Putnam
Global Growth
and Income
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The welcome improvement in many of the world's security markets that we
noted in the semiannual report last spring continued throughout the second
half of fiscal 1999, allowing Putnam Global Growth and Income Fund to
close its fourth year of operation solidly in the black. Such an outcome
was not a certain prospect, given the global market and economic
environment when the fiscal year began last October.
That market and economic conditions made such a dramatic improvement in so
short a time is remarkable. Your fund's strong absolute performance is
gratifying. The achievement is a tribute to the ability of the fund's
management team to take maximum advantage of the wide latitude allowed by
the fund's investment strategy.
In the following report, the managers present a detailed discussion of the
fund's fiscal 1999 performance and explain why they are optimistic about
prospects for the year ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 17, 1999
Report from the Fund Managers
Deborah F. Kuenstner
Hugh H. Mullin
George W. Stairs
Results for the past year suggest that value investing with a global scope
can succeed even in uncertain times. As Putnam Global Growth and Income
Fund began its fiscal year on October 1, 1998, world markets were still in
a slump following Russia's debt restructuring. The decision by the U.S.
Federal Reserve Board to cut interest rates restored calm which permitted
a subsequent rally. In the year since then, Asian economies have started
to rebound, a currency devaluation in Brazil caused scarcely a ripple in
international markets, and the Japanese government has stimulated economic
growth while bailing out troubled banks. While international equities
continue to move ahead, rising rates have brought U.S. equities down from
their summer records. Still, for the 12 months that ended September 30,
1999 the fund's class A shares posted a robust return.
Total return for 12 months ended 9/30/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------
27.06% 19.81% 26.08% 21.08% 26.22% 25.22% 26.57% 22.16%
- -----------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and an explanation of performance
calculation methods begin on page 7.
* FUND POSITIONED WELL AS GLOBAL CONDITIONS CHANGED
Your fund's global mandate gives us the latitude to invest in what we
consider the best opportunities, wherever they are available in world
markets. It also provides an attractive risk control benefit: strength in
one country or region can help offset weakness in another. In addition,
our emphasis on undervalued stocks of large, well-established companies
avoids the most volatile stocks in most markets. For that reason, this
fund experiences less volatility than most other equity funds, even those
concentrated in the United States.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
United States 46.0%
United Kingdom 12.2%
Japan 9.1%
France 5.5%
Canada 4.7%
Footnote reads:
*Based on net assets as of 9/30/99. Holdings will vary over time.
Our stock selection process relies primarily on fundamental analysis
intended to identify companies undertaking positive changes. However, we
occasionally make strategic allocation decisions to shift assets to what
we consider undervalued markets. Midway through the fiscal period, for
example, we sold some positions in the United States in order to invest in
what we considered more attractive opportunities in international markets.
At that point, the U.S. market was setting records, and we were concerned
that many U.S. stocks were more expensive than their international
counterparts. Although the U.S. market continued to rise until July, its
subsequent decline confirmed many of our concerns. We were pleased to see
that between March and September international markets outperformed those
in the United States.
* CONSOLIDATIONS DRIVE GLOBAL PERFORMANCE
The trend toward industrial consolidation in Japan and Europe continued
during the fiscal year. Several industries in these regions are plagued by
excess capacity and low returns on invested capital. As companies merge or
acquire competitors, they reduce redundancies and should improve their
profitability to reward shareholders.
The hostile takeover of Telecom Italia, which we discussed in the fund's
semiannual report, represented the first successful European debt-financed
buyout of a large company by a smaller rival. It serves as a lesson for
managers of European companies -- they must improve operations or face the
prospect that rivals might take over the company and do it for them. In
either event, shareholder value would be enhanced. Late in the period we
sold the fund's holding in Telecom Italia at a substantial profit.
Morningstar, Inc. an independent rating agency, has recognized the solid
risk-adjusted performance of Putnam Global Growth and Income Fund by
awarding the fund's class A shares 4 out of 5 stars for overall performance
(based on 3-year returns) within Morningstar's international funds category
as of September 30, 1999. Only 22.5% of the 1,025 international funds rated
received 4 stars.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 9/30/99 and are subject to change
every month. Morningstar ratings are calculated from a fund's 3-, 5-, and
10-year returns (with fee adjustments) in excess of 90-day Treasury bill
returns and a risk factor that reflects performance below 90-day Treasury
bill returns. For 3-year performance, the fund received 4 stars. There were
1,025 international equity funds rated; the top 10% of the funds in an
investment category receive 5 stars; the next 22.5% receive 4 stars. The fund
was not rated over longer time periods. Performance of other share classes
will vary.
In France, two high-profile mergers helped your fund holdings outperform
their sectors. French bank Societe Generale doubled in price during the
fiscal year. Although it lost to rival BNP in a struggle for Paribas,
Soc-Gen nonetheless benefited from this industry consolidation. By
comparison, other European bank holdings, such as UBS and Deutsche Bank,
at which change has progressed more slowly, appreciated by 50%. The other
major French merger involved fund holding Elf Aquitaine, an oil company.
In June, Elf received a takeover bid from one of its competitors, France's
Totalfina. Elf responded by counter-bidding for Total. Elf and Total
finally agreed to a friendly merger in September. Elf's stock outperformed
those of other European oil companies, rising by approximately 60%.
Although mergers like these can result in layoffs, the French government
has quietly encouraged them in a drive to enhance global competitiveness
while using other measures to combat unemployment. Although these
holdings, as well as others mentioned in this report, were viewed
favorably at the end of the reporting period, all portfolio holdings are
subject to review and adjustment in accordance with the fund's investment
strategy and may vary in the future.
Consolidation continues in the United States as well. We bought Union
Carbide in the spring as the global chemical industry hovered near the low
point in its business cycle. Shortly thereafter, the fund received an
unexpected boost when Union Carbide agreed to be acquired by Dow Chemical,
another fund holding.
Japan: Selectivity is still key
Although the Japanese stock market has posted excellent returns so far in 1999,
your fund's management team insists on buying stocks that meet its requirements
for "cheapness and change." In a September 10, 1999 interview on CNNfn, the
cable television channel, portfolio manager Deborah Kuenstner outlined some of
the attractive points of Fuji Heavy Industries, a stock the fund bought during
1999. Fuji's products -- Subaru cars and minicars -- are respectable, Kuenstner
acknowledged, "But they have a lot of businesses that they don't really need to
be in and they don't make money. They've announced that they're going to be
getting out of those businesses. They're very openly looking for a foreign
partner to share technology and maybe to invest in." This rigorous analysis of
Fuji highlights an advantage of the fund's global approach.Because the fund's
management team compares companies on a global basis, it can determine which
ones have the best strategies and execution to achieve positive changes.
* PACE OF RESTRUCTURING ACCELERATES IN JAPAN
In Japan, many companies announced restructuring plans in the fiscal
period. Our enthusiasm for these long-awaited steps is tempered with
skepticism because it sometimes takes Japanese companies a long time to
execute promised changes. For example, despite two high-profile merger
announcements among Japanese banks, we still consider the sector highly
risky. Nevertheless, we have added Japanese holdings to your portfolio.
Among these are Fuji Heavy Industries, which is divesting itself of
underperforming units and focusing on its Subaru and other automobile
product lines. Another, Toshiba, reorganized to focus on its electronics
division while exiting its industrial businesses. Teijin, which makes
specialized chemicals, has announced a significant stock repurchase
program and has formed a global joint venture with DuPont that will
combine their respective polyester businesses. Finally, we are pleased to
report that the fund's position in Nikko Securities appreciated more than
200% in the period. In our opinion, this company represents the best
restructuring story in Japan. Its positive changes include shutting down
superfluous international offices, a performance-based compensation plan
for managers, and the establishment of a strategic investment banking
alliance to create a global distribution partnership with Citigroup.
* GLOBAL RECOVERY LIFTS BASIC MATERIALS STOCKS
Both external and internal changes have helped several holdings in the
energy and basic materials sectors. Strong global economic growth has
increased demand for paper products -- consequently, paper companies
Svenska Cellulosa of Sweden and Abitibi-Consolidated in Canada performed
well. We also added Jefferson Smurfit Group, a global cardboard company
headquartered in Ireland that has reaped benefits from merging its
linerboard unit with Stone Container. Pioneer International of Australia,
a cement company, is benefiting from stronger-than-expected global
construction activity and building projects for the 2002 Sydney Olympic
games. CRH of Ireland, which sells cement and rock for road building, is
enjoying rising sales thanks to its role in a huge interstate construction
project in the United States.
* NEW U.S. HOLDINGS FEATURE REGIONAL BANKS, INDUSTRIALS
As the period opened, U.S. stocks were in a sustained rally. Fortunately,
we had added many out-of-favor technology and financial companies. These
holdings helped the fund perform competitively even as value stocks in
general slipped behind growth stocks during the upswing. In early 1999, we
took profits in several technology holdings but the fund continued to
perform well as the energy and telecommunications sectors emerged as
leaders. One of the fund's better-performing holdings in the telecom
sector was Bell Atlantic. The market responded well to the growth of its
cellular phone service as well as its pending acquisition of GTE.
We maintained a large position in financials throughout the fiscal year
and have added several stocks in the past six months. We took profits on
J.P. Morgan and American Express after their strong rallies in the first
half of the year. The new positions we added are primarily in regional
banks that suffered price weakness as interest rates rose. We believe
these banks improve the overall quality and growth prospects of the fund's
financial holdings. An example is Firstar Bank, which acquired Mercantile
Bancorp, a former fund holding. This new entity has a strong position in
the Midwest. Other new financial holdings are Comerica, Sun Trust Bank,
and Associates First Capital.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Hoechst AG
Germany
Pharmaceuticals
Diageo PLC
United Kingdom
Food and beverages
BCE, Inc.
Canada
Telephone services
Ente Nazionale Idrocarburi SpA
Italy
Oil and gas
Bank of Nova Scotia
Canada
Banks
AXA S.A.
France
Insurance and finance
Akzo-Nobel N.V.
Netherlands
Chemicals
Novartis AG
Switzerland
Pharmaceuticals
Fuji Heavy Industries
Japan
Automobiles
Deutsche Bank AG
Germany
Banks
Footnote reads:
These holdings represent 11.8% of the fund's net assets as of 9/30/99.
Portfolio holdings will vary over time.
We also purchased aircraft maker Boeing. This company has been hurt by
production problems and cost overruns during the past two years, but
management is solving the manufacturing backlog while a new chief
financial officer has introduced better cost management and capital
planning programs.
* POSITIVE BACKGROUND FOR CHEAPNESS AND CHANGE
As the fund enters its fiscal year 2000, the U.S. market is in the midst
of a retrenchment after hitting a peak in July. Meanwhile, international
markets are continuing to rise. These conditions further point to the
advantage of a globally diversified portfolio. We believe that our
value-oriented cheapness and change strategy is especially well suited for
such a climate. Undervalued stocks tend to be less volatile than the
overall market. Many of them also become involved in mergers and
acquisitions. In international markets, in particular, we believe the fund
owns some of the most dynamic companies available -- those that are
responding to global competitive challenges and deploying capital in more
efficient and profitable ways. We have high expectations that this fund's
strategy can achieve attractive long-term growth with limited volatility.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 9/30/99, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Global Growth
and Income Fund is designed for investors seeking capital growth and current
income as a secondary objective through investing primarily in stocks of
companies in the United States and worldwide.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99
Class A Class B Class C Class M
(inception dates) (1/3/95) (11/5/97) (7/26/99) (11/5/97)
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 27.06% 19.81% 26.08% 21.08% 26.22% 25.22% 26.57% 22.16%
- ---------------------------------------------------------------------------------------------
Life of fund 111.26 99.08 102.06 100.06 104.15 104.15 104.77 97.71
Annual average 17.09 15.63 16.00 15.75 16.25 16.25 16.32 15.47
- ---------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/99
MSCI Consumer
World Index price index
- -------------------------------------------------------------------
1 year 29.47% 2.75%
- -------------------------------------------------------------------
Life of fund 114.06 11.71
Annual average 17.73 2.40
- -------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50%, respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares the
higher operating expenses applicable to such shares. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost. Performance data reflect an expense limitation which
is currently in effect. Without the expense limitation, total returns
would have been lower.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 1/3/95
Fund's class A MSCI World Consumer price
Date shares at POP Index index
1/3/95 9,425 10,000 10,000
9/30/95 10,687 11,703 10,193
9/30/96 12,413 13,302 10,499
9/30/97 16,618 16,511 10,725
9/30/98 15,668 16,533 10,872
9/30/99 $19,908 $21,406 $11,171
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B or class C shares
would have been valued at $20,206 ($20,006 at CDSC) and $20,415,
respectively, and no contingent deferred sales charges would apply; a
$10,000 investment in the fund's class M shares would have been valued at
$20,477 ($19,771 at public offering price). See first page of performance
section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/99
Class A Class B Class C Class M
- ------------------------------------------------------------------------------
Distributions (number) 4 1 1 1
- ------------------------------------------------------------------------------
Income $0.085 $0.034 $0.005 $0.041
- ------------------------------------------------------------------------------
Capital gains
Long-term 0.092 0.092 -- 0.092
- ------------------------------------------------------------------------------
Short-term 0.198 0.198 -- 0.198
- ------------------------------------------------------------------------------
Total $0.375 $0.324 $0.005 $0.331
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------
9/30/98 $11.39 $12.08 $11.34 $ -- $11.35 $11.76
- ------------------------------------------------------------------------------
7/26/99* -- -- -- 14.56 -- --
- ------------------------------------------------------------------------------
9/30/99 14.06 14.92 13.94 14.06 14.00 14.51
- ------------------------------------------------------------------------------
* Class C inception date.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B or C shares and assumes redemption at the end of
the period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Morgan Stanley Capital International (MSCI) World Index is an unmanaged
list of global equity securities with all values expressed in U.S.
dollars. Securities indexes assume reinvestment of all distributions and
interest payments and do not take into 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.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and non-investment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-ended funds, a separate
table is provided for each share class.
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Report of independent accountants
For the fiscal year ended September 30, 1999
To the Trustees of Putnam Investment Funds and
Shareholders of Putnam Global Growth and Income Fund
(a series of Putnam Investment Funds)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Putnam Global Growth
and Income Fund (the "fund") at September 30, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at September 30, 1999 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 11, 1999
<TABLE>
<CAPTION>
The fund's portfolio
September 30, 1999
COMMON STOCKS (96.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
7,870 Boeing Co. $ 335,459
5,550 Lockheed Martin Corp. 181,416
4,750 United Technologies Corp. 281,734
--------------
798,609
Airlines (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
31,795 British Airways PLC (United Kingdom) 178,472
3,890 Delta Air Lines, Inc. 188,665
725 UAL Corp. (NON) 47,352
--------------
414,489
Automobiles (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
6,545 Ford Motor Co. 328,477
90,000 Fuji Heavy Industries (Japan) 716,275
3,255 General Motors Corp. 204,862
12,000 Honda Motor Co., Ltd. (Japan) 503,481
6,300 Hyundai Motor Co Ltd. GDR 144A (Japan) 62,213
216,000 PT Astra International Inc. (Indonesia) 64,448
--------------
1,879,756
Automotive Parts (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,850 Valeo S.A. (France) 279,397
Banks (12.9%)
- --------------------------------------------------------------------------------------------------------------------------
65,653 Australia & New Zealand Banking Group Ltd. (Australia) 438,961
8,450 Bank of America Corp. 470,559
37,375 Bank of Nova Scotia (Canada) (NON) 802,750
7,811 Bank One Corp. 271,920
5,061 BankBoston Corp. 219,521
2,768 Barclays PLC (United Kingdom) 81,241
4,538 Chase Manhattan Corp. 342,052
4,140 Comerica, Inc. 209,588
26,514 DBS Group Holdings Ltd. (Singapore) (NON) 296,595
10,550 Deutsche Bank AG (Germany) 708,156
1,000 First American Corp. 42,875
6,662 First Union Corp. 236,917
8,293 Firstar Corp. 212,513
3,227 Fleet Financial Group, Inc. 118,189
10,143 ForeningsSparbanken AB (Sweden) 165,815
30,582 HSBC Holdings PLC (United Kingdom) 350,409
3,980 Huntington Bancshares, Inc. 105,719
191 Julius Baer Holdings AG (Switzerland) 568,072
19,223 National Bank of Canada (Canada) (NON) 229,376
314 National Westminster Bancorp Inc. (United Kingdom) 7,319
17,000 Oversea Chinese Banking Corp. (Singapore) 132,117
5,442 PNC Bank Corp. 286,725
2,364 Societe Generale (France) 488,540
2,250 Summit Bancorp 72,984
3,190 SunTrust Banks, Inc. 209,743
4,370 Synovus Financial Corp. 81,664
10,450 U.S. Bancorp 315,459
2,491 Unidanmark AS (Denmark) 168,851
1,905 United Bank of Switzerland (UBS) AG (Switzerland) 538,574
7,851 Washington Mutual, Inc. 229,642
7,936 Wells Fargo Co. 314,464
--------------
8,717,310
Building Products (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
10,494 CRH PLC (Ireland) 201,513
154,000 Pioneer International Ltd. (Australia) 380,521
--------------
582,034
Business Equipment (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
14,000 Canon, Inc. (Japan) 408,278
11,000 Ricoh Co., Ltd. (Japan) 191,439
--------------
599,717
Business Services (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
11,000 Dai Nippon Printing Co., Ltd. (Japan) 204,788
Cable Television (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
6,120 Comcast Corp. Class A 244,035
Cellular Communications (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
35,800 Telecom Italia Mobile SpA (Italy) 223,289
10,078 Telesp Celular Participacoes S.A. ADR (Brazil) 263,288
--------------
486,577
Chemicals (3.5%)
- --------------------------------------------------------------------------------------------------------------------------
17,465 Akzo-Nobel N.V. (Netherlands) 742,374
11,100 BOC Group PLC (United Kingdom) 231,320
800 Clariant AG 144A (Switzerland) 363,588
127 Clariant AG (Switzerland) 57,720
2,490 Dow Chemical Co. 282,926
3,083 du Pont (E.I.) de Nemours & Co., Ltd. 187,678
4,575 Eastman Chemical Co. 183,000
3,130 PPG Industries, Inc. 187,800
1,735 Union Carbide Corp. 98,570
--------------
2,334,976
Computer Software and Services (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,553 Computer Associates International, Inc. 278,871
5,300 Electronic Data Systems Corp. 280,569
3,224 IBM Corp. 391,313
7,390 Seagate Technology, Inc. 227,704
94,000 Toshiba Corp. (Japan) 701,242
--------------
1,879,699
Conglomerates (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
4,035 Allied-Signal, Inc. 241,848
12,224 Canadian Pacific, Ltd. (Canada) 280,053
113,524 Cookson Group PLC (United Kingdom) 383,087
3,262 Minnesota Mining & Manufacturing Co. 313,356
101,589 Tomkins PLC (United Kingdom) 425,171
--------------
1,643,515
Consumer Products (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
5,075 Kimberly-Clark Corp. 266,438
Electric Utilities (6.7%)
- --------------------------------------------------------------------------------------------------------------------------
22,700 Chubu Electric Power, Inc. (Japan) 413,213
4,215 Dominion Resources, Inc. 190,202
4,973 Duke Energy Corp. 274,137
4,585 Edison International 111,473
8,520 Entergy Corp. 246,548
85,434 Hong Kong Electric Holdings Ltd. (Hong Kong) 265,074
39,856 Iberdola S.A. (Spain) 592,522
19,500 Kansai Electric Power Inc. (Japan) 377,893
6,390 Public Service Enterprise Group, Inc. 246,814
44,858 Scottish and Southern Energy PLC (United Kingdom) 418,308
49,890 Scottish Power PLC (United Kingdom) 458,252
274,000 Shandong International Power Development Co. Ltd. (China) 43,388
9,215 Southern Co. 237,286
3,630 Texas Utilities Co. 135,444
9,673 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) 531,518
--------------
4,542,072
Electronics and Electrical Equipment (5.0%)
- --------------------------------------------------------------------------------------------------------------------------
4,549 Cooper Industries, Inc. 212,666
5,146 Emerson Electric Co. 325,163
3,733 Motorola, Inc. 328,504
4,120 Philips Electronics N.V. (Netherlands) 415,815
6,378 Schneider SA (France) 467,964
143,017 Siebe PLC (United Kingdom) 696,844
2,300 Sony Corp. (Japan) 344,243
3,000 TDK Corp. (Japan) 347,977
5,378 Xerox Corp. 225,540
--------------
3,364,716
Entertainment (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
10,035 Disney (Walt) Productions, Inc. 259,656
Environmental Control (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
7,000 Waste Management, Inc. 134,750
Farm Equipment (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
2,414 Deere (John) & Co. 93,392
Financial Services (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,100 Associates First Capital Corp. 111,600
2,600 Charter One Financial, Inc. 60,125
14,300 Citigroup, Inc. 629,200
3,030 Merrill Lynch & Co., Inc. 203,578
58,000 Nikko Securities Co. Ltd. (Japan) 491,063
3,735 Paine Webber Group Inc. 135,394
2,500 Promise Co., Ltd. (Japan) 201,552
--------------
1,832,512
Food and Beverages (6.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,872 Anheuser-Busch Cos., Inc. 271,282
39,845 Bass PLC (United Kingdom) 480,438
5,692 ConAgra, Inc. 128,426
81,110 Diageo PLC (United Kingdom) 828,462
98,804 Fomento Economico Mexicano, S.A. de C.V. (Mexico) 306,488
1,182 Groupe Danone (France) 288,453
6,959 Heinz (H.J.) Co. 299,237
8,295 Kellogg Co. 310,544
38,000 Kirin Brewery Co. Ltd. (Japan) 455,786
11,795 Nabisco Group Holdings Corp. 176,925
3,700 PepsiCo, Inc. 111,925
10,490 Sara Lee Corp. 245,859
4,400 SYSCO Corp. 154,275
155,588 Tesco PLC (United Kingdom) 485,975
--------------
4,544,075
Gas Pipelines (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
6,203 Sonat, Inc. 246,182
5,540 Williams Cos., Inc. 207,404
--------------
453,586
Health Care Services (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
10,908 Tenet Healthcare Corp. 191,572
Insurance and Finance (8.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,110 Aetna Inc. 153,168
7,383 AGF (Assurances Generales de France) (France) 405,291
54,164 Allied Zurich AG (United Kingdom) 635,700
7,674 Allstate Corp. 191,370
4,560 American General Corp. 288,135
62,463 AMP Ltd. (Australia) 581,507
5,382 AON Corp. 159,105
5,961 Axa S.A. (France) 756,322
4,155 CIGNA Corp. 323,051
9,800 Clarica Life Insurance Co. (Canada) 147,675
4,655 Fannie Mae 291,810
12,781 Internationale Nederlanden Groep (ING) (Netherlands) 696,156
4,730 Lincoln National Corp. 177,671
15,800 Manulife Financial Corp. (Canada) 187,993
2,879 Scor (France) 139,902
6,140 St. Paul Cos., Inc. 168,850
3,985 The Chubb Corp. 198,503
--------------
5,502,209
Investment Companies (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
17,600 Investor AB (Sweden) 209,841
Medical Supplies and Devices (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,740 Baxter International, Inc. 225,335
Metals and Mining (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
10,821 Freeport-McMoRan Copper & Gold, Inc., Class A 150,141
2,989 Freeport-McMoRan Copper & Gold, Inc., Class B 46,516
--------------
196,657
Oil and Gas (7.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,695 Atlantic Richfield Co. 150,219
32,658 British Petroleum Co. PLC (United Kingdom) 596,180
3,615 Chevron, Inc. 320,831
2,195 Conoco, Inc. 60,911
6,548 Conoco, Inc. Class B 179,256
2,660 Elf Aquitaine S.A. (France) 465,904
129,947 Ente Nazionale Idrocarburi (ENI) SpA (Italy) 817,434
8,103 Exxon Corp. 615,322
3,564 Mobil Corp. 359,073
8,531 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 503,862
3,580 Schlumberger Ltd. 223,079
8,998 Tosco Corp. 227,200
3,163 Total S.A. Class B (France) 398,614
--------------
4,917,885
Paper and Forest Products (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
32,836 Abitibi-Consolidated Inc. (Canada) (NON) 395,169
3,275 Champion International Corp. 168,253
3,215 International Paper Co. 154,521
120,200 Jefferson Smurfit Group PLC (Ireland) 355,161
11,064 Svenska Cellulosa AB (Sweden) 17,788
11,064 Svenska Cellulosa AB (SCA) Class B (Sweden) 297,145
2,145 Temple Inland, Inc. 129,773
--------------
1,517,810
Pharmaceuticals (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
8,355 Abbott Laboratories 307,046
10,180 American Home Products Corp. 422,470
9,628 Bayer AG (Germany) 385,087
7,210 Bristol-Myers Squibb Co. 486,675
12,000 Eisai Co. Ltd. (Japan) 304,798
22,932 Hoechst AG (Germany) 1,001,697
6,780 Merck & Co., Inc. 439,429
7,200 Monsanto Co. 256,950
490 Novartis AG ADR (Switzerland) 729,007
8,055 Pharmacia & Upjohn, Inc. 399,729
7,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 328,598
--------------
5,061,486
Photography (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,520 Eastman Kodak Co. 265,540
Publishing (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
4,150 McGraw-Hill, Inc. 200,756
4,020 Times Mirror Co. Class A 264,566
--------------
465,322
Railroads (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
9,781 Burlington Northern Santa Fe Corp. 268,978
9,310 Canadian National Railway Co. (Canada) (NON) 283,122
--------------
552,100
Real Estate (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
16,500 Canary Wharf 144A PLC (United Kingdom) 95,062
12,600 Canary Wharf Finance PLC (United Kingdom) 72,593
38,000 Henderson Land Development Co. Ltd. (Hong Kong) (R) 175,629
13,000 Nomura Securities Co. Ltd. (Japan) 201,787
--------------
545,071
Retail (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,205 Albertsons, Inc. 166,360
68,281 Coles Myer Ltd. (Australia) 356,674
2,081 Dayton Hudson Corp. 124,990
3,050 Federated Department Stores, Inc. (NON) 133,247
8,670 K mart Corp. (NON) 101,331
14,550 Rite Aid Corp. 200,972
4,251 Sears, Roebuck & Co. 133,375
--------------
1,216,949
Steel (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
40,000 British Steel PLC (United Kingdom) 101,564
6,098 Pohang Iron & Steel Company, Ltd. ADR (South Korea) 190,944
15,106 SKF AB Class B (Sweden) 341,643
--------------
634,151
Telephone Services (10.3%)
- --------------------------------------------------------------------------------------------------------------------------
10,748 American Telephone & Telegraph Co. 467,538
7,643 Ameritech Corp. 513,514
16,489 BCE, Inc. (Canada) (NON) 820,750
9,056 Bell Atlantic Corp. 609,582
7,910 BellSouth Corp. 355,950
20,301 British Telecommunications PLC ADR (United Kingdom) 307,274
56,469 Cable & Wireless PLC (United Kingdom) 614,423
17,700 Carso Global Telecom (Mexico) 97,903
3,230 GTE Corp. 248,306
12,971 Hellenic Telecommunication Organization S.A. (Greece) 303,130
29,707 Mahanagar Telephone GDR 144A (India) 300,783
17 Nippon Telegraph and Telephone Corp. (Japan) 209,501
12,768 Portugal Telecom S.A. (Portugal) 532,904
6,673 Sprint Corp. 362,010
4,130 Tele Danmark A/S (Denmark) 246,214
837 Swisscom AG ADR (Switzerland) 261,807
66,590 Telecom Corp. of New Zealand Ltd. (New Zealand) 263,085
24,727 Telfonica S.A. (Spain) (NON) 396,919
519 U S West, Inc. 29,615
--------------
6,941,208
Tobacco (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
35,914 BAT Industries PLC (United Kingdom) 308,001
8,532 Philip Morris Cos., Inc. 291,688
--------------
599,689
Transportation (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
10,817 Peninsular and Oriental Steam Navigation Co.
(United Kingdom) 163,101
Water Utilities (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
25,740 Anglian Water PLC (United Kingdom) 304,251
--------------
Total Common Stocks (cost $63,868,843) $ 65,066,276
WARRANTS (0.6%) (a) (NON) (cost $455,248) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
9,000 Ito-Yokado Co., Ltd. (Japan) 11/29/09 $ 414,998
CONVERTIBLE PREFERRED STOCKS (0.1%) (a) (cost $85,792)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,393 K mart Financing I $3.875 cum. cv. pfd. $ 65,471
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%) (a) (cost $29,659)
PRINCIPAL AMOUNT VALUE
U.S. Treasury Obligations (--%)
- --------------------------------------------------------------------------------------------------------------------------
$ 30,000 US Treasury Bill 4.42s, December 16, 1999 (SEG) $ 29,712
SHORT-TERM INVESTMENTS (4.0%) (a) (cost $2,713,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 2,713,000 Interest in $750,000,000 joint tri-party repurchase agreement
dated September 30, 1999 with Goldman Sachs & Co.
due October 1, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $2,713,399 for an effective
yield of 5.29% $ 2,713,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $67,152,542) (b) $ 68,289,457
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $67,414,114.
(b) The aggregate identified cost on a tax basis is $67,653,538, resulting in gross unrealized appreciation and
depreciation of $5,150,427 and $4,514,508, respectively, or net unrealized appreciation of $635,919.
(NON) Non-income-producing security.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for futures
contracts at September 30, 1999.
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depositary Receipts or Global Depositary Receipts,
representing ownership of foreign securities on deposit with a domestic custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at September 30, 1999, (as percentage of Market Value)
Australia 2.6%
Canada 4.6
France 5.4
Germany 3.8
Italy 1.5
Japan 8.9
Netherlands 3.4
Spain 1.4
Sweden 1.5
Switzerland 3.7
United Kingdom 12.0
United States 45.1
Others 6.1
-----
Total 100.0%
- -------------------------------------------------------------------------------
Forward Currency Contracts to Sell at September 30, 1999
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- -------------------------------------------------------------------------------
Japanese Yen $423,670 $412,715 12/09/99 $10,955
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at September 30, 1999
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
- -------------------------------------------------------------------------------
Topix IDX Future (Long) $422,484 $419,294 Dec 99 $3,190
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $67,152,542) (Note 1) $68,289,457
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 173,367
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 334,691
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 484,957
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 13,669
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 10,955
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 804
- -----------------------------------------------------------------------------------------------
Total assets 69,307,900
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 15,551
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 1,440,818
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 164,138
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 134,485
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 34,558
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 4,817
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,201
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 51,468
- -----------------------------------------------------------------------------------------------
Other accrued expenses 46,750
- -----------------------------------------------------------------------------------------------
Total liabilities 1,893,786
- -----------------------------------------------------------------------------------------------
Net assets $67,414,114
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $61,149,595
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 386,372
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 4,717,162
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 1,160,985
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $67,414,114
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($36,082,254 divided by 2,567,159 shares) $14.06
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $14.06)* $14.92
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($28,105,404 divided by 2,016,832 shares)** $13.94
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($514,916 divided by 36,633 shares)** $14.06
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,711,540 divided by 193,744 shares) $14.00
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $14.00)* $14.51
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $64,008) $1,116,124
- -----------------------------------------------------------------------------------------------
Interest 99,908
- -----------------------------------------------------------------------------------------------
Total investment income 1,216,032
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 443,694
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 240,818
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 14,094
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,762
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 75,236
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 228,870
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 546
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 17,926
- -----------------------------------------------------------------------------------------------
Reports to shareholders 25,410
- -----------------------------------------------------------------------------------------------
Amortization of organization expense (Note 1) 3,218
- -----------------------------------------------------------------------------------------------
Registration fees 4,564
- -----------------------------------------------------------------------------------------------
Auditing 38,345
- -----------------------------------------------------------------------------------------------
Legal 3,831
- -----------------------------------------------------------------------------------------------
Postage 11,758
- -----------------------------------------------------------------------------------------------
Other 6,200
- -----------------------------------------------------------------------------------------------
Total expenses 1,119,272
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (9,592)
- -----------------------------------------------------------------------------------------------
Net expenses 1,109,680
- -----------------------------------------------------------------------------------------------
Net investment income 106,352
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 5,552,395
- -----------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 2,094
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (273,542)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in foreign
currencies during the year (4,796)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year 5,555,927
- -----------------------------------------------------------------------------------------------
Net gain on investments 10,832,078
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $10,938,430
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 106,352 $ 237,626
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 5,280,947 885,720
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies 5,551,131 (4,866,837)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 10,938,430 (3,743,491)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (178,962) (98,477)
- ---------------------------------------------------------------------------------------------------------------
Class B (51,905) (18,908)
- ---------------------------------------------------------------------------------------------------------------
Class C (168) --
- ---------------------------------------------------------------------------------------------------------------
Class M (6,805) (2,182)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (572,711) (229,559)
- ---------------------------------------------------------------------------------------------------------------
Class B (442,734) (110,952)
- ---------------------------------------------------------------------------------------------------------------
Class M (48,134) (10,348)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 17,588,405 41,517,210
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 27,225,416 37,303,293
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 40,188,698 2,885,405
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $386,372 and $129,481, respectively) $67,414,114 $40,188,698
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Jan. 3, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.39 $12.50 $10.77 $9.64 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .07(d) .16(a)(d) .14(a) .21(a) .27(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.98 (.87) 3.13 1.30 .87
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.05 (.71) 3.27 1.51 1.14
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.09) (.09) (.23) (.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.29) (.31) (1.31) (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.38) (.40) (1.54) (.38) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.06 $11.39 $12.50 $10.77 $9.64
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 27.06 (5.72) 33.88 16.14 13.41*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $36,082 $22,091 $2,885 $2,077 $1,771
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.69 1.70(a) 1.48(a) 1.27(a) .49(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .53 1.14(a) 1.19(a) 2.03(a) 3.04(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.46 62.96 103.92 222.89 21.68*
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities
sector. Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under
the fund's current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
period ended September 30, 1998 reflect a reduction of $.05 per share for class A, class B and class M. Expenses for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07,
$.09 and $.20 per share for class A, respectively.
(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 net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Per share net investment income amounted to less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended Nov. 3, 1997+
operating performance Sept. 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.34 $12.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) (.03) .04(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.95 (.35)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.92 (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.03) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.29) (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) (.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.94 $11.34
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 26.08 (2.62)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $28,105 $16,315
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.44 2.24(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.23) .39(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.46 62.96
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities
sector. Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under
the fund's current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
period ended September 30, 1998 reflect a reduction of $.05 per share for class A, class B and class M. Expenses for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07,
$.09 and $.20 per share for class A, respectively.
(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 net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Per share net investment income amounted to less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $14.56
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.48)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.49)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.06
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) (3.07)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $515
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .44*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.10)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.46
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities
sector. Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under
the fund's current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
period ended September 30, 1998 reflect a reduction of $.05 per share for class A, class B and class M. Expenses for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07,
$.09 and $.20 per share for class A, respectively.
(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 net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Per share net investment income amounted to less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended Nov. 3, 1997+
operating performance Sept. 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.35 $12.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) --(e) .07(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.98 (.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.98 (.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.29) (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.33) (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.00 $11.35
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 26.57 (2.48)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,712 $1,783
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.19 2.02(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .03 .62(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.46 62.96
- ------------------------------------------------------------------------------------------------------------------------------------
Effective December 28, 1995, the fund expanded its investment flexibility to include securities outside of the utilities
sector. Information in the table prior to December 28, 1995 may not reflect those that could have been achieved under
the fund's current investment policies.
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation during the period (Note 2). As a result of such limitation, expenses of the fund for the
period ended September 30, 1998 reflect a reduction of $.05 per share for class A, class B and class M. Expenses for the
periods ended September 30, 1997, September 30, 1996 and September 30, 1995, reflect a reduction of approximately $.07,
$.09 and $.20 per share for class A, respectively.
(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 net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Per share net investment income amounted to less than $0.01 per share.
</TABLE>
Notes to financial statements
September 30, 1999
Note 1
Significant accounting policies
Putnam Global Growth and Income Fund (the "fund") is a series of Putnam
Investment Funds (the "trust") which is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The objective of the fund is to seek capital growth
and current income as a secondary objective by investing primarily in
common stocks of companies worldwide.
The fund offers class A, class B, class C and class M shares. The fund
began offering Class C shares on July 26, 1999. 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 but lower than class B and C shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at fair market value, which is determined using the
last reported sale price on its principle exchange, or, if no sales are
reported -- as is 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. Other investments are stated at fair value
following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. 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. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
H) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
September 30, 1999, the fund had no borrowings against the line of credit.
I) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
J) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sale transactions, foreign currency gains and losses, post-October loss
deferrals, organization costs, realized gains and losses on passive
foreign investment companies, and unrealized gains and losses on passive
foreign investment companies. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended September 30, 1999, the fund reclassified $388,379 to
decrease distributions in excess of net investment income and $9,319 to
increase paid-in-capital, with a decrease to accumulated net realized
gains of $397,698. The calculation of net investment income per share in
the financial highlights table excludes these adjustments.
K) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
L) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public
offering of its shares were $6,425. These expenses are being amortized on
projected net asset levels over a five-year period. The fund will
reimburse Putnam Management for the payment of these expenses.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.80% of the first $500
million of average net assets, 0.70% of the next $500 million, 0.65% of
the next $500 million, 0.60% of the next $5 billion, 0.575% of the next $5
billion, 0.555% of the next $ 5 billion, 0.54% of the next $5 billion, and
0.53% thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through January 30, 2000, to the extent
that expenses of the fund (exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expense, credits from
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc. and payments under the Trust's distribution plan) would exceed an
annual rate of 1.45% of the fund's average net assets.
As part of the subcustodian contract between the subcustodian bank and
PFTC, the subcustodian bank has a lien on the securities of the fund to
the extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At September 30, 1999, the payable to the
subcustodian bank represents the amount due for cash advanced for the
settlement of a security purchased.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended September 30, 1999, fund expenses were reduced by
$9,592 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 $542 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plans provide for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund to an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the year ended September 30, 1999, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $66,925 and $2,072 from the
sale of class A and class M shares, respectively and $41,621 and no monies
in contingent deferred sales charges from redemptions of class B and class
C shares, respectively. A deferred sales charge of up to 1% is assessed on
certain redemptions of class A shares. For the year ended September 30,
1999, Putnam Mutual Funds Corp., acting as underwriter received no monies
from the redemption of class A shares.
Note 3
Purchases and sales of securities
During the year ended September 30, 1999, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $51,212,267 and $35,792,402, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At September 30, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,343,321 $18,476,863
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 57,493 737,033
- -----------------------------------------------------------------------------
1,400,814 19,213,896
Shares
repurchased (773,500) (10,587,836)
- -----------------------------------------------------------------------------
Net increase 627,314 $ 8,626,060
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,196,349 $27,443,419
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 27,329 321,431
- -----------------------------------------------------------------------------
2,223,678 27,764,850
Shares
repurchased (514,685) (6,378,953)
- -----------------------------------------------------------------------------
Net increase 1,708,993 $21,385,897
- -----------------------------------------------------------------------------
Year ended September 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 957,033 $13,040,713
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 37,264 471,017
- -----------------------------------------------------------------------------
994,297 13,511,730
Shares
repurchased (416,456) (5,565,754)
- -----------------------------------------------------------------------------
Net increase 577,841 $ 7,945,976
- -----------------------------------------------------------------------------
For the period November 3, 1997
(commencement of operations)
to September 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,704,469 $21,409,230
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,707 124,308
- -----------------------------------------------------------------------------
1,715,176 21,533,538
Shares
repurchased (276,185) (3,413,968)
- -----------------------------------------------------------------------------
Net increase 1,438,991 $18,119,570
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to September 30, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 36,694 $ 534,135
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8 120
- -----------------------------------------------------------------------------
36,702 534,255
Shares
repurchased (69) (1,017)
- -----------------------------------------------------------------------------
Net increase 36,633 $ 533,238
- -----------------------------------------------------------------------------
Year ended September 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 77,602 $1,030,825
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,326 54,810
- -----------------------------------------------------------------------------
81,928 1,085,635
Shares
repurchased (45,211) (602,504)
- -----------------------------------------------------------------------------
Net increase 36,717 $ 483,131
- -----------------------------------------------------------------------------
For the period November 3, 1997
(commencement of operations)
to September 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 182,828 $2,338,570
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,071 12,478
- -----------------------------------------------------------------------------
183,899 2,351,048
Shares
repurchased (26,872) (339,305)
- -----------------------------------------------------------------------------
Net increase 157,027 $2,011,743
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $2,205,064 as capital gain, for its taxable year ended
September 30, 1999.
The fund has designated 13.08% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
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.
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
Europe Growth Fund
Global Equity 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
Tax Smart Equity 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
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
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
[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 not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Deborah F. Kuenstner
Vice President and Fund Manager
Hugh H. Mullin
Vice President and Fund Manager
George W. Stairs
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Global Growth
and Income Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN063-56136 197/2HP/2HQ 11/99
