Putnam
Global Growth
and Income
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Putnam Global Growth and Income Fund's encouraging performance during the
first half of fiscal 1999 reflects not only the global equity rally that
began soon after the period opened but also the management team's astute
selection of portfolio holdings.
The value-oriented stocks in which your fund invests did not lead the
market during the period, but they did make solid gains in an investment
climate that despite continuing volatility, was considerably improved.
More to the point, your fund's managers identified and acted upon several
attractive opportunities during the period and many of these made
significant contributions to the fund's positive performance.
The fund also benefited from the portfolio's broad diversification, since
the rally played out across a broad range of industries and companies. The
following report provides a detailed snapshot of performance and strategy
during the semiannual period and concludes with management's view of
prospects for the remaining half of fiscal 1999.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 19, 1999
Report from the Fund Managers
Deborah F. Kuenstner
Hugh H. Mullin
George W. Stairs
In the six months since we last reported to you on the performance of
Putnam Global Growth and Income Fund, global equity markets recorded one
of the most impressive recoveries in modern memory. As you may recall, our
last report at the end of September 1998 detailed the global equity
retrenchment that followed Russia's financial crisis one month earlier.
For reasons that we will discuss below, global investors soon thereafter
regained their confidence and stock prices in the United States and Europe
advanced toward their previous record high levels. Although European
stocks cooled off in early 1999, Japanese stocks heated up, while several
emerging markets have risen from their low points.
Your fund's value-oriented investment strategy proved well suited to this
kind of volatile environment. While value stocks did not lead the market,
the price declines in 1998 provided us with many opportunities to buy
high-quality companies at prices that met our selection criteria. Many
holdings rose substantially in the six months ended March 31, 1999,
enabling the fund's class A shares to deliver impressive results.
Total return for 12 months ended 3/31/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------
20.57% 13.68% 20.02% 15.02% 20.42% 16.23%
- ------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* GLOBAL MARKET RESURGENCE LIFTS FUND
The market recovery in the fall of 1998 was triggered by a sudden shift in
the Federal Reserve Board's monetary policy. On September 29, the Fed cut
short-term interest rates and followed with additional reductions in
October and November. These moves restored confidence in financial markets
worldwide and were followed by similar decisions by several European
central banks. The lower rates helped to alleviate fears of a widespread
business slowdown; as a result, many stocks in the United States and
Europe approached or reached record highs by the end of the fund's
six-month reporting period.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
United States 47.3%
United Kingdom 11.2%
Japan 7.4%
France 6.3%
Netherlands 4.1%
Footnote reads:
*Based on net assets as of 3/31/99. Holdings will vary over time.
In the fund's 1998 annual report, we described our view that the
emerging-markets slowdown, including Russia's debt crisis, would depress
the earnings of many multinational companies for a short period. However,
we did not expect it to diminish the long-term potential offered by the
kinds of stocks we follow -- attractively priced companies experiencing
positive change. On the basis of this reasoning, we added to many of the
fund's positions as fiscal 1999 opened and equity prices were still weak.
The subsequent rise in value of these holdings propelled the fund during
the semiannual period.
* FINANCIAL AND ENERGY SECTORS REVIVE
Several of the portfolio's best performers during the period were in the
financial and energy sectors. Many banks and brokerage houses benefited
when the global financial system recovered its confidence. Over the past
six months, banks such as NatWest in the United Kingdom, Societe Generale
in France, UBS in Switzerland, and HSBC in Hong Kong all rallied by more
than 60%. In the United States, Chase Manhattan Bank nearly doubled. We
had bought additional shares of UBS and Chase when their prices had
dropped early in the period, enabling the fund to benefit handsomely from
this appreciation and to later reduce a portion of the UBS position.
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.
Energy stocks also came to life during the period after many quarters of
sluggish performance. Two major trends helped the fund's oil stocks --
industry consolidation and rising oil prices. BP Amoco, for example, the
result of a merger completed in January, has already realized cost savings
and announced the acquisition of Atlantic Richfield in March. Another fund
holding, Mobil, agreed to be acquired by Exxon in December. Although Mobil
was well managed, we believe Exxon is even more effective at controlling
costs. Amid these positive internal changes, oil stocks in general got a
boost when the OPEC nations agreed to reduce production in March. OPEC's
decision reflects the industry's goal of cutting output to match the
shortfall in demand and should help keep oil prices firm, thus relieving
negative pressure on oil companies' profits.
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 March 31, 1999. Only 22.5% of the 918 funds rated received 4 stars.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 3/31/99 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
918 international equity funds rated; 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.
* DYNAMIC MANAGEMENT SIGNALS OPPORTUNITY
To illustrate reasons why the fund favors corporations that are embracing
change, we often highlight specific examples of such corporations. In
Japan, a market we have recently underweighted because of its dual
problems of recession and outmoded business practices, we are nevertheless
optimistic about the future of Nikko Securities. Since joining this
brokerage company in 1997, Nikko's chief executive officer, Masashi
Kaneka, has molded the company into a global player rather than continuing
to conform to Japanese standards. In 1998, he established a partnership
with Salomon Smith Barney, which, thanks to subsequent U.S. combinations,
now allows Nikko access to the global distribution capabilities of
Citigroup. Unlike its counterparts in many other Japanese companies, Nikko
managers have a compensation plan that rewards better financial results.
Managing risk with a global approach
Global diversification, one of your fund's key features, is intended to offset
one of the chief risks of equity investing -- market risk. Studies show that
the single greatest factor that influences performance of most stocks is the
overall performance of the market in which the stock trades. Even amid the
current period of economic globalization, markets often move in different
directions because of country-specific factors such as economic growth and
interest rates. Your fund's global structure limits its dependency on the
fortunes of the market of any single country or region. Within each market,
the fund's managers invest in undervalued stocks that tend to be less volatile
over long periods.
"The merger activity surrounding Telecom Italia is good for shareholders
and a sign that international markets are awakening to competition the way
the United States did in the 1980s. Olivetti's initial bid compelled
Telecom Italia's management to respond by formulating one of the best
business plans in its industry."
- -- George W. Stairs, co-manager
Putnam Global Growth and Income Fund
In the United States, we added Allied Signal during the period. This well-
established manufacturing conglomerate is making progress under new
management. It produces a wide range of products, but management has been
focusing investments in the more profitable lines of aerospace components,
including flight-safety products and engines, while selling several
divisions of its auto parts and laminates businesses, which is suffering
from weak demand. Our analysis suggests that the company's cash flow will
soon be improving and could attract new investors to the stock.
Telecom Italia, a long-term fund holding, has recently grown to become the
top position in the portfolio as of March 31, 1999. The stock's price rose
during the period thanks to strong growth in cellular communications and a
hostile takeover bid from its much smaller rival, Olivetti. This bid
prompted the company to hire a new CEO, Franco Bernabe, who led the
turnaround of Italian oil company ENI from 1992 to 1998. At Telecom
Italia, Bernabe has crafted a strategic business plan that should improve
the company's earnings in coming years. Regardless of the outcome of the
takeover battle, which is reminiscent of the financially-motivated
takeovers common in the United States during the 1980s, Telecom Italia is
already changing in ways that benefit shareholders. The battle exemplifies
the spread of shareholder-oriented corporate change that this fund
targets.
* FUND'S BROAD DIVERSIFICATION REMAINS ADVANTAGEOUS
While global markets are unlikely to repeat the gains of the past six
months, we still foresee a generally positive environment. Interest rates
are declining in Europe, while both this region and the United States
continue to enjoy expanding economies. Japan remains in recession but many
Japanese companies are announcing plans to improve profitability.
Although the fund has few positions in emerging markets, a resumption of
growth in those regions in the coming year could help the profits of many
fund holdings. At the same time, we should note that financial markets
continue to experience above-average volatility and the world is in its
second straight year of subpar economic growth.
We believe the fund's global diversification and its emphasis on
undervalued, financially strong companies position it to perform well amid
volatility while still allowing it to benefit from good news in many
industries and markets.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 3/31/99, 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.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Telecom Italia SpA
Italy
Telephone services
Philips Electronics
Netherlands
Electronics and electrical equipment
General Electric Co.
United States
Electronics and electrical equipment
Siebe PLC
United Kingdom
Electronics and electrical equipment
Elf Aquitaine
France
Oil and gas
Nikko Securities Co. Ltd.
Japan
Financial services
Akzo-Nobel
Netherlands
Chemicals
Nippon Telephone & Telegraph Co.
Japan
Telephone services
ENI SpA
Italy
Oil and gas
Hoechst AG
Germany
Chemicals
Footnote reads:
These holdings represent 11.8% of the fund's net assets as of 3/31/99.
Portfolio holdings will vary over time.
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 through investing primarily in stocks of companies in the United
States and worldwide.
TOTAL RETURN FOR PERIODS ENDED 3/31/99
Class A Class B Class M
(inception dates) (1/3/95) (11/3/97) (11/3/97)
NAV POP NAV CDSC NAV POP
- ---------------------------------------------------------------------------
6 months 20.57% 13.68% 20.02% 15.02% 20.42% 16.23%
- ---------------------------------------------------------------------------
1 year 2.58 -3.34 1.65 -3.31 2.00 -1.60
- ---------------------------------------------------------------------------
Life of fund 100.46 88.91 92.35 90.35 94.83 88.11
Annual average 17.82 16.19 16.68 16.39 17.03 16.07
- ---------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/99
MSCI Consumer
World Index price index
- ----------------------------------------------------------------------------
6 months 25.44% 0.98%
- ----------------------------------------------------------------------------
1 year 12.64 1.73
- ----------------------------------------------------------------------------
Life of fund 104.22 10.22
Annual average 18.31 2.32
- ----------------------------------------------------------------------------
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-year and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the case
of class B and class M shares the higher operating expenses applicable to
such shares. All returns assume reinvestment of distributions at 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 do not reflect an expense limitation which is currently
in effect. Without the expense limitation, total returns would have been
lower.
PRICE AND DISTRIBUTION INFORMATION
6 MONTHS ENDED 3/31/99
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------
Income $0.065 $0.034 $0.041
- ------------------------------------------------------------------------
Capital gains:
Long term 0.092 0.092 0.092
- ------------------------------------------------------------------------
Short term 0.198 0.198 0.198
- ------------------------------------------------------------------------
Total $0.355 $0.324 $0.331
- ------------------------------------------------------------------------
Share value NAV POP NAV NAV POP
- ------------------------------------------------------------------------
9/30/98 $11.39 $12.08 $11.34 $11.35 $11.76
- ------------------------------------------------------------------------
3/31/99 13.36 14.18 13.27 13.32 13.80
- ------------------------------------------------------------------------
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
Comparative benchmarks
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 in account brokerage fees or taxes.
Securities in the fund do not match those in the index and performance of
the fund will differ. It is not possible to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector or country to show areas of concentration and
diversification.
Statement of Assets and Liabilities shows how the fund's net assets and
share price is determined. All investment and non-investment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares.
Statement of Operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in Net Assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the amounts listed in the Statement of Operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial Highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table. A separate table is provided for
each share class, reflecting the five most recent reporting periods. In a
semiannual report, the highlight table also includes the current reporting
period.
<TABLE>
<CAPTION>
The fund's portfolio
March 31, 1999 (Unaudited)
COMMON STOCKS (97.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
3,530 Raytheon Co. Class B $ 206,946
2,155 United Technologies Corp. 291,868
-------------
498,814
Airlines (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
22,806 British Airways PLC (United Kingdom) 157,849
3,690 Delta Air Lines, Inc. 256,455
2,125 UAL Corp. (NON) 165,219
-------------
579,523
Apparel (--%)
- --------------------------------------------------------------------------------------------------------------------------
170 Gucci Group (Netherlands) 13,852
Automobiles (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
5,195 Ford Motor Co. 294,816
11,000 Honda Motor Co., Ltd. (Japan) 494,538
-------------
789,354
Banks (13.7%)
- --------------------------------------------------------------------------------------------------------------------------
33,000 Australia & New Zealand Banking Group Ltd. (Australia) 239,859
24,668 Bank of Nova Scotia (Canada) 524,103
6,411 Bank One Corp. 353,006
8,050 BankAmerica Corp. 568,531
5,081 BankBoston Corp. 220,071
2,768 Barclays PLC (United Kingdom) 79,444
4,488 Chase Manhattan Corp. 364,931
38,941 Den Norske Bank A.S.A. (Norway) 142,000
3,306 Deutsche Bank AG (Germany) 169,346
20,900 Development Bank of Singapore Ltd. (Singapore) 158,581
1,000 First American Corp. 36,875
4,487 First Union Corp. 239,774
5,827 Fleet Financial Group, Inc. 219,241
6,762 ForeningsSparbanken AB (Sweden) 158,354
17,073 HSBC Holdings PLC (United Kingdom) 535,390
2,955 Huntington Bancshares, Inc. 91,420
10,000 Istituto Bancario San Paolo di Torino (Italy) 161,788
115 Julius Baer Holdings AG (Switzerland) 372,266
5,830 KeyCorp 176,722
1,993 Mercantile Bancorporation, Inc. 94,668
19,223 National Bank of Canada (Canada) 280,986
13,796 National Westminster Bancorp Inc. (United Kingdom) 317,477
4,442 PNC Bank Corp. 246,809
1,687 Societe Generale (France) 322,807
1,750 Summit Bancorp 68,250
2,800 Synovus Financial Corp. 57,225
1,336 UBS AG (Switzerland) 419,049
5,960 U.S. Bancorp 203,013
2,214 Unidanmark AS (Denmark) 151,067
5,956 Washington Mutual, Inc. 243,452
3,406 Wells Fargo Co. 119,423
-------------
7,335,928
Building Construction (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
28,742 Blue Circle Industries PLC (United Kingdom) 165,123
Building Products (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
16,679 CRH PLC (Ireland) 286,700
154,000 Pioneer International Ltd. (Australia) 305,986
10,435 Pohang Iron & Steel Company, Ltd. ADR (South Korea) 186,526
-------------
779,212
Cable Television (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,010 Comcast Corp. Class A 189,442
Chemicals (4.4%)
- --------------------------------------------------------------------------------------------------------------------------
15,980 Akzo-Nobel N.V. (Netherlands) 589,216
6,339 Bayer AG ADR (Germany) 236,461
1,765 Dow Chemical Co. 164,476
8,010 du Pont (E.I.) de Nemours & Co., Ltd. 465,081
3,375 Eastman Chemical Co. 141,961
13,526 Hoechst AG (Germany) 583,799
2,537 Minnesota Mining & Manufacturing Co. 179,493
-------------
2,360,487
Computer Software and Services (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
960 Apple Computer, Inc. (NON) 34,500
6,225 Compaq Computer Corp. 197,255
5,413 Computer Associates Intl., Inc. 192,500
2,172 IBM Corp. 384,987
-------------
809,242
Conglomerates (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
5,360 Allied-Signal, Inc. 263,645
140,696 Cookson Group PLC (United Kingdom) 325,609
813 Suez Lyonnaise Eaux Finance (France) 149,799
124,614 Tomkins PLC (United Kingdom) 460,871
1,747 Vivendi (France) 428,002
-------------
1,627,926
Consumer Products (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
2,325 Colgate-Palmolive Co. 213,900
3,955 Kimberly-Clark Corp. 189,593
1,860 Procter & Gamble Co. 182,164
-------------
585,657
Electric Utilities (5.0%)
- --------------------------------------------------------------------------------------------------------------------------
17,300 Chubu Electric Power, Inc. (Japan) 305,294
3,973 Duke Energy Corp. 217,025
7,700 Edison International 171,325
6,920 Entergy Corp. 190,300
50,000 Hong Kong Electric Holdings Ltd. (Hong Kong) 151,310
2,200 Iberdrola II (Spain) 32,448
28,724 Iberdola S.A. (Spain) 423,650
5,190 Public Service Enterprise Group, Inc. 198,193
37,261 Scottish Power PLC (United Kingdom) 324,249
7,515 Southern Co. 175,193
8,921 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) 467,037
-------------
2,656,024
Electronics and Electrical Equipment (8.8%)
- --------------------------------------------------------------------------------------------------------------------------
5,367 3Com Corp. (NON) 125,118
3,849 Cooper Industries, Inc. 164,064
4,706 Emerson Electric Co. 249,124
6,175 General Electric Co. 683,109
4,213 Motorola, Inc. 308,602
8,636 Philips Electronics N.V. (Netherlands) 700,455
33,000 Ricoh Co., Ltd. (Japan) 343,034
3,040 Schneider SA (France) 167,485
6,440 Seagate Technology, Inc. (NON) 190,383
141,902 Siebe PLC (United Kingdom) 624,855
4,100 Sony Corp. (Japan) 377,269
4,664 STMicroelectronics N.V. ADR (France) (NON) 452,991
2,000 TDK Corp. (Japan) 161,176
3,168 Xerox Corp. 169,092
-------------
4,716,757
Entertainment (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,750 Disney (Walt) Productions, Inc. 116,719
Farm Equipment (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
5,639 Deere (John) & Co. 217,806
Financial Services (4.6%)
- --------------------------------------------------------------------------------------------------------------------------
35,871 Allied Zurich AG (United Kingdom) (NON) 482,674
2,282 American Express Co. 268,135
8,970 Citigroup, Inc. 572,959
130,000 Nikko Securities Co. Ltd. (Japan) 600,840
10,700 Promise Co., Ltd. (Japan) 562,874
-------------
2,487,482
Food and Beverages (7.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,557 Anheuser-Busch Cos., Inc. 270,999
35,562 Bass PLC (United Kingdom) 482,248
8,322 ConAgra, Inc. 212,731
47,979 Diageo PLC (United Kingdom) 538,134
135,368 Fomento Economico Mexicano, S.A. de C.V. (Mexico) 414,479
2,791 General Mills, Inc. 210,895
1,908 Groupe Danone (France) 478,111
5,009 Heinz (H.J.) Co. 237,301
3,985 Kellogg Co. 134,743
30,000 Kirin Brewery Co. Ltd. 349,916
127 Nestle S.A. (Switzerland) 230,356
7,040 Sara Lee Corp. 174,240
20,661 Scottish & Newcastle PLC (United Kingdom) 221,913
-------------
3,956,066
Health Care Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,610 Aetna Inc. 216,630
7,008 Tenet Healthcare Corp. (NON) 132,714
-------------
349,344
Industrial Products (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
15,106 SKF AB Class B, (Sweden) 213,899
Insurance and Finance (6.9%)
- --------------------------------------------------------------------------------------------------------------------------
5,514 AGF (Assurances Generales de France) (France) 296,378
5,779 Allstate Corp. 214,184
3,760 American General Corp. 265,080
15,470 AMP Ltd. (Australia) 169,598
2,955 AON Corp. 186,904
2,206 Axa S.A. (France) 291,214
3,035 CIGNA Corp. 254,371
3,110 Fannie Mae 215,368
9,319 Internationale Nederlanden Groep (Netherlands) 511,415
104,660 Istituto Nazionale delle Assicurazioni (Italy) 315,027
2,365 Lincoln National Corp. 233,839
2,250 Merrill Lynch & Co., Inc. 198,984
1,850 Morgan (J.P.) & Co., Inc. 228,244
2,879 SCOR (France) 144,224
2,485 The Chubb Corp. 145,528
-------------
3,670,358
Metals and Mining (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
8,921 Freeport-McMoRan Copper & Gold Co., Inc. Class A 91,440
2,489 Freeport-McMoRan Copper & Gold Co., Inc. Class B 27,068
-------------
118,508
Oil and Gas (8.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,495 Atlantic Richfield Co. 255,135
13,664 BP Amoco PLC (United Kingdom) 234,374
3,215 Chevron, Inc. 284,327
2,270 Conoco, Inc. 55,757
4,481 Elf Aquitaine S.A. (France) 605,988
92,142 Ente Nazionale Idrocarburi (ENI) SPA (Italy) 584,411
6,503 Exxon Corp. 458,868
2,964 Mobil Corp. 260,832
6,776 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 352,352
4,830 Schlumberger Ltd. 290,706
5,103 Sonat, Inc. 153,090
3,285 Texaco, Inc. 186,424
7,998 Tosco Corp. 198,450
4,900 Williams Cos., Inc. 193,550
10,274 YPF S.A. ADR (Argentina) 324,273
-------------
4,438,537
Paper and Forest Products (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
34,946 Abitibi-Consolidated Inc. (Canada) 312,742
11,064 Svenska Cellulosa AB Class B, (Sweden) 239,014
1,645 Temple Inland, Inc. 103,224
-------------
654,980
Pharmaceuticals and Biotechnology (5.3%)
- --------------------------------------------------------------------------------------------------------------------------
7,905 American Home Products Corp. 515,801
3,140 Baxter International, Inc. 207,240
6,730 Bristol-Myers Squibb Co. 432,823
6,610 Merck & Co., Inc. 530,039
237 Novartis AG ADR (Switzerland) 383,836
9,050 Pharmacia & Upjohn, Inc. 564,494
7,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 220,588
-------------
2,854,821
Photography (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
12,000 Canon, Inc. (Japan) 295,462
2,920 Eastman Kodak Co. 186,515
-------------
481,977
Publishing (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,450 McGraw-Hill, Inc. 188,025
3,320 Times Mirror Co. Class A 179,488
-------------
367,513
Real Estate (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
16,500 Canary Wharf 144A PLC (United Kingdom) (NON) 87,746
12,600 Canary Wharf Finance PLC (United Kingdom) (NON) 67,006
38,000 Henderson Land Development Co. Ltd. (Hong Kong) (R) 185,856
-------------
340,608
Retail (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,385 Albertsons, Inc. 183,848
42,500 Coles Myer Ltd. (Australia) 230,859
3,791 Dayton Hudson Corp. 252,575
4,810 Federated Department Stores, Inc. 193,001
7,070 K mart Corp. (NON) 118,864
5,245 Rite Aid Corp. 131,125
4,601 Sears, Roebuck & Co. 207,908
-------------
1,318,180
Telephone Services (11.4%)
- --------------------------------------------------------------------------------------------------------------------------
5,899 American Telephone & Telegraph Co. 470,814
6,343 Ameritech Corp. 367,101
12,364 BCE, Inc. (Canada) 547,098
7,156 Bell Atlantic Corp. 369,876
18,818 Cable & Wireless PLC (United Kingdom) 234,717
11,773 Hellenic Telecommunication Organization S.A. (Greece) 285,330
29,707 Mahanager Telephone GDR 144A 315,488
60 Nippon Telegraph and Telephone Corp. (Japan) 584,874
8,282 Portugal Telecom S.A. (Portugal) 369,392
2,569 Sprint Corp. 252,083
1,222 Swisscom AG ADR (Switzerland) (NON) 476,436
75,390 Telecom Corp. of New Zealand Ltd. (New Zealand) 367,705
70,598 Telecom Italia SPA (Italy) 746,433
12,092 Telfonica de Espana (Spain) 510,727
3,389 U S West, Inc. 186,607
-------------
6,084,681
Tobacco (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
14,880 BAT PLC (United Kingdom) 123,728
6,932 Philip Morris Cos., Inc. 272,920
6,390 RJR Nabisco Holdings Corp. 159,750
-------------
556,398
Transportation (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
5,901 Burlington Northern Santa Fe Corp. 193,995
10,817 Peninsular and Oriental Steam Navigation Co.
(United Kingdom) 157,232
-------------
351,227
Water Utilities (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
26,554 Anglian Water PLC (United Kingdom) 325,431
-------------
Total Common Stocks (cost $49,217,540) $ 52,011,876
CONVERTIBLE PREFERRED STOCKS (0.4%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,193 K mart Financing $3.875 cum. cv. pfd. $ 70,984
2,900 St George Bank Ltd. 144A $4.50 cv. pfd. (Australia) 135,575
-------------
Total Convertible Preferred Stocks (cost $217,932) $ 206,559
CONVERTIBLE BONDS AND NOTES (0.6%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$110,000 Apple Computer, Inc. cv. sub. notes 6s, 2001 $ 140,938
15,000 Development Bank of Singapore Structured Note (Issued by
Credit Swisse First Boston) zero %, 2000 (Singapore) 89,400
12,000 Development Bank of Singapore Structured Note (Issued by
Merrill Lynch & Co., Inc.) 3%, 2000 (Singapore) 72,810
-------------
Total Convertible Bonds and Notes (cost $279,392) $ 303,148
SHORT-TERM INVESTMENTS (1.4%) (a) (cost $729,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$729,000 Interest in $400,000,000 joint repurchase agreement dated
March 31, 1999 with Warburg Securities due April 1, 1999
with respect to various U.S. Treasury obligations -- maturity
value of $729,099 for an effective yield of 4.90% $ 729,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $50,443,864) (b) $ 53,250,583
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $53,504,300.
(b) The aggregate identified cost on a tax basis is $50,613,528, resulting in gross unrealized appreciation and
depreciation of $5,624,730 and $2,987,675, respectively, or net unrealized appreciation of $2,637,055.
(NON) Non-income-producing security.
(PIK) Income may be received in cash or additional securities at the discretion of the issuer.
(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 after the name of a foreign holding stands for American Depository Receipts, representing ownership of
foreign securities on deposit with a domestic custodian bank.
DIVERSIFICATION BY COUNTRY (Unaudited)
Distribution of investments by country of issue at March 31, 1999:
(as percentage of Market Value)
Australia 2.3%
Canada 3.1
France 6.3
Germany 2.7
Italy 3.4
Japan 7.4
Mexico 1.0
Netherlands 4.1
Spain 1.8
Sweden 1.2
Switzerland 3.5
United Kingdom 11.2
United States 47.3
Others 4.7
-----
Total 100.0%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $50,443,864) (Note 1) $53,250,583
- -----------------------------------------------------------------------------------------------
Cash 52,668
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 199,886
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 344,930
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 443,293
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 2,744
- -----------------------------------------------------------------------------------------------
Total assets 54,294,104
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 2,003
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 445,256
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 154,717
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 100,258
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 31,222
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 400
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,142
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 39,583
- -----------------------------------------------------------------------------------------------
Payable for organization expense (Note 1) 6,425
- -----------------------------------------------------------------------------------------------
Other accrued expenses 8,798
- -----------------------------------------------------------------------------------------------
Total liabilities 789,804
- -----------------------------------------------------------------------------------------------
Net assets $53,504,300
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $49,710,597
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (44,554)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 1,026,972
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 2,811,285
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $53,504,300
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($29,180,477 divided by 2,184,725 shares) $13.36
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.36)* $14.18
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($21,886,845 divided by 1,648,775 shares)** $13.27
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,436,978 divided by 183,004 shares) $13.32
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.32)* $13.80
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $24,306) $ 423,164
- -----------------------------------------------------------------------------------------------
Interest 50,816
- -----------------------------------------------------------------------------------------------
Total investment income 473,980
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 190,458
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 101,800
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,234
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,275
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 32,321
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 98,287
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 7,985
- -----------------------------------------------------------------------------------------------
Reports to shareholders 12,898
- -----------------------------------------------------------------------------------------------
Amortization of organization expense (Note 1) 1,278
- -----------------------------------------------------------------------------------------------
Auditing 6,224
- -----------------------------------------------------------------------------------------------
Legal 2,021
- -----------------------------------------------------------------------------------------------
Other 3,380
- -----------------------------------------------------------------------------------------------
Total expenses 463,161
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (4,024)
- -----------------------------------------------------------------------------------------------
Net expenses 459,137
- -----------------------------------------------------------------------------------------------
Net investment income 14,843
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,431,780
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (238,721)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (21,110)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 7,222,541
- -----------------------------------------------------------------------------------------------
Net gain on investments 8,394,490
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $8,409,333
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
1999* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 14,843 $ 237,626
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 1,193,059 885,720
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies 7,201,431 (4,866,837)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 8,409,333 (3,743,491)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (130,168) (98,477)
- ---------------------------------------------------------------------------------------------------------------
Class B (51,905) (18,908)
- ---------------------------------------------------------------------------------------------------------------
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) 6,158,726 41,517,210
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 13,315,602 37,303,293
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 40,188,698 2,885,405
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income and undistributed net investment
income of $44,554 and $129,481, respectively) $53,504,300 $40,188,698
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Jan. 3, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.39 $12.50 $10.77 $9.64 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .03(d) .16(a)(d) .14(a) .21(a) .27(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.30 (.87) 3.13 1.30 .87
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.33 (.71) 3.27 1.51 1.14
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.07) (.09) (.23) (.36) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.29) (.31) (1.31) (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.36) (.40) (1.54) (.38) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.36 $11.39 $12.50 $10.77 $9.64
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 20.57* (5.72) 33.88 16.14 13.41*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $29,180 $22,091 $2,885 $2,077 $1,771
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .80* 1.70(a) 1.48(a) 1.27(a) .49(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .20* 1.14(a) 1.19(a) 2.03(a) 3.04(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 31.77* 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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Nov. 3, 1997+
operating performance (Unaudited) to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.34 $12.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) (.02) .04(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.27 (.35)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.25 (.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 $13.27 $11.34
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 20.02* (2.62)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $21,887 $16,315
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.18* 2.24(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.18)* .39(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 31.77* 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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Nov. 3, 1997+
operating performance (Unaudited) to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.35 $12.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) (.01) .07(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.31 (.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.30 (.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 $13.32 $11.35
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 20.42* (2.48)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,437 $1,783
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.05* 2.02(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.05)* .62(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 31.77* 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.
</TABLE>
Notes to financial statements
March 31, 1999 (Unaudited)
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
with current income as a secondary objective. The fund invests primarily
in common stocks in a number of foreign countries and the United States.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than
class A shares, and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class M shares are
sold with a maximum front-end sales charge of 3.50% and pay an ongoing
distribution fee that is lower than class B shares and higher than class A
shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value which is determined using the last
reported sale price 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. All other investments are stated at fair market
value following procedures approved by the Trustees. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). 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) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended March 31, 1999, the fund had no borrowings against the line of
credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
J) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
K) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public
offering of its shares were $6,425. These expenses are being amortized on
projected net asset levels over a five year period. The fund will
reimburse Putnam Management for the payment of these expenses.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 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.
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.
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 March 31, 1999, the payable to the subcustodian
bank represents the amount due for cash advance for the settlement of a
security purchased.
For the six months ended March 31, 1999, fund expenses were reduced by
$4,024 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 $660 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees have approved payment by the fund to an annual
rate of 0.25%, 1.00% and 0.75% of the average net assets attributable to
class A, class B and class M shares respectively.
For the six months ended March 31, 1999, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $25,999 and $1,090 from the
sale of class A and class M shares, respectively and $18,584 in contingent
deferred sales charges from redemptions of class B shares. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the six months ended March 31, 1999, Putnam Mutual Funds Corp.
acting as underwriter received no monies from the redemption of class A
shares.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$18,787,626 and $14,052,409, respectively. There were no purchases and
sales of U.S. government obligations. In determining the net gain or loss
on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At March 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended March 31, l999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 535,910 $6,852,834
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 54,310 691,059
- -----------------------------------------------------------------------------
590,220 7,543,893
Shares
repurchased (345,340) (4,378,711)
- -----------------------------------------------------------------------------
Net increase 244,880 $3,165,182
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 399,976 $5,081,984
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 37,263 471,006
- -----------------------------------------------------------------------------
437,239 5,552,990
Shares
repurchased (227,455) (2,888,410)
- -----------------------------------------------------------------------------
Net increase 209,784 $2,664,580
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 53,668 $688,703
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,311 54,611
- -----------------------------------------------------------------------------
57,979 743,314
Shares
repurchased (32,002) (414,350)
- -----------------------------------------------------------------------------
Net increase 25,977 $328,964
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
At March 31, 1999, Putnam Investment, Inc. owned 225,071 of class A shares
(10.30% of class A shares outstanding) valued at $3,006,949.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
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
Beverly Marcus
Clerk and Assistant Treasurer
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
For account balances, economic forecasts, and the latest on Putnam funds,
visit
www.putnaminv.com
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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SA063-51843 197/2HP/2HQ 5/99
