PUTNAM
INTERNATIONAL
NEW OPPORTUNITIES
FUND
ANNUAL REPORT
September 30, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
The Putnam International New Opportunities Fund seeks high returns by
focussing its investments in the most rapidly growing business sectors
outside of the United States, and at the same time seeking to mitigate
some of the risks associated with growth investing by diversifying our
investments over a wide range of markets and economies."
-- Justin Scott, Portfolio Manager
FISCAL 1995 RESULTS AT A GLANCE
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A
TOTAL RETURN: NAV POP
- ----------------------------------------------------------------------
(change in value during
period plus reinvested
distributions)
9 months ended
9/30/95 21.06% 14.08%
- ----------------------------------------------------------------------
EECLASS A CLASS B CLASS M
SHARE VALUE: NAV POP NAV NAV POP
- ----------------------------------------------------------------------
1/3/95 (inception of
class A shares) $8.50 $9.02
7/21/95 (inception of
class B and class M
shares) EE-- EE-- $10.25 $10.25 $10.62
9/30/95 10.29 10.92 10.28 10.29 10.66
- ----------------------------------------------------------------------
DISTRIBUTIONS:
- ----------------------------------------------------------------------
The fund is currently expected to pay its first distribution in
December.
- ----------------------------------------------------------------------
<FN>
Data above represent past results and are not indicative of future
performance. Performance reflects an expense limitation in effect
during the period; without the limitation, results would have been
lower. For additional information, see pages 8 and 9. POP assumes
5.75% maximum sales charge for class A shares and 3.50% for class M
shares. Total return performance for class B and class M shares is not
shown because of the brevity of the reporting period.
</TABLE>
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM]
(C) KARSH, OTTAWA
DEAR SHAREHOLDER:
IT IS ALWAYS EXCITING TO INTRODUCE A NEW FUND AND ESPECIALLY SO WHEN
THE FUND GETS OFF TO AN EXCELLENT START. AS IS THE CASE WITH MOST OF
OUR NEW FUNDS, WE LAUNCHED PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND
INTERNALLY SEVERAL MONTHS AGO, ALLOWING IT TO INCUBATE WHILE ITS
PORTFOLIO WAS ASSEMBLED AND IT WAS SET FIRMLY ON ITS COURSE.
THAT DONE, WE RECENTLY OPENED THE FUND TO INVESTORS AT LARGE. I AM
PLEASED TO WELCOME OUR NEW SHAREHOLDERS AND BRING YOU THIS REPORT OF
THE FUND'S INITIAL, THOUGH ABBREVIATED, FISCAL YEAR, WHICH ENDED ON
SEPTEMBER 30, 1995.
ALTHOUGH PAST PERFORMANCE SHOULD NEVER BE TAKEN AS A GUARANTEE OF
FUTURE PERFORMANCE, THE FUND'S RESULTS DURING THE FISCAL PERIOD WERE
GRATIFYING. IT OUTPERFORMED THE KEY MARKET INDEXES AGAINST WHICH IT IS
JUDGED IN A PERIOD WHEN MANY INTERNATIONAL STOCK MARKETS WERE
FLAGGING.
IN THE REPORT THAT FOLLOWS, FUND MANAGER JUSTIN SCOTT DISCUSSES THE
FUND'S OBJECTIVES AND STRATEGIES, AS WELL AS ITS PERFORMANCE TO DATE
AND PROSPECTS FOR ITS FIRST FULL FISCAL YEAR.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
NOVEMBER 15, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
JUSTIN M. SCOTT
We are pleased to report on Putnam International New Opportunities
Fund's strong performance during its first fiscal year. Between
commencement of operations on January 3, 1995, and September 30, 1995,
your fund's class A shares rose 21.06% at net asset value (NAV). We
were able to achieve these returns despite the indifferent performance
of most international markets. During the period, Morgan Stanley
Capital International's Europe, Australia, and Far East (EAFE) Index
gained only 6.88%, while the MSCI Emerging Markets Index fell 7.26%.
Nine months is a short record; however, your fund has shown its
ability to achieve many of the investment goals we originally
intended. It has outperformed established international markets while
avoiding the volatility of emerging markets. While past performance is
no indication of future results, we are optimistic about the
effectiveness of the fund's strategy.
SHIFTING BETWEEN ESTABLISHED AND EMERGING MARKETS
Your fund is an aggressive growth fund, pursuing strong long-term
returns. To achieve this goal, the fund targets stocks of companies
with exceptional potential in sectors exhibiting strong growth.
Outside the United States, these rapid growth sectors exist in diverse
international markets, including established and emerging markets. The
fund cannot be characterized as a typical international fund that
invests only in larger, mature stock markets, nor is it intended to be
an emerging markets fund. Rather, the fund is designed to capture the
benefits of both markets, while seeking to temper some of the
disadvantages each poses.
In this fiscal year, much of the fund's strong performance has come
from growth companies in established markets. While a number of
holdings in emerging markets performed well, we believe that this
portion of the fund has yet to achieve its full
<PAGE>
potential. When it does, the results could be dramatically positive.
Encouragingly, we are seeing marked signs of recovery taking shape in
emerging markets, spurred by renewed investor confidence and interest.
SHARING A STRATEGY WITH PUTNAM NEW OPPORTUNITIES FUND
The fund shares an important aspect of its strategy with the primarily
domestic Putnam New Opportunities Fund. Both funds seek to identify
sectors with strong growth rates, and then select the fastest-growing
companies from within these sectors. Indeed, Putnam believes well-
managed companies within rapidly expanding sectors often have a
decided advantage in achieving strong and persistent revenue growth --
more so than similarly well-operated companies in less-robust sectors.
Currently, fast-growing sectors, and thus the companies within them,
tend to be enjoying a growing share of overall economic activity.
Your fund takes this sector strategy abroad, investing in rapidly
growing sectors in countries in varied stages of economic development.
The sectors exhibiting the strongest growth potential will vary from
one economy to another. In less- developed economies, basic industries
such as those focusing on developing infrastructure and those
supplying food and beverages are growing most rapidly.
[BAR CHART]
ALLOCATIONS BY MARKET (AS OF 9/30/95)
- ----------------------------------------------------------------------
Developed markets (EAFE) 56.6%
Emerging markets (Non-EAFE) 41.5%
Cash 1.9%
- ----------------------------------------------------------------------
*Based on net assets as of indicated date. Holdings will vary over
time.
<PAGE>
As a country becomes what we term a "sustained-growth" economy,
financial services and consumer goods tend to become the fastest-
growing sectors. By the time a country's economy has reached the
mature stage, high technology, leisure and media companies are
typically the fastest-growing, most profitable enterprises.
Over your fund's fiscal period, strong performers were found in each
economic category. In growth stocks in mature economies, which
comprise some 35% of the fund, technology proved a persistent high-
growth sector. Many stocks such as Austria Mikro Systems are
increasing earnings over 25% annually. Like this Austria-based custom
chip manufacturer, these companies are globally competitive players in
this high-value-added sector.
Sustained-growth economies account for 50% of the fund's portfolio. We
have seen areas of abiding strength in these economies, with the
financial services sector particularly vibrant. As citizens of these
countries become salary earners, the demand for banking services,
credit cards, and insurance rises. Malaysian Assurance is an example
of an insurance company growing at a dynamic rate. Finally, in the
less- developed economies, which account for 15% of the fund's
holdings, the infrastructure sector is enjoying rapid growth.
P. T. Mulia, a supplier of glass products to the dynamic construction
sector of Indonesia, is producing earnings at an annual rate of nearly
45%.
CONCENTRATING BY SECTOR; DIVERSIFYING BY GEOGRAPHY
The fund balances sector concentration with geographic
diversification. Typically, it will invest in companies from seven or
eight rapidly growing sectors. Narrowing holdings to a few sectors
gives the fund exposure to strong, rapid growth; it also leaves the
fund dependent on the performance of relatively few sectors. However,
this risk is reduced to some extent because the fund invests in many
different countries. As of this report, the fund was invested in 27
countries. Its weighting in the largest -- Hong Kong -- was only 9.9%,
and the typical country weighting is around 2-5%.
<PAGE>
TOP 10 HOLDINGS (9/30/95)
- ----------------------------------------------------------------------
- -
SGL CARBON (GERMANY)
Carbon products
- ----------------------------------------------------------------------
- -
CHARGEURS (FRANCE)
Satellite television; movie distribution
- ----------------------------------------------------------------------
- -
KYOCERA (JAPAN)
Semiconductor manufacturer
- ----------------------------------------------------------------------
- -
ASTRA A (SWEDEN)
Pharmaceuticals
- ----------------------------------------------------------------------
- -
ROCHE HOLDINGS (SWITZERLAND)
Pharmaceuticals and biotechnology
- ----------------------------------------------------------------------
- -
CIFRA (MEXICO)
Hypermarket retailer
- ----------------------------------------------------------------------
- -
BARCO (BELGIUM)
Electronics
- ----------------------------------------------------------------------
- -
VODAFONE GROUP (U.K.)
Cellular telecommunications
- ----------------------------------------------------------------------
- -
RECORDATI (ITALY)
Pharmaceuticals
- ----------------------------------------------------------------------
- -
PHILIPPINE LONG DISTANCE (ADR)
Telecommunications provider
- ----------------------------------------------------------------------
- -
These holdings represent 19.20% of the fund's assets. Portfolio
holdings will shift over time.
We are optimistic about the environment for growth stocks in both
emerging and established markets in the months ahead. After widespread
declines during 1994 and into 1995, emerging markets appear to have
begun their recovery. We are similarly upbeat about the prospects for
growth stocks in established markets. Technology companies, leisure
companies, and media concerns will have strong earnings growth
independent of local economic conditions. Whatever happens in the
coming months, we urge you to evaluate your investments with a longer-
term perspective, as time tends to reduce the effects of volatility on
an investment portfolio.
The views expressed throughout the report are exclusively those of
Putnam Management. They are not meant as investment advice. Although
the described holdings were viewed favorably as of 9/30/95, there is
no guarantee the fund will continue to hold these securities in the
future.
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. 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 back into the fund. For
comparative purposes, we show how the fund performed relative to
appropriate indexes and benchmarks.
Performance should always be considered in light of a fund's
investment strategy. Putnam International New Opportunities Fund is
designed for investors seeking capital appreciation primarily through
common stocks of international companies.
TOTAL RETURN FOR PERIOD ENDED 9/30/95
(most recent calendar quarter)
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
MSCI
MSCI EMERGING
CLASS A EAFE MKTS.
NAV POP INDEX INDEX
- ----------------------------------------------------------------------
Life of fund
(since 1/3/95) 21.06% 14.08% 6.88% _7.26%
- ----------------------------------------------------------------------
<FN>
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions. POP assumes maximum 5.75%
sales charge for class A shares. The fund began operations 1/3/95
offering class A shares, and began offering class B and class M shares
on 7/21/95. Performance for class B and class M shares is not shown
due to the brevity of the reporting period. Performance data represent
past results and an expense limitation currently in effect. Without
the expense limitation, the fund's total return would have been lower.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost. The short-term results of a relatively new fund are not
necessarily indicative of its long-term prospects.
Both market indexes assume reinvestment of all distributions and do
not take into account brokerage commissions or other costs. It is not
possible to invest directly in an index. The fund's portfolio contains
securities that differ from those in the indexes. Investment in the
fund is subject to special international risks, such as currency
fluctuations and political developments.
</TABLE>
<PAGE>
[MOUNTAIN CHART]
Date Class A at POP MSCI EAFE MSCI emerging
1/3/95 $9,425 $10,000 $10,000
1/31/95 $9,435 $9,616 $8,905
2/28/95 $9,534 $9,588 $8,746
3/31/95 $9,922 $10,186 $8,869
4/30/95 $9,878 $10,569 $9,050
5/31/95 $10,710 $10,443 $9,369
6/30/95 $10,865 $10,260 $9,346
7/31/95 $11,652 $10,899 $9,488
8/31/95 $11,463 $10,483 $9,173
9/30/95 $11,408 $10,688 $9,274
TERMS AND DEFINITIONS
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 maximum 5.75% sales charge
for class A shares and 3.50% for class M shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at the
end of the period. Your fund's CDSC declines from a 5% maximum during
the first year to 1% during the sixth year. After the sixth year, the
CDSC no longer applies.
COMPARATIVE BENCHMARKS
THE EUROPE, AUSTRALIA AND THE FAR EAST (EAFE) component of the Morgan
Stanley Capital International World Index is an unmanaged list of
international equity securities, excluding U.S., with all values
expressed in U.S. dollars.
MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS INDEX is an
unmanaged list of 1,100 securities representing 20 emerging markets,
with values expressed in U.S. dollars.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
for the period January 3, 1995 (commencement of operations) to
September 30, 1995
To the Trustees and Shareholders of
Putnam International New Opportunities Fund
We have audited the accompanying statement of assets and liabilities
of Putnam International New Opportunities Fund, including the
portfolio of investments owned, as of September 30, 1995, the related
statement of operations, the statement of changes in net assets and
the financial highlights for the period January 3, 1995 (commencement
of operations) to September 30, 1995. These financial statements and
financial highlights are the responsibility of the fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we perform our audit to obtain
reasonable assurance about whether the financial statements and
financial highlights are free from material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam International New Opportuntities Fund as
of September 30, 1995, the results of its operations, the changes in
its net assets and the financial highlights for the period January 3,
1995 (commencement of operations) to September 30, 1995, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 10, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
September 30, 1995
<TABLE><CAPTION>
<S> <C> <C>
COMMON STOCKS (97.8%)*
NUMBER OF SHARES VALUE
COMMUNICATIONS (11.2%)
- ----------------------------------------------------------------------
24 Nippon Telegraph and Telephone Corp. (Japan) $EE 205,130
1,000 Pakistan Telecommunications Corp.
144A GDS (Pakistan)+ 103,000
6,700 Philippine Long Distance ADR (Philippines) 444,713
41,300 Pilipino Telephone Corp. 144A (Philippines)+ 35,685
7,000 Securicor Group PLC Class A (United Kingdom) 120,592
9,000 Technology Resources Industries (Malaysia)+ 23,463
3,200 Telebras Co. ADR (Brazil) 150,000
10,500 Telecom Argentina S.A. ADR (Argentina) 439,688
12,300 Telefonica de Argentina S.A. ADR (Argentina) 293,663
9,300 Telefonos de Mexico S.A. Class L ADR (Mexico) 295,275
120,000 Vodafone Group PLC (United Kingdom) 503,547
----------
2,614,756
CONSUMER PRODUCTS & SERVICES (15.8%)
- ----------------------------------------------------------------------
500 Autoliv AB (Sweden) 30,431
15,000 Bulgari S.P.A. (Italy)+ 114,382
500 CIA Tecidos Norte de Minas (Brazil) 163,711
418,000 Cifra S.A. de CV Class C (Mexico) 516,681
100,000 Courts Ltd. (Singapore) 144,612
71,400 Dixons Group PLC (United Kingdom) 390,453
16,000 Ek Chor China Motorcycle Co., Ltd. 260,000
2,650 Luxottica Group ADR (Italy)+ 129,519
10,000 Malbak Ltd. 144A GDR (South Africa) 66,000
42,200 Malbak Ltd. GDR (South Africa)+ 278,520
178,000 PT Matahari Putra Prima (Indonesia) 322,207
115,000 Pt Astra International Foreign Registered (Indonesia)228,476
50,000 Rentokil Group Ord. PLC (United Kingdom) 252,880
30,000 Sampoerna Ind. (Indonesia) 279,470
18,200 Santa Isabel S.A. ADR (Chile)+ 393,575
6,000 Siam Makro Public Co. Ltd. (Thailand)+ 21,292
12,000 Siam Makro Public Co. Ltd. (Registered) (Thailand)+ 42,584
5,200 Swedish Motor Corp. (Thailand) 19,697
1,500 Tarkett AG (Germany)+ 36,214
----------
3,690,704
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
FINANCE (10.7%)
- ----------------------------------------------------------------------
230,900 Banca Fideuram S.P.A. (Italy) $EE 257,352
24,000 Banco Industrial Colombiano ADR (Columbia) 327,000
26,700 Banco Osorno y Louisiana Union ADR (Chile) 413,850
665,000 Bankard, Inc. (Philippines)+ 245,162
60,000 Guoco Group Ltd. (Hong Kong) 300,349
11,500 Industrial Finance Corp. of Thailand (The) (Thailand)35,307
42,000 Malaysian Assurance SA (Malaysia) 183,881
5,400 Mapfre Vida Seguros (Spain) 292,105
30,000 Philippine Commercial International Bank
(Philippines)+ 270,737
47,400 Sage Group Ltd.(South Africa) 194,741
----------
2,520,484
FOOD AND BEVERAGES (2.3%)
- ----------------------------------------------------------------------
33,000 Carlsberg Brewery of Malaysia (Malaysia) 152,358
12,000 South African Breweries Ltd. (South Africa) 377,978
----------
530,336
INFASTRUCTURE (18.0%)
- ----------------------------------------------------------------------
1,000 American Standard Sanitaryware Ltd. (Thailand) 15,949
94,000 Apasco S.A.(Mexico) 389,271
28,000 Capex 144A GDR (Argentina) 392,000
70,000 Cement Industries of Malaysia Berhad (Malaysia) 224,279
8,800 Chilectra S.A. 144A ADR (Chile)+ 391,600
80,000 Clipsal Industries Ltd. (Singapore) 200,000
215,000 Consolidated Electric Power (Asia) 431,057
865,000 Filinvest Land, Inc. (Philippines)+ 279,033
3,700 IPC Ltd. GDR (India)+ 49,025
6,000 India Cements Ltd. GDR (India) 51,000
16,300 Inversiones Y Represent-ADR (Argentina)+ 391,200
54,000 Jurong Engineering Ltd. (Singapore) 320,323
5,000 Leader Universal (Malaysia) 15,323
83,000 Malayawata Steel Berhad (Malaysia) 168,478
7,670 Naviera Perez Co. (Argentina) 33,521
8,000 Nylex (Malaysia) 23,403
18,000 Osprey Maritime Ltd. (Singapore)+ 40,140
159,900 PT Mulia Industrindo (Indonesia) 397,102
81,100 SA Iron & Steel Industrial Corp. Ltd. (South Africa) 87,742
5,000 Sasol Ltd. (South Africa) 41,085
219,000 Shun Tak Holdings Ltd. (Hong Kong) 172,798
4,000 Tata Engineering & Locomotive Co. Ltd. GDR (India)+ 92,000
6,000 Westmont Industries Berhad Co. (Malaysia) 24,358
----------
4,230,687
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
LEISURE & MEDIA (8.3%)
- ----------------------------------------------------------------------
3,300 Chargeurs S.A. (France) $EE 683,036
3,600 East India Hotels Ltd. 144A GDR (India)+ 68,400
30,000 Elsevier N.V. (Netherlands) 384,394
3,500 Indian Hotels, Ltd. 144A GDR (India)+ 63,000
20,000 Investec Consultadoria International(Portugal)+ 367,829
3,750 Societe Television Francaise 1 (France) 369,825
163 Wolters Kluwer N.V. (Netherlands) 14,966
----------
1,951,450
OTHER (7.0%)
- ----------------------------------------------------------------------
370,000 Chen Hsong Hldgs. (Hong Kong) (Machinery & Equipment)263,226
3,000 IRO AB (Sweden) (Machinery & Equipment)+ 39,759
36,900 Portucel Industrial Empresa S.A.144A ADS
(Portugal) (Forestry Products)+ 267,525
7,000 Randstad Hldgs. (Netherlands) (Temporary Employment)300,581
12,000 SGL Carbon AG (Germany) (Carbon Products)+ 780,126
----------
1,651,217
PHARMACEUTICALS & MEDICAL TECHNOLOGY (7.3%)
- ----------------------------------------------------------------------
15,000 Astra AB (Sweden) 536,957
500 Hogy Medical Co. (Japan) 22,094
23,500 Recordati(Italy)+ 145,512
137,000 Recordati Savings Shares (Italy) 470,809
75 Roche Holdings AG Rights (Switzerland) 528,954
----------
1,704,326
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
TECHNOLOGY (17.2%)
- ----------------------------------------------------------------------
3000 Alphatec Electronics PCL (Thailand)+ $EE E48,325
2,200 Austria Mikro Systeme International AG (Austria) 383,275
4,400 Barco N.V. (Belgium) 514,379
415,000 First Pacific Co., Ltd. (Hong Kong) 442,860
729 Getronics Electric N.V.(Netherlands) 35,905
11,000 Glory Ltd. (Glory Kogyo) (Japan) 387,976
8,000 Hana Microelectronics PCL (Thailand) 32,536
7,000 Kyocera Corp. (Japan) 570,942
400 Mabuchi Motor (Japan) 23,447
10,000 Murata Manufacturing Co. Ltd. (Japan) 372,745
900 SGS-Thomson Microelec. ADR (France)+ 43,763
200,000 Varitronix International Ltd. (Hong Kong) 407,451
62,000 Venture Manufacturing Ltd. (Singapore) 194,117
8,000 WM-Data AB Class B (Sweden) 290,410
24,000 Yageo Corp. GDR (Taiwan)+ 294,000
- ----------------------------------------------------------------------
4,042,131
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS (cost $22,778,850) $22,936,091
<PAGE>
WARRANTS (0.2%) (cost $37,456)*+
NUMBER OF WARRANTS EXPIRATION DATE VALUE
<S> <C> <C>
2,500 Randstad Holdings-Falcons 5/15/95 $46,019
- ----------------------------------------------------------------------
CONVERTIBLE BONDS AND NOTES (0.1%) (cost $26,945)
PRINCIPAL AMOUNT VALUE
ELECTRONIC COMPONENTS AND EQUIPMENT (0.1%)
- ----------------------------------------------------------------------
$17,000 United Micro Electronics 144A cv.unsub. 1 1/4s, 2004$27,200
- ----------------------------------------------------------------------
SHORT-TERM INVESTMENTS (25.2%)*
PRINCIPAL AMOUNT VALUE
$1,000,000 Federal Home Loan Mortgage
Corp. 5.67s, October 3, 1995 $999,685
4,000,000 Federal National Mortgage Assn. 5.60s,
October 4, 1995 3,998,133
904,000 Interest in $652,192,000 joint repurchase
agreement dated September 29, 1995 with
Goldman, Sachs & Co. due October 2, 1995 with
respect to various U.S. Treasury obligations --
maturity value of $904,480 for an effective
yield of 6.375% 904,320
- ----------------------------------------------------------------------
Total Short-Term Investments (cost $5,902,138) $5,902,138
- ----------------------------------------------------------------------
Total Investments (cost $28,745,389)*** $28,911,448
- ----------------------------------------------------------------------
<PAGE>
<FN>
NOTES
- ----------------------------------------------------------------------
* Percentages indicated are based on net assets of $23,449,467,
which correspond to a net asset value per class A, class B and
class M of $10.29, $10.28 and $10.29, respectively.
+ Non-income-producing security.
*** The aggregate identified cost for federal income tax purposes is
$28,745,389, resulting in gross unrealized appreciation and
depreciation of $594,764 and $428,705, respectively, or net
unrealized appreciation of $166,059.
ADR, ADS, GDR or GDS after the name of a foreign holding stands
for American Depository Receipt, American Depository Shares,
Global Depository Receipt or Global Depository Shares,
respectively, representing ownership of foreign securities on
deposit with a custodian bank.
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.
Diversification by Country (as of 9/30/95)
Argentina 6.6%
Austria 1.6
Belgium 2.2
Brazil 1.4
Chile 5.2
Colombia 1.4
France 4.7
Germany 3.5
Hong Kong 9.7
India 1.4
Indonesia 5.2
Italy 4.8
Japan 6.7
Malaysia 3.5
Mexico 5.1%
Netherlands 3.3
Pakistan 0.4
Philippines 5.4
Portugal 2.7
Singapore 3.8
South Africa 4.5
Spain 1.2
Sweden 2.6
Switzerland 3.5
Taiwan 1.4
Thailand 0.9
United Kingdom 5.4
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------------------
Investments in securities, at value
(identified cost $28,745,389) (Note 1) $28,911,448
- ----------------------------------------------------------------------
Cash 573
- ----------------------------------------------------------------------
Dividends and other receivables 9,056
- ----------------------------------------------------------------------
Receivable from Manager (Note 3) 22,111
- ----------------------------------------------------------------------
Receivable for securities sold 25,785
- ----------------------------------------------------------------------
Receivable for shares of the fund sold 4,932,553
- ----------------------------------------------------------------------
Unamortized organization expense (Note 1) 6,353
- ----------------------------------------------------------------------
TOTAL ASSETS $33,907,879
LIABILITIES
- ----------------------------------------------------------------------
Payable for shares of the fund sold 14,584
- ----------------------------------------------------------------------
Payable for securities purchased 10,403,717
- ----------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 16,374
- ----------------------------------------------------------------------
Payable for distribution fees (Note 3) 4,891
- ----------------------------------------------------------------------
Payable for orgainzation expenses (Note 1) 6,425
- ----------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 74
- ----------------------------------------------------------------------
Other accrued expenses 12,347
- ----------------------------------------------------------------------
TOTAL LIABILITIES 10,458,412
- ----------------------------------------------------------------------
NET ASSETS $23,449,467
- ----------------------------------------------------------------------
REPRESENTED BY
- ----------------------------------------------------------------------
Paid-in capital (Notes 1, 2 and 5) $23,227,450
- ----------------------------------------------------------------------
Undistributed net investment income (Note 1) 30,541
- ----------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions (Note 1) 25,425
- ----------------------------------------------------------------------
Net unrealized appreciation of investments, and assets and liabilities
in foreign currencies 166,051
- ----------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES
OUTSTANDING $23,449,467
- ----------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- ----------------------------------------------------------------------
Net asset value and redemption price of class A share ($15,137,411
divided by 1,470,943 shares) $10.29
- ----------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.29)* $10.92
- ----------------------------------------------------------------------
Net asset value and redemption price of class B share ($7,053,273
divided by 685,817 shares) $10.28
- ----------------------------------------------------------------------
Net asset value and redemption price of class M share ($1,258,783
divided by 122,384 shares) $10.29
- ----------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.29)* $10.66
- ----------------------------------------------------------------------
<FN>
* 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.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
For the period January 3, 1995
(commencement of operations) to
September 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------
Dividends (net foreign tax of $2,841) $24,784
- ----------------------------------------------------------------------
Interest 26,084
- ----------------------------------------------------------------------
TOTAL INVESTMENT INCOME 50,868
EXPENSES:
- ----------------------------------------------------------------------
Compensation of Manager (Note 3) 26,644
- ----------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 35,129
- ----------------------------------------------------------------------
Compensation of Trustees (Note 3) 543
- ----------------------------------------------------------------------
Reports to shareholders 6,405
- ----------------------------------------------------------------------
Legal 9,809
- ----------------------------------------------------------------------
Auditing 16,306
- ----------------------------------------------------------------------
Other 127
- ----------------------------------------------------------------------
Registration fees 8,024
- ----------------------------------------------------------------------
Distribution fees--Class A (Note 3) 2,619
- ----------------------------------------------------------------------
Distribution fees--Class B (Note 3) 2,039
- ----------------------------------------------------------------------
Distribution fees--Class M (Note 3) 238
- ----------------------------------------------------------------------
Administrative services (Note 3) 30
- ----------------------------------------------------------------------
Amortization of organization expense (Note 1) 72
- ----------------------------------------------------------------------
Fees waived by Manager (Note 3) (66,625)
- ----------------------------------------------------------------------
TOTAL EXPENSES 41,360
- ----------------------------------------------------------------------
FEES PAID INDIRECTLY (NOTE 3) (11,468)
- ----------------------------------------------------------------------
NET EXPENSES 29,892
- ----------------------------------------------------------------------
NET INVESTMENT INCOME 20,976
- ----------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 4) 25,425
- ----------------------------------------------------------------------
Net realized gain on foreign currency translation (Notes 1 and 4) 6
- ----------------------------------------------------------------------
Net unrealized appreciation of investments during the period 166,059
- ----------------------------------------------------------------------
Net unrealized depreciation of foreign currency translations during
the period (8)
- ----------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 191,482
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $212,458
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C>
For the period
January 3, 1995
(commencement of
operations) to
September 30
--------------
1995
- ----------------------------------------------------------------------
INCREASE IN NET ASSETS
- ----------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------
Net investment income $20,976
- ----------------------------------------------------------------------
Net realized gain on investments and foreign currency contracts25,431
- ----------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilties in foreign currencies 166,051
- ----------------------------------------------------------------------
Net increase in net assets resulting from operations 212,458
- ----------------------------------------------------------------------
Increase from capital share transactions (Note 5) 23,217,009
- ----------------------------------------------------------------------
Total increase in net assets 23,429,467
- ----------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------
Beginning of period (Note 2) 20,000
- ----------------------------------------------------------------------
End of period (including undistributed of net investment
income of $30,541) $23,449,467
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C> <C>
July 21, 1995 July 21, 1995 January 3, 1995
(commencement (commencement (commencement
of operations) toof operations) toof operations) to
September 30 September 30 September 30
- ----------------------------------------------------------------------
1995+ 1995+ 1995+
- ----------------------------------------------------------------------
Class M Class B Class A
- ----------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $10.25 $10.25 $8.50
- ----------------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income(a) EE-- (.01) .02
Net realized and unrealized
loss on investments .04 .04 1.77
- ----------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS.04 .03 1.79
- ----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD10.29 10.28 10.29
- ----------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (b)(c) 0.39 0.29 21.06
NET ASSETS, END OF PERIOD
(in thousands) $1,259 $7,053 $15,137
- ----------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(a)(c)(d) .79 .83 1.23
- ----------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a)(c)(.15) (.20) .86
- ----------------------------------------------------------------------
Portfolio turnover (%)(c) 9.24 9.24 9.24
- ----------------------------------------------------------------------
<FN>
+ Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the
period.
(a) Reflects an expense limitation in effect during the period (See
Note 3). As a result of such limitation, expenses for the fund
reflect a reduction of $0.02 per share for each class of shares.
(b) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(c) Not annualized.
(d) The ratio of expenses to average net assets for the year ended
September 30, 1995 includes amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts
(See Note 3).
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is a series of Putnam Investment Funds (the "Trust") which is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The objective of
the fund is to seek long-term capital appreciation by investing
primarily in common stocks that offer potential for capital
appreciation.
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 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 3.5% 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 all 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 policies are in conformity with generally accepted
accounting principles.
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, except that certain U.S. government obligations
are stated at the mean between the bid and asked prices. Market
quotations are not considered to be readily available for long term
corporate bonds and notes; such investments are stated at fair market
value on the basis of valuations furnished by a pricing service,
approved by the Trustees. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at fair
market value following procedures approved by the Trustees.
B JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account, along with the cash of
other registered investment companies managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-
owned subsidiary of Putnam Investments, Inc., and certain other
accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
<PAGE>
C REPURCHASE AGREEMENTS The fund, or any joint trading account,
through its custodian, receives delivery of the underlying securities,
the market value of which at the time of purchase is required to be in
an amount at least equal to the resale price, including accrued
interest. Putnam Managment 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 and dividend income is recorded on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as
the fund is informed of the ex-dividend date.
E FOREIGN CURRENCY TRANSLATION The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and
withholding taxes are translated at prevailing exchange rates when
accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such fluctuations are
included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency
transactions represent net exchange gains or losses on closed forward
currency contracts, disposition of foreign currencies and the
difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized gains and
losses on foreign currency transactions arise from changes in the
value of open forward currency contracts and assets and liability
other than investments at the period end, resulting from changes in
the exchange rate.
F FEDERAL TAXES It is the policy of the fund to distribute all of
its taxable income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the fund
to distribute an amount sufficient to avoid imposition of any excise
tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation on securities held and for
excise tax on income and capital gains.
<PAGE>
G 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 annually. The amount and character of income
and gains to be distributed are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences include treatment of unrealized gains
and losses on passive foreign investment companies and Section 988
foreign currency reclasses. 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 September 30, 1995, the fund reclassified $9,565 to
increase undistributed net investment income and $9,560 to decrease
paid-in-capital, with a decrease to accumulated net realized gains and
losses of $5. The calculation of net investment income per share in
the financial highlights table excludes these adjustments
H EXPENSES OF THE TRUST Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally,
expenses of the Trust will be allocated among and charged to the
assets of each fund on a basis that the Trustees deem fair and
equitable, which may be based on the relative assets of each fund or
the nature of the services performed and relative applicability to
each fund.
I UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the fund
in connection with its organization, its registration with the
Securities and Exchange Commission and with various states and the
initial public offering of its shares were $6,425. These expenses are
being amortized on a straight-line basis over a five-year period. The
fund will reimburse Putnam Management for the payment of these
expenses.
NOTE 2
INITIAL CAPITALIZATION AND OFFERING PRICE OF SHARES
The fund was established as a Massachusetts business trust under the
laws of Massachusetts on October 31, 1994.
During the period October 31, 1994 to January 3, 1995, the fund had no
operations other than those related to organizational matters,
including the initial capital contribution of $20,000 and the issuance
of 2,353 shares to Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc. on January 3,
1995.
At September 30, 1995, Putnam Investments Management, Inc. owned
232,451 shares of the fund, 10.2% of shares outstanding, valued at
$2,391,921.
<PAGE>
NOTE 3
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment
advisory services is paid quarterly based on the average net assets of
the fund for the quarter. Such fee is based on the following annual
rates: 0.80% of the first $500 million of average net assets, 0.70% of
the next $500 million, 0.65% of the next $500 million, and 0.60% of
the next $5 billion.
Through July 31, 1995, Putnam Management has agreed to limit the
fund's expenses to the extent that expenses (exclusive of brokerage,
interest, taxes, deferred organizational and extraordinary expenses
and distribution fees) exceed an annual rate of 1.15% of the fund's
average net assets. For the period August 1, 1995 through December 31,
1995 the expense limitation increased to 1.95% of the fund's average
net assets.
The fund also reimburses Putnam Management for the compensation and
related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of
all such reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $100 and an
additional fee for each Trustees' meeting attended. Trustees who are
not interested persons of Putnam Managment and who serve on committees
of the Trustees receive additional fees for attendance at certain
committee meetings.
During the period ended September 30, 1995, the fund adopted a Trustee
Fee Deferral Plan (the "Plan") which allows the Trustees to defer the
receipt of all or a portion of Trustees Fees payable on or after July
1, 1995. The deferred fees remain in the fund and are invested in the
fund or in other Putnam funds until distribution in accordance with
the Plan.
<PAGE>
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 period ended September 30, 1995, fund expenses were reduced by
$11,468 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the
assets utilized in connection with the offset arrangements in an
income- producing asset if it had not entered into such arrangements.
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 Trustees have approved
payment by the fund to Putnam Mutual Funds Corp. at an annual rate of
.25%, 1.00% and .75% of the average net assets attributed to class A,
class B, and class M shares, respectively.
For the period ended September 30, 1995, Putnam Mutual Funds Corp.,
acting as underwriter, received net commissions of $14,015 and $1,458
from the sale of class A and class M shares, respectively. There were
no monies received on 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 period
ended September 30, 1995, Putnam Mutual Funds Corp., acting as
underwriter received no monies on class A redemptions.
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the period January 3, 1995 (commencement of operations) to
September 30, 1995, purchases and sales of investment securities other
than short-term investments aggregated $23,265,461 and $447,634
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.
<PAGE>
NOTE 5
CAPITAL SHARES
At September 30, 1995 there was an unlimited number of shares of
beneficial interest authorized divided into three classes of shares,
class A, class B and class M. Transactions in capital shares were as
follows:
<TABLE><CAPTION>
<S> <C> <C>
JANUARY 3, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30
- ----------------------------------------------------------------------
1995
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 1,522,577 $15,415,502
- ----------------------------------------------------------------------
Shares repurchased (53,987) (563,723)
- ----------------------------------------------------------------------
NET INCREASE 1,468,590 $14,851,779
- ----------------------------------------------------------------------
JULY 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30
- ----------------------------------------------------------------------
- --
1995
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 686,920 $7,109,976
- ----------------------------------------------------------------------
- --
Shares repurchased (1,103) (11,377)
- ----------------------------------------------------------------------
- --
NET INCREASE 685,817 $7,098,599
- ----------------------------------------------------------------------
- --
JULY 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS M SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 122,784 $1,270,784
- ----------------------------------------------------------------------
- --
Shares repurchased (400) (4,153)
- ----------------------------------------------------------------------
- --
NET INCREASE 122,384 $1,266,631
- ----------------------------------------------------------------------
- --
</TABLE>
- ----------------------------------------------------------------------
- --
FEDERAL TAX INFORMATION
The Form 1099 you receive in January 1996 will show the tax status of
all distributions paid to your account in calendar 1995.
<PAGE>
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
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Anthony W. Regan
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Justin M. Scott
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam
International New Opportunities Fund. It may also be used as sales
literature when preceded or accompanied by the current prospectus,
which gives details of sales charges, investment objectives, and
operating policies of the fund, and the most recent copy of Putnam's
Quarterly Performance Summary. For more information, or to request a
prospectus, call toll free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, are not insured
by the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board or any other agency, and involve risk, including the
possible loss of principal amount invested.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
20971-539/2AH/2AI 11/95
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OThe accompanying notes are an integral part of these
financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
