Putnam
Emerging
Markets
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
2000. In the following report, the fund's managers discuss performance for
the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam
Emerging Markets Fund that I will be signing. After more than 30 years as
Chairman of the Trustees and President of the Putnam Funds, the time has
come for me to step aside. In June, John Hill will become Chairman. John
is currently an independent Trustee and has served on the board for the
past 14 years. In addition, my son, George Putnam, III, will take on the
role of President. I am confident that the leadership of the funds will be
in exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 19, 2000
Report from the Fund Managers
Thomas R. Haslett
J. Peter Grant
Paul Warren
Stephen Oler
Carmel Peters
In our last report to shareholders, we had plenty of good news and
positive performance results to share regarding the recovery in emerging
markets. As we now comment on the first half of Putnam Emerging Markets
Fund's 2000 fiscal year, we are happy to report further strong returns as
well as what might be called a return to normalcy for emerging markets.
Developing economies in 2000 are poised to achieve higher economic growth
rates than those of the world's developed economies, an advantage they
have not enjoyed since the middle of the 1990s. At the same time, emerging
markets are also participating in the great long-term secular change in
the world economy driven by computer and telecommunications technology and
the service sectors. In other words, emerging markets are joining the "new
economy." These positive fundamental factors are reflected in your fund's
strong returns for the past six months.
Total return for 6 months ended 2/29/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------
40.24% 32.18% 39.61% 34.61% 39.61% 38.61% 39.72% 34.79%
- ------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* EMERGING MARKETS PARTICIPATE IN GLOBAL RALLY
The closing months of 1999 turned out to be among the most memorable
periods ever for global financial markets. As the six months under
discussion opened on September 1, 1999, stocks around the world were in
the midst of a mild correction. For the emerging markets in which your
fund invests, this downturn represented a breather from a rather rapid
recovery that started earlier in the year.
[GRAPHIC OMITTED: horizontal bar chart COUNTRY ALLOCATION]
COUNTRY ALLOCATION*
India 13.1%
Mexico 13.0%
Taiwan 9.8%
Brazil 9.6%
South Korea 9.6%
Footnote reads:
*Based on net assets as of 2/29/00. Holdings will vary over time.
By October, however, market sentiment around the world had turned positive
once again. Month after month, economic reports demonstrated a sustained
recovery in emerging markets and accelerating business activity for the
entire global economy. An even stronger force in the markets than the
economic rebound, however, was investors' enthusiasm for the technology
and telecommunications stocks considered part of the new economy. The
essence of the new economy is that new computer and communications
technologies, combined with innovative business practices, allow companies
to increase their earnings by a significant amount. The optimism for
technology easily overwhelmed concerns about Y2K computer risks, and the
markets registered some of their strongest gains in December before
moderating a bit in the first two months of 2000.
"Mexico's recent elevation to the ranks of the investment-grade elite has
bolstered confidence in the country and brought euphoria to the stock
market...the Mexican stock market rallied on the news and credit-starved
companies immediately headed for Wall Street in search of cheap financing,
triggered by dropping yield spreads."
- -- Financial Times March 27, 2000
Your fund's strong performance derived from the same factors that were
driving global markets. Examples of fund holdings in new economy stocks
include Gilat Satellite Networks of Israel and Carso Global Telecom of
Mexico. Secondarily many of the fund's holdings in the cyclical, natural
resource, and basic materials sectors -- such as steel, paper, chemical,
and cement companies -- benefited from the effects of economic recovery on
their operating results. Your fund's holdings in these sectors included
Companhia Vale do Rio Doce of Brazil, Reliance Industries of India, and
Cemex of Mexico. While these holdings, along with others discussed in this
report, were viewed favorably at the end of the period, all are subject to
review and adjustment in accordance with the fund's investment strategy
and may vary in the future.
* LATIN AMERICAN COMPANIES AND MARKETS ATTRACTIVE
Although we maintain consistent diversification across regions and
sectors, we also favor countries based on relative risks and rewards. The
same is true with stocks. We try to identify those offering a combination
of an attractive price and potential earnings growth. When we meet with
managers of companies we are considering for the portfolio, we assess how
wisely they use capital to achieve long-term growth. For a company to meet
our criteria, its managers must be positioning it to compete in a global
market, as we believe this is one of the best indicators of its growth
potential.
"Telmex, Mexico's dominant telephone company, and Microsoft, the US software
giant, are to launch their much-touted Hispanic Internet portal next week in
what is seen as the first of several shake-ups on the Mexican Internet
scene...The portal, to be called T1, should expand to Argentina, Venezuela,
Chile and Colombia by the end of the year, Telmex said."
- -- Financial Times, March 16, 2000
During the period, we primarily added to our positions in Mexico and
Brazil because these markets were attractive and many companies there
offered the qualities we seek. Latin American economies, the last emerging
markets to enter recession, were among the most undervalued during 1999,
as Asian markets in particular recovered sooner. We felt confident in
Latin America because Brazil's 1999 devaluation was not followed by
escalating inflation in contrast to previous currency crises.
Mexico was especially inviting. Thanks to NAFTA, Mexico has become more
integrated with the economies of the United States and Canada. For that
reason, during 1999, it was able to avoid the recession that gripped other
Latin American countries. Just after the end of the period, the bond
rating service Moody's recognized the strong fundamental situation of the
Mexican economy by awarding Mexican government bonds investment-grade
status. This recognizes a lower level of risk in Mexican securities and
reduces interest costs for Mexican corporations which now have the
possibility of receiving an investment-grade rating. Moody's caps the
ratings of corporate bonds at the level of the government of the country
where the corporation is located.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Telefonos de Mexico S.A.
Mexico
Telecommunications
Samsung Electronics Co.
South Korea
Electronics and electrical equipment
SK Telecom Co.
South Korea
Telecommunications
Taiwan Semiconductor Manufacturing Co.
Taiwan
Electronics and electrical equipment
China Telecom
Hong Kong
Telecommunications
Telesp-Telecomunicacoes de
Sao Paulo S.A.
Brazil
Telecommunications
Grupo Financiero Banamex Accival
S.A. de C.V.
Mexico
Financials
Wipro Ltd., structured note
India
Technology
United Microelectronics Corp.
Taiwan
Electronics and electrical equipment
Infosys Technologies Ltd.
India
Consumer services
Footnote reads:
These holdings represent 21.0% of the fund's assets as of 2/29/00.
Portfolio holdings will vary over time.
One of the fund's largest holdings is Telefonos de Mexico (Telmex), the
Mexican telephone utility. This company not only benefits from Mexico's
healthy economy but also is the nation's largest provider of Internet and
cellular telephone services. During the period, it signed an agreement
with Microsoft to develop an Internet portal that will serve all
Spanish-speaking Latin America as well as the U.S. Hispanic population. In
spite of these positive features, Telmex is still priced at a discount to
the global telecommunications sector. We also are very positive on the
bank Grupo Financiero Banamex Accival. We believe this bank's strong
management and its business position stand in contrast to the stock's
undervaluation. The bank had strong operating results during the period
and is poised to benefit as lending activity in Mexico's banking sector
returns to growth. It has also embarked on a joint venture with Commerce
One to launch business-to-business Internet portals across Latin America.
* ASIAN STOCKS CONTINUE TO REGISTER GAINS
South Korean stocks composed one of your fund's largest country weightings
during the period. In South Korea, as we have discussed in previous
reports, companies are restructuring to ensure their global
competitiveness by cutting costs, getting out of unprofitable businesses,
and focusing on growth opportunities. Your fund had holdings in several
sectors -- Samsung Electronics, a leading manufacturer of electronic
products, Korea Electric Power, a utility, and SK Telecom, a provider of
wireless telecommunications services.
The fund also had sizable positions in Taiwan and India. The Taiwanese
position was diversified across many sectors, but among the
best-performing holdings were globally competitive technology companies
exporting computer, telecommunications, and networking components.
Examples included Taiwan Semiconductor Manufacturing, United
Microelectronics, and ASE Test. In India, we are positive on a variety of
holdings including software companies. Their services will be in great
demand as the entire world embraces new business practices enabled by the
Web. Examples of these companies include Infosys Technologies and Satyam
Computer Services.
* BUSINESSES AND ECONOMIES POISED FOR STRONGER GROWTH
As we look ahead to the second half of your fund's 2000 fiscal year, we
find that most factors remain strongly positive. Most emerging markets are
poised for healthy economic growth in the year 2000 and are likely to
achieve even more rapid expansion in 2001. The companies your fund invests
in are, we believe, prepared to benefit from this expansionary period. In
the more traditional sectors, such as basic materials, utilities, and
industrial cyclicals, we have favored companies with managers who learned
important lessons during the previous period of economic contraction.
These companies are committed to competing internationally and providing
long-term shareholder value. At the same time, your fund owns many younger
companies that are helping to build the new economy around the world. From
their origins, these companies have focused on growth and global
competitiveness. In fact, because more and more companies in emerging
markets are focusing on investing in growth opportunities and taking costs
out of older businesses, we have confidence that the current expansion is
less likely to result in inflation than expansions of the past. We will
continue to strive to identify the companies and countries with the most
attractive combinations of risk and reward.
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 2/29/00, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, including those related to economic instability,
unfavorable political developments, and currency fluctuations not present
with domestic investments. Additional risks, including liquidity and
volatility, may be associated with emerging-markets securities.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Emerging
Markets Fund is designed for investors seeking capital appreciation through
common stocks of companies operating primarily in developing economies.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 2/29/00
Class A Class B Class C Class M
(inception dates) (12/28/95) (10/30/96) (7/26/99) (10/30/96)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 40.24% 32.18% 39.61% 34.61% 39.61% 38.61% 39.72% 34.79%
- --------------------------------------------------------------------------------------------
1 year 87.86 76.96 86.56 81.56 86.48 85.48 87.04 80.53
- --------------------------------------------------------------------------------------------
Life of fund 61.34 52.04 56.71 54.71 56.44 56.44 57.78 52.25
Annual average 12.16 10.57 11.37 11.03 11.33 11.33 11.56 10.61
- --------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/00
MSCI Emerging Consumer
Markets Free Index price index
- --------------------------------------------------------------------------
6 months 23.53% 1.67%
- --------------------------------------------------------------------------
1 year 70.73 3.16
- --------------------------------------------------------------------------
Life of fund 18.71 10.32
Annual average 4.21 2.39
- --------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Recent returns were achieved during
favorable market conditions. Returns for class A and class M shares
reflect the current maximum initial sales charges of 5.75% and 3.50%,
respectively. Class B share returns for the 1-year and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the case
of class B and class M shares the higher operating expenses applicable to
such shares. 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.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 2/29/00
Class A Class B Class C Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1 1
- ------------------------------------------------------------------------------
Income $0.085 $0.026 $0.077 $0.037
- ------------------------------------------------------------------------------
Capital gains -- -- -- --
- ------------------------------------------------------------------------------
Total $0.085 $0.026 $0.077 $0.037
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------
8/31/99 $9.35 $9.92 $9.26 $9.35 $9.29 $9.63
- ------------------------------------------------------------------------------
2/29/00 13.02 13.81 12.90 12.97 12.94 13.41
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (12/28/95) (10/30/96) (7/26/99) (10/30/96)
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6 months 42.52% 34.32% 41.95% 36.95% 41.91% 40.91% 42.32% 37.40%
- -----------------------------------------------------------------------------------------------
1 year 67.20 57.56 65.76 60.76 65.87 64.87 66.36 60.47
- -----------------------------------------------------------------------------------------------
Life of fund 58.00 48.89 53.30 51.30 53.06 53.06 54.49 49.07
Annual average 11.33 9.79 10.55 10.21 10.51 10.51 10.75 9.83
- -----------------------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns may be more or less than
those shown. They do not take into account any adjustment for taxes payable on reinvested
distributions. Investment returns and principal value will fluctuate so that an investor's
shares when sold may be worth more or less than their original cost. See first page of
performance section for performance calculation method.
</TABLE>
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) Emerging Markets Free Index is
an unmanaged list of equity securities from emerging markets available to
non-domestic investors 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.
Welcome to www.putnaminv.com
Now you can use your PC to get up-to-date information about your funds, learn
more about investing and retirement planning, and access market news and
economic outlooks from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* complete fund information, daily pricing and long-term performance
* your current account value, portfolio value and transaction history
* the latest on new funds and other Putnam news
You can also read Putnam economist Dr. Robert Goodman's commentary and
Putnam's Capital Markets outlook, search for a particular fund by name or
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The site can be accessed through any of the major online services (America
Online, CompuServe, Prodigy) that offer web access. Of course, you can also
access it via Netscape or Microsoft Internet Explorer, using an independent
Internet service provider.
New features will be added to the site regularly. So be sure
to bookmark us at http://www.putnaminv.com
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, 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.
<TABLE>
<CAPTION>
The fund's portfolio
February 29, 2000 (Unaudited)
COMMON STOCKS (96.3%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Argentina (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
16,975 El Sitio, Inc. $ 384,059
30,576 Telecom Argentina S.A. ADR (NON) 1,274,637
--------------
1,658,696
Brazil (9.6%)
- --------------------------------------------------------------------------------------------------------------------------
38,416 Aracruz Celulose S.A. ADR 804,335
100,491 Banco Bradesco S.A. BRC (NON) 722,830
21,679 Cia Cervejaria Brahma ADR 279,117
14,419 Companhia Brasileira de Distribuicao Grupo Pao
de Acucar ADR 486,641
8,347 Companhia Brasileira de Distribuicao Grupo Pao
de Acucar ADR 282,957
59,815 Companhia Vale do Rio Doce ADR (NON) 1,577,621
15,935 Compania Siderurgica Nacional 487,880
12,769 Eletropaulo Metropolitana S.A. 881,617
20,100 Embratel Participacoes S.A. ADR (NON) 482,400
162,901 Empresa Bras Aeronautica 737,526
30,371 Gerdau S.A. 845,644
19,600 Globo Cabo S.A. ADR (NON) 379,750
68,311 Petroleo Brasileiro S/A-Petrobras ADR (NON) 1,776,086
21,246 Tele Celular Sul Participacoes S.A. (NON) 1,030,431
5,698 Tele Centro Sul Participacoes S.A. (NON) 410,968
34,935 Telesp Celular Participacoes S.A. ADR (NON) 1,882,123
97,761 Telesp-Telecomunicacoes de Sao Paulo S.A. (NON) 3,342,284
9,800 Uniao de Bancos Brasileiros S.A. GDR 285,425
123,531 Usiminas 671,136
--------------
17,366,771
Canada (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
16,400 Global Light Telecom, Inc. 339,275
Chile (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
18,506 Banco Santiago S.A. 370,120
11,774 Compania Cervecera Unitas 303,181
--------------
673,301
China (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
405,000 United World Chinese Commercial Bank 513,026
Egypt (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,300 Al Ahram Beverage Co. (NON) 57,819
21,000 Al Ahram Beverage Co.GDR 144A (NON) 379,050
14,900 Commercial International Bank 160,987
20,000 Commercial International Bank 144A (NON) 222,000
31,375 Orascom Construction Industries, Inc. 503,906
--------------
1,323,762
Greece (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
12,050 Commercial Bank of Greece, S.A. 799,261
68,802 Hellenic Telecommunication Organization S.A. 2,047,619
5,200 Hellenic Telecommunication Organization S.A. GDR 78,000
23,000 National Bank of Greece S.A. ADR (NON) 309,063
6,400 OTP Bank GDR 144A 364,800
--------------
3,598,743
Hong Kong (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
371,000 China Telecom Ltd. (NON) 3,408,568
65,000 Citic Pacific Ltd. 327,410
728,000 e-New Media Co. Ltd. 257,250
76,500 Johnson Electric Holdings Ltd. 503,787
334,000 Pacific Century CyberWorks Ltd. 950,632
550,000 TCL International (NON) 289,760
--------------
5,737,407
Hungary (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
16,900 Mahindra & Mahindra GDR 216,320
28,587 Tiszai Vegyi Kombinat Rt (NON) 527,376
--------------
743,696
India (11.7%)
- --------------------------------------------------------------------------------------------------------------------------
64,800 BSES Ltd. GDR 456,393
11,200 Cipla Ltd. (NON) 288,925
15,500 Global Tele-Systems Ltd. 741,235
57,777 Grupo Elektra S.A. GDR 686,102
29,200 Gujarat Ambuja Cements Ltd. (NON) 187,915
24,800 Hindustan Lever Ltd. (NON) 1,649,163
66,250 Hindustan Petroleum Corp. Ltd. (NON) 215,035
94,200 Housing Development Finance Corporation Ltd. (NON) 846,958
6,400 Hughes Software Systems 474,269
48,400 ICICI Ltd. ADR (NON) 1,790,800
11,370 Infosys Technologies Ltd. 2,269,463
60,726 Larsen & Toubro Ltd. GDR (NON) 493,286
50,000 Mahindra & Mahindra Ltd. (NON) 550,447
56,600 Panafon Hellenic Telecommunication GDR 144A 917,486
26,500 Pentamedia Graphics Ltd. 989,542
159,400 Reliance Industries Ltd. 1,138,389
18,000 Satyam Computer Services Ltd. 2,084,384
4,300 Software Solution 557,984
46,400 Videsh Sanchar Nigam Ltd. GDR (NON) 1,705,200
12,100 Wipro Corp. Ltd. (NON) 1,453,887
52,200 Zee Telefilms Ltd. (NON) 1,564,743
--------------
21,061,606
Indonesia (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
885,500 PT Astra International Inc. (NON) 439,758
39,285 PT Telekomunikasi Indonesia ADR (NON) 380,573
--------------
820,331
Israel (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
9,846 Gilat Satellite Networks Ltd. (NON) 1,476,285
20,044 Orbotech Ltd. (NON) 1,845,301
24,747 Orckit Communications Ltd. 2,160,722
60,027 Sapiens International Corp. (NON) 1,189,285
--------------
6,671,593
Kenya (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
400,208 Theta Group Ltd. 837,255
Korea (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
6,090 Cheil Communications, Inc. 770,068
4,000 Digital Chosun Co. Ltd. 937,307
11,200 Dreamline Corp. 1,480,591
17,500 Hansol M. Com Co. Ltd. 608,918
28,800 LG Investment and Securities 514,422
4,250 Locus Corp. (NON) 900,057
24,000 Mirae Corp. ADR (NON) 313,500
4,400 Serome Technology, Inc. 556,371
--------------
6,081,234
Malaysia (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
239,000 Commerce Asset-Holding Berhad 748,447
98,000 Edaran Otomobil Nasional Berhad 412,632
594,000 IJM Copr. Berhad 665,905
78,000 Malaysian Pacific Industries Berhad 990,395
753,000 Public Bank Berhad 832,263
200,000 Resorts World Berhad 726,316
196,000 Tanjong PLC 492,579
200,000 Telekom Malaysia 847,368
87,000 WTK Holdings Berhad 304,500
--------------
6,020,405
Mexico (13.0%)
- --------------------------------------------------------------------------------------------------------------------------
127,642 Alfa S.A. de C.V. Class A 449,924
164,612 Carso Global Telecom (NON) 2,057,210
57,361 Cemex S.A. de C.V. ADR (NON) 1,226,091
39,575 Coca-Cola Femsa S.A. ADR 759,345
221,394 Controladora 212,833
398,865 Corporacion Moctezuma, S.A. de C.V. (NON) 660,373
201,168 Fomento Economico Mexicano, S.A. de C.V. 896,038
142,449 Grupo Carso S.A. de C.V. 555,372
615,941 Grupo Financiero Banamex Accival, S.A. de C.V. (NON) 2,628,375
5,193 Grupo Imsa S.A. de C.V. ADR (NON) 72,702
245,115 Grupo Mexico S.A. (NON) 1,217,459
212,804 Grupo Modelo S.A. de C.V. 483,026
351,776 Grupo Sanborns S.A. de C.V. 725,195
18,159 Grupo Televisa S.A. GDR (NON) 1,394,838
17,700 HCL Technologies Ltd 872,610
96,534 Organizacion Soriana S.A. 396,468
120,024 Telefonos de Mexico S.A. ADR Class L (NON) 7,891,578
62,890 TV Azteca, S.A. de C.V. 876,529
--------------
23,375,966
Peru (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
15,953 Compania de Minas Buenaventura S.A. ADR 278,180
19,800 Telefonica del Peru S.A. ADR 388,575
--------------
666,755
Philippines (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
100,700 Bank of the Philippine Islands (NON) 228,976
128,700 Manila Electric Co. Class B 236,002
9,000 Philippine Long Distance Telephone Co. ADR (NON) 195,750
--------------
660,728
Poland (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
22,200 Agora S.A. (NON) 768,675
20,239 Agora S.A. GDR (NON) 700,775
70,800 Orbis S.A. (NON) 665,132
--------------
2,134,582
Russia (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
103,897 Surgutneftegaz ADR (NON) 1,181,828
81,362 Tatneft ADR 956,004
25,844 Vimpel Communications ADR (NON) 1,109,677
--------------
3,247,509
South Africa (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
167,300 Sappi Ltd. 1,386,792
198,500 Sasol Ltd. 1,272,456
108,900 South African Breweries, Ltd. 842,520
--------------
3,501,768
South Korea (9.6%)
- --------------------------------------------------------------------------------------------------------------------------
3,510 Daum Communications Corp. 571,085
17,800 Hannsoft Inc. 639,031
3,060 Housing & Commercial Bank GDR (NON) 54,522
49,460 Kookmin Bank 144A GDR 551,062
69,600 Korea Electric Power Corp. (NON) 1,741,692
23,700 Korea Telecom Corp. (NON) 1,030,950
11,500 L.G. Chemical Ltd. 304,558
11,660 Pohang Iron & Steel Company, Ltd. 1,264,567
21,602 Samsung Electronics Co. 4,890,010
18,882 Samsung Securities Co. Ltd. 577,697
14,350 Sansung Electro-Mechanics Co. 870,466
48,800 Shinhan Bank 466,036
1,160 SK Telecom Co., Ltd. (NON) 4,308,073
--------------
17,269,749
Spain (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
4,200 Terra Networks S.A. ADR (NON) 544,425
Taiwan (9.8%)
- --------------------------------------------------------------------------------------------------------------------------
54,200 Acer Inc. (NON) 737,120
119,840 Acer Peripherals Inc. 557,532
165,120 Advanced Semiconductor Engineering Inc. 552,556
18,800 Ase Test Limited 564,000
93,484 Asustek Computer, Inc. GDR 1,168,932
569,770 Bank Sinopac 392,496
293,000 Cathay Life Insurance Co., Ltd. 813,092
422,600 Chinatrust Commercial Bank 455,299
328,100 Far Eastern Textile Ltd. 717,685
235,000 Formosa Plastics Corp. 517,875
8,100 GigaMedia Ltd. 567,506
142,480 Hon Hai Precision Industry 1,330,372
192,000 K Laser Technology, Inc. 570,421
335,000 Nan Ya Plastic Corp. 743,715
124,000 President Chain Store Corp. 542,475
82,000 Synnex Technology Intl. Corp. 575,580
283,030 Taishin Intl. Bank 190,350
646,836 Taiwan Semiconductor Manufacturing Co. (NON) 4,244,663
629,850 United Microelectronics Corp. 2,313,357
--------------
17,555,026
Thailand (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
36,000 Advanced Info Service Public Co., Ltd. (NON) 559,664
65,000 Bec World Public Co. Ltd. 488,183
100,200 Polski Koncern Nafto GDR 144A (NON) 1,077,150
43,500 Shin Corp. PLC (NON) 344,984
16,500 Siam Cement Public Company Ltd. (The) (NON) 298,109
70,000 Siam City Cement Co. Ltd. 235,294
550,000 TelecomAsia Corporation Public Co. Ltd. 765,494
420,100 Thai Farmers Bank Public Co. (NON) 397,153
--------------
4,166,031
Turkey (4.6%)
- --------------------------------------------------------------------------------------------------------------------------
34,144,400 Dogan Sirketler Grubu Holding A.S. (NON) 1,011,368
5,243,100 Enka Holding Yatirim A.S. 1,370,315
13,897,000 Ericiyas Biracilik Ve Malt 575,076
16,967,000 Guney Biracilik Ve Malt Sana 591,257
88,100 Haci Omer Sabanci Holdings ADR (NON) 1,013,150
51,883,000 Hurriyet Gazetecilik Ve Matbaacilik A.S. 1,242,993
3,595,200 Vestel Elektronik Sanayi ve Ticaret A.S. (NON) 1,174,533
38,900 Yapi ve Kredi Bankasi A.S. GDR (NON) 1,118,375
--------------
8,097,067
United Kingdom (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
271,900 Billiton PLC (NON) 1,193,466
13,360 MIH Ltd. (NON) 946,890
22,913 Old Mutual PLC 53,198
557,100 Old Mutual PLC 144A 1,293,429
--------------
3,486,983
United States (8.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,700 ADV Vision Technology 69,733
10,900 Anglogold Ltd. 566,211
7,300 AudioCodes Ltd. 563,925
40,700 De Beers-Centenary (NON) 893,234
173,100 Dimension Data Holdings Ltd. 1,612,521
10,941 DSP Group, Inc. (NON) 960,757
13,500 Elbit Ltd. (NON) 295,186
15,722 Elbit Ltd. (NON) 290,120
37,459 Impala Platinum Holdings Ltd. 1,337,843
12,600 IMPSAT Fiber Newworks, Inc. (NON) 462,263
20,500 ITC Ltd. 351,617
109,400 Johnnies Industrial Corp. 1,830,962
33,700 Magic Software Enterprises Ltd. (NON) 846,713
264,000 Malaysian Resources Corp. 326,526
610,000 National Finance PLC (NON) 140,966
400 National Financial Insurance 92
237,500 National Petrochemical Co. 244,797
18,611 NICE Systems Ltd. ADR (NON) 1,666,849
250,800 Standard Bank Investment (NON) 978,095
13,252 StarMedia Network, Inc. (NON) 622,844
31,200 Winbond Electronics 144A GDR (NON) 756,600
--------------
14,817,854
Venezuela (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
13,100 Compania Anonima Nacional Telefonos de Venezuela ADR 436,394
--------------
Total Common Stocks (cost $117,088,000) $ 173,407,938
UNITS (1.4%) (a) (cost $3,739,865)
NUMBER OF UNITS VALUE
- --------------------------------------------------------------------------------------------------------------------------
16,700 Wipro Ltd. Structured Note (issued by Goldman Sachs
Group, Inc.) zero %, 2001 (India) $ 2,525,708
PREFERRED STOCKS (0.3%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
2,236 Banco Itau S.A. BRC $6.86 $ 177,792
466,200 Siam Commercial Bank pfd 281,581
--------------
Total Preferred Stocks (cost $444,644) $ 459,373
WARRANTS (--%) (a) (NON) (cost $6,473) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
3,584 Cemex SA 12/13/02 $ 10,304
SHORT-TERM INVESTMENTS (2.4%) (a) (cost $4,285,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 4,285,000 Interest in $700,000,000 joint repurchase agreement dated
February 29, 2000 with Warburg Securities due
March 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $4,285,687 for an effective
yield of 5.77%. $ 4,285,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $125,563,982) (b) $ 180,688,323
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $180,117,690.
(b) The aggregate identified cost on a tax basis is $127,729,186, resulting in gross unrealized appreciation and
depreciation of $59,753,755 and $6,794,618, respectively, or net unrealized appreciation of $52,959,137.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR and GDR after the name of a foreign holding stands for American Depository Receipts and Global Depository
Receipts, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank.
The fund had the following industry group concentrations greater than 10% at February 29, 2000 (as a percentage of
net assets):
Communication services 12.2%
Insurance and finance 11.7
Technology 11.5
- -------------------------------------------------------------------------------
SWAP Contracts Outstanding at February 29, 2000 (Unaudited)
Notional Termination Unrealized
Amount Date Depreciation
- -------------------------------------------------------------------------------
Agreement with Salomon Brothers
International Ltd. Dated 1/13/00 to
receive (pay) quarterly the notional
amount multiplied by the return of
SK Telecom Co. Limited (South Korea)
and pay the notional amount multiplied
by three months LIBOR adjusted by a
specified spread. $597,313 Jan-00 $(51,440)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29, 2000 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $125,563,982) (Note 1) $180,688,323
- -----------------------------------------------------------------------------------------------
Cash 2,031,218
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $2,435,004) 2,237,415
- -----------------------------------------------------------------------------------------------
Dividends, interest, and other receivables 379,067
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,382,521
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 5,513,840
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 1,626
- -----------------------------------------------------------------------------------------------
Total assets 192,234,010
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 360
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 9,902,664
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 693,632
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 383,395
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 123,950
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 8,694
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,115
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 101,989
- -----------------------------------------------------------------------------------------------
Payable for open swap contract (Note 1) 51,440
- -----------------------------------------------------------------------------------------------
Other accrued expenses 849,081
- -----------------------------------------------------------------------------------------------
Total liabilities 12,116,320
- -----------------------------------------------------------------------------------------------
Net assets $180,117,690
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $153,763,868
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (853,659)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (26,868,334)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 54,075,815
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $180,117,690
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($104,451,658 divided by 8,022,545 shares) $13.02
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.02)* $13.81
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($68,259,869 divided by 5,291,582 shares)** $12.90
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($1,679,925 divided by 129,489 shares)** $12.97
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($5,726,238 divided by 442,509 shares) $12.94
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.94)* $13.41
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 29, 2000 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $12,211) $ 566,652
- -----------------------------------------------------------------------------------------------
Interest 47,443
- -----------------------------------------------------------------------------------------------
Total investment income 614,095
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 664,524
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 342,779
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,271
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,436
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 94,138
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 265,205
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 3,153
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 17,045
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,080
- -----------------------------------------------------------------------------------------------
Reports to shareholders 8,560
- -----------------------------------------------------------------------------------------------
Registration fees 6,843
- -----------------------------------------------------------------------------------------------
Auditing 35,403
- -----------------------------------------------------------------------------------------------
Legal 2,550
- -----------------------------------------------------------------------------------------------
Postage 15,798
- -----------------------------------------------------------------------------------------------
Other 5,420
- -----------------------------------------------------------------------------------------------
Total expenses 1,470,205
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (5,574)
- -----------------------------------------------------------------------------------------------
Net expenses 1,464,631
- -----------------------------------------------------------------------------------------------
Net investment loss (850,536)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (net of foreign tax of $255,681)
(Notes 1 and 3) 10,109,075
- -----------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 89,785
- -----------------------------------------------------------------------------------------------
Net realized loss on swap contracts (Note 1) (121,284)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in foreign
currencies during the period (190,298)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
swap contracts during the period
(net of deferred foreign tax of $786,032) 35,227,386
- -----------------------------------------------------------------------------------------------
Net gain on investments 45,114,664
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $44,264,128
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
February 29 August 31
2000* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (850,536) $ (205,753)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 10,077,576 (12,594,769)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 35,037,088 45,788,400
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 44,264,128 32,987,878
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (560,909) (360,213)
- ---------------------------------------------------------------------------------------------------------------
Class B (127,527) (7,594)
- ---------------------------------------------------------------------------------------------------------------
Class C (4,183) --
- ---------------------------------------------------------------------------------------------------------------
Class M (14,995) (4,040)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 27,155,753 23,835,099
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 70,712,267 56,451,130
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 109,405,423 52,954,293
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $853,659 and undistributed
net investment income of $704,491, respectively) $180,117,690 $109,405,423
- ---------------------------------------------------------------------------------------------------------------
* Unaudited.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 Dec. 28, 1995+
operating performance (Unaudited) Year ended August 31 to August 31
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.35 $5.81 $10.94 $10.28 $8.50
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (c)(d) (.05) --(e) .01 (.02) .01
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.81 3.61 (4.94) .81 1.77
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.76 3.61 (4.93) .79 1.78
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.09) (.07) -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.20) (.12) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.07) (.20) (.13) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.02 $9.35 $5.81 $10.94 $10.28
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 40.24* 62.45 (45.69) 7.82 20.94*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $104,452 $60,669 $29,239 $49,581 $2,925
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) .94* 2.10 2.10 2.10 1.25*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(c) (.47)* .06 .06 (.23) .11*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.20* 163.86 112.35 141.81 45.90*
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses for the fund
reflect a reduction of $.09 per share for class A for the period ended August 31, 1996. Expenses for the period ended
August 31, 1997 reflect a reduction of $.04, $.03 and $.03 per share for class A, class B and class M, respectively.
Expenses for the period ended August 31, 1998 reflect a reduction of $.02, $.02 and $.02 per share for class A, Class B and
Class M, respectively. Expenses for the period ended August 31, 1999 reflect a reduction of $.01, $.02, $.00 and $.02 per
share for class A, class B, class C and class M, respectively.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Net investment income and/or distributions from net investment income were less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 Oct. 30, 1996+
operating performance (Unaudited) Year ended August 31 to August 31
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.26 $5.74 $10.87 $9.95
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (c)(d) (.09) (.05) (.07) (.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.76 3.57 (4.86) 1.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.67 3.52 (4.93) 1.05
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.03) --(e) -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.20) (.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.03) -- (.20) (.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.90 $9.26 $5.74 $10.87
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 39.61* 61.37 (45.99) 10.67*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $68,260 $44,838 $21,722 $38,044
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) 1.31* 2.85 2.85 2.39*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(c) (.85)* (.69) (.72) (.76)*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.20* 163.86 112.35 141.81
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses for the fund
reflect a reduction of $.09 per share for class A for the period ended August 31, 1996. Expenses for the period ended
August 31, 1997 reflect a reduction of $.04, $.03 and $.03 per share for class A, class B and class M, respectively.
Expenses for the period ended August 31, 1998 reflect a reduction of $.02, $.02 and $.02 per share for class A, Class B and
Class M, respectively. Expenses for the period ended August 31, 1999 reflect a reduction of $.01, $.02, $.00 and $.02 per
share for class A, class B, class C and class M, respectively.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Net investment income and/or distributions from net investment income were less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 July 26, 1999+
operating performance (Unaudited) to August 31
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $9.35 $9.56
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (c)(d) (.09) (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.79 (.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.70 (.21)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.08) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.97 $9.35
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 39.61* (2.20)*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,680 $81
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.31* .29*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets ( (.81)* (.25)*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.20* 163.86
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses for the fund
reflect a reduction of $.09 per share for class A for the period ended August 31, 1996. Expenses for the period ended
August 31, 1997 reflect a reduction of $.04, $.03 and $.03 per share for class A, class B and class M, respectively.
Expenses for the period ended August 31, 1998 reflect a reduction of $.02, $.02 and $.02 per share for class A, Class B
and Class M, respectively. Expenses for the period ended August 31, 1999 reflect a reduction of $.01, $.02, $.00 and $.02
per share for class A, class B, class C and class M, respectively.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Net investment income and/or distributions from net investment income were less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 Oct. 30, 1996+
operating performance (Unaudited) Year ended August 31 to August 31
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.29 $5.76 $10.89 $9.95
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (c)(d) (.08) (.03) (.05) (.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.77 3.57 (4.88) 1.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.69 3.54 (4.93) 1.07
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.01) -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (.20) (.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.04) (.01) (.20) (.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.94 $9.29 $5.76 $10.89
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 39.72* 61.59 (45.91) 10.88*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,726 $3,817 $1,993 $4,043
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) 1.19* 2.60 2.60 2.18*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (c) (.72)* (.41) (.43) (.53)*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 68.20* 163.86 112.35 141.81
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an expense limitation in effect during the period (Note 2). As a result of such limitation, expenses for the fund
reflect a reduction of $.09 per share for class A for the period ended August 31, 1996. Expenses for the period ended
August 31, 1997 reflect a reduction of $.04, $.03 and $.03 per share for class A, class B and class M, respectively.
Expenses for the period ended August 31, 1998 reflect a reduction of $.02, $.02 and $.02 per share for class A, Class B
and Class M, respectively. Expenses for the period ended August 31, 1999 reflect a reduction of $.01, $.02, $.00 and $.02
per share for class A, class B, class C and class M, respectively.
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
(e) Net investment income and/or distributions from net investment income were less than $0.01 per share.
</TABLE>
Notes to financial statements
February 29, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Emerging Markets 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-ended management
investment company. The objective of the fund is to seek long-term capital
appreciation by investing in common stocks and other equity securities of
emerging market companies.
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.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate. 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) Swap contracts The fund may engage in swap agreements, which are
agreements to exchange the return generated by one instrument for the
return generated by another instrument. The fund may enter into equity
swap agreements, to manage its exposure to equity markets, which involve a
commitment by one party to pay interest in exchange for a market-linked
return based on a notional amount. To the extent that the total return of
the security or index underlying the transaction exceeds or falls short of
the offsetting interest rate obligation, the fund will receive a payment
from or make a payment to the counterparty, respectively. Equity swaps are
marked to market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gain or loss. Payments received
or made at the end of the measurement period are recorded as realized
gains or losses. The fund could be exposed to credit or market risk due to
unfavorable changes in the fluctuation of interest rates or in the price
of the underlying security or index, the possibility that there is no
liquid market for these agreements or that the counterparty may default on
its obligation to perform.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended February 29, 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.
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.
At August 31, 1999, the fund had a capital loss carryover of approximately
$29,135,000 available to offset future capital gains, if any. The amount
of the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- ---------------
$3,889,000 August 31, 2006
25,246,000 August 31, 2007
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
J) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
K) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public
offering of its shares were $3,662. These expenses are being amortized on
projected net asset levels over a five-year period.
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.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through August 31, 2000, to the extent
that expenses of the fund (exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expense, credits from
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc and payments under the Trust's distribution plan) would exceed an
annual rate of 1.85% 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 Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended February 29, 2000, fund expenses were reduced by
$5,574 under expense offset arrangements with PFTC and brokerage service
arrangements (only if applicable to your fund). 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 $745 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 Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plans provide for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares respectively.
For the six months ended February 29, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $44,021 and $1,299 from
the sale of class A and class M shares, respectively, and received $66,883
and $2,487 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 six months
ended February 29, 2000, Putnam Mutual Funds Corp., acting as underwriter
received $8,961 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended February 29, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $126,369,691 and $104,847,947, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At February 29, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,071,991 $47,222,221
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 43,532 519,340
- -----------------------------------------------------------------------------
4,115,523 47,741,561
Shares
repurchased (2,578,623) (28,357,286)
- -----------------------------------------------------------------------------
Net increase 1,536,900 $19,384,275
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 11,334,932 $86,575,553
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 45,700 319,903
- -----------------------------------------------------------------------------
11,380,632 86,895,456
Shares
repurchased (9,923,299) (74,002,428)
- -----------------------------------------------------------------------------
Net increase 1,457,333 $12,893,028
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,991,362 $22,299,108
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,665 114,428
- -----------------------------------------------------------------------------
2,001,027 22,413,536
Shares
repurchased (1,552,402) (16,474,098)
- -----------------------------------------------------------------------------
Net increase 448,625 $ 5,939,438
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,807,669 $32,248,790
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,002 6,983
- -----------------------------------------------------------------------------
3,808,671 32,255,773
Shares
repurchased (2,750,247) (22,052,112)
- -----------------------------------------------------------------------------
Net increase 1,058,424 $10,203,661
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 143,887 $1,716,306
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 307 3,661
- -----------------------------------------------------------------------------
144,194 1,719,967
Shares
repurchased (23,414) (293,157)
- -----------------------------------------------------------------------------
Net increase 120,780 $1,426,810
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to August 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 8,855 $83,255
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
8,855 83,255
Shares
repurchased (146) (1,365)
- -----------------------------------------------------------------------------
Net increase 8,709 $81,890
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 132,830 $1,496,231
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,242 14,737
- -----------------------------------------------------------------------------
134,072 1,510,968
Shares
repurchased (102,675) (1,105,738)
- -----------------------------------------------------------------------------
Net increase 31,397 $ 405,230
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 409,484 $3,517,717
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 561 3,915
- -----------------------------------------------------------------------------
410,045 3,521,632
Shares
repurchased (344,672) (2,865,112)
- -----------------------------------------------------------------------------
Net increase 65,373 $ 656,520
- -----------------------------------------------------------------------------
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. Please call
your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus for
any Putnam fund. It contains more complete information, including charges and
expenses. Please read it carefully before you invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund [DBL. DAGGER]
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
John J. Morgan, Jr.
Vice President
Justin M. Scott
Vice President
Thomas R. Haslett
Vice President and Fund Manager
J. Peter Grant
Vice President and Fund Manager
Paul Warren
Vice President and Fund Manager
Stephen Oler
Vice President and Fund Manager
Carmel Peters
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 Emerging
Markets Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA004-59714 2AY/2CK/2CL 4/00
