Putnam
Global Natural
Resources
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
8-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
While we have felt the pain in our pocketbooks resulting from the abrupt
rise in prices at the gasoline pump, we can take comfort in the knowledge
that the improved fortunes of the world's oil companies have had a
salutary effect on Putnam Global Natural Resources Fund's fiscal 1999
performance. Petroleum-based industries have been major beneficiaries of
the continued strength in U.S. business and an economic recovery that is
building momentum in Asia.
Even though oil-related industries make up more than half of the fund's
holdings, the portfolio is well diversified. Fund Manager Dolores Snyder
Bamford focuses on value-oriented companies that are multinational rather
than tied to one economy and that are improving profits through internal
change.
In the following report, Dolores discusses the fund's strategy and
performance in detail then explains why she is optimistic about prospects
for the new fiscal year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
October 20, 1999
Report from the Fund Manager
Dolores Snyder Bamford
Steady growth in the United States throughout the year, and more recently
economic recovery in Asia, brought about a rebound in oil prices and
contributed to Putnam Global Natural Resources Fund's positive performance
during the fiscal year ended August 31, 1999. Oil-related industries,
which account for more than half your fund's holdings, were the strongest
players during the past 12 months.
Having noted that oil dominates your fund's portfolio -- to good effect --
we believe one of the fund's key features is its unique balance of
holdings in all major natural resources. What's more, most of the
companies in the portfolio are multinationals, not tied to one economy in
one part of the world. We also concentrate on companies that demonstrate a
commitment to improving profits through internal change. Overall, we look
for undervalued stocks whose current prices do not appear to reflect their
actual worth.
Total return for 12 months ended 8/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------
42.50% 34.32% 41.42% 36.42% 41.57% 40.57% 41.72% 36.76%
- -----------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* FUND'S PERFORMANCE INFLUENCED BY OIL PRICES
Oil prices peaked in 1997 at approximately $27 a barrel, sank to about $11
near the midpoint of the fund's fiscal year, and then rebounded, closing
August at about $22 a barrel. The principal causes included economic
turmoil in Asia (a major energy consumer), which sharply cut demand for
oil in 1997 and 1998, leading to a prolonged decline in prices in 1998 and
early 1999. Not until late in 1998 and again in March of 1999 did the
major oil producers commit to slowing production, setting the stage for a
price recovery. Recently, as the Asian economy began to show signs of
strengthening, the supply/demand equation began to shift again in favor of
the oil companies. Your fund's diversification across other
natural-resource sectors offset some of the downside pressure in the oil
sector during the first half of the year, while allowing it to participate
in the rally during the latter half.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Oil-integrated 32.9%
Oil services 11.6%
Oil exploration
and production 11.2%
Chemicals 11.1%
Metals and mining 8.2%
Footnote reads:
*Based on net assets as of 8/31/99. Holdings will vary over time.
As we began fiscal 2000, about 55% of your fund's investments were
concentrated in the oil sector and energy stocks. We believe the Asian
recovery has only just begun, and we expect the fundamentals for the
energy industry to hold oil prices up for some time, with less volatility
than last year. Although we do not rule out the possibility of a seasonal
spike in demand this winter -- which would be reflected in oil and gas
prices -- we believe OPEC will respond quickly to expand production,
keeping prices within their current range in the year ahead.
* OTHER NATURAL-RESOURCE INVESTMENTS BALANCE THE PORTFOLIO
Chemicals, metals and mining, and paper are other resources featured in
the portfolio. Like oil, chemicals are participating in a global economic
recovery. We have focused on leaders in specialty chemicals because these
companies have the ability to create new markets by finding solutions to
old problems. One of your fund's largest holdings, Dow Chemical, is a
world leader in the development and production of specialty chemicals. Dow
is currently undergoing a great deal of internal change and recently
announced its intention to acquire Union Carbide.
Precious metals is another important sector for your fund, with an
emphasis on diversified mining companies active all over the world. Alcoa,
which is among the top 20 holdings, is a good example. A globally diverse
company involved in mining, refining and fabricating aluminum, Alcoa is
undergoing internal change and has an aggressive acquisition policy. The
paper industry is also benefiting from the global economic recovery and
undergoing a period of consolidation and restructuring. For example,
International Paper, a key holding, is implementing cost cutting programs
and acquired rival paper company Union Camp Corp. during the past year.
Natural gas companies have also benefited from recent merger and
acquisition activities, as well as from opportunities presented by
deregulation in the U.S. electric power market. We believe this trend
represents a long-term positive for the industry. Examples among your
fund's portfolio holdings include Enron, a large buyer and seller of
natural gas and power in the United States. It also has power plant and
pipeline projects in several emerging markets. We expect Coastal Group, a
company with greatly undervalued pipeline assets, to benefit from
consolidation and from their exploration, production and refining
business. While these holdings, along with others discussed in this
report, were viewed favorably at the end of the fiscal period, all
holdings are subject to review and adjustment in accordance with the
fund's strategy and may vary in the future.
Putnam Global Natural Resources Fund ranked 5 out of 36 natural resources funds
(top 14%) and 7 of 25 such funds (top 27%) tracked by Lipper for the 3- and
5-year periods ended August 31, 1999.
Past performance is not indicative of future results. Lipper is an industry
research firm whose rankings are based on total return performance, vary over
time, and do not reflect he effects of sales charges. For the 1-year period,
the fund's class A shares ranked 34 of 57 funds (top 59%). The fund was not
ranked for longer periods. Performance of other share classes will vary.
* FUND SEEKS UNDERVALUED COMPANIES THAT CAN ADAPT TO CHANGE
Even major world players must work to maintain their competitive edge, and
we seek companies that combine value with a commitment to adapt and
change. In the case of major integrated oil companies, this takes the form
of a commitment to cutting costs and consolidation. For example, French
oil company Elf Aquitaine recently received a takeover bid from one of its
competitors, France's TotalFina. Elf responded by counter-bidding for
Total. Elf and Total finally agreed to a friendly merger in September.
Meanwhile, with holdings in both companies, your fund has already
benefited from both sides of this equation.
Other examples include Royal Dutch Petroleum a leading international oil
company undergoing a restructuring and profit-improvement program. British
Petroleum recently took over Arco, and Exxon plans to merge with Mobil
Corp. Oil companies as a group appear to be focused on consolidation and
improving returns at the moment, but the companies we have emphasized are
the largest players and, as such, we believe they offer less risk than
smaller companies active in more limited areas.
* MACROECONOMIC CONDITIONS ARE POSITIVE FOR THE COMING YEAR
Inflation is one word that the stock market (and most people) do not like
to hear because it means rising prices. But natural-resource companies
benefit from rising prices, even when the rest of the world does not.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Royal Dutch Petroleum Co. PLC ADR (Netherlands)
Oil-integrated
Atlantic Richfield Co.
Oil-integrated
Mobil Corp.
Oil-integrated
Halliburton Co.
Oil services
Baker Hughes, Inc.
Oil services
Unocal Corp.
Oil exploration and production
Exxon Corp.
Oil-integrated
Dow Chemical Co.
Chemicals
Total Corp. S.A. ADR (France)
Oil-integrated
Coastal Corp.
Gas pipelines
Footnote reads:
These holdings represent 29.7% of the fund's net assets as of 8/31/99.
Portfolio holdings will vary over time.
We still see Asia as a major, growing market for many of natural resources
industries, with supply growing slowly and demand improving, it should
provide a positive environment for natural resources generally.
Consolidation, supply constraints, and cost reduction programs are also
likely to be recurring themes that will influence global natural resources
markets.
In the year ahead we plan to continue our emphasis on multinational
companies that seem to be undervalued relative to the earnings growth
projected as a result of their improving operations. This may seem to be
an all-but-impossible task when the major U.S. stock market indexes, which
reflect the price performance of some of the world's largest companies,
continue to reach new highs.
However, we believe the overvaluation that applies to the stock market as
a whole does not hold true for all its components. There are still
segments of the market, as well as individual issues, that offer fair or
even cheap valuations, and that is where your fund will continue to
concentrate.
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 8/31/99, 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.
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
primarily through stocks of companies in the energy and natural resources
industries.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 8/31/99
Class A Class B Class C Class M
(inception dates) (7/24/80) (2/1/94) (7/26/99) (7/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 42.50% 34.32% 41.42% 36.42% 41.57% 40.57% 41.72% 36.76%
- -----------------------------------------------------------------------------------------
5 years 78.52 68.24 72.13 70.13 72.08 72.08 74.03 67.91
Annual average 12.29 10.96 11.47 11.21 11.47 11.47 11.72 10.92
- -----------------------------------------------------------------------------------------
10 years 141.53 127.65 123.55 123.55 124.21 124.21 129.09 121.09
Annual average 9.22 8.57 8.38 8.38 8.41 8.41 8.64 8.26
- -----------------------------------------------------------------------------------------
Life of fund 280.59 258.65 223.26 223.26 229.69 229.69 239.15 227.38
Annual average 7.25 6.92 6.34 6.34 6.45 6.45 6.60 6.41
- -----------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 8/31/99
S&P 500 Lipper Natural
Index Resources Average
- ------------------------------------------------------------------------
1 year 39.82% 47.83%
- ------------------------------------------------------------------------
5 years 206.52 53.30
Annual average 25.11 8.33
- ------------------------------------------------------------------------
10 years 384.71 112.14
Annual average 17.10 7.22
- ------------------------------------------------------------------------
Life of fund 1964.27 654.96
Annual average 17.19 11.16
- ------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C 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.
[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 8/31/89
Fund's class A Standard & Poor's Lipper Natural
Date shares at POP 500 Index Resources Average
8/31/89 9,425 10,000 10,000
8/31/90 10,342 9,502 10,910
8/31/91 10,865 12,058 10,614
8/31/92 11,591 13,013 10,533
8/31/93 14,117 14,993 12,935
8/31/94 12,752 15,813 13,059
8/31/95 14,167 19,205 14,008
8/31/96 16,285 22,801 16,876
8/31/97 21,398 32,070 21,990
8/31/98 15,975 34,666 13,997
8/31/99 $22,765 $48,471 $21,214
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 or class C shares
would have been valued at $22,355 and $22,421, respectively and no
contingent deferred sales charges would apply; a $10,000 investment in the
fund's class M shares would have been valued at $22,909 ($22,109 at public
offering price). See first page of performance section for performance
calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 8/31/99
Class A Class B Class C Class M
- -----------------------------------------------------------------------------
Distributions (number) 1 1 -- 1
- -----------------------------------------------------------------------------
Income $0.225 $0.082 $ -- $0.118
- -----------------------------------------------------------------------------
Capital gains
Long-term 1.178 1.178 -- 1.178
- -----------------------------------------------------------------------------
Short-term 0.001 0.001 -- 0.001
- -----------------------------------------------------------------------------
Total $1.404 $1.261 -- $1.297
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- -----------------------------------------------------------------------------
8/31/98 $15.28 $16.21 $15.00 $ -- $15.15 $15.70
- -----------------------------------------------------------------------------
7/26/99* -- -- -- 19.78 -- --
- -----------------------------------------------------------------------------
8/31/99 19.98 21.20 19.61 19.98 19.82 20.54
- -----------------------------------------------------------------------------
*Inception of class C shares.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (7/24/80) (2/1/94) (7/26/99) (7/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 19.06% 12.22% 18.06% 13.06% 18.20% 17.20% 18.38% 14.22%
- ----------------------------------------------------------------------------------------
5 years 74.49 64.47 67.95 65.95 68.09 68.09 69.99 64.08
Annual average 11.78 10.46 10.93 10.66 10.94 10.94 11.19 10.41
- ----------------------------------------------------------------------------------------
10 years 133.19 119.72 115.78 115.78 116.30 116.30 121.17 113.48
Annual average 8.84 8.19 7.99 7.99 8.02 8.02 8.26 7.88
- ----------------------------------------------------------------------------------------
Life of fund 268.97 247.70 213.04 213.04 219.29 219.29 228.54 217.14
Annual average 7.04 6.71 6.13 6.13 6.24 6.24 6.40 6.20
- ----------------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See first
page of performance section for performance calculation method.
</TABLE>
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 C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
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 or C shares and assumes redemption at the end of
the period. Your fund's class B 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. The CDSC for class C shares is 1% for one year after
purchase.
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 unmanaged list of common stocks that is
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.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price is determined. All investment and non-investment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-ended funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended August 31, 1999
To the Trustees and Shareholders of
Putnam Global Natural Resources Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, 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 (the "fund") at August 31, 1999, 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, 1999 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 12, 1999
<TABLE>
<CAPTION>
The fund's portfolio
August 31, 1999
COMMON STOCKS (99.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aluminum (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
66,300 Alcan Aluminum Ltd. (Canada) $ 2,179,613
106,700 Alcoa Inc. 6,888,819
14,200 Reynolds Metal Co. 899,038
--------------
9,967,470
Appliances (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
22,700 Whirlpool Corp. 1,604,606
Chemicals (11.1%)
- --------------------------------------------------------------------------------------------------------------------------
39,300 Avery Dennison Corp. 2,156,588
75,600 Dow Chemical Co. 8,590,050
75,675 du Pont (E.I.) de Nemours & Co., Ltd. 4,795,903
65,300 Eastman Chemical Co. 3,032,369
140,800 Engelhard Corp. 2,807,200
59,400 Great Lakes Chemical Corp. 2,446,538
58,100 Minnesota Mining & Manufacturing Co. 5,490,450
69,600 Monsanto Co. 2,857,950
44,200 PPG Industries, Inc. 2,654,763
36,900 Praxair, Inc. 1,734,300
59,600 Rohm & Haas Co. 2,227,550
18,100 Union Carbide Corp. 1,029,438
--------------
39,823,099
Containers (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
19,200 Sealed Air Corp. (NON) 1,128,000
Electric Utilities (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
112,100 Illinova Corp. 3,573,188
Gas Pipelines (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
185,200 Coastal Corp. 8,021,475
106,300 Enron Corp. 4,451,313
99,100 Equitable Resources, Inc. 3,641,925
102,900 Sonat, Inc. 3,717,263
165,500 Williams Cos., Inc. 6,826,875
--------------
26,658,851
Gas Utilities (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
26,100 Columbia Gas System, Inc. 1,541,531
59,300 Consolidated Natural Gas Co. 3,776,669
147,100 K N Energy, Inc. 2,997,163
35,600 National Fuel Gas Co. 1,675,425
9,600 NICOR Inc. 371,400
15,300 Peoples Energy Corp. 557,494
61,300 Sempra Energy 1,367,756
--------------
12,287,438
Metals and Mining (8.2%)
- --------------------------------------------------------------------------------------------------------------------------
135,200 Barrick Gold Corp. 2,619,500
165,700 Cyprus Amax Minerals Co. (NON) 2,806,544
274,874 Freeport-McMoRan Copper & Gold Co., Inc. Class A 3,951,314
252,800 Inco Ltd. (Canada) 5,182,400
148,525 Newmont Mining Corp. 3,035,480
114,400 Phelps Dodge Corp. 6,399,250
291,700 Rio Tinto PLC (United Kingdom) 5,246,866
--------------
29,241,354
Oil -- Integrated (32.9%)
- --------------------------------------------------------------------------------------------------------------------------
163,200 Atlantic Richfield Co. 14,351,400
64,726 BP Amoco PLC ADR (United Kingdom) 7,257,403
73,100 Chevron, Inc. 6,743,475
169,800 Conoco, Inc. 4,542,150
159,254 Conoco, Inc. Class B 4,279,945
71,200 Elf Aquitane ADR (France) 6,270,050
54,900 Ente Nazionale Idrocarburi S.P.A. (ENI) ADR (Italy) 3,321,450
113,700 Exxon Corp. 8,968,088
44,400 Kerr-McGee Corp. 2,486,400
136,400 Mobil Corp. 13,963,950
277,200 Occidental Petroleum Corp. 6,011,775
90,900 Phillips Petroleum Co. 4,635,900
233,200 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 14,429,250
76,200 Shell Transportation & Trading Plc (Canada) 3,671,888
56,900 Texaco, Inc. 3,613,150
58,600 Tosco Corp. 1,494,300
127,200 Total Corp. S.A. ADR (France) 8,275,950
112,600 USX-Marathon Group Inc. 3,504,675
--------------
117,821,199
Oil Exploration and Production (11.2%)
- --------------------------------------------------------------------------------------------------------------------------
114,200 Apache Corp. 5,196,100
55,400 Barrett Resources Corp. (NON) 1,997,863
145,500 Burlington Resources Inc. 6,083,719
84,400 Devon Energy Corp. 3,259,950
112,200 Enron Oil & Gas Co. 2,678,775
92,000 Newfield Exploration Co. (NON) 2,794,500
322,100 Union Pacific Resources Group Inc. 5,777,669
226,600 Unocal Corp. 9,488,875
44,500 Vastar Resources, Inc. 2,964,813
--------------
40,242,264
Oil Services (11.6%)
- --------------------------------------------------------------------------------------------------------------------------
293,500 Baker Hughes, Inc. 9,979,000
88,900 BJ Services Co. (NON) 3,044,825
74,200 Diamond Offshore Drilling, Inc. 2,838,150
219,200 Halliburton Co. 10,165,400
120,600 Nabors Industries, Inc. (NON) 3,256,200
109,700 Rowan Companies, Inc. (NON) 2,043,163
108,000 Schlumberger Ltd. 7,209,000
85,200 Transocean Offshore, Inc. 2,896,800
--------------
41,432,538
Paper and Forest Products (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
18,000 Boise Cascade Corp. 654,750
65,600 Champion International Corp. 3,608,000
55,000 Georgia Pacific Corp. 2,275,625
54,300 International Paper Co. 2,555,494
894,200 Jefferson Smurfit Group PLC (Ireland) 2,541,812
92,400 Mead Corp. 3,447,675
191,500 Smurfit-Stone Container Corp. (NON) 4,057,406
41,900 Temple Inland, Inc. 2,597,800
76,600 Weyerhaeuser Co. 4,308,750
19,100 Willamette Industries, Inc. 756,838
--------------
26,804,150
Railroads (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
26,400 Canadian National Railway Co. (Canada) 1,678,050
20,100 CSX Corp. 878,119
--------------
2,556,169
Steel (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
88,700 Ispat International NV (NY Registered) (Netherlands) 920,252
28,500 USX-U.S. Steel Group 769,500
--------------
1,689,752
--------------
Total Common Stocks (cost $289,329,820) $ 354,830,078
CONVERTIBLE PREFERRED STOCKS (0.4%) (a) (cost $3,022,552)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
46,000 Kinam Gold, Inc. Ser. B, $3.75 cv. cum. pfd. $ 1,460,500
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $292,352,372) (b) $ 356,290,578
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $357,799,100.
(b) The aggregate identified cost on a tax basis is $298,590,588, resulting in gross unrealized appreciation and
depreciation of $65,338,150 and $7,638,160, respectively, or net unrealized appreciation of $57,699,990.
(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 Depositary 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, 1999: (as percentage of Market Value)
Canada 3.6%
France 4.1
Netherlands 4.3
United Kingdom 3.5
United States 82.9
Other 1.6
-----
Total 100.0%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
August 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $292,352,372) (Note 1) $356,290,578
- -----------------------------------------------------------------------------------------------
Cash 87,754
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 873,065
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 3,768,020
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 4,646,143
- -----------------------------------------------------------------------------------------------
Total assets 365,665,560
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 2,917,585
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,976,130
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 632,526
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 64,686
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 17,020
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,179
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 225,495
- -----------------------------------------------------------------------------------------------
Other accrued expenses 31,839
- -----------------------------------------------------------------------------------------------
Total liabilities 7,866,460
- -----------------------------------------------------------------------------------------------
Net assets $357,799,100
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $295,772,384
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,535,724
- -----------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments (Note 1) (3,447,046)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 63,938,038
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $357,799,100
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($200,823,958 divided by 10,050,504 shares) $19.98
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $19.98)* $21.20
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($146,228,335 divided by 7,457,721 shares)** $19.61
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($209,469 divided by 10,485 shares)** $19.98
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($10,537,338 divided by 531,759 shares) $19.82
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $19.82)* $20.54
- -----------------------------------------------------------------------------------------------
* 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, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $43,193) $7,006,182
- -----------------------------------------------------------------------------------------------
Interest 87,890
- -----------------------------------------------------------------------------------------------
Total investment income 7,094,072
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,242,901
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 456,897
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 17,488
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,012
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 458,577
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,300,448
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 78
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 54,776
- -----------------------------------------------------------------------------------------------
Reports to shareholders 35,683
- -----------------------------------------------------------------------------------------------
Registration fees 2,578
- -----------------------------------------------------------------------------------------------
Auditing 32,930
- -----------------------------------------------------------------------------------------------
Legal 5,132
- -----------------------------------------------------------------------------------------------
Postage 66,077
- -----------------------------------------------------------------------------------------------
Other 64,890
- -----------------------------------------------------------------------------------------------
Total expenses 4,745,467
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (162,112)
- -----------------------------------------------------------------------------------------------
Net expenses 4,583,355
- -----------------------------------------------------------------------------------------------
Net investment income 2,510,717
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (1,369,261)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and
liabilities in foreign currencies during the year (168)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 106,473,874
- -----------------------------------------------------------------------------------------------
Net gain on investments 105,104,445
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $107,615,162
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended August 31
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 2,510,717 $ 2,487,942
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions (1,369,261) 21,860,526
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and liabilities
in foreign currencies 106,473,706 (121,285,286)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 107,615,162 (96,936,818)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (2,162,804) (2,239,396)
- ---------------------------------------------------------------------------------------------------------------
Class B (565,276) (484,057)
- ---------------------------------------------------------------------------------------------------------------
Class M (41,873) (57,359)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (10,182,664) (14,717,567)
- ---------------------------------------------------------------------------------------------------------------
Class B (7,302,527) (9,190,367)
- ---------------------------------------------------------------------------------------------------------------
Class M (375,903) (572,336)
- ---------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
Class A (1,150,430) --
- ---------------------------------------------------------------------------------------------------------------
Class B (825,034) --
- ---------------------------------------------------------------------------------------------------------------
Class M (42,469) --
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 2,065,937 5,130,761
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 87,032,119 (119,067,139)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 270,766,981 389,834,120
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,535,724 and $1,789,964, respectively) $357,799,100 $270,766,981
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.28 $22.13 $18.03 $16.09 $14.73
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .20(c) .20(c) .25(c) .28(c) .29
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.91 (5.47) 5.18 2.09 1.31
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 6.11 (5.27) 5.43 2.37 1.60
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.21) (.16) (.34) (.24)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.06) (1.37) (1.17) (.09) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments (.12) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.41) (1.58) (1.33) (.43) (.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.98 $15.28 $22.13 $18.03 $16.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 42.50 (25.34) 31.39 14.95 11.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $200,824 $157,589 $239,539 $170,678 $135,330
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.16 1.20 1.23 1.27 1.13
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.09 .95 1.26 1.62 1.89
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 118.37 28.63 39.25 47.71 42.75
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.00 $21.77 $17.81 $15.94 $14.65
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .06(c) .04(c) .10(c) .15(c) .16
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.81 (5.37) 5.11 2.07 1.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.87 (5.33) 5.21 2.22 1.49
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.08) (.07) (.08) (.26) (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.06) (1.37) (1.17) (.09) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments (.12) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.26) (1.44) (1.25) (.35) (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.61 $15.00 $21.77 $17.81 $15.94
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 41.42 (25.91) 30.40 14.14 10.38
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $146,228 $107,252 $142,442 $66,375 $29,916
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.91 1.95 1.98 2.04 1.87
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .35 .21 .52 .85 1.20
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 118.37 28.63 39.25 47.71 42.75
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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 C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $19.78
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .02(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .18
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .20
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.98
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.01*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $209
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .19*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .13*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 118.37
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.15 $21.99 $17.97 $16.07 $15.59
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .11(c) .09(c) .15(c) .19(c) .03
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.86 (5.42) 5.16 2.09 .45
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.97 (5.33) 5.31 2.28 .48
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.14) (.12) (.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.06) (1.37) (1.17) (.09) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gain on investments (.12) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.30) (1.51) (1.29) (.38) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.82 $15.15 $21.99 $17.97 $16.07
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 41.72 (25.73) 30.79 14.39 3.08*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,537 $5,926 $7,853 $2,641 $46
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.66 1.70 1.73 1.85 .28*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .62 .45 .77 1.07 .44*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 118.37 28.63 39.25 47.71 42.75
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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, 1999
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 seeks capital appreciation by
investing primarily in the common stocks of companies in the energy and
natural resource industries.
The fund offers class A, class B, class C and class M shares. The fund
began offering class C shares on July 26, 1999. 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 C shares are
subject to the same fees and expenses as class B shares, except that class
C shares have a one-year 1.00% contingent deferred sales charge and do not
convert to class A shares. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that
is higher than class A but lower than class B and class C shares.
Expenses of the fund are borne pro-rata by the holders of both classes 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 not 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). Gains or losses on securities sold are determined on
the identified cost basis. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except that
certain dividends from foreign securities are recorded as soon as the fund
is informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
August 31, 1999, the fund had no borrowings against the line of credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sale transactions. 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, 1999, the fund reclassified $4,996 to increase
undistributed net investment income and an increase to distributions in
excess of net realized gains of $4,996. 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, and
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, 1999, fund expenses were reduced by $162,112
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 $716 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
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, class C 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund of an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the year ended August 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $82,948 and $6,309 from the sale
of class A and class M shares, respectively and received $321,507 and no
monies in contingent deferred sales charges from redemptions of class B
and C shares, respectively. A deferred sales charge of up to 1% is
assessed on certain redemptions of class A shares. For the year ended
August 31, 1999, Putnam Mutual Funds Corp., acting as underwriter received
$1,526 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended August 31, 1999, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $382,002,892 and $401,838,476, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At August 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 9,489,587 $ 170,456,258
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 775,875 12,134,731
- -----------------------------------------------------------------------------
10,265,462 182,590,989
Shares
repurchased (10,527,918) (188,703,653)
- -----------------------------------------------------------------------------
Net decrease (262,456) $ (6,112,664)
- -----------------------------------------------------------------------------
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, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,974,343 $ 89,304,868
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 476,918 7,358,783
- -----------------------------------------------------------------------------
5,451,261 96,663,651
Shares
repurchased (5,142,465) (91,552,333)
- -----------------------------------------------------------------------------
Net increase 308,796 $ 5,111,318
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to August 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 10,485 $216,902
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
10,485 216,902
Shares
repurchased -- --
- -----------------------------------------------------------------------------
Net increase 10,485 $216,902
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 866,310 $ 16,408,162
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 27,372 426,192
- -----------------------------------------------------------------------------
893,682 16,834,354
Shares
repurchased (753,129) (13,983,973)
- -----------------------------------------------------------------------------
Net increase 140,553 $ 2,850,381
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $3,196,124 as capital gain, for its taxable year ended
August 31, 1999.
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 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Fund information
WEB SITE
www.putnaminv.com
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
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Dolores Snyder Bamford
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
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' Web site: 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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN007 55087 018/501/2AD 10/99
