PUTNAM
GLOBAL NATURAL
RESOURCES
FUND
ANNUAL REPORT
August 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "While the world's use of natural resources may not always rise
smoothly and steadily, demand for these commodities is growing as
countries around the globe modernize their economies. The portfolio's wide
diversification among industries, geographic markets, and natural resource
sectors seeks to produce solid returns while dampening the effects of a
downturn in any one market or region."
-- Jeanne L. Mockard, manager
Putnam Global Natural Resources Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
18 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
It is difficult to imagine any thread in our world's economic weave that does
not in some fashion involve natural resources. Companies that provide the
fuels to power our factories and supply the materials to construct and
maintain our roads and buildings play prominently in the business of the
global village.
From this worldwide array of companies, Fund Manager Jeanne Mockard constantly
seeks out the most efficient and productive to include in the portfolio of
Putnam Global Natural Resources Fund. She is backed by an equity research
capability that ranks among the mutual fund industry's best.
The effectiveness of an investment focus on global natural resources over both
the fiscal year ended August 31, 1997, and longer periods is demonstrated in
the performance tables that follow Jeanne's management report. On the
following pages, she discusses the market and economic environment that
prevailed during fiscal 1997 and looks at prospects for the fiscal year just
begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
October 15, 1997
Report from the Fund Manager
Jeanne L. Mockard
As developing nations around the world continue to industrialize their
economies and modernize their physical infrastructures, the demand for natural
resources continues to grow. The building of bridges and roads, the
introduction of modern telecommunications, and the construction of housing and
commercial structures -- all of these changes create a need for the energy,
chemicals, metals, minerals, and other natural resources that underlie the
business of the companies in which this fund invests.
It is no surprise, then, that during the 12 months ended August 31, 1997,
Putnam Global Natural Resources Fund's class A shares rose by 31.39% at net
asset value and 23.84% at public offering price. For results over longer
periods and performance of class B and class M shares, please refer to pages 9
and 10.
* DIVERSIFICATION AND GLOBAL EMPHASIS PROVIDE PROTECTION AND STRONG RETURNS
Throughout the fiscal year, the fund's portfolio remained concentrated in
large multinational company stocks from a wide spectrum of industries. Many
are familiar, household names including Exxon, du Pont, Dow Chemical, and
Mobil, while others such as Freeport-McMoRan Copper & Gold Co. and
Schlumberger Ltd. are lesser known to consumers yet produce cutting-edge
products and hold industry leadership positions. As economic reforms and the
adoption of free-market policies continued throughout Asia, Latin America, and
the Pacific Rim, these multinational holdings provided strong returns during
the period.
Your fund's large-company, multinational stock holdings offer important
advantages. As the name implies, these companies sell their goods and services
in markets around the world so that a short-term problem in one country or
region is unlikely to affect their overall performance. In fact, a downturn in
one local economy may even benefit a multinational company by reducing some of
its production costs without affecting profits, which accrue in many different
countries. This is exactly what happened in Asia during your fund's fiscal
year as downturns in some local economies lowered costs for many petroleum
companies. At the same time, oil -- which is priced in dollars and is their
main commodity -- remained in demand and continued to bring in large profits.
In addition, many multinational companies have undertaken strict cost-cutting
measures in recent years, leaving them more profitable than ever, even in
today's environment of lower price margins.
* OIL POSITION BENEFITS FROM PRICE CHANGES, LARGE-CAP FOCUS, AND TREND TOWARD
PRIVATIZATION
Oil stocks remained the fund's largest sector weighting throughout the period.
Last fall, when oil prices peaked, we shifted some of the fund's assets away
from stocks we believed had become fully valued. Some months later, Iraq was
allowed to resume oil production, eliminating a wild card that had been
creating a great deal of market uncertainty and price volatility. By March,
oil prices had retreated to their normal trading range -- $18 to $22 per
barrel -- as did oil stock prices. We capitalized on these lower prices to
increase oil holdings to an overweight position in anticipation of continued
solid returns in the months ahead.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Oil and gas 35.2%
Chemicals 14.0%
Oil services 9.9%
Metals and mining 7.9%
Paper and forest products 6.3%
Footnote reads:
*Based on net assets as of 8/31/97. Holdings will vary over time.
The fund's focus on large-capitalization oil company stocks also contributed
to strong performance in fiscal 1997. Last year, heavy exploration and
drilling demand and a shortage of companies equipped to provide these services
led to outperformance by small oil service company stocks. During 1997,
however, the market took back these gains and the large-company stocks favored
by this fund soon began to outperform once again.
In Europe, the trend toward privatizing formerly state-run oil companies also
created some unique investment opportunities during the period. The stocks of
these companies are selling at extremely attractive valuations relative to the
stocks of major oil companies such as British Petroleum and Exxon. After
meeting with the managements of several of these companies, we decided to add
ENI SPA of Italy, Elf Aquitaine of France, and YPF of Argentina to the
portfolio. We believe these companies are now well prepared to compete
successfully in the growing world market and have excellent performance
potential going forward. While these holdings, along with others discussed in
this report, were viewed favorably at the end of the fiscal period, all
portfolio holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* CHEMICAL STOCKS CONTINUE OUTPERFORMANCE; PAPER HOLDINGS INCREASED
Chemical stocks were another of the portfolio's major sector allocations, at
14% of net assets. Once again these holdings were top performers, benefiting
from solid fundamentals and individual company strengths. Two holdings in
particular, du Pont and Dow Chemical Co., remain performance leaders. In both
cases, aggressive cost cutting has made the companies highly productive and
profitable, while innovative new products continue to sustain their
competitive edge in the market.
One of the major benefits of your fund's multisector strategy is the
portfolio's ability to shift into and out of different natural resource
industries as opportunities arise. During the recent period, we took advantage
of this flexibility to increase holdings in the paper and forest products
sector, giving the portfolio an overweight position in these areas. Prices on
paper, pulp, and packaging products began to firm during the latter half of
the fiscal year just as steady demand reduced inventories.
TOP 10 HOLDINGS
Schlumberger Ltd.
Oil services
Atlantic Richfield Co.
Oil and gas
Dow Chemical Co.
Chemicals
Amoco Corp.
Oil and gas
Mobil Corp.
Oil and gas
E. I. du Pont de Nemours & Co., Ltd.
Chemicals
Chevron Corp.
Oil and gas
Royal Dutch Petroleum Co. ADR (the Netherlands)
Oil and gas
Exxon Corp.
Oil and gas
PPG Industries, Inc.
Chemicals
Footnote reads:
These holdings represent 30.0% of the fund's net assets as of 8/31/97.
Portfolio holdings will vary over time
* IN METALS AND MINING, STRENGTH AMID WEAKNESS
The fund maintained approximately 8% of its assets in metals and mining stocks
over the period, focusing on companies with strong fundamentals and
diversified operations. In fact, although gold prices remained low throughout
the fiscal year, Freeport-McMoRan Copper & Gold Co., one of the fund's
holdings in this sector, delivered extremely strong relative returns. This
Louisiana-based company is conservatively managed and holds a world leadership
position in the exploration and recovery of copper, gold, and silver. Thus,
although gold prices moved lower over the period, Freeport-McMoRan's stock
rose in value as its diversified operations yielded profitable results.
* FAVORABLE ECONOMIC TRENDS CREATE OPTIMISTIC OUTLOOK
As we begin a new fiscal year, most global economies are in good shape,
although the Asian markets bear close watching to determine whether current
difficulties will be short lived or deepen with time. We will continue to
monitor natural resources industries around the world, seeking to keep the
portfolio well diversified while also taking advantage of the stocks of large
multinational companies.
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 8/31/97, there is no guarantee the fund will continue to hold
these securities in the future. Funds investing in a single sector may be
subject to more volatility than funds investing in a diverse group of sectors.
International investing involves certain risks, including those related to
economic instability, unfavorable political developments, and currency
fluctuations, not present with domestic investments.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Global Natural Resources Fund is designed for investors seeking capital
appreciation through stocks of companies in the energy and natural
resources industries. Current income is only an incidental consideration.
TOTAL RETURN FOR PERIODS ENDED 8/31/97
Class A Class B Class M
(inception date) (7/24/80) (2/1/94) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 31.39% 23.84% 30.40% 25.40% 30.79% 26.22%
- ------------------------------------------------------------------------------
5 years 84.61 74.01 77.84 75.84 80.00 73.69
Annual average 13.04 11.72 12.20 11.95 12.47 11.67
- ------------------------------------------------------------------------------
10 years 163.97 148.77 143.19 143.19 149.37 140.70
Annual average 10.19 9.54 9.29 9.29 9.57 9.18
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 8/31/97
Lipper
Standard Natural
& Poor's Resources
500 Index Average
- ------------------------------------------------------------------------------
1 year 37.96% 23.28%
- ------------------------------------------------------------------------------
5 years 117.25 111.31
Annual average 16.79 15.62
- ------------------------------------------------------------------------------
10 years 172.73 118.09
Annual average 10.55 7.41
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% for class A shares and 3.50% for class M shares.
One-, five-, and ten-year (when available) and life-of-fund returns for
class B shares reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declines each year to 1% in the
sixth year, and is eliminated thereafter. Returns shown for class B and
class M shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
initial sales charge or CDSC, if any, currently applicable to each class
and, in the case of class B and class M shares, the higher operating costs
applicable to such shares. All returns assume reinvestment of
distributions at NAV and represent past performance; they do not guarantee
future results. Investment return and principal value will fluctuate so
that an investor's shares when redeemed may be worth more or less than
their original cost.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a %10,000 investment since 8/31/87
Plot Pionts read:
Lipper Natural Standard &
Fund at Resources Poor's
Date/year Pop Average 500 Index
8/31/87 9425 10000 10000
8/31/88 8325 7802 7930
8/31/89 10959 9713 10657
8/31/90 12024 10479 9781
8/31/91 12820 10159 11991
8/31/92 13476 10129 12554
8/31/93 16413 12741 14056
8/31/94 14826 12403 14418
8/31/95 16471 13294 17038
8/31/96 18934 16338 19771
8/31/97 24877 21809 27273
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have been
valued at $24,319 and no contingent deferred sales charges would apply; a
$10,000 investment in the fund's class M shares would have been valued at
$24,937 ($24,070 at public offering price). See page 9 of performance section
for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 8/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income $0.160 $0.077 $0.124
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long term 0.880 0.880 0.880
- ------------------------------------------------------------------------------
Short term 0.288 0.288 0.288
- ------------------------------------------------------------------------------
Total $1.328 $1.245 $1.292
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
8/31/96 $18.03 $19.13 $17.81 $17.97 $18.62
- ------------------------------------------------------------------------------
8/31/97 22.13 23.48 21.77 21.99 22.79
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (7/24/80) (2/1/94) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 34.15% 26.42% 33.18% 28.18% 33.51% 28.86%
- ------------------------------------------------------------------------------
5 years 93.00 81.92 85.92 83.92 88.30 81.66
Annual average 14.05 12.71 13.20 12.96 13.49 12.68
- ------------------------------------------------------------------------------
10 years 184.51 168.14 162.13 162.13 168.96 159.58
Annual average 11.02 10.37 10.12 10.12 10.40 10.01
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares when sold may
be worth more or less than their original cost. See page 9 of performance
section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales 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
Lipper Natural Resources Average* is composed of funds that invest more
than 65% of their equity holdings in the natural resources industries.
Standard & Poor's 500 Index* is an index of common stocks frequently used
as a general measure of stock market performance.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
WELCOME TO
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VISIT PUTNAM'S NEW SITE ON THE WORLD WIDE WEB TO FIND OUT:
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You can also read Dr. Robert Goodman's economic commentary and Putnam's
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The site can be accessed through any of the major online services
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you can also access it via Netscape and an independent Internet service
provider.
New features will be added to the site on an ongoing basis. So, visit us
at http://www.putnaminv.com -- often!
Report of independent accountants
To the Trustees and Shareholders of
Putnam Global Natural Resources Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam Global
Natural Resources Fund (the "fund") at August 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at August 31, 1997 by correspondence with
the custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
October 16, 1997
Portfolio of investments owned
August 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS (98.9%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Aluminum (1.7%)
- ------------------------------------------------------------------------------------------------------------
40,000 Alumax, Inc. + $ 1,657,500
60,000 Aluminum Co. of America 4,935,000
--------------
6,592,500
Chemicals (14.0%)
- ------------------------------------------------------------------------------------------------------------
150,000 Dow Chemical Co. 13,275,000
189,000 du Pont (E.I.) de Nemours & Co., Ltd. 11,777,063
109,000 Eastman Chemical Co. 6,519,563
30,000 Georgia Gulf Corp. 862,500
59,000 Hercules, Inc. 3,049,563
50,000 Olin Corp. 2,225,000
124,000 PPG Industries, Inc. 7,812,000
31,000 Rohm & Haas Co. 2,970,176
32,000 Union Carbide Corp. 1,642,000
94,000 Witco Chemical Corp. 4,418,000
--------------
54,550,865
Conglomerates (1.5%)
- ------------------------------------------------------------------------------------------------------------
65,000 Minnesota Mining & Manufacturing Co. 5,841,875
Construction (0.2%)
- ------------------------------------------------------------------------------------------------------------
14,000 Foster Wheeler Corp. 639,625
Consumer Products (1.5%)
- ------------------------------------------------------------------------------------------------------------
128,000 Kimberly-Clark Corp. 6,072,000
Containers (0.8%)
- ------------------------------------------------------------------------------------------------------------
47,200 Temple Inland, Inc. 3,044,400
Electric Utilities (0.7%)
- ------------------------------------------------------------------------------------------------------------
54,726 Duke Power Co. 2,650,791
Environmental Control (0.3%)
- ------------------------------------------------------------------------------------------------------------
30,000 Browning-Ferris Industries, Inc. 1,048,125
Gas Pipelines (4.5%)
- ------------------------------------------------------------------------------------------------------------
113,000 Coastal Corp. 6,525,750
28,000 Columbia Gas System, Inc. 1,848,000
37,185 El Paso Natural Gas Co. 2,091,656
75,000 Enron Corp. 2,892,188
37,000 Sonat, Inc. 1,843,063
48,500 Williams Cos., Inc. 2,258,281
--------------
17,458,938
Gas Utilities (1.3%)
- ------------------------------------------------------------------------------------------------------------
31,000 Consolidated Natural Gas Co. 1,830,938
55,000 Pacific Enterprises 1,811,563
30,000 Tejas Gas Corp. + 1,425,000
--------------
5,067,501
Machinery (1.5%)
- ------------------------------------------------------------------------------------------------------------
36,600 Caterpillar, Inc. 2,125,088
67,000 Deere (John) & Co. 3,752,000
--------------
5,877,088
Metals and Mining (7.9%)
- ------------------------------------------------------------------------------------------------------------
280,000 Barrick Gold Corp. 6,370,000
86,000 Euro Nevada Mining Corp. 1,316,738
199,374 Freeport-McMoRan Copper & Gold Co., Inc. Class A 5,333,255
27,000 Newmont Gold Co. 1,167,750
58,050 Newmont Mining Corp. 2,456,241
40,000 Phelps Dodge Corp. 3,217,500
233,000 Placer Dome Inc. (Canada) 3,873,625
270,000 Rio Tinto PLC (United Kingdom) + 4,254,588
60,000 RMI Titanium Co. + 1,256,250
46,000 Titanium Metals Corp. + 1,644,500
--------------
30,890,447
Oil and Gas (35.2%)
- ------------------------------------------------------------------------------------------------------------
133,200 Amoco Corp. 12,595,725
37,000 Anadarko Petroleum Corp. 2,717,188
183,000 Atlantic Richfield Co. 13,725,000
71,282 British Petroleum Co., PLC ADR (United Kingdom) 6,032,239
58,000 Burlington Resources Inc. 2,936,250
137,300 Chevron Corp. 10,632,169
79,400 Elf Aquitane ADR (France) 4,426,550
73,400 Ente Nazionale Idrocarburi S.P.A. (ENI) ADR (Italy) 4,073,700
159,400 Exxon Corp. 9,753,288
139,000 Halliburton Co. 6,637,250
107,000 Kerr-McGee Corp. 6,647,375
20,000 Louisiana Land & Exploration Co. 1,531,250
163,800 Mobil Corp. 11,916,450
40,000 NGC Corp. 655,000
249,000 Occidental Petroleum Corp. 5,835,938
47,000 Pennzoil Co. 3,627,813
101,000 Phillips Petroleum Co. 4,803,813
196,000 Royal Dutch Petroleum Co.
(NY Registered) (Netherlands) 9,947,000
19,000 Texaco, Inc. 2,189,750
36,000 Total Corp. ADR (France) 1,705,500
137,000 Unocal Corp. 5,351,563
182,000 USX-Marathon Group Inc. 5,926,375
66,300 Western Gas Resources, Inc. 1,259,700
65,000 YPF S.A. ADR (Argentina) 2,116,563
--------------
137,043,449
Oil and Gas Exploration and Production (3.4%)
- ------------------------------------------------------------------------------------------------------------
38,000 Apache Corp. 1,508,125
37,000 Barrett Resources Corp. + 1,355,125
200,000 Gulf Canada Resources, Ltd. (Canada) + 1,612,500
35,000 Noble Affiliates, Inc. 1,623,125
60,000 Mitchell Energy & Development Corp. Class B 1,500,000
230,326 Union Pacific Resources Group Inc. 5,758,150
--------------
13,357,025
Oil Services (9.9%)
- ------------------------------------------------------------------------------------------------------------
112,000 Baker Hughes, Inc. 4,746,000
36,600 BJ Services Co. + 2,644,350
97,000 Dresser Industries, Inc. 4,049,750
204,000 Schlumberger Ltd. 15,542,250
40,000 Smith International, Inc. + 2,910,000
53,000 Weatherford Enterra, Inc. + 2,441,313
80,000 Western Atlas, Inc. + 6,340,000
--------------
38,673,663
Paper and Forest Products (6.3%)
- ------------------------------------------------------------------------------------------------------------
29,600 Boise Cascade Corp. 1,171,050
61,875 Fort James Corp. 2,598,750
30,000 Georgia Pacific Corp. 2,737,500
114,700 International Paper Co. 6,050,425
50,300 Mead Corp. 3,568,156
21,900 Union Camp Corp. 1,298,944
94,200 Weyerhaeuser Co. 5,440,050
20,000 Willamette Industries, Inc. 1,595,000
--------------
24,459,875
Railroads (4.6%)
- ------------------------------------------------------------------------------------------------------------
76,433 Burlington Northern Santa Fe Corp. 7,007,951
35,000 CSX Corp. 2,001,563
44,000 Norfolk Southern Corp. 4,312,000
71,000 Union Pacific Corp. 4,610,563
--------------
17,932,077
Refining and Marketing (1.4%)
- ------------------------------------------------------------------------------------------------------------
34,098 Ashland, Inc. 1,709,162
32,733 Sun Co., Inc. 1,272,495
75,000 Tosco Corp. 2,479,688
--------------
5,461,345
Steel (1.7%)
- ------------------------------------------------------------------------------------------------------------
70,000 Birmingham Steel Corp. 1,312,500
50,000 Carpenter Technology Corp. 2,240,625
41,900 Ispat International NV (Canada) + 1,123,444
20,000 Nucor Corp. 1,133,750
31,000 USX-U.S. Steel Group 1,088,875
--------------
6,899,194
Transportation (0.5%)
- ------------------------------------------------------------------------------------------------------------
80,000 Avondale Industries, Inc. + 1,830,000
--------------
Total Common Stocks (cost $305,905,302) $ 385,390,783
CONVERTIBLE PREFERRED STOCKS (0.9%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
46,000 Amax Gold, Inc. Ser. B, $3.75 cv. pfd. $ 2,461,000
36,364 Atlantic Richfield Co. LYON (Liquid Yield Option Notes)
$2.23 cv. pfd. 863,645
--------------
Total Convertible Preferred Stocks (cost $3,937,970) $ 3,324,645
CONVERTIBLE BONDS AND NOTES (0.2%) * (cost $770,000)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 770,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 $ 844,113
SHORT-TERM INVESTMENTS (1.8%) * (cost $7,160,322)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 7,157,000 Interest in $500,000,000 joint repurchase agreement
dated August 29, 1997 with Morgan Stanley & Co. Inc.
due September 2, 1997 with respect to various
U.S. Treasury obligations -- maturity value of
$7,161,429 for an effective yield of 5.57% $ 7,160,322
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $317,773,594) *** $ 396,719,863
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $389,834,120.
*** The aggregate identified cost on a tax basis is $317,847,473,
resulting in gross unrealized appreciation and depreciation of
$84,310,887 and $5,438,497, respectively, or net unrealized appreciation
of $78,872,390.
+ Non-income-producing security.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American
Depository Receipt, representing ownership of foreign securities on
deposit with a domestic custodian bank.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at August 31, 1997
(aggregate face value $7,544,483)
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
French Francs $4,474,980 $ 4,361,031 2/2/98 $ (113,949)
Italian Lira 3,266,154 3,183,452 2/2/98 (82,702)
- ----------------------------------------------------------------------------------------
$ (196,651)
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
August 31, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $317,773,594) (Note 1) $396,719,863
- ---------------------------------------------------------------------------------------------------
Cash 37
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 1,156,225
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,459,401
- ---------------------------------------------------------------------------------------------------
Total assets 399,335,526
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 5,084,350
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,142,823
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 665,346
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 82,106
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,418
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,285
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 230,087
- ---------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 196,651
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 89,340
- ---------------------------------------------------------------------------------------------------
Total liabilities 9,501,406
- ---------------------------------------------------------------------------------------------------
Net assets $389,834,120
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $288,575,686
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,211,045
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 20,297,771
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 78,749,618
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $389,834,120
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($239,539,130 divided by 10,825,115 shares) $22.13
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $22.13)* $23.48
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($142,442,254 divided by 6,543,297 shares)** $21.77
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($7,852,736 divided by 357,052 shares) $21.99
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $21.99)* $22.79
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended August 31, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $119,937) $ 7,674,045
- --------------------------------------------------------------------------------------------------
Interest 277,746
- --------------------------------------------------------------------------------------------------
Total investment income 7,951,791
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,267,627
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 658,741
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 23,759
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,839
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 525,503
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,080,174
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 40,308
- --------------------------------------------------------------------------------------------------
Reports to shareholders 52,166
- --------------------------------------------------------------------------------------------------
Registration fees 24,829
- --------------------------------------------------------------------------------------------------
Auditing 33,758
- --------------------------------------------------------------------------------------------------
Legal 9,045
- --------------------------------------------------------------------------------------------------
Postage 71,555
- --------------------------------------------------------------------------------------------------
Other 31,014
- --------------------------------------------------------------------------------------------------
Total expenses 4,826,318
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (137,087)
- --------------------------------------------------------------------------------------------------
Net expenses 4,689,231
- --------------------------------------------------------------------------------------------------
Net investment income 3,262,560
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 25,198,035
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in foreign
currencies during the year (196,651)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 57,480,549
- --------------------------------------------------------------------------------------------------
Net gain on investments 82,481,933
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $85,744,493
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended August 31
--------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 3,262,560 $ 2,936,986
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 25,198,035 13,903,973
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 57,283,898 8,598,159
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 85,744,493 25,439,118
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (1,593,014) (2,905,176)
- ----------------------------------------------------------------------------------------------------------------------
Class B (385,225) (559,144)
- ----------------------------------------------------------------------------------------------------------------------
Class M (26,332) (11,830)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (11,629,001) (789,766)
- ----------------------------------------------------------------------------------------------------------------------
Class B (5,843,416) (194,224)
- ----------------------------------------------------------------------------------------------------------------------
Class M (248,026) (3,751)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 84,120,311 53,426,929
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 150,139,790 74,402,156
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 239,694,330 165,292,174
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $2,211,045 and and $953,056, respectively) $389,834,120 $239,694,330
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ----------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended August 31
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $18.03 $16.09 $14.73 $20.51 $17.57
- ----------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income .25(d) .28(d) .29 .19 .23
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.18 2.09 1.31 (2.37) 3.41
- ----------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.43 2.37 1.60 (2.18) 3.64
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------
From net
investment income (.16) (.34) (.24) (.19) (.18)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) (.09) -- (2.91) (.52)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- -- (.50) --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (1.33) (.43) (.24) (3.60) (.70)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.13 $18.03 $16.09 $14.73 $20.51
- ----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 31.39 14.95 11.10 (9.67) 21.79
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $239,539 $170,678 $135,330 $129,449 $133,585
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.23 1.27 1.13 1.24 1.18
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.26 1.62 1.89 1.24 1.25
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 39.25 47.71 42.75 189.83 170.54
- ----------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0511 $.0547
- ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios
exclude these amounts. (Note 2)
(c) Average commission rate paid on security trades is required for fiscal periods beginning on
or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ----------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 1, 1994+
operating performance Year ended August 31 to August 31
- ----------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $17.81 $15.94 $14.65 $14.78
- ----------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------
Net investment income .10(d) .15(d) .16 .13(d)
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.11 2.07 1.33 (.26)
- ----------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.21 2.22 1.49 (.13)
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------
From net
investment income (.08) (.26) (.20) --
- ----------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) (.09) -- --
- ----------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions (1.25) (.35) (.20) --
- ----------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.77 $17.81 $15.94 $14.65
- ----------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 30.40 14.14 10.38 (.88)*
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $142,442 $66,375 $29,916 $10,244
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.98 2.04 1.87 1.11*
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .52 .85 1.20 .90*
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 39.25 47.71 42.75 189.83
- ----------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0511 $.0547
- ----------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios
exclude these amounts. (Note 2)
(c) Average commission rate paid on security trades is required for fiscal periods beginning on
or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 3, 1995+
operating performance Year ended August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $17.97 $16.07 $15.59
- ------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------
Net investment income .15(d) .19(d) .03
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 5.16 2.09 .45
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.31 2.28 .48
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.29) --
- ------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) (.09) --
- ------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (1.29) (.38) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.99 $17.97 $16.07
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 30.79 14.39 3.08*
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $7,853 $2,641 $46
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.73 1.85 .28*
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .77 1.07 .44*
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 39.25 47.71 42.75
- ------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0511 $.0547
- ------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios
exclude these amounts. (Note 2)
(c) Average commission rate paid on security trades is required for fiscal periods beginning on
or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
August 31, 1997
Note 1
Significant accounting policies
Putnam Global Natural Resources Fund ("the fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-ended
management investment company. The fund continues to seek capital appreciation
by investing primarily in the common stocks of companies in the energy and
natural resource industries, but may also invest a portion of its assets in
other industries and in fixed-income securities.
The fund offers class A, class B and class M shares. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at 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. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. Market quotations are not considered to be readily available
for some convertible securities; such investments are stated at fair value on
the basis of valuations furnished by a pricing service approved by the
Trustees, which determines valuations for normal, institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost, which
approximates market, 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 appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the value
of open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. The fund could be exposed to
risk if the value of the currency changes unfavorably, if the counterparties
to the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal
taxes on income, capital gains or unrealized appreciation on securities held
nor for excise tax on income and capital gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include treatment
of losses on wash sale transactions, unrealized losses on forward foreign
currency contracts, post October foreign loss deferrals and non-taxable
dividends. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. For the year ended August 31, 1997,
the fund reclassified $60,002 to decrease paid-in-capital, with an increase to
accumulated net realized gain on investments of $60,002. The calculation of
net investment income per share in the financial highlights table excludes
these adjustments.
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: 0.70% of the first $500 million of
average net assets, 0.60% of the next $500 million, 0.55% of the next $500
million, 0.50% of the next $5 billion, 0.475% of the next $5 billion, 0.455%
of the next $5 billion, 0.44% of the next $5 billion, 0.43% thereafter. Prior
to December 20, 1996, any amount over $1.5 billion was based on 0.50%.
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 year ended August 31, 1997, fund expenses were reduced by $137,087
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.
Trustees of the fund receive an annual Trustees fee of $870 and an additional
fee for each Trustee's meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees 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 year ended August 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $153,986 and $10,359 from the sale of
class A and class M shares, respectively and $166,547 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 August 31, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $4,424 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended August 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $195,107,251 and
$125,659,508, 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 August 31, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
August 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 12,910,287 $257,413,523
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 619,119 11,664,201
- ------------------------------------------------------------
13,529,406 269,077,724
Shares
repurchased (12,171,985) (243,305,067)
- ------------------------------------------------------------
Net increase 1,357,421 $ 25,772,657
- ------------------------------------------------------------
Year ended
August 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 11,202,058 $196,442,808
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 196,998 3,248,494
- ------------------------------------------------------------
11,399,056 199,691,302
Shares
repurchased (10,341,511) (181,209,527)
- ------------------------------------------------------------
Net increase 1,057,545 $ 18,481,775
- ------------------------------------------------------------
Year ended
August 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 11,091,368 $217,130,354
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 289,947 5,401,714
- ------------------------------------------------------------
11,381,315 222,532,068
Shares
repurchased (8,565,885) (168,255,569)
- ------------------------------------------------------------
Net increase 2,815,430 $ 54,276,499
- ------------------------------------------------------------
Year ended
August 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 6,522,110 $113,561,023
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 39,356 644,251
- ------------------------------------------------------------
6,561,466 114,205,274
Shares
repurchased (4,709,889) (81,820,138)
- ------------------------------------------------------------
Net increase 1,851,577 $ 32,385,136
- ------------------------------------------------------------
Year ended
August 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 512,227 $10,089,265
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 13,021 244,674
- ------------------------------------------------------------
525,248 10,333,939
Shares
repurchased (315,154) (6,262,784)
- ------------------------------------------------------------
Net increase 210,094 $ 4,071,155
- ------------------------------------------------------------
Year ended
August 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 242,106 $ 4,266,444
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 735 12,120
- ------------------------------------------------------------
242,841 4,278,564
Shares
repurchased (98,755) (1,718,546)
- ------------------------------------------------------------
Net increase 144,086 $ 2,560,018
- ------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended,
the Fund hereby designates $29,673,725 (or if different, the amount
necessary to offset net capital gain earned by the Fund) as capital
gain dividends for its taxable year ended August 31, 1997.
The fund has designated 84.65% of the distributions from net investment
income as qualifying for the dividends received deduction for corporations.
The Form 1099 you receive in January 1998 will show the tax status of
all distributions paid to your account in calendar 1997.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a price of $1.00 per share, although there is no
assurance that this price will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581
to obtain a prospectus for any Putnam fund. It contains more
complete information, including charges and expenses. Please
read it carefully before you invest or send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Jeanne L. Mockard
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 Global Natural
Resources 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.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts
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Putnam
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AN007 36576-018/501/2AD 10/97
