Putnam
International
New
Opportunities
Fund
SEMIANNUAL REPORT
March 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* According to Lipper Analytical Services, Putnam International New
Opportunities Fund's class A share total return ranked 21 out of 278 (top
8%) of international funds for the 2-year period ended March 31, 1997.*
* "Putnam International New Opportunities Fund has put its
flexibility to good use. The fund has a wide variety of stocks in a
multitude of countries. . . . The fund's performance has been a hit in its
first two years. . . . This fund's flexible profile so far has led to some
muscular returns."+
-- Morningstar Mutual Funds, January 17, 1997
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
16 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. For the 1-year period
ended 3/31/97, class A, class B, and class M shares ranked 75, 85, and 79,
respectively, out of 354 funds. Class B and M shares were not ranked over
longer periods. Past performance is not indicative of future results.
+Please see page 8 for fund performance and index comparison. Past
performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
* Karsh, Ottawa
Dear Shareholder:
From the established bourses of Western Europe to the emerging markets of
Latin America and Southeast Asia, Putnam International New Opportunities
Fund's managers continually seek out stocks of companies whose prospects meet
or exceed a strict set of investment criteria. For shareholders, the result is
a broadly diversified and actively managed portfolio representing ownership in
some of the world's most dynamic companies.
Diversification beyond national boundaries is a matter of growing importance
to U.S. investors as they become increasingly aware of the interdependent
nature of the global economy. The concept of investing abroad is made all the
more compelling when combined with active management employing a strict
investment discipline.
Though past performance can never be taken as a guarantee of future results,
in the two years since its introduction, your fund has compiled an enviable
record. In the following report, your fund's management team discusses
performance so far in fiscal 1997 and looks at prospects for the remainder of
the year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 21, 1997
Report from the Fund Managers
Robert J. Swift, lead manager
Kelly Morgan, Thomas R. Haslett
Ami Kuan Danoff
It is gratifying to report that Putnam International New Opportunities Fund's
record of outpacing selected emerging market and developed market indexes has
continued through its most recent semiannual period. For the six months ended
March 31, 1997, your fund's class A shares gained 8.42% at net asset value and
2.21% at public offering price. Over the same period, the Morgan Stanley
Capital International EAFE Index, representing established markets in Europe,
Australia, and the Far East, was flat at 0.0%, while the MSCI Emerging Markets
Index rose 6.99%. For performance of other share classes and over longer
periods, please turn to page 8 of this report.
As we have noted in past reports, the long-term goal of your fund is to
outpace established markets while sustaining less volatility than emerging
markets. A glance at historical performance shows that the fund is indeed
performing as we intended. And for the coming months and years, we believe
your fund is exceptionally well positioned to take advantage of exciting,
changing growth opportunities in diverse international markets.
* LATIN AMERICAN HOLDINGS ENJOY STRONG REVENUE, EARNINGS GROWTH
While we invest in stocks of companies we believe offer growth potential
regardless of overall business conditions, a favorable economic environment
certainly bolsters corporate performance. Many fund holdings operating in the
emerging markets of Latin America received a boost from strong gross domestic
product (GDP) growth, sustained inflows of capital, and continued political
support for reform. In particular, Brazil has had an exceptionally strong
stock market, catalyzed in part by massive privatization in the electricity
and telecommunications sectors. We believe that such positive conditions may
well persist over the coming months.
Many fast-growing Latin American companies are found in the banking and
finance sector. Your fund's portfolio includes Argentina's Banco De Galicia
and Banco Frances, both highly attractive banking companies. Chile's Banco
Santander has an excellent management and is benefiting from structural
changes in Chile's banking system. While these portfolio holdings, along with
others discussed in this report, were viewed favorably at the end of the
fiscal period, all are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
Several of the region's other economic sectors -- notably telecommunications,
food and beverage, and infrastructure -- harbor companies that are expanding
their revenues and earnings at rapid paces. Mexico's Cemex continues to gain
from the recovery in construction in that country. Multicanal Participacoes is
a leading Brazilian telecommunications company, which we believe is well
positioned for ongoing growth in the coming years. Mexico's Panamerican
Beverages has long dominated the country's beverage bottling industry and also
has a large market share throughout Central and South America.
* MANY ASIAN COMPANIES -- IN EMERGING AND DEVELOPED COUNTRIES -- EXPANDING
RAPIDLY
Despite Japan's well-publicized economic problems, we believe that a number of
Japanese companies -- particularly those with strong overseas operations and
market share -- are very attractive. Rohm makes specialized electronic
components and semiconductors, mostly used in consumer products. The company
already has production plants in Brazil, South Korea, and the United States
and is further expanding its overseas operations. Another fund holding,
Sankyo, manufactures pharmaceuticals, selling therapeutic treatments through
subsidiaries in the United States, India, Taiwan, and Thailand.
[GRAPHIC OMITTED: horizontal bar chart REGIONAL BREAKDOWN]
REGIONAL BREAKDOWN*
Europe 40.2%
Asia 40.1%
Latin America 11.2%
North America 6.3%
Other 2.2%
Footnote reads:
*Based on net assets as of 3/31/97. Holdings will vary over time.
In sharp contrast to Japan, Hong Kong has had a buoyant stock market in recent
months, as investors concluded that the turnover of power to China in July
1997 will be relatively smooth. Hong Kong companies that are positioned to
benefit from closer ties with the mainland have been particularly robust;
building company New World Infrastructure, insurance firm National Mutual
Asia, and communications concern Television Broadcasts Ltd. are all, we
believe, capable of profiting from China's ongoing development. Hong Kong also
has a number of successful high-technology companies, including fund holding
Varitronix -- a manufacturer of liquid crystal display screens for computers
and television sets.
* WESTERN EUROPE'S HIGH-GROWTH COMPANIES CONTRIBUTE TO FUND PERFORMANCE
The developed markets of Western Europe have been quite strong over the
semiannual period, led by many of the companies in your fund's portfolio. The
region's pharmaceutical and medical technology sector boasts many high growth
firms. The United Kingdom's SmithKline Beecham is a profitable pharmaceutical
concern, producing 2 of the world's top 10 therapeutic drugs. Sweden's Astra
AB, too, has a number of leading pharmaceuticals, as does Switzerland's Roche
Holdings and the newly formed Novartis. Germany's Fresenius Medical Care, much
smaller than these other pharmaceutical companies, is a fast-growing
organization serving the important kidney dialysis equipment niche.
We also anticipate strong prospects for a number of advanced communications
companies in Europe. Sweden's Ericsson is a globally competitive provider of
both wired and mobile telecommunications equipment. Ericsson has over 13
million mobile-telephone subscribers in more than 64 countries. The U.K.'s
Vodafone is another leading cellular telephone company, with a number of
promising initiatives -- most importantly a 48-satellite global
telecommunications service. We are upbeat about prospects for an Italian
company, Telecom Italia Mobile, also in the thriving telecommunications
sector.
Elsewhere in Europe, your fund has participated in the investor enthusiasm for
shares of consumer products firms, including Germany's Adidas, which has been
an exceptional performer since its initial public offering (IPO) in 1996.
Finally, your fund owns shares in Dixons, a U.K.-based retailer of electronics
goods and other home appliances.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Panamerican Beverages (Mexico)
Food and beverage
Portugal Telecom (Portugal)
Telecommunications
Vodafone Group (United Kingdom)
Telecommunications
SmithKline Beecham (United Kingdom)
Pharmaceuticals
Ericsson (Sweden)
Telecommunications equipment
SGS-Thomson Microelectronics (France)
Semiconductors
Tokyo Electron Ltd (Japan)
Semiconductors
Advantest (Japan)
Semiconductors
Oy Nokia (Finland)
Telecommunications equipment
Disco (Argentina)
Retail
These holdings represent 19.1% of the fund's net assets as of 3/31/97.
Portfolio holdings will vary over time.
* OUTLOOK APPEARS QUITE POSITIVE FOR FUND HOLDINGS
We are very optimistic about the outlook for carefully selected international
high-growth companies. In emerging markets, companies operating in lucrative
industries are experiencing rapid revenue and earnings gains and may well
continue to thrive in the months ahead. In developed markets, companies in
more advanced industries appear poised for continued growth as well. In short,
we look forward to the coming months, which may once again remind investors
about the importance -- and potential rewards -- of international
diversification.
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 3/31/97, 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.
TOTAL RETURN FOR PERIODS ENDED 3/31/97
Class A Class B Class M
(inception date) (1/3/95) (7/21/95) (7/21/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 8.42% 2.21% 8.03% 3.03% 8.13% 4.36%
- ------------------------------------------------------------------------------
1 year 14.80 8.23 14.02 9.02 14.21 10.22
- ------------------------------------------------------------------------------
Life of fund 49.31 40.70 22.45 18.45 22.90 18.62
Annual average 19.60 16.47 12.65 10.47 12.90 10.57
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/97
MSCI
MSCI Emerging
EAFE Markets
Index Index
- ------------------------------------------------------------------------------
6 months 0.00% 6.99%
- ------------------------------------------------------------------------------
1 year 1.45 9.46
- ------------------------------------------------------------------------------
Life of class A 16.09 4.03
Annual average 6.86 1.78
- ------------------------------------------------------------------------------
Life of class B and class M 6.51 9.65
Annual average 3.86 5.68
- ------------------------------------------------------------------------------
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%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income $0.039 $0.000 $0.004
- ------------------------------------------------------------------------------
Capital gain
- ------------------------------------------------------------------------------
Long-term -- -- --
- ------------------------------------------------------------------------------
Short-term 0.002 0.002 0.002
- ------------------------------------------------------------------------------
Total $0.041 $0.002 $0.006
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
9/30/96 $11.69 $12.40 $11.61 $11.64 $12.06
- ------------------------------------------------------------------------------
3/31/97 12.63 13.40 12.54 12.58 13.04
- ------------------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales 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.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*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.
<TABLE>
<CAPTION>
Portfolio of investments owned
March 31, 1997 (Unaudited)
COMMON STOCKS (96.2%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Aerospace and Defense (0.5%)
- ------------------------------------------------------------------------------------------------------------
617,000 Smiths Industries PLC (United Kingdom) $ 8,059,624
Automotive (3.1%)
- ------------------------------------------------------------------------------------------------------------
6,197 Bayerische Motoren Werke (BMW) AG (Germany) + 4,991,617
1,416,000 Edaran Otomobil Nasional Berhad (Malaysia) 14,281,104
2,478,000 Perusahaan Otomobil Nasional Berhad (Malaysia) 15,694,933
660,000 Tata Engineering & Locomotive Co, Ltd. 144A GDR
(India) + 7,342,500
1,575,000 UMW Holdings Berhad (Malaysia) + 8,704,817
--------------
51,014,971
Banks & Finance (9.8%)
- ------------------------------------------------------------------------------------------------------------
188,000 Banco de A. Edwards ADR (Chile) 3,948,000
198,000 Banco de Bilbao Vizcaya (Spain) 11,977,994
486,500 Banco De Galicia y Buenos Aires Class B ADR (Argentina) 11,858,438
417,000 Banco Frances del Rio de la Plata ADR (Argentina) 12,510,000
532,000 Banco Santander Chile ADR (Chile) + 8,911,000
160,200 Equitable Banking Corp. (Philippines) + 723,759
2,874,000 Guoco Group Ltd. (Hong Kong) 14,205,689
2,039,000 Hong Leong Finance Ltd. (Singapore) + 6,862,562
5,102,000 Industrial Finance Corp. of Thailand (The) (Thailand) 13,566,013
115,650 Mapfre Vida Seguros (Spain) 7,379,481
3,091,000 Overseas Union Bank Ltd. (Singapore) + 21,298,788
685,000 Philippine Commercial International (Philippines) + 10,142,368
11,057,000 PT Bank International Indonesia (Indonesia) + 8,407,994
750,000 State Bank of India 144A GDR (India) + 14,812,500
268,190 Takefuji Corp. (Japan) 12,192,433
--------------
158,797,019
Building and Construction (0.5%)
- ------------------------------------------------------------------------------------------------------------
140,500 IHC Caland N.V. (Netherlands) + 7,494,730
Business Services (1.7%)
- ------------------------------------------------------------------------------------------------------------
2,650,000 Reuters Holdings PLC (United Kingdom) 26,901,740
Carbon Products (0.9%)
- ------------------------------------------------------------------------------------------------------------
108,500 SGL Carbon AG (Germany) + 14,824,881
Communications (11.7%)
- ------------------------------------------------------------------------------------------------------------
918,000 Advanced Info Service Public Co., Ltd. (Thailand) 7,853,411
2,219,200 Korea Mobile Telecommunications ADR (South Korea) 22,746,800
437,402 Multicanal Participacoes S.A. ADR (Brazil) + 6,068,953
948,700 Portugal Telecom S.A. (Portugal) + 35,152,675
543,600 PT Pasifik Satelit Nusantara ADR (Indonesia) + 7,474,500
408,400 PT Telekomunikasi Indonesia ADR (Indonesia) + 12,303,050
167,500 Telecom Argentina S.A. ADR (Argentina) 7,705,000
6,338,400 Telecom Italia Mobile SPA (Italy) + 18,196,482
715,000 Telefonica del Peru S.A. ADR (Peru) 15,908,750
108,218 Telemig (Telecomunicacoes De Minas Gerais) (Brazil) + 14,643,360
339,000 Videsh Sanchar Nigam Ltd. 144A (India) 5,254,500
7,570,300 Vodafone Group PLC (United Kingdom) 34,576,588
--------------
187,884,069
Computer Services (1.9%)
- ------------------------------------------------------------------------------------------------------------
630,000 Getronics Electric N.V. (Netherlands) 20,458,901
397,000 SEMA Group PLC (United Kingdom) + 8,952,350
--------------
29,411,251
Computer Software (4.4%)
- ------------------------------------------------------------------------------------------------------------
296,000 Baan Co., N.V. (Netherlands) + 13,630,750
303,000 Baan Co., N.V. (Netherlands) + 13,521,375
1,106,000 JBA Holdings PLC (United Kingdom) 13,204,755
462,000 SGS-Thomson Microelectronics ADR (France) + 30,549,750
--------------
70,906,630
Conglomerates (0.4%)
- ------------------------------------------------------------------------------------------------------------
1,805,000 Wharf (Holdings) Ltd. (Hong Kong) 6,906,828
Consumer Products & Services (5.2%)
- ------------------------------------------------------------------------------------------------------------
375,900 Adidas AG 144A (Germany) + 20,392,575
901,000 Bulgari SPA (Italy) + 17,217,187
1,329,500 Compass Group PLC (United Kingdom) 14,335,999
264,800 Gucci Group (Netherlands) 19,098,700
1,720,000 Sampoerna Ind. (Indonesia) + 8,062,565
46,019 Securicor PLC (United Kingdom) 221,130
1,206,000 Siam Makro Public Co. Ltd. (Thailand) 4,600,925
--------------
83,929,081
Electronics (2.6%)
- ------------------------------------------------------------------------------------------------------------
143,000 Keyence Corp (Japan) 16,310,476
2,231,000 NEC Corp. (Japan) 25,266,151
--------------
41,576,627
Food and Beverages (5.1%)
- ------------------------------------------------------------------------------------------------------------
392,824 Coca-Cola Amatil Ltd. (Australia) 3,742,087
4,000,000 Fomento Economico Mexicano S.A. de C.V. Class B
(Mexico) + 17,722,159
102,800 Nutricia Verenigde Bedrijven N.V. (Netherlands) + 15,870,954
1,346,000 Panamerican Beverages Inc. Class A (Mexico) 36,089,625
750,000 PizzaExpress PLC (United Kingdom) 8,972,850
--------------
82,397,675
Infrastructure (6.3%)
- ------------------------------------------------------------------------------------------------------------
4,178,000 Cemex S.A. (Mexico) 15,315,636
133,000 Centrais Eletricas de Santa Catarina S.A. 144A (Brazil) + 16,259,250
6,824,000 Cosco Pacific Ltd. (Hong Kong) 8,982,887
1,600,000 Lingaran Trans Kota Holdings Berhad (Malaysia) + 3,550,105
5,407,600 New World Infrastructure Ltd. (Hong Kong) + 15,492,956
900,082 Sasol Ltd. (South Africa) 9,624,095
1,284,500 Siebe PLC (United Kingdom) 21,624,044
2,087,000 YTL Corp. Berhad (Malaysia) 10,861,021
--------------
101,709,994
Insurance (4.8%)
- ------------------------------------------------------------------------------------------------------------
2,753,750 Malaysian Assurance Alliance Berhad (Malaysia) + 15,886,165
2,155,000 MNI Holdings Berhad (Malaysia) 11,214,902
23,382,000 National Mutual Asia Ltd. (Hong Kong) 24,442,377
1,123,700 QBE Insurance Group Ltd. (Australia) 5,798,380
650,000 Skandia Forsakrings AB (Sweden) 20,383,305
--------------
77,725,129
Leisure & Media (3.8%)
- ------------------------------------------------------------------------------------------------------------
68,000 Canal Plus ADR (France) + 13,325,302
187,000 Investec Consultadoria Intl (Portugal) + 6,768,127
7,042,000 Magnum Corp. Berhad (Malaysia) 13,352,187
2,974,000 Tanjong PLC (Malaysia) 11,817,775
3,762,000 Television Broadcasts Ltd. (Hong Kong) + 15,293,472
--------------
60,556,863
Metals and Mining (0.7%)
- ------------------------------------------------------------------------------------------------------------
28,700 CIA Tecidos Norte de Minas (Brazil) + 11,474,587
Office Equipment (0.5%)
- ------------------------------------------------------------------------------------------------------------
44,000 Guilbert S.A. (France) + 8,185,684
Oil and Gas (3.5%)
- ------------------------------------------------------------------------------------------------------------
297,600 Total Corp. ADR Class B (France) + 25,673,537
2,120,000 Woodside Petroleum Ltd. (Australia) 15,641,461
600,000 YPF S.A. ADR (Argentina) 15,900,000
--------------
57,214,998
Pharmaceuticals & Medical Technology (9.1%)
- ------------------------------------------------------------------------------------------------------------
246,000 Astra AB (Sweden) + 11,839,415
210,700 Fresenius Medical Care AG (Germany) + 20,101,987
13,000 Novartis AG (Switzerland) + 16,028,996
2,310 Roche Holdings AG (Switzerland) 19,846,704
854,000 Sankyo Co., Ltd. (Japan) 23,557,203
2,119,000 Smithkline Beecham PLC (United Kingdom) 31,380,695
1,064,000 Taisho Pharmaceutical Co. (Japan) 24,874,305
--------------
147,629,305
Real Estate (0.5%)
- ------------------------------------------------------------------------------------------------------------
24,486,000 Belle Corp. (Philippines) + 7,808,747
18,588,000 Fil-Estate Land, Inc. (Philippines) 7,233,371
--------------
15,042,118
Retail (4.8%)
- ------------------------------------------------------------------------------------------------------------
802,300 Argos PLC (United Kingdom) 8,901,198
840,000 Disco S.A. ADR (Argentina) + 27,405,000
1,296,400 Dixons Group PLC (United Kingdom) 11,278,939
2,753,000 KFC Holdings Berhad (Malaysia) + 12,883,169
221,500 Santa Isabel S.A. ADR (Chile) + 5,731,313
201,000 Seven-Eleven Japan (Japan) 12,227,154
--------------
78,426,773
Semiconductors (7.4%)
- ------------------------------------------------------------------------------------------------------------
55,000 ASM Lithography Holding N.V. (Netherlands) + 4,269,059
221,900 ASM Lithography Holding N.V. 144A (Netherlands) + 17,223,712
556,600 Advantest Corp. (Japan) 28,095,662
1,637,000 Nikon Corp. (Japan) 21,452,365
280,000 Rohm Co. Ltd. (Japan) 20,656,882
863,500 Tokyo Electron Ltd. (Japan) 28,638,989
--------------
120,336,669
Technology (1.8%)
- ------------------------------------------------------------------------------------------------------------
80,000 Barco N.V. (Belgium) + 13,796,303
4,773,000 Varitronix International Ltd. (Hong Kong) 7,268,590
3,143,000 Venture Manufacturing Ltd. (Singapore) + 7,705,139
--------------
28,770,032
Telecommunication Equipment (5.2%)
- ------------------------------------------------------------------------------------------------------------
870,000 Ericsson LM Class B (Sweden) + 30,556,141
224,100 Northern Telecom Ltd. (Canada) + 14,618,385
2,304,000 Oki Electric Industry Co. Ltd. (Japan) 11,014,922
458,700 Oy Nokia AB Class A (Finland) 27,467,892
--------------
83,657,340
--------------
Total Common Stocks (cost $1,441,329,606) 1,560,834,618
PREFERRED STOCKS (1.4%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
1,909,100 Banco Bradesco BRC .1815 NPV (No Par Value) pfd. (Brazil) $ 15,751,650
36,050 Eletropaulo-Eletricidade de Sao Paulo S.A. Class B,
(Brazil) + 6,900,660
--------------
Total Preferred Stocks (cost $19,080,869) $ 22,652,310
CONVERTIBLE BONDS AND NOTES (0.6%) * (cost $11,289,811)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$10,900,000 Bangkok Bank Public Co. 144A cv. sub. 3 1/4s, 2004 (Thailand) $ 10,137,000
SHORT-TERM INVESTMENTS (1.2%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$13,554,000 Metlife Funding Inc. effective yield of 5.3%, May 5, 1997 $ 13,442,254
2,300,000 National Rural Utilities Corporate Finance Corp.
effective yield of 5.65%, April 2, 1997 2,297,112
2,000,000 Interest in $803,250,000 joint repurchase agreement
March 31, 1997 with UBS Securities due April 1, 1997,
with year with respect to various U.S. Treasury
obligations -- maturity value of $2,000,356 for an
effective yield of 6.40% 2,000,356
--------------
Total Short-Term Investments (cost $17,739,722) $ 17,739,722
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,489,440,008) *** $1,611,363,650
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,623,155,884.
*** The aggregate identified cost on a tax basis is $1,491,522,440, resulting in gross unrealized appreciation
and depreciation of $2,082,406 and $121,923,616, respectively, or net unrealized appreciation of $119,841,210.
+ 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, or GDR after the name of a foreign holding stands for American Depository Receipts, 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 March 31, 1997: (as percentage of Market Value)
Argentina 4.7% Netherlands 6.9
Australia 1.6 Peru 1.0
Brazil 4.4 Philippines 1.6
Chile 1.1 Portugal 2.6
France 4.8 Singapore 2.2
Germany 3.7 South Korea 1.4
Hong Kong 5.3 Spain 1.2
India 1.7 Sweden 3.9
Indonesia 2.3 Switzerland 2.2
Italy 2.2 Thailand 2.2
Japan 15.6 United Kingdom 12.1
Malaysia 7.3 United States 1.2
Mexico 4.3 Other 2.5
Total 100%
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at March 31, 1997
(aggregate face value $89,162,575)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen $ 26,148,408 $ 26,808,491 4/16/97 $ 660,083
Japanese Yen 62,398,665 62,354,084 5/12/97 (44,581)
- ----------------------------------------------------------------------------------------
$ 615,502
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,489,440,008) (Note 1) 1,611,363,650
- ---------------------------------------------------------------------------------------------------
Cash 8,636,215
- ---------------------------------------------------------------------------------------------------
Foreign currency (cost $1,574,269) 1,537,966
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 2,055,632
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 10,878,284
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 12,855,769
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 615,502
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 5,632
- ---------------------------------------------------------------------------------------------------
Total assets 1,647,948,650
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 14,081,581
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 4,150,893
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,226,874
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 770,451
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 11,136
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,768
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,261,544
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 278,094
- ---------------------------------------------------------------------------------------------------
Total liabilities 24,792,766
- ---------------------------------------------------------------------------------------------------
Net assets $1,623,155,884
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,458,979,180
- ---------------------------------------------------------------------------------------------------
Distributions in excess net investment income (Note 1) (6,935,299)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment and
foreign currency transactions (Note 1) 48,598,219
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 122,513,784
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,623,155,884
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($692,210,265 divided by 54,805,170 shares) $12.63
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.63)* $13.40
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($856,331,914 divided by 68,294,596 shares)** $12.54
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($74,613,705 divided by 5,930,271 shares) $12.58
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.58)* $13.04
- ---------------------------------------------------------------------------------------------------
* 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
Six months ended March 31, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $434,129) $ 5,868,757
- --------------------------------------------------------------------------------------------------
Interest 2,581,225
- --------------------------------------------------------------------------------------------------
Total investment income 8,449,982
Expenses:
Compensation of Manager (Note 2) 7,759,946
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,228,579
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 30,330
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 13,715
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 755,378
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,571,524
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 240,859
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 424
- --------------------------------------------------------------------------------------------------
Reports to shareholders 75,611
- --------------------------------------------------------------------------------------------------
Registration fees 80,009
- --------------------------------------------------------------------------------------------------
Auditing 21,323
- --------------------------------------------------------------------------------------------------
Legal 10,686
- --------------------------------------------------------------------------------------------------
Postage 123,459
- --------------------------------------------------------------------------------------------------
Other 214,858
- --------------------------------------------------------------------------------------------------
Total expenses 15,126,701
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (460,562)
- --------------------------------------------------------------------------------------------------
Net expenses 14,666,139
- --------------------------------------------------------------------------------------------------
Net investment loss (6,216,157)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 57,106,677
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (4,587)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 590,149
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 55,862,285
- --------------------------------------------------------------------------------------------------
Net gain on investments 113,554,524
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $107,338,367
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (6,216,157) $ (354,310)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 57,102,090 (8,283,598)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 56,452,434 65,895,299
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 107,338,367 57,257,391
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (1,892,656) (104,544)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- (35,744)
- ----------------------------------------------------------------------------------------------------------------------
Class M (20,814) (6,345)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (97,836) (17,396)
- ----------------------------------------------------------------------------------------------------------------------
Class B (115,550) (14,314)
- ----------------------------------------------------------------------------------------------------------------------
Class M (10,409) (1,813)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 393,248,183 1,044,179,897
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 498,449,285 1,101,257,132
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 1,124,706,599 23,449,467
- ----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income and undistributed net investment
income of $6,935,299 and $1,194,327, respectively) $1,623,155,884 $1,124,706,599
- ----------------------------------------------------------------------------------------------------------------------
nn* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ----------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended Jan. 3, 1995+
operating performance (Unaudited) September 30 to Sept. 30
- ----------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.69 $10.29 $8.50
- ----------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (.03) .04 .02
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.01 1.37 1.77
- ----------------------------------------------------------------------------------------------------------
Total from
investment operations .98 1.41 1.79
- ----------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.01) --
- ----------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (f) -- --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.04) (.01) --
- ----------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.63 $11.69 $10.29
- ----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(c) 8.42 * 13.76 21.06 *
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $692,210 $499,396 $15,137
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) .89 * 1.95 1.23 *
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.25)* .34 .86 *
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 61.83 * 24.69 9.24 *
- ----------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0160 $.0190
- ----------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 and the period ended March 31, 1997 per share distributions
from net realized gains on investments were less than $.01 per share for each share class.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended July 21, 1995+
operating performance (Unaudited) September 30 to Sept. 30
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.61 $10.28 $10.25
- ---------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) (.08) (.05) (.01)
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.01 1.39 .04
- ---------------------------------------------------------------------------------------------------------
Total from
investment operations .93 1.34 .03
- ---------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------
From net
investment income -- (.01) --
- ---------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (f) -- --
- ---------------------------------------------------------------------------------------------------------
Total distributions -- (.01) --
- ---------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.54 $11.61 $10.28
- ---------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(c) 8.03 * 13.02 .29 *
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $856,332 $573,129 $7,053
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) 1.26 * 2.72 .83 *
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.62)* (.43) (.20)*
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 61.83 * 24.69 9.24 *
- ---------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0160 $.0190
- ---------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 and the period ended March 31, 1997 per share distributions
from net realized gains on investments were less than $.01 per share for each share class.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended July 21, 1955+
operating performance (Unaudited) September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.64 $10.29 $10.25
- ------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.05) (.02) --
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .99 1.38 .04
- ------------------------------------------------------------------------------------------------------------
Total from
investment operations .94 1.36 .04
- ------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------
From net
investment income -- (.01) --
- ------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (f) -- --
- ------------------------------------------------------------------------------------------------------------
Total distributions -- (.01) --
- ------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.58 $11.64 $10.29
- ------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(c) 8.13 * 13.22 .39 *
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $74,614 $52,182 $1,259
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) 1.14 * 2.46 .79 *
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.49)* (.17) (.15)*
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 61.83 * 24.69 9.24 *
- ------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0160 $.0190
- ------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 and the period ended March 31, 1997 per share distributions
from net realized gains on investments were less than $.01 per share for each share class.
</TABLE>
Notes to financial statements
March 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam International New Opportunities Fund (the "fund") is one of 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.
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rate.
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 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) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. The fund could be exposed to
risk if the value of the currency changes unfavorably, if the counterparties
to the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) 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 nor for excise tax
on income and capital gains.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. 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.
I) 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.
J) 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 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.
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.
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, 1997, fund expenses were reduced by
$460,562 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 $2,320 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "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 an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees 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, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $847,088 and $47,016 from the sale of
class A and class M shares, respectively and $451,260 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, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $19,319 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended March 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $1,225,544,235 and
$806,163,087, 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, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 33,897,181 415,637,415
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 154,871 1,833,651
- ------------------------------------------------------------
34,052,052 417,471,066
Shares
repurchased (21,965,274) (271,248,921)
- ------------------------------------------------------------
Net increase 12,086,778 146,222,145
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 23,901,052 290,072,923
- ------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 7,867 92,667
- ------------------------------------------------------------
23,908,919 290,165,590
Shares
repurchased (4,985,573) (60,628,799)
- ------------------------------------------------------------
Net increase 18,923,346 229,536,791
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,917,348 23,241,099
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,142 25,303
- ------------------------------------------------------------
1,919,490 23,266,402
Shares
repurchased (472,443) (5,777,155)
- ------------------------------------------------------------
Net increase 1,447,047 17,489,247
- ------------------------------------------------------------
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
- ------------------------------------------------------------
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
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
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
Tim Ferguson
Vice President
Brett C. Browchuk
Vice President
Robert J. Swift
Vice President and Fund Manager
Kelly Morgan
Vice President and Fund Manager
Thomas R. Haslett
Vice President and Fund Manager
J. Peter Grant
Vice President and Fund Manager
Ami Kuan Danoff
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.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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32898-539/2AH/2AI 5/97
