Putnam
Global Growth
and Income
Fund
SEMIANNUAL REPORT
March 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam Global Growth and Income Fund has two features that help it
avoid market drops: our value strategy leads us to stocks with minimum
downside risk and global diversification insulates the portfolio from
volatility in any one market or region. We are confident that our strategy
of investing in undervalued companies undergoing positive change will
continue to serve us well."
-- George Stairs, co-manager
* According to Lipper Analytical Services, Putnam Global Growth and
Income Fund's class A shares' total return ranked 11 out of 119 global
funds for the 3 years ended March 31, 1998, placing the fund in the top
10% of its investment category.*
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
20 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 period ended
3/31/98, class A shares ranked 47 out of 191 for 1-year return. Past
performance is not indicative of future results. Performance of other
share classes will vary.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[Copyright] Karsh, Ottawa
Dear Shareholder:
One of the noteworthy attributes of the current worldwide market environment
is its resilience in the face of adversity. Last year's Asian currency and
debt crisis is the most recent and perhaps most dramatic example. Quick action
by the International Monetary Fund in arranging loans and taking other
remedial steps prevented a major calamity.
The aftereffects of the crisis are still being felt, of course, and will
continue to be felt for some months. But in the main, the world's equity
markets have regained their stability. It is comforting to see that in this
increasingly interdependent world economy, mechanisms are in place for serving
the common good.
How these events affected Putnam Global Growth and Income Fund during the
first half of its fiscal year and will continue to influence it in the months
ahead is the underlying theme of the following report from your fund's
management team.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 20, 1998
Report from the Fund Managers
Deborah F. Kuenstner, lead manager
Hugh H. Mullin
George W. Stairs
Events such as the 1997 financial crisis in Asia occasionally spark periods of
volatility throughout global markets. However, it's reassuring to know that
undervalued stocks of large, dividend-paying companies such as those in which
Putnam Global Growth and Income Fund invests tend to be less susceptible to
sharp market drops. Another element of the fund's strategy -- our insistence
on buying corporations undertaking positive change -- also enhanced the
portfolio's resiliency and its performance during the first six months of the
1998 fiscal year.
Although stock markets in Europe and the United States were affected by the
turmoil in Asia, they recovered quickly and reached new highs in the first
quarter of 1998. For the six months ended March 31, 1998, the fund's class A
shares posted a healthy 10.82% return at net asset value (4.47% at public
offering price). You will find complete performance information, including
returns for other share classes, beginning on page 8.
* ASIA CRISIS SPREADS, THEN ABATES
As your fund began its fiscal year on October 1, 1997, it had virtually no
exposure to the Asian markets that were at the center of the debt and currency
crisis -- Thailand, Malaysia, Indonesia, Hong Kong, and South Korea.
Unfortunately even companies in the United States, Europe, and Japan felt the
effects of an expected decline in profits and some of the portfolio's holdings
were inevitably affected. Slowing business activity in Asia reduced demand for
oil and other commodities, while technology and consumer companies in the
United States feared that price competition from cheaper imports would hurt
their earnings.
As the International Monetary Fund extended stabilization loans to Asian
nations, we took a hard look at the business prospects of companies and
concluded that some were being unfairly punished. We added to the fund's
position in Philips Electronics when its stock price dropped in late 1997.
Although sellers expected that Philips would suffer because of its large Asian
operations, we noted that 75% of the products that Philips manufactures in
Asia are exported outside the region, and that the cost savings on these
exports in the wake of the currency devaluations would strengthen the
company's earnings. In fact, Philips' stock has performed well in the first
three months of 1998. Although this holding, as well as others discussed in
this report, was viewed favorably at the end of the reporting period, all
portfolio holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* EUROPE SHINES WITH ECONOMIC GROWTH AND INDUSTRIAL CONSOLIDATION
European economic growth has been on the rise during the semiannual period and
the scheduled introduction of the single currency, the euro, has remained on
track. Although unemployment remains stubbornly high in Germany and France,
the governments of both countries have continued to control deficits. In
Germany, the last major country facing an election prior to the adoption of
the euro in 1999, both the ruling and the opposition parties have committed to
Europe's single currency.
Our search for companies with qualities of "cheapness and change" --
attractive stock prices and the potential for improvement -- prepared us well
for this period, as the favorable political backdrop supported genuine
progress on industry consolidation. We had long ago noticed the potential
within two Swiss banks, Schweizerischer Bankverein (SBC) and Union Bank of
Switzerland (UBS); in late 1997, they decided to merge. This move will slash
their business costs in Switzerland and position the combined operation to
become a more competitive global asset manager.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
United States 46.8%
United Kingdom 12.8%
France 7.8%
Japan 6.6%
Germany 5.3%
Footnote reads:
*Based on net assets as of 3/31/98. Holdings will vary over time.
Other European companies have also benefited from repositioning. BMW, a stock
we first added to the fund more than a year ago, has appreciated during the
fiscal period thanks to its long-term strategy to expand into new product
lines and develop global production capabilities. Its Range Rover vehicles,
manufactured by a British subsidiary, and its 5 Series cars have been selling
well, and the company is planning to expand its Spartanburg, South Carolina,
manufacturing plant. The stock's price rose rapidly in the first quarter of
1998, and so we are re-evaluating it to make sure that it still meets our
value criteria.
* STRONG RESULTS FOR U.S. FINANCIAL AND RETAIL COMPANIES
The U.S. stock market has trailed behind Europe's but has nonetheless far
exceeded pessimistic predictions since October. In the midst of volatility in
late 1997, we remained committed to companies whose potential we believed in
and even added to positions in technology, oil, and financial stocks when they
temporarily fell to more attractive levels. We also established a position in
Citicorp, which was punished for its extensive emerging-markets operations but
has performed well in early 1998.
The financial sector in general, along with retail stocks, has helped to lead
the U.S. portion of the fund higher. U.S. banks, like their European
counterparts, are consolidating to cut costs. In the fiscal period, two fund
holdings, H.F. Ahmanson, a California thrift, and Washington Mutual, a bank
based in the Pacific Northwest, announced an agreement to merge, boosting
their stock prices. Several of the fund's retail stocks, acquired during the
sector's recent sluggishness, have also done well. Retail profit margins have
improved over the semiannual period because low interest rates and gas prices
give Americans more money to spend, while the costs of clothing and other
consumer goods made in Asia have fallen.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
BTR PLC (United Kingdom)
Conglomerate
General Electric Co. (United States)
Conglomerate
General Electric Co. UK (United Kingdom)
Electronics and electrical equipment
Elf Aquitaine SA (France)
Oil
ENI SPA (Italy)
Oil
Bayer AG (Germany)
Diversified chemicals
Nestle SA (Switzerland)
Food and beverages
Philips Electronics N.V. (Netherlands)
Electronics and electrical equipment
Akzo-Nobel N.V. (Netherlands)
Chemicals
Compagnie Generale des Eaux (France)
Conglomerate
Footnote reads:
These holdings represent 10.45% of the fund's net assets as of 3/31/98.
Portfolio holdings will vary over time.
* ASIA STILL A CONCERN, BUT VALUE OPPORTUNITIES ABOUND
As global markets put some of the Asian worries behind them, there is reason
for both caution and optimism. Corporate profits may no longer rise as rapidly
as they have in the past two or three years, but neither Europe nor North
America shows signs of a significant business slowdown. Despite strong market
performance, we are still able to find stocks with attractive relative values
in every market and we are even selectively adding Asian stocks. We will
continue to search global markets for these opportunities, confident in our
strategy of selecting clearly undervalued companies undertaking positive
change.
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 3/31/98, there is no guarantee the fund will continue to hold
these securities in the future. International investing involves certain
risks, such as currency fluctuations, economic instability and political
developments, not present with domestic investments.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Global Growth and Income Fund is designed for investors seeking capital
growth through investing in the stocks of companies in the United States
and worldwide.
TOTAL RETURN FOR PERIODS ENDED 3/31/98
Class A Class B Class M
(inception date) (1/3/95) (11/3/97) (11/3/97)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 10.82% 4.47% 10.39% 5.39% 10.53% 6.70%
- ------------------------------------------------------------------------------
1 year 32.18 24.57 31.02 26.02 31.32 26.75
- ------------------------------------------------------------------------------
Life of fund, 95.42 84.16 89.24 86.24 91.01 84.42
Annual average 22.97 20.74 21.76 21.16 22.11 20.79
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/98
MSCI WORLD Consumer
Index Price Index
- ------------------------------------------------------------------------------
6 months 11.51% 0.62%
- ------------------------------------------------------------------------------
1 year 31.96 1.38
- ------------------------------------------------------------------------------
Life of fund, 81.30 8.35
Annual average 20.11 2.50
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% and 3.50%, respectively. Class B share returns for
the 1-, 5-, and 10-year (where available) and life-of-fund periods reflect
the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated
thereafter. Returns shown for class B and class M shares for periods prior
to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any,
currently applicable to each class and, in the case of class B and class M
shares, the higher operating expenses applicable to such shares. All
returns assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 2 1 2
- ------------------------------------------------------------------------------
Income $0.074 $0.053 $0.060
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.139 0.139 0.139
- ------------------------------------------------------------------------------
Short-term 0.172 0.172 0.172
- ------------------------------------------------------------------------------
Total $0.385 $0.364 $0.371
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
9/30/97 $12.50 $13.26 $-- $-- $--
- ------------------------------------------------------------------------------
11/3/97 -- -- 12.01 12.01 12.45
- ------------------------------------------------------------------------------
3/31/98 13.41 14.23 13.39 13.40 13.89
- ------------------------------------------------------------------------------
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 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
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Morgan Stanley Capital International (MSCI) World Index is an unmanaged
list of global equity securities, 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.
The MSCI EAFE Index and the Standard & Poor's 500(registered trademark) Index
that were included as comparative benchmarks in previous shareholder reports
are no longer included because the MSCI World Index, which contains both U.S.
and international securities, is a sufficient comparative benchmark.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Strategic Income Fund *
High Quality Bond Fund +
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
+ Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
Portfolio of investments owned
March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (94.4%) *
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (2.0%)
- ------------------------------------------------------------------------------------------------------------
2,258 Boeing Co. $117,698
943 Lockheed Martin Corp. 106,088
242 Northrop Grumman Corp. 26,000
892 Raytheon Co. Class A 50,733
71,931 Rolls-Royce PLC (United Kingdom) 335,349
--------------
635,868
Airlines (1.1%)
- ------------------------------------------------------------------------------------------------------------
1,216 Delta Air Lines, Inc. 143,792
7,662 Deutsche Lufthansa AG (Germany) 161,534
1,300 Deutsche Lufthansa AG 144A (Germany) 27,407
--------------
332,733
Automotive (1.6%)
- ------------------------------------------------------------------------------------------------------------
239 Bayerische Motoren Werke (BMW) AG (Germany) 264,549
3,393 Chrysler Corp. 141,022
1,995 TRW, Inc. 109,974
--------------
515,545
Banks (15.1%)
- ------------------------------------------------------------------------------------------------------------
13,029 Allied Irish Banks PLC (Ireland) 159,852
9,404 Bank of Nova Scotia (Canada) 254,906
1,561 BankAmerica Corp. 128,978
1,271 BankBoston Corp. 140,128
1,171 Bankers Trust New York Corp. [UPSIDE DOWN DELTA] 140,886
1,003 Chase Manhattan Corp. 135,280
1,030 Citicorp 146,260
652 CoreStates Financial Corp. 58,517
637 Crestar Financial Corp. 37,663
33,000 Dao Heng Bank Group Ltd. (Hong Kong) 97,532
42,382 Den Norske Bank ASA (Norway) 231,261
2,684 Deutsche Bank AG (Germany) 202,154
25,300 Development Bank of Singapore Ltd. (Singapore) 185,084
4,600 Development Bank of Singapore Rights
Expiration 5/1/98 2,424
1,667 First Chicago NBD Corp. 146,904
1,000 First Tennessee National Corp. 32,125
1,762 First Union Corp. 99,994
1,635 Fleet Financial Group, Inc. 139,077
1,300 ForeningsSparbanken AB (Sweden) 42,791
5,200 HSBC Holdings PLC (United Kingdom) 159,056
1,049 Huntington Bancshares, Inc. 38,223
44 Julius Baer Holdings AG (Switzerland) 107,000
3,676 Keycorp 138,999
584 Mercantile Bancorpation, Inc. 32,011
1,149 Morgan (J.P.) & Co., Inc. 154,325
10,029 National Bank (Canada) 188,066
15,565 National Westminster Bancorp Inc. (United Kingdom) 284,280
1,981 NationsBank Corp. 144,489
3,480 Norwest Corp. 144,638
2,515 PNC Bank Corp. 150,743
542 Schweizerischer Bankverein (Switzerland) 190,938
1,391 Societe Generale (France) 278,694
606 Summit Bancorp 30,338
117 United Bank of Switzerland (Switzerland) 191,476
25,505 Westpac Banking Corp. (Australia) 170,921
--------------
4,786,013
Basic Industrial Products (0.6%)
- ------------------------------------------------------------------------------------------------------------
7,794 SKF AB Class B, (Sweden) 184,500
Broadcasting (0.3%)
- ------------------------------------------------------------------------------------------------------------
726 Societe Television Francaise 1 (France) 90,325
Building Products (2.2%)
- ------------------------------------------------------------------------------------------------------------
19,180 Cemex, S.A. de C.V. (Mexico) 85,194
18,807 CRH PLC (Ireland) + 282,611
2,282 Lafarge Coppee (France) 194,315
2,282 Larfarge S.A. Rights Expiration date 4/8/98 2,987
45,000 Pioneer International Ltd. (Australia) 129,626
--------------
694,733
Business Equipment (1.1%)
- ------------------------------------------------------------------------------------------------------------
1,793 Xerox Corp. 190,842
15,000 Ricoh., Ltd. (Japan) + 151,037
--------------
341,879
Cable Television (0.3%)
- ------------------------------------------------------------------------------------------------------------
2,717 Comcast Corp. Class A 95,944
Chemicals (4.2%)
- ------------------------------------------------------------------------------------------------------------
1,749 Akzo-Nobel N.V. (Netherlands) 355,628
8,010 Bayer AG ADR (Germany) + 366,791
64,365 Cookson Group PLC (United Kingdom) 243,932
3,428 du Pont (E.I.) de Nemours & Co., Ltd. 233,104
1,886 Eastman Chemical Co. 127,187
--------------
1,326,642
Computer Software and Services (1.4%)
- ------------------------------------------------------------------------------------------------------------
3,075 Computer Associates Intl., Inc. 177,581
2,657 IBM Corp. 275,996
--------------
453,577
Conglomerates (4.0%)
- ------------------------------------------------------------------------------------------------------------
130,269 BTR PLC (United Kingdom) 426,652
2,203 Cooper Industries, Inc. 130,941
2,166 Compagnie Generale des Eaux (France) 352,076
1,347 Minnesota Mining & Manufacturing Co. 122,830
39,823 Tomkins PLC (United Kingdom) 242,055
--------------
1,274,554
Consumer Products (1.5%)
- ------------------------------------------------------------------------------------------------------------
3,233 Kimberly-Clark Corp. 162,054
2,219 Lowe's Cos., Inc. 155,746
17,671 Unilever Group (United Kingdom) 166,835
--------------
484,635
Electric Utilities (3.5%)
- ------------------------------------------------------------------------------------------------------------
1,453 Ameren Corp. 61,208
1,741 Carolina Power & Light Co. 78,780
1,393 Dominion Resources, Inc. 58,506
400 Electrabel S.A. (Belgium) 102,026
1,393 Duke Energy Corp. 82,971
9,368 Iberdola S.A. (Spain) 142,482
2,200 Iberdrola II (Spain) 33,503
1,589 Potomac Electric Power Co. 39,824
21,595 Scottish Power PLC (United Kingdom) 202,799
2,800 Southern Co. 77,525
3,241 Veba (Vereinigte Elektrizitaets Bergwerks)
AG (Germany) 230,159
--------------
1,109,783
Electronics and Electrical Equipment (7.1%)
- ------------------------------------------------------------------------------------------------------------
8,000 Canon, Inc. (Japan) + 180,944
2,381 Emerson Electric Co. 155,211
4,479 General Electric Co. 386,034
48,065 General Electric Co. PLC (United Kingdom) 379,898
2,288 Hewlett-Packard Co. 145,002
2,478 Motorola, Inc. 150,229
4,845 Philips Electronics N.V. (Netherlands) 355,908
6,091 Seagate Technology, Inc. + 153,798
2,800 Siebe PLC (United Kingdom) 60,965
3,300 Sony Corp. (Japan) 280,208
--------------
2,248,197
Farm Equipment (0.4%)
- ------------------------------------------------------------------------------------------------------------
2,249 Deere (John) & Co. 139,297
Financial Services (1.3%)
- ------------------------------------------------------------------------------------------------------------
44,000 Nikko Securities Co. Ltd. (Japan) 142,170
4,900 Promise Co. Ltd. (Japan) 254,426
--------------
396,596
Food and Beverages (4.4%)
- ------------------------------------------------------------------------------------------------------------
2,928 Anheuser-Busch Cos., Inc. 135,603
12,682 Bass PLC (United Kingdom) 242,644
3,896 ConAgra, Inc. 125,159
8,900 Fomento Economico Mexicano, S.A. de C.V.
Class B, (Mexico) 64,737
1,716 General Mills, Inc. 130,416
2,848 Heinz (H.J.) Co. 166,252
190 Nestle S.A. (Switzerland) 363,766
2,443 Sara Lee Corp. 150,550
--------------
1,379,127
Gas Pipelines (0.4%)
- ------------------------------------------------------------------------------------------------------------
2,645 Sonat, Inc. 115,058
Health Care Services (0.5%)
- ------------------------------------------------------------------------------------------------------------
2,337 United Healthcare Corp. 151,321
Hospital Management (0.4%)
- ------------------------------------------------------------------------------------------------------------
3,790 Tenet Healthcare Corp. + 137,624
Household Products (1.3%)
- ------------------------------------------------------------------------------------------------------------
1,740 Colgate-Palmolive Co. 150,728
21,000 KAO Corp. (Japan) 276,150
--------------
426,878
Insurance and Finance (4.9%)
- ------------------------------------------------------------------------------------------------------------
8,055 ABN AMRO Holding N.V. (Netherlands) 186,021
1,447 Aetna Inc. 120,734
3,289 AGF (Assurances Generales de France) (France) 185,308
1,995 American General Corp. 129,052
2,615 AON Corp. 169,321
430 Beneficial Corp. 53,454
751 CIGNA Corp. 153,955
2,679 Federal National Mortgage Association 169,447
4,642 Internationale Nederlanden Groep (Netherlands) 263,659
2,373 Scor (France) 136,115
--------------
1,567,066
Medical Supplies and Devices (0.7%)
- ------------------------------------------------------------------------------------------------------------
4,191 Baxter International, Inc. 231,029
Metals and Mining (1.3%)
- ------------------------------------------------------------------------------------------------------------
5,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 93,438
1,393 Freeport-McMoRan Copper & Gold Co., Inc. Class B 27,773
20,663 Rio Tinto PLC (United Kingdom) 276,914
--------------
398,125
Networking (0.5%)
- ------------------------------------------------------------------------------------------------------------
4,671 3Com Corp. + 167,864
Oil and Gas (7.4%)
- ------------------------------------------------------------------------------------------------------------
1,635 Amoco Corp. 141,223
15,935 British Petroleum Co. PLC (United Kingdom) 229,528
2,863 Elf Aquitaine S.A. (France) + 375,627
54,835 Ente Nazionale Idrocarburi SPA (Italy) (ENI)+ 374,203
3,684 Exxon Corp. 249,131
1,825 Mobil Corp. 139,841
2,800 Royal Dutch Petroleum Co. ADR (Netherlands) 159,075
18,106 Shell Transportation & Trading (United Kingdom) 132,820
1,981 Tosco Corp. 69,830
2,336 Total Corp. ADR Class B, (France) 280,818
5,621 YPF S.A. ADR (Argentina) 191,114
--------------
2,343,210
Paper (1.8%)
- ------------------------------------------------------------------------------------------------------------
6,600 Abitibi-Consolidated Inc. (Canada) 101,198
7,656 Svenska Cellulosa AB Class B, (Sweden) 210,403
1,975 Temple Inland, Inc. 122,697
2,632 Weyerhaeuser Co. 148,708
--------------
583,006
Pharmaceuticals and Biotechnology (5.0%)
- ------------------------------------------------------------------------------------------------------------
1,680 American Home Products Corp. 160,230
8,836 Astra AB (Sweden) 182,124
1,785 Bristol-Myers Squibb Co. 186,198
5,807 Glaxo Wellcome PLC (United Kingdom) 155,935
2,096 Merck & Co., Inc. 269,074
6,519 Pharmacia & Upjohn, Inc. 285,206
12,000 Sankyo Co., Ltd. (Japan) 333,634
--------------
1,572,401
Photography (1.0%)
- ------------------------------------------------------------------------------------------------------------
1,890 Eastman Kodak Co. 122,614
5,000 Fuji Photo Film Co. (Japan) 186,354
--------------
308,968
Publishing (1.0%)
- ------------------------------------------------------------------------------------------------------------
2,091 McGraw-Hill, Inc. 159,047
2,337 Times Mirror Co. Class A 148,107
--------------
307,154
REIT's (Real Estate Investment Trust) (0.6%)
- ------------------------------------------------------------------------------------------------------------
22,000 Henderson Land Development Co. Ltd. (Hong Kong) 111,587
1,547 Equity Residential Properties Trust 77,737
--------------
189,324
Railroads (0.4%)
- ------------------------------------------------------------------------------------------------------------
1,254 Burlington Northern Santa Fe Corp. + 130,416
Retail (1.5%)
- ------------------------------------------------------------------------------------------------------------
1,712 Dayton Hudson Corp. 150,656
2,000 Ito-Yokado Co., Ltd. (Japan) 108,506
5,572 K mart Corp. + 92,983
4,294 Toys R Us 129,088
--------------
481,233
Savings and Loans (0.6%)
- ------------------------------------------------------------------------------------------------------------
800 Ahmanson (H.F.) & Co. 62,000
1,765 Washington Mutual, Inc. 126,584
--------------
188,584
Semiconductors (2.6%)
- ------------------------------------------------------------------------------------------------------------
2,925 Intel Corp. 228,333
4,432 SGS-Thomson Microelectronics ADR (France) + 343,757
1,272 Texas Instruments, Inc. 68,847
5,000 Tokyo Electron Ltd. (Japan) 168,696
--------------
809,633
Steel (0.6%)
- ------------------------------------------------------------------------------------------------------------
857 Thyssen AG (Germany) 184,388
Telephone Services (6.0%)
- ------------------------------------------------------------------------------------------------------------
3,151 Ameritech Corp. 155,778
3,393 American Telephone & Telegraph Co. 222,666
1,589 Bell Atlantic Corp. 162,873
11,450 Deutsche Telekom AG (Germany) + 248,832
7,850 Hellenic Telecommunication Organization
S.A. (Greece) 196,649
8,800 Mahanager Telephone Nigam Ltd. (India) 151,184
2,534 Portugal Telecom S.A. (Portugal) 131,937
4,131 SBC Communications, Inc. 180,215
1,925 Sprint Corp. 130,298
200 Telecom Corp. of New Zealand Ltd. (New Zealand) 952
24,400 Telecom Italia SPA (Italy) 192,586
2,487 US West Communications, Inc. 136,163
--------------
1,910,133
Tire and Rubber (1.2%)
- ------------------------------------------------------------------------------------------------------------
1,741 Goodyear Tire & Rubber Co. (The) 131,881
4,126 Michelin Corp. Class B, (France) 246,600
--------------
378,481
Tobacco (2.0%)
- ------------------------------------------------------------------------------------------------------------
33,222 B A T Industries PLC (United Kingdom) + 338,080
4,777 Philip Morris Cos., Inc. 199,141
3,028 RJR Nabisco Holdings Corp. 94,814
--------------
632,035
Transportation (0.6%)
- ------------------------------------------------------------------------------------------------------------
12,736 Peninsular and Oriental Steam Navigation Co.
(United Kingdom) 190,473
--------------
Total Common Stocks (cost $26,427,859) $29,894,352
CONVERTIBLE PREFERRED STOCKS (0.8%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
892 K mart Financing $3.875 cv. pfd. $55,973
7 Sanwa Financial Bermuda 144A $1.25 cv. pfd. 154,239
533 Tosco Corp. $2.875 cv. pfd. 32,513
75 Tosco Financing Trust 144A $2.875 cv. pfd. 4,575
--------------
Total Convertible Preferred Stocks (cost $257,928) $247,300
CONVERTIBLE BONDS AND NOTES (--%)*(Cost $5,896)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$6,000 Apple Computer, Inc. cv. sub. notes 6s, 2001 $6,765
SHORT-TERM INVESTMENTS (4.3%) *(Cost $1,370,225)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$1,370,000 Interest in $321,730,000 joint repurchase agreement
dated March 31, 1998 with J.P. Morgan due
April 1, 1998 with respect to various U.S.
Treasury obligations -- maturity value of
$1,370,225 for an effective yield of 5.90% $1,370,225
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $28,061,908) *** $31,518,642
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $31,664,572
*** The aggregate identified cost on a tax basis is $28,064,913, resulting in gross unrealized appreciation
and depreciation of $3,732,583 and $278,854, respectively, or net unrealized appreciation of $3,453,729.
+ Non-income-producing security.
[UPSIDE DOWN DELTA] This entity provides subcustodian services to the fund.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American
Depository Receipts, respectively, representing ownership of foreign
securities on deposit with a domestic custodian bank.
Diversification by Country
Distribution of investments by country of issue at March 31, 1998,
(as percentage of Market Value)
Australia 1.0%
Canada 1.7
France 7.9
Germany 5.3
Ireland 1.4
Italy 1.8
Japan 6.6
Netherlands 4.2
Sweden 2.0
Switzerland 2.7
United Kingdom 12.9
United States 47.0
Others 5.5
-----
Total 100.0%
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at March 31, 1998 (Unaudited)
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen $436,415 $453,908 6/12/98 $17,493
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $28,061,908) (Note 1) $31,518,642
- ---------------------------------------------------------------------------------------------------
Cash 50,433
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 82,304
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 533,541
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 71,588
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 17,493
- ---------------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 24,117
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 4,273
- ---------------------------------------------------------------------------------------------------
Total assets 32,302,391
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 534,527
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 15,629
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 42,074
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,517
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 25
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 19,687
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 17,935
- ---------------------------------------------------------------------------------------------------
Total liabilities 637,819
- ---------------------------------------------------------------------------------------------------
Net assets $31,664,572
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $27,861,945
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 15,691
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 312,947
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 3,473,989
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $31,664,572
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($17,964,099 divided by 1,339,363 shares) $13.41
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.41)* $14.23
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($12,480,904 divided by 932,054 shares)** $13.39
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,219,569 divided by 91,030 shares) $13.40
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.40)* $13.89
- ---------------------------------------------------------------------------------------------------
* 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, 1998 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $12,135) $152,472
- --------------------------------------------------------------------------------------------------
Interest 30,636
- --------------------------------------------------------------------------------------------------
Total investment income 183,108
Expenses:
Compensation of Manager (Note 2) 61,190
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 99,006
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,224
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 53
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 11,386
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 26,097
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,822
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 520
- --------------------------------------------------------------------------------------------------
Reports to shareholders 2,341
- --------------------------------------------------------------------------------------------------
Registration fees 7,758
- --------------------------------------------------------------------------------------------------
Auditing 6,142
- --------------------------------------------------------------------------------------------------
Legal 2,704
- --------------------------------------------------------------------------------------------------
Postage 2
- --------------------------------------------------------------------------------------------------
Other 915
- --------------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (70,524)
- --------------------------------------------------------------------------------------------------
Total expenses 150,636
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (8,049)
- --------------------------------------------------------------------------------------------------
Net expenses 142,587
- --------------------------------------------------------------------------------------------------
Net investment income 40,521
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 358,876
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (8,227)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 25,253
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 2,972,045
- --------------------------------------------------------------------------------------------------
Net gain on investments 3,347,947
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,388,468
- --------------------------------------------------------------------------------------------------
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
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $40,521 $29,367
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 350,649 358,837
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 2,997,298 327,464
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,388,468 715,668
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (62,933) (44,540)
- ----------------------------------------------------------------------------------------------------------------------
Class B (18,908) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (2,182) --
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (229,559) (252,586)
- ----------------------------------------------------------------------------------------------------------------------
Class B (110,952) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (10,349) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 25,825,582 389,976
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 28,779,167 808,518
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 2,885,405 2,076,887
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $15,691 and $59,193, respectively) $31,664,572 $2,885,405
- ----------------------------------------------------------------------------------------------------------------------
* 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.50 $10.77 $9.64 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .05 (d) .14 .21 .27
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.24 3.13 1.30 .87
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.29 3.27 1.51 1.14
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.07) (.23) (.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.31) (1.31) (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.38) (1.54) (.38) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.41 $12.50 $10.77 $9.64
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 10.82 * 33.88 16.14 13.41 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $17,964 $2,885 $2,077 $1,771
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .83 * 1.48 1.27 .49 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .39 * 1.19 2.03 3.04 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 21.54 * 103.92 222.89 21.68 *
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0284 $.0305 $.0374
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities sector.
Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under the fund's
current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07, $.09
and $.20 per share, respectively. Expenses for the period ended March 31, 1998 reflect a reduction of approximately $.05, $.05
and $.06 for class A, class B and class M, respectively
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Nov. 3, 1997+
Per-share to March 31
operating performance (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $12.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .01 (d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.73
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.74
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 10.39 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $12,481
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a) (c) 1.00 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (a) .05 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 21.54 *
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0284
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities sector.
Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under the fund's
current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07, $.09
and $.20 per share, respectively. Expenses for the period ended March 31, 1998 reflect a reduction of approximately $.05, $.05
and $.06 for class A, class B and class M, respectively
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Nov. 3, 1997+
Per-share to March 31
operating performance (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $12.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .02 (d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.74
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.76
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.40
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 10.53 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,220
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a) (c) .90 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (a) .15 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 21.54 *
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0284
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities sector.
Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under the fund's
current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07, $.09
and $.20 per share, respectively. Expenses for the period ended March 31, 1998 reflect a reduction of approximately $.05, $.05
and $.06 for class A, class B and class M, respectively
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
Notes to financial statements
March 31, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam Global Growth and Income Fund (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 capital appreciation
and current income as a secondary objective by investing primarily in common
stocks with a significant portion of its assets in countries outside the
United States.
The fund offers class A, class B and class M shares. The fund began offering
class B and class M on November 3, 1997. 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.
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 fair market value, which is determined using the last
reported sale price, or, if no sales are reported -- as is the case of some
securities traded over-the-counter -- the last reported bid price. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. 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 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 gains and losses are included with the
net realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign currencies
and the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized appreciation and
depreciation of assets and liabilities in foreign currencies arise from
changes in the value of open forward currency contracts and assets and
liabilities other than investments at the period end, resulting from changes
in the exchange rate.
F) 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 current 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) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the six months ended March 31, 1998, the
fund had no borrowing against the line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
I) 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.
J) 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.
K) 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: 0.80% of the first $500 million of
average net assets, 0.70% of the next $500 million, 0.65% of the next $500
million, 0.60% of the next $5 billion, 0.575% of the next $5 billion, 0.555%
of the next $5 billion, 0.54% of the next $5 billion, and 0.53% thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through December 31, 1998, to the extent that
expenses of the fund (exclusive of brokerage commissions, interest, taxes,
deferred organizational and extraordinary expense, credits from Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. and payments under the Trust's distribution plan) would
exceed an annual rate of 1.45% of the fund's average net assets.
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Service, a division
of PFTC.
For the six months ended March 31, 1998, fund expenses were reduced by $8,049
under expense offset arrangements with PFTC. Investor servicing and custodian
fees reported in the Statement of operations exclude these credits. The fund
could have invested a portion of the assets utilized in connection with the
expense offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $100 has
been allocated to the fund and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B 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 of 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 currently limit payment by the fund to 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, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $80,221 and $4,995 from the sale of
class A and class M shares, respectively and $1,772 in contingent deferred
sales charges from redemption of class B shares. A deferred sales charges of
up to 1% is assessed on certain redemption of class A shares. For the six
months ended March 31, 1998, Putnam Mutual Funds Corp. acting as underwriter
received no monies from the redemption of class A shares.
Note 3
Purchases and sales of securities
During the six months ended March 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $27,050,238 and
$3,089,397 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, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
March 31, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 1,359,431 $16,484,907
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 24,453 286,584
- ------------------------------------------------------------
1,383,884 16,771,491
Shares
repurchased (275,373) (3,353,856)
- ------------------------------------------------------------
Net increase 1,108,511 $13,417,635
- ------------------------------------------------------------
Year ended
September 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 16,348 $177,118
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 29,497 296,547
- ------------------------------------------------------------
45,845 473,665
Shares
repurchased (7,804) (83,689)
- ------------------------------------------------------------
Net increase 38,041 $389,976
- ------------------------------------------------------------
For the period
November 3, 1997
(commencement of
operations) to
March 31, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 995,769 $12,084,225
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,707 124,308
- ------------------------------------------------------------
1,006,476 12,208,533
Shares
repurchased (74,422) (915,332)
- ------------------------------------------------------------
Net increase 932,054 $11,293,201
- ------------------------------------------------------------
For the period
November 3, 1997
(commencement of
operations) to
March 31, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 102,254 $1,251,451
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,071 12,478
- ------------------------------------------------------------
103,325 1,263,929
Shares
repurchased (12,295) (149,183)
- ------------------------------------------------------------
Net increase 91,030 $1,114,746
- ------------------------------------------------------------
At March 31, 1998, Putnam Investment, Inc. owned 218,597 of
class A shares (16.32% of class A shares outstanding) valued
at $2,931,386.
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
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Deborah F. Kuenstner
Vice President and Fund Manager
George W. Stairs
Vice President and Fund Manager
Hugh H. Mullin
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Global Growth and
Income 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 the principal amount
invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
SA063-42027 197/2HP/2HQ 5/98
