Putnam
International
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-28-99
[LOGO: BOSTON * LONDON * TOKYO]
The following report contains a list of your fund's portfolio holdings and
complete financial statements for the six months ended 2/28/99. Additional
details, including fund strategy, performance, and managers' outlook, will
be provided in the annual report, which will cover the 12 months ended
8/31/99.
<TABLE>
<CAPTION>
Portfolio of investments owned
February 28, 1999 (Unaudited)
COMMON STOCKS (99.0%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Australia (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
2,000 AMP Ltd. $ 22,530
2,000 Coles Myer Ltd. 10,626
1,000 National Australia Bank, Ltd. 16,588
6,000 Pioneer International Ltd. 12,029
1,000 Rio Tinto Ltd. 12,439
4,085 Westpac Banking Corp. 26,870
--------------
101,082
Austria (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
200 VA Technologies AG 15,533
Belgium (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
150 Electrabel S.A. 62,791
Denmark (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
300 Danisco A/S 14,679
200 Tele Danmark A/S 24,139
--------------
38,818
Finland (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
500 Oy Nokia AB Class A 68,630
500 Sampo Insurance Co., Ltd. Class A 16,579
--------------
85,209
France (10.1%)
- --------------------------------------------------------------------------------------------------------------------------
100 Axa S.A. 13,087
300 Banque Nationale de Paris 24,026
200 Bouygues S.A. 49,902
320 Compagnie Financiere de Paris 27,672
600 Elf Aquitaine S.A. 62,791
200 Groupe Danone 49,991
100 L'OREAL 61,690
414 Michelin Corp. Class B 18,516
10 Promodes 6,395
113 Societe Generale 16,643
400 Total S.A. ADR 20,650
200 Total S.A.Class B 20,930
300 Vivendi 78,489
--------------
450,782
Germany (10.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,200 Bayer AG 42,632
20 Bayerische Motoren Werke (BMW) AG 14,497
30 Bayerische Motoren Werke (BMW) AG NEW 21,250
1,400 Deutsche Bank AG 73,334
2,000 Deutsche Telekom AG 92,094
1,500 Hoechst AG 70,971
500 Mannesmann AG 67,363
700 Veba (Vereinigte Elektrizitaets Bergwerks) AG 37,476
470 Volkswagen AG 30,496
--------------
450,113
Hong Kong (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
10,000 Hong Kong and China Gas Co., Ltd. 11,617
4,000 Hong Kong Electric Holdings Ltd. 11,385
2,048 Sun Hung Kai Properties Ltd. 13,945
--------------
36,947
Ireland (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,211 Allied Irish Banks PLC 38,483
1,188 Bank of Ireland 24,675
1,028 CRH PLC 19,138
6,000 Greencore Group PLC 23,596
--------------
105,892
Italy (5.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,400 Alleanza Assicurazioni 15,052
1,200 Banca Popolare di Milano 10,311
12,800 Ente Nazionale Idrocarburi (ENI) SpA 74,028
1,000 La Rinascente SpA 8,868
5,000 Telecom Italia Mobile SpA 33,709
10,000 Telecom Italia SpA 105,640
--------------
247,608
Japan (19.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,000 Canon, Inc. 64,034
2,000 Dai Nippon Printing Co., Ltd. 27,748
1,000 Fuji Photo Film Co. 36,639
2,000 Fujitsu Ltd. 24,874
1,000 Ito-Yokado Co., Ltd. 58,151
1,000 KAO Corp. 19,916
1,000 Kurita Water Industries Ltd. 13,151
5,000 Mitsui Fudoscan Co., Ltd. 27,143
1,000 Murata Manufacturing Co. Ltd. 44,874
13,000 Nikko Securities Co. Ltd. 40,966
6 Nippon Telegraph and Telephone Corp. 49,311
1,000 Promise Co., Ltd. 45,378
1,000 Rohm Co. Ltd. 97,479
1,000 Sankyo Co., Ltd. 21,429
2,000 Shin-Etsu Chemical Co. 46,723
1,000 Shiseido Co., Ltd. 12,101
1,000 Softbank Corp. 70,588
1,000 Takefuji Corp. 72,353
1,000 TDK Corp. 71,513
1,000 Tokyo Electric Power Co. 20,126
--------------
864,497
Netherlands (6.9%)
- --------------------------------------------------------------------------------------------------------------------------
2,876 ABN AMRO Holding N.V. 58,770
800 Akzo-Nobel N.V. 30,448
909 Internationale Nederlanden Groep (ING) 51,069
2,060 Koninklijke Ahold N.V. 79,425
580 Laurus N.V. 16,612
600 Philips Electronics N.V. 41,971
300 TNT Post Group N.V. 10,294
394 Vedior N.V. 8,398
400 Vendex International N.V. 10,752
--------------
307,739
New Zealand (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,500 Telecom Corp. of New Zealand Ltd. 12,666
3,800 Telecom New Zealand Ltd. 10,817
--------------
23,483
Norway (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,000 Christiana Bank & Trust 3,599
700 Petro Geo-Services ADR (NON) 8,006
500 Saga Petroleum ADR 4,213
--------------
15,818
Portugal (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
98 Banco Comercial Portugues, S.A. 2,957
600 Electricidade de Portugal S.A. 12,981
600 Portugal Telecom S.A. 29,485
--------------
45,423
Singapore (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
2,000 Development Bank of Singapore Ltd. 14,518
1,000 Keppel Land Ltd. 1,028
2,000 Oversea Chinese Banking Corp. 13,357
3,000 United Overseas Bank Ltd. 17,596
--------------
46,499
Spain (2.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,450 Iberdola S.A. 22,762
1,300 Superdiplo S.A. (NON) 32,651
1,571 Telfonica S.A. 71,994
--------------
127,407
Sweden (4.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,500 Astra AB 29,886
700 Electrolux AB 13,346
1,000 Pharmacia & Upjohn, Inc. 53,028
2,000 Skandia Forsakrings AB 36,905
1,300 Svenska Cellulosa AB (SCA) Class B 26,061
600 Telefonaktiebolaget LM Ericsson Class B 15,964
700 Volvo AB Class B 18,238
--------------
193,428
Switzerland (7.8%)
- --------------------------------------------------------------------------------------------------------------------------
40 ABB AG Bearer 48,990
20 Julius Baer Holdings AG 60,905
40 Nestle S.A. 75,699
45 Novartis AG ADR 79,152
90 Swisscom AG ADR (NON) 35,684
150 United Bank of Switzerland (UBS) AG (NON) 46,810
--------------
347,240
United Kingdom (18.9%)
- --------------------------------------------------------------------------------------------------------------------------
2,098 Allied Zurich PLC (NON) 30,969
1,000 Anglian Water PLC 11,696
2,000 Bass PLC 27,750
2,098 BAT Industries PLC 19,140
1,000 British Airways PLC 7,382
7,108 British Petroleum Co. PLC 101,236
3,500 Burmah Castrol PLC 45,703
5,000 Cable & Wireless Communications (NON) 59,281
800 Diageo PLC 8,838
2,000 Glaxo Wellcome PLC 63,800
2,000 Granada Group PLC 40,327
1,344 HSBC Holdings PLC (75P) 39,197
1,213 HSBC Holdings PLC 34,134
700 Molins PLC 1,290
1,000 Royal & Sun Alliance Insurance Group PLC 8,452
303 Royal PTT 15,955
6,012 Scottish Power PLC 55,531
6,000 Securicor Group PLC 57,895
2,000 Siebe PLC 8,436
4,000 Smiths Industries PLC 60,659
5,000 Tomkins PLC 18,165
5,075 Vodafone Group PLC 93,102
800 Zeneca Group PLC 33,274
--------------
842,212
--------------
Total Common Stocks (cost $3,645,746) $ 4,408,521
SHORT-TERM INVESTMENTS (1.7%) (a) (cost $77,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 77,000 Interest in $310,913,000 joint repurchase agreement
dated February 26, 1999 with Warburg Securities
due March 1, 1999 with respect to various U.S.
Treasury obligations -- maturity value of $77,030
for an effective yield of 4.74% $ 77,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,722,746) (b) $ 4,485,521
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $4,452,747.
(b) The aggregate identified cost on a tax basis is $3,723,068, resulting in gross unrealized appreciation and
depreciation of $986,669 and $224,216, respectively, or net unrealized appreciation of $762,453.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depository Receipts, representing ownership of
foreign securities on deposit with a domestic custodian bank.
The fund had the following industry group concentrations greater than 10% at February 28, 1999 (as a
percentage of net assets):
Insurance and Finance 20.3%
Telecommunications 16.1
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 28, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,722,746) (Note 1) $4,485,521
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 25
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 2,850
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 2,713
- -----------------------------------------------------------------------------------------------
Total assets 4,491,109
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 12,008
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 6,238
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 163
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,285
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4
- -----------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 3,662
- -----------------------------------------------------------------------------------------------
Other accrued expenses 15,002
- -----------------------------------------------------------------------------------------------
Total liabilities 38,362
- -----------------------------------------------------------------------------------------------
Net assets $4,452,747
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,610,506
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (25,966)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 105,578
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 762,629
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $4,452,747
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($4,452,747 divided by 416,183 shares) $10.70
- -----------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $10.70)* $11.35
- -----------------------------------------------------------------------------------------------
* 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
Six months ended February 28, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 7,337
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 16,539
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,586
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,203
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 17
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses 154
- -----------------------------------------------------------------------------------------------
Reports to shareholders 1,693
- -----------------------------------------------------------------------------------------------
Registration fees 29
- -----------------------------------------------------------------------------------------------
Auditing 10,997
- -----------------------------------------------------------------------------------------------
Legal 1,239
- -----------------------------------------------------------------------------------------------
Other 7
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (5,344)
- -----------------------------------------------------------------------------------------------
Total expenses 30,120
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,801)
- -----------------------------------------------------------------------------------------------
Net expenses 27,319
- -----------------------------------------------------------------------------------------------
Net investment loss (19,982)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 105,882
- -----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 24
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 278
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 390,257
- -----------------------------------------------------------------------------------------------
Net gain on investments 496,441
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $476,459
- -----------------------------------------------------------------------------------------------
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
February 28 August 31
1999* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (19,982) $ 16,078
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 105,906 150,512
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 390,535 24,152
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 476,459 190,742
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (21,375) (24,481)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments (150,404) (35,574)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 289,848 63,880
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 594,528 194,567
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 3,858,219 3,663,652
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income and undistributed net
investment income of $25,966 and $15,391, respectively) $4,452,747 $3,858,219
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 28 Year ended Dec. 28, 1995+
operating performance (Unaudited) August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.92 $9.58 $8.58 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) (.05)(c) .04 .07 .08
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.28 .45 1.15 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.23 .49 1.22 .08
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.06) (.06) (.09) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.39) (.09) (.13) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.45) (.15) (.22) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.70 $9.92 $9.58 $8.58
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and suplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 12.38* 5.29 14.43 0.94*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,453 $3,858 $3,664 $3,144
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(d) .72* 1.47 1.45 .98*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) (.48)* .40 .74 .96*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 21.80* 38.61 76.09 48.18*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(c) Per share net investment income has been determined on the basis of weighted average number
of shares outstanding during the period.
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund for the period ended February 28, 1999, August 31, 1998, August 31, 1997, and
August 31, 1996, reflect a reduction of $0.01, $0.04, $0.03, and $0.05 per share, respectively.
</TABLE>
Notes to financial statements
February 28, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam International Fund (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-ended 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 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, 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 following
procedures approved by the trustees. Foreign securities quoted in foreign
currencies are translated in U.S. dollars at the current exchange rate.
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. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. 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, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended February 28, 1999, the fund had no borrowings against the line of
credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
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) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
J) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public
offering of its shares were $3,662. These expenses are being amortized on
projected net asset levels over a five-year period. The fund will
reimburse Putnam Management for the payment of these expenses.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.80% of the first $500
million of average net assets, 0.70% of the next $500 million, 0.65% of
the next $500 million, 0.60% of the next $5 billion, 0.575% of the next $5
billion, 0.555% of the next $5 billion, 0.54% of the next $5 billion, and
0.53% thereafter.
As part of the subcustodian contract between the subcustodian bank and
Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc., the subcustodian bank has a lien on the securities of
the fund to the extent permitted by the fund's investment restrictions to
cover any advances made by the subcustodian bank for the settlement of
securities purchased by the fund. At February 28, 1999, the payable to the
subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through December 31, 1999, to the extent
that expenses of the fund (exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expense, credits from
PFTC and payments under the Trust's distribution plan) would exceed an
annual rate of 1.45% of the fund's average net assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended February 28, 1999, fund expenses were reduced by
$2,801 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $100 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. 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. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35% of
the fund's average net assets. The fund is currently not making any
payments pursuant to the Plan.
For the six months ended February 28, 1999, Putnam Mutual Funds Corp.,
acting as underwriter, received no monies from net commissions from the
sale of shares of the fund.
Note 3
Purchases and sales of securities
During the six months ended February 28, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$1,011,136 and $895,417, 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 February 28, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
February 28, 1999
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 11,655 $124,313
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 16,267 171,779
- -----------------------------------------------------------------------------
27,922 296,092
Shares
repurchased (608) (6,244)
- -----------------------------------------------------------------------------
Net increase 27,314 $289,848
- -----------------------------------------------------------------------------
Year ended
August 31, 1998
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,111 $25,296
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,415 60,048
- -----------------------------------------------------------------------------
8,526 85,344
Shares
repurchased (2,114) (21,464)
- -----------------------------------------------------------------------------
Net increase 6,412 $63,880
- -----------------------------------------------------------------------------
At February 28, 1999, Putnam Investments Inc., owned 383,164 shares of the
fund (92.1% of shares outstanding), valued at $4,099,855.
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Justin M. Scott
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
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.
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 the
principal amount invested.
51090-2AX 4/99
