGS Thompson, a French electronics company that investors dumped
because it manufactures semiconductors. The market feared that the oversupply
of DRAM memory chips from Asian countries would cause huge price cuts and hurt
the earnings of all companies in the industry. SGS Thompson, however, makes
highly specialized semiconductors and has only minor competition from
Southeast Asian producers; thus we anticipate greater stability in its
earnings. We added to our position in SGS Thompson at what we considered to be
an attractive price.
Asian market woes also presented us with a chance to buy Sony at what we
considered a cheap price. While many investors dumped the stock fearing price
competition in consumer electronics, we added it to the portfolio, attracted
by Sony's falling production costs in Southeast Asia and the company's strong
flow of new products.
* LONG-TERM STRATEGY PROMOTES VIGILANCE
While the fund's strategy helps it to sidestep much of the current volatility
in international markets, we believe it is also well positioned for many types
of market conditions. No matter what the global situation, competition in
coming years will cause many large companies to initiate the sorts of changes
that we target and provide us with a continuing supply of opportunities.
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 December 31, 1997, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, such as currency fluctuations, economic instability,
and political developments, not present with domestic investments.
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 PERIODS ENDED 12/31/97
Class A Class B Class M
(inception date) (8/1/96) (8/1/96) (8/1/96)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 3.30% -2.67% 2.99% -1.94% 3.07% -0.54%
- ------------------------------------------------------------------------------
1 year 20.52 13.64 19.65 14.65 19.95 15.69
- ------------------------------------------------------------------------------
Life of fund 30.91 23.39 29.56 25.56 30.04 25.48
Annual average 20.89 15.95 20.01 17.39 20.32 17.33
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/97
Consumer
MSCI EAFE Price Index
- ------------------------------------------------------------------------------
6 months -8.48% 0.62%
- ------------------------------------------------------------------------------
1 year 1.78 1.70
- ------------------------------------------------------------------------------
Life of fund 6.38 2.74
Annual average 4.46 1.92
- ------------------------------------------------------------------------------
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 which is 5% in the first year,
declines to 1% in the sixth year, and is 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.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 12/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 2 2 2
- ------------------------------------------------------------------------------
Income $0.135000 $0.101000 $0.110000
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.007000 0.007000 0.007000
- ------------------------------------------------------------------------------
Short-term 0.350000 0.350000 0.350000
- ------------------------------------------------------------------------------
Total $0.492000 $0.458000 $0.467000
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
6/30/97 $10.76 $11.42 $10.72 $10.74 $11.13
- ------------------------------------------------------------------------------
12/31/97 10.61 11.26 10.57 10.59 10.97
- ------------------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 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 indexes
assume reinvestment of all distributions and interest payments and do not
take into account brokerage fees or 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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Portfolio of investments owned
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (95.5%) *
NUMBER OF SHARES VALUE
Argentina (0.9%)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
155,812 YPF S.A. ADR $ 5,326,823
Australia (1.1%)
- ------------------------------------------------------------------------------------------------------------
1,086,000 Westpac Banking Corp. 6,939,775
Brazil (1.5%)
- ------------------------------------------------------------------------------------------------------------
573,400 Banco Bradesco S.A. + 5,651,792
147,800 Petroleo Brasileiro S/A-Petrobras ADR + 3,491,775
--------------
9,143,567
Canada (2.7%)
- ------------------------------------------------------------------------------------------------------------
211,178 Bank of Nova Scotia 9,951,608
401,001 National Bank of Canada 6,621,623
--------------
16,573,231
France (12.8%)
- ------------------------------------------------------------------------------------------------------------
101,686 Compagnie Generale des Eaux 14,181,677
113,279 Elf Aquitaine S.A. + 13,165,416
97,377 Lafarge S.A. 6,384,556
192,520 Michelin Corp. Class B 9,685,134
15,440 Renault S.A. + 434,002
102,339 Scor 4,890,116
148,294 SGS-Thomson Microelectronics ADR + 9,171,429
45,481 Societe Generale 6,192,001
40,023 Societe Television Francaise 1 4,086,692
92,680 Total S.A. Class B + 10,078,931
--------------
78,269,954
Germany (10.9%)
- ------------------------------------------------------------------------------------------------------------
38,514 Altana AG 2,645,428
365,067 Bayer AG ADR 13,644,328
13,339 Bayerische Motoren Werke (BMW) AG 9,978,284
94,079 Deutsche Bank AG 6,645,180
293,300 Deutsche Lufthansa AG 144A 5,627,837
46,200 Deutsche Lufthansa AG 886,485
600,797 Deutsche Telekom AG + 11,310,889
82,300 Deutsche Telekom AG ADR + 1,532,838
26,298 Thyssen AG 5,631,107
123,402 Veba AG 8,407,533
--------------
66,309,909
Hong Kong (1.2%)
- ------------------------------------------------------------------------------------------------------------
1,486,500 Dao Heng Bank Group Ltd. 3,712,988
1,519,000 Guoco Group Ltd. 3,715,734
--------------
7,428,722
India (0.6%)
- ------------------------------------------------------------------------------------------------------------
233,800 Mahanagar Telephone Nigam Ltd. GDR F95 3,612,210
Ireland (3.7%)
- ------------------------------------------------------------------------------------------------------------
1,362,257 Allied Irish Banks PLC 13,210,456
803,093 CRH PLC 9,414,289
--------------
22,624,745
Italy (2.1%)
- ------------------------------------------------------------------------------------------------------------
2,210,933 Ente Nazionale Idrocarburi SPA (ENI) 12,538,782
Japan (10.7%)
- ------------------------------------------------------------------------------------------------------------
315,000 Canon, Inc. 7,346,372
167,000 Fuji Photo Film Co. 6,405,828
117,000 Ito-Yokado Co., Ltd. 5,968,927
661,000 KAO Corp. 9,533,406
1,799,000 Kawasaki Steel Corp. 2,456,631
29,000 NEC Corp. 309,244
1,245,000 Nikko Securities Co. Ltd. 3,304,717
169,900 Promise Co. Ltd. 9,436,713
497,000 Ricoh Co. Ltd. 6,176,752
171,000 Sankyo Co. Ltd. 3,869,964
113,300 Sony Corp. 10,082,694
--------------
64,891,248
Mexico (1.3%)
- ------------------------------------------------------------------------------------------------------------
1,237,476 Cemex, S.A. de C.V. 5,610,239
286,900 Fomento Economico Mexicano, S.A. de C.V. Class B 2,306,018
--------------
7,916,257
Netherlands (7.5%)
- ------------------------------------------------------------------------------------------------------------
240,670 ABN AMRO Holding N.V. 4,692,234
76,304 Akzo-Nobel N.V. 13,166,771
215,429 Internationale Nederlanden Groep 9,080,768
214,717 Philips Electronics N.V. 12,887,259
143,372 Royal PTT ADR 5,986,807
--------------
45,813,839
New Zealand (0.1%)
- ------------------------------------------------------------------------------------------------------------
65,100 Telecom Corp. of New Zealand Ltd. 315,279
Norway (1.6%)
- ------------------------------------------------------------------------------------------------------------
2,032,289 Den Norske Bank ASA 9,593,551
Portugal (0.7%)
- ------------------------------------------------------------------------------------------------------------
95,644 Portugal Telecom S.A. 4,441,545
Singapore (0.7%)
- ------------------------------------------------------------------------------------------------------------
495,000 Development Bank of Singapore Ltd. 4,240,333
Spain (1.2%)
- ------------------------------------------------------------------------------------------------------------
209,459 Iberdola S.A. + 2,757,127
325,300 Iberdrola II + 4,281,952
--------------
7,039,079
Sweden (5.2%)
- ------------------------------------------------------------------------------------------------------------
406,459 Pharmacia & Upjohn Inc. ADS 14,963,693
7,330 Sandvik AB Class A 208,858
168,247 Sandvik AB Class B 4,815,179
317,270 SKF AB Class B 6,760,128
228,014 Svenska Cellulosa AB Class B 5,131,436
--------------
31,879,294
Switzerland (6.1%)
- ------------------------------------------------------------------------------------------------------------
63,557 Ciba Specialty Chemicals AG + 7,566,827
947 Julius Baer Holdings AG 1,755,984
8,455 Nestle AG 12,663,699
22,663 Schweizerischer Bankverein 7,040,029
5,421 Union Bank of Switzerland 7,833,836
--------------
36,860,375
United Kingdom (22.9%)
- ------------------------------------------------------------------------------------------------------------
1,645,255 B A T Industries PLC 15,030,161
512,537 Bass PLC 7,982,664
603,863 British Petroleum Co. PLC 7,966,161
3,521,032 BTR Ltd. PLC 10,683,374
1,462,615 Cookson Group PLC 4,751,349
1,941,388 General Electric Co. PLC 12,629,322
417,888 Glaxo Wellcome PLC 9,923,001
134,000 HSBC Holdings PLC 3,303,816
579,932 National Westminster Bank PLC 9,677,836
570,064 Peninsular and Oriental Steam Navigation Co. 6,509,750
638,107 Rio Tinto PLC 7,881,266
3,085,915 Rolls-Royce PLC 11,958,384
742,359 Scottish Power PLC 6,585,927
833,888 Shell Transportation & Trading Co. 6,050,358
1,920,426 Tomkins PLC 9,215,337
1,076,000 Unilever PLC 9,244,228
--------------
139,392,934
--------------
Total Common Stocks (cost $556,308,451) $ 581,151,452
WARRANTS (--%) * (cost $21,838) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- ------------------------------------------------------------------------------------------------------------
28,630 Compagnie Generale des Eaux (France) 5/2/01 $ 19,442
SHORT-TERM INVESTMENTS (6.3%) * (cost $38,449,941)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$38,443,000 Interest in $369,996,000 joint repurchase agreement
dated December 31, 1997 with Merrill Lynch,
Pierce, Fenner, & Smith, Inc. due January 2, 1998
with respect to various U.S. Treasury obligations --
maturity value of $38,456,882 for an effective yield
of 6.50% $ 38,449,941
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $594,780,230) *** $ 619,620,835
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $608,663,428.
*** The aggregate identified cost on a tax basis is $595,011,714,
resulting in gross unrealized appreciation and depreciation of
$53,664,212 and $29,055,091, respectively, or net unrealized
appreciation of $24,609,121.
+ Non-income-producing security.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR, 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.
The fund had the following industry group concentration greater
than 10% at December 31, 1997 (as a percentage of net assets):
Insurance and Finance 24.2%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at December 31, 1997 (Unaudited)
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen $30,482,405 $30,762,017 6/12/98 $279,612
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1997 (Unaudited)
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $594,780,230) (Note 1) $619,620,835
- --------------------------------------------------------------------------------------------------
Cash 664
- --------------------------------------------------------------------------------------------------
Foreign currency (identified cost $512,341) 510,376
- --------------------------------------------------------------------------------------------------
Dividends and interest receivable 1,074,876
- --------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 3,295,390
- --------------------------------------------------------------------------------------------------
Receivable for securities sold 1,726,713
- --------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 279,612
- --------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 56,862
- --------------------------------------------------------------------------------------------------
Total assets 626,565,328
Liabilities
- --------------------------------------------------------------------------------------------------
Distributions payable to shareholders 18,765
- --------------------------------------------------------------------------------------------------
Payable for securities purchased 11,194,910
- --------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,166,785
- --------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,055,100
- --------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 241,694
- --------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,449
- --------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,892
- --------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 462,618
- --------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 64,834
- --------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 2,554,425
- --------------------------------------------------------------------------------------------------
Other accrued expenses 134,428
- --------------------------------------------------------------------------------------------------
Total liabilities 17,901,900
- --------------------------------------------------------------------------------------------------
Net assets $608,663,428
Represented by
- --------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4, and 5) 583,445,975
- --------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (2,400,786)
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions (Note 1) 2,498,703
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 25,119,536
- --------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $608,663,428
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($286,479,863 divided by 26,997,013 shares) $10.61
- --------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.61)* $11.26
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($292,339,957 divided by 27,669,465 shares)** $10.57
- --------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($29,843,608 divided by 2,818,396 shares) $10.59
- --------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.59)* $10.97
- --------------------------------------------------------------------------------------------------
* 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
Six months ended December 31, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $203,358) $ 3,310,493
- --------------------------------------------------------------------------------------------------
Interest 1,028,204
- --------------------------------------------------------------------------------------------------
Total investment income 4,338,697
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 2,055,100
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 811,295
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,957
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,759
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 301,418
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,246,306
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 94,019
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 6,560
- --------------------------------------------------------------------------------------------------
Reports to shareholders 29,780
- --------------------------------------------------------------------------------------------------
Registration fees 83,108
- --------------------------------------------------------------------------------------------------
Auditing 18,663
- --------------------------------------------------------------------------------------------------
Legal 3,687
- --------------------------------------------------------------------------------------------------
Postage 39,304
- --------------------------------------------------------------------------------------------------
Other 39,289
- --------------------------------------------------------------------------------------------------
Total expenses 4,744,245
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (149,099)
- --------------------------------------------------------------------------------------------------
Net expenses 4,595,146
- --------------------------------------------------------------------------------------------------
Net investment loss (256,449)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 12,894,739
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Notes 1 and 3) 640,375
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (541,003)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (945,373)
- --------------------------------------------------------------------------------------------------
Net gain on investments 12,048,738
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $11,792,289
- --------------------------------------------------------------------------------------------------
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
Six months ended of operations)
December 31 to June 30
1997* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (256,449) $ 1,695,612
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 13,535,114 11,272,068
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies (1,486,376) 26,605,912
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,792,289 39,573,592
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (3,381,236) (416,988)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,639,976) (54,244)
- ----------------------------------------------------------------------------------------------------------------------
Class M (288,398) (18,125)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (9,086,740) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (9,331,399) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (939,594) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 272,643,129 307,811,118
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 258,768,075 346,895,353
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 349,895,353 3,000,000
- ----------------------------------------------------------------------------------------------------------------------
End of period including distributions in excess of net
investment income and undistributed net investment
income of $2,400,786 and $4,165,273, respectively $608,663,428 $349,895,353
- ----------------------------------------------------------------------------------------------------------------------
*Unaudited
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended For the period
December 31 August 1, 1996+
Per-share operating performance (Unaudited) to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.76 $8.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .02(d) .15(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .33 2.13
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .35 2.28
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.50) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.61 $10.76
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.30* 26.73*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $286,480 $157,990
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .73* 1.52*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .14* 1.61*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 24.22* 70.25*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $.0311 $.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 (loss) 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended For the period
Per-share December 31 August 1, 1996+
operating performance (Unaudited) to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.72 $8.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.03)(d) .10(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .34 2.10
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .31 2.20
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.46) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.57 $10.72
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.99* 25.80*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $292,340 $174,801
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.11* 2.21*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.23)* 1.03*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 24.22* 70.25*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $.0311 $.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 (loss) 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended For the period
Per-share December 31 August 1, 1996+
operating performance (Unaudited) to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.74 $8.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.01)(d) .12(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .33 2.11
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .32 2.23
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.11) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.47) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.59 $10.74
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.07* 26.17*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $29,844 $17,105
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .98* 1.98*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.10)* 1.19*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 24.22* 70.25*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $.0311 $.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 (loss) has been determined on the basis of weighted average
number of shares outstanding during the period.
</TABLE>
Notes to financial statements
December 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam International Growth and Income Fund ("the fund") is a series of Putnam
Investment 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. 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 stated 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 gains and losses are included with the
net realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign currencies
and the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized appreciation and
depreciation of assets and liabilities in foreign currencies arise from
changes in the value of open forward currency contracts and assets and
liabilities other than investments at the period end, resulting from changes
in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using current forward currency
exchange rates supplied by a quotation service. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract
is "marked to market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The fund could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet the
terms of their contracts or if the fund is unable to enter into a closing
position.
G) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the period ended December 31, 1997, the
fund had no borrowings against the line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. 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.
J) 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.
K) 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% thereafter.
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the six months ended December 31, 1997, fund expenses were reduced by
$149,099 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested a portion of the assets utilized in connection
with the expense offset arrangements in an income producing asset if it had
not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee of which $900 has been
allocated to the fund and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees currently limit payment by the fund to an annual rate of 0.25%, 1.00%
and 0.75% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended December 31, 1997, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $559,133 and $26,235 from the sale
of class A and class M shares, respectively and $155,831 in contingent
deferred sales charges from redemptions of class B shares. A deferred sales
charge of up to 1% is assessed on certain redemptions of class A shares. For
the six months ended December 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received $750 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended December 31, 1997, purchases and sales of
investment securities other than short-term investments aggregated
$354,660,055 and $114,934,658, 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 December 31, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 20,938,154 $230,886,137
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,153,487 11,936,928
- ------------------------------------------------------------
22,091,641 242,823,065
Shares
repurchased (9,776,217) (108,090,310)
- ------------------------------------------------------------
Net increase 12,315,424 $134,732,755
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 11,933,130 $131,291,124
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,068,196 10,991,735
- ------------------------------------------------------------
13,001,326 142,282,859
Shares
repurchased (1,632,482) (17,808,409)
- ------------------------------------------------------------
Net increase 11,368,844 $124,474,450
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,557,196 $17,145,096
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 102,734 1,059,584
- ------------------------------------------------------------
1,659,930 18,204,680
Shares
repurchased (434,307) (4,768,756)
- ------------------------------------------------------------
Net increase 1,225,623 $13,435,924
- ------------------------------------------------------------
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 contribution 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.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
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
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
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 Total Return Fund
High Yield Trust +
Income Fund
Money Market 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 Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** 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.
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
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
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
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
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
- --------------------
SA024-36894 2CE/2CG/2CH 2/98
