Putnam
International
New
Opportunities
Fund
SEMIANNUAL REPORT
March 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam International New Opportunities Fund's portfolio management
team looks for international companies that exhibit superior rates of
revenue and earnings growth. We invest in those rapidly growing companies
whose competitive positioning suggests growth is sustainable or we invest
where we observe catalysts for positive earnings revisions."
-- Robert Swift, fund manager
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
18 Financial statements
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 International New Opportunities 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
Robert J. Swift
Ami Kuan Danoff
Debbie Farrell
Jack Chang
Stephen Oler
The six months ended March 31, 1998, were a period of stark contrasts in the
international financial markets. The first three months of the period saw
world markets work through the volatility associated with the Asian financial
crisis. The second three months, however, represented a period of recovery in
the emerging markets and solid growth in the established markets with the
exception of Japan.
It was within this rapidly changing environment that Putnam International New
Opportunities Fund successfully executed its strategy of seeking high-growth
international companies with strong revenue and earnings growth rates as well
as a proprietary or superior position in their industries. For the semiannual
period, the fund's class A shares had a total return of 3.68% at net asset
value (-2.28% at public offering price). For performance of other share
classes and over longer periods, please turn to page 9.
At Putnam, we evaluate the fund's performance against the returns of the
established markets, as represented by the Morgan Stanley Capital
International EAFE Index, and the returns of the emerging markets, as
represented by the Morgan Stanley Capital International Emerging Markets
Index. For comparison purposes, the MSCI EAFE Index had a 4.93% total return
for the past six months and the MSCI Emerging Markets Index had a -13.34%
total return for the same period.
* TECHNOLOGY EPITOMIZES SEESAW PERIOD
As Asia's economic and financial problems began to unfold, investors
considered what areas of business were likely to feel the greatest impact.
Technology companies, which manufacture and distribute extensively in Asia,
appeared to be first on the hit list. Price cuts by industry leaders such as
Intel and poor earnings reports from semiconductor companies such as SGS
Thomson only reinforced this notion.
Your fund's focus on growth meant that it was -- and continues to be --
heavily invested in the many industries that make up the technology sector.
This commitment dampered performance in the final quarter of 1997. However, in
the first quarter of 1998, our patience paid off. Many segments of technology
bounced back as investors began to recognize the inherent strengths of some
technology-related firms. Additionally, in several cases, the weakness in the
first half of the period gave us a chance to add to positions in companies we
believe have significant growth prospects.
For example, we added to the fund's holdings in companies that provide service
and outsourcing to the information technology industry. Some of these
companies include Merkantildata, a Norwegian information technology service
company, as well as U.K. companies Sema and CMG. We believe these companies
will remain strong as their clients' information technology needs continue to
grow and require outsourcing. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all are subject to review and adjustment in accordance with the fund's
investment strategy and may vary in the future.
Other technology companies as well as those in telecommunications rebounded in
early 1998. Vodafone remains a significant cellular telephone holding in the
portfolio. This U.K. company has enjoyed solid performance as a result of
better-than-expected cellular subscriber growth as well as stable pricing
power. Telecommunications equipment company Nokia of Finland and
semiconductor-related manufacturer ASM Lithography of the Netherlands also
experienced solid rebounds.
[GRAPHIC BAR CHART OMITTED: COUNTRY ALLOCATIONS]
COUNTRY ALLOCATIONS*
United Kingdom 19.9%
Italy 8.0%
Canada 6.9%
Japan 6.6%
Brazil 6.1%
United States 5.7%
Other 5.4%
Netherlands 4.4%
Germany 4.1%
Footnote reads:
*Based on net assets as of 3/31/98. Holdings will vary over time.
*LOWER EUROPEAN INTEREST RATES HELP GROWTH COMPANIES IN ITALY, SPAIN
With each passing month bringing us closer to Europe's Economic and Monetary
Union (EMU) in January 1999, the Continent has enjoyed low or falling interest
rates and rising economic growth -- all despite stubbornly high unemployment
rates. The so-called peripheral countries of Ireland, Spain, Portugal, and
Italy have particularly benefited from this economic environment; their growth
rates have led the region and their interest rates have fallen more in line
with those of the core countries of France and Germany. This convergence
effect has occurred because interest rates and monetary policy will be unified
under EMU.
Your fund has taken advantage of this phenomenon by buying stocks in growing
companies in southern Europe. For example, the Italian banking sector has been
a major beneficiary of the lower interest-rate environment. Italian banks in
the portfolio such as Banca di Roma and Credito Italiano performed
exceptionally well. During the period, we also added Mapfre Vida of Spain. The
company, a leading insurer in Spain, benefited not only from the lower
interest rates but also from the rapid growth in the Spanish private pension
savings market.
* APPROACHING ASIA WITH CAUTION, SEEKING OPPORTUNITIES IN LATIN AMERICA
The start of 1998 brought some relief from the stock and currency
deterioration in Asia that dominated the second half of calendar 1997. Over
the past six months, the fund remained underweighted in Asia as well as in the
emerging markets in general -- decisions that helped the fund's performance
relative to its benchmark. We believe Asia's stock markets, currencies, and
interest rates will remain volatile over the near term. Nevertheless, we are
cautiously evaluating several investment opportunities. In general, we are
looking for resilient companies with the ability to generate cash flows and to
increase their market shares.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
SEMA Group PLC (United Kingdom)
Computer services
Vodafone Group PLC (United Kingdom)
Communications
Telecom Italia SPA (Italy)
Banks and finance
Nestle S.A. (Switzerland)
Food and beverages
Compass Group PLC (United Kingdom)
Business equipment and services
Telecomunicacoes Brasileiras S.A. ADR (Brazil)
Telecommunications
Hellenic Telecommunication Organization S.A. (Greece)
Satellite services
HSBC Holdings PLC (United Kingdom)
Banks and finance
Companhia Energetica de Minas Gerais (CEMIG) ADR (Brazil)
Electric utilities
Zeneca Group PLC (United Kingdom)
Biotechnology
Footnote reads:
These holdings represent 23.2% of the fund's net assets as of 3/31/98.
Portfolio holdings will vary over time.
One stock we purchased early in 1998 was the Indonesian company Gudang Garam,
one of the country's leading domestic consumer goods producers. Gudang Garam
had a healthy balance sheet and strong cash flow and it showed the ability to
take advantage of the uncertainty in Asia to gain market share. Resorts World
of Malaysia also exemplified many of the qualities we sought. This gaming
company, which operates a resort within driving distance of the Malaysian
capital, Kuala Lumpur, offered strong cash flow and a seasoned management. As
these stocks reached our price targets, we sold the fund's positions.
Latin America, which enjoyed a robust 1997, was hit by higher interest rates
and the higher risk premium assigned to emerging-markets securities following
the Asian problem. We sought companies in the region that, despite high
interest rates and volatility, were likely to sustain stable growth rates.
During the period, we purchased several Brazilian stocks that met these
criteria. Additionally, after the strong performance of Latin American stocks
in 1997, we took the opportunity to lock in profits from sales of Mexican
stocks Alfa SA, Cemex, and Cifra SA.
* POSITIVE BUT CAUTIOUS OUTLOOK
As a result of globalization, demand for the products and services of growing
companies is coming from markets that would have been unimaginable 5 or 10
years ago. We believe, therefore, that there are many investment opportunities
for growth investors. Going forward, we will continue to seek companies
anywhere in the world that exhibit superior sales rates and earnings growth as
well as strong competitive positions. Additionally, we remain committed to a
strict buy-sell discipline that positions the portfolio to take advantage of
exciting, changing growth opportunities in diverse international markets.
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. This fund invests all or a portion of its
assets in small to midsize companies. Such investments increase the risk of
greater price fluctuations. 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
International New Opportunities Fund is designed for investors seeking
long-term capital appreciation primarily through common stocks of
international companies.
TOTAL RETURN FOR PERIODS ENDED 3/31/98
Class A Class B Class M
(inception date) (1/3/95) (7/21/95) (7/21/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 3.68% -2.28% 3.26% -1.42% 3.48% -0.15%
- ------------------------------------------------------------------------------
1 year 11.65 5.23 10.76 5.76 11.13 7.21
- ------------------------------------------------------------------------------
Life of fund 66.70 57.08 62.77 59.77 64.31 58.54
Annual average 17.08 14.96 16.23 15.56 16.56 15.28
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/98
MSCI
MSCI Emerging Consumer
EAFE Markets Price
Index Index Index
- ------------------------------------------------------------------------------
6 months 4.93% -13.34% 0.62%
- ------------------------------------------------------------------------------
1 year 16.85 -14.15 1.38
- ------------------------------------------------------------------------------
Life of fund 30.87 -10.68 8.35
Annual average 8.64 -3.42 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) 1 1 1
- ------------------------------------------------------------------------------
Income $0.008 -- --
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.441 $0.441 $0.441
- ------------------------------------------------------------------------------
Short-term 0.668 0.668 0.668
- ------------------------------------------------------------------------------
Total $1.117 $1.109 $1.109
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
9/30/97 $13.60 $14.43 $13.45 $13.51 $14.00
- ------------------------------------------------------------------------------
3/31/98 12.79 13.57 12.59 12.68 13.14
- ------------------------------------------------------------------------------
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
Morgan Stanley Capital International (MSCI) Emerging Markets Index is an
unmanaged list of equity securities from emerging markets with all values
expressed in U.S. dollars.
MSCI EAFE Index is an index of approximately 1,045 equity securities
issued by companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All values are expressed
in U.S. dollars.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
Portfolio of investments owned
March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (94.9%) *
NUMBER OF SHARES VALUE
<S> <C> <C>
Airlines (0.2%)
- ------------------------------------------------------------------------------------------------------------
120,500 Ryanair Holdings PLC ADR (Ireland) + $4,458,500
Automotive (0.9%)
- ------------------------------------------------------------------------------------------------------------
14,824 Bayerische Motoren Werke (BMW) AG (Germany) 16,408,704
Automotive Parts (0.7%)
- ------------------------------------------------------------------------------------------------------------
1,577,100 Kwik-Fit Holdings PLC (United Kingdom) 12,307,010
Banks & Finance (13.6%)
- ------------------------------------------------------------------------------------------------------------
2,222,100 ABSA Group Ltd. (South Africa) 20,196,893
199,000 Acom Co., Ltd. (Japan) 9,944,022
107,700 Aiful Corp. (Japan) 6,798,019
3,323,100 Banca di Roma (Italy) + 5,614,573
1,043,600 Banca San Paolo di Brescia SPA (Italy) 5,364,213
450,100 Banco Bilbao Vizcaya, S.A. (Spain) + 21,154,485
649,400 Banco Frances del Rio de la Plata ADR (Argentina) 19,563,175
4,000,000 Credito Italiano SPA (Italy) 19,791,189
2,222,000 Dao Heng Bank Group Ltd. (Hong Kong) 6,567,177
15,000,000 Grupo Financiero Bancomer, S.A. de C.V. Class B (Mexico) 8,848,413
1,199,500 HSBC Holdings PLC (United Kingdom) 39,045,020
82,800 National Bank of Greece, S.A. (Greece) + 9,074,681
573,500 Newcourt Credit Group, Inc. (Canada) 28,705,323
502,900 Power Corp. of Canada (Canada) 19,516,845
71,100 Shohkoh Fund & Co. Ltd. (Japan) 23,774,806
643,730 Skandinaviska Enskilda Bank Class A (Sweden) 9,368,229
372,000 State Bank of India 144A GDR (India) 6,510,000
--------------
259,837,063
Basic Industrial Products (0.5%)
- ------------------------------------------------------------------------------------------------------------
360,400 Ispat International N.V. (Netherlands) + 10,382,178
Building and Construction (0.5%)
- ------------------------------------------------------------------------------------------------------------
319,100 NBM-Amsetlland N.V. (Netherlands) + 9,989,111
Business Equipment and Services (7.6%)
- ------------------------------------------------------------------------------------------------------------
3,655,000 Aurora Corp. (Taiwan) + 8,078,886
115,500 Bellsystem 24, Inc. (Japan) 15,795,768
373,600 Brunel International N.V. (Netherlands) 11,121,183
1,272,800 Capita Group PLC (United Kingdom) 9,677,162
2,856,400 Compass Group PLC (United Kingdom) 48,565,727
1,168,800 Hays PLC (United Kingdom) 20,956,385
135,100 Meitec (Japan) 4,233,297
472,950 Securitas AB Class B (Sweden) 16,069,854
211,900 Select Appointments Holdings PLC ADR (United Kingdom) 5,350,475
242,400 Serco Group PLC (United Kingdom) + 5,277,807
--------------
145,126,544
Cable Television (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,070,300 Flextech PLC (United Kingdom) + 9,639,860
Cellular Communications (5.6%)
- ------------------------------------------------------------------------------------------------------------
370,400 NetCom Systems AB Class B (Sweden) + 10,780,892
129,171 Telecel-Comunicacaoes Pessoais, S.A. (Portugal) + 20,072,018
4,402,400 Telecom Italia Mobile SPA (Italy) 23,693,113
4,997,365 Vodafone Group PLC (United Kingdom) 52,191,231
--------------
106,737,254
Computer Services (7.7%)
- ------------------------------------------------------------------------------------------------------------
69,300 Atos S.A. (France) + 11,533,204
345,200 CMG PLC (United Kingdom) 15,496,543
375,000 CGI Group, Inc. (Canada) + 9,781,458
230,400 Enator AB (Sweden) 5,425,273
136,100 Enator AB 144A (Sweden) 3,204,773
516,300 Getronics Electric N.V. (Netherlands) 22,185,928
123,000 Merkantildata ASA (Norway) 6,129,380
304,000 Misys PLC (United Kingdom) 15,137,923
1,460,000 SEMA Group PLC (United Kingdom) 57,453,993
--------------
146,348,475
Computer Software (1.9%)
- ------------------------------------------------------------------------------------------------------------
629,200 Fuji Soft ABC, Inc. (Japan) 20,614,014
38,240 SAP AG (Germany) 15,275,302
--------------
35,889,316
Conglomerates (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,551,900 Grupo Carso S.A. de C.V. (Mexico) 9,482,820
Consumer Non-Durables (1.1%)
- ------------------------------------------------------------------------------------------------------------
4,217,000 Kimberly-Clark de Mexico, S.A. de C.V. Class A (Mexico) 21,803,525
Consumer Products & Services (0.5%)
- ------------------------------------------------------------------------------------------------------------
55,480 Adidas AG (Germany) 9,848,263
Containers (0.5%)
- ------------------------------------------------------------------------------------------------------------
392,641 Tomra Systems ASA (Norway) 10,428,437
Electric Utilities (1.6%)
- ------------------------------------------------------------------------------------------------------------
648,500 Companhia Energetica de Minas Gerais (CEMIG) ADR (Brazil) 31,290,125
Electronics and Electrical Equipment (3.9%)
- ------------------------------------------------------------------------------------------------------------
314,000 Aiwa Co. Ltd. (Japan) 8,824,470
302,000 Assa Abloy AB Class B (Sweden) 9,544,546
99,600 Keyence Corp (Japan) 13,770,970
414,700 Leitch Technology Corp. (Canada) + 8,887,473
1,464,000 NEC Corp. (Japan) 14,741,214
87,200 Samsung Electronics Co. (South Korea) 4,599,401
435,300 Siebe PLC (United Kingdom) 9,477,843
31,300 Singulus Technologies AG (Germany) + 3,642,490
--------------
73,488,407
Food and Beverages (3.7%)
- ------------------------------------------------------------------------------------------------------------
1,282,300 Fomento Economico Mexicano S.A. de C.V. Class B (Mexico) 9,327,188
41,400 Itoen, Ltd. (Japan) 1,210,145
25,638 Nestle S.A. (Switzerland) 49,085,438
260,000 Panamerican Beverages Inc. Class A (Mexico) 10,432,500
--------------
70,055,271
Gaming (0.1%)
- ------------------------------------------------------------------------------------------------------------
839,000 Berjaya Sports Toto Berhad (Malaysia) 2,275,644
Insurance (3.1%)
- ------------------------------------------------------------------------------------------------------------
171,300 Aegon N.V. (Netherlands) 20,849,121
221,480 Mapfre Vida Seguros, S.A. (Spain) 10,932,045
10,354,000 National Mutual Asia Ltd. (Hong Kong) 8,552,386
210,000 Sampo Insurance Co. Ltd. Class A (Finland) 8,313,569
161,900 Skandia Forsakrings AB (Sweden) 10,536,888
--------------
59,184,009
Medical Supplies and Devices (0.2%)
- ------------------------------------------------------------------------------------------------------------
1,369 Disetronic Holding AG (Switzerland) 3,985,981
Metals and Mining (0.6%)
- ------------------------------------------------------------------------------------------------------------
574,800 Bodycote International PLC (United Kingdom) 10,565,399
Motion Picture Distribution (0.4%)
- ------------------------------------------------------------------------------------------------------------
2,841,615 Village Roadshow Ltd. Class A (Australia) 7,406,439
Oil and Gas (5.1%)
- ------------------------------------------------------------------------------------------------------------
186,320 Coflexip S.A. (France) 22,608,874
113,400 MOL Magyar Olaj-ES Gazipari GDR 144A (Hungary) 3,453,030
803,300 Petroleo Brasileiro S.A.-Petrobras ADR (Brazil) 19,178,788
1,475,082 Sasol Ltd. (South Africa) 11,956,560
170,000 Total S.A. Class B (France) 20,436,258
575,200 YPF S.A. ADR (Argentina) 19,556,800
--------------
97,190,310
Pharmaceuticals & Medical Technology (6.1%)
- ------------------------------------------------------------------------------------------------------------
304,100 Elan Corp. PLC ADR (Ireland) + 19,652,463
476,540 Gehe AG (Germany) 26,541,795
10,537 Novartis AG ADR (Switzerland) + 18,684,736
1,655,519 Smithkline Beecham PLC (United Kingdom) 20,886,110
703,200 Zeneca Group PLC (United Kingdom) 30,245,716
--------------
116,010,820
Real Estate (0.4%)
- ------------------------------------------------------------------------------------------------------------
1,197,000 Sun Hung Kai Properties Ltd. (Hong Kong) 8,149,215
Restaurants (3.4%)
- ------------------------------------------------------------------------------------------------------------
3,851,000 Autogrill SPA (Italy) 27,612,912
4,060,000 KFC Holdings Berhad (Malaysia) 7,063,288
16,600 Sodexho Alliance S.A. (France) 11,466,311
1,313,100 PizzaExpress PLC (United Kingdom) 18,140,467
--------------
64,282,978
Retail (3.0%)
- ------------------------------------------------------------------------------------------------------------
347,000 Centros Comerciales Continente, S.A. (Spain) 8,209,739
7,392,342 Cifra S.A. de CV (Mexico) 13,533,806
1,980,600 La Rinascente SPA (Italy) + 21,220,693
205,400 Moebel Walther AG (Germany) 6,337,104
2,000,069 Woolworth Co. + 7,483,118
--------------
56,784,460
Semiconductors (1.3%)
- ------------------------------------------------------------------------------------------------------------
97,300 ASM Lithography Holding N.V. (Netherlands) + 8,997,494
7,000 Rohm Co. Ltd. (Japan) 641,720
354,800 Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan) + 9,180,450
165,500 Tokyo Electron Ltd. (Japan) 5,583,824
--------------
24,403,488
Supermarkets (1.1%)
- ------------------------------------------------------------------------------------------------------------
230,800 Companhia Brasileira de Distribuicao Grupo Pao de
Acucar ADR (Venezuela) 5,308,400
608,750 Distribucion y Servicio S.A. ADR (Chile) + 10,577,031
8,620 Promodes (France) 4,149,133
--------------
20,034,564
Telecommunication Equipment (4.6%)
- ------------------------------------------------------------------------------------------------------------
770,600 Newbridge Networks Corp. (Canada) + 20,507,684
385,827 Northern Telecom Ltd. (Canada) 24,955,682
258,200 Nokia Oyj AB Class A (Finland) 27,741,409
323,612 Telefonaktiebolaget LM Ericsson Class B (Sweden) 15,361,585
--------------
88,566,360
Telecommunications (11.5%)
- ------------------------------------------------------------------------------------------------------------
464,000 Compania Anonima Nacional Telefonos
de Venezuela ADR (Venezuela) 19,401,000
150,850 Global Telesystems Group, Inc. + 7,052,238
1,602,440 Hellenic Telecommunication Organization S.A. (Greece) 40,142,532
2,171,000 Mahanagar Telephone Nigam Ltd. (India) 14,451,337
304,450 Portugal Telecom S.A. (Portugal) 15,851,669
6,334,500 Telecom Italia SPA (Italy) 49,997,250
334,400 Telecomunicacoes Brasileiras S.A. ADR (Brazil) 43,409,300
640,500 Telfonica de Espana (Spain) 28,265,143
--------------
218,570,469
Telephone Services (0.1%)
- ------------------------------------------------------------------------------------------------------------
1,222,200 Ionica Group PLC (United Kingdom) + 1,307,070
Theaters (0.2%)
- ------------------------------------------------------------------------------------------------------------
1,768,120 Hoyts Cinemas Group (Australia) 3,044,208
Transportation (1.7%)
- ------------------------------------------------------------------------------------------------------------
794,800 Bombardier, Inc. Class B (Canada) 19,638,872
119,100 Finnliness OY (Finland) 5,628,243
4,035,000 Lingaran Trans Kota Holdings Berhad (Malyasia) 6,743,425
--------------
32,010,540
Water Utilities (0.5%)
- ------------------------------------------------------------------------------------------------------------
44,300 Companhia de Saneamento Basico do Estado
de Sao Paulo (Brazil) 10,169,519
--------------
Total Common Stocks (cost $1,515,242,733) $1,807,462,336
PREFERRED STOCKS (0.7%) * (cost $13,189,349)
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
20,880 Banco Itau S.A. BRC 6.86 No par value (NPV) pfd. (Brazil) + $13,405,805
SHORT-TERM INVESTMENTS (5.0%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$25,000,000 Federal Home Loan Mortgage Corp. effective yield
of 5.42%, June 8, 1998 $24,865,104
25,000,000 Preferred Receivables Funding effective yield of 5.55%,
May 5, 1998 24,740,292
45,297,000 Interest in $223,360,000 joint repurchase agreement
dated March 31, 1998, with SBC Warburg due
April 1, 1998, with respect to various U.S. Treasury
obligations -- maturity value of $45,304,449 for
an effective yield of 5.92% 45,304,449
--------------
Total Short-Term Investments (cost $94,909,845) $94,909,845
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,623,341,927) *** $1,915,777,986
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,905,087,467.
*** The aggregate identified cost on a tax basis is $1,623,341,927, resulting in gross unrealized appreciation
and depreciation of $348,231,067 and $55,795,008, respectively, or net unrealized appreciation of $292,436,059.
+ Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depository Receipts and Global 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)
Argentina 2.0% Netherlands 4.4%
Brazil 6.1 Portugal 1.9
Canada 6.9 Spain 3.6
Finland 2.2 South Africa 1.1
France 3.7 Sweden 3.4
Germany 4.1 Switzerland 3.7
Greece 2.6 United Kingdom 19.9
Hong Kong 1.2 United States 5.7
India 1.1 Venezuela 1.3
Ireland 1.3 Other 5.4
Italy 8.0 -----
Japan 6.6 Total 100.0%
Mexico 3.8
<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 $40,675,998 $43,903,108 05/15/98 $3,227,110
- ----------------------------------------------------------------------------------------
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 $1,623,341,927) (Note 1) $1,915,777,986
- ---------------------------------------------------------------------------------------------------
Foreign currency (cost $8,450,102) 8,469,673
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,928,923
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 67,954,871
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 3,381,964
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 3,227,110
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 1,456,989
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 4,046
- ---------------------------------------------------------------------------------------------------
Total assets 2,005,201,562
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 8,638,369
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,008,813
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 81,429,463
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,793,006
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 485,115
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 23,968
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,425
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,446,248
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 277,263
- ---------------------------------------------------------------------------------------------------
Total liabilities 100,114,095
- ---------------------------------------------------------------------------------------------------
Net assets $1,905,087,467
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,728,440,588
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (10,464,345)
- ---------------------------------------------------------------------------------------------------
Distributions in excess of gains on investments and
and foreign currency transactions (Note 1) (108,557,340)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 295,668,564
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,905,087,467
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($803,290,350 divided by 62,809,428 shares) $12.79
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.79)* $13.57
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,019,328,100 divided by 80,932,421 shares)** $12.59
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($82,469,017 divided by 6,505,552 shares) $12.68
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.68)* $13.14
- ---------------------------------------------------------------------------------------------------
* 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 $782,147) $8,012,264
- --------------------------------------------------------------------------------------------------
Interest 2,875,963
- --------------------------------------------------------------------------------------------------
Total investment income 10,888,227
Expenses:
Compensation of Manager (Note 2) 9,921,113
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,965,807
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 26,380
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 13,752
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 955,981
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,814,096
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 301,003
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 977
- --------------------------------------------------------------------------------------------------
Reports to shareholders 101,533
- --------------------------------------------------------------------------------------------------
Auditing 28,894
- --------------------------------------------------------------------------------------------------
Legal 11,195
- --------------------------------------------------------------------------------------------------
Postage 212,123
- --------------------------------------------------------------------------------------------------
Other 268,020
- --------------------------------------------------------------------------------------------------
Total expenses 19,620,874
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (539,626)
- --------------------------------------------------------------------------------------------------
Net expenses 19,081,248
- --------------------------------------------------------------------------------------------------
Net investment loss (8,193,021)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (114,779,397)
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 5,376,718
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 897,289
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 164,030,699
- --------------------------------------------------------------------------------------------------
Net gain on investments 55,525,309
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $47,332,288
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months Year ended
ended March 31 September 30
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $(8,193,021) $(10,770,865)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (109,402,679) 181,709,608
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabliities in foreign currencies 164,927,988 64,679,226
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 47,332,288 235,617,969
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (488,058) (1,892,656)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- --
- ----------------------------------------------------------------------------------------------------------------------
Class M -- (20,814)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (67,656,989) (97,836)
- ----------------------------------------------------------------------------------------------------------------------
Class B (86,180,848) (115,551)
- ----------------------------------------------------------------------------------------------------------------------
Class M (7,131,233) (10,409)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (12,088,635) 673,113,640
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (126,213,475) 906,594,343
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 2,031,300,942 1,124,706,599
- ----------------------------------------------------------------------------------------------------------------------
End of period (distributions in excess of net investment
income and accumulated net investment loss of
$10,464,345 and $1,783,266, respectively) $1,905,087,467 $2,031,300,942
- ----------------------------------------------------------------------------------------------------------------------
* 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 $13.60 $11.69 $10.29 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.03) (.03)(d) .04 (d)(e) .02 (d)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .34 1.98 1.37 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .31 1.95 1.41 1.79
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.01) (.04) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.11) - (f) -- (f) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.12) (.04) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.79 $13.60 $11.69 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.68 * 16.74 13.76 21.06 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) 803,290 $859,999 $499,396 $15,137
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .87 * 1.75 1.95 (e) 1.23 (e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.24)* (.24) .34 (e) .86 (e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 69.46 * 141.29 24.69 9.24 *
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0146 $.0180 $.0190
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense
offset and brokerage service arrangements (Note 2).
(c) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding during the period.
(e) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund reflect a reduction of less than $0.01 and $0.02 per share for each share
class for periods ended September 30, 1996 and 1995, respectively.
(f) Per share distributions were less than $.01 per share, variances may occur due to rounding.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended July 21, 1995+
operating performance (Unaudited) September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.45 $11.61 $10.28 $10.25
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.07) (.13)(d) (.05)(d)(e) (.01)(d)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .32 1.97 1.39 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .25 1.84 1.34 .03
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.11) -- (f) -- (f) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.11) -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.59 $13.45 $11.61 $10.28
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.26 * 15.87 13.02 .29 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) 1,019,328 $1,079,912 $573,129 $7,053
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.25 * 2.50 2.72 (e) .83 (e) *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.62)* (.99) (.43)(e) (.20)(e) *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 69.46 * 141.29 24.69 9.24 *
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0146 $.0180 $.0190
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense
offset and brokerage service arrangements (Note 2).
(c) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding during the period.
(e) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund reflect a reduction of less than $0.01 and $0.02 per share for each share
class for periods ended September 30, 1996 and 1995, respectively.
(f) Per share distributions were less than $.01 per share, variances may occur due to rounding.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended July 21, 1995+
operating performance (Unaudited) September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.51 $11.64 $10.29 $10.25
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.06) (.10)(d) (.02)(d)(e) -- (d)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .34 1.98 1.38 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .28 1.88 1.36 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.01)(f) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.11) -- (f) -- (f) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.11) (.01) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.68 $13.51 $11.64 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.48 * 16.12 13.22 .39 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) 82,469 $91,390 $52,182 $1,259
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.12 * 2.25 2.46 (e) .79 (e) *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.49)* (.74) (.17)(e) (.15)(e) *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 69.46 * 141.29 24.69 9.24 *
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0146 $.0180 $.0190
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense
offset and brokerage service arrangements (Note 2).
(c) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding during the period.
(e) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation,
expenses for the fund reflect a reduction of less than $0.01 and $0.02 per share for each share
class for periods ended September 30, 1996 and 1995, respectively.
(f) Per share distributions were less than $.01 per share, variances may occur due to rounding.
</TABLE>
Notes to financial statements
March 31, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam International New Opportunities 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 long-term capital
appreciation by investing primarily in common stocks that offer potential for
capital appreciation and are primarily traded in security markets outside the
United States.
The fund offers class A, class B and class M shares. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other investments are
stated at fair market value following procedures approved by the Trustees.
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rate.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date except that certain dividends from foreign
securities are recorded as soon as the fund is informed of the ex-dividend
date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, other assets and liabilities are recorded in the books and records
of the fund after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange
rates when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the foreign
exchange rate on investments from fluctuations arising from changes in the
market prices of the securities. Such 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 borrowings 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: 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, 0.93% thereafter.
As part of the subcustodian contract between the subcustodian bank and Putnam
Fiduciary Trust Company (PFTC), the subcustodian bank has a lien on the
securities of the fund to the extent permitted by the fund's investment
restrictions to cover any advances made by the subcustodian bank for the
settlement of securities purchased by the fund. At March 31, 1998, the payable
to the subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
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, a subsidiary
of Putnam Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended March 31, 1998, fund expenses were reduced by
$539,626 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 $2,310 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 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 $258,966 and $17,233 from the sale of
class A and class M shares, respectively and $1,037,794 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the six
months ended March 31, 1998, Putnam Mutual Funds Corp., acting as underwriter
received $62,864 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $1,200,864,759 and
$1,359,892,596, 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 21,091,141 $253,388,459
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,838,907 63,644,105
- ------------------------------------------------------------
26,930,048 317,032,564
Shares
repurchased (27,357,791) (327,384,160)
- ------------------------------------------------------------
Net decrease (427,743) $(10,351,596)
- ------------------------------------------------------------
Year ended
September 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 80,897,399 $1,046,929,224
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 154,879 1,833,744
- ------------------------------------------------------------
81,052,278 1,048,762,968
Shares
repurchased (60,533,499) (792,875,227)
- ------------------------------------------------------------
Net increase 20,518,779 $255,887,741
- ------------------------------------------------------------
Six months ended
March 31, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 9,671,281 $113,514,903
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,550,536 70,418,267
- ------------------------------------------------------------
16,221,817 183,933,170
Shares
repurchased (15,575,748) (182,140,335)
- ------------------------------------------------------------
Net increase 646,069 $1,792,835
- ------------------------------------------------------------
Year ended
September 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 41,621,976 $525,008,380
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,867 92,671
- ------------------------------------------------------------
41,629,843 525,101,051
Shares
repurchased (10,714,741) (136,384,138)
- ------------------------------------------------------------
Net increase 30,915,102 $388,716,913
- ------------------------------------------------------------
Six months ended
March 31, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,191,082 $14,264,365
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 572,076 6,189,864
- ------------------------------------------------------------
1,763,158 20,454,229
Shares
repurchased (2,020,636) (23,984,103)
- ------------------------------------------------------------
Net decrease (257,478) $(3,529,874)
- ------------------------------------------------------------
Year ended
September 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 3,840,971 $48,824,959
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,144 25,331
- ------------------------------------------------------------
3,843,115 48,850,290
Shares
repurchased (1,563,309) (20,341,304)
- ------------------------------------------------------------
Net increase 2,279,806 $28,508,986
- ------------------------------------------------------------
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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
Robert J. Swift
Vice President and Fund Manager
Ami Kuan Danoff
Vice President and Fund Manager
Jack Chang
Vice President and Fund Manager
Debbie Farrell
Vice President and Fund Manager
Stephen Oler
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 New
Opportunities Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information or to
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Shares of mutual funds are not deposits or obligations of, or guaranteed or
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Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency;
and involve risk, including the possible loss of the principal amount
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