Putnam
International
New
Opportunities
Fund
ANNUAL REPORT
September 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam International New Opportunities Fund has been one of the
best of a new breed. . . . The fund has seen tremendous success with
[its] approach thus far."
-- Morningstar Mutual Funds, August 30, 1996
* "According to Lipper Analytical Services, Putnam International New
Opportunities Fund's class A shares ranked 43 out of 319
international funds (top 14%) for the 1-year period ended September
30, 1996.
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
17 Financial statements
*Lipper Analytical Services, an independent research organization,
ranks funds according to total return performance. Their rankings
vary over time and do not reflect the effects of sales charges.
Class B shares ranked 63 out of 319 international funds for 1-year
performance. Class M shares ranked 57 out of 319 funds over the same
period. The fund was not ranked over longer periods. Past
performance is not indicative of future results.
From the Chairman
[PHOTO OF GEORGE PUTNAM OMITTED]
(copyright) Karsh, Ottawa
Dear Shareholder:
Putnam International New Opportunities Fund, which began operations
in January 1995, closed its first full fiscal year on September 30,
1996. In pursuing your fund's goal of long-term capital appreciation
primarily from common stocks traded in non-U.S. markets, its
management team seeks to balance the potential for above-average
returns from emerging markets with the greater safety of established
markets. Although the fund is not quite two years old, the
performance numbers on pages 8 and 9 of this report suggest that the
strategy has viability.
With Putnam's extensive international research capability behind it,
your fund's management team can seek investment opportunities from
just beyond our nation's borders to around the globe. In the report
that follows, the team discusses the fiscal year just ended and
prospects for the year ahead.
I am pleased to introduce Robert J. Swift as a new addition to the
team. Robert joined Putnam in 1995 as a senior vice president and
portfolio manager. His prior assignments have been with IAI
International/Hill Samuel in London; Pring Dean in Sydney,
Australia; and Brown Shipley in London. He has 13 years of
investment experience.
Respectfully yours,
/S/ George Putnam
George Putnam
Chairman of the Trustees
November 20, 1996
Report from the Fund Managers
Justin M. Scott
J. Peter Grant
Robert J. Swift
Putnam International New Opportunities Fund continues to
successfully target companies with exceptional growth
characteristics in both emerging and developed markets. Your fund
ended its fiscal year on September 30, 1996, with class A shares
gaining 13.76% at net asset value and 7.20% at public offering
price. By contrast, the Morgan Stanley Capital International (MSCI)
EAFE Index rose 8.61% over the same period. For information on
different share classes and longer-term performance, please turn to
pages 8 and 9 of this report.
After nearly two years in operation, the fund has clearly met and
surpassed its objective of outperforming both established and
emerging markets without experiencing excessive volatility. Of
course, past performance is not indicative of future results, and
there are risks associated with this fund that may not be present in
funds investing mainly in domestic securities. But we believe that
in this fund we have an effective, sophisticated strategy for
pursuing strong growth in diverse international markets.
*EMERGING MARKET HOLDINGS SHOW STRENGTH
During fiscal 1996, we witnessed excellent performance from a number
of portfolio holdings in emerging markets. A number of South
American markets were particularly strong, since investors have
returned to the region and economic growth appears firm. Brazilian
equities have been quite robust over the year; many fund holdings in
the Brazilian brewing, food and beverage, electricity, and
telecommunications sectors moved sharply higher. Some standouts
included Cia Cervejaria Brahma, a brewery; Telebras, a telephone
firm; and Telemig, a communications company. While these stocks,
along with others discussed in this report, were viewed favorably at
the end of the fiscal period, all portfolio holdings are subject to
review and adjustment in accordance with the fund's investment
strategy and may vary in the future.
Mexico, too, has boasted a number of companies with strong earnings
growth over the past several months. Apasco, a cement supplier, and
Cifra, a retailer, are benefiting from Mexico's economic upturn; and
Panamerican Beverages, a long-time fund holding, is one of the most
successful beverage companies in the region. Elsewhere in Latin
America, Chile continues to demonstrate the benefits of intelligent
financial and political reform. Indeed, Chile's often-imitated
national private pension plan efficiently funnels capital to
companies. Supported by such capital, Banco Santander, a financial
services firm, Chilectra, an electricity distributor, and Santa
Isabel, a consumer goods maker, all had strong years on Chile's
stock exchange.
Generally, the emerging markets of Southeast Asia have not had firm
macroeconomic support in the past several months. In short, many
economies across the region are either slowing or overheating,
neither of which is typically positive for equities. However, your
fund looks for companies within sectors that enjoy strong demand,
sales, and earnings -- regardless of the prevailing conditions.
[GRAPHIC OMITTED: horizontal bar chart REGIONAL BREAKDOWN* (AS OF
9/30/96)]
Europe 39.3%
Asia 27.4%
Latin America 21.0%
North America 8.7%
Other 3.6%
Footnote reads:
*Based on portfolio holdings as of indicated date. Allocations will
vary over time.
Within this region, Filinvest Land had an upbeat year, as did Fil-
Estate Land, both operating within the country's thriving real
estate development sector. In Indonesia, PT Gudang Garam, a
cigarette manufacturer, and PT Pasifik Satelit, a telecommunications
equipment company, appear to have excellent growth prospects in the
months ahead. Malaysian Assurance, an insurance company, has
performed well for the fund. In spite of Thailand's general economic
difficulties, your fund's holding in Siam Makro, a bulk retailer,
did quite well. Finally Sasol, a South African development firm, has
historically exhibited rapid earnings growth rates.
*MATURE MARKETS OFFER ATTRACTIVE GROWTH COMPANIES
The other major portion of your fund is invested in fast-growing
companies in mature economies. Typically these firms are smaller
than those making up the emerging-markets portion of the fund. Over
the year the broader economic environment in these markets varied:
Western Europe was quite strong, while Japan remained lackluster.
However, as we do with emerging-market holdings, we target those
companies in mature economies that can grow regardless of the
prevailing economic conditions.
In Germany, the pharmaceutical company Altana has performed superbly
as has another fund holding, Tarkett, a maker of luxury floors. Germany's
Adidas is doing extremely well within its sportswear niche. Finally SGL
Carbon, a maker of advanced materials, has long proved its ability to
grow earnings consistently.
The United Kingdom's Vodafone, supplying cellular equipment and
services, is a standout. Among other U.K. holdings, your fund owns
PizzaExpress and Rentokil Group, a supplier of diverse office
products and business services. Dixons Group is an electronic
consumer goods retailer. Finally Securicor is, we believe, an
excellent company in the cellular phone field.
Elsewhere in mature markets we saw several Swedish companies perform
well, particularly Ericsson, a telecommunications concern, and W-M
Data, a software developer. Baan, a Netherlands software developer,
and Bulgari, an Italian luxury-goods manufacturer, both appear well
situated for ongoing growth. In Hong Kong, New World Infrastructure
is benefitting from China's booming market. Varitronix, which we
consider an extremely well-run company, is a Hong Kong manufacturer
of computer displays.
TOP 10 HOLDINGS
Telecom Italia (Italy)
Communications
SGS-Thomson Microelectronics ADR (France)
Technology
Pharmacia & Upjohn, Inc. (Sweden)
Pharmaceuticals and medical technology
Rentokil Group (United Kingdom)
Business services
Skandia Forsakrings (Sweden)
Insurance
Altana (Germany)
Pharmaceuticals and medical technology
SAP (Germany)
Computer software
Vodafone Group (United Kingdom)
Communications
Telebras (Brazil)
Communications
Panamerican Beverages (Mexico)
Food and Beverages
Footnote reads:
These holdings represent 17.7% of the fund's assets as of 9/30/96.
Portfolio holdings will vary over time.
*OPTIMISM FOR MANY FUND HOLDINGS
We target stocks of companies that are exhibiting strong sales and
earnings growth rates. In emerging markets these tend to be larger
companies; in mature markets they are often small to midsize. To do
so, we identify sectors supported by long-term trends, which make
them potentially less susceptible to the vagaries of economic
cycles. To conclude, we are optimistic that your fund can continue
to find companies with excellent growth characteristics in the
months ahead.
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 9/30/96, there is no guarantee
the fund will continue to hold these securities in the future.
International investing involves risks including political
developments, economic instability, and currency fluctuations.
Investing in emerging markets may involve added risks.
Performance summary
Performance should always be considered in light of a fund's
investment strategy. 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 9/30/96
Class A Class B Class M
(inception date) (1/3/95) (7/21/95) (7/21/95)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------
1 year 13.76% 7.20% 13.02% 8.02% 13.22% 9.29%
- -----------------------------------------------------------------
Life of fund 37.72 29.78 13.35 9.35 13.66 9.70
Annual average 20.19 16.16 11.00 7.73 11.26 8.02
- -----------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/96
MSCI
MSCI Emerging
EAFE Markets
Index Index
- ------------------------------------------------------------------
1 year 8.61% 4.84%
- ------------------------------------------------------------------
Life of class A 16.09 -2.77
Annual average 8.90 -1.59
- ------------------------------------------------------------------
Life of classes B & M 6.51 2.48
Annual average 5.54 2.12
- ------------------------------------------------------------------
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 principal 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%.
[GRAPHIC OMITTED: GROWTH OF A $10,000 INVESTMENT]
Cumulative total return of a $10,000 investment since 1/3/95
Starting value (Insert ending Total)
$9,425 Fund's class A shares at POP $12,978
$10,000 MSCI EAFE Index $11,609
$10,000 MSCI Emerging Markets Index $9,723
(plot points for 10-year total return mountain chart)
MSCI EAFE MSCI Emerging
Date/year Fund at POP Index Markets Index
- --------- ----------- --------- -------------
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
10/31/95 11,242 10,401 8,967
11/30/95 11,197 10,690 8,742
12/31/95 11,524 11,121 9,080
1/31/96 12,045 11,166 9,493
2/29/96 12,156 11,204 9,372
3/31/96 12,256 11,442 9,505
4/30/96 12,667 11,775 10,185
5/31/96 13,089 11,558 9,988
6/30/96 13,133 11,623 10,119
7/31/96 12,456 11,283 9,432
8/31/96 12,834 11,308 9,640
9/30/96 12,978 11,609 9,723
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 7/21/95 would have been
valued at $11,335 on 9/30/96 ($10,935 with a redemption at the end of
the period). A $10,000 investment in the fund's class M shares at inception
on 7/21/95 would have been valued at $11,366 at net asset value on 9/30/96
$10,970 at public offering price.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/96
Class A Class B Class M
- -------------------------------------------------------------------
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
- -------------------------------------------------------------------
9/30/96 11.69 12.40 11.61 11.64 12.06
- -------------------------------------------------------------------
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
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.*
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.
*Securities indexes assume reinvestment of all distributions and
interest payments and do not take in account brokerage fees or
taxes. Securities in the fund do not match those in the indexes and
performance of the fund will differ. It is not possible to invest
directly in an index.
Report of independent accountants
For the fiscal year ended September 30, 1996
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, 1996, and the
related statement of operations for the year then ended, the
statements of changes in net assets for the year then ended and the
period January 3, 1995 (commencement of operations) through
September 30, 1995, and the financial highlights for each of the
periods indicated therein. 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of 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, 1996, 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 audits provide 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 Opportunities Fund as
of September 30, 1996, the results of its operations for the year
then ended, the statements of changes in net assets for the year
then ended and the period January 3, 1995 (commencement of
operations) through September 30, 1995 and the financial highlights
for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 11, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1996
<S> <C> <C> <C>
Common Stocks (90.3%) *
NUMBER OF SHARES VALUE
Automotive (3.6%)
- ----------------------------------------------------------------------------------------------------------------------------
18,000 Bayerische Motoren Werke (BMW) AG (Germany) 10,310,164
1,100,000 Edaran Otomobil Nasional Berhad (Malaysia) 10,841,979
2,000,000 Perusahaan Otomobil Nasional Berhad (Malaysia) 10,853,951
625,000 Tata Engineering & Locomotive Co. Ltd. GDR (India) + 8,046,875
43,400 Telco (Tata Engineering & Locomotive Co, Ltd.) 144A GDR (India) 553,350
-------------
40,606,319
Banks & Finance (8.6%)
- ----------------------------------------------------------------------------------------------------------------------------
228,000 Aegon N.V. (Netherlands) 11,267,985
2,500,000 Banca Fideuram S.P.A (Italy) 5,942,230
366,000 Banco Totta & Accores S.A. (Portugal) 6,406,178
350,000 Banco Santander Chile ADR (Chile) + 4,637,500
1,209,000 Guoco Group Ltd. (Hong Kong) 5,909,916
2,622,750 MAAF Assurances S.A. (Malaysia) 14,442,917
72,500 Mapfre Vida Seguros (Spain) 4,293,282
850,000 Industrial Credit & Investment Corp. of India Ltd. (India) + 9,137,500
973,000 Industrial Finance Corp. of Thailand (The) (Thailand) 3,809,006
610,000 Overseas Union Bank Ltd. (Singapore) 4,268,916
650,000 Philippine Commercial International (Philippines) + 8,993,321
491,000 Philippine National Bank (Philippines) + 8,105,248
2,000,000 Siam City Bank PCL (Thailand) 3,363,891
1,615,000 Wing Hang Bank Ltd. (Hong Kong) 6,056,668
-------------
96,634,558
Building Products (0.3%)
- ----------------------------------------------------------------------------------------------------------------------------
153,000 Tarkett AG (Germany) + 3,105,148
Building and Construction (0.5%)
- ----------------------------------------------------------------------------------------------------------------------------
105,500 IHC Caland N.V. (Netherlands) 5,559,451
Business Services (1.7%)
- ----------------------------------------------------------------------------------------------------------------------------
2,831,000 Rentokil Group PLC (United Kingdom) 18,525,469
Chemicals (--%)
- ----------------------------------------------------------------------------------------------------------------------------
50,000 Indian Petrochemicals GDR (India) 475,000
Communications (16.4%)
- ----------------------------------------------------------------------------------------------------------------------------
90,000 Compania De Telecomunicaciones De Chile S.A. ADR (Chile) + 8,696,250
453,000 Ericsson LM Class B (Sweden) 11,429,370
3,278,800 Hong Kong Telecommunications Ltd. (Hong Kong) 5,936,168
185,000 Hong Kong Telecommunications Ltd. ADR (Hong Kong) + 3,330,000
700,000 Korea Mobile Telecommunications ADR (South Korea) + 10,587,500
3,400 Pakistan Telecommunications Corp. GDR (Pakistan) + 297,500
96,600 Pakistan Telecommunications Corp. 144A (Pakistan) + 8,452,500
120,000 Philippine Long Distance ADR (Philippines) 7,500,000
543,600 PT Pasifik Satelit Nusantara ADR (Indonesia) + 7,882,200
380,000 PT Telekomunikasi Indonesia ADR (Indonesia) 11,827,500
240,000 Portugal Telecom S.A. (Portugal) + 6,178,062
210,000 Telebras Co. ADR (Brazil) 16,485,000
255,000 Telecom Argentina S.A. ADR (Argentina) 10,295,625
15,000,000 Telecom Italia S.P.A. (Italy) 33,338,865
450,000 Telefonica del Peru S.A. ADR (Peru) 10,293,750
150,000 Telefonos de Mexico S.A. ADR Class L (Mexico) 4,818,750
80,218 Telemig (Telecomunicacoes De Minas Gerais) (Brazil) + 9,507,668
5,000,000 Vodafone Group PLC (United Kingdom) 17,337,913
-------------
184,194,621
Computer Software (3.9%)
- ----------------------------------------------------------------------------------------------------------------------------
405,000 Baan Co., N.V. (Netherlands) + 13,516,875
115,000 Baan Co., N.V. (Netherlands) + 3,887,589
60,000 Dassault Systemes S.A. (France) 2,516,279
5,000 Dassault Systemes S.A. ADR (France) + 209,375
489,300 Frontec AB Class B (Sweden) + 5,766,037
105,700 SAP AG (Germany) 17,501,147
-------------
43,397,302
Conglomerates (3.5%)
- ----------------------------------------------------------------------------------------------------------------------------
900,000 Barlow Ltd. (South Africa) 8,728,234
1,000,000 Citic Pacific Ltd. (Hong Kong) 4,526,174
2,000,000 Cosco Pacific Ltd. (Hong Kong) 1,696,669
2,019,928 First Pacific Co., Ltd. (Hong Kong) 3,056,222
196,000 Great Eagle Holdings Co. (Hong Kong) 582,971
1,350,000 Swire Pacific Ltd. Class A (Hong Kong) 12,089,734
2,207,000 Wharf (Holdings) Ltd (Hong Kong) 9,133,043
-------------
39,813,047
Consumer Products & Services (13.2%)
- ----------------------------------------------------------------------------------------------------------------------------
355,900 Adidas AG 144A ADS (Germany) 16,148,963
648,900 Bulgari S.P.A. (Italy) + 12,079,020
1,440,000 Carlton Communications PLC (United Kingdom) 10,888,366
751,000 China Hong Kong Photo Products Holdings, Ltd. (Hong Kong) + 274,361
7,000,000 Cifra S.A. de C.V. Class C (Mexico) + 10,053,093
4,310,000 Controladora Comercial Mexicana S.A. (Mexico) + 4,004,513
550,000 Disco S.A. ADR (Argentina) + 10,791,000
720,000 Dixons Group PLC (United Kingdom) 5,911,954
95,000 Gucci Group (Netherlands) 6,887,500
21,400 Hermes International (France) 5,022,364
23,500 Indian Hotels, Ltd. 144A GDR (India) + 528,750
691,000 KFC Holdings Berhad (Malaysia) 3,005,547
105,000 Luxottica Group ADR (Italy) + 7,638,750
810,000 Overseas Union Enterprise Ltd. (Singapore) + 4,316,163
1,440,000 PT Gudang Garam (Indonesia) 5,426,820
3,456,000 PT Matahari Putra Prima (Indonesia) 3,758,460
3,456,000 PT Matahari Putra Prima Rights exp. 11/14/96 (Indonesia) + 2,269,961
870,000 PT Ramayana Lestari (Indonesia) 1,461,365
88,000 Paris Miki, Inc. (Japan) 3,612,973
615,000 Sampoerna Ind. (Indonesia) 5,986,299
325,000 Santa Isabel S.A. ADR (Chile) 8,328,125
46,019 Securicor PLC (United Kingdom) 195,236
690,000 Siam Makro Public Co. Ltd. (Thailand) + 3,257,663
9,099,000 Sinocan Holdings Ltd. (Hong Kong) 4,059,532
200,000 Srithai Superware PCL (Thailand) 865,563
600,000 TAG Heuer International S.A. ADR (Switzerland) + 11,850,000
-------------
148,622,341
Electronics (1.5%)
- ----------------------------------------------------------------------------------------------------------------------------
450,000 SAES Getters S.P.A. ADR (Italy) + 6,412,500
444,000 Toolex Alpha N.V. (Netherlands) + 9,990,000
-------------
16,402,500
Food and Beverages (5.5%)
- ----------------------------------------------------------------------------------------------------------------------------
3,800,000 Fomento Economico Mexicano S.A. de C.V. Class B (Mexico) 11,600,744
80,000 Nutricia Verenigde Bedrijven N.V. (Netherlands) 10,574,336
400,000 Panamerican Beverages Inc. Class A (Mexico) + 16,450,000
626,600 PizzaExpress PLC (United Kingdom) 4,674,190
1,000,000 Quilmes Industrial S.A. ADR (Argentina) 10,375,000
325,222 South African Breweries Ltd. (South Africa) 8,673,542
-------------
62,347,812
Infrastructure (11.5%)
- ----------------------------------------------------------------------------------------------------------------------------
850,000 Apasco S.A. (Mexico) 5,844,173
4,250,000 Cheung Kong Infrastructure Holdings (Hong Kong) + 7,007,489
3,000,000 Cemex S.A. (Mexico) 11,201,221
137,500 Centrais Eletricas de Santa Catarina S.A. 144A (Brazil) + 11,876,563
80,000 Chilectra S.A. ADR (Chile) 4,400,000
110,000 Chilquinta S.A. ADR (Chile) + 1,773,199
3,500,000 Consolidated Electric Power (Asia) 7,400,295
1,460,000 Comercial del Plata S.A. (Argentina) 3,533,553
550,000 DBS Land Ltd. (Singapore) 1,820,959
2,100,000 Far East Levingston Shipbuilding Ltd. (Singapore) 9,921,847
5,999,400 Fil-Estate Land, Inc. (Philippines) + 5,552,880
14,403,800 Filinvest Development Corp. (Philippines) + 5,497,634
16,200,000 Filinvest Land, Inc. (Philippines) + 5,874,046
200,000 India Cements Ltd. 144A GDR (India) 700,000
200,000 Inversiones Y Represent ADR (Argentina) + 5,925,178
4,074,000 New World Infrastructure Ltd. (Hong Kong) + 9,641,294
702,306 PT Mulia Industrindo (Indonesia) 703,274
800,082 Sasol Ltd. (South Africa) 9,434,513
7,000,000 SA Iron & Steel Industrial Corp. (South Africa) 4,613,180
1,000,000 Sun Hung Kai Properties Ltd. (Hong Kong) + 10,636,509
1,000,000 YTL Corp. Berhad (Malaysia) + 5,666,401
-------------
129,024,208
Insurance (1.6%)
- ----------------------------------------------------------------------------------------------------------------------------
650,000 Skandia Forsakrings AB (Sweden) 18,020,093
Leisure & Media (2.5%)
- ----------------------------------------------------------------------------------------------------------------------------
790,000 Elsevier N.V. (Netherlands) 13,075,798
177,700 Investec Consultadoria Intl. (Portugal) + 5,674,933
633,000 Schibsted A/S (Denmark) 9,256,665
-------------
28,007,396
Metals and Mining (1.5%)
- ----------------------------------------------------------------------------------------------------------------------------
32,240 CIA Tecidos Norte de Minas (Brazil) 11,684,592
1,100,000 Timah Langat Berhad (Malaysia) 5,706,305
-------------
17,390,897
Oil and Gas (1.5%)
- ----------------------------------------------------------------------------------------------------------------------------
8,775,000 Oil Search Ltd. (Australia) 10,896,032
240,000 YPF S.A. ADR (Argentina) + 5,490,000
-------------
16,386,032
Other (1.4%)
- ----------------------------------------------------------------------------------------------------------------------------
670,000 Keppel Corp. (Singapore) (Transportation) 5,188,632
100,000 UMW Holdings Berhad (Malaysia) (Machinery & Equipment) 374,820
90,000 SGL Carbon AG (Germany) (Carbon products) + 10,504,918
-------------
16,068,370
Pharmaceuticals & Medical Technology (5.1%)
- ----------------------------------------------------------------------------------------------------------------------------
21,600 Altana AG (Germany) 17,520,787
210,000 Astra AB (Sweden) 8,883,517
516,000 Pharmacia & Upjohn, Inc. (Sweden) + 21,516,241
450,000 PT Tempo Scan Pacific (Indonesia) 891,549
1,110 Roche Holdings AG (Switzerland) 8,171,915
-------------
56,984,009
Technology (6.5%)
- ----------------------------------------------------------------------------------------------------------------------------
65,000 Axime S.A. (France) + 6,500,000
80,000 Barco N.V. (Belgium) 13,208,809
100,000 Glory Ltd. (Glory Kogyo) (Japan) 3,000,629
1,106,000 JBA Holdings PLC (United Kingdom) 8,830,359
100,000 Murata Manufacturing Co. Ltd. (Japan) 3,575,600
462,000 SGS-Thomson Microelectronics ADR (France) + 21,887,250
142,900 WM-Data AB Class B (Sweden) 9,153,890
2,750,000 Varitronix International Ltd. (Hong Kong) 5,049,917
1,375,000 Venture Manufacturing Ltd. (Singapore) 2,403,197
-------------
73,609,651
-------------
Total Common Stocks (cost $955,304,360) 1,015,174,224
PREFERRED STOCKS (4.1%) *
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------------
1,300,000 Banco Bradesco BRC .1815 NPV (No Par Value) pfd. (Brazil) 11,078,460
17,000 Brasmotor S.A. BRC 7.87 NPV pfd. (Brazil) 6,277,794
25,980 Cia Cervejaria Brahma BRC 9.75 NPV pfd. (Brazil) 16,159,820
100,000 Petroleo Brasileiro S.A. BRC 5.352 NPV pfd. (Brazil) 11,753,355
7,395 Telecomunicacoes do Rio de Janeiro BRC .0386 NPV pfd. (Brazil) 833,754
-------------
Total Preferred Stocks (cost $39,908,103) 46,103,183
SHORT-TERM INVESTMENTS (9.0%) *
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
$30,000,000 Federal National Mortgage Association effective yield of 5.28%, October 15, 1996 29,938,400
25,000,000 Merrill Lynch & Co. Inc. effective yield of 5.29%, October 7, 1996 24,977,958
45,923,000 Interest in $374,793,000 joint repurchase agreement September 30, 1996
with Morgan Stanley & Co. Inc. due October 1, 1996 with respect to various
U.S. Treasury obligations -- maturity value of $45,930,207 for an effective
yield of 5.65% 45,930,207
-------------
Total Short-Term Investment (cost $100,846,565) 100,846,565
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,096,059,028)*** 1,162,123,972
- ----------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,124,706,599.
*** The aggregate identified cost on a tax basis is
$1,098,141,434, resulting in gross unrealized appreciation and
depreciation of $100,447,340, and $36,464,802, respectively,
or net unrealized appreciation of $63,982,538.
+ Non-income producing security.
144A after the name of a security represents those exempt
from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional
buyers.
ADR, ADS or GDR after the name of a foreign holding
stands for American Depository Receipts, American Depository
Shares, or Global Depository Receipts, respectively, representing
ownership of foreign securities on deposit with a domestic
custodian bank.
Distribution of investments by country of issue at September 30, 1996
Argentina 4.0% Norway 0.8
Australia 0.9 Peru 0.9
Belgium 1.1 Pakistan 0.7
Brazil 8.2 Philippines 3.6
Chile 2.4 Portugal 1.6
France 3.1 Singapore 2.4
Germany 6.5 South Africa 2.7
Hong Kong 8.3 South Korea 0.9
India 1.7 Spain 0.4
Indonesia 3.5 Sweden 6.4
Italy 6.2 Switzerland 1.7
Japan 0.9 Thailand 1.0
Malaysia 4.4 United Kingdom 5.7
Mexico 5.5 United States 8.7
Netherlands 5.8 Total 100.00%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996
<S> <C>
Assets
- ------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$1,096,059,028) (Note 1) $1,162,123,972
- ------------------------------------------------------------------------------------------------
Cash 205,693
- ------------------------------------------------------------------------------------------------
Dividends and other receivables 699,444
- ------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 12,940,271
- ------------------------------------------------------------------------------------------------
Receivable for securities sold 3,907,435
- ------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 6,056
- ------------------------------------------------------------------------------------------------
Total assets 1,179,882,871
Liabilities
- ------------------------------------------------------------------------------------------------
Payable for securities purchased 50,034,511
- ------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 604,069
- ------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,829,692
- ------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 479,916
- ------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,621
- ------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 810,101
- ------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ------------------------------------------------------------------------------------------------
Other accrued expenses 407,937
- ------------------------------------------------------------------------------------------------
Total liabilities 55,176,272
- ------------------------------------------------------------------------------------------------
Net assets $1,124,706,599
Represented by
- ------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,065,730,997
- ------------------------------------------------------------------------------------------------
Unistributed net investment income (Note 1) 1,194,327
- ------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
and foreign currency transactions (Note 1) (8,280,075)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 66,061,350
- ------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,124,706,599
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($499,395,344 divided by 42,718,392 shares) $11.69
- ------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.69)* $12.40
- ------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($573,129,093 divided by 49,371,250 shares)** $11.61
- ------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($52,182,162
divided by 4,483,224 shares) $11.64
- ------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 or $11.64)* $12.06
- ------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1996
<S> <C>
Investment Income:
- -----------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $1,026,435) $7,447,673
- -----------------------------------------------------------------------------------------------------
Interest 4,309,329
- -----------------------------------------------------------------------------------------------------
Total investment income 11,757,002
Expenses:
- -----------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,187,712
- -----------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,202,095
- -----------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 15,708
- -----------------------------------------------------------------------------------------------------
Administrative services (Note 2) 13,033
- -----------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 609,296
- -----------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,617,218
- -----------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 191,059
- -----------------------------------------------------------------------------------------------------
Amortization of organization expenes (Note 1) 297
- -----------------------------------------------------------------------------------------------------
Reports to shareholders 56,322
- -----------------------------------------------------------------------------------------------------
Registration fees 379,840
- -----------------------------------------------------------------------------------------------------
Auditing 50,423
- -----------------------------------------------------------------------------------------------------
Legal 12,334
- -----------------------------------------------------------------------------------------------------
Postage 92,017
- -----------------------------------------------------------------------------------------------------
Other 129,822
- -----------------------------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (59,304)
- -----------------------------------------------------------------------------------------------------
Total expenses 12,497,872
- -----------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (386,560)
- -----------------------------------------------------------------------------------------------------
Net expenses 12,111,312
- -----------------------------------------------------------------------------------------------------
Net investment loss (354,310)
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (8,271,977)
- -----------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Notes 1 and 3) (11,621)
- -----------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the year (3,587)
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 65,898,886
- -----------------------------------------------------------------------------------------------------
Net gain on investments 57,611,701
- -----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $57,257,391
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the Period
January 3, 1995
(Commencement of
Year ended operations) to
September 30, September 30,
-----------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -----------------------------------------------------------------------------------------------------------
Operations:
- -----------------------------------------------------------------------------------------------------------
Net investment income (loss) ($354,310) $20,976
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions (8,283,598) 25,431
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currency 65,895,299 166,051
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 57,257,391 212,458
- -----------------------------------------------------------------------------------------------------------
Distributions to shareholders
- -----------------------------------------------------------------------------------------------------------
From net investment income:
Class A (104,544) --
- -----------------------------------------------------------------------------------------------------------
Class B (35,744) --
- -----------------------------------------------------------------------------------------------------------
Class M (6,345) --
- -----------------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (17,396) --
- -----------------------------------------------------------------------------------------------------------
Class B (14,314) --
- -----------------------------------------------------------------------------------------------------------
Class M (1,813) --
- -----------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,044,179,897 23,217,009
- -----------------------------------------------------------------------------------------------------------
Total increase in net assets 1,101,257,132 23,429,467
- -----------------------------------------------------------------------------------------------------------
Net assets
- -----------------------------------------------------------------------------------------------------------
Beginning of period 23,449,467 20,000
- -----------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
of $1,194,327 and $30,541, respectively) $1,124,706,599 $23,449,467
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
July 21, 1995
(commencement
Year ended of operations) to Year ended
September 30 September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Class M Class M Class B
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.29 $10.25 $10.28
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a)(b) (.02) - (.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.38 .04 1.39
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.36 .04 1.34
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.01) - (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (f) (.01) - (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.64 $10.29 $11.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(c) 13.22 .39* 13.02
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $52,182 $1,259 $573,129
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b)(d) 2.46 .79* 2.72
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(b) (.17) (.15)* (.43)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 24.69 9.24* 24.69
- ---------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0190 $.0190
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
July 21, 1995 January 3, 1995
(commencement (commencement
of operations) to Year ended of operations) to
September 30 September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------
1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Class B Class A Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning
of period $10.25 $10.29 $8.50
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a)(b) (.01) .04 .02
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments .04 1.37 1.77
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .03 1.41 1.79
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (f) -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.28 $11.69 $10.29
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(c) .29* 13.76 21.06*
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $7,053 $499,396 $15,137
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b)(d) .83* 1.95 1.23*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(b) (.20)* .34 .86*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 9.24* 24.69 9.24*
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0190
- ---------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses for the fund
reflect a reduction of less than $0.01 and $0.02 per share for each share class for periods ended September 30, 1996 and
1995, respectively.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(d) The ratio of expenses to average net assets includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(e) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
(f) For the year ended September 30, 1996 per share distributions from net realized gains on investments was less than $.01
per share for each share class.
</TABLE>
Notes to financial statements
September 30, 1996
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 and are principally traded in security markets
outside the United States.
The fund offers class A, class B and class M shares. Class A shares
are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight
years, do not pay a front-end sales charge, but pay a higher ongoing
distribution fee than class A shares, and are subject to a
contingent deferred sales charge, if those shares are redeemed
within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee
that is lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class
of shares, except that each class bears expenses unique to that
class (including the distribution fees applicable to such class).
Each class votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required
by law or determined by the Trustees. Shares of each class would
receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its
financial statements. The preparation of financial statements is in
conformity with generally accepted accounting principles and
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are reported --
as in the case of some securities traded over-the-counter the last
reported bid price. 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 and certain other
accounts managed by Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc.. These balances may be invested in one or
more repurchase agreements and/or short-term money market
instruments.
C) Repurchase agreements The fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued
interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed).
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of
the ex-dividend date.
E) Foreign currency translation The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income
and withholding taxes are translated at prevailing exchange rates
when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such fluctuations
are included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency
transactions represent net exchange gains or losses on closed
forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized 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.
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. These differences include treatment of unrealized gains
on passive foreign investment companies, currency losses on foreign
bonds, post October loss deferrals, and foreign taxes. 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, 1996, the fund
reclassified $1,664,729 to increase undistributed net investment income
and $1,676,350 to decrease paid-in-capital, with a decrease to accumulated
net realized loss on investments of $11,621. 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 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, 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, 0.93% thereafter, subject, under current law, to reduction
in any year by the amount of certain brokerage commissions and fees
(less expenses) received by affiliates of Putnam Management on the
fund's portfolio transactions.
Putnam Management 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 1.95% of the fund's average net assets for
the period October 1, 1995 through December 31, 1995. The limit
expired on December 31, 1995.
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.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended September 30, 1996, fund expenses were reduced by
$386,560 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported
in the Statement of operations exclude these credits. The fund could
have invested a portion of the assets utilized in connection with
the expense offset arrangements in an income producing asset if it
had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $1,630 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 certain Putnam funds until
distribution in accordance with the Plan.
The fund has adopted distribution plans (the "Plans") with respect
to its class A, class B and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans
is to compensate Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Mutual Funds Corp.
at an annual rate up to 0.35%, 1.00% and 1.00% of the average net
assets attributable to class A, class B and class M shares,
respectively. The Trustees have approved payment by the fund at an
annual rate of 0.25%, 1.00% and 0.75% of the average net assets
attributable to class A, class B and class M shares, respectively.
For the year ended September 30, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $1,678,681 and
$115,042 from the sale of class A and class M shares, respectively
and $281,600 in contingent deferred sales charges from redemptions
of class B shares. A deferred sales charge of up to 1% is assessed
on certain redemptions of class A shares. For the year ended
September 30, 1996, Putnam Mutual Funds Corp., acting as underwriter
received $2,516 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended September 30, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$1,094,456,039 and $113,868,487, respectively. 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 September 30, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were
as follows:
Year ended
September 30, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 50,877,661 $566,106,489
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,430 106,273
- ----------------------------------------------------
50,888,091 566,212,762
Shares
repurchased (9,640,642) (109,813,776)
- ----------------------------------------------------
Net increase 41,247,449 $456,398,986
- ----------------------------------------------------
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
- ----------------------------------------------------
Year ended
September 30, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 51,924,757 $576,251,556
- ----------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 3,355 34,157
- ----------------------------------------------------
51,928,112 576,285,713
Shares
repurchased (3,242,679) (36,661,422)
- ----------------------------------------------------
Net increase 48,685,433 $539,624,291
- ----------------------------------------------------
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
- ----------------------------------------------------
Year ended
September 30, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 4,702,306 $52,031,046
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 397 4,044
- ----------------------------------------------------
4,702,703 52,035,090
Shares
repurchased (341,863) (3,878,470)
- ----------------------------------------------------
Net increase 4,360,840 $48,156,620
- ----------------------------------------------------
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
- ----------------------------------------------------
- -----------------------------------------------------------------
Federal tax information
(Unaudited)
For the period, dividends from foreign countries were $8,474,108 or
$.088 per share for all share classes. Taxes paid to foreign
countries were $1,026,435 or $.011 per share for all classes of
shares.
The Form 1099 you receive in January 1997 will show the tax status
of all distributions paid to your account in calendar 1996.
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
Ronald J. Jackson
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
J. Peter Grant
Vice President and Fund Manager
Robert J. Swift
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. You can also learn more
at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, are not
insured by the Federal Deposit Insurance Corporation (FDIC), the
Federal Reserve Board or any other agency, and involve risk,
including the possible loss of principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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28352-539/2AH/2AI 11/96
