Putnam
International
Fund
SEMIANNUAL REPORT
February 29, 1996
[GRAPHIC OMITTED: PUTNAM SCALES LOGO]
BOSTON * LONDON * TOKYO
The following report contains a list of your fund's portfolio holdings
and complete financial statements for the period from December 28, 1995
(commencement of operations) to February 29, 1996. Once the fund has been
in operation for a longer period, we expect to provide additional
details, including fund strategy, performance, and managers' outlook.
<TABLE>
<CAPTION>
Portfolio of investments owned
February 29, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------
Common Stocks (98.2%)*
Number of Shares VALUE
<S> <C> <C> <C>
Austria (1.8%)
- -------------------------------------------------------------------------------------------
1,700 Amcor Ltd. $12,347
350 VA Technologies AG 44,190
----------
56,537
Denmark (1.1%)
- -------------------------------------------------------------------------------------------
700 Danisco A/S 34,324
Finland (1.3%)
- -------------------------------------------------------------------------------------------
2,000 Repola 39,543
France (6.6%)
- -------------------------------------------------------------------------------------------
200 Chargeurs S.A. 51,511
200 Credit Locale de France S.A. 15,861
300 Lafarge Coppee (Bearer) 20,606
200 Peugeot Citroen S A + 29,876
250 Societe Generale 28,479
750 Societe Nationale Elf Aquitaine (Bearer) 51,679
200 Total Corp. ADR 6,575
----------
204,587
Germany (3.1%)
- -------------------------------------------------------------------------------------------
100 Preussag AG 29,755
1,400 Veba (Vereinigte Elektrizitaets Bergwerks) AG + 65,815
----------
95,570
Hong Kong (2.5%)
- -------------------------------------------------------------------------------------------
1,000 Guoco Group Ltd. 5,329
2,500 HSBC Holdings PLC 41,178
2,000 Hong Kong Telecommunications Ltd. 3,919
3,000 Hutchison Whampoa, Ltd. + 19,014
1,000 Swire Pacific Ltd. Class A 8,731
----------
78,171
Ireland (3.4%)
- -------------------------------------------------------------------------------------------
11,000 Allied Irish Banks PLC 57,227
2,000 Bank of Ireland + 13,716
4,000 CRH PLC 33,422
----------
104,365
Japan (38.4%)
- -------------------------------------------------------------------------------------------
2,000 Asahi Diamond Industrial Co. , Ltd. $27,952
1,000 Best Denki Co. Ltd. 13,881
2,000 Bridgestone Corp. 31,185
1,000 Chubu Electric Power, Inc. 23,103
2,000 Dai Nippon Printing Co., Ltd. 34,417
5,000 Daiwa Securities Co., Ltd. 70,356
10 East Japan Railway Co. 51,055
4,000 Fujitsu Ltd. 41,072
1,000 Ito-Yokado Co., Ltd. 55,904
2,000 KAO Corp. + 25,100
1,000 Komori Printing Machinery Co., Ltd. 25,005
1,000 Kurita Water Industries Ltd. 25,575
2,000 Maeda Corp. 19,585
2,000 Marui Co., Ltd. 38,410
3,000 Mitsubishi Bank Ltd. 61,323
3,000 Mitsubishi Motors Corp. 24,786
7,000 Mitsui Fudoscan Co., Ltd. 59,431
5 Nippon Telegraph and Telephone Corp. 38,030
3,000 Nippondenso Co., Ltd. 59,612
1,000 Omron Tateisi Electronics Co. 22,057
1,000 Santen Pharmaceutical Co., Ltd. 22,343
2,000 Sekisui Chemical Co., Ltd. 25,480
5,000 Sharp Corp. 77,962
7,000 Toda Construction Co. 63,225
7,000 Tokio Marine & Fire Insurance Co., Ltd. 84,522
9,000 Toray Industries Inc. 58,272
1,000 Tostem Corp. 30,709
2,000 Yamaguchi Bank Ltd. 33,086
1,000 Yamanouchi Pharmaceutical Co., Ltd. 22,343
2,000 Yamato Transport Co., Ltd. 22,438
----------
1,188,219
Malaysia (0.9%)
- -------------------------------------------------------------------------------------------
1,000 Genting Berhad Co. 8,948
2,000 Malayan Banking Berhad 18,289
----------
27,237
Netherlands (9.4%)
- -------------------------------------------------------------------------------------------
900 ABN AMRO Holding N.V. + 41,780
400 Aegon N.V. + 17,186
300 Akzo-Nobel N.V. 33,333
700 Internationale Nederlanden Groep 46,429
1,000 K.L.M.-Royal Dutch Airlines 33,254
800 Koninklijke PPT Nederland N.V. 32,089
500 Philips Electronics N.V. 20,784
500 Unilever N.V. 67,449
----------
292,304
Norway (0.5%)
- -------------------------------------------------------------------------------------------
1,500 Christiana Bank & Trust $3,837
1,000 Saga Petroleum A.S. Ser. B 11,151
----------
14,988
Singapore (2.1%)
- -------------------------------------------------------------------------------------------
1,000 Development Bank of Singapore Ltd. (Registered) 14,239
3,000 Singapore Airlines Ltd. (Registered) 30,179
2,000 United Overseas Bank Ltd. (Registered) 21,394
----------
65,812
Spain (4.9%)
- -------------------------------------------------------------------------------------------
1,600 Banco de Bilbao-Vizcaya (Registered) 62,199
1,700 Iberdola S.A. 16,727
1,500 Repsol S.A. 54,682
400 Tabacalera S.A. Ser. A 17,582
----------
151,190
Sweden (2.0%)
- -------------------------------------------------------------------------------------------
1,000 Astra AB + 45,861
900 Svenska Cellulosa AB Ser. B 15,179
----------
61,040
Switzerland (6.6%)
- -------------------------------------------------------------------------------------------
50 BBC Brown Boveri & Cie AG (Bearer) 59,784
100 Ciba-Geigy AG (Registered) 89,180
50 Nestle S.A. (Registered) 54,621
----------
203,585
United Kingdom (13.6%)
- -------------------------------------------------------------------------------------------
3,200 Argyll Group PLC 14,457
4,900 B A T Industries PLC 42,887
4,600 Barclays Bank PLC 54,668
1,800 Burmah Oil PLC 28,973
1,200 East Midlands Electricity + 13,287
8,900 General Electric Co. (The) PLC 50,364
5,700 Guinness PLC 40,069
1,500 North West Water Group PLC 13,324
4,000 Scottish Power PLC 22,421
9,200 Sears PLC 13,456
1,400 Securicor Group PLC Class A 20,004
1,200 Security Services PLC 17,330
2,500 Shell Transportation & Trading 32,315
900 South Wales Electricity PLC 11,716
2,000 Tate & Lyle PLC 14,580
8,600 Vodafone Group PLC 30,491
----------
420,342
----------
Total Common Stocks ($3,039,826) *** $3,037,814
----------
- --------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,092,885.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is $3,039,826, resulting in gross unrealized
appreciation and depreciation of $88,853 and $90,865, respectively, or net unrealized
depreciation of $2,012.
ADR after the name of a foreign security stands for American Depoitory Receipt, representing
ownership of foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29,1996 (Unaudited)
- -------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $ 3,039,826) (Note 1) $3,037,814
- -------------------------------------------------------------------------------
Cash 47,830
- -------------------------------------------------------------------------------
Dividends receivable 2,566
- -------------------------------------------------------------------------------
Receivable for securities sold 12,134
- -------------------------------------------------------------------------------
Receivable from Manager (Note 3) 3,834
- -------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,658
- -------------------------------------------------------------------------------
Total assets 3,107,836
Liabilities
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 315
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 4,213
- -------------------------------------------------------------------------------
Payable for organizational expenses (Note 1) 3,662
- -------------------------------------------------------------------------------
Other accrued expenses 6,761
- -------------------------------------------------------------------------------
Total liabilities 14,951
- -------------------------------------------------------------------------------
Net assets $3,092,885
Represented by
- -------------------------------------------------------------------------------
Paid-in-capital (Notes 2 and 5) $3,090,534
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 3,971
- -------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 405
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments and
assets and liabilities in foreign currencies (2,025)
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,092,885
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per share
($3,092,885 divided by 363,486 shares) $8.51
- -------------------------------------------------------------------------------
Offering price per share (100/94.25 of $8.51)* $9.03
- -------------------------------------------------------------------------------
* 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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
For the period December 28, 1995 (commencement of operations)
to February 29, 1996 (Unaudited)
- -------------------------------------------------------------------------------
Investment Income
- -------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign tax of $780) $5,580
- -------------------------------------------------------------------------------
Interest 5,833
- -------------------------------------------------------------------------------
Total investment income 11,413
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 3) 4,242
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 4,464
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 315
- -------------------------------------------------------------------------------
Reports to shareholders 158
- -------------------------------------------------------------------------------
Auditing 2,852
- -------------------------------------------------------------------------------
Legal 3,413
- -------------------------------------------------------------------------------
Postage 105
- -------------------------------------------------------------------------------
Registration Fees 210
- -------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 4
- -------------------------------------------------------------------------------
Administrative services (Note 3) 7
- -------------------------------------------------------------------------------
Fees waived by Manager (Note 3) (8,077)
- -------------------------------------------------------------------------------
Total expenses 7,693
- -------------------------------------------------------------------------------
Expense reduction (Note 3) (251)
- -------------------------------------------------------------------------------
Net expenses 7,442
- -------------------------------------------------------------------------------
Net investment income 3,971
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 4) 418
- -------------------------------------------------------------------------------
Net realized loss on foreign currency translation (Note 1) (13)
- -------------------------------------------------------------------------------
Net unrealized depreciation of foreign currency translation (13)
- -------------------------------------------------------------------------------
Net unrealized depreciation on investments during the period (2,012)
- -------------------------------------------------------------------------------
Net loss on investments (1,620)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,351
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
- -------------------------------------------------------------------------------
For the period
December 28, 1995
(commencement of
operations to)
February 29, 1996*
- -------------------------------------------------------------------------------
Increase in net assets
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
<S> <C>
Net investment income $3,971
- -------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 405
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments and
assets and liabilities in foreign currencies (2,025)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,351
- -------------------------------------------------------------------------------
Increase from capital share transactions (Note 5) 90,534
- -------------------------------------------------------------------------------
Total increase in net assets 92,885
- -------------------------------------------------------------------------------
Net assets
- -------------------------------------------------------------------------------
Beginning of period 3,000,000
- -------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $3,971) $3,092,885
- -------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPITON>
Financial highlights
(For a share outstanding throughout the period)
- -------------------------------------------------------------------------------
For the Period
December 28, 1995
(commencement
of operations)
to February 29, 1996*
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $8.50
- -------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------
Net investment income .01(c)
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments --
- -------------------------------------------------------------------------------
Total from investment operations .01
- -------------------------------------------------------------------------------
Net asset value, end of period $8.51
- -------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 0.59(d)
- -------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,093
- -------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) .25(c)(d)
- -------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .13(c)(d)
- -------------------------------------------------------------------------------
Portfolio turnover (%) 8.83(d)
- -------------------------------------------------------------------------------
* Unaudited
(a) Total investment return does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period December 28, 1995
(commencement of operations) to February 29, 1996 includes amounts paid through
expense offset arrangements (See Note 3).
(c) Reflects an expense limitation in effect during the period (See Note 3). As a
result of such limitation, expenses for the fund reflect a reduction of $0.02
per share.
(d) Not annualized.
</TABLE>
Notes to financial statements
For the period December 28, 1995
(commencement of operations) to
February 29, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is one of a series of Putnam Investment Funds (the "Trust")
which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
objective of the fund is to seek long-term capital appreciation by
investing primarily in equity securities of issues which have a
principle place of business located outside of the United States or
whose securities are principally traded on foreign markets.
The following is a summary of significant accounting policies followed
by the fund in the preparation of its financial statements. The
preparation of financial statements are 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, 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 market 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 managed by Putnam Investment Management,
Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc., and certain other accounts.
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 102% of the resale price, including accrued
interest. Putnam Management is responsible for determining that the
value of these underlying securities is at all times equal to at least
102% of 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
and 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 of 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) 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 and for excise tax on income and capital
gains.
G) Distributions to shareholders Distributions to shareholders will be
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
will be determined in accordance with income tax regulations which may
differ from generally accepted accounting principles.
H) 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.
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 $3,662. These expenses are being amortized
based on projected net asset levels over a five-year period. The fund
will reimburse Putnam Management for the payment of these expenses.
Note 2
Initial capitalization and offering price of shares
The Trust was established as a Massachusetts business trust on October
31, 1994. During the period October 31, 1994 to December 28, 1995, the
fund had no operations other than those related to organizational
matters, including the initial capital contribution of $3,000,000 and
the issuance of 352,941 shares to Putnam Mutual Funds Corp., a wholly-
owned subsidiary of Putnam Investments, Inc. on December 28, 1995.
At February 29, 1996, Putnam Management, owned 352,941 shares of the
fund (97.00% of shares outstanding), valued at $3,003,528.
Note 3
Management fee, administrative services, and other transactions
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average net assets of the fund
for the quarter. Such fee is based on the following annual rates: 0.80%
of the first $500 million of average net assets, 0.70% of the next $500
million, 0.65% of the next $500 million, 0.60% of the next $5 billion,
0.575% of the next $5 billion, 0.555% of the next $5 billion, 0.54% of
the next $5 billion, and 0.53% of any excess thereafter.
Through July 31, 1996, Putnam Management has agreed to limit the it's
compensation to the extent that expenses of the fund (exclusive of
brokerage, interest, taxes, deferred organizational and extraordinary
expense, payments under the fund's distribution plan and credits from
Putnam Fiduciary Trust Company ("PFTC"), a wholly-owned subsidiary of
Putnam Investments, Inc., if any) exceed an annual rate of 1.45%
of the fund's average net assets.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $100 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 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 are invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the period December 28, 1995 (commencement of operations) to
February 29, 1996, the fund's expenses were reduced by $251 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 the assets utilized in connection
with the expense offset arrangements in an income-producing asset if it
had not entered into such arrangements.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, although the fund is not
currently making any payments pursuant to the Plan. The purpose of the
Plan 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.
During the period December 28, 1995 (commencement of operations) to
February 29, 1996, Putnam Mutual Funds Corp., acting as the underwriter,
received no net commissions from the sale of shares of the fund.
Note 4
Purchases and sales of securities
During the period December 28, 1995(commencement of operations) to
February 29, 1996, purchases and sales of investment securities other
than short-term investments aggregated $3,218,231 and $178,823,
respectively. There were no purchases or 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 5
Capital shares
At February 29, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
For the period
December 28, 1995
(commencement of
operations) to
February 29, 1996
- ----------------------------------------------------
Shares Amount
- ----------------------------------------------------
Shares sold 10,560 $90,658
- ----------------------------------------------------
Shares
repurchased (15) (124)
- ----------------------------------------------------
Net increase 10,545 $90,534
- ----------------------------------------------------
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
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
Justin Scott
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 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.
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.
