PUTNAM
INTERNATIONAL
NEW
OPPORTUNITIES
FUND
SEMIANNUAL REPORT
March 31, 1996
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
FUND HIGHLIGHTS
According to Lipper Analytical Services Inc., an industry research
firm, Putnam International New Opportunities Fund's class A shares
ranked 17 out of 279 international funds (top 7%) for 1-year
performance as of March 31, 1996.*
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
17 Financial statements
* Lipper rankings are based on total return performance, vary over
time, and do not reflect the effects of sales charges.
Performance of other share classes will vary. Past performance is
not indicative of future results.
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM]
(C) KARSH, OTTAWA
DEAR SHAREHOLDER:
U.S. INVESTORS LOOKING ABROAD FOR EQUITY INVESTMENT OPPORTUNITIES
QUICKLY DISCOVER THE COMPLEXITIES OF THE UNDERTAKING. IT IS NOT
SURPRISING, THEREFORE, THAT, LIKE YOU, MANY OF THEM HAVE TURNED TO
PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND. YOUR FUND'S MANAGEMENT
TEAM BRINGS TO THE TASK NOT ONLY CONSIDERABLE EXPERTISE BUT THE
ABILITY TO PROVIDE ONGOING MONITORING OF BOTH THE FUND'S PORTFOLIO AND
INTERNATIONAL DEVELOPMENTS THAT MIGHT AFFECT PERFORMANCE.
THIS CAPABILITY IS REFLECTED IN THE FUND'S POSITIVE RELATIVE
PERFORMANCE DURING THE SIX MONTHS ENDED MARCH 31, 1996. RESULTS DURING
THE SEMIANNUAL PERIOD REFLECT STRONG PERFORMANCE FROM THRIVING
COMPANIES IN THE MARKETS OF SOUTHEAST ASIA AS WELL AS THOSE IN LATIN
AMERICA. WHILE THE ESTABLISHED MARKETS OF EUROPE PAUSED EARLY IN THE
PERIOD, INNOVATIVE COMPANIES THERE GAINED MOMENTUM TO CONTRIBUTE
SUBSTANTIALLY TO THE FUND'S RESULTS.
THE RESULTS ALSO DEMONSTRATE THE EFFECTIVENESS OF THE FUND'S
INVESTMENT STRATEGY, WHICH SEEKS TO BALANCE THE POTENTIAL FOR ABOVE-
AVERAGE RETURNS FROM EMERGING MARKETS WITH THE GREATER SAFETY OF
ESTABLISHED MARKETS. FUND MANAGER JUSTIN SCOTT EXPECTS THAT COMPANIES
IN BOTH MARKETS WILL CONTINUE TO EXPAND IN THE MONTHS AHEAD. HE
DISCUSSES PERFORMANCE AND PROSPECTS IN THE REPORT THAT FOLLOWS.
RESPECTFULLY YOURS,
/s/GEORGE PUTNAM
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
MAY 15, 1996
<PAGE>
REPORT FROM THE FUND MANAGER
JUSTIN M. SCOTT
Putnam International New Opportunities Fund generated strong returns
over its semiannual period, even as international markets experienced
generally sound, but hardly inspiring performance. For the six months
ended March 31, 1996, your fund's class A shares rose 7.44%, with
class B shares climbing 7.08%, and class M shares rising 7.19% each at
net asset value (NAV). These returns moderately exceeded one of the
fund's comparative benchmarks, the MSCI EAFE index, which rose 7.06%
over the period and handily outperformed its other benchmark, the MSCI
Emerging Markets Index, which gained 2.48%. (Returns at public
offering price were 1.24% for class A shares, 2.08% for class B
shares, and 3.47% for class M shares.) For the 12 months ended March
31, 1996, your fund easily outpaced both indexes, as the results on
pages 8 and 9 of this report show.
The ability to achieve positive results in a somewhat difficult
investment environment is particularly gratifying for us because it
helps to highlight the effectiveness of the fund's strategy. When we
created Putnam International New Opportunities Fund, we planned to
seek a higher level of growth than would be expected from established
markets, with less volatility than emerging market funds typically
experience. While past performance cannot guarantee future results,
thus far, our approach has proved its merit.
DUAL STRATEGY FOR GROWTH
Your fund targets stocks of companies with exceptional growth
potential -- wherever they can be found. Because the fund invests in
both established and emerging markets, it cannot be characterized as
an emerging market fund; nor is it a typical international fund that
invests only in larger, mature stock markets. Rather, the fund is
designed to capture some of the benefits of both types of market,
while seeking to temper several of the disadvantages posed by each.
<PAGE>
Your fund shares an important aspect of its strategy with the domestic
Putnam New Opportunities Fund. Both funds identify industry and
economic sectors with strong growth rates and then select the fastest-
growing companies from within these sectors. Putnam International New
Opportunities Fund takes this sector strategy abroad, investing in
rapidly growing sectors in countries in various stages of economic
development. Of course, international investing involves certain
risks, including currency fluctuations, political developments, and
economic instability.
RAPIDLY GROWING COMPANIES IN ESTABLISHED MARKETS THRIVE
Over the fund's semiannual period, many fast-growing companies in
mature, established economies performed well. Among your fund's
holdings in Europe are shares of WM-Data, a Swedish software company.
While this stock, along with others discussed in this report, was
viewed favorably at the end of the fiscal period, all portfolio
holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may well vary in the future.
Another large fund holding is Schibsted, a Norway-based media company
with publishing and advertising subsidiaries. We are upbeat about
prospects for the fund's shares of Ericsson, the major Swedish mobile
telecommunications corporation. Altana is a well-run German
pharmaceutical firm with a strong, varied drug portfolio.
REGIONAL BREAKDOWN* (as of 3/31/96)
[BAR CHART]
- ----------------------------------------------------------------------
Asia 26.9%
Europe 26.1%
Central/South America 18.0%
South Africa 1.6%
Cash and other countries 27.4%
- ----------------------------------------------------------------------
*Based on portfolio holdings as of indicated date. Allocations will
vary over time.
<PAGE>
In spite of recent weakness in stock prices of Japanese technology
companies, we believe their long-term growth potential remains intact.
Japanese technology firms represented in the portfolio include Murata
Manufacturing, a supplier of capacitors for high-tech companies; and
Glory, a manufacturer of vending machines and pachinko (the Japanese
version of pinball) machines. Other Asian nations boast rapidly
growing technology companies as well. Your fund owns shares in
Shinawatra Computer, a successful Thai cellular phone company with as
well as in Varitronix, a Hong Kong-based maker of liquid crystal
displays.
EMERGING MARKETS: A NEW FOCUS ON LATIN AMERICA
In recent years, Latin America has largely been neglected by
investors, who instead have sought opportunities in Asia's developing
economies. Memories of Mexico's 1994 peso crisis and the subsequent
selloff in stock markets across Latin America have proved difficult to
shake. Despite these lingering doubts, however, we believe many sound,
competitive, and expanding Latin American companies have been unfairly
tarnished. Indeed, their long-term growth potential remains superb.
Furthermore, because of investor reticence, we believe many strong
values can currently be found from Mexico to Argentina.
We have stressed those companies that are helping to build a more
advanced infrastructure for Latin America and that we believe are
likely to exhibit strong growth in the coming years. Stocks of such
companies in the fund's portfolio include Commercial del Plata, an
Argentine company with interests in oil, gas, and electricity
operations; Apasco and Cemex, two major Mexican cement makers; Fomento
Economico, a Mexican beverage operator; and Panamerican Beverages, a
leading bottler of soft drinks reaching some 16% of Latin America's
population. Your fund also owns shares in Chilectra, Chile's largest
electricity distributor; and Banco Bradesco, a major banking player
operating in Brazil's expanding market.
A number of companies in Asia's dynamic emerging markets are highly
attractive as well. We believe that Filinvest, a Philippine land
developer, has strong growth potential. In Malaysia, where financial
services are booming, your fund owns shares of MAAF Assurances, an
insurer. In India,
<PAGE>
TOP 10 HOLDINGS
- ----------------------------------------------------------------------
ADIDAS (GERMANY)
Athletic gear
- ----------------------------------------------------------------------
SGS-THOMSON MICROELEC (FRANCE)
Semiconductors and related equipment
- ----------------------------------------------------------------------
SCHIBSTED (NORWAY)
Media and advertising
- ----------------------------------------------------------------------
ALTANA (GERMANY)
Pharmaceuticals
- ----------------------------------------------------------------------
ERICSSON (SWEDEN)
Mobile telecommunications
- ----------------------------------------------------------------------
PANAMERICAN BEVERAGES (MEXICO)
Beverage bottler and distributor
- ----------------------------------------------------------------------
FOMENTO ECONOMICO (MEXICO)
Beverage bottler and distributor
- ----------------------------------------------------------------------
TELEBRAS (BRAZIL)
Telecommunications
- ----------------------------------------------------------------------
CIA CERVEJARIA (BRAZIL)
Beverage bottler and distributor
- ----------------------------------------------------------------------
BANCO BRADESCO (BRAZIL)
Financial services
- ----------------------------------------------------------------------
These holdings represent 13.6% of the fund's net assets as of 3/31/96.
Portfolio holdings will vary over time.
the fund owns stock in India Cements, which appears well positioned to
benefit from infrastructure development.
OUTLOOK: CONTINUING RAPID GROWTH
COULD COME WITH GREATER VOLATILITY
We emphasize fast-growing companies within expanding sectors when
selecting holdings for your fund. Such companies often outpace their
country's broader economy; for example, if a country's overall economy
is weak, strong growth companies may still perform relatively well. In
the coming months, unsettled economic conditions -- particularly
regarding interest rates -- may affect stocks around the globe,
regardless of their growth characteristics. Taking a long-term view of
your fund's prospects helps put such potential volatility into
perspective.
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 3/31/96, there is no guarantee
the fund will continue to hold these securities in the future.
International investing involves certain risks, including currency
fluctuations, political developments, and economic instability.
<PAGE>
PERFORMANCE SUMMARY
PUTNAM INTERNATIONAL NEW OPPORTUNITIES FUND IS DESIGNED FOR INVESTORS
SEEKING LONG-TERM CAPITAL APPRECIATION PRIMARILY THROUGH COMMON STOCKS
OF INTERNATIONAL COMPANIES.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 3/31/96
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS M
(INCEPTION DATE) (1/3/95) (7/21/95) (7/21/95)
NAV POP NAV CDSC NAV POP
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
6 months 7.44% 1.24% 7.08% 2.08% 7.19% 3.47%
- ----------------------------------------------------------------------
1 year 23.52 16.37 -- -- -- --
- ----------------------------------------------------------------------
Life of class 30.06 22.56 7.39 2.39 7.61 3.86
Annual average23.82 17.99 -- -- -- --
- ----------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/96
<TABLE><CAPTION>
MSCI
MSCI EMERGING
EAFE MARKETS
INDEX INDEX
<S> <C> <C>
- ----------------------------------------------------------------------
6 months 7.06% 2.48%
- ----------------------------------------------------------------------
1 year 12.33 7.17
- ----------------------------------------------------------------------
Life of class A 14.42 -4.95
Annual average 11.39 -3.99
- ----------------------------------------------------------------------
Life of classes B & M 4.98 0.18
- ----------------------------------------------------------------------
<FN>
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take
into account any adjustment for taxes payable on reinvested
distributions. Performance data reflect an expense limitation
previously in effect. Without the expense limitation, total returns
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. POP assumes 5.75% maximum sales
charge for class A shares and 3.50% for class M shares. CDSC for class
B shares assumes the applicable sales charge, with the maximum being
5%.
</TABLE>
<PAGE>
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/96
<TABLE><CAPTION>
CLASS A CLASS B CLASS M
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Distributions (number) 1 1 1
- ----------------------------------------------------------------------
Income $0.012 $0.005 $0.007
Capital gains:
Long-term -- -- --
Short-term 0.002 0.002 0.002
- ----------------------------------------------------------------------
TOTAL $0.014 $0.007 $0.009
- ----------------------------------------------------------------------
SHARE VALUE: NAV POP NAV NAV POP
- ----------------------------------------------------------------------
9/30/95 $10.29 $10.92 $10.28 $10.29 $10.66
- ----------------------------------------------------------------------
3/31/96 11.04 11.71 11.00 11.02 11.42
- ----------------------------------------------------------------------
</TABLE>
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.
<PAGE>
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 the 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.*
* Securities indexes assume reinvestment of all distributions and
interest payments and do not take into 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.
<PAGE>
A PUTNAM PERSPECTIVE ON RISK AND REWARD
You've probably been told how important it is to understand the
relationship between an investment's potential rewards and its
accompanying risks. Given the cautionary nature of such instructions,
it may take most investors a while to realize that risk has a positive
side.
EVERY RISK SIGNALS A POTENTIAL REWARD. Selecting only those
investments that offer the greatest degree of security generally leads
to only modest rewards. Furthermore, even insured or guaranteed
investments may be subject to changes in their rates of return or, in
some cases, in their principal values. Experienced investors know that
no investment is truly risk free and are therefore willing to take on
some measure of risk in order to increase their potential gains.
THE GREATER THE RISK, THE GREATER THE POTENTIAL REWARD. Accepting an
appropriate level of investment risk can give you a better chance of
outpacing inflation over time and seeking to maximize your
investment's return. How much risk? Your financial advisor's feedback
and your time horizon can make all the difference in determining how
much risk is compatible with your investment goals and your peace of
mind.
FITTING YOUR FUND SELECTION TO YOUR RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards? It's helpful to understand the types of risks that
can apply to different types of investments, and to look at your own
portfolio with this perspective.
For short-term goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And
all income-oriented investors should consider interest-rate, credit,
and prepayment risks carefully. Within each of Putnam's four
investment categories, you can select funds with differing levels of
risk and reward potential to customize your portfolio.
<PAGE>
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's
prospectus.
A RUNDOWN OF RISK TYPES
MARKET RISK Most important for stock funds, but relevant to all funds,
this is a measure of how sensitive a fund's holdings are to changes in
general market conditions. Remember, though, that securities that lose
value quickly in market declines may also show the strongest gains in
more favorable environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this
type of risk is a particular concern for fixed-income investors.
However, interest-rate increases can also have a substantial negative
effect on the stock market.
INFLATION RISK If your investments cannot keep pace with inflation,
your money will begin to lose its purchasing power. Stock investments
are generally considered among the best ways of addressing inflation
risk over the long term.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the
security's issuer will not be able to meet its payment, while
prepayment risk involves the premature payoff of a loan, with a
resulting loss of interest income. Professional management and in-
depth research are invaluable in managing both these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash
at their perceived market values. Liquidity risk can affect the price
of securities held in the fund's portfolio and, thus, the fund's share
prices.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
March 31, 1996 (Unaudited)
<TABLE><CAPTION>
COMMON STOCKS (68.8%)*
NUMBER OF SHARES VALUE
COMMUNICATIONS (11.3%)
- ----------------------------------------------------------------------
<C> <S> <C>
60,000 Compania de Telecomunicaciones de Chile S.A.
ADR (Chile) $5,085,000
300,000 Ericsson LM Class B (Sweden) 6,609,514
2,500,000 Hong Kong Telecommunications Ltd. (Hong Kong) 4,994,052
320,000 Orange PLC ADR (United Kingdom)+ 5,480,000
40,000 PT Telekomunikasi Indonesia ADR (Indonesia)+ 1,240,000
54,000 Pakistan Telecommunications Corp. 144A (Pakistan)+5,184,000
85,000 Philippine Long Distance ADR (Philippines) 4,526,250
41,300 Pilipino Telephone Corp. (Philippines)+ 55,320
205,000 Portugal Telecom S.A. (Portugal)+ 4,626,431
12,000 Securicor Group PLC Class A (United Kingdom) 219,234
120,000 Telebras Co. ADR (Brazil) 5,955,000
60,000 Telecom Argentina S.A. ADR (Argentina)+ 2,490,000
140,000 Telefonica de Argentina S.A. ADR (Argentina) 3,605,000
50,000 Telefonos de Mexico S.A. Class L ADR (Mexico) 1,643,750
6,310 Telemig (Telecomunicacoes de Minas Gerais)
(Brazil) 498,296
1,300,000 Vodafone Group PLC (United Kingdom) 4,807,563
-----------
57,019,410
CONSUMER PRODUCTS & SERVICES (11.2%)
- ----------------------------------------------------------------------
50,000 Amway Japan Ltd. (Japan) 2,518,657
115,000 Bulgari S.P.A. (Italy)+ 1,436,142
12,000 CIA Tecidos Norte de Minas (Brazil) 4,981,774
1,340,000 Cifra S.A. de CV Class C (Mexico)+ 1,759,830
2,094,000 Controladora Comercial Mexicana S.A. Series B
(Mexico) 1,736,881
190,000 Courts Ltd. (Singapore) 322,400
450,000 Dixons Group PLC (United Kingdom) 3,067,538
3,600 East India Hotel Ltd. 144A GDR (India)+ 78,300
600,000 Edaran Otomobil Nasional Berhad (Malaysia) 5,377,023
80,000 Gucci Group+ 3,840,000
23,500 Indian Hotels, Ltd. 144A GDR (India)+ 611,000
44,000 Luxottica Group ADR (Italy) 3,437,500
7,900 Malbak Ltd. 144A GDR (South Africa) 44,438
300,000 Malbak Ltd. GDR (South Africa) 1,687,500
756,500 PT Astra International (Foreign Registered)
(Indonesia) 1,084,416
300,000 PT Gudang Garam (Registered) (Indonesia) 3,716,312
1,500,000 PT Matahari Putra Prima (Registered) (Indonesia) 3,273,435
66,000 Paris Miki, Inc. (Japan) 2,524,254
1,000,000 Rentokil Group PLC (United Kingdom) 5,520,500
330,000 Sampoerna Ind. (Indonesia) 3,448,981
100,000 Santa Isabel S.A. ADR (Chile)+ 2,537,500
600,000 Siam Makro Public Co. Ltd. (Registered)
(Thailand)+ 2,661,913
150,000 Srithai Superware PCL (Registered) (Thailand) 1,134,878
1,500 Tarkett AG (Germany)+ 33,756
-----------
56,834,928
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
FINANCE (7.4%)
- ----------------------------------------------------------------------
105,000 Aegon N.V. (Netherlands) $4,951,632
1,400,000 Banca Fideuram S.P.A. (Italy) 2,060,026
140,000 Banco Industrial Colombiano ADR (Columbia) 2,590,000
170,000 Banco Osorno y Louisiana Union ADR (Chile) 2,635,000
250,000 Banco Totta & Accores S.A. (Portugal) 4,864,066
2,500,000 Bankard, Inc. (Philippines)+ 1,291,619
815,000 Guoco Group Ltd. (Hong Kong) 4,489,023
973,000 Industrial Finance Corp. of Thailand (The)
(Thailand) 3,584,432
309,750 MAAF Assurances SA (Malaysia) 1,932,116
30,000 Mapfre Vida Seguros (Spain) 1,714,837
321,000 Overseas Union Bank Ltd. (Registered)
(Singapore) 2,279,020
487,000 Pacific & Orient Berhad (Malaysia) 1,576,550
55,000 Philippine Commercial International Bank
(Philippines)+ 631,458
120,000 Sage Group Ltd. (South Africa) 663,733
1,675,000 Siam City Bank PCL (Registered) (Thailand) 2,090,018
-----------
37,353,530
FOOD AND BEVERAGES (5.4%)
- ----------------------------------------------------------------------
67,000 Carlsberg Brewery of Malaysia (Malaysia) 425,859
31,000 Docks de France (France) 5,549,778
2,200,000 Fomento Economico Mexicano S.A. de C.V. Class B
(Mexico) 6,228,896
160,000 Panamerican Beverages Inc. Class A (Mexico) 6,460,000
60,000 PizzaExpress PLC (United Kingdom) 290,055
475,000 Quilmes Industrial S.A. ADR (Luxembourg)+ 5,106,250
100,079 South African Breweries Ltd. (South Africa) 3,170,321
-----------
27,231,159
INFRASTRUCTURE (12.8%)
- ----------------------------------------------------------------------
350,000 Apasco S.A. (Mexico) 1,767,912
43,000 Capex (Argentina) 612,750
350,000 Cement Industries of Malaysia Berhad 144A GDR
(Malaysia) 1,167,588
1,000,000 Cemex S.A. (Mexico) 3,721,919
45,000 Chilectra S.A. ADR (Chile)+ 2,238,750
110,000 Chilquinta S.A. ADR (Chile) 1,708,245
900,000 Citic Pacific Ltd. (Hong Kong) 3,490,988
1,000,000 Comercial del Plata S.A. (Argentina) 2,700,540
3,000,000 Consolidated Electric Power (Asia) 4,964,961
1,350,000 DBS Land Ltd. (Singapore) 5,175,719
850,000 Far East Levingston Shipbuilding Ltd. (Singapore) 4,737,309
3,999,400 Fil-Estate Land, Inc. (Philippines)+ 3,329,007
2,836,900 Filinvest Development Corp. (Philippines)+ 2,062,805
6,000,000 Filinvest Land, Inc. (Philippines)+ 2,812,859
28,700 IPC Ltd. GDR (India) 459,200
230,000 India Cements Ltd. 144A GDR (India) 1,207,500
100,006 Inversiones Y Represent ADR (Argentina)+ 2,812,669
225,000 Jurong Engineering Ltd. (Singapore) 1,022,364
300,000 Malayawata Steel Berhad (Malaysia) 504,540
600,000 NatSteel Ltd. (Singapore) 1,179,979
2,200,000 New World Infrastructure Ltd. (Hong Kong)+ 4,693,439
1,471,790 PT Mulia Industrindo (Indonesia) 2,566,349
260,000 Sasol Ltd. (South Africa) 2,536,266
88,000 Shun Tak Holdings Ltd. (Hong Kong) 61,441
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
INFRASTRUCTURE (CONTINUED)
- ----------------------------------------------------------------------
4,300,000 Sinocan Holdings Ltd. (Hong Kong) $1,626,219
540,000 Sun Hung Kai Properties Ltd. (Hong Kong)+ 4,835,018
43,400 Tata Engineering & Locomotive Co. Ltd. GDR
(India)+ 661,850
-----------
64,658,186
LEISURE & MEDIA (7.1%)
- ----------------------------------------------------------------------
240,000 Adidas AG 144A ADS (Germany)+ 8,670,000
18,900 Chargeurs S.A. (France) 4,835,285
4,000,000 China Hong Kong Photo Products Holdings, Ltd.
(Hong Kong) 2,042,874
350,000 Elsevier N.V. (Netherlands) 5,353,688
109,300 Investec Consultadoria International (Portugal)+ 2,577,660
600,000 Overseas Union Enterprise Ltd. (Singapore) 3,620,873
575,000 Schibsted A/S (Norway) 7,885,551
11,000 Societe Television Francaise 1 (France) 1,124,365
-----------
36,110,296
OTHER (1.3%)
- ----------------------------------------------------------------------
2,200,000 Chen Hsong Hldgs. (Hong Kong) (Machinery &
Equipment) 1,223,139
600,000 Keppel Corp. (Transportation) 5,452,609
-----------
6,675,748
PHARMACEUTICALS & MEDICAL TECHNOLOGY (3.9%)
- ----------------------------------------------------------------------
11,000 Altana AG (Germany) 7,072,758
100,000 Astra AB (Sweden) 4,638,650
50,000 PT Tempo Scan Pacific (Indonesia) 132,649
400,000 PT Tempo Scan Pacific (Registered) (Indonesia) 1,061,192
25,500 Recordati (Italy) 256,643
351,300 Recordati Savings Shares (Italy) 1,834,952
440 Roche Holdings AG Rights (Switzerland) 3,651,268
55,000 Scandinavian Mobility International (Denmark)+ 1,069,926
-----------
19,718,038
TECHNOLOGY (8.4%)
- ----------------------------------------------------------------------
12,700 Austria Mikro Systeme International AG (Austria) 1,783,639
30,000 Axime S.A. (France)+ 3,810,734
25,000 Barco N.V. (Belgium) 3,448,787
2,000,599 First Pacific Co., Ltd. (Hong Kong) 2,845,361
729 Getronics Electric N.V. (Netherlands) 52,802
56,000 Glory Ltd. (Glory Kogyo) (Japan) 1,812,687
260,000 JBA Holdings PLC (United Kingdom) 1,546,350
56,000 Murata Manufacturing Co. Ltd. (Japan) 1,922,388
31,000 Rohm Co. Ltd. (Japan) 1,763,993
230,000 SGS-Thomson Microelectronics ADR (France) 8,337,500
185,000 Shinawatra Computer Co. PLC (Registered)
(Thailand) 4,690,037
86,000 Tokyo Electron Ltd. (Japan) 2,928,172
710,000 Varitronix International Ltd. (Hong Kong) 1,303,561
502,000 Venture Manufacturing Ltd. (Singapore) 1,782,038
100,000 WM-Data AB Class B (Sweden) 4,421,330
30,000 Yageo Corp. 144A GDR (Taiwan)+ 225,000
42,674,379
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $327,058,540) $348,275,674
- ----------------------------------------------------------------------
<PAGE>
PREFERRED STOCKS (4.4%)*
NUMBER OF SHARES VALUE
550,000 Banco Bradesco BRC 0.12 NPV pfd. (Brazil) $5,763,973
20,000 Brasmotor S.A. 5.32 NPV pfd. (Brazil) 5,164,034
12,000 Cia Cervejaria Brahma 8.86 NPV pfd. (Brazil) 5,795,869
225,000 Lojas Americanas S.A. 0.2852 NPV pfd. (Brazil) 5,422,236
- ----------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $21,674,815) $22,146,112
- ----------------------------------------------------------------------
SHORT-TERM INVESTMENTS (28.7%)*
PRINCIPAL AMOUNT VALUE
$10,900,000 Federal Home Loan Bank effective yield of 5.1%,
September 6, 1996 $10,656,022
15,000,000 Federal Home Loan Mortgage Corp. effective yield
of 5%, May 8, 1996 14,922,917
30,000,000 Federal National Mortgage Assn. effective
yield of 5.08%, April 9, 1996 29,966,133
30,000,000 Federal National Mortgage Assn. effective
yield of 5.14%, June 12, 1996 29,691,600
20,000,000 Metropolitan Life Funding, effective
yield of 5.63%, October 24, 1995 19,916,867
40,263,000 Interest in $844,579,000 joint repurchase
agreement dated March 29, 1996 with Morgan
(J.P.) & Co., Inc., due April 1, 1996 with
respect to various U.S. Treasury obligations
-- maturity value of $40,281,118 for an
effective yield of 5.4% 40,281,118
- ----------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $145,434,657) $145,434,657
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (cost $494,168,012)*** $515,856,443
- ----------------------------------------------------------------------
<FN>
* Percentages indicated are based on net assets of $506,189,669.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is $494,168,012,
resulting in gross unrealized appreciation and depreciation of
$31,232,008 and $9,543,577, respectively, or net unrealized
appreciation of $21,688,431.
ADR, ADS, GDR or GDS after the name of a foreign holding stands
for American Depository Receipts, American Depository Shares,
Global Depository Receipts or Global Depository Shares,
respectively, representing ownership of foreign securities on
deposit with a domestic 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.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996 (Unaudited)
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------------------
Investments in securities, at value
(identified cost $494,168,012) (Note 1) $515,856,443
- ----------------------------------------------------------------------
Cash 275,464
- ----------------------------------------------------------------------
Dividends, interest, and other receivables 673,424
- ----------------------------------------------------------------------
Receivable for shares of the fund sold 10,526,122
- ----------------------------------------------------------------------
Receivable for securities sold 90,518
- ----------------------------------------------------------------------
Unamortized organization expenses (Note 1) 6,302
- ----------------------------------------------------------------------
TOTAL ASSETS 527,428,273
LIABILITIES
- ----------------------------------------------------------------------
Payable for securities purchased 19,125,126
- ----------------------------------------------------------------------
Payable for shares of the fund repurchased 249,829
- ----------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,065,978
- ----------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 275,003
- ----------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 48
- ----------------------------------------------------------------------
Payable for administrative services (Note 2) 2,273
- ----------------------------------------------------------------------
Payable for distribution fees (Note 2) 329,959
- ----------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ----------------------------------------------------------------------
Other accrued expenses 183,963
- ----------------------------------------------------------------------
TOTAL LIABILITIES 21,238,604
- ----------------------------------------------------------------------
NET ASSETS $506,189,669
- ----------------------------------------------------------------------
REPRESENTED BY
- ----------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $484,989,167
- ----------------------------------------------------------------------
Undistributed net investment income (Note 1) 115,283
- ----------------------------------------------------------------------
Distributions in excess of gains on investments and
foreign currency transactions (Note 1) (599,275)
- ----------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 21,684,494
- ----------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $506,189,669
- ----------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- ----------------------------------------------------------------------
Net asset value and redemption price per class A share
($234,867,249 divided by 21,277,246 shares) $11.04
- ----------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.04)* $11.71
- ----------------------------------------------------------------------
Net asset value and offering price per class B share
($247,144,539 divided by 22,462,907 shares)+ $11.00
- ----------------------------------------------------------------------
Net asset value and redemption price per class M share
($24,177,881 divided by 2,194,645 shares) $11.02
- ----------------------------------------------------------------------
Offering price per class M share (100/96.50 of $11.02)* $11.42
- ----------------------------------------------------------------------
<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.
+ Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Six months ended March 31, 1996 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------
Interest $1,875,788
- ----------------------------------------------------------------------
Dividends (net of foreign tax of $149,492) 1,039,055
- ----------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,914,843
EXPENSES:
- ----------------------------------------------------------------------
Compensation of Manager (Note 2) 1,367,113
- ----------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 472,608
- ----------------------------------------------------------------------
Compensation of Trustees (Note 2) 3,922
- ----------------------------------------------------------------------
Administrative services (Note 2) 4,561
- ----------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 141,608
- ----------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 519,485
- ----------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 43,956
- ----------------------------------------------------------------------
Amortization of organization expenses (Note 1) 51
- ----------------------------------------------------------------------
Reports to shareholders 23,678
- ----------------------------------------------------------------------
Registration fees 178,978
- ----------------------------------------------------------------------
Postage 16,138
- ----------------------------------------------------------------------
Other 34,082
- ----------------------------------------------------------------------
Fees waived by Manager (Note 2) (59,305)
- ----------------------------------------------------------------------
TOTAL EXPENSES 2,746,875
- ----------------------------------------------------------------------
Expense reduction (Note 2) (63,363)
- ----------------------------------------------------------------------
NET EXPENSES 2,683,512
- ----------------------------------------------------------------------
NET INVESTMENT INCOME 231,331
- ----------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (590,247)
- ----------------------------------------------------------------------
Net realized loss on forward currency contracts and
foreign currency translation (Note 1) (930)
- ----------------------------------------------------------------------
Net unrealized depreciation on foreign currency translation
during the period (3,929)
- ----------------------------------------------------------------------
Net unrealized appreciation of investments during the period21,522,372
- ----------------------------------------------------------------------
NET GAIN ON INVESTMENTS 20,927,266
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $21,158,597
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3
(COMMENCEMENT
SIX MONTHS ENDED OF OPERATIONS) TO
MARCH 31 SEPTEMBER 30
<S> <C> <C>
1996* 1995
- ----------------------------------------------------------------------
INCREASE IN NET ASSETS
- ----------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------
Net investment income $231,331 $20,976
- ----------------------------------------------------------------------
Net realized gain (loss) on investment
and foreign currency transactions (591,177) 25,431
- ----------------------------------------------------------------------
Net unrealized appreciation of investment
transactions and assets and liabilities in
foreign currencies 21,518,443 166,051
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 21,158,597 212,458
- ----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
- ----------------------------------------------------------------------
From net investment income
- ----------------------------------------------------------------------
Class A (104,500) --
- ----------------------------------------------------------------------
Class B (35,744) --
- ----------------------------------------------------------------------
Class M (6,345) --
- ----------------------------------------------------------------------
From net realized gains on investments
- ----------------------------------------------------------------------
Class A (17,396) --
- ----------------------------------------------------------------------
Class B (14,314) --
- ----------------------------------------------------------------------
Class M (1,813) --
- ----------------------------------------------------------------------
Increase from capital share transactions
(Note 4) 461,761,717 23,217,009
- ----------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 482,740,202 23,429,467
- ----------------------------------------------------------------------
Net assets
- ----------------------------------------------------------------------
Beginning of period 23,449,467 20,000
- ----------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of $115,283 and
$30,541, respectively) $506,189,669 $23,449,467
- ----------------------------------------------------------------------
<FN>
* Unaudited.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
JULY 21, 1995
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) TO
MARCH 31 SEPTEMBER 30
- ----------------------------------------------------------------------
1996* 1995+
- ----------------------------------------------------------------------
CLASS M
<S> <C> <C>
- ----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.29 $10.25
- ----------------------------------------------------------------------
INVESTMENT OPERATIONS:
- ----------------------------------------------------------------------
Net investment income (loss)(a) .01 --
Net realized and unrealized gain on investments.73 .04
- ----------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .74 .04
- ----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.01) --
- ----------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.01) --
- ----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.02 $10.29
- ----------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE (%)(b)(c) 7.19 0.39
- ----------------------------------------------------------------------
NET ASSETS, END OF PERIOD (in thousands) $24,178 $1,259
- ----------------------------------------------------------------------
Ratio of expenses to average net assets
(%)(a)(c)(d) 1.26 .79
- ----------------------------------------------------------------------
Ratio of net investment income to average
net assets (%)(a)(c) .03 (.15)
- ----------------------------------------------------------------------
Portfolio turnover (%)(c) 6.21 9.24
- ----------------------------------------------------------------------
Average commission rate paid(e) $.0189(c) --
- ----------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<C> <C> <C> <C>
JULY 21, 1995 JANUARY 3, 1995
SIX MONTHS (COMMENCEMENT SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) TO ENDED OF OPERATIONS) TO
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
- ----------------------------------------------------------------------
1996* 1995+ 1996* 1995+
- ----------------------------------------------------------------------
Class B Class A
- ----------------------------------------------------------------------
$10.28 $10.25 $10.29 $8.50
- ----------------------------------------------------------------------
-- (.01) .01 .02
- ----------------------------------------------------------------------
.73 .04 .75 1.77
- ----------------------------------------------------------------------
.73 .03 .76 1.79
- ----------------------------------------------------------------------
(.01) -- (.01) --
- ----------------------------------------------------------------------
(.01) -- (.01) --
- ----------------------------------------------------------------------
$11.00 $10.28 $11.04 $10.29
- ----------------------------------------------------------------------
7.08 0.29 7.44 21.06
- ----------------------------------------------------------------------
$247,145 $7,053 $234,867 $15,137
- ----------------------------------------------------------------------
1.40 .83 1.02 1.23
- ----------------------------------------------------------------------
(.09) (.20) .28 .86
- ----------------------------------------------------------------------
6.21 9.24 6.21 9.24
- ----------------------------------------------------------------------
$.0189(c) -- $.0189(c) --
- ----------------------------------------------------------------------
<FN>
* Unaudited.
+ 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 2). As a result of such limitation, expenses of the fund for
the periods ended March 31, 1996 and September 30, 1995 reflect a
reduction of less than $0.01 and a reduction of $0.02 per share
for each class of shares, respectively.
(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 includes amounts paid
through brokerage service and expense offset arrangements. (See
Note 2).
(e) Average commission rate paid is presented for fiscal periods
beginning September 1, 1995 in conformance with requirements
issued by the S.E.C.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (Unaudited)
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 3.50% and pay an ongoing distribution fee that is lower than
class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class
of shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or
other matters on which a class vote is required by law or determined
by the Trustees. Shares of each class would receive their pro-rata
share of the net assets of the fund, if the fund were liquidated. In
addition, the Trustees declare separate dividends on each class of
shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
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.
<PAGE>
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.
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 102% of the resale price, including
accrued interest. Putnam Management is responsible for determining
that the value of these underlying securities is at all times at least
equal to 102% of the resale price, including accrued interest.
D SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date.
E FOREIGN CURRENCY TRANSLATION The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and
withholding taxes are translated at prevailing exchange rates when
accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such fluctuations are
included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency
transactions represent net exchange gains or losses on closed forward
currency contracts, disposition of foreign currencies and the
difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized gains and
losses on foreign currency transactions 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.
<PAGE>
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.
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. 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.
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 projected net asset levels over a five-year period. The fund will
reimburse Putnam Management for the payment of these expenses.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 1.20% of
the first $500 million of average net assets, 1.10% of the next $500
million, 1.05% of the next $500 million, 1.00% of the next $5 billion,
0.975% of the next $5 billion, 0.955% of the next $5 billion, 0.94% of
the next $5 billion, and 0.93% thereafter, subject, under current law,
to reduction in any year to the extent that expenses (exclusive of
brokerage, interest and taxes) of the fund exceed 2.5% of the first
$30 million of average net assets, 2.0% of the next $70 million and
1.5% of any excess over $100 million and by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates
of Putnam Management on the fund's portfolio transactions.
<PAGE>
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $920 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 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.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended March 31, 1996, fund expenses were reduced by
$63,363 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 the assets utilized in connection with the expense
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 at an annual rate of 0.25%, 1.00% and 0.75% of the
average net assets attributable to class A, class B and class M
shares, respectively.
For the six months ended March 31, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $561,194 and $44,719
from the sale of class A and class M shares, respectively, and
received $31,144 in contingent deferred sales charges from redemptions
of class B shares. A deferred sales charge of up to 1% is assessed on
certain redemptions of class A shares. For the six months ended March
31, 1996, Putnam Mutual Funds Corp., acting as underwriter received no
monies on class A redemptions.
<PAGE>
NOTE 3
PURCHASE AND SALES OF SECURITIES During the six months ended March 31,
1996, purchases and sales of investment securities other than short-
term investments aggregated $336,401,542 and $10,213,076,
respectively. There were no purchases and sales of U.S. government
obligations. In determining the net gain or loss on securities sold,
the cost of securities has been determined on the identified cost
basis.
NOTE 4
CAPITAL SHARES
At March 31, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MARCH 31
- ----------------------------------------------------------------------
1996
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 21,675,304 $229,259,880
- ----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 10,430 106,273
- ----------------------------------------------------------------------
21,685,734 229,366,153
- ----------------------------------------------------------------------
Shares repurchased (1,879,431) (20,214,784)
- ----------------------------------------------------------------------
NET INCREASE 19,806,303 $209,151,369
- ----------------------------------------------------------------------
JANUARY 3, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30
- ----------------------------------------------------------------------
1995
- ----------------------------------------------------------------------
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 1,522,577 $15,415,502
- ----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- --
- ----------------------------------------------------------------------
1,522,577 15,415,502
- ----------------------------------------------------------------------
Shares repurchased (53,987) (563,723)
- ----------------------------------------------------------------------
NET INCREASE 1,468,590 $14,851,779
- ----------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31
- ----------------------------------------------------------------------
1996
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 22,350,739 $236,880,774
- ----------------------------------------------------------------------
Shares issued in connection with
reinvestments of distributions 3,355 34,157
- ----------------------------------------------------------------------
22,354,094 236,914,931
- ----------------------------------------------------------------------
Shares repurchased (577,004) (6,118,317)
- ----------------------------------------------------------------------
NET INCREASE 21,777,090 $230,796,614
- ----------------------------------------------------------------------
JULY 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30
- ----------------------------------------------------------------------
1995
- ----------------------------------------------------------------------
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 686,920 $7,109,976
- ----------------------------------------------------------------------
Shares issued in connection with
reinvestments of distributions -- --
686,920 7,109,976
- ----------------------------------------------------------------------
Shares repurchased (1,103) (11,377)
- ----------------------------------------------------------------------
NET INCREASE 685,817 $7,098,599
- ----------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31
- ----------------------------------------------------------------------
1996
- ----------------------------------------------------------------------
CLASS M SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 2,127,016 $22,394,191
- ----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 397 4,044
- ----------------------------------------------------------------------
2,127,413 22,398,235
- ----------------------------------------------------------------------
Shares repurchased (55,152) (584,501)
- ----------------------------------------------------------------------
NET INCREASE 2,072,261 $21,813,734
- ----------------------------------------------------------------------
JULY 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30
- ----------------------------------------------------------------------
1995
- ----------------------------------------------------------------------
CLASS M SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 122,784 $1,270,784
- ----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- --
- ----------------------------------------------------------------------
122,784 1,270,784
- ----------------------------------------------------------------------
Shares repurchased (400) (4,153)
- ----------------------------------------------------------------------
NET INCREASE 122,384 $1,266,631
- ----------------------------------------------------------------------
</TABLE>
<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
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
John D. Hughes
Senior Vice President and Treasurer
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
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
24526-539/2AH/2AI 5/96
<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.
