Putnam
International
New Opportunities
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The world is teeming with new investment opportunities, some of them
destined to thrive, others to languish. The challenge of Putnam
International New Opportunities Fund is to find and invest in the former
and to avoid the latter. Even though the fund's managers exclude U.S.
companies from the scope of their search, the task is immense.
While past performance can never be taken as a guarantee of future
results, the four-year-old fund's results speak well of the team's ability
to identify and invest in successful ventures. A look at the portfolio
reveals the fund's broad scope -- across both industries and national
economies.
In the following report, the fund's managers review strategy and
performance during the first half of fiscal 1999. They discuss some of the
interesting companies in the portfolio, and then they look at prospects
for the fiscal year's second half.
I am pleased to announce the appointment of J. Peter Grant to the fund's
management team. Peter joined Putnam in 1973 and since 1986 has
specialized in Pacific Basin and Latin American markets. He has 31 years
of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 19, 1999
Report from the Fund Managers
Robert J. Swift
Jack P. Chang
Stephen Oler
J. Peter Grant
As portfolio managers of Putnam International New Opportunities Fund, our
goal is to identify the fastest growing international companies of any
size. Over the first half of fiscal 1999, this strategy continued to serve
the fund well as investors sought out niche players in global growth
industries around the world.
For the semiannual period ended March 31, 1999, the fund logged an
impressive return. Since the fund targets both established and emerging
markets, we evaluate performance against both the Morgan Stanley Capital
International EAFE Index (which represents established markets) and the
Morgan Stanley Capital International Emerging Markets Index (which
represents emerging markets). During the period, the MSCI EAFE Index had a
total return of 22.34% and the MSCI Emerging Markets Index returned
33.19%. For more information, including results for other share classes,
please turn to page 6.
Total return for six months ended 3/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------
28.12% 20.75% 27.52% 22.52% 27.68% 26.68% 27.78% 23.29%
- -----------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* JAPANESE EXPOSURE INCREASED
Despite the poor economic conditions prevailing in Japan, we continued to
find smaller Japanese companies in strong industries that have shown the
ability to grow their earnings. One example is Hikari Tsushin, the number
two Japanese distributor of cellular phones. The company is also a leading
provider of Internet infrastructure for small and midsize corporations.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
Japan 19.8%
United Kingdom 17.4%
Germany 9.5%
Italy 7.7%
France 5.9%
Footnote reads:
*Based on net assets as of 3/31/99. Holdings will vary over time.
Another Internet-related holding in Japan is Kadokawa Shoten Publishing.
The company is planning to become the Amazon.com of Japan by developing an
Internet sales channel for its books.
Lipper ranked the fund's class A shares in the top 10% of all
international funds for one-year performance as of March 31, 1999. The
fund ranked 35 out of 558 funds.*
* 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. For the 3-year period, the fund ranked 98 out of 332
international funds. The fund was not ranked over longer periods.
Outside technology, one of the fund's major Japanese holdings is in the
consumer products area. Fancl Corporation is the leading Japanese company
in the growing market for all-natural cosmetics -- those produced with
only organic materials rather than synthetic chemicals. The company has
emerged as a challenger to the large Japanese cosmetics company Shiseido,
based on its preeminence in a niche market in which Shiseido has lesser
penetration. Fancl also offers an alternative distribution method to the
traditional department store counter by selling through mail-order
catalogues. 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.
* FOCUS ON TELECOMMUNICATIONS AND MEDIA REMAINS IN EUROPE
Throughout the past six months, the fund continued to benefit from its
holdings in rapidly growing companies in technology, telecommunications,
and telecommunications equipment as well as in media industries located
across Europe. We have identified a number of international companies
among the firms in the telecommunications and information technology
industries that are aggressively positioning themselves for the
convergence of voice and data communications on a common network, creating
a cheaper and more efficient telecommunications technology.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Vodafone Group PLC
United Kingdom
Telephone services
Nokia OYJ Class A
Finland
Telecommunication equipment
EM TV & Merchandising AG
Germany
Broadcasting
Bellsystem 24, Inc.
Japan
Consumer services
Fuji Soft AB, Inc.
Japan
Computer software
Mannesmann AG
Germany
Telephone services
Rogers Communication
Canada
Cable television
Shohkoh Fund & Co., Ltd.
Japan
Financial services
Seat Pagine Gialle SpA
Italy
Publishing
Obic Co., Ltd.
Japan
Computer services
Footnote reads:
These holdings represent 22.3% of the fund's net assets as of 3/31/99.
Portfolio holdings will vary over time.
According to the research group Analysys, the worldwide pervasiveness of the
Internet has caused the estimates for data traffic over telecommunications
networks to rise exponentially.
During the past six months, European technology companies such as
Micrologica and Real Software as well as telecommunications companies such
as Stet Hellas and Colt Telecom all performed so well that we were able to
take profits once their prices reached our target levels. (Micrologica,
Real Software, and Stet Hellas were sold prior to the end of the period.)
Well-known British mobile phone company Vodafone remains a key fund
holding. Prior to the company's announced merger with Airtouch
Communications of the United States, Vodafone had been a leader in the
United Kingdom and Europe. Now it has positioned itself as a globally
dominant player in the rapidly growing telecommunications industry. The
Airtouch acquisition will now allow the company to benefit from cellular
growth around the world.
Class Editori: A growing company in a growing industry
Class Editori of Italy is a publisher with a variety of media interests
including electronic publishing, newspapers, and magazines and -- as of
March 31, 1999 -- was a significant holding of the fund. Known as the
Barron's of Italy, Class Editori has developed into a leading Italian
financial publisher. The company is benefiting from the growth of the
Italian financial services market by becoming a leader in stock trading on
the Internet. As a result of a joint venture with an Italian software
company, Class Editori retains a presence in two thirds of Internet-based
stock trading among the Italian banks.
Your fund is also well positioned in Europe's dynamic media industry. For
example, EM TV & Merchandizing of Germany is the largest European producer
of cartoon programming for television and the largest merchandiser of
cartoon characters. The company offers significantly high growth rates, it
matches Disney in terms of cartoon programming market share in Europe, and
its founder and CEO remains the company's largest shareholder.
"We look for companies in any market outside the United States with
superior rates of sales revenue and earnings growth. We favor companies
that we believe offer visible and sustainable high earnings growth as well
as the potential for future positive earnings revisions."
- -- Robert Swift, manager
Putnam International
New Opportunities Fund
Another strong media holding is Seat-Pagine Gialle of Italy. The company
is the second leading yellow pages publisher in the country. Much like
many U.S. companies, it has successfully utilized the newest distribution
channel open to businesses, the Internet. Seat-Pagine Gialle's Web site
generates income from advertising revenue.
* EMERGING MARKETS REBOUND IN FIRST QUARTER
Emerging markets have stabilized and almost all markets rebounded
substantially from their recent lows. The Brazilian market's quick
stabilization after that country's currency devaluation in January, the
relative strength of markets such as Mexico, and South Korea's resurgence
have removed some of the more extreme sources of volatility from these
markets. In concert with this relative stability, we now also expect a
sharp and positive reversal in the fortunes of select emerging-markets
companies.
In Brazil, we have positioned the fund in companies with attractive
long-term growth potential and quality management teams such as leading
cellular telecommunications company Telesp Celular. In Mexico, the average
company had about 15% earnings growth in 1998 and this level of growth
seems to be continuing in 1999. In the fund, we are maintaining our focus
on Mexican blue-chip stocks such as Telefonos de Mexico and Grupo
Televisa.
* LONG-TERM GROWTH OPPORTUNITIES REMAIN ABUNDANT
As the demand for equity investments rises around the world and the
quality of those investments improves, more companies will go public,
driving growth and creating more opportunities for the fund. As such, we
will continue to rely on a bottom-up, research-driven process to identify
companies of any size that we believe offer visible and sustainable high
earnings growth as well as the potential for future positive earnings
revisions.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 3/31/99, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments. Additional risks, including
illiquidity and volatility, may be associated with emerging-markets
securities. This fund invests all or a portion of its assets in small to
midsize companies. Such investments increase the risk of greater price
fluctuations.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
International New Opportunities Fund is designed for investors seeking
long-term capital appreciation through investing primarily in the stocks
of companies outside of the United States.
TOTAL RETURN FOR PERIODS ENDED 3/31/99
Class A Class B Class C Class M
(inception date) (1/3/95) (7/21/95) (2/1/99) (7/21/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -------------------------------------------------------------------------------
6 months 28.12% 20.75% 27.52% 22.52% 27.68% 26.68% 27.78% 23.29%
- -------------------------------------------------------------------------------
1 year 8.29 2.06 7.47 2.47 7.54 6.54 7.73 3.96
- -------------------------------------------------------------------------------
Life of fund 80.51 70.10 74.93 72.93 75.02 75.02 77.01 70.79
Annual average 14.95 13.35 14.10 13.79 14.11 14.11 14.42 13.46
- -------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/99
MSCI
Emerging
MSCI Markets Consumer
EAFE Index Index price index
- -------------------------------------------------------------------------------
6 months 22.34% 33.19% 0.98%
- -------------------------------------------------------------------------------
1 year 6.06 -19.20 1.73
- -------------------------------------------------------------------------------
Life of fund 46.04 -27.84 10.22
Annual average 9.33 -7.39 2.32
- -------------------------------------------------------------------------------
Past performance is not indicative 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 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.
PRICE INFORMATION 6 MONTHS ENDED 3/31/99
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 -- --
- ----------------------------------------------------------------------------
3/31/99 13.85 14.69 13.53 13.84 13.66 14.16
- ----------------------------------------------------------------------------
*Inception date 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 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 shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
Comparative benchmarks
Morgan Stanley Capital International (MSCI) 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 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 or country 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.
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 amounts 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. A separate table is provided for
each share class, reflecting the five most recent reporting periods. In a
semiannual report, the highlight table also includes the current reporting
period.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest
or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Quality Bond Fund +
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds-three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
+ Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor guaranteed by
the U.S. government. These funds are managed to maintain a price of $1.00 per
share, although there is no assurance that this price will be maintained in
the future.
Check your account balances and current performance at www.putnaminv.com.
<TABLE>
<CAPTION>
The fund's portfolio
March 31, 1999 (Unaudited)
COMMON STOCKS (99.0%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
874,400 WPP Group PLC (United Kingdom) $ 7,566,843
Apparel (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
282,900 Hennes & Mauritz AB Class B (Sweden) (NON) 21,227,429
Automotive (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
48,888 Altran Technologies SA (France) (NON) 12,350,331
Banks (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
175,955,000 Akbank T.A.S. (Turkey) 5,658,713
585,600 Banca Lombarda SpA (Italy) 8,561,472
779,600 Banca Popolare di Brescia SpA (Italy) 23,968,802
1,021,400 Banco de Bilbao Vizcaya (BBV) (Spain) (NON) 15,152,469
10,780 National Bank of Greece S.A. (Greece) (NON) 728,403
39,800 Commercial Bank Of Greece S.A. (Greece) 6,509,521
1,156,000 Oversea Chinese Banking Corp. (Singapore) 7,833,884
3,022,000 Thai Farmers Bank Public Co. (Thailand) (NON) 6,103,428
160,832 Yapi ve Kredi Bankasi A.S. GDR (Turkey) 2,894,976
--------------
77,411,668
Basic Industrial Products (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,403,800 Alfa S.A. de C.V. Class A (Mexico) 4,261,325
148,000 Tomy Company Ltd. (Japan) 7,822,856
--------------
12,084,181
Brewing (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
598,400 Cia Cervejaria Brahma ADR (Brazil) 5,572,600
480,200 South African Breweries Ltd. (South Africa) (NON) 4,176,331
--------------
9,748,931
Broadcasting (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
53,319 EM TV & Merchandising AG (Germany) (NON) 45,567,750
258,700 Grupo Televisa S.A. de C.V. GDR (Mexico) (NON) 8,116,713
95,133 Television Francaise I (France) (NON) 17,784,401
--------------
71,468,864
Building Products (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
630,159 CRH PLC (Ireland) 10,831,961
Business Equipment and Services (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
2,005,900 Fomento Economico Mexicano, S.A. de C.V. (Mexico) (NON) 6,141,803
1,364,690 Securitas AB Class B (Sweden) (NON) 21,470,894
1,060,000 Serco Group PLC (United Kingdom) 24,939,574
--------------
52,552,271
Cable Television (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,725,000 Rogers Communication (Canada) (NON) 31,332,450
462,500 Shaw Communications, Inc. Class B (Canada) 14,869,904
--------------
46,202,354
Cellular Communications (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
4,503,000 China Telecom Ltd. (Hong Kong) (NON) 7,496,283
647,800 Filtronic PLC (United Kingdom) 8,309,680
127,400 Mobistar SA (Belgium) (NON) 8,011,868
1,337,800 Telecom Italia Mobile SpA (Italy) (NON) 8,959,581
185,200 Telesp Celular Participacoes S.A. ADR (Brazil) (NON) 3,877,625
--------------
36,655,037
Computers (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
344,400 Psion PLC (United Kingdom) 5,228,106
Computer Equipment (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
30,900 Nidec Corp. (Japan) 3,791,092
Computer Services (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
674,500 CGI Group, Inc. (Canada) (NON) 14,643,603
124,700 Data Communication Systems Co. Ltd. 5,029,915
2,105,200 Logica PLC (United Kingdom) 21,542,564
156,000 Obic Co. Ltd. (Japan) 28,905,878
--------------
70,121,960
Computer Software (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
127,718 Brokat Infosystems AG (Germany) (NON) 20,045,340
52,900 Formula Systems Ltd. (Israel) (NON) 1,391,207
615,810 Fuji Soft AB, Inc. (Japan) 40,105,267
28,737 Infomatec Integrated Info Sys (Germany) (NON) 7,923,869
190,800 NIIT Ltd. (India) 8,449,458
300 Oracle Japan (Japan) 32,269
348,400 Sage Group PLC (United Kingdom) 12,576,404
--------------
90,523,814
Conglomerates (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,646,000 Grupo Carso S.A. de C.V. (Mexico) (NON) 6,771,739
17,428 Preussag AG (Germany) (NON) 9,311,345
--------------
16,083,084
Consumer Durable Goods (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
203,500 Hindustan Lever Ltd. (India) 10,881,531
Consumer Services (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
126,000 Bellsystem 24, Inc. (Japan) 42,882,346
18,022 Ce Consumer Electronic (Germany) (NON) 5,540,864
1,640,700 Compass Group PLC (United Kingdom) 18,957,394
--------------
67,380,604
Cosmetics (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
205,790 Fancl Corp. (Japan) 23,345,921
Education (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
125,600 Benesse Corp. (Japan) 10,100,771
Electric Utilities (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
376,588 Companhia Energetica de Minas Gerais ADR (Brazil) 8,520,304
162,900 Vestas Wind Systems A/S (Denmark) (NON) 10,760,358
--------------
19,280,662
Electronic Components (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
314,600 ARM Holdings PLC (United Kingdom) (NON) 13,688,403
431,830 ASM Lithography Holding N.V. (Netherlands) (NON) 19,659,601
--------------
33,348,004
Electronics and Electrical Equipment (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
22,300 JDS Fitel, Inc. (Canada) (NON) 1,263,393
3,370 Kudelski SA (Switzerland) (NON) 13,411,804
79,347 Medion AG (Germany) (NON) 13,690,333
212,978 Samsung Electronics Co. (South Korea) 16,503,175
9,628,200 Singapore Tech Engineering (Singapore) (NON) 8,699,677
--------------
53,568,382
Financial Services (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,986,800 Grupo Financiero Bancomer, S.A. de C.V. (Mexico) (NON) 6,473,914
47,773 Housing Development Finance Corp. Ltd. (India) (NON) 2,572,566
2,771,600 Sanlam Ltd. (South Africa) (NON) 2,405,973
60,900 Shohkoh Fund & Co., Ltd. (Japan) 30,705,877
--------------
42,158,330
Food and Beverages (2.9%)
- --------------------------------------------------------------------------------------------------------------------------
290,200 Coca-Cola Femsa S.A. de C.V. ADR (Mexico) (NON) 4,733,888
62,804 Danone (France) (NON) 15,737,583
153,529 Kamps AG (Germany) 15,926,715
7,922 Nestle S.A. (Switzerland) 14,369,145
--------------
50,767,331
Gaming (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
967,000 Berjaya Sports Toto Berhad (Malaysia) 1,083,040
Insurance (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
74,765 Aegon N.V. (Netherlands) 6,795,484
59,070 Axa S.A. (France) 7,797,831
201,000 Liberty Life Association of Africa Ltd. (South Africa) 2,496,367
872,800 Skandia Forsakrings AB (Sweden) (NON) 16,161,398
--------------
33,251,080
Media (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,313,900 Aegis Group PLC 144A (United Kingdom) 7,289,578
2,297,680 Aegis Group PLC (United Kingdom) 5,054,201
21,760 Edel Music AG (Germany) (NON) 7,859,712
633,000 Gruppo Editoriale L'Espresso (Italy) (NON) 7,076,940
571,900 Pearson (United Kingdom) 13,004,014
--------------
40,284,445
Medical Supplies and Devices (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,105,300 Mediaset SpA (Italy) (NON) 10,349,200
485,000 Takeda Chemical Industries (Japan) 18,707,140
--------------
29,056,340
Networking (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
215,020 Equant N.V. (Netherlands) (NON) 16,272,714
Oil and Gas (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
207,300 MOL Magyar Olaj-es Gazipari GDR (Hungary) (NON) 4,405,125
195,300 YPF S.A. ADR (Argentina) 6,164,156
--------------
10,569,281
Pharmaceuticals and Biotechnology (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
291,000 Banyu Pharmaceutical Co. Ltd. (Japan) 4,744,033
368,000 Glaxo Wellcome PLC (United Kingdom) 12,293,553
100,904 Sanofi S.A. (France) (NON) 16,921,601
669,013 Smithkline Beecham PLC ADR (United Kingdom) 9,632,953
68,107 Synthelabo (France) (NON) 14,752,828
455,000 Yamanouchi Pharmaceutical Co. Ltd. (Japan) 14,338,233
--------------
72,683,201
Publishing (4.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,971,300 Class Editori (Italy) (NON) 17,419,392
1,809,500 John Fairfax Holdings Ltd. (Australia) 4,479,815
73,800 Kadokawa Shoten Publishing (Japan) 9,798,654
24,923,700 Seat Pagine Gialle SpA (Italy) 29,070,381
719,200 Trinity PLC (United Kingdom) 6,084,702
263,962 VNU N.V. (Netherlands) 10,243,705
44,112 Wolters Kluwer N.V. (Netherlands) (NON) 7,966,627
--------------
85,063,276
Real Estate (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,732,000 Westfield Holdings (Australia) 11,654,420
Restaurants (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,594,800 Autogrill SpA (Italy) (NON) 25,523,102
Retail (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
267,696 Centros Comerciales Continente, S.A. (Spain) (NON) 7,413,038
738,500 Coles Myer Ltd. (Australia) 4,011,520
1,201,200 Dixons Group PLC (United Kingdom) 25,416,185
201,200 Fast Retailing Co. Ltd. (Japan) 7,929,646
822,500 Harvey Norman Holdings Ltd. (Australia) 8,098,128
5,001,700 Migros Turk T.A.S. (Turkey) (NON) 6,568,232
780,800 Next PLC (United Kingdom) 8,921,058
1,292,000 President Chain Store Corp. (Taiwan) (NON) 3,998,491
--------------
72,356,298
Satellite Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,304,200 Pace Micro Technology PLC (United Kingdom) 3,047,492
Semiconductors (2.9%)
- --------------------------------------------------------------------------------------------------------------------------
275,500 Advantest Corp. (Japan) 20,951,887
90,500 Ase Test Ltd. (Taiwan) (NON) 3,574,750
127,450 STMicroelectronics N.V. ADR (France) (NON) 12,378,581
1,400,000 Taiwan Semiconductor Manufacturing Co. (Taiwan) (NON) 4,396,136
187,000 Tokyo Electron Ltd. (Japan) 9,632,856
--------------
50,934,210
Supermarkets (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
6,348 Carrefour Supermarche SA (France) 4,872,407
435,395 Koninklijke Ahold N.V. (Netherlands) 16,615,762
--------------
21,488,169
Telecommunication Equipment (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
113,300 Hikari Tsushin, Inc. (Japan) 19,898,904
323,000 Matsushita Communication Industrial Co. Ltd. (Japan) 21,741,425
304,700 Nokia OYJ Class A (Finland) 48,838,078
--------------
90,478,407
Telecommunications (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
1,530,500 Cable & Wireless Communications (United Kingdom) (NON) 17,277,137
817,800 Carso Global Telecom de C.V. (Mexico) (NON) 4,246,468
449,100 Colt Telecom Group PLC (United Kingdom) 8,076,767
613,700 Energis PLC (United Kingdom) (NON) 17,425,784
304,100 Hellenic Telecommunication Organization S.A. (Greece) (NON) 7,370,149
144,600 Helsingin Puhelin OYJ (Helsinki Telephone Corp.)
Class E (Finland) (NON) 7,041,659
3,733 NTT Data Corp. (Japan) 28,734,684
1,036,900 Orange PLC ADR (United Kingdom) (NON) 14,478,906
437,100 Sonera Group OYJ (Finland) (NON) 7,236,191
3,556,000 Telstra Corporation Ltd. (Australia) 18,634,415
--------------
130,522,160
Telephone Services (9.6%)
- --------------------------------------------------------------------------------------------------------------------------
881,000 British Telecommunications PLC ADR 14,353,485
298,800 Cia de Telecomunicationes de Chile S.A. ADR (Chile) 7,040,475
402,500 Embratel Participacoes S.A. ADR (Brazil) (NON) 6,716,719
2,500 Mahanagar Telephone Nigam Ltd. (India) (NON) 10,427
312,514 Mannesmann AG (Germany) (NON) 39,743,187
80,900 Panafon Hellenic Telecom SA (Greece) (NON) 2,098,350
376,100 Portugal Telecom S.A. (Portugal) (NON) 16,774,718
335,300 Tele Norte Leste Participacoes S.A. ADR (Brazil) (NON) 5,155,238
186,400 Telefonica de Argentina S.A. ADR (Argentina) 5,638,600
137,700 Telefonos de Mexico S.A. de C.V. ADR Class L (Mexico) 9,019,350
489,300 Telesp Participacoes S.A. ADR (Brazil) (NON) 10,091,813
2,711,748 Vodafone Group PLC (United Kingdom) 50,298,492
--------------
166,940,854
Utilities (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,563,100 AEM SpA (Italy) 3,629,583
--------------
Total Common Stocks (cost $1,357,472,384) $1,719,517,534
SHORT-TERM INVESTMENTS (0.7%)(a) (cost $11,929,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$11,929,000 Interest in $400,000,000 joint repurchase agreement
dated March 31, 1999 with Warburg Securities due
April 1, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $11,930,624 for
an effective yield of 4.90% $ 11,929,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,369,401,384) (b) $1,731,446,534
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,736,798,670.
(b) The aggregate identified cost on a tax basis is $1,381,024,996, resulting in gross unrealized appreciation and
depreciation of $384,533,831 and $34,112,293, respectively, or net unrealized appreciation of $350,421,538.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depository Receipts or Global Depository
Receipts, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at March 31, 1999: (as percentage of Market Value) (Unaudited)
Australia 2.7%
Brazil 2.3
Canada 3.6
Finland 3.6
France 5.9
Germany 9.6
Greece 1.0
India 1.3
Italy 7.8
Japan 19.9
Mexico 2.9
Netherlands 4.5
Portugal 1.0
Singapore 1.0
South Korea 1.0
Spain 1.3
Sweden 3.4
Switzerland 1.6
United Kingdom 18.0
United States 1.8
Other 5.8
-----
Total 100.0%
- -------------------------------------------------------------------------------------------
Swap Contracts outstanding at March 31, 1999 (Unaudited)
Notional Termination Unrealized
Amount Date Appreciation
- -------------------------------------------------------------------------------------------
Agreement with Lehman Brothers Securities
Asia Ltd. dated March 10, 1999 to receive (pay)
quarterly the notional amount multiplied by the
return of SK Telecom (Korea) and pay the
notional amount multiplied by three month
LIBOR adjusted by a specified spread. $1,435,112 3/12/01 $219,284
Agreement with Morgan Stanley Dean Witter
dated March 16, 1999 to receive (pay) quarterly
the notional amount multiplied by the return of
SK Telecom (Korea) and pay the notional amount
multiplied by three month LIBOR adjusted by
a specified spread. 1,503,834 12/10/99 196,477
Agreement with Salomon Brothers International
Ltd. dated April 13, 1998 to receive (pay) quarterly
the notional amount multiplied by the return of
SK Telecom (Korea) and pay the notional amount
multiplied by three month LIBOR adjusted by
a specified spread. 237,462 4/13/00 25,317
- -------------------------------------------------------------------------------------------
$441,078
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,369,401,384) (Note 1) $1,731,446,534
- -----------------------------------------------------------------------------------------------
Cash 4,210,123
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $22,160,053) 22,510,376
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,096,431
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 15,874,469
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 2,552,827
- -----------------------------------------------------------------------------------------------
Receivable for open swap contracts 441,078
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 2,428
- -----------------------------------------------------------------------------------------------
Total assets 1,779,134,266
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 22,201,444
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 13,154,104
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,735,356
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 541,516
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 35,591
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,990
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,365,105
- -----------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
- -----------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 246,213
- -----------------------------------------------------------------------------------------------
Other accrued expenses 44,852
- -----------------------------------------------------------------------------------------------
Total liabilities 42,335,596
- -----------------------------------------------------------------------------------------------
Net assets $1,736,798,670
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,436,406,777
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (6,906,680)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
and foreign currency transactions (Note 1) (55,371,485)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 362,670,058
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,736,798,670
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($735,845,583 divided by 53,134,260 shares) $13.85
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.85)* $14.69
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($926,431,132 divided by 68,459,628 shares)** $13.53
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class C share
($1,155,426 divided by 83,465 shares)** $13.84
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($73,366,529 divided by 5,369,867 shares) $13.66
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.66)* $14.16
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $951,845) $ 9,450,071
- -----------------------------------------------------------------------------------------------
Interest 490,142
- -----------------------------------------------------------------------------------------------
Total investment income 9,940,213
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,159,901
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,836,562
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 77,521
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,898
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 880,614
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,406,016
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 1,001
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 261,735
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,618
- -----------------------------------------------------------------------------------------------
Auditing 94,898
- -----------------------------------------------------------------------------------------------
Legal 6,164
- -----------------------------------------------------------------------------------------------
Postage 97,253
- -----------------------------------------------------------------------------------------------
Other 140,846
- -----------------------------------------------------------------------------------------------
Total expenses 16,974,027
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (127,134)
- -----------------------------------------------------------------------------------------------
Net expenses 16,846,893
- -----------------------------------------------------------------------------------------------
Net investment loss (6,906,680)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 65,407,383
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (1,217,181)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 154,304
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
swap contracts during the period 349,514,853
- -----------------------------------------------------------------------------------------------
Net gain on investments 413,859,359
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $406,952,679
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets Six months ended Year ended
March 31 September 30
1999* 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (6,906,680) $ (13,169,571)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 64,190,202 (102,181,173)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabliities in foreign currencies 349,669,157 (117,739,675)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 406,952,679 (233,090,419)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A -- (488,058)
- ---------------------------------------------------------------------------------------------------------------
Class B -- --
- ---------------------------------------------------------------------------------------------------------------
Class M -- --
- ---------------------------------------------------------------------------------------------------------------
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) (168,328,405) (138,578,999)
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 238,624,274 (533,126,546)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 1,498,174,396 2,031,300,942
- ---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment loss
of $6,906,680 and $--, respectively) $1,736,798,670 $1,498,174,396
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Jan. 3, 1995+
operating performance (Unaudited) 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) (.03) (.04) (.03) .04(e) .02(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.07 (1.63) 1.98 1.37 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.04 (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 $13.85 $10.81 $13.60 $11.69 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 28.12* (12.37) 16.74 13.76 21.06*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $735,846 $630,422 $859,999 $499,396 $15,137
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .81* 1.75 1.75 1.95(e) 1.23(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.21)* (.30) (.24) .34(e) .86(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 95.05* 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, variances may occur due to rounding.
(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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 July 21, 1995+
operating performance (Unaudited) 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) (.08) (.13) (.13) (.05)(e) (.01)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.00 (1.60) 1.97 1.39 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.92 (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 $13.53 $10.61 $13.45 $11.61 $10.28
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 27.52* (12.98) 15.87 13.02 .29*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $926,431 $803,785 $1,079,912 $573,129 $7,053
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.19* 2.50 2.50 2.72(e) .83(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.58)* (1.05) (.99) (.43)(e) (.20)(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 95.05* 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, variances may occur due to rounding.
(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
February 1, 1999+
Per-share to March 31
operating performance (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $13.82
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .02
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.84
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) .15*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,155
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .39*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.19)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 95.05*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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, variances may occur due to rounding.
(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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 July 21, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
beginning of period $10.69 $13.51 $11.64 $10.29 $10.25
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) (.07) (.10) (.10) (.02)(e) --(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.04 (1.61) 1.98 1.38 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.97 (1.71) 1.88 1.36 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.01)(d) (.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 $13.66 $10.69 $13.51 $11.64 $10.29
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 27.78* (12.76) 16.12 13.22 .39*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $73,367 $63,967 $91,390 $52,182 $1,259
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.06* 2.25 2.25 2.46(e) .79(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.46)* (.80) (.74) (.17)(e) (.15)(e)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 95.05* 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, variances may occur due to rounding.
(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
March 31, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam International New Opportunities Fund (the "fund") is a series of
Putnam Investment Funds (the "Trust") which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The objective of the fund is to seek
long-term capital appreciation by investing primarily in common stocks
that offer potential for capital appreciation and are primarily traded in
security markets outside the United States.
The fund offers class A, class B, 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 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. 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). 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 maintains an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended March 31, 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.
At September 30, 1998, the fund had a capital loss carryover of
approximately $20,068,000 available to offset future net capital gain, if
any, which will expire on September 30, 2006.
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.
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.
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.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 1.20% of the first $500
million of average net assets, 1.10% of the next $500 million, 1.05% of
the next $500 million, 1.00% of the next $5 billion, 0.975% of the next $5
billion, 0.955% of the next $5 billion, 0.94% of the next $5 billion, and
0.93% thereafter.
The fund reimburses Putnam Management 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 six months ended March 31, 1999, fund expenses were reduced by
$127,134 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 $2,060
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, 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 six months ended March 31, 1999, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $99,606 and $7,356 from the
sale of class A and class M shares, respectively and received $1,061,607
and $2 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 six months ended March 31, 1999,
Putnam Mutual Funds Corp., acting as underwriter received $5,389 on class
A redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$1,553,106,482 and $1,709,809,948, respectively. There were no purchases
and sales of U.S. government obligations. In determining the net gain or
loss on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At March 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 47,223,293 $593,649,424
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
47,223,293 593,649,424
Shares
repurchased (52,416,882) (665,761,836)
- -----------------------------------------------------------------------------
Net decrease (5,193,589) $(72,112,412)
- -----------------------------------------------------------------------------
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)
- -----------------------------------------------------------------------------
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,021,265 $ 61,059,277
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- -----------------------------------------------------------------------------
5,021,265 61,059,277
Shares
repurchased (12,350,851) (150,713,011)
- -----------------------------------------------------------------------------
Net decrease (7,329,586) $(89,653,734)
- -----------------------------------------------------------------------------
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
March 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 151,748 $2,044,525
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- -----------------------------------------------------------------------------
151,748 2,044,525
Shares
repurchased (68,283) (923,862)
- -----------------------------------------------------------------------------
Net increase 83,465 $1,120,663
- -----------------------------------------------------------------------------
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,220,577 $15,180,390
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
1,220,577 15,180,390
Shares
repurchased (1,835,122) (22,863,312)
- -----------------------------------------------------------------------------
Net decrease (614,545) $(7,682,922)
- -----------------------------------------------------------------------------
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)
- -----------------------------------------------------------------------------
Welcome to www.putnaminv.com
Now you can use your PC to get up-to-date information about your funds, learn
more about investing and retirement planning, and access market news and
economic outlooks from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* complete fund information, daily pricing and long-term performance
* your current account value, portfolio value and transaction history
* the latest on new funds and other Putnam news
You can also read Putnam economist Dr. Robert Goodman's commentary and
Putnam's Capital Markets outlook, search for a particular fund by name or
objective, use our glossary to decode investment terms . . . and much more.
The site can be accessed through any of the major online services (America
Online, CompuServe, Prodigy) that offer web access. Of course, you can also
access it via Netscape or Microsoft Internet Explorer, using an independent
Internet service provider.
New features will be added to the site regularly. So be sure to bookmark us
at
http://www.putnaminv.com
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative. To learn more about Putnam, visit our Web site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number.
1-800-225-1581
* DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+ Regular investing, of course, does not guarantee a profit or protect
against a loss in a declining market.
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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan
Vice President
Robert J. Swift
Vice President and Fund Manager
Jack P. Chang
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
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam International
New Opportunities Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details of
sales charges, investment objectives, and operating policies of the fund,
and the most recent copy of Putnam's Quarterly Performance Summary. For
more information or to request a prospectus, call toll free:
1-800-225-1581.
You can also learn more at Putnam Investments' 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
For account balances, economic forecasts, and the latest on Putnam funds,
visit
www.putnaminv.com
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