Putnam
International
Growth
Fund
SEMIANNUAL REPORT
December 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Lipper Analytical Services ranked Putnam International Growth Fund's class A
shares 11 out of 79 (top 14%) of all international funds tracked for five-year
performance as of January 31, 1997.
* "Look at the world as an investment supermarket in which U.S. stocks are
just one of many categories of products."
-- Business Week, January 6, 1997
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
16 Financial statements
* Lipper rankings are based on total return performance, vary over time, and do
not reflect the effects of sales charges. The fund's class A shares ranked 129
out of 389 (top 34%) for 1-year performance, as of 1/31/97. Class B shares
ranked 133 out of 389 funds (top 35%) and class M shares ranked 133 out of 389
funds (top 35%) for 1-year performance over the same period. The fund was not
ranked over longer periods. Past performance is not indicative of future
results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The sustained rise in the domestic stock market has opened the eyes of a
growing number of U.S. investors to the opportunities presented by foreign
equities. Some are shifting assets as a defensive measure against volatility
in the market at home. Others look at the rising number of companies with
multinational business lines and take a "global village" approach to
diversification of their investment programs.
Whatever their reasons, many of these investors have joined the ranks of
Putnam International Growth Fund shareholders. During the first half of fiscal
1997, your fund's managers once again delivered above-average results. In the
following report, they provide a discussion of the fund's performance and
prospects.
I am pleased to announce the appointment of Omid Kamshad to the fund's
management team. Omid joined Putnam's International Equity Group in early
1996. Prior positions have included Lombard Odier International Investment
Managers and Baring International Investment Ltd. He has 11 years of
investment experience.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
February 19, 1997
Report from the Fund Managers
Justin M. Scott
Omid Kamshad
Taking advantage of strong equity markets across Western Europe and in parts
of Asia, Putnam International Growth Fund's class A shares returned 6.91% at
net asset value (NAV) and 0.76% at public offering price (POP) for the six
months ended December 31, 1996. Your fund's results at NAV handily outpaced
the Morgan Stanley Capital International EAFE index, which rose 1.46% over the
same period. For performance over longer periods and for different class
shares, please turn to page 8 of this report.
We believe your fund's investment strategy, which balances top-down country
allocation and bottom-up stock selection, has allowed it to produce superior
results with reduced risk over the long term. In addition, our focus on
predictable growth at reasonable valuations has led us to emphasize stocks
that appeared to be selling at significant discounts to their real worth,
further contributing to the fund's strong performance.
* EUROPEAN MARKETS GENERALLY UPBEAT
Over the past six months, many Western European countries have continued to
prepare for introduction of the European Monetary Union (EMU). EMU will
establish a common currency among European Union member states. In order for
EMU to be in place by its target of late 1999, participating governments need
to have similar economic profiles: their budget deficits, bond yields, and
inflation data must meet the same defined targets. Consequently, in the
process of convergence, or meeting economic targets, countries have had to
rein in government spending and cut inflation. Such policies have slightly
impeded economic growth across Europe. However, fairly low interest rates --
to compensate for lower spending -- have helped keep European stock markets in
fairly strong shape over the fund's semiannual period.
An unequivocally positive development has been the ongoing growth of a
European equity culture. Companies have been changing their management
objectives. While many are well-run corporations, with world-class products,
they are making changes on behalf of shareholders. Such companies have focused
on profitability and return on capital compared to cost of capital. This could
lead to a major unlocking of value to shareholders.
Over the period a number of solid fund holdings in Europe exemplified this
trend toward corporate efficiency and profitability. Bayer, a German
pharmaceutical company, is a successful, shareholder-friendly firm. Elf
Aquitaine, a French oil company now largely privatized, has implemented an
ambitious restructuring program. SGS-Thomson, another French firm, supplies
semiconductors for mobile telephones. This major fund holding has thrived
despite a difficult environment for many chip makers, in part because of its
well-cultivated network of relationships with businesses across Europe. While
these stocks, along with others discussed in this report, were viewed
favorably at the end of the semiannual period, all portfolio holdings are
subject to review and adjustment in accordance with the fund's investment
strategy and may vary in the future.
In the coming months, an important area of focus for the fund will be the
United Kingdom. Significantly, the ruling Conservative party has expressed
skepticism about the United Kingdom's participating in EMU, and the government
has not strained to meet the criteria for convergence, thus helping to keep
its economy robust. Throughout 1996, the U.K. market was bolstered by a wealth
of good economic news, including falling unemployment and positive retail
sales. In the year ahead, we believe Britain's economic growth will pace that
of the Continent.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
Japan 15.0%
United Kingdom 11.7%
France 11.0%
The Netherlands 10.6%
Hong Kong 8.7%
Germany 7.8%
Sweden 7.4%
Switzerland 5.6%
Footnote reads:
* Based on net assets as of 12/31/96. Allocations will vary over time.
* STRENGTH IN HONG KONG IN SHARP CONTRAST TO JAPAN'S PROBLEMS
The Japan of the 1990s has been frustrating for investors: periodic bursts of
optimism have usually given way to bad news. In spite of years of falling
share prices, we believe that a number of sectors of the Japanese stock market
remain overvalued. As a result, we have reduced the fund's allocation to
Japanese stocks from 26.4% to 15% of net assets. Despite the gloom, we
consider some Japanese companies attractive targets for investment,
particularly multinationals with large exports. Canon, for example, earns two
thirds of its sales outside of Japan, and its foray into the market for
computer peripherals has been profitable. TDK, another fund holding, has added
to its core product line of audiotapes and videotapes, manufacturing higher
value-added electronics components.
In marked contrast to the environment in Japan, an upbeat sentiment prevailed
in Hong Kong over the past six months. More importantly, attitudes toward the
hand-over of power to China later this year are surprisingly positive. Indeed,
investors are clamoring to buy shares of Hong Kong companies with close ties
to the booming mainland. Stocks of many property companies have moved sharply
higher, benefiting fund holdings such as Cheung Kong, Sun Hung, and Amoy
Properties. Financial services companies have also turned in exceptional
performance, and fund holding HSBC continues to do quite well.
Elsewhere in Asia, a somewhat uncharacteristic lethargy took hold of the
region's markets during your fund's semiannual period. Malaysian stocks were
fairly subdued in the second half of 1996, after a strong first half. Recent
Singapore stock performance has been fairly uninspired as well, with exports
slowing in the crucial electronics sector. Finally, your fund benefited from
having no exposure to Thailand's troubled exchange. We believe the long-term
outlook for Asia continues to be quite positive; nevertheless, the near-term
picture for some Asian countries necessitates caution.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS*
HSBC Holdings (Hong Kong)
Financial services
Bayer AG (Germany)
Chemicals and pharmaceuticals
SGS-Thomson Microelec (France)
Electronic components
ABN Amro (The Netherlands)
Banking
Total Corp. (France)
Energy
BMW AG (Germany)
Automobiles
CRH PLC (Ireland)
Building construction
Cheung Kong Holdings (Hong Kong)
Real estate development
Canon Inc. (Japan)
Office supplies
ING (The Netherlands)
Financial services
Footnote reads:
* These holdings represented 15.58% of the fund's assets as of 12/31/96.
Portfolio holdings will vary over time.
* OUTLOOK: EUROPE AND HONG KONG AREAS OF FOCUS
We continue to find a number of attractively valued, competitive companies in
Europe, particularly in the United Kingdom, France, the Netherlands, and
Sweden. In Japan, although we have cut the fund's overall holdings there, we
have concentrated on viable, export-driven companies that may do well
regardless of Japan's economic difficulties (and may also continue to benefit
from the weaker yen, which makes Japanese products less expensive in world
markets). Elsewhere in Asia, we remain optimistic about Hong Kong's prospects
in the coming months. Whatever the conditions, we will continue to use all of
Putnam's extensive international investing resources to target stocks with
predictable growth rates at attractive valuations.
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 12/31/96, there is no guarantee the fund will continue to hold
these securities in the future. International investing involves certain risks
including currency fluctuations, political developments and economic
instability.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam International Growth Fund is designed for investors
seeking capital appreciation through equity securities of issuers located
outside the United States.
This section provides, at a glance, information about your fund's performance.
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.
TOTAL RETURN FOR PERIODS ENDED 12/31/96
Class A Class B Class M
(inception date) (2/28/91) (6/1/94) (12/1/94)
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------
6 months 6.91% 0.76% 6.46% 1.46% 6.61% 2.85%
- ----------------------------------------------------------------
1 year 16.12 9.44 15.21 10.21 15.54 11.47
- ----------------------------------------------------------------
5 years 83.68 73.19 -- -- -- --
Annual average 12.93 11.61 -- -- -- --
- ----------------------------------------------------------------
Life of class 89.15 78.21 31.32 28.32 31.87 27.26
Annual average 11.53 10.40 11.09 10.10 14.15 12.23
- ----------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/96
MSCI EAFE Consumer
Index Price Index
- ----------------------------------------------------------------
6 months 1.46% 1.21%
- ----------------------------------------------------------------
1 year 6.05 3.32
- ----------------------------------------------------------------
5 years 47.98 15.01
Annual average 8.15 2.84
- ----------------------------------------------------------------
Life of class A 45.17 17.66
Annual average 6.59 2.82
- ----------------------------------------------------------------
Life of class B 18.49 7.52
Annual average 6.78 2.84
- ----------------------------------------------------------------
Life of class M 18.67 5.94
Annual average 8.55 2.80
- ----------------------------------------------------------------
Footnote reads:
Performance data represent past results, do not reflect future performance,
and will differ for each share class. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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. POP assumes 5.75% maximum
sales charge for class A shares and 3.50% for class M shares. CDSC for class
B shares assumes the applicable sales charge, with the maximum being 5%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 12/31/96
Class A Class B Class M
- ----------------------------------------------------------------
Distributions
(number) 1 1 1
- ----------------------------------------------------------------
Income $0.151 $0.09 $0.117
- ----------------------------------------------------------------
Capital gains
- ----------------------------------------------------------------
Long-term 0.035 0.035 0.035
- ----------------------------------------------------------------
Short-term 0.021 0.021 0.021
- ----------------------------------------------------------------
Total $0.207 $0.146 $0.173
- ----------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ----------------------------------------------------------------
6/30/96 $14.25 $15.12 $14.10 14.22 14.74
- ----------------------------------------------------------------
12/31/96 15.02 15.94 14.86 14.98 15.52
- ----------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Portfolio of investments owned
December 31, 1996 (Unaudited)
COMMON STOCKS (93.8%) *
NUMBER OF SHARES VALUE
Australia (2.1%)
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
238,000 Commonwealth Bank of Australia $ 2,276,656
106,800 Commonwealth Bank of Australia 664,396
3,241,700 Goodman Fielder Ltd. ADR 4,017,828
586,250 QBE Insurance Group Ltd. 3,088,092
677,000 Westpac Banking Corp. 3,851,196
--------------
13,898,168
Austria (0.9%)
- ---------------------------------------------------------------------------------------------------------
36,010 VA Technolgies AG 5,654,009
Belgium (--%)
- ---------------------------------------------------------------------------------------------------------
650 Solvay S.A. 397,878
Brazil (0.8%)
- ---------------------------------------------------------------------------------------------------------
68,000 Telebras Co. ADR 5,202,000
Canada (0.6%)
- ---------------------------------------------------------------------------------------------------------
64,700 Magna International, Inc. Class A 3,607,025
Denmark (0.5%)
- ---------------------------------------------------------------------------------------------------------
50,000 Danisco A/S 3,037,502
France (11.0%)
- ---------------------------------------------------------------------------------------------------------
42,600 Cetelem Group 4,926,279
65,170 Chargeurs S.A. 3,228,041
82,400 Credit Locale de France S.A. 7,178,337
101,000 Lafarge Coppee 6,059,805
139,100 Michelin Corp. Class B 7,509,282
42,300 Peugeot Citroen S. A. 4,761,145
90,000 Sassault Systemes S.A. 4,150,911
154,300 SGS-Thomson Microelectronics ADR 10,801,000
92,700 Societe Nationale Elf Aquitaine 8,438,317
94,020 Sommer Allibert 2,808,731
119,400 Total Corp. ADR Class B 9,711,246
5,820 Zodiac S.A. 1,779,034
--------------
71,352,128
Germany (7.8%)
- ---------------------------------------------------------------------------------------------------------
103,100 Adidas AG 144A ADS + 4,394,638
6,500 Altana AG 5,054,852
278,100 Bayer AG ADR 11,337,020
13,600 Bayerische Motoren Werke (BMW) AG 9,472,769
58,000 Deutsche Telekom AG + 1,221,746
200,400 Deutsche Telekom AG ADR + 4,083,150
18,940 Preussag AG 4,284,706
103,100 Tarkett AG 2,054,638
150,700 Veba (Vereinigte Elektrizitaets Bergwerks) AG 8,706,459
--------------
50,609,978
Hong Kong (8.7%)
- ---------------------------------------------------------------------------------------------------------
3,014,500 Amoy Properties Ltd. 4,345,963
48,100 Asia Satellite Telecommunications Holdings Ltd. ADR + 1,124,338
1,019,000 Cheung Kong Holdings Ltd. 9,058,217
501,000 Dao Heng Bank Group Ltd. 2,403,297
709,600 Guoco Group Ltd. 3,972,806
347,000 Hong Kong Electric Holdings Ltd. 1,153,077
1,165,000 Hong Kong Land Holdings Ltd. 3,238,700
605,049 HSBC Holdings PLC 12,947,454
720,000 Hutchison Whampoa, Ltd. 5,655,547
482,000 Sun Hung Kai Properties Ltd. 5,905,030
646,500 Swire Pacific Ltd. Class A 6,164,905
--------------
55,969,334
Ireland (4.3%)
- ---------------------------------------------------------------------------------------------------------
1,143,288 Allied Irish Banks PLC 7,583,018
786,448 Bank of Ireland 7,119,083
907,971 CRH PLC 9,371,350
539,612 Greencore Group PLC 3,423,838
--------------
27,497,289
Italy (1.3%)
- ---------------------------------------------------------------------------------------------------------
1,143,400 Ente Nazionale Idrocarburi SPA 5,867,782
37,000 Gucci Group + 2,363,375
--------------
8,231,157
Japan (15.0%)
- ---------------------------------------------------------------------------------------------------------
360,000 Bridgestone Corp. 6,827,586
408,000 Canon, Inc. 9,004,138
310,000 Dai Nippon Printing Co., Ltd. 5,425,000
300,000 Daikin Industries Ltd. 2,663,793
600 East Japan Railway Co. 2,694,828
60,300 Hirose Electric Co. Ltd. 3,488,043
90,000 Ito-Yokado Co., Ltd. 3,910,345
410,000 KAO Corp. 4,771,552
19,000 Komori Printing Machinery Co. 402,931
130,000 Kurita Water Industries Ltd. 2,622,414
90,000 Kyushu Electric Power Inc. 1,745,690
280,000 Marui Co., Ltd. 5,044,828
370,000 Mitsui Fudoscan Co. 2,998,276
72,000 Murata Manufacturing Co. 2,389,655
366 Nippon Telegraph and Telephone Corp. 2,770,241
240,000 Nippondenso Co., Ltd. 5,772,414
380,000 Ohbayashi Corp. 2,561,724
125,000 Omron Corp. 2,349,138
120,000 Onward Kashiyama Co. Ltd. 1,686,207
120,000 Santen Pharmaceutical Co. Ltd 2,482,759
240,000 Sekisui Chemical Co. Ltd. 2,420,690
286,000 Sharp Corp. 4,068,104
185,000 Sumitomo Trust & Banking 1,850,000
126,000 TDK Corp. 8,200,862
254,000 Tokio Marine & Fire Insurance Co. Ltd. (The) 2,386,724
80,000 Tostem Corp. 2,206,897
130,000 Yamanouchi Pharmaceutical Co. Ltd. 2,667,241
158,000 Yamato Transport Co. Ltd. 1,634,483
--------------
97,046,563
Malaysia (1.0%)
- ---------------------------------------------------------------------------------------------------------
275,000 Malayan Banking BHD 3,049,505
425,000 Malaysian Assurance Alliance 2,070,297
400,000 Sungei Way Holdings Berhad 1,188,119
40,000 Sungei Way Holdings Berhad Rights 44,356
--------------
6,352,277
Mexico (0.7%)
- ---------------------------------------------------------------------------------------------------------
97,500 Panamerican Beverages, Inc. Class A 4,570,316
Netherlands (10.6%)
- ---------------------------------------------------------------------------------------------------------
155,640 ABN AMRO Holding N.V. 10,124,977
104,035 Aegon N.V. 6,629,386
44,100 Akzo-Nobel N.V. 6,023,614
31,300 Dutch States Mines N.V. 3,086,885
129,796 Getronics Electric N.V. 3,523,227
101,700 IHC Caland N.V. 5,809,579
247,340 Internationale Nederlanden Groep 8,904,125
177,880 K.L.M.-Royal Dutch Airlines 5,003,454
150,000 New Holland N.V. 3,131,250
183,600 Philips Electronics N.V. 7,438,361
29,700 Unilever N.V. 5,253,108
78,500 Vendex International N.V. 3,357,536
--------------
68,285,502
Portugal (1.0%)
- ---------------------------------------------------------------------------------------------------------
219,600 Portugal Telecom S.A. 6,258,101
Singapore (1.9%)
- ---------------------------------------------------------------------------------------------------------
221,000 Cycle & Carriage Ltd. 2,701,287
385,000 Far East Levingston Shipbuilding Ltd. 2,008,935
400,000 Overseas Union Bank Ltd. 3,087,920
302,000 United Overseas Bank Ltd. 3,367,548
337,500 Venture Manufacturing Ltd. 839,528
--------------
12,005,218
Spain (1.0%)
- ---------------------------------------------------------------------------------------------------------
83,000 Banco de Bilbao Vizcaya S.A 4,481,476
11,500 Mapfre Vida Seguros 797,196
36,900 Tabacalera S.A. Ser. A 1,588,778
--------------
6,867,450
Sweden (7.4%)
- ---------------------------------------------------------------------------------------------------------
164,100 Astra AB 8,085,635
45,200 Autoliv AB 1,975,992
69,630 Electrolux ser. B AB 4,031,505
190,000 Pharmacia & Upjohn, Inc. 7,764,457
282,020 Sandvik AB Class B 7,628,292
212,300 Skandia Forsakrings AB 5,990,774
245,000 Svenska Cellulosa AB Class B 4,961,255
231,100 Telefonaktiebolaget LM Ericsson Class B 7,129,483
--------------
47,567,393
Switzerland (5.6%)
- ---------------------------------------------------------------------------------------------------------
2,725 Baer Holdings AG 2,850,988
4,290 BBC Brown Boveri & Cie AG. 5,326,510
7,050 Nestle S.A. 7,554,698
6,677 Novartis AG ADR + 7,632,991
9,300 Rieter Holding AG 2,565,996
1,400 Societe Generale de Surveillance Holdings S.A. 3,434,750
6,580 Swiss Reinsurance Co. 7,011,797
--------------
36,377,730
United Kingdom (11.7%)
- ---------------------------------------------------------------------------------------------------------
340,668 Barclays Bank PLC 5,835,152
1,027,349 BAT Industries PLC 8,521,490
510,000 British Petroleum Co. PLC 6,116,206
264,100 Burmah Oil PLC 4,978,053
1,097,100 General Electric Co. 7,174,858
108,500 Guinness PLC 849,815
66,000 Molins PLC 1,014,103
264,748 North West Water Group PLC 2,814,674
132,500 Royal PTT 5,053,681
388,300 RTZ Corp. PLC 6,225,567
1,082,138 Scottish Power PLC 6,521,223
413,815 Securicor PLC 1,980,121
456,400 Shell Transportation & Trading 7,903,424
1,864,100 Vodafone Group PLC 7,866,651
604,957 Weir Group PLC (The) 2,718,677
--------------
75,573,695
--------------
Total Common Stocks (cost $554,416,827) $ 606,360,713
WARRANTS (--%)*
NUMBER OF WARRANTS+ EXPIRATION VALUE
- ---------------------------------------------------------------------------------------------------------
2,237 Danieli & Co. (Italy) 11/30/99 $ 2,097
3,600 Rieter Holdings (Switzerland) 2/28/97 4,698
--------------
Total Warrants (cost $--) $ 6,795
SHORT-TERM INVESTMENT (3.2%) * cost ($20,583,859)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$20,580,000 Interest in $624,569,000 joint repurchase agreement
dated month day, year with SBC Warburg Inc., due
January 2, 1997 with year with respect to various
U.S. Treasury obligations -- maturity value of
$20,587,718 for an effective yield of 6.75% $ 20,583,859
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $575,000,686)*** $ 626,951,367
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $646,545,186
+ Non-income-producing securities
*** The aggregate identified cost on a tax basis is $575,294,881, resulting in gross unrealized
appreciation and depreciation of $64,911,668 and $13,255,182, respectively, or net unrealized
appreciation of $51,656,486.
ADR or ADS, after the name of a foreign holding stands for American Depository Receipts and
American Depository Shares 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 Sell at December 31, 1996
(aggregate face value $108,972,070)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschemarks $15,529,465 $15,915,847 5/12/97 $ 386,382
French Francs 41,786,480 41,838,980 5/12/97 52,500
Japanese Yen 22,940,772 24,605,337 5/12/97 1,664,565
Dutch Guilder 15,376,721 15,760,622 5/12/97 383,901
Dutch Guilder 11,000,054 10,851,284 1/6/97 (148,770)
- ----------------------------------------------------------------------------------------
$ 2,338,578
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statments.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1996 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $575,000,686) (Note 1) $626,951,367
- ---------------------------------------------------------------------------------------------------
Cash 319
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 2,565,826
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 17,710,476
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 338,367
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 2,778,034
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 1,641,275
- ---------------------------------------------------------------------------------------------------
Total assets 651,985,664
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 2,455,069
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 393,697
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,052,221
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 335,808
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 4,964
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,190
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 400,481
- ---------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 439,456
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 205,661
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 150,931
- ---------------------------------------------------------------------------------------------------
Total liabilities 5,440,478
- ---------------------------------------------------------------------------------------------------
Net assets $646,545,186
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $593,574,417
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (4,059,810)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 2,726,462
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 54,304,117
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $646,545,186
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($315,347,679 divided by 20,997,488 shares) $15.02
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $15.02)* $15.94
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($236,960,373 divided by 15,948,916 shares)** $14.86
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($28,492,174 divided by 1,902,418 shares) $14.98
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $14.98)* $15.52
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($65,744,960 divided by 4,370,895 shares) $15.04
- ---------------------------------------------------------------------------------------------------
* 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 statments.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended December 31, 1996 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $267,262) $ 2,888,806
- --------------------------------------------------------------------------------------------------
Interest 481,113
- --------------------------------------------------------------------------------------------------
Total investment income 3,369,919
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,757,751
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,011,161
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 12,702
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,367
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 280,858
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 882,133
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 76,822
- --------------------------------------------------------------------------------------------------
Reports to shareholders 18,366
- --------------------------------------------------------------------------------------------------
Registration fees 78,992
- --------------------------------------------------------------------------------------------------
Auditing 19,851
- --------------------------------------------------------------------------------------------------
Legal 7,467
- --------------------------------------------------------------------------------------------------
Postage 18,829
- --------------------------------------------------------------------------------------------------
Other 30,966
- --------------------------------------------------------------------------------------------------
Total expenses 4,200,265
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (117,007)
- --------------------------------------------------------------------------------------------------
Net expenses 4,083,258
- --------------------------------------------------------------------------------------------------
Net investment loss (713,339)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (432,867)
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 3,444,635
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 865,472
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 33,682,979
- --------------------------------------------------------------------------------------------------
Net gain on investments 37,560,219
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $36,846,880
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
December 31 June 30
1996* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (713,339) $ 933,554
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 3,011,768 4,871,423
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 34,548,451 17,321,399
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 36,846,880 23,126,376
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (2,849,541) (1,052,356)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,353,515) (570,446)
- ----------------------------------------------------------------------------------------------------------------------
Class M (209,670) (60,867)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (724,847) --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,057,137) (31,357)
- ----------------------------------------------------------------------------------------------------------------------
Class B (842,213) (14,842)
- ----------------------------------------------------------------------------------------------------------------------
Class M (100,353) (1,361)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (237,377) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 319,662,513 215,489,871
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 349,134,740 236,885,018
- ----------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 297,410,446 60,525,428
- ----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of net
investment income and undistributed net investment
income of $4,059,810 and $1,791,102, respectively) $646,545,186 $297,410,446
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
July 12, 1996
(commencement of Six months
operations) to ended
December 31 December 31 Year ended
(unaudited) (unaudited) June 30
- ---------------------------------------------------------------------------------------------------------------------------
1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
Class Y Class M
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.88 $14.22 $12.09
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) -- (.06) .08(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.39 1.00 2.28
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.39 .94 2.36
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.17) (.12) (.22)
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.06) (.06) (.01)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.18) (.23)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.04 $14.98 $14.22
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 9.98* 6.61* 19.71
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $65,745 $28,492 $14,309
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .63* 1.06* 2.25
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .10* (.26)* .61
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.57* 32.57* 44.14
- ---------------------------------------------------------------------------------------------------------------------------
Average commision rate paid (e) $.0383 $.0383
- ---------------------------------------------------------------------------------------------------------------------------
See page 21 for notes to Financial Highlights.
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
December 1,1994 Six months
(commencement of ended
operations) to December 31 Year ended
Year ended June 30 (unaudited) June 30
- ---------------------------------------------------------------------------------------------------------------------------
1995 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
Class M Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.87 $14.10 $12.00
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .03(d) (.07) .04(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .36 .98 2.26
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .39 .91 2.30
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income -- (.09) (.19)
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.11) (.06) (.01)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments (.06) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.15) (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.09 $14.86 $14.10
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 3.33* 6.46* 19.35
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,777 $236,960 $132,013
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.61(d)* 1.18* 2.49
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .58(d)* (.38)* .32
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 25.83 32.57* 44.14
- ---------------------------------------------------------------------------------------------------------------------------
Average commision rate paid (e) $.0383
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
June 1, 1994 Six months
(commencement of ended
Year ended operations) to December 31
June 30 June 30 (unaudited)
- -----------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- -----------------------------------------------------------------------------------------------------------------------
Class B Class A
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.82 $11.78 $14.25
- -----------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .01 (d) (.01)(c)(d) (.03)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .34 .05 1.01
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 .04 .98
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------
From net investment income -- -- (.15)
- -----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.11) -- (.06)
- -----------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments (.06) -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions (.17) -- (.21)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.00 $11.82 $15.02
- -----------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 3.00 0.34* 6.91
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $25,892 $2,470 $315,348
- -----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 2.41(d) .15(d)* .80
- -----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .23(d) (.06)(d)* (.01)
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 25.83 96.13 32.57*
- -----------------------------------------------------------------------------------------------------------------------
Average commision rate paid (e) $.0383
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended June 30
- ----------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.10 $11.83 $9.58
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .13(c) .08(d) (.06)(d)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2.29 .36 2.53
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.42 .44 2.47
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (.26) -- --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.01) (.11) (.22)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (.06) --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.17) (.22)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.25 $12.10 $11.83
- ----------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 20.21 3.76 25.81
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $151,088 $32,856 $8,781
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.74 1.61(d) 2.17
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .99 .97(d) (.17)(d)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.14 25.83 96.13
- ----------------------------------------------------------------------------------------------------------------------
Average commision rate paid (e)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended June 30
- ----------------------------------------------------------------------------------------------------------------------
1993 1992
- ----------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.82 $8.18
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .07(d) .06
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .69 .71
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations .76 .77
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income -- (.13)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- --
- ----------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions -- (.13)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.58 $8.82
- ----------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 8.62 9.52
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,859 $2,502
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.80(d) 1.98
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .81(d) .76
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.92 82.45
- ----------------------------------------------------------------------------------------------------------------------
Average commision rate paid (e)
- ----------------------------------------------------------------------------------------------------------------------
* 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 ended December 31, 1996
includes amounts paid through expense offset and brokerage service arrangements. Prior
period ratios exclude these amounts (Note 2).
(c) Per share net imvestment income (loss) has been determined on the basis of the weighted
average number of shares outstanding for the period.
(d) Reflects an expense limitation in effect during the year. As a result of such limitation, expenses for class A
shares of the fund for the periods ended June 30, 1994 and June 30, 1993 reflect per share reductions of
approximately $0.03 and $0.05, respectively. Expenses for class B shares of the fund for the period ended June 30,
1994 reflect a reduction of less than $0.01 per share. Expenses for class A, B and M shares for the period ended
June 30, 1995 reflect a reduction of less than $0.01 per share.
(e) Average commision rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
Notes to financial statements
December 31, 1996 (Unaudited)
Note 1
Significant accounting policies
Putnam International Growth Fund ("the fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks capital appreciation by
investing primarily in equity securities of companies located outside United
States. Prior to August 12,1996, the fund's objective was to invest in equity
securities of companies located outside North America.
The fund offers class A, class B, class M and class Y 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 may be 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 higher than class A shares but lower than class B shares. Class Y
shares, which are sold at net asset value, are generally subject to the same
expenses as class A shares, class B and class M shares, but do not bear a
distribution fee. Class Y shares are sold to defined contribution plans that
initially invest at least $250 million in a combination of Putnam Funds.
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 market value, which is determined using the last
reported sale price on the principal market in which the securities are
traded, or, if no sales are reported -- as in the case of some securities
traded over-the-counter -- the last reported bid price. Short-term investments
having remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value, and 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. 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
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.
I) 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 $14,123.
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. 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, and 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
amount over $21.5 billion. Prior to October 21, 1996 any amount over $1.5
billion was at 0.60%.
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.
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 six months ended December 31, 1996, fund expenses were reduced by
$117,007 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.
Trustees of the fund receive an annual Trustees fee of $990 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 payable on
or after July 1, 1995. The deferred fees remain in the fund and invested in
the fund or in other 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.
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 six months ended December 31, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $257,222 and $13,683 from the sale
of class A and class M shares, respectively and received $78,393 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 year ended December 31, 1996, Putnam Mutual Funds Corp., acting as
underwriter received $1,563 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended December 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$397,319,496 and $103,480,549, 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, 1996, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 14,467,098 $ 208,591,055
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 249,986 3,619,799
- ------------------------------------------------------------
14,717,084 212,210,854
Shares
repurchased (4,320,540) (62,375,213)
- ------------------------------------------------------------
Net increase 10,396,544 $149,835,641
- ------------------------------------------------------------
Year ended
June 30, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 11,085,467 $ 150,078,344
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 80,088 1,025,963
- ------------------------------------------------------------
11,165,555 151,104,307
Shares
repurchased (3,279,126) (44,273,218)
- ------------------------------------------------------------
Net increase 7,886,429 $106,831,089
- ------------------------------------------------------------
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 10,705,621 $152,327,374
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 133,436 1,912,143
- ------------------------------------------------------------
10,839,057 154,239,517
Shares
repurchased (4,255,397) (60,877,513)
- ------------------------------------------------------------
Net increase 6,583,660 $ 93,362,004
- ------------------------------------------------------------
Year ended
June 30, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 11,269,808 $150,716,247
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 41,968 534,228
- ------------------------------------------------------------
11,311,776 151,250,475
Shares
repurchased (4,104,000) (54,296,586)
- ------------------------------------------------------------
Net increase 7,207,776 $ 96,953,889
- ------------------------------------------------------------
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,160,215 $ 16,599,957
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 20,074 289,862
- ------------------------------------------------------------
1,180,289 16,889,819
Shares
repurchased (284,132) (4,052,007)
- ------------------------------------------------------------
Net increase 896,157 $12,837,812
- ------------------------------------------------------------
Year ended
June 30, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 979,590 $ 13,313,633
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,674 59,873
- ------------------------------------------------------------
984,264 13,373,506
Shares
repurchased (125,026) (1,668,613)
- ------------------------------------------------------------
Net increase 859,238 $11,704,893
- ------------------------------------------------------------
For the period
July 12, 1996
(commencement
of operations)
to December 31, 1996
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 4,347,403 $ 63,304,503
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 66,452 962,224
- ------------------------------------------------------------
4,413,855 64,266,727
Shares
repurchased (42,960) (639,671)
- ------------------------------------------------------------
Net increase 4,370,895 $63,627,056
- ------------------------------------------------------------
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
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
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
Tim Ferguson
Vice President
Brett C. Browchuk
Vice President
Justin M. Scott
Vice President and Fund Manager
Omid Kamshad
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 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.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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30601-841/524/891 2/97
PUTNAM INVESTMENTS [LOGO]
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Putnam International Growth Fund
Supplement to Semiannual Report dated 1/31/97
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A, B,
and M shares, which are discussed more extensively in the semiannual report.
SEMIANNUAL RESULTS AT A GLANCE
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Total return: NAV
Six months ended 7/30/96 11.75%
One year ended 1/31/97 N/A
Life of class (since 7/12/96) 18.66
Annual average 10.66
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Share value: NAV
7/30/96 $13.67
1/31/97 15.04
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Distributions: No. Income Capital gains Total
1 $0.171 $0.056 $0.227
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Please note that past performance does not indicate future results.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full report
for information on comparative benchmarks. If you have questions, please
consult your fund prospectus or call Putnam toll free at 1-800-752-9894.
