Putnam
Balanced
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce the appointment of Anthony R. Sellitto, III,
to your fund's management team shortly after the close of the fiscal
year. Tino recently joined Putnam from Berger Associates and was also
formerly associated with Crestone Capital Management. He has 8 years of
investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 15, 2000
REPORT FROM FUND MANAGEMENT
Manuel Weiss
Kevin M. Cronin
In our report to shareholders six months ago, amid increasingly volatile
stock market conditions, we discussed the advantages of Putnam Balanced
Fund's approach to investing. Since the fund's national debut on April
4, 2000, stock market turbulence has continued while the bond market has
strengthened, further confirming the effectiveness of your fund's
balanced strategy. At the close of the fiscal year on September 30,
2000, the fund had delivered solid returns due in large part to its
investment in a combination of stocks and bonds.
Total return for 12 months ended 9/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
28.40% 21.02% 27.59% 22.59% 27.61% 26.61% 27.89% 23.41%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 5.
The fund is designed for investors who seek the growth potential of
stocks but who are also seeking the potential downside protection
offered by bond investments. This balanced approach, typically a 60%
allocation to stocks and a 40% position in bonds, can offset the risk of
downturns in the equity market, such as those we have witnessed in
fiscal 2000. Although the stock market had periods of recovery after its
sharp declines in April, stocks in most sectors once again suffered
downturns by the close of the fund's fiscal year. Despite generally good
economic news -- the Federal Reserve Board left interest rates unchanged
and the economy began to show signs of slowing -- investors became
concerned about high oil prices and some weaker-than-expected corporate
earnings. On the other hand, for the first nine months of 2000, the bond
market significantly outperformed stocks, the first time that has
happened since 1990.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Communications
equipment 10.1%
Software 10.0%
Electronics 7.1%
Pharmaceuticals 5.6%
Computers 5.1%
Footnote reads:
*Based on net assets as of 9/30/00. Holdings will vary over time.
* STOCK HOLDINGS PROVIDE BOOST DESPITE TURBULENCE
While the equity market delivered its share of ups and downs, strategic
stock selection, especially in the technology sector, contributed to
strong returns for the fiscal period. The greatest portion of the fund's
portfolio is invested in the stocks of large, rapidly growing companies.
We target companies across a range of industries that are enjoying
rising sales and profits and offer attractive long-term growth
potential. Although technology has been one of the most volatile
sectors, it actually was the strongest performing sector in the fund's
equity portfolio.
In technology, we believe that the long-term growth potential is still
extraordinary as consumers and businesses continue to demand better,
faster, and more sophisticated systems for sending, receiving, and
storing data and information. One theme we have capitalized on is the
Internet and e-commerce. Throughout the business world, from established
blue-chip giants to small emerging firms, competitive companies know
they must develop e-commerce strategies to bring their businesses,
products, and services online effectively. As a result, we believe
businesses that provide e-commerce support have outstanding growth
potential.
* E-COMMERCE, NETWORKING STOCKS DELIVER
Among the top performing technology stocks in the fund's portfolio was
Brocade Communications Systems. As increasing amounts of data fly across
corporate networks, businesses need more efficient methods for storing
and managing the information. Brocade is benefiting from this demand
with products that allow businesses to improve the performance and
increase the size and scope of their computer servers and storage
systems. Brocade specializes in fiber channel switches, which help
prevent bottlenecks of data in computer storage networks. While this
holding and others discussed in this report were viewed favorably at the
end of the fiscal period, all are subject to review in accordance with
the fund's investment strategy and may vary in the future.
"Increasingly volatile market conditions have further confirmed the
effectiveness of the fund's balanced strategy."
-- Manuel Weiss, portfolio manager
By offering extremely sophisticated software, fund holding i2
Technologies has become a recognized leader in the business-to-business
(B2B) marketplace. i2 provides software to help companies manage their
businesses and to participate effectively in B2B exchanges online.
Redback Networks, another outstanding technology stock in your fund's
portfolio, is a powerful competitor in the networking marketplace.
Redback's strength is due in large part to a line of products called
subscriber management systems. The systems allow businesses, such as
telephone companies, to provide high-speed access to a large number of
customers using different types of technology, including digital
subscriber lines, cable, and wireless.
* HEALTH-CARE SECTOR OFFERS CONTINUED GROWTH POTENTIAL
In the health-care sector, we took advantage of strength in
biotechnology stocks such as Genentech, Inc. One of the world's largest
biotech firms, Genentech has a large pipeline of products, including
treatments for breast cancer and cystic fibrosis and for post-heart
attack patients. Another biotech holding, MedImmune, Inc., develops
drugs for transplants and infectious diseases. One of its successful
products is Synagis, a treatment that helps prevent a common
respiratory virus in infants.
Detracting from performance during the period was the fund's underweight
position in pharmaceutical stocks. The relatively small number of drug
stocks in the portfolio prevented the fund from taking full advantage of
their rally in the latter half of the period.
* HIGH-QUALITY BONDS DESIGNED TO OFFSET RISK
A key component of the fund's strategy is its portfolio of high-quality
fixed-income securities, designed to cushion the blow of downturns in
the stock market. The fund typically divides its assets between U.S.
Treasury securities and mortgage-backed securities issued by
government-sponsored agencies (GNMA, FNMA, FHLMC). It is important to
note that prior to the fund's national debut, this portion of the
portfolio also invested in bonds issued by U.S. corporations, which
typically offer more risk. We believe that our shift to a portfolio
composed strictly of high- quality government securities will allow us
to execute the fund's balanced strategy more effectively.
[GRAPHIC OMITTED: TOP 10 EQUITY HOLDINGS]
TOP 10 EQUITY HOLDINGS
Cisco Systems, Inc.
Communications equipment
General Electric Co.
Conglomerates
Pfizer, Inc.
Pharmaceuticals
Intel Corp.
Electronics
VERITAS Software Corp.
Software
EMC Corp.
Computers
Oracle Corp.
Software
Redback Networks, Inc.
Communications equipment
Sun Microsystems, Inc.
Computers
Applied Micro Circuits Corp.
Electronics
Footnote reads:
These holdings represent 18.8% of the fund's net assets as of 9/30/00.
Portfolio holdings will vary over time.
During the course of your fund's fiscal year, the relative value and
performance potential shifted back and forth between Treasuries and
mortgage-backed securities. As long-term rates declined in early 2000,
Treasuries were the place to be and the fund was positioned to benefit.
As the relative prices of mortgage-backed securities became more
attractive, we added to the fund's position while selling Treasuries
that had performed well. During the second half of the fiscal year, we
began to take advantage of higher-yielding mortgage-backed securities
that were selling at attractive levels.
* FOCUS REMAINS ON BALANCED APPROACH
As your fund enters a new fiscal year, we believe that its balanced
strategy will be especially beneficial if market volatility continues.
We plan to take full advantage of the buying opportunities offered by
declines in the stock market while strategically selecting fixed-income
securities in an effort to reduce the fund's overall risk.
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 9/30/00, there is no guarantee the fund will
continue to hold these securities in the future.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Balanced Fund is designed for investors seeking capital growth and
current income by investing in common stocks and in fixed-income
securities.
TOTAL RETURN FOR PERIODS ENDED 9/30/00
Class A Class B Class C Class M
(inception dates) (1/3/95) (4/4/00) (4/4/00) (4/4/00)
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------------
1 year 28.40% 21.02% 27.59% 22.59% 27.61% 26.61% 27.89% 23.41%
-----------------------------------------------------------------------------
5 years 148.18 134.00 139.39 137.39 139.44 139.44 142.28 133.84
Annual average 19.94 18.53 19.08 18.88 19.08 19.08 19.36 18.52
-----------------------------------------------------------------------------
Life of fund 208.32 190.55 195.72 194.72 195.78 195.78 199.72 189.44
Annual average 21.67 20.42 20.79 20.72 20.80 20.80 21.07 20.34
-----------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/00
Lehman Bros.
Intermediate
Russell 1000 Treasury S&P 500 Consumer
Growth Index Bond Index Index price index
-----------------------------------------------------------------------------
1 year 23.43% 6.08% 13.28% 3.46
-----------------------------------------------------------------------------
5 years 206.00 34.07 166.82 13.32
Annual average 25.06 6.04 21.68 2.53
-----------------------------------------------------------------------------
Life of fund 301.47 48.39 246.24 15.58
Annual average 27.35 7.11 24.11 2.55
-----------------------------------------------------------------------------
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, 5- and
10-year, if 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. For a portion of this period, the fund
was offered on a limited basis and had limited assets. Performance data
reflect an expense limitation currently or previously in effect, without
which total returns would have been lower.
<TABLE>
<CAPTION>
[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
Lehman Bros.
Fund's class A Russell 1000 S&P Intermediate Consumer price
Date shares at POP Growth Index 500 Index Treasury Index index
<S> <C> <C> <C> <C> <C>
1/3/95 9,425 10,000 10,000 10,000 10,000
9/30/95 12,424 13,120 12,977 11,068 10,200
9/30/96 14,289 15,928 15,615 11,630 10,506
9/30/97 17,801 21,709 21,931 12,532 10,739
9/30/98 19,969 24,120 23,915 13,887 10,892
9/30/99 24,013 32,527 30,564 13,988 11,172
9/30/00 $29,055 $40,147 $34,624 $14,839 $11,558
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $29,572 ($29,472 with the contingent deferred
sales charge); a $10,000 investment in the fund's class C shares would
have been valued at $29,578 and no contingent deferred sales charges
would apply; a $10,000 investment in the fund's class M shares would
have been valued at $29,972 ($28,944 at public offering price). See
first page of performance section for performance calculation method.
</TABLE>
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/00
Class A Class B Class C Class M
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Distributions
(number) 3 2 2 2
---------------------------------------------------------------------------
Income $0.325 $0.056 $0.069 $0.057
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Capital gains
Long-term 0.210 -- -- --
---------------------------------------------------------------------------
Short-term 1.185 -- -- --
---------------------------------------------------------------------------
Total $1.720 $0.056 $0.069 $0.057
---------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
---------------------------------------------------------------------------
9/30/99 $12.63 $13.40 -- -- -- --
---------------------------------------------------------------------------
4/4/00* -- -- $14.27 $14.27 $14.27 $14.79
---------------------------------------------------------------------------
9/30/00 14.30 15.17 14.29 14.28 14.30 14.82
---------------------------------------------------------------------------
*Inception date for class B, class C, and class M shares.
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
Standard & Poor's 500 Index* is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance.
Russell 1000 Growth Index* contains those Russell 1000 Index securities
with a greater-than-average growth orientation.
Lehman Brothers Intermediate Treasury Bond Index*+ is an unmanaged list
of Treasury bonds that is used as a general gauge of the market for
intermediate-term fixed-income securities.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take 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.
+Putnam Management has recently undertaken a review of benchmarks for various
funds. This index replaces the Lehman Brothers Government/Corporate Bond
Index as a performance benchmark for this fund because, in Putnam Management's
opinion, the securities tracked by this index more accurately reflect the
types of securities generally held by the fund.
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 noninvestment 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-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended September 30, 2000
To the Board of Trustees of Putnam Investment Funds
and Shareholders of Putnam Balanced 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
Balanced Fund (the "fund") at September 30, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards generally accepted in
the United States of America, 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, 2000 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 3, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
September 30, 2000
COMMON STOCKS (59.8%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Banking (0.3%)
-------------------------------------------------------------------------------------------------------------------
2,900 State Street Corp. $ 377,000
Biotechnology (2.7%)
-------------------------------------------------------------------------------------------------------------------
11,968 Amgen, Inc. (NON) 835,703
5,249 Genentech, Inc. (NON) 974,674
14,252 MedImmune, Inc. (NON) 1,100,967
2,900 Millennium Pharmaceuticals, Inc. (NON) 423,581
-------------
3,334,925
Broadcasting (1.1%)
-------------------------------------------------------------------------------------------------------------------
8,847 Clear Channel Communications, Inc. (NON) 499,856
16,552 Echostar Communications Corp. Class A (NON) 873,118
-------------
1,372,974
Cable Television (0.6%)
-------------------------------------------------------------------------------------------------------------------
40,522 AT&T Corp. - Liberty Media Group Class A (NON) 729,396
Communications Equipment (10.1%)
-------------------------------------------------------------------------------------------------------------------
18,284 ADC Telecommunications, Inc. (NON) 491,668
6,301 Brocade Communications Systems (NON) 1,487,036
70,600 Cisco Systems, Inc. (NON) (SEG) 3,900,650
11,802 Comverse Technology, Inc. (NON) 1,274,616
5,032 Corning, Inc. 1,494,504
6,501 Juniper Networks, Inc. (NON) 1,423,313
11,400 QUALCOMM, Inc. (NON) 812,250
10,783 Redback Networks, Inc. (NON) 1,768,412
-------------
12,652,449
Computers (5.1%)
-------------------------------------------------------------------------------------------------------------------
2,700 Ariba, Inc. (NON) 386,817
20,613 EMC Corp. (NON) 2,043,264
3,100 Inktomi Corp. (NON) 353,400
4,500 Network Appliance, Inc. (NON) 573,188
13,622 Sun Microsystems, Inc. (NON) 1,590,369
7,111 VeriSign, Inc. (NON) 1,440,422
-------------
6,387,460
Conglomerates (3.8%)
-------------------------------------------------------------------------------------------------------------------
58,725 General Electric Co. 3,387,698
26,865 Tyco International, Ltd. 1,393,622
-------------
4,781,320
Consumer Goods (0.1%)
-------------------------------------------------------------------------------------------------------------------
4,158 Estee Lauder Cos. Class A 152,287
Electronics (7.1%)
-------------------------------------------------------------------------------------------------------------------
7,500 Applied Micro Circuits Corp. (NON) 1,552,969
56,200 Intel Corp. 2,335,813
9,130 JDS Uniphase Corp. (NON) 864,497
5,302 PerkinElmer, Inc. 553,396
5,275 PMC - Sierra, Inc. (NON) 1,135,444
2,318 SDL, Inc. (NON) 716,986
20,111 Texas Instruments, Inc. 948,988
10,236 Xilinx, Inc. (NON) 876,458
-------------
8,984,551
Energy (1.3%)
-------------------------------------------------------------------------------------------------------------------
8,420 BJ Services Co. (NON) 514,673
10,700 Nabors Industries, Inc. (NON) 560,680
9,400 Transocean Sedco Forex, Inc. 551,075
-------------
1,626,428
Entertainment (0.7%)
-------------------------------------------------------------------------------------------------------------------
15,217 Viacom, Inc. Class B (NON) 890,195
Health Care Services (1.0%)
-------------------------------------------------------------------------------------------------------------------
8,200 UnitedHealth Group, Inc. 809,750
3,400 Quest Diagnostics, Inc. (NON) 390,150
-------------
1,199,900
Insurance (0.6%)
-------------------------------------------------------------------------------------------------------------------
8,270 American International Group, Inc. 791,336
Investment Banking/Brokerage (1.2%)
-------------------------------------------------------------------------------------------------------------------
5,900 Goldman Sachs Group, Inc. (The) 672,231
8,900 Morgan Stanley, Dean Witter, Discover and Co. 813,794
-------------
1,486,025
Media (0.6%)
-------------------------------------------------------------------------------------------------------------------
9,889 Time Warner, Inc. 773,814
Medical Technology (1.1%)
-------------------------------------------------------------------------------------------------------------------
12,401 PE Corp. 1,444,717
Natural Gas Utilities (1.2%)
-------------------------------------------------------------------------------------------------------------------
16,800 Enron Corp. 1,472,100
Oil & Gas (0.2%)
-------------------------------------------------------------------------------------------------------------------
4,650 Apache Corp. 274,931
Pharmaceuticals (5.6%)
-------------------------------------------------------------------------------------------------------------------
22,268 American Home Products Corp. 1,259,534
5,568 Andrx Group (NON) 519,912
4,044 Forest Laboratories, Inc. (NON) 463,796
12,900 IVAX Corp. (NON) 593,400
15,500 Lilly (Eli) & Co. 1,257,438
64,511 Pfizer, Inc. 2,898,963
-------------
6,993,043
Retail (2.2%)
-------------------------------------------------------------------------------------------------------------------
17,540 Home Depot, Inc. (The) 930,716
21,081 Intimate Brands, Inc. 393,951
11,930 RadioShack Corp. 770,976
14,889 Wal-Mart Stores, Inc. 716,533
-------------
2,812,176
Software (10.0%)
-------------------------------------------------------------------------------------------------------------------
3,900 Adobe Systems, Inc. 605,475
9,500 Agile Software Corp. (NON) 854,406
14,176 BEA Systems, Inc. (NON) 1,103,956
6,630 i2 Technologies, Inc. (NON) 1,240,224
3,497 Micromuse, Inc. (NON) 702,678
20,519 Microsoft Corp. (NON) 1,237,552
25,158 Oracle Corp. (NON) 1,981,193
8,100 Phone.com, Inc. (NON) 920,363
7,200 Rational Software Corp. (NON) 499,500
11,296 Siebel Systems, Inc. (NON) 1,257,386
15,116 VERITAS Software Corp. (NON) 2,146,472
-------------
12,549,205
Technology Services (1.4%)
-------------------------------------------------------------------------------------------------------------------
16,128 America Online, Inc. (NON) 866,880
15,041 InfoSpace.com, Inc. (NON) 454,990
8,500 Paychex, Inc. 446,250
-------------
1,768,120
Telecommunications (1.8%)
-------------------------------------------------------------------------------------------------------------------
27,941 Metromedia Fiber Network, Inc. Class A (NON) 679,316
11,484 Nextel Communications, Inc. Class A (NON) 536,877
11,000 Nextlink Communications, Inc. Class A (NON) 387,063
19,399 Sprint Corp. (PCS Group) (NON) 680,177
-------------
2,283,433
-------------
Total Common Stocks (cost $72,569,448) $ 75,137,785
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (33.7%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
U.S. Government Agency Mortgage Obligations (20.2%)
-------------------------------------------------------------------------------------------------------------------
Fannie Mae
$ 10,000 7 1/4s, January 15, 2010 $ 10,313
325,000 6 1/2s, August 15, 2004 324,136
10,000 5 1/8s, February 13, 2004 9,569
24,006 Federal Home Loan Mortgage Association 6s,
February 1, 2029 22,431
Federal National Mortgage Association Pass-Through
Certificates
3,996,732 8s, March 1, 2030 4,050,400
5,364,589 7 1/2s, with due dates from May 1, 2015 to March 1, 2030 5,404,526
9,402,074 6s, with due dates from May 15, 2008 to March 1, 2029 8,858,514
25,000 Freddie Mac 6 7/8s, January 15, 2005 25,270
Government National Mortgage Association Pass-Through
Certificates
22,919 9s, October 15, 2016 24,050
4,333,878 8s, with due dates from June 15, 2026 to July 15, 2030 4,413,361
991,436 7 1/2s, with due dates from November 15, 2029 to
June 15, 2030 994,569
1,103,830 7s, with due dates from May 15, 2023 to
February 15, 2030 1,089,096
153,447 6 1/2s, with due dates from September 15, 2024
to April 15, 2029 147,789
-------------
25,374,024
U.S. Treasury Obligations (13.5%)
-------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
3,245,000 10 5/8s, August 15, 2015 4,660,112
5,150,000 6 1/4s, May 15, 2030 5,412,341
370,000 6 1/8s, November 15, 2027 373,411
U.S. Treasury Notes
415,000 6 3/4s, May 15, 2005 429,915
6,000,000 6 1/8s, August 15, 2007 6,059,040
-------------
16,934,819
-------------
Total U.S. Government and Agency Obligations
(cost 41,983,196) $ 42,308,843
<CAPTION>
PREFERRED STOCKS (--%) (a) (cost 16)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
250 TCR Holding Corp zero % cum. pfd. (NON) $ 3
<CAPTION>
SHORT-TERM INVESTMENTS (6.3%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 4,000,000 Interest in 843,280,000 joint repurchase agreement
dated September 29, 2000 with Morgan Stanley & Co.,
Inc. due October 2, 2000 with respect to various
U.S. Government obligations -- maturity value of
4,002,210 for an effective yield of 6.63% $ 4,000,000
3,893,000 Interest in 800,000,000 joint repurchase agreement
dated September 29, 2000 with S.B.C. Warburg, Inc.
due October 2, 2000 with respect to various U.S.
Government obligations -- maturity value of 3,895,157
for an effective yield of 6.65% 3,893,000
-------------
Total Short-Term Investments (cost $7,893,000) $ 7,893,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $122,445,660) (b) $ 125,339,631
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $125,549,087.
(b) The aggregate identified cost on a tax basis is $122,969,109,
resulting in gross unrealized appreciation and depreciation of
$7,857,015 and $5,486,493, respectively, or net unrealized appreciation
of $2,370,522.
(NON) Non-income-producing security.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirement for futures contracts at September
30, 2000.
------------------------------------------------------------------------------
Futures Contracts Outstanding at September 30, 2000
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
------------------------------------------------------------------------------
S&P 500 Index
(short) $3,270,824 $3,428,174 Dec-00 $157,350
US Treasury Note
10yr (long) 2,104,594 2,109,031 Dec-00 (4,437)
US Treasury Note
5yr (long) 1,507,969 1,505,486 Dec-00 2,483
------------------------------------------------------------------------------
$155,396
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $122,445,660) (Note 1) $125,339,631
-------------------------------------------------------------------------------------------
Cash 545
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 447,543
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 702,182
-------------------------------------------------------------------------------------------
Receivable for securities sold 1,746,574
-------------------------------------------------------------------------------------------
Receivable for variation margin 53,784
-------------------------------------------------------------------------------------------
Total assets 128,290,259
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 2,436,607
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 64,341
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 118,776
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 18,961
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,821
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,506
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 48,941
-------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 6,425
-------------------------------------------------------------------------------------------
Other accrued expenses 42,794
-------------------------------------------------------------------------------------------
Total liabilities 2,741,172
-------------------------------------------------------------------------------------------
Net assets $125,549,087
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $121,862,419
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 193,195
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 444,106
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,049,367
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $125,549,087
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($72,564,909 divided by 5,073,365 shares) $14.30
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $14.30)* $15.17
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($6,215,448 divided by 435,039 shares)** $14.29
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($918,282 divided by 64,325 shares)** $14.28
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($561,511 divided by 39,265 shares) $14.30
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $14.30)* $14.82
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($45,288,937 divided by 3,166,191 shares) $14.30
-------------------------------------------------------------------------------------------
* 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 sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended September 30, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends $ 42,254
-------------------------------------------------------------------------------------------
Interest income (net of foreign tax $45) 865,820
-------------------------------------------------------------------------------------------
Total investment income 908,074
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 205,975
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 52,963
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,297
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 1,536
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 50,679
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 10,887
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 1,408
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,272
-------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 319
-------------------------------------------------------------------------------------------
Reports to shareholders 19,858
-------------------------------------------------------------------------------------------
Registration fees 36,090
-------------------------------------------------------------------------------------------
Auditing 27,110
-------------------------------------------------------------------------------------------
Other 5,956
-------------------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (102,067)
-------------------------------------------------------------------------------------------
Total expenses 314,283
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (15,719)
-------------------------------------------------------------------------------------------
Net expenses 298,564
-------------------------------------------------------------------------------------------
Net investment income 609,510
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 455,778
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 22,732
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts during the 2,528,004
-------------------------------------------------------------------------------------------
Net gain on investments 3,006,514
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,616,024
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended September 30
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 609,510 $ 76,507
--------------------------------------------------------------------------------------------------
Net realized gain on investments 478,510 428,223
--------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 2,528,004 141,449
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,616,024 646,179
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (328,066) (58,592)
--------------------------------------------------------------------------------------------------
Class B (14,095) --
--------------------------------------------------------------------------------------------------
Class C (2,222) --
--------------------------------------------------------------------------------------------------
Class M (1,758) --
--------------------------------------------------------------------------------------------------
Class Y (136,973) --
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (451,413) (357,149)
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 118,901,030 588,681
--------------------------------------------------------------------------------------------------
Total increase in net assets 121,582,527 819,119
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 3,966,560 3,147,441
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $193,195 and $57,862, respectively) $125,549,087 $3,966,560
--------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.63 $11.92 $11.90 $11.03 $10.56
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (a) .34(d) .25(d) .22 .25 .29
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.06 2.02 1.05 2.16 1.18
-----------------------------------------------------------------------------------------------------
Total from
investment operations 3.40 2.27 1.27 2.41 1.47
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.33) (.22) (.25) (.27) (.35)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.40) (1.34) (1.00) (1.27) (.65)
-----------------------------------------------------------------------------------------------------
Total distributions (1.73) (1.56) (1.25) (1.54) (1.00)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.30 $12.63 $11.92 $11.90 $11.03
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 28.40 20.25 12.18 24.58 15.01
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $72,565 $3,967 $3,147 $2,769 $2,246
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .91 .78 .77 .71 .73
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) 2.00 2.05 1.82 2.29 2.72
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 275.49 123.90 139.55 151.15 170.75
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses of the fund for the period
ended September 30, 2000 reflect a reduction of $0.02 for all classes of
shares. For the periods ended September 30, 1999, 1998, 1997 and 1996,
expenses reflect a reduction of $0.19, $0.13, $0.12, and $0.15,
respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
-------------------------------------------------
For the period
Per-share April 4, 2000+
operating performance to September 30
-------------------------------------------------
2000
-------------------------------------------------
Net asset value,
beginning of period $14.27
-------------------------------------------------
Investment operations
-------------------------------------------------
Net investment income (a)(d) .07
-------------------------------------------------
Net realized and unrealized
gain on investments .01
-------------------------------------------------
Total from
investment operations .08
-------------------------------------------------
Less distributions:
-------------------------------------------------
From net
investment income (.06)
-------------------------------------------------
From net realized gain
on investments --
-------------------------------------------------
Total distributions (.06)
-------------------------------------------------
Net asset value,
end of period $14.29
-------------------------------------------------
Ratios and supplemental data
-------------------------------------------------
Total return at
net asset value (%)(b) 0.53*
-------------------------------------------------
Net assets, end of period
(in thousands) $6,215
-------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .88*
-------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .58*
-------------------------------------------------
Portfolio turnover (%) 275.49
-------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses of the fund for the period
ended September 30, 2000 reflect a reduction of $0.02 for all classes of
shares. For the periods ended September 30, 1999, 1998, 1997 and 1996,
expenses reflect a reduction of $0.19, $0.13, $0.12, and $0.15,
respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
-------------------------------------------------
For the period
Per-share April 4, 2000+
operating performance to September 30
-------------------------------------------------
2000
-------------------------------------------------
Net asset value,
beginning of period $14.27
-------------------------------------------------
Investment operations
-------------------------------------------------
Net investment income (a)(d) .07
-------------------------------------------------
Net realized and unrealized
gain on investments .01
-------------------------------------------------
Total from
investment operations .08
-------------------------------------------------
Less distributions:
-------------------------------------------------
From net
investment income (.07)
-------------------------------------------------
From net realized gain
on investments --
-------------------------------------------------
Total distributions (.07)
-------------------------------------------------
Net asset value,
end of period $14.28
-------------------------------------------------
Ratios and supplemental data
-------------------------------------------------
Total return at
net asset value (%)(b) 0.55*
-------------------------------------------------
Net assets, end of period
(in thousands) $918
-------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .88*
-------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .58*
-------------------------------------------------
Portfolio turnover (%) 275.49
-------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses of the fund for the period
ended September 30, 2000 reflect a reduction of $0.02 for all classes of
shares. For the periods ended September 30, 1999, 1998, 1997 and 1996,
expenses reflect a reduction of $0.19, $0.13, $0.12, and $0.15,
respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-------------------------------------------------
For the period
Per-share April 4, 2000+
operating performance to September 30
-------------------------------------------------
2000
-------------------------------------------------
Net asset value,
beginning of period $14.27
-------------------------------------------------
Investment operations
-------------------------------------------------
Net investment income (a)(d) .09
-------------------------------------------------
Net realized and unrealized
gain on investments --
-------------------------------------------------
Total from
investment operations .09
-------------------------------------------------
Less distributions:
-------------------------------------------------
From net
investment income (.06)
-------------------------------------------------
From net realized gain
on investments --
-------------------------------------------------
Total distributions (.06)
-------------------------------------------------
Net asset value,
end of period $14.30
-------------------------------------------------
Ratios and supplemental data
-------------------------------------------------
Total return at
net asset value (%)(b) 0.61*
-------------------------------------------------
Net assets, end of period
(in thousands) $562
-------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .76*
-------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .70*
-------------------------------------------------
Portfolio turnover (%) 275.49
-------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses of the fund for the period
ended September 30, 2000 reflect a reduction of $0.02 for all classes of
shares. For the periods ended September 30, 1999, 1998, 1997 and 1996,
expenses reflect a reduction of $0.19, $0.13, $0.12, and $0.15,
respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS Y
-------------------------------------------------
For the period
Per-share August 2, 2000+
operating performance to September 30
-------------------------------------------------
2000
-------------------------------------------------
Net asset value,
beginning of period $13.95
-------------------------------------------------
Investment operations
-------------------------------------------------
Net investment income (a)(d) .05
-------------------------------------------------
Net realized and unrealized
gain on investments .34
-------------------------------------------------
Total from
investment operations .39
-------------------------------------------------
Less distributions:
-------------------------------------------------
From net
investment income (.04)
-------------------------------------------------
From net realized gain
on investments --
-------------------------------------------------
Total distributions (.04)
-------------------------------------------------
Net asset value,
end of period $14.30
-------------------------------------------------
Ratios and supplemental data
-------------------------------------------------
Total return at
net asset value (%)(b) 2.82*
-------------------------------------------------
Net assets, end of period
(in thousands) $45,289
-------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) .13*
-------------------------------------------------
Ratio of net investment income
to average net assets (%)(a) .37*
-------------------------------------------------
Portfolio turnover (%) 275.49
-------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period (Note
2). As a result of such limitation, expenses of the fund for the period
ended September 30, 2000 reflect a reduction of $0.02 for all classes of
shares. For the periods ended September 30, 1999, 1998, 1997 and 1996,
expenses reflect a reduction of $0.19, $0.13, $0.12, and $0.15,
respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis
of weighted average number of shares outstanding during the period.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
Note 1
Significant accounting policies
Putnam Balanced Fund (the "fund") is one of 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.
The fund, which became open to the public on April 4, 2000, offers class
A, class B, class C, class M and class Y shares. The fund began offering
class B, class C and class M shares on April 4, 2000 and class Y shares
on August 2, 2000. Class A shares are sold with a maximum front-end
sales charge of 5.75%. Class B shares, which convert to class A shares
after approximately eight years, do not pay a front-end sales charge but
pay a higher ongoing distribution fee than class A shares, and are
subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class C shares are subject to the
same fees and expenses as class B shares, except that class C shares
have a one-year 1.00% contingent deferred sales charge and do not
convert to class A shares. Class M shares are sold with a maximum front
end sales charge of 3.50% and pay an ongoing distribution fee that is
higher than class A shares but lower than class B and class C shares.
Class Y shares, which are sold at net asset value, are generally subject
to the same expenses as class A , class B, class C and class M shares,
but do not bear a distribution fee. Class Y shares are sold to defined
contribution plans that invest at least $150 million in a combination of
Putnam funds and other accounts managed by affiliates of Putnam
Management.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Short-term investments
having remaining maturities of 60 days or less are stated at amortized
cost, which approximates market value. Other investments, including
restricted securities, are stated at fair value following procedures
approved by the Trustees. Market quotations are not considered to be
readily available for certain debt obligations; such investments are
stated at fair value on the basis of valuations furnished by a pricing
service or dealers, approved by the Trustees, which determine valuations
for normal institutional-size trading units of such securities using
methods based on market transactions for comparable securities and
variable relationships between securities that are generally recognized
by institutional traders.
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. Original issue discount bonds are
accreted according to the yield-to-maturity basis. Non-cash dividends,
if any, are recorded at the fair market value of the securities
received.
E) 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.
F) 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, 2000, the fund had no borrowings against the line of
credit.
G) 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.
H) 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. These differences
include temporary and permanent differences of losses on wash sales
transactions, organization costs, unrealized gains and losses on certain
futures contracts, paydown gains and losses on mortgage-backed
securities and market discount. 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, 2000, the fund reclassified $8,937 to
increase undistributed net investment income and $743 to decrease
paid-in-capital, with an decrease to accumulated net realized gains of
$8,194. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
I) 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.
J) 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. The expenses have been fully
amortized as of September 30, 2000.
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: 0.65% of the
first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion,
0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of
the next $5 billion, and 0.38% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through March 31, 2001, 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 0.80% of the fund's average net
assets. Prior to April 3, 2000, the limit was 0.70% 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, a
subsidiary of Putnam Investments, Inc. Investor servicing agent
functions are provided by Putnam Investor Services, a division of PFTC.
For the year ended September 30, 2000, fund expenses were reduced by
$15,719 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 $100
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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 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 Retail Management, Inc., 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 Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%, 1.00%,
1.00% and 0.75% of the average net assets attributable to class A, class
B, class C and class M shares respectively.
For the year ended September 30, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $33,660 and $232 from
the sale of class A and class M shares, respectively, and received $89
and $297 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, 2000, Putnam Retail Management, Inc., acting as
underwriter received $2,132 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended September 30, 2000, cost of purchases and proceeds
from sales of investment securities other than U.S. government
obligations and short-term investments aggregated $145,253,088 and
$50,611,365, respectively. Purchases and sales of U.S. government
obligations aggregated $45,529,568 and $29,456,413, respectively.
Note 4
Capital shares
At September 30, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 5,449,088 $76,959,310
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 58,542 777,629
---------------------------------------------------------------------------
5,507,630 77,736,939
Shares
repurchased (748,407) (10,661,354)
---------------------------------------------------------------------------
Net increase 4,759,223 $67,075,585
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 17,014 $208,524
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 35,933 415,741
---------------------------------------------------------------------------
52,947 624,265
Shares
repurchased (2,849) (35,584)
---------------------------------------------------------------------------
Net increase 50,098 $588,681
---------------------------------------------------------------------------
For the period April 4, 2000
(commencement of operations) to
September 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 452,749 $6,456,571
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 928 13,305
---------------------------------------------------------------------------
453,677 6,469,876
Shares
repurchased (18,638) (268,002)
---------------------------------------------------------------------------
Net increase 435,039 $6,201,874
---------------------------------------------------------------------------
For the period April 4, 2000
(commencement of operations) to
September 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 74,279 $1,055,760
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 137 1,967
---------------------------------------------------------------------------
74,416 1,057,727
Shares repurchased (10,091) (144,258)
---------------------------------------------------------------------------
Net increase 64,325 $ 913,469
---------------------------------------------------------------------------
For the period April 4, 2000
(commencement of operations) to
September 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 57,126 $803,902
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 123 1,758
---------------------------------------------------------------------------
57,249 805,660
Shares repurchased (17,984) (253,164)
---------------------------------------------------------------------------
Net increase 39,265 $552,496
---------------------------------------------------------------------------
For the period August 2, 2000
(commencement of operations) to
September 30, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 3,303,950 $46,161,500
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,532 136,973
---------------------------------------------------------------------------
3,313,482 46,298,473
Shares repurchased (147,291) (2,140,867)
---------------------------------------------------------------------------
Net increase 3,166,191 $44,157,606
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated 4.15% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $911,345 as capital gain, for its taxable year
ended September 30, 2000.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, 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, III
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
Stephen Oristaglio
Vice President
C. Beth Cotner
Vice President
Manuel Weiss
Vice President and Fund Manager
Kevin M. Cronin
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Balanced
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 and
Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN072-65469 318 11/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
----------------------------------------------------------------------------
Putnam Balanced Fund
Supplement to annual Report dated 9/30/00
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, C, and M shares, which are discussed more extensively in the annual
report.
ANNUAL RESULTS AT A GLANCE
----------------------------------------------------------------------------
Total return for periods ended 9/30/00
NAV
1 year 28.72%
5 years 139.95
Annual average 20.23
Life of fund (since class A inception, 1/3/95) 212.86
Annual average 21.98
Share value: NAV
8/2/00 $13.95
9/30/00 $14.30
----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
1 0.044 -- 0.044
----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for class
Y shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect the initial
sales charge currently applicable to class A shares. These returns have not
been adjusted to reflect differences in operating expenses which, for class
Y shares, typically are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. Investment return and principal value will fluctuate so your
shares, when redeemed, may be worth more or less than their original cost.
See full report for information on comparative benchmarks. If you have
questions, please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
Putnam
International
New Opportunities
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce the addition of Peter J. Hadden to your
fund's management team. Formerly a senior analyst in the Specialty
Growth Group, Peter has been with Putnam since 1992. Previously, he was
with Travelers Insurance. He has 13 years of investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 15, 2000
REPORT FROM FUND MANAGEMENT
Robert J. Swift
Stephen P. Dexter
Peter J. Hadden
In the past year, international equity markets have reminded us how
often and how quickly investor sentiment can change. During the first
several months of Putnam International New Opportunities Fund's fiscal
year, which began October 1, 1999, markets showed extraordinary
confidence in the growth stocks that your fund favors. Beginning in
February, though, investors grew more circumspect and these stocks
became more volatile. After sliding into April, growth stocks
alternately rallied and corrected for the rest of the period. In spite
of the volatility, your fund posted a robust gain for the fiscal year
and finished well ahead of its benchmark index. We believe the shifting
nature of investors' sentiments stands in contrast to the stability of
the long-term growth outlook for most of the stocks that the fund owns.
The short-term adversity these sectors have faced does not derail the
long-term structural changes that have improved the growth potential of
many companies.
Total return for 12 months ended 9/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
21.31% 14.30% 20.49% 15.49% 20.38% 19.38% 20.70% 16.51%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* GROWTH STOCKS CORRECT AFTER EARLY RUN-UP
The technology and telecommunications sectors that represent large
portions of your fund's portfolio led international markets to historic
gains in the early part of your fund's fiscal year. These sectors are in
the early phases of overwhelming change as the world -- the business
world, in particular -- taps the full potential of computing and
high-speed telecommunications. These technologies can generate greater
business efficiencies by cutting costs and thus compel companies to
invest in them in order to stay competitive.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY ALLOCATIONS]
TOP COUNTRY ALLOCATIONS*
France 17.5%
United Kingdom 16.7%
Japan 12.9%
Germany 10.1%
United States 6.8%
Footnote reads:
*Based on net assets as of 9/30/00. Holdings will vary over time.
Since February, however, investors have been questioning more critically
the profit outlook for the companies supplying and servicing these
technologies. Rising short-term interest rates in Europe and the United
States prompted a correction in technology stock valuations, which had
risen tremendously during February and March. A second problem emerged
in the spring and summer, when large European telecom companies paid
more than they had anticipated for new government licenses for the next
generation of wireless telephone services.
Morningstar, an independent rating agency, gave Putnam International New
Opportunities Fund's class A shares 4 out of 5 stars for overall, 3-,
and 5-year performance as of September 30, 2000. Of the 1,175
international equity funds rated overall and for the 3-year period, and
of the 730 funds rated over 5 years, only 22.5% received 4 stars.
Morningstar rates a fund in relation to other funds with similar
investment objectives based on the fund's 3-, 5-, and 10-year weighted
returns (if applicable), adjusted for risk factors and sales charges.
Ratings are updated monthly. The top 10% of the funds in an investment
category receive 5 stars; the next 22.5% receive 4 stars. Performance of
other share classes will vary. Past performance is not indicative of
future results.
Although your fund did not own most of the companies that bid for the
licenses, the outcome cast a cloud on the telecom sector because of its
large spending burden. A third setback occurred over the summer, when
sales of major technology products, such as personal computers,
telephone handsets, and semiconductors, turned out to be lower than
anticipated, though still growing rapidly. These developments led to
ongoing volatility in the technology and telecommunications sectors,
while other, more defensive stocks performed better.
In response to these events, we reexamined the holdings in the fund,
asking the critical questions about profit growth that are a normal part
of our investment research. In our judgment, the long-term outlook for
the fund's holdings has not changed. Technology spending will continue
for years to come. Outside the technology and telecommunications
sectors, we also continue to find many attractive growth stocks.
European investment companies focused on gathering retirement assets,
for example, are beginning to experience the growth that their U.S.
counterparts have experienced in the past 10 to 15 years. In short, we
remain confident the fund is positioned in companies capable of
achieving high rates of growth.
* TOP-PERFORMING HOLDINGS REFLECT BROADER MARKET LEADERSHIP
Amid the recent difficulties for technology and telecommunications
stocks, a more diverse group of holdings contributed to the fund's
gains. An example is Marschollek, Lautenschlaeger und Partner (MLP), a
German financial services company achieving strong growth in the assets
it manages. Its marketing has successfully targeted relatively young
Germans, in part by cleverly taking advantage of the Internet to build
brand recognition. MLP is also poised to benefit as the government moves
toward privatizing more of Germany's pension system. Although this
holding, as well as others discussed in this report, was viewed
favorably by fund management at the end of the reporting period, all
holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
Putnam International New Opportunities Fund's class A shares were ranked
in the top decile by Lipper for the 5-year period ended September 30,
2000. The fund ranked in the top 8%, or 21 out of 285 international
funds that were ranked.
Past performance is no guarantee of future results. Lipper is an
industry research firm whose rankings are based on total return
performance, vary over time, and do not reflect the effects of sales
charges. Performance of other share classes will vary. The fund was
ranked 30 out of 461 (top 7%) for the three-year period and 106 out of
655 (top 17%) for the one-year period. The fund was not ranked over
longer periods.
Media stocks also contributed solid gains to the portfolio. Television
Francaise (TF1) of France and ProSieben Media of Germany were two of
your fund's larger holdings in the media sector. TF1 was one of the
best-managed broadcasters in Europe, while ProSieben had been an
underperformer that recently underwent a restructuring and change in
management. Both firms benefited from an upsurge in European advertising
revenues. We took profits on a portion of the TF1 position when it
neared our price target.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Nokia OYJ AB, class A
Finland
Communications equipment
Bombardier, Inc.
Canada
Manufacturing
Sanofi-Synthelabo SA
France
Pharmaceuticals
ARM Holdings PLC
United Kingdom
Electronics
Bipop-Carire SpA
Italy
Banking
Marschollek, Lautenschlaeger und
Partner AG DEM $3.05 pfd
Germany
Investment banking/brokerage
NTT DoCoMo, Inc.
Japan
Telecommunications
Vodafone Group PLC
United Kingdom
Telecommunications
Societe Television Francaise 1 (TF1)
France
Broadcasting
Capita Group PLC
United Kingdom
Commercial and consumer services
Footnote reads:
These holdings represent 32.2% of the fund's net assets as of 9/30/00.
Portfolio holdings will vary over time.
We also continued to emphasize smaller service companies. An example is
in Japan, where the fund owns NTT DoCoMo rather than its parent, NTT,
Japan's equivalent of AT&T. NTT DoCoMo's innovative I-mode wireless
Internet service has surpassed all sales expectations, signing up 13
million subscribers in its first year. While the telecom financing
question has weighed on the entire sector, NTT DoCoMo has continued to
outperform its parent and we believe this will remain the case for a
long time to come.
* FUNDAMENTAL RESEARCH GOES BEYOND BEATEN PATH
Your fund's strategy relies on fundamental research to find growth
companies outside the mainstream of international markets. We scan
international markets to identify stocks that have the highest growth
rates in their industries. We investigate these companies by dissecting
their financial situations and getting to know their leaders. In
building the portfolio, we select companies with what we consider the
best growth prospects, worrying less about market and sector weightings
than many of our competitors.
Our research can often uncover opportunities that few others notice. A
recent example is fund holding Bombardier, based in Canada. This company
is part of a traditional industry -- aerospace and defense contracting
-- that holds little attraction for growth investors. However,
Bombardier is led by astute managers who identified a growth opportunity
in civil aviation: building regional aircraft that seat between 40 and
100 passengers and fly routes under 1,000 miles. Recent advances in
technology have made this type of plane more economical for airlines,
and regional flights have become one of the fastest growing segments of
the airline industry. Bombardier has been one of the fund's top
performers this year.
Elan is another relatively obscure holding in the portfolio. This Irish
company was one of the few pharmaceutical stocks we chose to own this
year because it had more attractive growth prospects than several larger
drug companies. Elan has performed well amid volatility.
* FUND STILL FAVORS TECHNOLOGY BUT IS POSITIONED FOR BROADENING MARKET
As the fund moves forward into its 2001 fiscal year, we are constructive
on the possibilities for growth stocks. The markets are digesting the
negative news from technology and telecommunications companies, which
should clear the air for a future rally. It remains imperative for
businesses to build out their technological capabilities. Other
structural changes, such as growing equity ownership in Europe, are also
positive for growth stocks. In addition, interest rates in most major
markets are likely to be more stable in the coming year than in the past
12 months. Above all, though, our management team, backed by Putnam's
global investment research capabilities, continues to uncover a wide
array of growth opportunities that can keep the portfolio well
positioned for long-term performance.
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 9/30/00, there is no guarantee the fund will
continue to hold these securities in the future. The fund invests all or
a portion of its assets in small to midsize companies. Such investments
increase the risk of greater price fluctuations. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
International New Opportunities Fund is designed to seek long-term
capital appreciation through investments in common stocks that are
principally traded outside the United States.
TOTAL RETURN FOR PERIODS ENDED 9/30/00
Class A Class B Class C Class M
(inception dates) (1/3/95) (7/21/95) (2/1/99) (7/21/95)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
1 year 21.31% 14.30% 20.49% 15.49% 20.38% 19.38% 20.70% 16.51%
------------------------------------------------------------------------------
5 years 117.32 104.78 109.65 107.65 109.57 109.57 112.13 104.77
Annual average 16.79 15.41 15.96 15.74 15.95 15.95 16.23 15.41
------------------------------------------------------------------------------
Life of fund 163.08 147.92 152.36 151.36 152.39 152.39 156.20 147.21
Annual average 18.36 17.14 17.50 17.42 17.50 17.50 17.81 17.08
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/00
MSCI Emerging MSCI EAFE Consumer
Markets Index Index price index
-----------------------------------------------------------------------
1 year 2.93% 3.18% 3.46%
-----------------------------------------------------------------------
5 years -4.09 50.91 13.32
Annual average -0.83 8.57 2.53
-----------------------------------------------------------------------
Life of fund -11.05 61.29 15.58
Annual average -2.02 8.67 2.55
-----------------------------------------------------------------------
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,
if available, and life-of-fund periods reflect the applicable contingent
deferred sales charge (CDSC), which is 5% in the first year, declines to
1% in the sixth year, and is eliminated thereafter. Returns shown for
class B and class M shares for periods prior to their inception are
derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares
the higher operating expenses applicable to such shares. For class C
shares, returns for periods prior to their inception are derived from
the historical performance of class A shares, adjusted to reflect both
the CDSC currently applicable to class C shares, which is 1% for the
first year and is eliminated thereafter, and the higher operating
expenses applicable to class C shares. All returns assume reinvestment
of distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost. Performance data reflect an expense
limitation previously in effect. Without it, total returns would have
been lower. For a portion of this period, the fund was offered on a
limited basis and had limited assets.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 1/3/95
Fund's class A MSCI Emerging MSCI EAFE Consumer price
Date shares at POP Markets Index Index index
1/3/95 9,425 10,000 10,000 10,000
9/30/95 11,408 9,274 10,688 10,200
9/30/96 12,978 9,723 11,609 10,506
9/30/97 15,151 10,307 13,023 10,739
9/30/98 13,277 5,418 11,937 10,892
9/30/99 20,437 8,642 15,632 11,172
9/30/00 $24,792 $8,895 $16,129 $11,558
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $25,236 ($25,136 with a contingent deferred
sales charge); a $10,000 investment in the fund's class C shares would
have been valued at $25,239 and no contingent deferred sales charges
would apply; a $10,000 investment in the fund's class M shares would
have been valued at $25,620 ($24,721 at public offering price). See
first page of performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/00
----------------------------------------------------------------------------
Class A Class B Class C Class M
----------------------------------------------------------------------------
Distributions
(number) 1 1 1 1
----------------------------------------------------------------------------
Income -- -- -- --
----------------------------------------------------------------------------
Capital gains
Long-term $1.406 $1.406 $1.406 $1.406
----------------------------------------------------------------------------
Short-term 0.062 0.062 0.062 0.062
----------------------------------------------------------------------------
Total $1.468 $1.468 $1.468 $1.468
----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
----------------------------------------------------------------------------
9/30/99 $16.64 $17.66 $16.20 $16.58 $16.38 $16.97
----------------------------------------------------------------------------
9/30/00 18.94 20.10 18.28 18.72 18.53 19.20
----------------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth year,
the CDSC no longer applies. The CDSC for class C shares is 1% for one
year after purchase.
COMPARATIVE BENCHMARKS
Morgan Stanley Capital International (MSCI) EAFE Index* is an unmanaged
list of equity securities from Europe, Australasia and the Far East,
with all values expressed in U.S. dollars.
Morgan Stanley Capital International (MSCI) Emerging Markets Index* is
an unmanaged list of equity securities from emerging markets with all
values expressed in U.S. dollars.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take 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.
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 noninvestment 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-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended September 30, 2000
To the Trustees of Putnam Investment Funds and
Shareholders of Putnam International New Opportunities Fund
(a series of Putnam Investment Funds)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam
International New Opportunities Fund (the "fund") at September 30, 2000,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of
America. 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 auditing standards
generally accepted in the United States of America, 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, 2000 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 3, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
September 30, 2000
COMMON STOCKS (92.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising and Marketing Services (4.4%)
-------------------------------------------------------------------------------------------------------------------
2,282,842 Havas Advertising SA (France) $ 36,049,226
1,098,670 Publicis Groupe (France) 33,535,935
5,491,635 WPP Group PLC (United Kingdom) 65,744,756
-------------
135,329,917
Banking (4.7%)
-------------------------------------------------------------------------------------------------------------------
2,748,985 Banca Fideuram SpA (Italy) 45,544,403
11,089,039 Bipop-Carire SpA (Italy) (REL) 97,534,020
-------------
143,078,423
Beverage (0.8%)
-------------------------------------------------------------------------------------------------------------------
1,116,800 Companhia de Bebidas das Americas ADR (Brazil) 24,709,200
Broadcasting (7.2%)
-------------------------------------------------------------------------------------------------------------------
3,009,582 Capital Radio PLC (United Kingdom) 63,386,311
1,519 Fuji Television Network, Inc. (Japan) 19,685,273
417,460 ProSieben Media AG (Germany) 47,508,534
1,564,383 Societe Television Francaise 1 (T.F.1.) (France) 89,706,414
-------------
220,286,532
Capital Goods (1.2%)
-------------------------------------------------------------------------------------------------------------------
176,433 Altran Technologies SA (France) 37,215,722
Commercial and Consumer Services (4.0%)
-------------------------------------------------------------------------------------------------------------------
9,081,772 Capita Group PLC (United Kingdom) 80,537,154
371,790 GfK AG (Germany) 14,530,096
1,277,134 Securitas AB, Class B (Sweden) 27,922,383
-------------
122,989,633
Communications Equipment (5.9%)
-------------------------------------------------------------------------------------------------------------------
3,098,939 Nokia OYJ AB, Class A (Finland) 125,539,952
925,362 Nortel Networks Corp. (Canada) 55,585,704
-------------
181,125,656
Computers (3.4%)
-------------------------------------------------------------------------------------------------------------------
3,098,100 Baltimore Technologies PLC (United Kingdom) (NON) 31,595,043
373,506 Certicom Corp. (Canada) (NON) 14,800,185
697,260 Dassault Systemes SA (France) 56,683,563
200 Trend Micro, Inc. (Japan) (NON) 26,863
-------------
103,105,654
Conglomerates (1.1%)
-------------------------------------------------------------------------------------------------------------------
14,959,505 Aegis Group PLC (United Kingdom) 32,280,817
2,164,727 Aegis Group PLC 144A (United Kingdom) 4,671,221
-------------
36,952,038
Consumer Goods (--%)
-------------------------------------------------------------------------------------------------------------------
90 FANCL INTERNATIONAL, Inc. (Japan) 7,215
4,777 Hindustan Lever, Ltd. (India) (NON) 21,654
-------------
28,869
Electrical Equipment (0.7%)
-------------------------------------------------------------------------------------------------------------------
61,400 Keyence Corp. (Japan) 21,256,688
Electronics (14.0%)
-------------------------------------------------------------------------------------------------------------------
9,052,324 ARM Holdings PLC (United Kingdom) (NON) 100,612,598
8,068,800 Chartered Semiconductor Manufacturing, Ltd. (Singapore) (NON) 51,479,296
607,542 Epcos AG (Germany) (NON) 49,309,567
10 FUJISOFT ABC, Inc. (Japan) 686
4,611,100 Hon Hai Precision Industry, Co., Ltd. (Taiwan) 30,338,122
387,000 Murata Manufacturing Co., Ltd. (Japan) 53,376,840
73,500 ROHM Co., Ltd. (Japan) 20,145,654
1,207,117 STMicroelectronics NV ADR (France) 57,488,947
14,481,440 Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) (NON) 48,101,877
1,618,435 Venture Manufacturing, Ltd. (Singapore) 15,628,065
-------------
426,481,652
Engineering & Construction (1.5%)
-------------------------------------------------------------------------------------------------------------------
749,700 Coflexip SA ADR (France) 46,668,825
Financial (1.4%)
-------------------------------------------------------------------------------------------------------------------
8,125 Julius Baer Holding, Ltd. AG, Class B (Switzerland) 42,153,139
Food (0.5%)
-------------------------------------------------------------------------------------------------------------------
183,650 C TWO-NETWORK Co., Ltd. (Japan) 14,789,919
Insurance (3.0%)
-------------------------------------------------------------------------------------------------------------------
1,215,900 Aegon NV (Netherlands) 45,856,513
2,280,464 Skandia Forsakrings AB (Sweden) 45,239,782
-------------
91,096,295
Investment Banking/Brokerage (3.3%)
-------------------------------------------------------------------------------------------------------------------
422,910 Consors Discount Broker AG (Germany) (NON) 44,397,853
2,960,906 TD Waterhouse Group, Inc. (NON) 55,146,874
-------------
99,544,727
Manufacturing (3.4%)
-------------------------------------------------------------------------------------------------------------------
6,054,722 Bombardier, Inc. (Canada) 104,662,437
Oil & Gas (1.7%)
-------------------------------------------------------------------------------------------------------------------
344,950 TotalFinaElf SA, Class B (France) 50,455,409
Pharmaceuticals (10.0%)
-------------------------------------------------------------------------------------------------------------------
1,011,400 Elan Corp. PLC ADR (Ireland) (NON) 55,374,150
1,458,000 Fujisawa Pharmaceutical Co., Ltd. (Japan) 53,715,079
1,919,025 Sanofi-Synthelabo SA (France) 103,101,499
20,404 Serono SA, Class B (Switzerland) 24,914,606
1,025,000 Takeda Chemical Industries (Japan) 67,745,071
-------------
304,850,405
Publishing (1.3%)
-------------------------------------------------------------------------------------------------------------------
3,339,087 Gruppo Editoriale L' Espresso SpA (Italy) 40,386,130
Retail (0.4%)
-------------------------------------------------------------------------------------------------------------------
13,415,635 Esprit Holdings, Ltd. (Hong Kong) 11,012,360
81,800 Tsuruha Co., Ltd. (Japan) 1,741,553
-------------
12,753,913
Semiconductor (0.6%)
-------------------------------------------------------------------------------------------------------------------
508,979 ASM Lithography Holding NV (Netherlands) (NON) 16,883,200
Software (7.0%)
-------------------------------------------------------------------------------------------------------------------
1,259,020 Amdocs, Ltd. (NON) 78,531,373
655,840 BCE Emergis, Inc. (Canada) (NON) 31,394,508
199,000 Business Objects SA (France) (NON) 22,499,438
100,200 Oracle Corp. (Japan) 23,076,701
298,500 SAP AG (Systeme, Anwendungen, Produkte in der
Datenverarbeitung) (Germany) 57,407,401
-------------
212,909,421
Technology Services (1.6%)
-------------------------------------------------------------------------------------------------------------------
750,700 Logica PLC (United Kingdom) 24,687,145
60 OBIC Co., Ltd. (Japan) 21,383
198 Yahoo Japan Corp. (Japan) (NON) 24,559,844
-------------
49,268,372
Telecommunications (9.5%)
-------------------------------------------------------------------------------------------------------------------
5,193,000 China Mobile (Hong Kong), Ltd. (Hong Kong) (NON) 34,468,140
533,553 COLT Telecom Group PLC (United Kingdom) (NON) 15,298,672
869,307 KPN Qwest NV (Netherlands) (NON) 24,732,610
3,311 NTT DoCoMo, Inc. (Japan) 95,011,571
1,151,296 SK Telecom Co., Ltd. ADR (Korea) 29,501,961
24,691,171 Vodafone Group PLC (United Kingdom) 92,146,216
--------------
291,159,170
--------------
Total Common Stocks (cost $2,463,106,903) $2,830,141,346
<CAPTION>
PREFERRED STOCKS (3.1%) (a) (cost $54,762,019)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
639,902 Marshollek, Lautenschlaeger und Partner (MLP)
AG DEM 3.05 pfd. (Germany) 95,686,402
<CAPTION>
UNITS (0.9%) (a)
NUMBER OF UNITS VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
98,000 Infosys Technologies, Ltd. 144A Equity Participation Notes
(issued by Goldman Sachs) (India) $ 15,634,920
21,705 Infosys Technologies, Ltd. Equity Participation Notes
(issued by Goldman Sachs) (India) 7,258,152
12,500 Infosys Technologies, Ltd. Equity Participation Notes
(issued by Goldman Sachs) (India) 4,322,375
--------------
Total Units (cost $27,507,909) $ 27,215,447
<CAPTION>
SHORT-TERM INVESTMENTS (2.4%) (a) (cost $73,185,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 73,185,000 Interest in $800,000,000 joint repurchase agreement dated
September 29, 2000 with S.B.C. Warburg, Inc. due
October 2, 2000 with respect to various U.S. Government
Agency obligations -- maturity value of $73,225,557
for an effective yield of 6.65% $ 73,185,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,618,561,831) (b) $3,026,228,195
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,056,339,416.
(b) The aggregate identified cost on a tax basis is $2,670,566,161,
resulting in gross unrealized appreciation and depreciation of
$588,386,820 and $232,724,786, respectively, or net unrealized
appreciation of $355,662,034.
(NON) Non-income-producing security.
(REL) BiPop-Carire SpA is involved in a joint venture with Putnam Investments.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American
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, 2000:
(as percentage of Market Value)
Canada 6.8% Netherlands 2.9%
Finland 4.2 Singapore 2.2
France 17.6 Sweden 2.4
Germany 10.2 Switzerland 2.2
Hong Kong 1.5 Taiwan 2.6
Ireland 1.8 United Kingdom 16.9
Italy 6.1 United States 6.8
Japan 13.1 Other 1.7
Korea 1.0 ------
Total 100.0%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,618,561,831) (Note 1) $3,026,228,195
-------------------------------------------------------------------------------------------
Foreign currency (cost $29,270,561) 29,265,777
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 1,512,725
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 21,078,719
-------------------------------------------------------------------------------------------
Receivable for securities sold 98,250,873
-------------------------------------------------------------------------------------------
Total assets 3,176,336,289
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 234,675
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 43,754,553
-------------------------------------------------------------------------------------------
Payable for securities purchased 64,753,205
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 7,070,487
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,524,845
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 62,770
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7,392
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 2,209,763
-------------------------------------------------------------------------------------------
Other accrued expenses 379,183
-------------------------------------------------------------------------------------------
Total liabilities 119,996,873
-------------------------------------------------------------------------------------------
Net assets $3,056,339,416
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $2,279,411,304
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions (Note 1) 369,296,393
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 407,631,719
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,056,339,416
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,473,001,359 divided by 77,760,273 shares) $18.94
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $18.94)* $20.10
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,397,980,900 divided by 76,475,482 shares)** $18.28
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($78,295,143 divided by 4,181,691 shares)** $18.72
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($107,062,014 divided by 5,776,836 shares) $18.53
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $18.53)* $19.20
-------------------------------------------------------------------------------------------
* 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, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $2,053,334) $ 12,903,549
-------------------------------------------------------------------------------------------
Interest 3,297,847
-------------------------------------------------------------------------------------------
Total investment income 16,201,396
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 27,905,280
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 7,212,153
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 40,686
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 30,153
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,819,252
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 15,023,190
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 513,326
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 923,986
-------------------------------------------------------------------------------------------
Amortization of organization expense (Note 1) 809
-------------------------------------------------------------------------------------------
Other 1,954,479
-------------------------------------------------------------------------------------------
Total expenses 57,423,314
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,015,111)
-------------------------------------------------------------------------------------------
Net expenses 55,408,203
-------------------------------------------------------------------------------------------
Net investment loss (39,206,807)
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 421,976,708
-------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 12,179,060
-------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 7,727,311
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (100,695,958)
-------------------------------------------------------------------------------------------
Net gain on investments 341,187,121
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $301,980,314
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended September 30
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment loss $ (39,206,807) $ (15,335,477)
--------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 434,155,768 286,475,647
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies (92,968,647) 487,599,465
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 301,980,314 758,739,635
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (83,745,720) --
--------------------------------------------------------------------------------------------------
Class B (96,628,196) --
--------------------------------------------------------------------------------------------------
Class C (1,069,631) --
--------------------------------------------------------------------------------------------------
Class M (7,574,077) --
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 893,726,878 (207,264,183)
--------------------------------------------------------------------------------------------------
Total increase in net assets 1,006,689,568 551,475,452
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 2,049,649,848 1,498,174,396
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $-- and $5,302,910, respectively) $3,056,339,416 $2,049,649,848
--------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.64 $10.81 $13.60 $11.69 $10.29
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.18) (.06) (.04) (.03) .04(e)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.95 5.89 (1.63) 1.98 1.37
-----------------------------------------------------------------------------------------------------
Total from
investment operations 3.77 5.83 (1.67) 1.95 1.41
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income -- -- (.01) (.04) (.01)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) -- (1.11) --(d) --(d)
-----------------------------------------------------------------------------------------------------
Return of capital -- -- --(d) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (1.47) -- (1.12) (.04) (.01)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.94 $16.64 $10.81 $13.60 $11.69
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 21.31 53.93 (12.37) 16.74 13.76
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,473,001 $905,842 $630,422 $859,999 $499,396
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.39 1.54 1.75 1.75 1.95(e)
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.83) (.45) (.30) (.24) .34
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 151.67 204.39 170.28 141.29 24.69
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ended
September 30, 1996 reflect a reduction of $0.01 per share for each
class.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.20 $10.61 $13.45 $11.61 $10.28
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment loss (a) (.33) (.16) (.13) (.13) (.05)(e)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.88 5.75 (1.60) 1.97 1.39
-----------------------------------------------------------------------------------------------------
Total from
investment operations 3.55 5.59 (1.73) 1.84 1.34
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.01)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) -- (1.11) --(d) --(d)
-----------------------------------------------------------------------------------------------------
Return of capital -- -- --(d) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (1.47) -- (1.11) -- (.01)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.28 $16.20 $10.61 $13.45 $11.61
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 20.49 52.69 (12.98) 15.87 13.02
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,397,981 $1,053,443 $803,785 $1,079,912 $573,129
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.10 2.29 2.50 2.50 2.72(e)
-----------------------------------------------------------------------------------------------------
Ratio of net investment
loss to average net assets (%) (1.54) (1.20) (1.05) (.99) (.43)
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 151.67 204.39 170.28 141.29 24.69
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ended
September 30, 1996 reflect a reduction of $0.01 per share for each
class.
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------------------------
For the period
Per-share Year ended Feb. 1, 1999+
operating performance Sept. 30 to Sept. 30
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
Net asset value,
beginning of period $16.58 $13.82
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment loss (a) (.34) (.12)
--------------------------------------------------------------
Net realized and unrealized
gain on investments 3.95 2.88
--------------------------------------------------------------
Total from
investment operations 3.61 2.76
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income -- --
--------------------------------------------------------------
From net realized gain
on investments (1.47) --
--------------------------------------------------------------
Return of capital -- --
--------------------------------------------------------------
Total distributions (1.47) --
--------------------------------------------------------------
Net asset value,
end of period $18.72 $16.58
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(b) 20.38 19.97*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $78,295 $6,780
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.14 1.52*
--------------------------------------------------------------
Ratio of net investment
loss to average net assets (%) (1.56) (.78)*
--------------------------------------------------------------
Portfolio turnover (%) 151.67 204.39
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ended
September 30, 1996 reflect a reduction of $0.01 per share for each
class.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.38 $10.69 $13.51 $11.64 $10.29
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment loss (a) (.29) (.13) (.10) (.10) (.02)(e)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.91 5.82 (1.61) 1.98 1.38
-----------------------------------------------------------------------------------------------------
Total from
investment operations 3.62 5.69 (1.71) 1.88 1.36
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income -- -- -- (.01) (.01)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.47) -- (1.11) --(d) --(d)
-----------------------------------------------------------------------------------------------------
Return of capital -- -- --(d) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (1.47) -- (1.11) (.01) (.01)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.53 $16.38 $10.69 $13.51 $11.64
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 20.70 53.23 (12.76) 16.12 13.22
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $107,062 $83,585 $63,967 $91,390 $52,182
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.89 2.04 2.25 2.25 2.46(e)
-----------------------------------------------------------------------------------------------------
Ratio of net investment
loss to average net assets (%) (1.33) (.95) (.80) (.74) (.17)
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 151.67 204.39 170.28 141.29 24.69
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset and brokerage service arrangements (Note 2).
(d) Per share distributions were less than $.01 per share.
(e) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund for the period ended
September 30, 1996 reflect a reduction of $0.01 per share for each
class.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
Note 1
Significant accounting policies
Putnam International New Opportunities Fund (the "Fund") is a series of
Putnam Investment Funds (the "Trust") which is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The objective of the fund is to seek
long-term capital appreciation by investing primarily in common stocks
that offer potential for capital appreciation and are primarily traded
in security markets outside the United States.
The fund offers class A, class B, class C and class M shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing
distribution fee than class A shares, and are subject to a contingent
deferred sales charge, if those shares are redeemed within six years of
purchase. Class C shares are subject to the same fees and expenses as
class B shares, except that class C shares have a one-year 1.00%
contingent deferred sales charge and do not convert to class A shares.
Class M shares are sold with a maximum front-end sales charge of 3.50%
and pay an ongoing distribution fee that is higher than class A shares
but lower than class B and class C shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and variable relationships
between securities that are generally recognized by institutional
traders.
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. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
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. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments. The fund may be subject to taxes imposed by countries in
which it invests. Such taxes are generally based on either income or
gains earned or repatriated. The fund accrues and applies such taxes to
net investment income, net realized gains and net unrealized gains as
income and/or capital gains earned.
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 year ended
September 30, 2000, 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. These differences include temporary and permanent
differences of losses on wash sale transactions, foreign currency gains
and losses, foreign taxes, and realized 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, 2000, the fund
reclassified $33,903,897 to decrease accumulated net investment loss
with a decrease to accumulated net realized gains of $33,903,897. The
calculation of net investment income per share in the financial
highlights table excludes these adjustments.
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. The expenses have been fully
amortized on a projected net asset basis over a five-year period as of
September 30, 2000.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 1.00% of the
first $500 million of average net assets, 0.90% of the next $500
million, 0.85% of the next $500 million, 0.80% of the next $5 billion,
0.775% of the next $5 billion, 0.755% of the next $5 billion, 0.74% of
the next $5 billion and 0.73% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
Under 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, 2000, the payable to the
subcustodian bank represents the amount due for cash advance for
the settlement of a security purchased.
For the year ended September 30, 2000, fund expenses were reduced by
$2,015,111 under expense-offset arrangements with PFTC and
brokerage service arrangements. Investor servicing and custodian fees
reported in the Statement of operations exclude these credits. The fund
could have invested a portion of the assets utilized in connection with
the expense-offset arrangements in an income-producing asset if it had
not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $2,933
has been allocated to the fund and an additional fee for each Trustees
meeting attended. 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 a 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 Retail Management, Inc., 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 Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%, 0.90%,
1.00% and 0.75% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. Prior to May 1, 2000, the
annual rate for class B was 1.00%.
For the year ended September 30, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $1,197,520 and $63,396
from the sale of class A and class M shares, respectively, and received
$1,237,312 and $17,289 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 30,2000, Putnam Retail Management,
Inc., acting as underwriter received $108,024 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $5,420,444,744 and $4,808,895,484, respectively. There were
no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At September 30, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 103,070,949 $2,286,185,394
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,512,320 78,395,042
---------------------------------------------------------------------------
106,583,269 2,364,580,436
Shares
repurchased (83,249,638) (1,837,726,805)
---------------------------------------------------------------------------
Net increase 23,333,631 $ 526,853,631
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 97,757,355 $1,353,981,693
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
97,757,355 1,353,981,693
Shares
repurchased (101,658,562) (1,416,390,912)
---------------------------------------------------------------------------
Net decrease (3,901,207) $ (62,409,219)
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 23,936,053 $535,041,162
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,742,448 81,024,002
---------------------------------------------------------------------------
27,678,501 616,065,164
Shares
repurchased (16,226,133) (350,411,620)
---------------------------------------------------------------------------
Net increase 11,452,368 $265,653,544
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 11,537,016 $ 157,850,106
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
11,537,016 157,850,106
Shares
repurchased (22,303,116) (297,113,522)
---------------------------------------------------------------------------
Net decrease (10,766,100) $(139,263,416)
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 6,472,457 $146,312,199
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 37,374 829,333
---------------------------------------------------------------------------
6,509,831 147,141,532
Shares
repurchased (2,737,110) (59,138,017)
---------------------------------------------------------------------------
Net increase 3,772,721 $ 88,003,515
---------------------------------------------------------------------------
For the period February 1, 1999
(commencement of operations) to
September 30, 1999
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 525,383 $7,702,343
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
525,383 7,702,343
Shares
repurchased (116,413) (1,625,823)
---------------------------------------------------------------------------
Net increase 408,970 $6,076,520
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 10,498,661 $218,089,136
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 307,462 6,736,483
---------------------------------------------------------------------------
10,806,123 224,825,619
Shares
repurchased (10,133,019) (211,609,431)
---------------------------------------------------------------------------
Net increase 673,104 $ 13,216,188
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 2,876,518 $ 39,720,844
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
2,876,518 39,720,844
Shares
repurchased (3,757,198) (51,388,912)
---------------------------------------------------------------------------
Net decrease (880,680) $(11,668,068)
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $337,251,134 as capital gains for its taxable
year ended September 30, 2000.
For the year ended September 30, 2000, interest and dividends from
foreign countries were $14,751,787 or $0.090 per share (for all classes
of shares). Taxes paid to foreign countries were $2,053,334 or $0.013
per share (for all classes of shares).
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, 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, III
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
Stephen Oristaglio
Vice President
Robert J. Swift
Vice President and Fund Manager
Stephen P. Dexter
Vice President and Fund Manager
Peter J. Hadden
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam
International New Opportunities Fund. It may also be used as sales
literature when preceded or accompanied by the current prospectus, which
gives details of sales charges, investment objectives, and operating
policies of the fund, and the most recent copy of Putnam's Quarterly
Performance Summary and Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN010-65453 539/2AH/2AI 11/00
Putnam
Global Growth
and Income
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce the appointment of Colin Moore to your fund's
management team. Colin joined Putnam earlier this year from Rockefeller
& Co., Inc., and has 18 years of investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 15, 2000
REPORT FROM FUND MANAGEMENT
Deborah F. Kuenstner
Colin Moore
Hugh H. Mullin
George W. Stairs
Putnam Global Growth and Income Fund's 2000 fiscal year closed September
30, 2000, under conditions that were markedly different from those of
just a year ago. During the period, technology's dominance over world
markets gave way, as did the somewhat cavalier attitude toward earnings
and profits that had characterized the technology bubble. In the wake of
the market's correction in March 2000, investors reverted to a more
cautious approach and once again embraced traditional stock valuation
methods including price/earnings ratios, price/book ratios, dividend
yields, and profit margins. While individual attractively priced value
stocks became more popular among investors, market leadership broadened
to include sectors that historically have been associated with value
investing. Volatility has remained high, and ongoing changes in world
markets have created a challenging environment in which to invest your
fund's assets.
Total return for 12 months ended 9/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
5.10% -0.95% 4.26% -0.54% 4.48% 3.52% 4.46% 0.78%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 7.
* MARKETS CHANGED SIGNIFICANTLY DURING YEAR
From September to March, markets favored richly valued stocks, primarily
from rapidly growing technology, telecommunications, and Internet
companies. Large-capitalization stocks offered better returns than
smaller-cap issues, and non-U.S. stocks outperformed domestic stocks.
However, by the end of the fiscal period, the backdrop had shifted to
such an extent that many traditional value sectors are now outperforming
traditional growth sectors. Investors rotated assets out of technology
and into sectors with strong fundamentals, including the financial,
health-care, utilities, and energy sectors. Investors also developed an
appetite for earnings and now favor companies with proven track records
for earnings and dividends. Domestic stocks produced better returns than
non-U.S. issues over the last six months of the period.
[GRAPHIC OMITTED: horizontal bar chart TOP COUNTRY SECTORS]
TOP COUNTRY SECTORS*
United States 56.4%
United Kingdom 11.1%
Japan 8.6%
France 4.7%
Netherlands 4.2%
Footnote reads:
*Based on net assets as of 9/30/00. Holdings will vary over time.
Despite all these changes, several themes remained constant throughout
the year. Mergers and acquisitions continued at a heightened pace.
Capital spending on new technologies contributed greatly to economic
growth. Inflation was kept in check by restrictive monetary policies,
and significant productivity gains were wrought from technological
advances. Your fund remained focused on identifying undervalued
companies throughout the world that are taking positive steps to improve
returns for their shareholders.
* SECTOR WEIGHTINGS PLAY IMPORTANT ROLE IN RETURNS
Many factors contribute to your fund's performance, the most important
of which is stock selection. We carefully research and scrutinize stocks
to find those that satisfy a combination of stringent requirements
including healthy fundamentals, a history of paying dividends, effective
management, strong market position, financial muscle, and perhaps most
important, an action plan for increasing shareholder value.
In our effort to identify promising stocks, we also take cues from the
market, which influences what sectors are shifting in and out of favor
at any given time. Taking into consideration the dynamic quality of
market sectors, it should be evident that our decision to emphasize or
deemphasize particular sectors can have an important influence on
performance results. When combined with stock selection, the results can
be highly effective. Superior stock selection within an out-of-favor
sector can contribute positively to overall fund performance,
especially if we are underweight in that sector.
* SECTOR AND STOCK SELECTION HIGHLIGHTS
From our perspective, the communications services sector had an
exceptionally strong, positive impact on the fund. This sector, which
includes local and long-distance telephone service providers, suffered
greatly in the latter half of the year; in fact, it has been the
worst-performing U.S. market sector to date in calendar year 2000. The
good news is that your fund was underweighted relative to its benchmark
and our stock selections in the sector produced superior returns. The
overall result was rewarding to fund shareholders. BCE, Inc., a Canadian
telecommunications company that was highlighted in the fund's semiannual
report, was the portfolio's best-performing stock during the year and
contributed significantly to the fund's returns. While this stock, as
well as others mentioned in this report, was viewed favorably at the end
of the period, all are subject to review and adjustment in accordance
with the fund's investment strategy and may vary in the future.
"When hot technology stocks dropped sharply last spring, investors in
the United States and abroad shifted to out-of-favor financial and
industrial shares. Since then, undervalued overseas sectors have
outshined their market benchmarks."
-- Individual Investor, November 2000
Your fund benefited from overweighting in the financial sector, which
was among the market's top-performing sectors during the period. Rising
interest rates clouded the outlook for financial companies earlier in
the year, and despite healthy fundamentals, valuations dropped to
extremely low levels. We bought shares of high-quality companies that
later rebounded when investors changed their priorities. Strong stock
selection within the financial sector magnified the benefits of our
overweight position. Among the fund's holdings were Bank of New York,
Fannie Mae, Italian bank San Paolo-IMI S.p.A., and Dutch banking and
insurance company ING Groep N.V.
Our underweight position in consumer cyclicals worked to the fund's
advantage, as the sector was weak in 2000. Our excellent stock selection
within this sector produced superior returns and boosted fund
performance. Among our stock picks was Reed International Plc, a U.K.
holding company with a 50% interest in Reed Elsevier, which publishes
industry-specific materials for scientific, legal, and business
concerns. As of the fiscal year-end, the stock had appreciated 49%
since we purchased it, roughly six months earlier.
Utilities presented an interesting challenge and mixed results. Stocks
of foreign utilities companies underperformed, while domestic companies,
electric utilities in particular, were unusually strong performers. In
the United States, high demand and regional shortages drove prices for
electrical power skyward. U.S. holding Entergy Corp. provides electrical
power to more than two million commercial and residential customers
throughout Arkansas, Texas, Louisiana, and Mississippi. It uses nuclear
generators, natural gas, and coal-fired plants to generate electricity.
Your fund's position in Entergy stock appreciated 28% during the year.
Sharp increases in the prices of oil, natural gas, and derivative
petroleum products have benefited oil and gas providers and the
companies that service them. Fund holdings included familiar names such
as ExxonMobil Corp., British Petroleum Co., Royal Dutch Petroleum Co.,
and TotalFina Elf. Fund holdings Halliburton Co. and Schlumberger Ltd.
provide services to the oil and gas industry. Your fund enjoyed
generally strong returns from the energy sector.
The health-care sector, long undervalued, was given a boost when assets
that had been invested in technology were redistributed after the market
corrected in March. Among health-care stocks, pharmaceuticals took the
lead. Worth mentioning is fund holding Aventis S.A., the product of a
1999 merger between the former Rhone Poulenc and Hoechst companies.
Aventis exemplifies the sort of company this fund seeks -- it has the
qualities of "cheapness and change," which we alluded to in our
discussion of stock selection. Formerly a chemical conglomerate, it
transformed itself into a life-sciences company under the guidance of an
innovative CEO. The company produces prescription drugs, vaccines,
diagnostic products, herbicides, and insecticides as well as medicines
for veterinary use. A streamlined research and development process has
produced two promising products now in the pipeline. The fund's shares
of Aventis are up 86% since the merger. Other pharmaceutical holdings
with notable returns are Pharmacia Corp., Merck, and Schering-Plough.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
ExxonMobil Corp.
United States
Energy
SBC Communications, Inc.
United States
Communications services
Citigroup, Inc.
United States
Financial
IBM Corp.
United States
Technology
Merck & Co., Inc.
United States
Health care
Bristol-Myers Squibb Co.
United States
Health care
Royal Dutch Petroleum Co. Plc ADR
Netherlands
Energy
BCE, Inc.
Canada
Communications services
Akzo-Nobel NV
Netherlands
Basic materials
Total Fina Elf S.A.
France
Energy
Footnote reads:
These holdings represent 13.0% of the fund's net assets as of 9/30/00.
Portfolio holdings will vary over time.
Consumer staples was a weak sector, and yet our underweight position and
strong stock selection among domestic offerings combined to net a
positive for the fund. Valuations in this sector remain attractive, and
we recently introduced shares of Coca-Cola, McDonald's, and Procter and
Gamble to the portfolio.
Portfolio negatives included an overweight position in basic materials,
a sector that has fallen out of favor, and disappointing performance
from the fund's stocks within the capital goods sector.
* FUND STRATEGY ACKNOWLEDGES SLOWING ECONOMY
Looking ahead, we expect the economy will grow at a slower rate and that
further interest-rate increases by the Federal Reserve Board will not be
necessary in the near term. With regard to the possible inflationary
effect of rising oil prices, we believe any increase in inflation will
be modest and temporary. In our opinion, the opportunities to own
high-quality companies at attractive valuations remain abundant. In our
effort to position the fund for strong performance in a slowing economy,
we are currently emphasizing consumer staples, health-care, utilities,
and financial stocks. We have trimmed basic materials and are adding
selectively to technology and communications services companies. The
balance between U.S. and non-U.S. investments has tipped slightly in
favor of domestic companies, with domestic equities currently
representing about 51% of the portfolio. Your fund remains an
appropriate choice for long-term investors seeking both capital
appreciation and income from a global marketplace.
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 9/30/00, 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 through investing primarily in stocks of companies in the United
States and worldwide.
TOTAL RETURN FOR PERIOD ENDED 9/30/00
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
------------------------------------------------------------------------------
1 year 5.10% -0.95% 4.26% -0.54% 4.48% 3.52% 4.46% 0.78%
------------------------------------------------------------------------------
5 years 95.78 84.49 87.33 85.33 89.00 89.00 89.65 82.92
Annual average 14.38 13.03 13.38 13.13 13.58 13.58 13.66 12.84
------------------------------------------------------------------------------
Life of fund 122.04 109.24 110.66 109.66 113.30 113.30 113.90 106.52
Annual average 14.91 13.73 13.86 13.77 14.11 14.11 14.16 13.47
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 9/30/00
MSCI Consumer
World Index price index
-----------------------------------------------------------------
1 year 8.16% 3.46%
-----------------------------------------------------------------
5 years 97.84 13.32
Annual average 14.61 2.53
-----------------------------------------------------------------
Life of fund 127.99 15.58
Annual average 15.41 2.55
-----------------------------------------------------------------
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,
if 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 currently or previously in effect. Without the expense
limitation, total returns would have been lower. For a portion of those
periods, the fund was offered on a limited basis and had limited assets.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 1/3/95
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 11,524 10,200
9/30/96 12,413 13,100 10,506
9/30/97 16,618 16,259 10,739
9/30/98 15,668 16,281 10,892
9/30/99 19,908 21,079 11,172
9/30/00 $20,924 $22,799 $11,558
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $21,066 ($20,966 with the contingent deferred
sales charge); a $10,000 investment in the fund's class C shares would
have been valued at $21,330 and no contingent deferred sales charges
would apply; a $10,000 investment in the fund's class M shares would
have been valued at $21,390 ($20,652 at public offering price). See
first page of performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/00
Class A Class B Class C Class M
-----------------------------------------------------------------------------
Distributions
(number) 4 1 1 1
-----------------------------------------------------------------------------
Income $0.259 $0.203 $0.207 $0.212
-----------------------------------------------------------------------------
Capital gains
Long-term 0.432 0.432 0.432 0.432
-----------------------------------------------------------------------------
Short-term 0.507 0.507 0.507 0.507
-----------------------------------------------------------------------------
Total $1.198 $1.142 $1.146 $1.151
-----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
-----------------------------------------------------------------------------
9/30/99 $14.06 $14.92 $13.94 $14.06 $14.00 $14.51
-----------------------------------------------------------------------------
9/30/00 13.56 14.39 13.38 13.53 13.46 13.95
-----------------------------------------------------------------------------
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 in account brokerage fees or taxes.
Securities in the fund do not match those in the indexes and performance
of the fund will differ. It is not possible to invest directly in an
index.
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 noninvestment 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-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended September 30, 2000
To the Trustees 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, 2000, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of
America. 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 auditing standards
generally accepted in the United States of America, 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, 2000 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 7, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
September 30, 2000
COMMON STOCKS (94.8%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Basic Materials (7.3%)
-------------------------------------------------------------------------------------------------------------------
48,276 Abitibi-Consolidated Inc. (Canada) $ 450,953
4,900 Air Products & Chemicals, Inc. 176,400
23,495 Akzo-Nobel NV (Netherlands) 990,764
27,546 BOC Group PLC 364,381
14,912 CRH PLC (Ireland) 237,323
109,465 CSR, Ltd. (Australia) 240,391
14,500 Dow Chemical Co. 361,594
12,500 du Pont (E.I.) de Nemours & Co., Ltd. 517,969
5,500 Eastman Chemical Co. 203,156
12,500 Freeport-McMoRan Copper & Gold Co., Inc., Class A (NON) 103,125
5,500 Freeport-McMoRan Copper & Gold Co., Inc., Class B (NON) 48,469
7,229 Henkel KGaA (Germany) 376,332
3,500 International Paper Co. 100,406
300,139 Jefferson Smurfit Group PLC (Ireland) 519,018
5,250 Lafarge Coppee (France) 361,261
2,980 Minnesota Mining & Manufacturing Co. 271,553
15,200 Pohang Iron & Steel Company, Ltd. ADR (South Korea) 283,100
6,400 PPG Industries, Inc. 254,000
33,350 Rhodia S.A. (France) 362,177
46,950 Sappi, Ltd. (South Africa) 348,091
14,601 Svenska Cellulosa AB (SCA) (Sweden) 257,807
90,000 Teijin, Ltd. (Japan) 374,896
5,700 Temple Inland, Inc. 215,888
7,300 Weyerhaeuser Co. 294,738
-------------
7,713,792
Capital Goods (4.7%)
-------------------------------------------------------------------------------------------------------------------
73,534 Bae Systems PLC (United Kingdom) 396,694
8,825 Boeing Co. 555,975
10,000 Cannon, Inc. (Japan) 443,395
4,600 Caterpillar, Inc. 155,250
6,200 Emerson Electric Co. 415,400
3,100 General Dynamics Corp. 194,719
238,883 Invensys PLC (United Kingdom) 521,660
11,500 Lockheed Martin Corp. 379,040
7,900 Rockwell International Corp. 238,975
8,906 Schneider Electric S.A. (France) 560,981
30,539 SKF AB, Class B (Sweden) 396,487
5,900 United Technologies Corp. 408,575
18,600 Waste Management, Inc. 324,338
-------------
4,991,489
Communication Services (9.2%)
-------------------------------------------------------------------------------------------------------------------
3,100 Alltel Corp. 161,781
24,700 AT & T Corp. 725,563
44,600 BCE, Inc. (Canada) 1,042,525
19,100 BellSouth Corp. 768,775
32,778 Cable & Wireless PLC (United Kingdom) 467,503
7,090 Hellenic Telecommunications Organization S.A. (Greece) 136,449
38,307 Mahanager Telephone GDR 144A (India) 196,323
93 Nippon Telegraph and Telephone Corp. (Japan) (NON) 912,524
34,915 SBC Communications, Inc. 1,745,750
11,995 Sprint Corp. 351,603
45,225 Telefonica S.A. (Spain) (NON) 895,699
8,700 Telefonos de Mexico S.A. ADR, Class L (Mexico) 462,731
18,100 Verizon Communications 876,719
146,000 Vodafone Group PLC (United Kingdom) 544,865
14,400 Worldcom, Inc. (NON) 437,400
-------------
9,726,210
Conglomerates (2.2%)
-------------------------------------------------------------------------------------------------------------------
13,224 Canadian Pacific, Ltd. 343,766
126,606 Cookson Group PLC (United Kingdom) 354,599
7,900 Cooper Industries, Inc. 278,475
8,900 Honeywell International, Inc. 317,063
49,520 Smiths Industries PLC (United Kingdom) 513,432
9,500 Tyco International, Ltd. 492,813
-------------
2,300,148
Consumer Cyclicals (4.0%)
-------------------------------------------------------------------------------------------------------------------
22,000 Dai Nippon Printing Co., Ltd. (Japan) (NON) 326,854
5,700 Federated Department Stores, Inc. (NON) 148,913
16,701 Ford Motor Co. 422,740
4,800 General Motors Corp. 312,000
18,000 Honda Motor Co., Ltd. (Japan) (NON) 663,149
21,200 Hyundai Motor Co., Ltd. (Korea) 275,695
10,846 Hyundai Motor Co., Ltd. GDR (Korea) 67,788
13,075 K mart Corp. (NON) 78,450
6,200 Lowe's Cos., Inc. 278,225
25,000 Marui Co., Ltd. (Japan) (NON) 388,087
3,130 McGraw-Hill, Inc. 198,951
33,702 Reed International PLC (United Kingdom) 267,488
10,300 Target Corp. 263,938
13,952 Valeo S.A. (France) 604,591
-------------
4,296,869
Consumer Staples (10.1%)
-------------------------------------------------------------------------------------------------------------------
11,100 Albertsons, Inc. 233,100
12,500 Anheuser-Busch Cos., Inc. 528,906
7,400 Avon Products, Inc. 302,475
52,650 Bass PLC (United Kingdom) 517,481
28,089 British American Tobacco PLC (United Kingdom) 181,423
7,450 Clorox Co. 294,741
14,965 Coca-Cola Co. 824,946
13,400 Coca-Cola Enterprises, Inc. 213,563
6,700 Comcast Corp., Class A (NON) 274,281
10,200 ConAgra, Inc. 204,638
104,751 Diageo PLC (United Kingdom) 935,899
16,100 Disney (Walt) Productions, Inc. 615,825
96,060 Fomento Economico Mexicano, S.A. de C.V. (Mexico) 373,414
3,800 General Motors Corp., Class H (NON) 141,284
72,292 Granada Compass PLC (United Kingdom) (NON) 676,345
8,800 Heinz (H.J.) Co. 326,150
15,100 Kellogg Co. 365,231
8,400 Kimberly-Clark Corp. 468,825
10,200 McDonald's Corp. 307,913
205 Nestle S.A. (Switzerland) 427,083
9,100 PepsiCo, Inc. 418,600
24,800 Philip Morris Cos., Inc. 730,050
4,400 Procter & Gamble Co. 294,800
11,600 Rite Aid Corp. 46,400
18,700 Sara Lee Corp. 379,844
26,000 Shiseido Co., Ltd. (Japan) (NON) 322,984
6,400 SYSCO Corp. 296,400
-------------
10,702,601
Energy (7.9%)
-------------------------------------------------------------------------------------------------------------------
11,700 Alberta Energy Co. Ltd. (Canada) 485,782
96,156 British Petroleum Co. PLC (United Kingdom) 855,554
6,700 Chevron, Inc. 571,175
4,600 Conoco, Inc., Class A 120,175
9,700 Conoco, Inc., Class B 261,294
133,247 Ente Nazionale Idrocarburi (ENI) SpA (Italy) 705,303
22,800 ExxonMobil Corp. 2,032,040
5,500 Halliburton Co. 269,156
7,900 Petroleo Brasileiro ADR (Brazil) (NON) 237,494
18,700 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 1,120,831
3,200 Schlumberger, Ltd. 263,400
11,800 Tosco Corp. 368,013
6,759 Total Fina Elf S.A., Class B (France) 988,631
1,000 Transocean Sedco Forex, Inc. 58,625
-------------
8,337,473
Financial (25.2%)
-------------------------------------------------------------------------------------------------------------------
25,900 ABN AMRO Holding NV (Netherlands) 603,213
3,675 Aiful Corp. (Japan) 353,791
1,884 Allianz AG (Germany) 617,457
47,616 Allied Zurich PLC (United Kingdom) 541,195
10,800 Allstate Corp. 375,300
6,940 American General Corp. 541,320
76,826 AMP, Ltd. (Australia) 682,009
3,600 AmSouth Bancorporation 45,000
6,300 AON Corp. 247,275
7,737 Assurances Generales de France (AGF) (France) 416,360
38,953 Australia & New Zealand Banking Group, Ltd. (Australia) 280,012
3,858 Axa S.A. (France) 503,722
18,700 Bank of America Corp. 979,413
9,200 Bank of New York Company, Inc. 515,775
33,218 Bank of Nova Scotia (Canada) 966,217
14,300 Bank One Corp. 552,338
21,066 Barclays PLC (United Kingdom) 582,857
9,310 Charter One Financial, Inc. 226,931
11,700 Chase Manhattan Corp. 540,394
31,100 Citigroup, Inc. 1,681,344
9,500 Comerica, Inc. 555,156
12,513 DBS Group Holdings, Ltd. (Singapore) 138,090
13,500 Fannie Mae 965,250
12,700 First Union Corp. 408,781
18,200 Firstar Corp. 407,225
16,400 FleetBoston Financial Corp. 639,600
6,600 Freddie Mac 356,813
3,100 Goldman Sachs Group, Inc. (The) 353,206
1,600 Groupe Bruxelles Lambert S.A. (Belgium) 388,309
5,180 Hartford Financial Services Group 377,816
6,600 Household International, Inc. 373,725
4,900 Huntington Bancshares, Inc. 71,969
14,837 Internationale Nederlanden Groep (ING) (Netherlands) 987,973
7,030 Lincoln National Corp. 338,319
4,800 MBNA Corp. 184,800
6,100 Mellon Financial Corp. 282,888
6,700 Merrill Lynch & Co., Inc. 442,200
7,200 Morgan Stanley, Dean Witter, Discover and Co. 658,350
21,921 National Bank of Canada (Canada) 346,865
6,500 National City Corp. 143,813
99,000 Nikko Securities Co., Ltd. (Japan) 879,756
18,000 Nomura Securities Co., Ltd. (Japan) 391,558
51,850 Overseas-Chinese Banking Corp. (Singapore) 327,825
5,800 PNC Financial Services Group 377,000
7,200 Promise Co., Ltd. (Japan) 556,512
45,500 Royal Bank of Scotland Group PLC (United Kingdom) 960,316
40,209 San Paolo-IMI SpA (Italy) 653,401
4,600 Summit Bancorp 158,700
9,000 Synovus Financial Corp. 190,688
3,840 The Chubb Corp. 303,840
13,517 Toronto-Dominion Bank (Canada) 397,215
5,500 U.S. Bancorp 125,125
1,779 UBS AG (Switzerland) 236,788
8,800 Washington Mutual, Inc. 350,350
17,300 Wells Fargo Co. 794,719
547 Zurich Allied AG (Switzerland) 252,924
-------------
26,629,788
Health Care (9.2%)
-------------------------------------------------------------------------------------------------------------------
17,100 Abbott Laboratories 813,319
12,050 American Home Products Corp. 681,578
10,470 AstraZeneca Group PLC (United Kingdom) 548,422
12,613 Aventis S.A. (France) 945,811
5,115 Baxter International, Inc. 408,241
21,200 Bristol-Myers Squibb Co. 1,211,050
4,100 CIGNA Corp. 428,040
11,000 Eisai Co., Ltd. (Japan) 347,218
4,300 Johnson & Johnson 403,931
18,600 Merck & Co., Inc. 1,384,538
13,600 Pharmacia Corp. 818,550
10,200 Schering-Plough Corp. 474,300
52,850 SmithKline Beecham PLC (United Kingdom) 723,710
11,000 Yamanouchi Pharmaceutical Co., Ltd. (Japan) 529,483
-------------
9,718,191
Technology (8.8%)
-------------------------------------------------------------------------------------------------------------------
4,200 Alcatel (France) 268,630
18,700 BMC Software, Inc. (NON) 357,638
18,700 Compaq Computer Corp. 515,746
12,500 Computer Associates International, Inc. 314,844
6,500 Eastman Kodak Co. 265,688
10,400 Electronic Data Systems Corp. 431,600
31,000 Fujitsu Ltd. (Japan) (NON) 720,263
5,600 Hewlett-Packard Co. 543,200
2,300 Hirose Electric Co., Ltd. (Japan) 300,194
13,300 IBM Corp. 1,496,250
16,355 Koninklijke Philips Electronics NV (Netherlands) 703,672
3,680 Lexmark International Group, Inc., Class A (NON) 138,000
47,200 Misys PLC (United Kingdom) 442,986
18,000 NEC Corp. (Japan) (NON) 409,053
18,000 Ricoh Co., Ltd. (Japan) (NON) 327,409
2,710 Samsung Electronics Co. (South Korea) 490,960
1,840 Seagate Technology, Inc. (NON) 126,960
70,000 Taiwan Semiconductor Manufacturing Co. (Taiwan) (NON) 232,514
3,600 TDK Corp. (Japan) 456,540
51,000 Toshiba Corp. (Japan) 411,191
20,000 Xerox Corp. 301,250
-------------
9,254,588
Transportation (0.6%)
-------------------------------------------------------------------------------------------------------------------
12,400 Burlington Northern Santa Fe Corp. 267,375
16,565 Deutsche Lufthansa AG (Germany) 338,306
-------------
605,681
Utilities (5.6%)
-------------------------------------------------------------------------------------------------------------------
5,660 CP&L, Inc. 235,951
5,300 Dominion Resources, Inc. 307,731
5,200 Duke Energy Corp. 445,900
18,281 E.On AG (Germany) 941,846
6,400 Edison International 123,600
2,600 El Paso Energy Corp. 160,225
10,350 Entergy Corp. 385,538
123,434 Hongkong Electric Holdings, Ltd. (Hong Kong) 381,541
47,410 Iberdrola S.A. (Spain) 602,281
3,100 Pacific Gas & Electric Co. 74,981
6,100 Public Service Enterprise Group, Inc. 272,594
58,433 Scottish & Southern Energy PLC (United Kingdom) 476,729
125,173 Scottish Power PLC (United Kingdom) 971,280
8,900 TXU Corp. 352,663
4,800 Williams Cos., Inc. 202,800
-------------
5,935,660
-------------
Total Common Stocks (cost $99,847,835) $ 100,212,490
<CAPTION>
UNITS (0.4%) (a)
NUMBER OF UNITS VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
59,900 Taiwan Semiconductor Manufacturing Co., structured note
(Issued by UBS AG Warburg Dillon Read),
3.70%, 2001, (Taiwan) $ 209,153
78,600 Vodafone, structured warrant (Issued by Lehman Brothers
Finance S.A.), 2000, (United Kingdom) 237,860
-------------
Total Units (cost $518,228) $ 447,013
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (0.1%) (a) (cost $214,240)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
4,600 K mart Financing I 3.875 cum. cv. pfd. $ 142,025
<CAPTION>
SHORT-TERM INVESTMENTS (5.7%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 10,000 U.S. Treasury Notes zero %, December 21, 2000 (SEG) $ 9,849
3,000,000 Interest in $843,280,000 joint repurchase agreement dated
September 29, 2000 with Morgan Stanley & Co., Inc. due
October 2, 2000, with respect to various U.S. Government
Agency obligations -- maturity value of $3,001,658 for an
effective yield of 6.63% 3,000,000
2,976,000 Interest in $800,000,000 joint repurchase agreement dated
September 29, 2000 with S.B.C. Warburg, Inc. due
October 2, 2000, with respect to various U.S. Government
Agency obligations -- maturity value of $2,977,649 for an
effective yield of 6.65% 2,976,000
-------------
Total Short-Term Investments (cost $5,985,849) $ 5,985,849
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $106,566,152) (b) $ 106,787,377
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $105,665,819.
(b) The aggregate identified cost on a tax basis is $107,943,404,
resulting in gross unrealized appreciation and depreciation of
$8,314,858 and $9,470,885, respectively, or net unrealized depreciation
of $1,156,027.
(NON) Non-income-producing security.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures contracts at September 30, 2000.
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 custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at September 30, 2000:
(as percentage of Market Value)
Australia 1.1%
Canada 3.5
France 4.7
Germany 2.1
Italy 1.3
Japan 8.5
Netherlands 4.1
Spain 1.4
United Kingdom 11.0
United States 55.9
Others 6.4
-----
Total 100.0%
------------------------------------------------------------------------------
Forward Currency Contracts to Buy at September 30, 2000
(aggregate face value $2,431,343)
Unrealized
Aggregate Face Delivery Appreciation
Market Value Value Date (Depreciation)
------------------------------------------------------------------------------
Euro Dollars $2,059,317 $2,278,619 10/18/00 $(219,302)
Euro Dollars 156,719 152,724 12/15/00 3,995
------------------------------------------------------------------------------
$(215,307)
------------------------------------------------------------------------------
Forward Currency Contracts to Sell at September 30, 2000
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
------------------------------------------------------------------------------
Canadian Dollars $884,542 $898,526 2/12/01 $13,984
------------------------------------------------------------------------------
Futures Contracts Outstanding at September 30, 2000
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
------------------------------------------------------------------------------
Dax Index (Long) $151,606 $161,776 Dec-00 $(10,170)
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $106,566,152) (Note 1) $106,787,377
-------------------------------------------------------------------------------------------
Foreign currency (cost $370,567) 374,937
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 252,892
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 629,206
-------------------------------------------------------------------------------------------
Receivable for securities sold 4,269,117
-------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 17,979
-------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 882
-------------------------------------------------------------------------------------------
Total assets 112,332,390
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 176,132
-------------------------------------------------------------------------------------------
Payable for variation margin 860
-------------------------------------------------------------------------------------------
Payable for securities purchased 5,464,333
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 377,105
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 205,168
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 75,169
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,886
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,124
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 71,646
-------------------------------------------------------------------------------------------
Payable for open forward contracts 219,302
-------------------------------------------------------------------------------------------
Payable for closed forward contracts 41,416
-------------------------------------------------------------------------------------------
Other accrued expenses 26,430
-------------------------------------------------------------------------------------------
Total liabilities 6,666,571
-------------------------------------------------------------------------------------------
Net assets $105,665,819
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $102,039,940
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (235,139)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 3,855,115
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 5,903
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $105,665,819
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($63,055,369 divided by 4,649,889 shares) $13.56
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.56)* $14.39
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($37,356,157 divided by 2,792,178 shares)** $13.38
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($2,392,356 divided by 176,818 shares)** $13.53
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,861,937 divided by 212,560 shares) $13.46
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.46)* $13.95
-------------------------------------------------------------------------------------------
* 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, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $132,928) $1,813,734
-------------------------------------------------------------------------------------------
Interest 183,784
-------------------------------------------------------------------------------------------
Total investment income 1,997,518
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 687,766
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 331,557
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 12,133
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,572
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 118,910
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 340,514
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 14,625
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 21,815
-------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 804
-------------------------------------------------------------------------------------------
Other 111,756
-------------------------------------------------------------------------------------------
Total expenses 1,644,452
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (24,371)
-------------------------------------------------------------------------------------------
Net expenses 1,620,081
-------------------------------------------------------------------------------------------
Net investment income 377,437
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 4,195,258
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 28,595
-------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (60,475)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (226,032)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year (929,050)
-------------------------------------------------------------------------------------------
Net gain on investments 3,008,296
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,385,733
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended September 30
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 377,437 $ 106,352
--------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 4,163,378 5,280,947
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies (1,155,082) 5,551,131
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,385,733 10,938,430
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (737,087) (178,962)
--------------------------------------------------------------------------------------------------
Class B (440,375) (51,905)
--------------------------------------------------------------------------------------------------
Class C (10,200) (168)
--------------------------------------------------------------------------------------------------
Class M (45,749) (6,805)
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (2,534,576) (572,711)
--------------------------------------------------------------------------------------------------
Class B (2,037,004) (442,734)
--------------------------------------------------------------------------------------------------
Class C (46,269) --
--------------------------------------------------------------------------------------------------
Class M (202,632) (48,134)
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 40,919,864 17,588,405
--------------------------------------------------------------------------------------------------
Total increase in net assets 38,251,705 27,225,416
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 67,414,114 40,188,698
--------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
net investment income and undistributed net investment
income of $235,139 and $386,372, respectively) $105,665,819 $67,414,114
--------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.06 $11.39 $12.50 $10.77 $9.64
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .11(d) .07(d) .16(a)(d) .14(a) .21(a)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .59 2.98 (.87) 3.13 1.30
-----------------------------------------------------------------------------------------------------
Total from
investment operations .70 3.05 (.71) 3.27 1.51
-----------------------------------------------------------------------------------------------------
Distributions to shareholders:
-----------------------------------------------------------------------------------------------------
From net
investment income (.26) (.09) (.09) (.23) (.36)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (.94) (.29) (.31) (1.31) (.02)
-----------------------------------------------------------------------------------------------------
Total distributions (1.20) (.38) (.40) (1.54) (.38)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.56 $14.06 $11.39 $12.50 $10.77
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 5.10 27.06 (5.72) 33.88 16.14
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $63,055 $36,082 $22,091 $2,885 $2,077
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.59 1.69 1.70(a) 1.48(a) 1.27(a)
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .77 .53 1.14(a) 1.19(a) 2.03(a)
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.22 68.46 62.96 103.92 222.89
-----------------------------------------------------------------------------------------------------
+ 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
and September 30, 1996, reflect a reduction of approximately $.07 and
$.09 per share for class A, respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) 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) Amount represents less than $0.01 per share.
</TABLE>
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
---------------------------------------------------------------------------
2000 1999 1998
---------------------------------------------------------------------------
Net asset value,
beginning of period $13.94 $11.34 $12.01
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment income (d) --(e) (.03) .04(a)
---------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .58 2.95 (.35)
---------------------------------------------------------------------------
Total from
investment operations .58 2.92 (.31)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From net
investment income (.20) (.03) (.05)
---------------------------------------------------------------------------
From net realized gain
on investments (.94) (.29) (.31)
---------------------------------------------------------------------------
Total distributions (1.14) (.32) (.36)
---------------------------------------------------------------------------
Net asset value,
end of period $13.38 $13.94 $11.34
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(b) 4.26 26.08 (2.62)*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $37,356 $28,105 $16,315
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.34 2.44 2.24(a)*
---------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .01 (.23) .39(a)*
---------------------------------------------------------------------------
Portfolio turnover (%) 68.22 68.46 62.96
---------------------------------------------------------------------------
+ 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
and September 30, 1996, reflect a reduction of approximately $.07 and
$.09 per share for class A, respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) 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) Amount represents less than $0.01 per share.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------------------------
For the period
Per-share Year ended July 26, 1999+
operating performance Sept. 30 to Sept. 30
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
Net asset value,
beginning of period $14.06 $14.56
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income (d) .01 (.01)
--------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .61 (.48)
--------------------------------------------------------------
Total from
investment operations .62 (.49)
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income (.21) (.01)
--------------------------------------------------------------
From net realized gain
on investments (.94) --
--------------------------------------------------------------
Total distributions (1.15) (.01)
--------------------------------------------------------------
Net asset value,
end of period $13.53 $14.06
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(b) 4.48 (3.40)*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $2,392 $515
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.34 .44*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .09 (.10)*
--------------------------------------------------------------
Portfolio turnover (%) 68.22 68.46
--------------------------------------------------------------
+ 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
and September 30, 1996, reflect a reduction of approximately $.07 and
$.09 per share for class A, respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) 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) Amount represents less than $0.01 per share.
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
---------------------------------------------------------------------------
2000 1999 1998
---------------------------------------------------------------------------
Net asset value,
beginning of period $14.00 $11.35 $12.01
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment income (d) .03 --(e) .07(a)
---------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .58 2.98 (.36)
---------------------------------------------------------------------------
Total from
investment operations .61 2.98 (.29)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From net
investment income (.21) (.04) (.06)
---------------------------------------------------------------------------
From net realized gain
on investments (.94) (.29) (.31)
---------------------------------------------------------------------------
Total distributions (1.15) (.33) (.37)
---------------------------------------------------------------------------
Net asset value,
end of period $13.46 $14.00 $11.35
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Total return at
net asset value (%)(b) 4.46 26.57 (2.48)*
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,862 $2,712 $1,783
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.09 2.19 2.02(a)*
---------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .24 .03 .62(a)*
---------------------------------------------------------------------------
Portfolio turnover (%) 68.22 68.46 62.96
---------------------------------------------------------------------------
+ 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
and September 30, 1996, reflect a reduction of approximately $.07 and
$.09 per share for class A, respectively.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) 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) Amount represents less than $0.01 per share.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
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. 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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sales price on its principal exchange, or if no sales are
reported -- as in the case of some securities traded over-the-counter --
the last reported bid price. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value. Other investments, including restricted
securities, are stated at fair value following procedures approved by the
Trustees. Market quotations are not considered to be readily available for
certain debt obligations; such investments are stated at fair value on the
basis of valuations furnished by a pricing service or dealers, approved by
the Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market transactions
for comparable securities and variable relationships between securities that
are generally recognized by institutional traders.
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. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
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. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
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, 2000, 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 and realized
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, 2000, the fund reclassified $234,463 to decrease distributions in
excess of net investment income and $29,519 to decrease paid-in-capital,
with a decrease to accumulated net realized gains of $204,944. 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. The expenses have
been fully amortized over a five year period as of September 30, 2000.
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.
As part of the subcustodian contract between the subcustodian bank and
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc., 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, 2000, the payable to
the subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended September 30, 2000, fund expenses were reduced by
$24,371 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 $558
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. 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 Retail Management, Inc., 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 Retail Management, Inc. 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, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $108,513 and $1,773
from the sale of class A and class M shares, respectively and received
$60,723 and $904 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, 2000, Putnam Retail Management, Inc., acting as
underwriter received $27,055 from the redemption of class A shares.
Note 3
Purchases and sales
During the year ended September 30, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $87,610,121 and $55,634,796, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At September 30, 2000, there were an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 3,574,201 $48,633,746
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 232,368 3,106,638
---------------------------------------------------------------------------
3,806,569 51,740,384
Shares
repurchased (1,723,839) (23,413,867)
---------------------------------------------------------------------------
Net increase 2,082,730 $28,326,517
---------------------------------------------------------------------------
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, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 1,276,724 $17,129,171
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 176,150 2,333,995
---------------------------------------------------------------------------
1,452,874 19,463,166
Shares
repurchased (677,528) (9,037,279)
---------------------------------------------------------------------------
Net increase 775,346 $10,425,887
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 161,803 $2,174,153
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,601 48,143
---------------------------------------------------------------------------
165,404 2,222,296
Shares
repurchased (25,219) (340,843)
---------------------------------------------------------------------------
Net increase 140,185 $1,881,453
---------------------------------------------------------------------------
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, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 65,212 $895,558
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 18,598 247,541
---------------------------------------------------------------------------
83,810 1,143,099
Shares
repurchased (64,994) (857,092)
---------------------------------------------------------------------------
Net increase 18,816 $286,007
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $3,552,494 as capital gain, for its taxable year
ended September 30, 2000.
The fund has designated 36.82% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, 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, III
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
Colin Moore
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
Richard G. Leibovitch
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
and Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN063-65460 197/2HP/2HQ 11/00
