Putnam
International
New Opportunities
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
While you have this fiscal 1999 report in hand, I suggest that you thumb
through the portfolio of investments owned by Putnam International New
Opportunities Fund. I will venture to say that you will not find many
familiar names among these holdings. However, as you will read in the
report from the fund managers, some of these rapidly growing companies may
become tomorrow's leaders.
As the table on the facing page shows, this portfolio of relatively
obscure companies generated an impressive total return during the fiscal
year ended September 30, 1999 -- a performance that, of course, cannot be
taken as a guarantee of future results. In the following report, the
managers review the thinking that went into investment strategy during
fiscal 1999.
I am pleased to announce the appointment of Stephen P. Dexter to your
fund's management team. Before joining Putnam recently, Steve was with
Scudder Kemper Investments, Kemper Financial Services, and Sears
Investment Management. He has 16 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 17, 1999
Report from the Fund Managers
Robert J. Swift
Stephen P. Dexter
Stephen Oler
J. Peter Grant
The global recovery from the debt crisis of October 1998 has not only
brought about dramatic changes in Japan and Asia, but has also
complemented the astounding growth and consolidation of several new and
dynamic global industries. It is the secular growth and innovation
exhibited by companies within these new industries that is creating some
of the global leaders of tomorrow.
The managers of Putnam International New Opportunities Fund target these
future global leaders by relying on a stock selection process that
emphasizes rapidly growing international companies of any size. During the
period, as world growth improved and investors recognized the superior
growth rates of many of the companies the fund's managers track, the fund
enjoyed strong returns during the year ended September 30, 1999, in both
absolute terms and relative to its Lipper category (please see page 5).
Total return for 12 months ended 9/30/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ----------------------------------------------------------------------------
53.93% 45.07% 52.69% 47.69% 52.95% 51.95% 53.23% 47.83%
- ----------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 7.
* TELECOMMUNICATIONS: A GLOBAL PHENOMENON
The development of telecommunications around the world has been explosive.
From Canada to China, surging cellular subscriptions, the rising
importance of data over voice communications resulting from the
exponential growth of the Internet, and the development of new-generation
wireless technology and products are all having a profound impact on
people's daily lives. These factors have led not only to the astounding
growth of telecommunications-related companies but also to a frenetic pace
of industrial consolidation.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
Japan 28.4%
United Kingdom 15.9%
France 9.3%
Italy 7.7%
Germany 6.8%
Netherlands 3.2%
Finland 3.0%
Sweden 2.4%
Footnote reads:
*Based on net assets as of 9/30/99. Holdings will vary over time.
Morningstar gave Putnam International New Opportunities Fund's class A shares
4 out of 5 stars for 3-year performance as of September 30, 1999. This rating
put the fund among 22.5% of the 1,025 international equity funds rated.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 9/30/99 and are subject to change
every month. Morningstar ratings are calculated from a fund's 3-, 5-, and
10-year returns (with fee adjustments) in excess of 90-day Treasury bill
returns and a risk factor that reflects performance below 90-day Treasury
bill returns. The fund was not ranked over longer periods. The top 10% of the
funds in an investment category receive 5 stars; the next 22.5% receive 4
stars. Performance of other share classes will vary.
The fund holds substantial investments in companies that are building the
backbone of the world's communications networks or that are providing the
equipment, such as those ubiquitous cellular handsets. Companies such as
Vodafone AirTouch, and Colt Telecom of the United Kingdom, Nortel Networks
of Canada, Nokia of Finland, and Mannesmann of Germany are all rapidly
growing global leaders in infrastructure and equipment. Vodafone and
Mannesmann have also been the direct beneficiaries of consolidation
through acquisitions that have added to their subscriber bases and raised
their global presence.
Among the leaders in the development of communications technology is
Japan, which boasts one of the world's largest cellular markets -- about
37 mobile subscribers per 100 people. The country is at the forefront of
the next generation of mobile technology, IMT-2000, and according to
Japanese government figures, ranks just behind the United States in
Internet subscribers with an expected 20 million this year.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Vodafone AirTouch PLC
United Kingdom
Telephone services
Banca Popolare di Brescia SpA
Italy
Banks
Nokia Ojy Class A
Finland
Telecommunications equipment
NTT Mobile Communications Network
Network
Japan
Cellular communications
Hikari Tsushin, Inc.
Japan
Telecommunications equipment
Tokyo Electron Ltd.
Japan
Semiconductors
Television Francaise I (TF1)
France
Broadcasting
EM TV & Merchandising AG
Germany
Broadcasting
Carrefour Supermarche SA
France
Supermarkets
Softbank Corp.
Japan
Computer software
Footnote reads:
These holdings represent 19.7% of the fund's net assets as of 9/30/99.
Portfolio holdings will vary over time.
One of the fund's key holdings is NTT DoCoMo (NTT Mobile Communications
Network), which was spun off from its parent NTT earlier this year. NTT
DoCoMo is a cutting-edge provider of data transmission over cellular
networks, which is considered to be a precursor to the way cellular phones
will be used in the future. Every time a user sends a data message such as
a request for dinner reservations or for the purchase of theater tickets,
the company collects a fee. We believe the company is capable of producing
double-digit earnings gains over time as it continues to add to its
significant market share.
Complementing the growth of NTT DoCoMo's market are the products of Hikari
Tsushin, one of the largest distributors of cellular phones in Japan. The
company has grown with the rise of cellular subscriptions, especially
following the development of data transmission technology. Hikari Tsushin
is also benefiting from its presence in satellite TV systems and cable
set-top boxes as well as its position as a leading provider of Internet
infrastructure to small and midsize businesses. 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.
* BENEFITS OF GLOBAL RECOVERY
The acceleration in economic growth taking shape around the world has
benefited many different industries. With higher consumer spending, one
area with potentially high growth prospects is luxury goods. LVMH Moet
Hennessy Louis Vuitton may benefit from this increased consumer spending,
particularly among Japanese consumers who favor LVMH products such as Dom
Perignon champagne and Christian Dior perfume. The consolidation now
occurring in the European luxury goods businesses is leaving many famous
brands in the hands of a few large companies. With its well-known product
line, we believe LVMH is well positioned to attain double-digit earnings
growth over the long term.
A beneficiary of corporate change in Japan:
Fujitsu Support and Service
One remarkable development of the past year is the willingness of some
Japanese companies to run their businesses more efficiently and profitably
for shareholders. A direct result of this trend is the outsourcing of many
corporate functions by Japanese companies. Fujitsu Support and Service
(FSAS), an independently run subsidiary of Fujitsu Limited, is Japan's
leading information technology consulting and systems integrator and a
major vendor for technological outsourcing. The company has been a
beneficiary of Japanese companies' need to cut the costs of running
expensive computer systems. There is also exciting potential in this type
of outsourcing business as Japanese companies are about 10 years behind
their United States counterparts. As a result, we expect FSAS to enjoy
earnings growth of 30% per year.
An important development that coincided with the global recovery was the
upturn in the semiconductor business cycle. Prices for commodity-type
memory chips such as DRAMS -- is a large market for Asian companies -- as
well as more sophisticated microprocessors have improved substantially as
demand for high-tech goods grows around the world. The fund had stakes in
larger players such as STMicroelectronics in France and ARM Holdings of
the United Kingdom, which benefit from the proliferation of mobile
handsets and networking technology. On the commodity chip side, the fund
benefited from holdings in Asian companies such as Samsung Electronics of
South Korea, Taiwan Semiconductor, and Winbond Electronics.
In addition to targeting companies benefiting from the global recovery, we
also focused on companies that fulfill niche roles often ignored by larger
industrial players. One example is Marschollek, Lautenschlaeger und
Partner (MLP) of Germany. MLP is a financial services company that targets
recent graduates of professional degree programs (doctors, lawyers, etc.)
and creates comprehensive financial planning programs for them. The
company builds loyalty with these professionals when they are young so
that later on they will look to MLP for their financial needs as they
enter their peak earnings years. The company has a solid management team
and based on the level of fee income that its services could generate over
time, we believe MLP could post 25% or more earnings growth a year.
Putnam International New Opportunities Fund's class A shares were ranked in
the top quartile by Lipper for the 3-year period ended September 30, 1999.
The fund ranked in the top 14%, or 50 out of 368 international funds ranked.
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. Performance of other
share classes will vary. The fund was ranked 13 out of 578 funds (3%) for the
one-year period. The fund was not ranked over longer periods.
* SELECTED EMERGING MARKETS HOLDINGS SHOW GROWTH POTENTIAL
Over the past year, many of the world's emerging markets staged a sharp
and surprising rebound. We targeted emerging-markets companies with strong
managements, market leadership, and significant long-term growth
potential. As discussed above, Asian chip producers were a significant
part of the fund's emerging markets exposure.
Latin American equities have underperformed Asian equities so far in 1999;
however, stocks of many Latin American companies now trade at significant
discounts to Asian equities and they offer expected earnings-per-share
growth of 15% next year, on average. We targeted cyclical companies that
could benefit from global growth such as cement producer Cemex in Mexico
and Brazilian iron ore producer Companhia Vale Do Rio Doce. We also
continued to hold Latin American telecommunications staples Telefonos de
Mexico and Telesp Celular (Telesp Participacoe SA ADR) of Brazil.
* CONTINUED FOCUS ON CUTTING-EDGE GROWTH COMPANIES
We will continue to emphasize the selection of stocks of international
companies that we believe represent some of the world's most exciting
growth opportunities. All over the world (and often unbeknownst to Wall
Street), aggressive and innovative companies are at the forefront of
original technologies, new industries, and important social trends. Our
hunting ground is those companies that we believe offer visible and
sustainable high earnings growth as well as the potential for future
positive earnings revisions. As a fundamental means of identifying these
promising companies, we will always rely on a disciplined, bottom-up,
research-driven investment process.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 9/30/99, 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.
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 to seek long-term capital
appreciation through investments in common stocks that are principally
traded outside the United States.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99
Class A Class B Class C Class M
(inception dates) (1/3/95) (7/21/95) (2/1/99) (7/21/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 53.93% 45.07% 52.69% 47.69% 52.95% 51.95% 53.23% 47.83%
- --------------------------------------------------------------------------------------------
Life of fund 116.87 104.37 109.45 107.45 109.67 109.67 112.25 104.80
Annual average 17.74 16.28 16.88 16.64 16.91 16.91 17.21 16.33
- --------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/99
MSCI
Emerging
Markets MSCI Consumer
Index EAFE Index price index
- ------------------------------------------------------------------------
1 year 59.50% 30.95% 2.75%
- ------------------------------------------------------------------------
Life of fund -13.58 56.32 12.16
Annual average -3.03 9.87 2.45
- ------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. 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 reflect an expense limitation
previously in effect. Without it, total returns would have been lower. For
a portion of this period, the fund was offered on a limited basis and had
limited assets.
[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 1/3/95
MSCI Emerging
Fund's class A MSCI EAFE Markets Consumer price
Date shares at POP Index Index index
1/3/95 9,425 10,000 10,000 10,000
6/30/95 10,865 10,260 9,346 10,187
12/31/95 11,524 11,121 9,080 10,254
6/30/96 13,133 11,623 10,119 10,468
12/31/96 13,468 11,793 9,624 10,595
6/30/97 15,485 13,115 11,357 10,708
12/31/97 13,682 12,003 8,330 10,775
6/30/98 15,966 13,915 6,817 10,888
12/31/98 15,856 14,403 6,397 10,969
6/30/99 18,889 14,975 9,101 11,102
9/30/99 $20,437 $15,632 $8,642 $11,216
Footnote reads:
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 $20,945 ($20,745 with a contingent deferred sales charge);
a $10,000 investment in the fund's class C shares would have been valued
at $20,967 and no contingent deferred sales charges would apply; a $10,000
investment in the fund's class M shares would have been valued at $21,225
($20,480 at public offering price). See first page of performance section
for performance calculation method.
PRICE INFORMATION 12 MONTHS ENDED 9/30/99
Class A Class B Class C Class M
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- -----------------------------------------------------------------------------
9/30/98 $10.81 $11.47 $10.61 $ -- $10.69 $11.08
- -----------------------------------------------------------------------------
2/1/99+ -- -- -- 13.82 -- --
- -----------------------------------------------------------------------------
9/30/99 16.64 17.66 16.20 16.58 16.38 16.97
- -----------------------------------------------------------------------------
+Inception of class C shares.
The fund made no distributions during the period.
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 C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
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 or C shares and assumes redemption at the end of
the period. Your fund's class B 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. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Morgan Stanley Capital International (MSCI) EAFE Index* is an unmanaged
list of equity securities from Europe, Australasia and the Far East, with
all values expressed in U.S. dollars.
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.
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.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and non-investment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-ended funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended September 30, 1999
To the Trustees of Putnam Investment Funds and
Shareholders of Putnam International New Opportunities Fund
(a series of Putnam Investment Funds)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, 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
New Opportunities Fund (the "fund") at September 30, 1999, 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 September 30, 1999 by
correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 11, 1999
<TABLE>
<CAPTION>
The fund's portfolio
September 30, 1999
COMMON STOCKS (98.1%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,453,405 WPP Group PLC (United Kingdom) (NON) $ 13,517,342
Airlines (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
7,890,400 Qantas Airways Ltd. (Australia) 24,705,158
Apparel (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
8,305,000 Esprit Holdings Ltd. (Hong Kong) 7,644,769
849,488 Hennes & Mauritz AB Class B, (Sweden) 21,561,669
--------------
29,206,438
Automobiles (--%)
- --------------------------------------------------------------------------------------------------------------------------
467,929 China Motor Co. Ltd. (Taiwan) 526,328
Banks (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,115,200 ABSA Group Ltd. (South Africa) 4,367,867
1,034,325 Banca Popolare di Brescia SpA (Italy) (POR) 44,407,296
1,024,400 Banco Comercial Portugues, S.A. (Portugal) 27,679,698
95,000 Commercial Bank of Greece, S.A. (Greece) 8,788,004
5,165 Julius Baer Holdings AG (Switzerland) 15,361,750
3,124,000 Public Bank Berhad (Malaysia) 2,548,593
9,044,000 Thai Farmers Bank Public Co. (Thailand) (NON) 10,604,449
248,498 Yapi ve Kredi Bankasi A.S. GDR (Turkey) 3,385,780
--------------
117,143,437
Basic Industrial Products (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,403,800 Alfa S.A. de C.V. Class A, (Mexico) 5,928,488
Brewing (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
480,200 South African Breweries, Ltd. (South Africa) 4,073,697
Broadcasting (4.8%)
- --------------------------------------------------------------------------------------------------------------------------
870,493 EM TV & Merchandising AG (Germany) 38,024,179
258,700 Grupo Televisa S.A. de C.V. GDR (Mexico) (NON) 10,331,831
1,123,500 Mediaset SPA (Italy) 11,507,022
135,694 Television Francaise I (TF1) (France) 38,070,797
--------------
97,933,829
Building Products (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
294,320 Cemex S.A. de C.V. ADR (Mexico) (NON) 7,100,470
817,597 CRH PLC (Ireland) 15,700,021
--------------
22,800,491
Business Services (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
31,020 Altran Technologies SA (France) 9,359,044
2,005,900 Fomento Economico Mexicano, S.A. de C.V. (Mexico) 6,222,253
193,800 Randstad Holding N.V. (Netherlands) 9,934,963
--------------
25,516,260
Cable Television (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
406,700 Modern Times Group MTG AB (Sweden) (NON) 12,497,388
Cellular Communications (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
6,445,000 China Telecom Ltd. (Hong Kong) (NON) 19,872,256
2,068 NTT Mobile Communications (Japan) 40,854,196
--------------
60,726,452
Chemicals (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,474,000 Nan Ya Plastic Corp. (Taiwan) 5,543,034
Computers (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
288,000 Fujitsu Ltd. (Japan) 8,994,920
359,394 Psion PLC (United Kingdom) 5,886,405
239,600 Synnex Tech Intl 144A (Taiwan) (NON) 4,444,580
--------------
19,325,905
Computer Services (6.3%)
- --------------------------------------------------------------------------------------------------------------------------
30,850 Cap Gemini S.A. (France) 4,876,274
1,340,500 Capita Group PLC (United Kingdom) 15,446,179
307,700 CMG PLC (United Kingdom) (NON) 10,484,653
78,300 Fujitsu Support and Services Inc. 144A (Japan) 22,318,820
614,000 Logica PLC (United Kingdom) 8,115,964
2,203,300 Misys PLC (United Kingdom) 21,597,904
71,160 Obic Co., Ltd. (Japan) 33,303,959
459,000 SEMA Group PLC (United Kingdom) 5,617,588
175,000 StarMedia Network, Inc. (NON) 6,425,781
--------------
128,187,122
Computer Software (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
10 Fuji Soft AB, Inc. (Japan) 853
156,600 Konami Co., Ltd. (Japan) 15,173,851
180,800 NIIT Ltd. (India) (NON) 11,735,593
98,500 Oracle Corp. (Japan) 14,825,968
233,250 Sage Group (The) PLC (United Kingdom) 10,470,394
88,300 Softbank Corp. (Japan) 33,642,059
--------------
85,848,718
Conglomerates (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
2,744,255 Harvey Norman Holdings Ltd. (Australia) 5,316,530
347,234 Preussag AG (Germany) 17,541,012
--------------
22,857,542
Consumer Durable Goods (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
203,500 Hindustan Lever Ltd. (India) (NON) 11,971,577
Consumer Non Durables (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,365,710 Gruppo Editoriale L'Espresso (Italy) 25,525,120
Cosmetics (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
90,290 Fancl Corp. (Japan) 26,415,983
Electric Utilities (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
376,588 Companhia Energetica de Minas Gerais ADR (Brazil) (NON) 5,742,967
187,500 Korea Electric Power Corp. (South Korea) 6,167,775
--------------
11,910,742
Electronic Components (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,549,199 ARM Holdings PLC (United Kingdom) 24,162,543
400,330 ASM Lithography Holding N.V. (Netherlands) 27,192,335
5,206,000 JIT Holdings Ltd. (Singapore) 9,624,280
4,430,000 Winbond Electronics Corp. (Taiwan) 7,768,247
--------------
68,747,405
Electronics and Electrical Equipment (4.8%)
- --------------------------------------------------------------------------------------------------------------------------
72,900 Keyence Corp (Japan) 19,545,160
58,384 Medion AG (Germany) 13,904,967
237,000 Murata Manufacturing Co. Ltd. (Japan) 23,856,074
64,809 Samsung Electronics Co. (South Korea) 10,499,505
1,225,400 Sharp Corp. (Japan) 19,666,349
1,341,000 Venture Manufacturing Ltd. (Singapore) 11,684,898
--------------
99,156,953
Financial Services (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,986,800 Grupo Financiero Bancomer, S.A. de C.V. (Mexico) 5,364,440
2,321,000 Nikko Securities Co. Ltd. (Japan) 19,650,993
5,076,800 Old Mutual PLC 144A (United Kingdom) 10,822,212
12,800 Shohkoh Fund & Co., Ltd. (Japan) 9,572,909
--------------
45,410,554
Food and Beverages (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
76,600 C TWO-NETWORK Co., Ltd. (Japan) 20,176,863
290,200 Coca-Cola Femsa S.A. ADR (Mexico) (NON) 4,008,388
162,392 Kamps AG (Germany) 10,215,301
84,972 LVMH (France) 25,546,152
2,255,000 San Miguel Corp. (Philippines) 3,426,715
--------------
63,373,419
Health Care Services (--%)
- --------------------------------------------------------------------------------------------------------------------------
27,100 TLC The Laser Center Inc. (Canada) (NON) 665,212
Insurance (4.4%)
- --------------------------------------------------------------------------------------------------------------------------
333,500 Aegon N.V. (Netherlands) 28,779,182
2,641,000 Alleanza Assicurazioni SPA (Italy) 27,218,674
2,472,900 Mediolanum SPA (Italy) 18,989,201
727,900 Skandia Forsakrings AB (Sweden) 15,299,347
--------------
90,286,404
Machinery (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
107,700 THK Co., Ltd. (Japan) 3,181,355
Media (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,505,769 Aegis Group PLC (United Kingdom) 5,155,933
2,777,300 Aegis Group PLC 144A (United Kingdom) 5,714,642
--------------
10,870,575
Medical Management Services (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
44,200 NICHII GAKKAN Co. (Japan) 8,232,928
Medical Supplies and Devices (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
338,000 Takeda Chemical Industries (Japan) 18,283,165
Metals and Mining (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
359,600 Companhia Vale do Rio Doce ADR (Brazil) (NON) 7,371,800
253,800 Pohang Iron & Steel Company, Ltd. ADR
(South Korea) (NON) 7,947,113
406,300 Sasol Ltd. (South Africa) 3,128,510
--------------
18,447,423
Networking (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
583,600 Nortel Networks Corp. (Canada) (NON) 29,844,561
Pharmaceuticals and Biotechnology (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
632,166 Sanofi-Synthelabo SA (France) (NON) 27,006,132
1,560,100 Smithkline Beecham PLC ADR (United Kingdom) 17,938,043
203,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 9,529,352
--------------
54,473,527
Publishing (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
891,250 Class Editori (Italy) 7,662,433
4,117,000 John Fairfax Holdings Ltd. (Australia) 10,589,002
2,110,991 Trinity PLC (United Kingdom) 19,424,704
--------------
37,676,139
Real Estate (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
15,779,600 SM Prime Holdings Inc. (Philippines) 2,668,608
Recreation (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
119,400 Aruze Corp. (Japan) 9,996,804
Restaurants (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
2,007,822 Autogrill SPA (Italy) 22,515,716
478,800 TPI Paginas Amarillas 144A (Spain) 11,096,477
231,000 TPI Paginas Amarillas (Spain) 5,353,564
--------------
38,965,757
Retail (6.1%)
- --------------------------------------------------------------------------------------------------------------------------
32,400 Avex, Inc. (Japan) 6,034,997
118,300 Fast Retailing Co., Ltd. (Japan) 23,481,944
12,851,800 Migros Turk T.A.S. (Turkey) 5,577,681
1,057,990 Next PLC (United Kingdom) 10,658,331
1,905,560 President Chain Store Corp. (Taiwan) 5,418,655
95,000 Ryohin Keikaku Co. Ltd. (Japan) 19,214,492
10,600 Ryohin Keikaku Co. Ltd. (Japan) (NON) 2,133,961
151,300 Shimamura Co., Ltd. (Japan) 19,855,461
164,000 Tsuruha Co., Ltd. (Japan) 15,428,038
236,000 Yamada Denki (Japan) 18,182,883
--------------
125,986,443
Satellite Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
136,200 Gilat Satellite Networks Ltd. (Israel) (NON) 7,303,725
546,700 Hellenic Telecommunication Organization SA
GDR (Greece) (NON) 6,116,206
--------------
13,419,931
Semiconductors (8.2%)
- --------------------------------------------------------------------------------------------------------------------------
142,000 Advantest Corp. (Japan) 20,571,966
229,500 Ase Test Limited (Taiwan) (NON) 5,565,375
239,066 Consumer Electronic AG (Germany) 19,940,686
97,700 Rohm Co. Ltd. (Japan) 20,449,911
364,047 STMicroelectronics (France) 28,460,321
321,060 STMicroelectronics N.V. ADR (France) (NON) 23,758,440
2,337,000 Taiwan Semiconductor Manufacturing Co. (Taiwan) 9,857,489
451,000 Tokyo Electron Ltd. (Japan) 39,245,071
--------------
167,849,259
Supermarkets (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
211,523 Carrefour Supermarche SA (France) 33,953,757
Telecommunication Equipment (4.0%)
- --------------------------------------------------------------------------------------------------------------------------
64,200 Hikari Tsushin, Inc. (Japan) 39,256,830
484,529 Nokia Ojy Class A, (Finland) 43,519,813
--------------
82,776,643
Telecommunications (6.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,276,583 Colt Telecom Group PLC (United Kingdom) (NON) 30,343,975
192,799 Mannesmann AG (Germany) 30,886,400
1,495,125 Orange PLC ADR (United Kingdom) (NON) 29,385,836
592,600 Sonera Group OYJ (Finland) 17,214,793
2,175,700 Telewest Communications PLC (United Kingdom) (NON) 7,968,659
507,000 Telfonica S.A. (Spain) (NON) 8,138,384
--------------
123,938,047
Telephone Services (5.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,263,000 British Telecommunications PLC ADR (United Kingdom) 19,116,628
28,746 Dacom Corp. (South Korea) 2,517,644
121,900 Korea Telecom Corp. ADR (South Korea) (NON) 4,510,300
56,000 Korea Telecom Corp. (South Korea) 3,458,559
104,900 Tele Centro Sul Participacoes S.A. (Brazil) (NON) 5,821,950
141,100 Telefonos de Mexico S.A. ADR Class L, (Mexico) (NON) 10,053,375
320,000 Telesp Participacoes S.A. ADR (Brazil) 5,040,000
2,266,660 Vodafone AirTouch PLC (United Kingdom) 53,653,933
--------------
104,172,389
Textiles (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,984,000 Far Eastern Textile Ltd. (Taiwan) 5,677,043
--------------
Total Common Stocks (cost $1,501,649,975) $2,010,215,352
PREFERRED STOCKS (0.4%) (a) (cost $9,018,284)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
50,700 Marschollek, Lautenschlaeger und Partner AG DEM
$3.05 pfd. (Germany) $ 8,815,229
SHORT-TERM INVESTMENTS (0.4%) (a) (cost $8,267,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$8,267,000 Interest in $750,000,000 joint tri-party repurchase
agreement dated September 30, 1999 with Goldman
Sachs & Co. due October 1, 1999 with respect to
various U.S. Treasury obligations -- maturity value of
$8,268,215 for an effective yield of 5.29% $ 8,267,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,518,935,259) (b) $2,027,297,581
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,049,649,848.
(b) The aggregate identified cost on a tax basis is $1,525,305,496, resulting in gross unrealized appreciation and
depreciation of $541,973,494 and $39,981,409, respectively, or net unrealized appreciation of $501,992,085.
(NON) Non-income-producing security.
(POR) Banca Popolare di Brescia SpA is involved in a joint venture with Putnam Investments.
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 Depositary Receipts or Global Depositary Receipts,
respectively, representing ownership of foreign securities on deposit with a custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at September 30, 1999: (as percentage of Market Value)
Australia 2.0%
Brazil 1.2
Canada 1.5
Finland 3.0
France 9.4
Germany 6.9
Hong Kong 1.4
India 1.2
Italy 7.8
Japan 28.7
Mexico 2.4
Netherlands 3.3
Portugal 1.4
Singapore 1.1
South Korea 1.7
Spain 1.2
Sweden 2.4
Taiwan 2.2
United Kingdom 16.1
Other 5.1
-----
Total 100.0%
- -------------------------------------------------------------------------------
Forward Currency Contracts to Sell at September 30, 1999
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
- -------------------------------------------------------------------------------
Japanese Yen $128,857,109 $122,993,511 2/25/00 $(5,863,598)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,518,935,259) (Note 1) $2,027,297,581
- -----------------------------------------------------------------------------------------------
Cash 469
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $19,352,093) 18,736,775
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 17,800,183
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 13,034,958
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 1,747,041
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 809
- -----------------------------------------------------------------------------------------------
Total assets 2,078,617,816
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,778,615
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 14,813,237
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,423,962
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 352,809
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 41,267
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,184
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,567,248
- -----------------------------------------------------------------------------------------------
Payable for open forward currency contracts 5,863,598
- -----------------------------------------------------------------------------------------------
Other accrued expenses 122,048
- -----------------------------------------------------------------------------------------------
Total liabilities 28,967,968
- -----------------------------------------------------------------------------------------------
Net assets $2,049,649,848
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,385,684,426
- -----------------------------------------------------------------------------------------------
Undistributed net investment income 5,302,910
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
and foreign currency transactions (Note 1) 158,062,146
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 500,600,366
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,049,649,848
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($905,842,368 divided by 54,426,642 shares) $16.64
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $16.64)* $17.66
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,053,443,276 divided by 65,023,114 shares)** $16.20
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($6,779,657 divided by 408,970 shares)** $16.58
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($83,584,547 divided by 5,103,732 shares) $16.38
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $16.38)* $16.97
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $1,628,137) $ 17,734,975
- -----------------------------------------------------------------------------------------------
Interest 1,066,371
- -----------------------------------------------------------------------------------------------
Total investment income 18,801,346
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 18,466,907
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,822,674
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 99,571
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 20,578
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,907,649
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 9,314,698
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 19,714
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 553,110
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,237
- -----------------------------------------------------------------------------------------------
Auditing 128,397
- -----------------------------------------------------------------------------------------------
Legal 12,143
- -----------------------------------------------------------------------------------------------
Postage 221,948
- -----------------------------------------------------------------------------------------------
Other 98,541
- -----------------------------------------------------------------------------------------------
Total expenses 34,669,167
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (532,344)
- -----------------------------------------------------------------------------------------------
Net expenses 34,136,823
- -----------------------------------------------------------------------------------------------
Net investment loss (15,335,477)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 281,297,059
- -----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 237,525
- -----------------------------------------------------------------------------------------------
Net realized gain on swap contracts during the year 4,941,063
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (7,791,482)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
during the year 495,390,947
- -----------------------------------------------------------------------------------------------
Net gain on investments 774,075,112
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $758,739,635
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (15,335,477) $ (13,169,571)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 286,475,647 (102,181,173)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies 487,599,465 (117,739,675)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 758,739,635 (233,090,419)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A -- (488,058)
- ---------------------------------------------------------------------------------------------------------------
From return of capital
Class A -- (42,729)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (54,428)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (4,504)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (67,614,260)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (86,126,420)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (7,126,729)
- ---------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (207,264,183) (138,578,999)
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 551,475,452 (533,126,546)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 1,498,174,396 2,031,300,942
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $5,302,910 and $--, respectively) $2,049,649,848 $1,498,174,396
- ---------------------------------------------------------------------------------------------------------------
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 Jan. 3, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.81 $13.60 $11.69 $10.29 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.06) (.04) (.03) .04(e) .02(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.89 (1.63) 1.98 1.37 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.83 (1.67) 1.95 1.41 1.79
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.01) (.04) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.11) --(d) --(d) --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- --(d) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.12) (.04) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.64 $10.81 $13.60 $11.69 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 53.93 (12.37) 16.74 13.76 21.06*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $905,842 $630,422 $859,999 $499,396 $15,137
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.54 1.75 1.75 1.95 (e) 1.23(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.45) (.30) (.24) .34 .86*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 204.39 170.28 141.29 24.69 9.24*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 21, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.61 $13.45 $11.61 $10.28 $10.25
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.16) (.13) (.13) (.05)(e) (.01)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.75 (1.60) 1.97 1.39 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.59 (1.73) 1.84 1.34 .03
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.11) --(d) --(d) --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- --(d) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.11) -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.20 $10.61 $13.45 $11.61 $10.28
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 52.69 (12.98) 15.87 13.02 .29*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,053,443 $803,785 $1,079,912 $573,129 $7,053
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.29 2.50 2.50 2.72(e) .83(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (1.20) (1.05) (.99) (.43) (.20)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 204.39 170.28 141.29 24.69 9.24*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share February 1, 1999+
operating performance to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $13.82
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.76
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.58
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 19.97*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $6,780
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.52*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.78)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 204.39
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 21, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.69 $13.51 $11.64 $10.29 $10.25
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.13) (.10) (.10) (.02)(e) --(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.82 (1.61) 1.98 1.38 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.69 (1.71) 1.88 1.36 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.01) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (1.11) --(d) --(d) --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- --(d) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.11) (.01) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.38 $10.69 $13.51 $11.64 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 53.23 (12.76) 16.12 13.22 .39*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $83,585 $63,967 $91,390 $52,182 $1,259
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.04 2.25 2.25 2.46 (e) .79(e) *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.95) (.80) (.74) (.17) (.15)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 204.39 170.28 141.29 24.69 9.24*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(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.
</TABLE>
Notes to financial statements
September 30, 1999
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, class C, and class M shares. Effective
February 1, 1999, the fund began offering class C 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 C
shares are subject to the same fees and expenses as class B shares, except
that class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Class M shares are sold with a
maximum front end sales charge of 3.50% and pay an ongoing distribution
fee that is higher than class A shares but lower than class B and class C
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 that 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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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. 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). Gains or losses on securities sold are determined on
the identified cost basis.
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 realized 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) Swap contracts The fund may engage in swap agreements, which are an
agreement to exchange the return generated by one instrument for the
return generated by another instrument. The fund may enter into equity
swap agreements, to manage its exposure to equity markets, which involve a
commitment by one party to pay interest in exchange for a market linked
return based on a notional amount. To the extent that the total return of
the security or index underlying the transaction exceeds or falls short of
the offsetting interest rate obligation, the fund will receive a payment
from or make a payment to the counterparty, respectively. Equity swaps are
marked to market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gain or loss. Payments received
or made at the end of the measurement period are recorded as realized
gains or losses. The fund could be exposed to credit or market risk due to
unfavorable changes in the fluctuation of interest rates or in the price
of the underlying security or index, the possibility that there is no
liquid market for these agreements or that the counterparty may default on
its obligation to perform.
H) 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
September 30, 1999, the fund had no borrowings against the line of credit.
I) 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.
J) 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, realized gains and losses on swap contracts
and net operating loss. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations. For the
year ended September 30, 1999, the fund reclassified $20,638,387 to
decrease undistributed net investment loss and $11,786,573 to decrease
paid-in-capital, with a decrease to accumulated net realized gains of
$8,851,814. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
K) 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.
L) 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.
The Trustees approved a proposal to decrease fees payable to Putnam
Management under the fund's management contract effective July 1, 1999.
Management fees will be paid thereafter at an annual rate of: 1.00% of the
first $500 million of average net assets, 0.90% of the next $500 million,
0.85% of the next $500 million, 0.80% of the next $5 billion, 0.775% of
the next $5 billion, 0.755% of the next $5 billion, 0.74% of the next $5
billion, and 0.73% thereafter. Prior to July 1, 1999, the fee was based on
the following annual rates: 1.20% of the first $500 million of average net
assets, 1.10% of the next $500 million, 1.05% of the next $500 million,
1.00% of the next $5 billion, 0.975% of the next $5 billion, 0.955% of the
next $5 billion, 0.94% of the next $5 billion, and 0.93% thereafter.
The fund reimburses Putnam Management 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 September 30, 1999, fund expenses were reduced by
$532,344 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 $2,043
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
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, class C 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares respectively.
For the year ended September 30, 1999, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $226,327 and $14,970 from the
sale of class A and class M shares, respectively and received $1,844,454
and $743 in contingent deferred sales charges from redemptions of class B
and C shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares. For the year ended September 30, 1999,
Putnam Mutual Funds Corp., acting as underwriter received $48,744 on class
A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 1999, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $3,566,115,147 and $3,785,497,379, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At September 30, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 97,757,355 $1,353,981,693
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
97,757,355 1,353,981,693
Shares
repurchased (101,658,562) (1,416,390,912)
- -----------------------------------------------------------------------------
Net decrease (3,901,207) $ (62,409,219)
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 40,891,158 $ 500,905,060
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,841,168 63,668,753
- -----------------------------------------------------------------------------
46,732,326 564,573,813
Shares
repurchased (51,641,648) (632,786,272)
- -----------------------------------------------------------------------------
Net decrease (4,909,322) $ (68,212,459)
- -----------------------------------------------------------------------------
Year ended September 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 11,537,016 $ 157,850,106
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- -----------------------------------------------------------------------------
11,537,016 157,850,106
Shares
repurchased (22,303,116) (297,113,522)
- -----------------------------------------------------------------------------
Net decrease (10,766,100) $(139,263,416)
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 14,865,732 $ 179,189,819
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 6,548,440 70,395,732
- -----------------------------------------------------------------------------
21,414,172 249,585,551
Shares
repurchased (25,911,310) (309,930,505)
- -----------------------------------------------------------------------------
Net decrease (4,497,138) $ (60,344,954)
- -----------------------------------------------------------------------------
For the period February 1, 1999
(commencement of operations) to
September 30, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 525,383 $ 7,702,343
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- -----------------------------------------------------------------------------
525,383 7,702,343
Shares
repurchased (116,413) (1,625,823)
- -----------------------------------------------------------------------------
Net increase 408,970 $ 6,076,520
- -----------------------------------------------------------------------------
Year ended September 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,876,518 $ 39,720,844
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
2,876,518 39,720,844
- -----------------------------------------------------------------------------
Shares
repurchased (3,757,198) (51,388,912)
- -----------------------------------------------------------------------------
Net decrease (880,680) $(11,668,068)
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,786,653 $ 21,841,612
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 572,123 6,190,375
- -----------------------------------------------------------------------------
2,358,776 28,031,987
- -----------------------------------------------------------------------------
Shares
repurchased (3,137,394) (38,053,573)
- -----------------------------------------------------------------------------
Net decrease (778,618) $(10,021,586)
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $164,431,515 as capital gain, for its taxable year ended
September 30, 1999.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Fund information
WEB SITE
www.putnaminv.com
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
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
Stephen P. Dexter
Vice President and Fund Manager
Stephen Oler
Vice President and Fund Manager
J. Peter Grant
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam International
New Opportunities Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details of
sales charges, investment objectives, and operating policies of the fund,
and the most recent copy of Putnam's Quarterly Performance Summary. For
more information or to request a prospectus, call toll free:
1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN 010-56148 539/2AH/2AI 11/99
