Putnam
Global Natural
Resources
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
8-31-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* For the year ended September 30, 1998, Putnam Global Natural Resources
Fund's class A shares were ranked 5 of 55 natural resources funds tracked
by Lipper, placing the fund in the top 10% of its category. Class B and
class M shares were ranked 8 and 6 of the 55 funds, respectively.*
* "I believe now more than ever that we are going to see an improvement in
the oil markets. OPEC has made its cuts, consolidation has taken hold, and
production costs have declined. Barring depression in Russia or the Far
East, with commodities prices at 10-year lows, the current environment
provides a unique investment opportunity for a natural resources-related
fund such as ours."
-- 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
* Past performance is not indicative of future results. Lipper Analytical
Services is an industry research firm whose rankings are based on total
return performance, vary over time, and do not reflect the effects of
sales charges. For the 5 years ended 9/30/98, the fund's class A shares
ranked 9 of 23 funds; for the 10 years ended 9/30/98, class A shares
ranked 5 of 13 funds. Class B and Class M shares were not ranked over
longer periods.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
More telling than Putnam Global Natural Resources Fund's absolute
performance during the turbulent markets of its recently concluded fiscal
year is its relative position among its peers, as noted in its Lipper
ranking shown on the facing page. I feel confident in concluding that this
excellent showing positions your fund well for the day when the world's
economy resumes its strong growth track.
As Jeanne L. Mockard, your fund's manager, points out in the accompanying
report, the accelerating pace of infrastructure construction and of
development in emerging economies as well as the ongoing upgrading and
expansion of facilities in developed countries assure a steady stream of
demand for the products and services of the companies in which your fund
invests.
With the fund's global view, Jeanne is able to seek out and invest in the
most promising of these companies wherever they are located. In her
report, she discusses the challenges she faced during the fiscal year that
ended on August 31, 1998. More challenges lie ahead, of course, but Jeanne
remains optimistic about prospects in the next fiscal year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
October 21, 1998
Report from the Fund Manager
Jeanne L. Mockard
During the fiscal year ended August 31, 1998, Putnam Global Natural
Resources Fund's strategy was shaped by one key premise: as developing
nations continue to industrialize their economies and modernize their
infrastructures, the demand for natural resources will continue to grow.
In keeping with this premise, stocks of companies that fill a need for
energy, chemicals, minerals, metals, and other natural resources have
constituted the majority of the portfolio. Continuing global initiatives
in telecommunications, road and bridge building, and housing and
commercial construction are ensuring that the fund's focus is securely
based in economic reality.
Despite the potential offered by these opportunities, your fund's absolute
performance over fiscal 1998 declined, although its performance relative
to its peers remains outstanding. We attribute the decline to market
turmoil in Asia, a stagnant Japanese economy, Russian political and
economic instability, and toward the fiscal year's end, an increasingly
volatile U.S. economy. For the 12 months ended August 31, 1998, Putnam
Global Natural Resources Fund's class A shares returned -25.34% at net
asset value and -29.63% at public offering price. Yet, over the same
period, your fund's class A shares finished among the top 10% of the 55
natural resources funds tracked by Lipper Analytical Services. For results
over longer periods and performance of class B and class M shares, please
refer to pages 9, 10, and 11 and see page 2 for additional information
about the fund's Lipper standing.
* GLOBAL REACH AND CAPACITY FOR CHANGE ARE KEY SELECTION CRITERIA
Throughout a period of increasing economic instability in most foreign
markets other than Europe, your fund has stood up exceptionally well
relative to its competitors. There are three reasons why your fund has
tended to outperform other, similar funds in an underperforming market.
First, the fund emphasizes large-capitalization companies with a global
reach, as opposed to smaller, more volatile and generally riskier
companies. Unlike regionally oriented companies whose earnings are closely
linked to the performance of one or a few local markets, large-cap
multinational companies can often offset an economic downturn in one
geographic area with good performance in another, which tends to smooth
ups and downs in their overall performance. Furthermore, multinational
companies can sometimes increase profitability in a market downturn by
taking advantage of lower local production costs, even as demand remains
strong in other markets. While we have seen this take place in Southeast
Asia, economic declines in Russia and continuing stagnation in Japan have
made this balancing act more problematic.
Second, we attribute the fund's strong relative performance to our
requirement that companies we select must be undergoing positive change:
for example, buttressing market opportunities with a long-term strategy
for increasing profitability through cost reduction, other internal
efficiencies, and potential consolidation. Specifically, Amoco, one of the
fund's top 10 energy holdings, was recently acquired by British Petroleum
(another fund holding) in a move that puts the consolidated company in the
Exxon class in terms of global market power. Combining the best of both
companies and eliminating redundancies, the newly consolidated company
should accelerate efficiency measures already implemented by Amoco's
management. The share prices of both companies increased upon news of the
takeover. 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 strategy and may vary in the future.
[GRAPHIC OMITTED: horizontal bar chart of TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Oil and gas 21.7%
Oil services 21.2%
Chemicals 9.7%
Metals and mining 8.3%
Paper and
forest products 7.8%
Footnote reads:
*Based on net assets as of 8/31/98. Holdings will vary over time.
Finally, the share price of each company in which the fund invests must be
undervalued. That is, the price must not reflect what we see as the
company's true value.
* OIL: POSITIONING FOR FUTURE OPPORTUNITIES
In the past year, the price of oil has declined from about $27 per barrel
to as low as $13 per barrel, creating a difficult environment for oil
companies. In November 1997, at a time when oil prices, inventories, and
supply and demand were closely synchronized, OPEC chose to increase
production by 10%. Part of the reason was a desire for increased earnings;
part was in response to Venezuela's announcement of a unilateral
production increase. Iraq was also being permitted to increase its oil
exports. OPEC's move quashed Venezuelan production. Meanwhile, worldwide
demand had fallen because of a warmer-than-usual winter and declining
global economic activity. This combination of events led to historically
low oil prices, negatively affecting oil company earnings.
Although the share prices of oil companies, which constitute about 50% of
your fund's assets, declined as a result, this was not unalloyed bad news
for the fund. As a result of renewed efforts on the part of oil company
managements to increase efficiency, major oil companies now evaluate the
potential profitability of new ventures based on a $15-per-barrel
long-term price for oil. While prices had dropped well below that level,
as a result of some reduction in OPEC's production, they have recently
bounced back from their lows and exceeded $14 per barrel as this report
was being written; this upward trend has been reflected in the recent
price of oil company shares. Given some market stabilization, which could
occur in the near term especially if Japan's restorative economic measures
take hold, we would expect oil prices to inch back to more profitable
levels and oil stock prices rise accordingly -- with an accompanying
positive effect on your fund. A wild card in this scenario would be
decreasing demand as a result of severe recession or depression in Russia
or the Far East. As we believe further recovery in oil prices is likely,
your fund remains overweighted in oil stocks relative to the fund's
benchmark index.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Mobil Corp.
Oil and gas
du Pont (E.I.) de Nemours & Co., Ltd.
Chemicals
Amoco Corp.
Oil and gas
Atlantic Richfield Co.
Oil and gas
Royal Dutch Petroleum Co. (NY Registered)(Netherlands)
Oil and gas
Chevron, Inc.
Oil and gas
Phillips Petroleum Co.
Oil and gas
Burlington Northern Santa Fe Corp.
Railroads
Schlumberger Ltd.
Oil services
Barrick Gold Corp.
Metals and mining
These holdings represent 33.5% of the fund's net assets as of 8/31/98.
Portfolio holdings will vary over time.
* LONG-TERM OUTLOOK REMAINS PROMISING
In the 1970s, your fund was perceived to be an excellent hedge against
inflation. While that rationale remains valid today, inflation is
considered a less salient problem than it was at that time. Over the past
few years, your fund's principal opportunities have come from the
infrastructure growth potential of secondary economies such as those of
India and China. True to the nature of economic development, that growth
has not been linear, and we presently find ourselves in a developmental
downturn.
However, despite current Russian and Asian economic difficulties, we
believe economic growth in those and other regions over the next decade
should lead to unprecedented demand for all the natural resources required
for infrastructure development. We will continue to monitor global natural
resources usage in order to detect appropriate, diversified investment
opportunities and to take advantage of the stocks of multinational,
resource-related 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 8/31/98, 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 8/31/98
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 -25.34% -29.63% -25.91% -29.36% -25.73% -28.34%
- ------------------------------------------------------------------------------
5 years 13.17 6.66 9.02 7.61 10.33 6.49
Annual average 2.51 1.30 1.74 1.48 1.99 1.27
- ------------------------------------------------------------------------------
10 years 123.12 110.27 105.96 105.96 111.21 103.84
Annual average 8.36 7.72 7.49 7.49 7.76 7.38
- ------------------------------------------------------------------------------
Life of fund 167.09 151.69 128.58 128.58 139.31 131.00
Annual average 5.58 5.23 4.67 4.67 4.94 4.73
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 8/31/98
Lipper
Standard Natural
& Poor's Resources
500 Index Average
- ------------------------------------------------------------------------------
1 year 8.09% -39.44%
- ------------------------------------------------------------------------------
5 years 131.21 0.47
Annual average 18.25 0.09
- ------------------------------------------------------------------------------
10 years 382.68 74.52
Annual average 17.05 4.92
- ------------------------------------------------------------------------------
Life of fund 1376.33 441.49
Annual average 16.05 9.79
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. Returns for class A
and class M shares reflect the current maximum initial sales charges of
5.75% and 3.50% respectively. Class B share returns for the 1-, 5-, and
10-year (where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines 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 expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV. 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.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
[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
8/31/88
Fund's class A Standard & Poor's Lipper Natural
Date shares at POP 500 Resources Average
8/31/88 9,425 10,000 10,000
8/31/89 12,405 13,942 12,450
8/31/90 13,611 13,231 13,431
8/31/91 14,513 16,790 13,021
8/31/92 15,256 18,119 12,982
8/31/93 18,580 20,875 16,331
8/31/94 16,784 22,017 15,898
8/31/95 18,646 26,740 17,039
8/31/96 21,434 31,748 20,941
8/31/97 28,162 44,654 25,923
8/31/98 $21,027 $48,268 $17,452
Footnote reads:
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 $20,596 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $21,121 ($20,384 at public offering price).
PRICE AND DISTRIBUTION INFORMATION
12 months ended 8/31/98
Class A Class B Class M
- ---------------------------------------------------------------------
Distributions (number) 1 1 1
- ---------------------------------------------------------------------
Income $0.208 $0.072 $0.137
- ---------------------------------------------------------------------
Capital gains
- ---------------------------------------------------------------------
Long-term 1.114 1.114 1.114
- ---------------------------------------------------------------------
Short-term 0.253 0.253 0.253
- ---------------------------------------------------------------------
Total $1.575 $1.439 $1.504
- ---------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ---------------------------------------------------------------------
8/31/97 22.13 23.48 21.77 21.99 22.79
- ---------------------------------------------------------------------
8/31/98 15.28 16.21 15.00 15.15 15.70
- ---------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/98
(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 -17.93% -22.66% -18.55% -22.34% -18.39% -21.24%
- ------------------------------------------------------------------------------
5 years 33.53 25.85 28.65 26.98 30.21 25.66
Annual average 5.95 4.71 5.17 4.89 5.42 4.67
- ------------------------------------------------------------------------------
10 years 158.50 143.63 138.75 138.75 144.77 136.24
Annual average 9.96 9.31 9.09 9.09 9.36 8.98
- ------------------------------------------------------------------------------
Life of fund 209.91 192.05 165.16 165.16 177.53 167.90
Annual average 6.42 6.07 5.51 5.51 5.78 5.57
- ------------------------------------------------------------------------------
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 first page 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 charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum 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
Standard & Poor's 500 Index* is an index of common stocks frequently used
as a general measure of stock market performance.
Lipper Natural Resources Average* is composed of funds that invest more
than 65% of their equity holdings in the natural resources industries.
*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.
Report of independent accountants
For the fiscal year ended August 31, 1998
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, 1998, 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, 1998 by
correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 14, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
August 31, 1998
COMMON STOCKS (99.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Aluminum (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,454,875 Aluminum Co. of America $ 2,454,875
46,000 Reynolds Metal Co. 2,205,125
--------------
4,660,000
Chemicals (9.7%)
- --------------------------------------------------------------------------------------------------------------------------
195,500 du Pont (E.I.) de Nemours & Co., Ltd. 11,277,906
69,000 Eastman Chemical Co. 3,557,813
36,014 Lyondell Petrochemical Co. 776,552
50,000 Olin Corp. 1,406,250
102,500 PPG Industries, Inc. 5,208,281
31,000 Rohm & Haas Co. 2,675,688
32,000 Union Carbide Corp. 1,286,000
--------------
26,188,490
Conglomerates (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
30,000 Minnesota Mining & Manufacturing Co. 2,055,000
Containers (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
47,200 Temple Inland, Inc. 2,115,150
Electric Utilities (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
54,726 Duke Energy Corp. 3,413,534
Gas Pipelines (6.7%)
- --------------------------------------------------------------------------------------------------------------------------
246,000 Coastal Corp. 6,396,000
74,370 El Paso Energy Corp. 1,845,306
120,000 Enron Corp. 5,077,500
77,000 Sonat, Inc. 2,083,813
123,000 Williams Cos., Inc. 2,829,000
--------------
18,231,619
Gas Utilities (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
42,000 Columbia Gas System, Inc. 2,089,500
31,000 Consolidated Natural Gas Co. 1,358,188
70,000 K N Energy, Inc. 2,738,750
82,709 Sempra Energy 2,103,910
--------------
8,290,348
Machinery (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
45,000 Caterpillar, Inc. 1,898,438
33,000 Deere (John) & Co. 1,086,938
67,000 New Holland N.V. (Netherlands) 741,188
--------------
3,726,564
Metals and Mining (8.3%)
- --------------------------------------------------------------------------------------------------------------------------
515,000 Barrick Gold Corp. 6,695,000
86,000 Euro Nevada Mining Corp. 848,234
199,374 Freeport-McMoRan Copper & Gold Co., Inc.
Class A 2,267,879
99,000 Newmont Gold Co. 1,472,625
58,050 Newmont Mining Corp. 794,559
40,000 Phelps Dodge Corp. 1,790,000
473,000 Placer Dome Inc. (Canada) 3,813,563
436,000 Rio Tinto PLC (United Kingdom) 4,271,827
46,000 Titanium Metals Corp. 529,000
--------------
22,482,687
Oil and Gas (21.7%)
- --------------------------------------------------------------------------------------------------------------------------
74,000 Anadarko Petroleum Corp. 2,127,500
34,098 Ashland, Inc. 1,553,590
62,536 British Petroleum PLC ADR (United Kingdom) 4,572,945
114,300 Chevron, Inc. 8,465,344
37,000 Cooper Cameron Corp. (NON) 786,250
40,300 Elf Aquitane ADR (France) 1,969,663
26,400 Ente Nazionale Idrocarburi S.P.A. (ENI) ADR (Italy) 1,336,500
100,400 Exxon Corp. 6,569,925
184,800 Mobil Corp. 12,774,300
200,000 Phillips Petroleum Co. 8,162,500
32,733 Sun, Co. Inc. 1,082,235
105,000 Tosco Corp. 2,310,000
36,000 Total Corp. ADR (France) 1,730,250
182,000 USX-Marathon Group Inc. 4,732,000
66,300 Western Gas Resources, Inc. 551,119
--------------
58,724,121
Oil and Gas Exploration and Production (7.6%)
- --------------------------------------------------------------------------------------------------------------------------
73,000 Apache Corp. 1,669,875
166,500 Burlington Resources Inc. 4,922,156
82,000 Diamond Offshore Drilling, Inc. 1,711,750
60,000 Mitchell Energy & Development Corp. Class B 840,000
64,000 Nobile Affilitates, Inc. 1,480,000
249,000 Occidental Petroleum Corp. 4,606,500
47,000 Pennzoil Co. 1,680,250
60,000 Unocal Corp. 1,878,750
79,000 YPF S.A. ADR (Argentina) 1,747,875
--------------
20,537,156
Oil Services (21.2%)
- --------------------------------------------------------------------------------------------------------------------------
245,400 Amoco Corp. 11,119,688
173,000 Atlantic Richfield Co. 10,034,000
329,000 Baker Hughes, Inc. 6,004,250
137,200 BJ Services Co. (NON) 1,732,150
202,000 Halliburton Co. 5,365,625
137,000 Kerr-McGee Corp. 5,291,625
214,000 Royal Dutch Petroleum Co. (NY Registered) (Netherlands) 8,506,500
157,000 Schlumberger Ltd. 6,878,563
40,000 Smith International, Inc. (NON) 705,000
45,000 Transocean Offshore, Inc. 1,105,313
100,000 Varco International, Inc. (NON) 712,500
--------------
57,455,214
Paper and Forest Products (7.8%)
- --------------------------------------------------------------------------------------------------------------------------
50,000 Avery Dennison Corp. 2,684,375
39,600 Boise Cascade Corp. 967,725
46,000 Champion International Corp. 1,518,000
30,000 Georgia Pacific Corp. 1,286,250
30,000 Georgia Pacific Corp.(Timber Group) 603,750
153,700 International Paper Co. 5,686,900
100,600 Mead Corp. 2,753,925
21,900 Union Camp Corp. 811,669
94,200 Weyerhaeuser Co. 3,538,381
54,000 Willamette Industries, Inc. 1,329,750
--------------
21,180,725
Railroads (4.4%)
- --------------------------------------------------------------------------------------------------------------------------
74,433 Burlington Northern Santa Fe Corp. 6,926,921
35,000 CSX Corp. 1,321,250
132,000 Norfolk Southern Corp. 3,720,750
--------------
11,968,921
Steel (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
70,000 Birmingham Steel Corp. 481,250
50,000 Carpenter Technology Corp. 1,809,375
41,900 Ispat International NV (NY Registered) (Netherlands) 453,044
61,000 Nucor Corp. 2,192,188
31,000 USX-U.S. Steel Group 649,063
--------------
5,584,920
Transportation (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
80,000 Avondale Industries, Inc. (NON) 2,050,000
--------------
Total Common Stocks (cost $309,750,256) $ 268,664,449
CONVERTIBLE PREFERRED STOCKS (0.7%) (a)(cost $3,037,961)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
46,000 Amax Gold, Inc. Ser. B, $3.75 cv. pfd. $ 1,776,750
CONVERTIBLE BONDS AND NOTES (0.2%) (a)(cost $770,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$770,000 Lomak Petroleum, Inc. 144A cv. sub. deb. 6s, 2007 $ 581,350
SHORT-TERM INVESTMENTS (0.1%) (a) (cost $265,043)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$265,000 Interest in $750,000,000 joint tri-party repurchase
agreement dated August 31, 1998 with
Goldman Sachs & Co. due September 1, 1998
with respect to various U.S. Treasury obligations --
maturity value of $265,043 for an effective yield
of 5.78% $ 265,043
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $313,823,260) (b) $ 271,287,592
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $270,766,981.
(b) The aggregate identified cost on a tax basis is $313,883,114, resulting in gross unrealized appreciation and
depreciation of $24,356,963 and $66,952,485, respectively, or net unrealized depreciation of $42,595,522.
(NON) 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.
Diversification by Country
Distribution of investments by country of issue at August 31, 1998: (as percentage of Market Value)
Canada 1.6%
France 1.4
Netherlands 3.4
United Kingdom 3.3
United States 89.2
Other 1.1
-----
100.0%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
August 31, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $313,823,260) (Note 1) $271,287,592
- -----------------------------------------------------------------------------------------------
Cash 788
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 1,206,216
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 781,657
- -----------------------------------------------------------------------------------------------
Total assets 273,276,253
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,581,651
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 603,866
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 46,791
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 13,618
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,190
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 193,037
- -----------------------------------------------------------------------------------------------
Other accrued expenses 69,119
- -----------------------------------------------------------------------------------------------
Total liabilities 2,509,272
- -----------------------------------------------------------------------------------------------
Net assets $270,766,981
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $293,706,447
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,789,964
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 17,806,238
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (42,535,668)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $270,766,981
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($157,588,954 divided by 10,312,960 shares) $15.28
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $15.28)* $16.21
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($107,251,694 divided by 7,148,925 shares)** $15.00
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($5,926,333 divided by 391,206 shares) $15.15
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $15.15)* $15.70
- -----------------------------------------------------------------------------------------------
* 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, 1998
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $49,245) $7,833,994
- -----------------------------------------------------------------------------------------------
Interest 164,006
- -----------------------------------------------------------------------------------------------
Total investment income 7,998,000
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,646,309
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 691,577
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 19,486
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,219
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 566,175
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,430,598
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 61,577
- -----------------------------------------------------------------------------------------------
Reports to shareholders 51,669
- -----------------------------------------------------------------------------------------------
Registration fees 401
- -----------------------------------------------------------------------------------------------
Auditing 41,227
- -----------------------------------------------------------------------------------------------
Legal 5,836
- -----------------------------------------------------------------------------------------------
Postage 58,043
- -----------------------------------------------------------------------------------------------
Other 68,668
- -----------------------------------------------------------------------------------------------
Total expenses 5,648,785
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (138,727)
- -----------------------------------------------------------------------------------------------
Net expenses 5,510,058
- -----------------------------------------------------------------------------------------------
Net investment income 2,487,942
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 21,980,636
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Notes 1 and 3) (120,110)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign
currencies during the year 196,651
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (121,481,937)
- -----------------------------------------------------------------------------------------------
Net loss on investments (99,424,760)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(96,936,818)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended August 31
-------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 2,487,942 $ 3,262,560
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 21,860,526 25,198,035
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currencies (121,285,286) 57,283,898
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (96,936,818) 85,744,493
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (2,239,396) (1,593,014)
- ---------------------------------------------------------------------------------------------------------------
Class B (484,057) (385,225)
- ---------------------------------------------------------------------------------------------------------------
Class M (57,359) (26,332)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (14,717,567) (11,629,001)
- ---------------------------------------------------------------------------------------------------------------
Class B (9,190,367) (5,843,416)
- ---------------------------------------------------------------------------------------------------------------
Class M (572,336) (248,026)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 5,130,761 84,120,311
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (119,067,139) 150,139,790
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 389,834,120 239,694,330
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,789,964 and $2,211,045, respectively) $270,766,981 $389,834,120
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $22.13 $18.03 $16.09 $14.73 $20.51
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .20(c) .25(c) .28(c) .29 .19
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (5.47) 5.18 2.09 1.31 (2.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (5.27) 5.43 2.37 1.60 (2.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.16) (.34) (.24) (.19)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.37) (1.17) (.09) -- (2.91)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- -- -- (.50)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.58) (1.33) (.43) (.24) (3.60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.28 $22.13 $18.03 $16.09 $14.73
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (25.34) 31.39 14.95 11.10 (9.67)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $157,589 $239,539 $170,678 $135,330 $129,449
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.20 1.23 1.27 1.13 1.24
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .95 1.26 1.62 1.89 1.24
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.63 39.25 47.71 42.75 189.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.77 $17.81 $15.94 $14.65 $14.78
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .04(c) .10(c) .15(c) .16 .13(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (5.37) 5.11 2.07 1.33 (.26)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (5.33) 5.21 2.22 1.49 (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.07) (.08) (.26) (.20) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.37) (1.17) (.09) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.44) (1.25) (.35) (.20) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.00 $21.77 $17.81 $15.94 $14.65
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (25.91) 30.40 14.14 10.38 (.88)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $107,252 $142,442 $66,375 $29,916 $10,244
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.95 1.98 2.04 1.87 1.11*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .21 .52 .85 1.20 .90*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.63 39.25 47.71 42.75 189.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $21.99 $17.97 $16.07 $15.59
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .09(c) .15(c) .19(c) .03
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (5.42) 5.16 2.09 .45
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (5.33) 5.31 2.28 .48
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.12) (.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.37) (1.17) (.09) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.51) (1.29) (.38) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.15 $21.99 $17.97 $16.07
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (25.73) 30.79 14.39 3.08*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,926 $7,853 $2,641 $46
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.70 1.73 1.85 .28*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .45 .77 1.07 .44*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.63 39.25 47.71 42.75
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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) 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, 1998
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. 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) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
August 31, 1998, the fund had no borrowings against the line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sale transactions and foreign currency gains and losses. 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, 1998, the fund
reclassified $128,211 to decrease undistributed net investment income and
an increase to accumulated net realized gains of $128,211. 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.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended August 31, 1998, fund expenses were reduced by $138,727
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 $790 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees currently limit payment by the fund to an
annual rate of 0.25%, 1.00% and 0.75% of the average net assets
attributable to class A, class B and class M shares respectively.
For the year ended August 31, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $129,814 and $10,026 from the sale
of class A and class M shares, respectively and $281,159 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, 1998, Putnam Mutual Funds Corp.,
acting as underwriter received $27,316 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended August 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $106,376,363 and
$125,425,029, 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, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
August 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,636,246 $138,150,832
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 784,021 15,186,476
- -----------------------------------------------------------------------------
7,420,267 153,337,308
Shares
repurchased (7,932,422) (162,465,816)
- -----------------------------------------------------------------------------
Net decrease (512,155) $ (9,128,508)
- -----------------------------------------------------------------------------
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, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,347,358 $90,988,489
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 428,684 8,196,424
- -----------------------------------------------------------------------------
4,776,042 99,184,913
Shares
repurchased (4,170,414) (85,774,873)
- -----------------------------------------------------------------------------
Net increase 605,628 $13,410,040
- -----------------------------------------------------------------------------
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, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 316,065 $6,715,396
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 31,199 601,499
- -----------------------------------------------------------------------------
347,264 7,316,895
Shares
repurchased (313,110) (6,467,666)
- -----------------------------------------------------------------------------
Net increase 34,154 $ 849,229
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Federal Tax Information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $21,397,809 as capital gain, which includes $2,779,877
as 20% capital gain, for its taxable year ended August 31, 1998.
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities 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 [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Strategic Income Fund *
High Quality Bond Fund +
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
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
LIFESTAGE SM 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 Putnam Diversified Income Trust II
+Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
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
Thomas V. Reilly
Vice President
Anthony I. Kreisel
Vice President
Jeanne L. Mockard
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam 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 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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AN007 45967-018/501/2AD 10/98
