Putnam
International
Voyager
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
8-31-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Lipper Analytical Services ranked Putnam International Voyager Fund's
class A shares 15 out of 383 international funds for 2-year
performance as of September 30, 1998.
* "We believe many smaller international companies are currently
mispriced and we believe the fund is well positioned to take
advantage of this opportunity through its ability to buy growing and
undervalued smaller companies as well as those companies undergoing
restructurings or offering profitable products."
-- Omid Kamshad, portfolio manager
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
18 Financial statements
Past performance is not indicative of future results. Lipper is an
industry research firm whose rankings are based on total return
performance, vary over time, and do not reflect the effects of sales
charges. The fund's class A shares ranked 23 out of 489 funds for
one-year performance, as of 9/30/98. Performance of other share
classes will vary. The fund was not ranked over longer periods.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Putnam International Voyager Fund's ability to navigate the equity
markets beyond the borders of the United States for suitable investments
quite naturally led its managers to Europe during the fund's fiscal year
ended August 31, 1998. They did not completely ignore Asia or emerging
markets, but they found little to excite them in these troubled sectors.
Europe's continued economic strength, its vibrant consumer spending, and
the positive implications of Economic and Monetary Union simply offered
the best prospects in the search for undervalued stocks of companies
your fund's managers believe possess reasonably dependable earnings
growth.
Asia was represented in the portfolio, of course, mainly by companies
that report their earnings in U.S. dollars and that occupy niche
positions in their industries. Your fund's managers continue to view
Japan with caution.
In the following report, the management team discusses fiscal '98
strategy and performance and takes a look at prospects for the fiscal
year just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
October 21, 1998
Report from the Fund Managers
Omid Kamshad, lead manager
Justin M. Scott
Joshua Byrne
Nigel Hart
During the 12 months ended August 31, 1998, the investment environment
shifted from a tacit acknowledgment of a regional economic problem in
Southeast Asia to a worldwide focus on financial and currency market
instability and uncertainty. Despite this volatile environment, we
believe that Putnam International Voyager Fund is relatively well
positioned as it embarks on fiscal 1999. Your fund's portfolio of small
and midsize companies represents markets and industries we consider are
able to grow despite the current concerns in the world.
The Fund's current positioning reflects our disciplined investment
strategy of seeking companies outside the United States with dependable
earnings and compelling valuations. For the year ended August 31, 1998,
the fund had a total return of 11.77% at net asset value (5.36% at
public offering price). This compares favorably with the -0.14% return
of the Morgan Stanley Capital International EAFE Index. For more
performance information, including results for other share classes,
please turn to page 9.
* FOCUS REMAINS ON EUROPE, WHERE STRONG CONSUMER SPENDING IS DRIVING
ECONOMY
Despite economic contractions in much of the world outside the United
States, Europe has remained a beacon of solid economic growth. More
importantly, consumer spending has shown renewed strength and with the
approach of a single domestic market as a result of Economic and
Monetary Union (EMU) next year, it looks promising for the future.
Given the declining economic growth rates and lower corporate earnings
around the world, we focused the portfolio on the relative economic
strength of the European region, particularly on companies that we
believe have reasonably dependable earnings growth. As a result, we
targeted not only classic defensive companies such as utilities -- as
evidenced by the fund's large weighting in Milan-based electric and gas
distributor AEM SPA -- but also industries that stand to benefit from
strong consumer demand.
This reasoning accounts for many of the fund's positions in
telecommunications, retail, and media companies. One example is ESAT
Telecom Group of Ireland. This growing company is one of two Irish
mobile cellular operators, thus making it well positioned to take
advantage of nascent cellular subscription growth in Ireland. In our
opinion, an added bonus of investing in ESAT is that the market has not
accounted for the potential growth of its land-line business -- which we
believe could potentially create value for shareholders -- and is
considering only its cellular business.
We found Bouygues, a French company involved in construction,
telecommunications, and media, to be another attractive way to take
advantage of improving consumer demand and a growing European economy.
These industries benefit from a benign economic environment, as does
retailing. Two Italian retailers -- Industrie Natuzzi SPA is a furniture
manufacturer with sales across Europe and the United States and Marzotto
& Figli SPA, owner of the well-known Hugo Boss clothing line -- are also
in the portfolio. While these holdings, along with others discussed in
this report, were viewed favorably at the end of the period, all are
subject to review and adjustment in accordance with the fund's
investment strategy and may vary in the future.
[GRAPHIC OMITTED: horizontal bar chart of COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
Switzerland 16.0%
France 13.1%
Spain 8.5%
Italy 7.9%
Finland 7.6%
Footnote reads:
*Based on net assets as of 8/31/98. Holdings will vary over time.
* TARGETING EUROPEAN DEMAND FOR EQUITIES
With EMU fast approaching and concern about retirement savings on the
rise, more investors in Europe are beginning to invest in the region's
equity markets instead of their traditional asset choice, fixed-income
securities. This trend has already benefited the large, globally
oriented asset managers and banks in Europe; however, within the
universe of stocks we choose from, this trend is more apparent in Swiss
financial companies and in banks such as the Italian Popolare banks.
Swiss companies such as Julius Baer Holding AG and Verwaltungs-und
Privat-Bank AG, as well as Liechtenstein-based Liechtenstein Global
Trust AG, offer brand-name recognition and solid reputations among
investors. Additionally, they are not experiencing the fallout from
emerging markets trading and lending that has affected many larger
institutions.
* ASIA REMAINS DISAPPOINTING AS TROUBLES LINGER
Over the past year, the Asian financial crisis -- which was initially
centered in the emerging Southeast Asian nations and Korea -- spread to
the financial centers of Hong Kong and Singapore. The high interest
rates and the credit squeeze that occurred in Hong Kong and Singapore
then devastated property, finance, and other interest-rate influenced
companies.
For the most part, we concentrated on companies that have sales in U.S.
dollars and that occupy niche positions in their businesses. Some
examples included Asia Satellite Telecommunications and Smartone
Telecommunications, of Hong Kong as well as GP Batteries International
and Venture Manufacturing of Singapore. These companies have the
advantage of being dollar earners, while a large portion of their costs
are valued in the depreciated Asian currencies.
The fund continues to have a relatively small weighting in Japan. Within
our universe of stocks, we've found it especially difficult to find
Japanese companies that meet our fundamental stock selection criteria.
Many of the companies we have reviewed have managements that we believe
are not focused on raising returns, are not interested in returning
value to shareholders, and are, in fact, destroying value by investing
in businesses that can't even earn their cost of capital.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
AEM SPA (Italy)
Utilities
Bouygues S. A. (France)
Building and construction
Securicor Group PLC (United Kingdom)
Conglomerates
Verwaltungs-und Privat-Bank AG (Switzerland)
Insurance and finance
Julius Baer Holdings AG (Switzerland)
Insurance and finance
NRJ S.A. (France)
Broadcasting
Zellweger Luwa AG (Switzerland)
Business equipment
Publicitas Holding S.A. (Switzerland)
Advertising
Equant N.V. (Netherlands)
Business equipment
Liechtenstein Global Trust AG (Liechtenstein)
Insurance and finance
These holdings represent 18.1% of the fund's net assets as of 8/31/98.
Portfolio holdings will vary over time.
* STRATEGY FOR AN UNCERTAIN WORLD
With no signs of improvement in the Japanese economy and banking system,
uncertainty in the U.S. market, and the financial contagion affecting
emerging markets around the world, today's global environment can appear
to be a disconcerting place for investors. Nevertheless, we remain
optimistic about our ability to find attractive stocks within the market
segments in which your fund invests.
We will continue to look for stocks with the dual attraction of
dependable earnings growth and undervalued prices, relying on a rigorous
process of fundamental analysis and a global research team that is
experienced in the dynamics of small and midsize companies. We believe
many smaller international companies are currently mispriced and offer
attractive investment opportunities -- one that your fund is well
positioned to take advantage of.
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 8/31/98, 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. This fund invests all or a portion of its assets in small
to midsize companies. Such investments increase the risk of greater
price fluctuations.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
International Voyager Fund is designed for investors seeking long-term
capital appreciation substantially through common stocks of smaller-
capitalization companies located outside the United States.
TOTAL RETURN FOR PERIODS ENDED 8/31/98
Class A Class B Class M
(inception date) (12/28/95) (10/30/96) (10/30/96)
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------------
1 year 11.77% 5.36% 10.94% 5.94% 11.20% 7.32%
- ----------------------------------------------------------------------
Life of fund 54.96 46.03 52.07 49.07 52.87 47.51
Annual average 17.83 15.24 17.00 16.13 17.23 15.67
- ----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 8/31/98
MSCI EAFE Consumer
Index Price Index
- ----------------------------------------------------------------------
1 year -0.14% 1.62%
- ----------------------------------------------------------------------
Life of fund 10.73 6.45
Annual average 3.90 2.37
- ----------------------------------------------------------------------
Past performance is no assurance of future results. 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-year 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 net asset value. 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. Performance data reflects an
expense limitation currently or previously in effect. Without it, total
returns would have been lower.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment since
12/28/95
Fund's class A MSCI EAFE Consumer Price
Date shares at POP Index Index
12/28/95 9,525 10,000 10,000
3/31/96 10,233 10,289 10,143
6/30/96 10,654 10,452 10,208
9/30/96 10,776 10,438 10,279
12/31/96 11,250 10,604 10,332
3/31/97 11,575 10,437 10,423
6/30/97 13,401 11,792 10,443
9/30/97 13,782 11,710 10,501
12/31/97 13,103 10,793 10,507
3/31/98 15,724 12,380 10,566
6/30/98 16,232 12,512 10,618
8/31/98 $14,603 $11,073 $10,645
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $15,207 ($14,907 at CDSC); a $10,000
investment in the fund's class M shares would have been valued at
$15,287 ($14,751 at public offering price). See first page of
performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 8/31/98
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------
Income $0.036 $0.000 $0.001
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term 0.010 0.010 0.010
- ------------------------------------------------------------------------
Short-term 0.541 0.541 0.541
- ------------------------------------------------------------------------
Total $0.587 $0.551 $0.552
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
8/31/97 $11.66 $12.37 $11.60 $11.62 $12.04
- ------------------------------------------------------------------------
8/31/98 12.37 13.12 12.25 12.30 12.75
- ------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (12/28/95) (10/30/96) (10/30/96)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 1.07% -4.74% 0.24% -4.53% 0.59% -2.90%
- ------------------------------------------------------------------------
Life of fund 47.82 39.30 44.87 41.87 45.79 40.68
Annual average 15.21 12.76 14.37 13.51 14.64 13.16
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and principal value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost. See first page
of performance section for performance calculation method.
This performance information does not reflect market volatility that may
have occurred since the date of the information. More recent returns may
be more or less than those shown.
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 5.75% maximum 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
Europe, Australia and the Far East (EAFE) component of the Morgan
Stanley Capital International World Index is an unmanaged list of
international equity securities, excluding U.S., with all values
expressed in U.S. dollars. The index assumes reinvestment of all
distributions and interest payments and does not take in account
brokerage fees or taxes. Securities in the fund do not match those in
the index and performance of the fund will differ. It is not possible to
invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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Report of independent accountants
For the fiscal year ended August 31, 1998
To the Trustees of Putnam Investment Funds and
Shareholders of Putnam International Voyager Fund
(a series of Putnam Investment Funds)
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements
of operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Putnam International Voyager Fund (the "fund") at August 31, 1998, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at August
31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 9, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
August 31, 1998
COMMON STOCKS (94.4%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Canada (3.0%)
- --------------------------------------------------------------------------------------------
104,055 BCE Mobile Communications, Inc. (NON) $ 2,446,600
500 BCE Mobile Communications, Inc. 144A (NON) 11,756
62,734 Four Seasons Hotels, Inc. (NON) 1,477,033
108,332 National Bank of Canada (NON) 1,399,389
--------------
5,334,778
Denmark (1.6%)
- --------------------------------------------------------------------------------------------
27,500 Sydbank A/S 1,438,499
9,400 Vestas Wind Systems A/S (NON) 358,242
26,050 Vestas Wind Systems A/S 144A (NON) 992,789
--------------
2,789,530
Finland (7.6%)
- --------------------------------------------------------------------------------------------
44,877 Helsingin Puhelin Oyj (Helsinki Telephone Corp.)-Class E 1,972,781
17,800 Helsingin Puhelin Oyj (Helsinki Telephone Corp.) 144A 782,483
58,264 Huhtamaki I Free 2,670,261
57,541 KCI Konecranes International PLC 2,314,212
59,864 Orion-yhtyma Class B 1,455,782
73,825 Sampo Insurance Co., Ltd. Class A 2,692,932
242,600 Sponda Oyj 144A (NON) 1,656,422
--------------
13,544,873
France (13.2%)
- --------------------------------------------------------------------------------------------
19,453 Bouygues S. A. 3,724,166
27,900 Chargeurs S.A. 1,743,720
17,946 ISIS Holdings 1,467,300
1,200 ISIS Holdings 144A 98,114
11,700 M6 Metropole Television 1,889,047
16,648 NRJ S.A. 2,989,730
42,197 Scor 2,645,132
15,008 Societe Television Francaise 1 2,222,277
13,575 SPIR Communication 920,179
31,600 Strafor-Facom S.A. 2,446,624
59,979 TRANSGENE S.A. (NON) 907,182
16,850 Union des Assurances Federales 2,255,231
--------------
23,308,702
Germany (5.5%)
- --------------------------------------------------------------------------------------------
20,720 Axa Colonia Konzern AG 2,359,237
25,600 BERU AG (NON) 580,063
42,850 BERU AG 144A (NON) 970,925
15,991 Hannover Rueckversicherungs AG 1,816,228
17,600 Hawesko Holding AG 921,833
13,197 Kamps AG (NON) 552,223
30,200 Kamps AG 144A (NON) 1,263,706
1,966 Winkler & Duennebier AG (NON) 78,349
29,500 Winkler & Duennebier AG 144A (NON) 1,175,633
--------------
9,718,197
Hong Kong (3.4%)
- --------------------------------------------------------------------------------------------
565,000 Asia Satellite Telecommunications Holdings Ltd. 594,330
644,000 Johnson Electric Holdings Ltd. 1,088,877
575,000 Li & Fung Ltd. 675,353
566,000 Lui Chong Hing Bank Ltd. 297,691
87,800 Peak International Ltd. 1,048,113
536,000 Smartone Telecommunications 1,127,649
358,000 VTech Holdings Ltd. 1,256,821
--------------
6,088,834
Ireland (3.0%)
- --------------------------------------------------------------------------------------------
81,400 Esat Telecom Group PLC (NON) 1,790,800
346,510 Greencore Group PLC 1,383,836
271,700 Irish Life PLC 2,150,768
--------------
5,325,404
Italy (7.9%)
- --------------------------------------------------------------------------------------------
3,608,733 AEM SPA 144A 4,409,518
134,500 Banca Popolare Commercio de Industria SPA 2,647,363
83,741 Banca Popolare di Bergamo SPA 1,785,831
46,200 Banca Popolare di Brescia SPA 1,061,135
70,914 Industrie Natuzzi SPA ADR 1,613,294
144,900 Marzotto & Figli SPA 1,620,207
221,700 Unicem SPA 870,188
--------------
14,007,536
Japan (3.6%)
- --------------------------------------------------------------------------------------------
20,600 Aiful Corp. 926,598
47,000 Disco Corp. 1,033,700
61,000 Mitsumi Electric Company, Ltd. 1,133,877
298,000 Nikko Securities Co. Ltd. 938,716
25,000 Nippon Broadcasting System 984,392
39,000 Taiyo Ink Manufacturing 1,405,605
--------------
6,422,888
Liechtenstein (1.5%)
- --------------------------------------------------------------------------------------------
2,711 Liechtenstein Global Trust AG 2,741,060
Netherlands (6.5%)
- --------------------------------------------------------------------------------------------
25,900 Beter Bed Holding N.V. 914,225
38,164 Brunel International N.V. 1,270,145
65,700 Equant N.V. (NON) 2,771,588
64,771 Nutreco Holding N.V. 2,318,966
13,978 Nutreco Holding N.V. 144A 500,448
49,917 Samas Groep N.V. 2,642,976
48,400 Smit International N.V. 1,025,062
--------------
11,443,410
New Zealand (0.2%)
- --------------------------------------------------------------------------------------------
309,400 Fletcher Challenge Building 359,110
Norway (1.2%)
- --------------------------------------------------------------------------------------------
197,000 Merkantildata ASA 2,217,413
Poland (1.0%)
- --------------------------------------------------------------------------------------------
69,200 Bank Handlowy 144A GDS 768,889
43,500 Bank Handlowy 144A 483,333
45,100 Bank Handlowy W Warszawie, GDR 480,315
--------------
1,732,537
Portugal (2.0%)
- --------------------------------------------------------------------------------------------
51,800 Cimpor-Cimentos de Portugal, SGPS, S.A. 1,566,996
11,900 Telecel-Comunicacaoes Pessoais, S.A. 1,948,612
--------------
3,515,608
Singapore (1.1%)
- --------------------------------------------------------------------------------------------
2,981,500 Courts Ltd. 420,522
247,000 GP Batteries International Ltd. 270,341
508,000 Keppel Bank 289,467
370,000 Venture Manufacturing Ltd. (NON) 939,351
--------------
1,919,681
Spain (8.5%)
- --------------------------------------------------------------------------------------------
12,300 Azkoyen S. A. 1,748,432
41,422 Banco Pastor S.A. 2,211,504
44,512 Cementos Portland, S.A. 1,550,525
76,773 Centros Comerciales Continente, S.A. 2,016,011
18,448 CF Alba Spain S. A. 2,125,573
107,627 Inmobiliaria Metropolitana Vasco Central S.A. 2,667,604
22,200 Miquel Y Costas S.A. 832,797
80,130 Superdiplo S.A. (NON) 1,986,073
--------------
15,138,519
Sweden (1.5%)
- --------------------------------------------------------------------------------------------
311,200 Hufvudstaden AB Class A 1,023,684
57,875 Seco Tools AB Class B 1,652,340
--------------
2,676,024
Switzerland (16.0%)
- --------------------------------------------------------------------------------------------
7,761 Danzas Holding AG 2,097,568
6,649 Edipresse S.A. 2,128,786
3,410 Forbo Holding AG 1,536,036
3,836 Georg Fischer AG 1,156,383
2,997 Hilti AG 2,035,385
1,098 Julius Baer Holdings AG 3,043,659
2,354 Kuehne & Nagel Intl. AG 1,566,071
9,333 Publicitas Holding S.A. 2,781,143
848 SAIA-Burgess Electronics AG 196,868
7,000 SAIA-Burgess Electronics AG 144A 1,625,087
5,925 Sairgroup AG 1,476,117
8,128 Sika Finanz AG 2,579,781
1,083 Verwaltungs-und Privat-Bank AG 3,227,235
4,291 Zellweger Luwa AG 2,973,666
--------------
28,423,785
United Kingdom (6.1%)
- --------------------------------------------------------------------------------------------
1,194,413 Aegis Group PLC 1,773,422
298,100 Aegis Group PLC 144A 442,608
29,250 ARM Holdings PLC (NON) 564,336
461,461 Avis Europe PLC 144A ADR 1,858,063
375,000 Dialogic Corp. PLC (NON) 1,207,944
402,680 Securicor Group PLC (NON) 3,512,996
151,064 Viridian Group PLC 1,394,048
--------------
10,753,417
--------------
Total Common Stocks (cost $165,240,873) $ 167,461,306
SHORT-TERM INVESTMENTS (5.5%) (a) (cost $9,766,568)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------
$9,765,000 Interest in $750,000,000 joint tri-party repurchase agreement
dated August 31, 1998 with Goldman Sachs due
September 1, 1998 with respect to various
U.S. Treasury obligations -- maturity value of $9,766,568
for an effective yield of 5.78% $ 9,766,568
- --------------------------------------------------------------------------------------------
Total Investments (cost $175,007,441) (b) $ 177,227,874
- --------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $177,379,628.
(b) The aggregate identified cost on a tax basis is $175,851,360, resulting in gross
unrealized appreciation and depreciation of $18,727,320 and $17,350,806, respectively,
or net unrealized appreciation of $1,376,514.
(NON) 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, GDR or GDS after the name of a foreign holding stands for American Depository
Receipts, Global Depository Receipts or Global Depository Shares, respectively,
representing ownership of foreign securities on deposit with a domestic custodian bank.
The fund had the following industry group concentration greater than 10% at
August 31, 1998 (as a percentage of net assets):
Insurance and Finance 21.2%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
August 31, 1998
<S> <C>
Assets
- -------------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $175,007,441) (Note 1) $177,227,874
- --------------------------------------------------------------------------------------------------------
Cash 236
- --------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 195,481
- --------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,095,252
- --------------------------------------------------------------------------------------------------------
Receivable for securities sold 5,652,088
- --------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,024
- --------------------------------------------------------------------------------------------------------
Total assets 184,173,955
Liabilities
- --------------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 386,701
- --------------------------------------------------------------------------------------------------------
Payable for securities purchased 4,636,629
- --------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 950,773
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 568,324
- --------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 80,250
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 666
- --------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,190
- --------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 122,330
- --------------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 55
- --------------------------------------------------------------------------------------------------------
Other accrued expenses 47,409
- --------------------------------------------------------------------------------------------------------
Total liabilities 6,794,327
- --------------------------------------------------------------------------------------------------------
Net assets $177,379,628
Represented by
- --------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $171,403,327
- --------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (131,777)
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 3,973,319
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 2,134,759
- --------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $177,379,628
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($95,404,117 divided by 7,710,988 shares) $12.37
- --------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.37)* $13.12
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($73,176,320 divided by 5,973,738 shares)** $12.25
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($8,799,191 divided by 715,237 shares) $12.30
- --------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.30)* $12.75
- --------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales
charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended August 31, 1998
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $298,197) $2,404,252
- --------------------------------------------------------------------------------------------------------
Interest 563,606
- --------------------------------------------------------------------------------------------------------
Total investment income 2,967,858
Expenses:
- --------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,604,682
- --------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 496,755
- --------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 15,681
- --------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 6,944
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 176,161
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 567,246
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 48,519
- --------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 246
- --------------------------------------------------------------------------------------------------------
Reports to shareholders 19,266
- --------------------------------------------------------------------------------------------------------
Registration fees 22,979
- --------------------------------------------------------------------------------------------------------
Auditing 26,618
- --------------------------------------------------------------------------------------------------------
Legal 4,478
- --------------------------------------------------------------------------------------------------------
Postage 27,491
- --------------------------------------------------------------------------------------------------------
Other 12,838
- --------------------------------------------------------------------------------------------------------
Total expenses 3,029,904
- --------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (54,171)
- --------------------------------------------------------------------------------------------------------
Net expenses 2,975,733
- --------------------------------------------------------------------------------------------------------
Net investment loss (7,875)
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 4,010,399
- --------------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (218,326)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 10,905
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 926,359
- --------------------------------------------------------------------------------------------------------
Net gain on investments 4,729,337
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $4,721,462
- --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended August 31
------------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment loss $ (7,875) $ (55,058)
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 3,792,073 5,150,993
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
asset and liabilities in foreign currencies 937,264 1,045,488
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,721,462 6,141,423
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------------
From net investment income
Class A (159,691) (61,397)
- --------------------------------------------------------------------------------------------------------
Class B -- (25,675)
- --------------------------------------------------------------------------------------------------------
Class M (432) (3,552)
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (2,453,405) (33,131)
- --------------------------------------------------------------------------------------------------------
Class B (2,132,632) (14,909)
- --------------------------------------------------------------------------------------------------------
Class M (237,711) (1,855)
- --------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 98,406,679 70,805,726
- --------------------------------------------------------------------------------------------------------
Total increase in net assets 98,144,270 76,806,630
Net assets
- --------------------------------------------------------------------------------------------------------
Beginning of year 79,235,358 2,428,728
- --------------------------------------------------------------------------------------------------------
End of year (including distributions in
excess and undistributed
net investment income of $131,777
and $236,529, respectively) $177,379,628 $79,235,358
- --------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 28, 1995+
operating performance Year ended August 31 to Aug. 31
- -------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.66 $9.47 $8.50
- -------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .05 .02 .04
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.25 2.28 .93
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.30 2.30 .97
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.07) --
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.55) (.04) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.59) (.11) --
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.37 $11.66 $9.47
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 11.77 24.44 11.41*
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $95,404 $40,687 $2,429
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.92 2.10 (d) 1.26*(d)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .35 .15 (d) .44*(d)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 89.50 126.65 55.87*
- -------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expense to average net assets includes amounts paid through expense offset and
brokerage service arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expense for class A reflect a reduction of approximately $0.08 per share for the year ended
August 31, 1996. Expenses for the period ended August 31, 1997 reflect a reduction of $0.02, $0.01,
and $0.02 for class A, class B, and class M, respectively.
(e) Distributions from net investment income amounted to less than $0.01 per share for class M.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- -------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended October 30, 1996+
operating performance August 31 to August 31
- -------------------------------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.60 $9.82
- -------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.05) (.06)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.25 1.94
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.20 1.88
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.06)
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.55) (.04)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.55) (.10)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.25 $11.60
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 10.94 19.35*
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $73,176 $34,463
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.67 2.39*(d)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.43) (.50)*(d)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 89.50 126.65
- -------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expense to average net assets includes amounts paid through expense offset and
brokerage service arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expense for class A reflect a reduction of approximately $0.08 per share for the year ended
August 31, 1996. Expenses for the period ended August 31, 1997 reflect a reduction of $0.02, $0.01,
and $0.02 for class A, class B, and class M, respectively.
(e) Distributions from net investment income amounted to less than $0.01 per share for class M.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- -------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended October 30, 1996+
operating performance August 31 to August 31
- -------------------------------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.62 $9.82
- -------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.02) (.03)(c)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.25 1.93
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.23 1.90
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (e) (.06)
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.55) (.04)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.55) (.10)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.30 $11.62
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 11.20 19.56*
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $8,799 $4,086
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.42 2.18*(d)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.18) (.26)*(d)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 89.50 126.65
- -------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expense to average net assets includes amounts paid through expense offset and
brokerage service arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expense for class A reflect a reduction of approximately $0.08 per share for the year ended
August 31, 1996. Expenses for the period ended August 31, 1997 reflect a reduction of $0.02, $0.01,
and $0.02 for class A, class B, and class M, respectively.
(e) Distributions from net investment income amounted to less than $0.01 per share for class M.
</TABLE>
Notes to financial statements
August 31, 1998
Note 1
Significant accounting policies
Putnam International Voyager 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-ended
management investment company. The fund seeks long-term capital
appreciation by investing primarily in equity securities of a number of
different countries and under normal market conditions it will invest
primarily in at least three different countries other than 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
following procedures approved by the Trustees. Foreign 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.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. 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, and 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) 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 year ended
August 31, 1998, the fund had no borrowings against the line of credit.
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, 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.
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. These differences include temporary and permanent
differences of losses on wash sale transactions, foreign currency gains
and losses, post October loss deferrals, organization costs, foreign
taxes and unrealized gains and losses on passive foreign investment
companies. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations. For the year
ended August 31, 1998, the fund reclassified $200,308 to decrease
undistributed net investment income and $3 to decrease paid-in-capital,
with an increase to accumulated net realized gains of $200,311. The
calculation of net investment income per share in the financial
highlights table excludes these adjustments.
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 $3,662. These expenses are being amortized
on projected net asset levels over a five-year period. The fund will
reimburse Putnam Management for the payment of these expenses.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 1.20% of the
first $500 million of average net assets, 1.10% of the next $500
million, 1.05% of the next $500 million, 1.00% of the next $5 billion,
0.975% of the next $5 billion, 0.955% of the next $5 billion, 0.94% of
the next $5 billion and 0.93% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through August 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 subsidiary of
Putnam Investments, Inc. and payments under the Trust's distribution
plan) would exceed an annual rate of 1.85% 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 Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the year ended August 31, 1998 fund expenses were reduced by $54,171
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.
Each Trustee of the fund receives an annual Trustee fee, of which $790
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 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 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 year ended August 31, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $157,672 and $9,402 from the
sale of class A and class M shares, respectively and received $82,243 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended August 31, 1998, Putnam Mutual Funds
Corp., acting as underwriter received $63 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended August 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $198,824,126 and
$109,841,176 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 August 31, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
August 31, 1998
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 6,331,000 $82,848,055
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 224,603 2,461,648
- ----------------------------------------------------
6,555,603 85,309,703
Shares
repurchased (2,333,574) (30,360,221)
- ----------------------------------------------------
Net increase 4,222,029 $54,949,482
- ----------------------------------------------------
Year ended
August 31, 1997
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 5,364,541 $58,632,380
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,877 88,147
- ----------------------------------------------------
5,373,418 58,720,527
Shares
repurchased (2,140,948) (23,963,526)
- ----------------------------------------------------
Net increase 3,232,470 $34,757,001
- ----------------------------------------------------
Year ended
August 31, 1998
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 4,028,457 $51,974,706
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 180,293 1,967,001
- ----------------------------------------------------
4,208,750 53,941,707
Shares
repurchased (1,205,658) (15,283,453)
- ----------------------------------------------------
Net increase 3,003,092 $38,658,254
- ----------------------------------------------------
For the period October 30, 1996
(commencement of operations) to
August 31, 1997
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 3,287,600 $35,748,997
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,637 36,113
- ----------------------------------------------------
3,291,237 35,785,110
Shares
repurchased (320,591) (3,515,037)
- ----------------------------------------------------
Net increase 2,970,646 $32,270,073
- ----------------------------------------------------
Year ended
August 31, 1998
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 482,034 $6,367,558
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 21,553 235,566
- ----------------------------------------------------
503,587 6,603,124
Shares
repurchased (139,901) (1,804,181)
- ----------------------------------------------------
Net increase 363,686 $4,798,943
- ----------------------------------------------------
For the period October 30, 1996
(commencement of operations) to
August 31, 1997
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 379,922 $4,076,595
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 570 5,665
- ----------------------------------------------------
380,492 4,082,260
Shares
repurchased (28,941) (303,608)
- ----------------------------------------------------
Net increase 351,551 $3,778,652
- ----------------------------------------------------
At August 31, 1998, Putnam Investments, Inc. owned
250,542 of class A shares (3.2% of class A shares
outstanding), valued at $3,099,205.
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $3,760,387 as capital gain, which includes
$47,233 as 20% capital gain, for its taxable year ended August 31, 1998.
For the period, interest and dividends from foreign countries were
$2,683,813. Taxes paid to foreign countries were $298,197.
The Form 1099 you receive in January 1999 will show the tax status of
all distributions paid to your account in calendar 1998.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities 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
Research 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
LIFESTAGE SM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments to help maximize your return and reduce your risk.
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.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
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
John J. Morgan, Jr.
Vice President
Omid Kamshad
Vice President and Fund Manager
Justin M. Scott
Vice President and Fund Manager
Joshua Byrne
Vice President and Fund Manager
Nigel Hart
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
International Voyager 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
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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AN011-45950 8/98
